A. O. Smith Corp. said it expects fourth quarter results will be weaker than expected due to sluggish demand in both its water heater and electric motor businesses. As a result, the previously communicated 2008 forecast of US$2.80 to $2.90 per share will likely not be achieved.
A decline in global construction and consumer spending, intensified by inventory reductions by the company's customers, has resulted in a significant drop in order volumes during the fourth quarter. The company responded with a decision to mitigate its inventory build throughout the quarter and aggressively curtailed production.
"The speed with which the market downturn confronted us is unprecedented," said Paul Jones, chairman and CEO. "However, with current orders less than historical replacement demand levels, we expect inventories will likely be replenished in early 2009."
"We are taking actions to further reduce costs and conserve cash in response to the market challenges. We are scrutinizing capital expenditures, maximizing working capital and reducing production schedules. We believe our financial strength gives us an advantage to navigate these challenging times."
The company now expects 4Q earnings to be between $0.15 and $0.25 per share. For the year, it expects earnings per share to be between $2.63 and $2.73.
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