Emerson (NYSE: EMR), St. Louis, MO, reported sales for the second quarter ended March 31, 2010, were $5.1 billion, an increase of 1 percent from the same quarter a year ago.

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For the quarter, underlying sales declined 6 percent, which excludes the impact of growth from acquisitions of 4 percent and favorable currency exchange rates of 3 percent. The underlying sales decline moderated in the U.S., which was down 3 percent. Although the rate of decline has improved, underlying sales in Europe were down 18 percent, Emerson reported. Sales in Asia were up 5 percent.

“Operational performance and financial results are improving across our business as we expected. We believe that industrial markets around the world have bottomed and are beginning to recover,” said CEO and President David N. Farr. “While the pace and strength of the global recovery continue to gain momentum, we remain concerned about the sustainability of the U.S. and European economies compared to historical recovery cycles.”

Process Management sales were down 5 percent in the quarter, including a 13 percent decline in underlying sales and a favorable 4 percent impact each from currency and acquisitions.  Segment margin declined slightly to 16.9 percent, compared with the prior year margin of 17.1 percent, reflecting deleverage on lower sales volume, partially offset by the positive impact from Emerson's aggressive cost containment actions. Orders turned positive in the quarter as MRO continued to show improvement, particularly in power and chemical end markets. Oil and gas orders have improved globally and nuclear end markets have gained strength, especially in Asia. During the quarter, Process Management entered into a five-year global framework agreement with Shell to serve as a main automation contractor on capital projects.

Sales in the Industrial Automation segment declined 10 percent in the second quarter, including an underlying sales decline of 16 percent and a 3 percent favorable impact each from currency and acquisitions. The electrical drives business was strong and growth resumed in the fluid power and electrical distribution businesses. The power generating alternators business remained weak, but orders have turned positive. Despite the decline in sales and increased restructuring expense, segment margin was flat at 10.7 percent, with positive impacts realized from cost reduction initiatives.

Sales in the Network Power segment increased 4 percent in the second quarter, which included an underlying sales decline of 6 percent, a 7 percent favorable impact from the Avocent acquisition, and a positive currency impact of 3 percent. Segment margin improved 3.5 points to 11.7 percent, reflecting benefits from aggressive cost repositioning actions in 2009 as well as lower restructuring expense.

Climate Technologies sales were up 24 percent. Underlying sales were up 19 percent, acquisitions added 3 percent and currency added 2 percent. Asia remained very strong, with sales up 67 percent compared with the prior year quarter, driven primarily by positive effects from government stimulus programs in China. Underlying sales in the U.S. grew 13 percent, with strength in residential, refrigeration and commercial end markets. Sales in Europe declined 11 percent in the quarter, but orders have turned positive. Segment margin improved to 17.9 percent, up 8.5 points from 9.4 percent in the prior year quarter, driven by volume leverage and aggressive cost repositioning as well as effective price/cost management and lower restructuring expense.

Appliance and Tools sales were up 4 percent in the quarter, which included a 2 percent underlying sales increase and a 1 percent favorable impact each from currency translation and acquisitions. Sales growth within the businesses in this segment was mixed, an indication that consumer demand is still tepid, but demand is improving from a very low two-year base. Segment margin improved 9.0 points to 17.4 percent, driven by aggressive restructuring in prior periods, volume leverage and reduced restructuring expense.