Honeywell Rides Aerospace, Specialty Products Sales to Growth in Second-Quarter 2015

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Researched by Industrial Info Resources (Sugar Land, Texas)--Leading diversified technology company Honeywell International (NYSE:HON) (Morris Township, New Jersey) defied a drop in sales to post solid profit gains in second-quarter 2015, as growth accelerated in the Aerospace and Automated & Control segments, and volumes grew for products such as fluorine. Net income was reported to be $1.19 billion, an 8.64% increase from second-quarter 2014.

Industrial Info is tracking $8.64 billion in active projects involving Honeywell, including two in southeastern Virginia: the $50 million expansion of a synthetic fibers plant in Colonial Heights, and the $35 million expansion of an organic fibers plant in Chester. The Colonial Heights project, which is expected to kick off in third-quarter 2016, would increase the plant's capacity to produce ultra-high molecular weight polyethylene fibers by a yet-unknown amount; the Chester project, which is under construction, involves building a 40,000-ton-per-year production line to boost plant capacity to 200,000 tons per year of resins.

Net sales stood at $9.76 billion, a 4.66% decrease from the same period last year. Although each of the three major segments reported overall sales declines, productivity improved companywide and several key businesses showed strength. The Aerospace segment benefited from its Transportations Systems business, which launched new platforms and broadened the reach of its gas turbo products, and its Defense & Space and Commercial Aftermarket businesses, which saw strong international growth.

The Automation and Control Solutions (ACS) segment continued to see higher volumes in its commercial and industrial businesses, particularly in Americas Distribution, while the Performance Materials & Technologies (PMT) segment benefited from raw materials pricing for its resins and chemicals products, and significantly higher volumes for its fluorine products.

Capital expenditures were reported to be $243 million for the quarter, compared with $229 million in second-quarter 2014. Capital expenditures were determined by subtracting "free cash flow" from "cash flow from operations" in the company's quarterly earnings report.

"We proactively funded about $39 million of new restructuring in the quarter building on a healthy pipeline of new projects," said Dave Cote, the chairman and chief executive officer of Honeywell, in a conference call. "While managing cost as critical, we're also seed planting. And that is investing in capacity expansion, new products and technologies and resources in high-growth regions to drive future growth."

Honeywell executive expect sales to total $9.7 billion to $9.9 billion for the third quarter, up 3% to 4% from the same period last year, and $39 billion to $39.6 billion for the full year, up about 3% from 2014. Aerospace sales are expected be up 3% to 4% in the third quarter, driven by healthy engine demand for commercial aircraft. ACS sales are expected to be up 4% to 5% in the third quarter, and PMT sales are expected to be flat to up 1%.

"Our Aerospace team in Dassault [Group] developed the next-generation cockpit with the future in mind, giving pilots and operators advanced communication, vision, and awareness features that simplify their jobs," Cote said in the conference call. "And in PMT, our Fluorine Products business [brought an] additional $600 million in orders, with key OEMs [original equipment manufacturers] for our Solstice low-global warming suite of products, bringing lifetime value of signed agreements to approximately $3.2 billion. We also have an additional $200 million in agreements currently under negotiation, which we anticipate finalizing by the end of the year."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.