Power tool maker Snap-on, Inc. lowered its full-year earnings outlook for the second time in less than two months due to high steel prices and weak business in Europe, as its shares fell more than 12 percent.
Net earnings for the third quarter of 2004 are expected to be in the range of $.37 to $.40 per share, compared to $.30 per share for the third quarter of 2003. Snap-on forecast full-year 2004 net earnings of $1.35 to $1.45 per share, compared to $1.35 per share for 2003 net earnings.
The Kenosha, Wis., U.S. company attributed the reduced earnings outlook for the remainder of 2004 to slower-than-expected improvement in achieving cost and productivity benefits from the U.S. hand-tool plant consolidations and mid-year cost increases on raw materials, particularly steel. Other significant factors – adjustments to fourth-quarter U.S. production schedules for certain product lines and weak economies in Western Europe impacting Snap-on’s European tool and equipment businesses – also affected the company’s earnings outlook.
Sales and earnings did benefit from the successful launch of new handheld diagnostics and software products in the U.S. and UK, including he new SOLUS ™ Scanner ™ tool, which has been well received by Snap-on dealers and vehicle-repair technicians.
The company said it expects cash flow to remain strong the third quarter and full year. At the end of the third quarter of 2004 to be approximately U.S. $140 million, compared to $127 million in 2003.
In January, Snap-on announced its plan to repurchase 750,000 to one million shares of common stock in 2004. To date, the company has purchased 900,000 shares. Snap-on may purchase more than the previously announce one million shares before the end of 2004, pursuant to board clearances.
“As exemplified by our strong cash flow, we believe that progress toward our goals is being made. The consolidation of our U.S. hand-tool plants has been challenging, and we believe the full benefits will not be realized until the first half of 2005,” Dale F. Elliot said, Snap-on chairman and CEO.
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