UPDATE 1-China lifts Johnson Controls revenue above estimates

Thu Jan 23, 2014 9:01am EST

By Bernie Woodall

Jan 23 (Reuters) - Johnson Controls Inc on Thursday reported a fiscal first-quarter profit that met Wall Street expectations and reaffirmed its fiscal 2014 outlook, while sales beat forecasts, helped by higher automobile production, particularly in China.

Revenue rose 5 percent to $10.91 billion, beating expectations of analysts polled by Thomson Reuters I/B/E/S of $10.73 billion.

Net profit for the quarter was $469 million, 69 cents per share, up from $359 million, or 52 cents per share, a year ago.

Johnson Controls makes car interiors and batteries as well as heating, ventilation and cooling systems for buildings.

Overall revenue rose, but sales in JCI's building efficiency business fell 4 percent to $3.38 billion, as gains in Asia could not overcome lower demand in Europe, the Middle East and Latin America, the Milwaukee-based company said.

Profit in the building efficiency business of $146 million was down 15 percent from a year ago.

"While Building Efficiency revenues were lower than last year, there are early indications of improving global commercial buildings markets, which should positively impact the business later in the year," said Alex Molinaroli, the company's chief executive.

A larger part of JCI's revenue came from its automotive segment, where a rise in global auto sales helped boost revenue 10 percent from a year ago to $5.76 billion. Auto industry production rose 10 percent in North America, 2 percent in Europe and 14 percent in China, JCI said.

Automotive revenue in China, which is centered on seating and generated through non-consolidated joint ventures, rose 33 percent in the quarter to $1.9 billion. Income from its automotive business rose 130 percent to $232 million, JCI said.

Earlier this month, JCI sold its automotive electronics business to Visteon Corp for $265 million in cash.

JCI's power solutions business sales increased 6 percent to $1.77 billion, and raised income by 12 percent to $308 million.

The company forecast profit between $3.15 and $3.30 per share for 2014 with free cash flow of $1.6 billion. A month ago, the company issued a forecast that disappointed Wall Street, which had expected 2014 earnings of $3.31 per share.

JCI said expects its fiscal second quarter earnings of 64 to 66 cents per share, while Thomson Reuters I/B/E/S poll of analysts shows expectations of 67 cents per share.

In the fiscal first quarter, JCI increased its quarterly dividend by 16 percent and completed $1.2 billion in share repurchases.

Analyst Christian Mayes of Edward Jones said that the company exited the automotive electronics business, which increased sales by 7 percent in the quarter, because it does not want to invest heavily to keep up with new technology in automotive connectivity.

"JCI wants to lower capital spending to enable more share buybacks and higher dividends," said Mayes. "They will pay more dividends and share repurchases in the next three years than they are going to bring in free cash flow. So they don't want to be spending a lot on capital expenditure."

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