Tecumseh posts first annual loss in 10 years
2/10/2006TECUMSEH - The financially struggling Tecumseh Products Co. yesterday reported an annual loss of $224 million for 2005, the company's first red ink in at least 10 years, in an amount that may be a record.
It also had a slump in sales.
The Michigan maker of compressors, pumps, and lawn mower engines said more production relocations and consolidations are likely this year, and it will evaluate potential acquisitions, joint ventures, or sale of business units or assets to shore up its financial position.
"We're happy to put 2005 behind us," James Nicholson, chief financial officer, said during a teleconference with Wall Street analysts.
For the year, the Fortune 1,000 firm lost $12.09 a share on sales of $1.85 billion, compared with making a profit of $10.1 million, or 55 cents a share, on sales of $1.91 billion a year earlier.
The performance was so poor that the company said it is again in violation of its loan terms, requiring it to renegotiate them this month.
Much of its loss last year stemmed from restructuring and other special accounting charges. One was a $108 million charge to devalue its 2002 purchase of Fasco Motor Group, which makes electrical components.
Wall Street was not pleased. The company stock dropped $1.09 yesterday to close at $22.94 on Nasdaq, in heavier-than-normal trading.
For the fourth quarter, Tecumseh Products lost $55.8 million, or $3.02 a share, on sales of $442 million. That compared with a loss of $13.2 million, or 71 cents a share, on sales of $472 million for the same period a year earlier.
The firm was hurt in its compressor business by higher raw-material costs and unfavorable currency exchanges in Brazil, where nearly 40 percent of its products are made, Mr. Nicholson said.
"Copper is a big deal. It's in compressors and motors," the financial chief said. "Copper is still going absolutely crazy and setting new record [prices] every day."
The company said it suffered significant sales declines in its compressor and engine and power train segments. It lost business in Europe, Brazil, and India for its compressors, which are used in refrigerators, freezers, and air conditioners.
Overall, 2006 doesn't look particularly bright, Mr. Nicholson said. The company said in its report it does not expect commodity costs, currency rates, or overall economic growth rates in its markets to "become any more favorable" this year.
But Tecumseh Products has almost completed restructuring moves recommended last year by a consultant, has new lending agreements in place, and a new contract with an auto supplier, he said.
The firm hopes it can start to turn things around, he explained, possibly in the second half of the year. The company said its performance in the first half of this year likely will lag last year.
Contact Jon Chavez at:
jchavez@theblade.com
or 419-724-6128.