Briggs & Stratton announced a solid improvement in quarterly earnings Thursday, Oct. 16, partly as the result of robust power generator sales tied to the East Coast blackout and Hurricane Isabel.
The small-engine company had fiscal first-quarter net income of $4 million, or 18 cents a share, compared with a net loss of $7 million, or 32 cents, a year earlier.
Earnings for the three months ended Sept. 30 benefited primarily from a 40-percent increase in consolidated sales and greater production volumes, company officials said in a conference call.
After the announcement, Briggs’ stock closed at $64.30, up 81 cents, or 1.3 percent.
The company’s power generator sales soared with the failure of an electrical grid that darkened millions of homes from the East Coast to Michigan in August. Weeks later, generator sales received another boost from power failures caused by Hurricane Isabel.
Last year’s quarter had no major power failures, said James Brenn, Briggs’ chief financial officer.
A combination of the East Coast failures and Hurricane Isabel created more demand for generators than any single power failure in all of last year, he said.
Lawn and garden equipment sales were extended into late summer, aided by favorable weather in much of the country.
Engine sales were $235.7 million, a 21-percent increase over a year earlier. Unit volume was up 27 percent. Income from engine operations was $4 million, compared with a loss of $3.8 million a year earlier. The improvement was the result of the increased sales volume and higher production levels, according to the company.
Second-quarter consolidated sales are projected to improve about 5 percent over a year earlier. Gross profit margins are expected to be about 20 percent.
In the conference call, Briggs Chief Executive John Shiely repeated assertions he made in September that Briggs might move its manufacturing to China if tougher air pollution regulations are implemented in California.
The company says the tougher rules would force it to redesign engines. New factories would have to be built to produce the equipment, and it would be much cheaper to build those factories overseas.
“We will move to China, if necessary,” to remain competitive with other engine companies and to maintain profit margins, Shiely said.
Moving costs could be extended over years and would be recovered through cost reductions, and perhaps engine price increases in California, according to Shiely.
Briggs executives have appealed to Congress to block the regulations adopted by the California Air Resources Board. Up to 22,000 U.S. manufacturing jobs tied to Briggs and its vendors are at risk, according to the company.
California regulators say the new rules are not onerous enough to force companies the size of Briggs to move work overseas. They say Briggs is using the rules as an excuse to move its operations and get cheap labor.
Briggs’ appeal to Congress could be heard soon, according to the Congressional delegations from Wisconsin and Missouri, where Briggs has manufacturing plants.
Source: Milwaukee Journal Sentinel