Johnson Controls ups production outlook, eyes M&A

DETROIT Thu Jan 20, 2011 7:51pm EST

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DETROIT (Reuters) - Johnson Controls (JCI.N) boosted its 2011 outlook for North American auto production and said it would focus its deal activity on its unit that makes heating, ventilation and air-conditioning products.

Johnson Controls, which supplies seating, auto interiors and starter batteries for vehicles, projected that 2011 North American auto production will be 12.5 million vehicles, up from its earlier forecast of 12.3 million vehicles.

The Milwaukee-based company provided the higher production outlook during its first-quarter earnings report on Thursday.

The higher forecast for North American auto production comes as the global auto industry shows signs that the recovery that began last year is starting to gather strength.

A number of companies in the auto sector, including Johnson Controls' rival International Automotive Components Group (IAC), plan to go public in 2011. [ID:nN19250664]

While the company sees opportunities to buy companies in the auto sector, Johnson Controls said it was unlikely to buy an auto company this year. Johnson Controls said about 80 percent of its M&A activity in the "mid- to long-term" would be in its building efficiency unit.

"I don't believe you're going to see a mega transaction from us on the building efficiency side," Chief Executive Stephen Roell said during a call with analysts. "It will likely be smaller transactions, maybe even up into the $300 million, $400 million range."

Roell said the company was "struggling" to identify targets for large acquisitions. Last year, Johnson Controls' $1.25 billion bid for rival Visteon Corp was rejected.

Nearly half of Johnson Control's first-quarter revenue came from its automotive unit, while about 35 percent came from the building efficiency unit. The rest came from Johnson Controls' power solutions unit, which provides battery technology.

The automaker reported first-quarter earnings of 55 cents per share. The average analyst estimate was 54 cents per share, according to Thomson Reuters I/B/E/S.

Johnson Controls lifted its fiscal 2011 per-share earnings to between $2.50 and $2.55. On average, analysts project it will post earnings of $2.54 per share.

Revenue for its fiscal year 2011 is now projected to be $38.5 billion, higher than the average $37.2 billion forecast.

But shares fell more than 3 percent Thursday as analysts said operating profit margins for the company's three segments were lower than expected in the quarter.

(Reporting by Deepa Seetharaman; editing by Sofina Mirza-Reid)

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