Three-quarters into 2009, the common tune among metro Atlanta’s biggest firms is this: The economy remains shaky, but we’re seeing our way through it and we’re laying the groundwork for a turnaround.
A quick look by The Atlanta Journal-Constitution at the nine-month mark for the top 10 Georgia-based publicly traded firms shows most of them are still turning a profit.
Even those that have cumulative losses in the first nine months of this year, compared with the first nine months of 2008, are hemorrhaging less. Delta Air Lines, for example, reported a loss of $1.21 billion in the nine-month period ended Sept. 30, or $1.47 per share. In last year’s comparable period, Delta reported a loss of $7.48 billion, or $18.91 per share. Contributing to last year’s loss, however, were expenses tied to the airline’s merger with Northwest Airlines.
Like airlines, agricultural equipment makers have been hard hit by the economy. AGCO Corp., which makes farm equipment such as tractors, saw its profits shrink to $102.2 million, or $1.09 per share, in the first nine months of 2009. That’s down from $287.4 million, or $2.91 per share, in last year’s comparable period.
AGCO, in its most recent quarter, said business conditions continue to be weak. Global farm incomes are expected to fall. Further dampening expectations are concerns the professional farming segment in North America will remain soft in the fourth quarter. A drought in Argentina and continued economic weakness in Western Europe also are taking their toll.
But AGCO also sees the seedlings of growth in some of its markets. In Brazil, for example, a government-supported financing incentive program is helping stabilize demand for equipment there.
Many companies are focused on cutting internal costs, which they say will help in the short term by reducing expenses, and in the long term by making them more nimble to take advantage of the economic rebound when it comes.
Companies aren’t looking to just cut willy-nilly, said Jon Winsett, a corporate expense expert and chief executive of the Atlanta-based consulting firm NPI Financial. What they’re looking at is making strategic cuts and investments in technology to better position themselves for the turnaround, said Winsett, whose firm counts 50 Fortune 500 companies as clients, counseling them on outsourcing, contract-cost reduction and other ways to trim expenses.
“They want to hit the ground running, and they don’t want to be caught flat-footed when the economy rebounds,” he said.
Part of that means increasing spending this year by purchasing hardware and software, and modernizing their technology infrastructure, Winsett said.
They also are looking at buying out competitors. Genuine Parts, whose units include NAPA auto parts and S.P. Richards office products, has been focused on acquisitions. The company has taken over six firms this year and says it will continue to look at strategic acquisitions in the fourth quarter.
“Everyone is focused on how they can compete effectively,” Winsett said. “One thing that we see is that they’re trying to put as much as they can into expenses this year. They’re buying a lot.
“They can tighten belts but for so long,” he added.
● Current year (9-month performance): Profit $2.3 billion /$1.37 per share
● Prior year (9-month performance): Profit $2.3 billion/$1.37 per share
● Outlook: Expects total sales for the year to be down about 9 percent
● Current year (9-month perform.): Profit $1.39 billion/$1.39 per share
● Prior year (9-month perform.): Profit $2.7 billion/$2.67 per share
● Outlook: Projects fourth-quarter profits of between 58 cents and 65 cents per share
● Current year (9-month perform.): Profit $5.3 billion/$2.27 per share
● Prior year (9-month perform.): Profit $4.86 billion/$2.06 per share
● Outlook: Focused on growing currency-neutral revenue, expanding margins and investing back into the business. Expects slow recovery in consumer sentiment about the economy.
● Current year (9-month perform.): Profit $621 million/$1.26 per share
● Prior year (9-month perform.): Loss ($2.9 billion)/($6.07) per share
● Outlook: Raised full-year earnings expectations to $1.54 to $1.57 per share.
Delta Air Lines
● Current year (9-month perform.): Loss ($1.21 billion)/($1.47) per share
● Prior year (9-month perform.): Loss ($7.48 billion)/($18.91) per share
● Outlook: Expects to end the year with $5.8 billion in unrestricted liquidity, including $5.5 billion in cash. Projects $700 million in savings related to merger with Northwest Airlines.
● Current year (9-month perform.): Profit $1.39 billion/$1.77 per share
● Prior year (9-month perform.): Profit $1.55 billion/$2.02 per share
● Outlook: Sees signs of stabilization and beginning of a recovery in some sectors.
● Current year (9-month perform.): Profit $1.2 billion/$2.66 per share
● Prior year (9-month perform.): Profit $1 billion/$2.22 per share
● Outlook: Projects new premium sales in U.S. will not meet objective of flat to 5 percent increase this year, but overall expects to meet guidance of 13 percent to 15 percent increase of operating earnings for the full year.
● Current year (9-month perform.): Loss ($1.3 billion)/($3.41) per share
● Prior year (9-month perform.): Profit $1.1 billion/$3.19 per share
● Outlook: Earnings will lag behind economy because pace of recovery is uncertain.
Genuine Parts Co.
● Current year (9-month perform.): Profit $300 million/$1.88 per share
● Prior year (9-month perform.): Profit $387.6 million/$2.36 per share
● Outlook: Remains focused on strategic acquisitions. May deploy cash buyback shares.
● Current year (9-month perform.): Profit $102.2 million/$1.09 per share
● Prior year (9-month perform.): Profit $287.4 million/$2.91 per share
● Outlook: Generally, weak global economy will dampen demand for farm equipment in the fourth quarter, though in Brazil, demand has started to stabilize because of government finance incentives.
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