The struggling aerospace industry has put a damper on profits for aviation electronics manufacturer Rockwell Collins Inc. The Cedar Rapids, Iowa-based company is trying to rebound from a third-quarter net-income decline of 17% from the year-earlier period.
In a Sept. 1 conference call with investors, President and CEO Clay Jones said he expects to see improvement in the second half of the company's next fiscal year.
"I would say there are indications things are not as bad as they were," said Jones, according to a Thomson Reuters transcript. "In some cases you can argue they are getting a little better, but I don't think we are anywhere close to being out of the woods yet... "What we in general see as the lay of the land is that business aircraft seem to be stabilizing, but we face two quarters of really, really bad comparables because of the shape of 2008. So we are going to see kind of a bad first half, better second half where business OEM comparables are concerned."
One business segment that is showing signs of improvement is in the commercial aerospace aftermarket, Jones said.
"I think the aftermarket over the year next year will see some continuous improvement," he said. "It will start out fairly flat and slow in the first quarter, and then we think the beginning of the first calendar quarter, our second fiscal quarter, we will probably begin to see some incremental improvement, assuming the economy continues to strengthen as everyone is predicting it might."
Jones also touched on some lessons the company has learned during the economic downturn. He said the aerospace market showed signs of decline earlier than the company recognized.
At A Glance
Rockwell Collins Inc.
Cedar Rapids, Iowa
Primary Industry: Communications Equipment
Number of Employees: 20,300
2008 In Review
Revenue: $4.77 billion
Profit Margin: 14.22%
Sales Turnover: 1.51
Inventory Turnover: 3.72
Revenue Growth: 8.02%
Return On Assets: 18.08%
Return On Equity: 43.10%
"And so the market in the short term can be irrational, but in the long term, it is a pretty rational thing. And we had been getting indications really since about January/February 2008 that there was something coming, and the market felt it, and we did not. So it was right."
Jones also said crisis situations are unpredictable, despite any amount of strategic or financial planning, and that debt management has helped the company sustain during the recession. The company has benefited from having an under-leveraged balance sheet, Jones said.
"Now we have plenty of access to cash and capital," he said. "Our credit ratings, which are superior in this industry, have stayed strong, and just imagine those companies that have suffered because the fundamentals were not quite right, and they were living out on the edge."
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