A. O. Smith Corporation announced record second quarter net earnings of US $27 million or $0.7 per share on sales of $611.5 million. Second quarter net earnings increased nearly 8% compared with net earnings of $25.1 million or $0.81 per share in the second quarter of last year. Second quarter 2006 results included an after-tax gain of $3.2 million or $0.10 per share on foreign currency contracts related to the April 2006 GSW acquisition. A lower tax rate in the second quarter of 2007 contributed approximately $.06 per share in year over year earnings per share growth. Second quarter sales of $611.5 million were 3% higher than sales in the second quarter of 2006.
For the first 6 months of the year, the company earned $46.5 million or $1.50 per share compared with $40.6 million or $1.31 per share for the first six months of last year. Six month 2007 sales of $1.19 billion were approximately 13% higher than six month 2006 sales of $1.05 billion.
"Continued strength in China, improved sales in the global commercial markets, and cost reduction initiatives in both of our businesses more than offset a sluggish U.S. housing market," Paul W. Jones, chairman and chief executive officer, commented. "Despite the weakness in housing, our financial performance during the first half of the year was strong. Accordingly, we are increasing our 2007 earnings forecast to a range of between $2.85 and $3.00 per share."
For water products, second quarter sales of $354.2 million were $11.3 million or three percent higher than the same period in 2006 reflecting increased sales of commercial water heating equipment and continued strong growth in China. Revenue in the residential market segment was similar to the second quarter of 2006.
For electrical products, second quarter sales of $258.5 million were slightly higher than the second quarter of 2006. Increased sales in the company's distribution and commercial hermetic motor market segments and improved pricing more than offset lower sales to the residential hermetic, pump and home appliance motor market segments which were negatively impacted by the slow-down in U.S. residential housing construction.
Sales in the company's commercial hermetic motor business in China continued to demonstrate strong growth in the second quarter as the company broke ground on a new facility for its operation in Yueyang, China. Yueyang, along with the company's operation in Suzhou, China, manufactures hermetic motors used by global manufacturers in air conditioning and refrigeration applications.
"We believe the domestic housing market will remain weak for the foreseeable future," Jones said. "And this weakness has partially offset the strength of our commercial and Chinese businesses as well as the positive impact of the company's ongoing cost reduction activities. Nonetheless, on the strength of our performance through the first six months of the year and continued confidence in our plan we recently announced a 6% increase in our dividend. And for the year we are narrowing and raising our earnings forecast to a range of $2.85 to $3.00 per share," Jones stated.
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