* Second-quarter results hit by poor sales in Europe
* Second-quarter adjusted earnings $0.59/share vs est $0.86
* Cuts FY EPS view to $2.70-$2.90 from $3.67-$3.92
* Cuts FY rev outlook to $4.18 bln-$4.25 bln from $4.3
* Shares fall 10 pct premarket
By Sruthi Ramakrishnan and Neha Alawadhi
Jan 31 Audio systems maker Harman International
Industries Inc slashed its full-year outlook and said it
would cut up to 9 percent of its workforce after second-quarter
profit missed Street estimates due to lower sales to European
Harman shares plunged 14 percent to $42.49 in morning trade
on the New York Stock Exchange.
"We expected European production to be lower, but the
accelerated slowdown in the month of December really surprised
us," Chief Executive Dinesh Paliwal told Reuters.
Harman, which owns brands such as JBL and Harman Kardon,
said it would shed about 500 jobs in high-cost countries. It is
also considering the sale or closure of a manufacturing site in
Europe, which could cut a further 500 jobs.
"We are reducing 500 permanent jobs in high cost countries
in Europe and America," Paliwal said.
The company has been reducing its footprint in "high-cost"
countries such as Germany, US, France and the United Kingdom,
and moving to China, India, Brazil, Ukraine, Hungary and Mexico.
The shut-down of the manufacturing plant could take two to
three years due to compliance approvals from the European Works
Council, "but this decision is made," he added.
The company slashed its per-share earnings forecast for the
year to between $2.70 and $2.90 from between $3.67 and $3.92. It
also cut its revenue forecast to between $4.18 billion and $4.25
billion for the year ending June from the earlier range of $4.3
billion to $4.6 billion.
Paliwal does not see a "miraculous change" in European car
production in the first quarter of calendar year 2013, and
expects the second half to be "modestly better".
Sales in Harman's biggest business, known as infotainment,
which provides audio systems used by carmakers such as Daimler
AG, Ferrari and Volkswagen's luxury
division Audi, fell 10 percent to $540 million in the quarter
ended Dec. 31.
Sales to German carmakers accounted for 43 percent of
Harman's revenue for the year ended June 2012, with the rest of
Europe bringing in another 20 percent.
Harman employed 11,366 people as of June 30, 2012, according
to a regulatory filing.
Harman said it expected a restructuring charge of about
$30-35 million in the second half of fiscal year 2013.
Demand for new cars in Europe fell to a 17-year low in 2012,
leaving mass market manufacturers little hope for this year as
they try to cut excess capacity and as aggressive discounting
dents their margins.
Harman customer Fiat said European car markets
would slump for a sixth consecutive year in 2013, while France's
PSA Peugeot Citroen is cutting some 10,000 jobs and
adding work stoppage days in response to weak demand across
Morgan Stanley analyst Ravi Shanker said he was encouraged
to see Harman take restructuring actions, but was "surprised to
see margins fall so much."
During the second quarter, the company earned 59 cents per
share excluding one-time items, well below the 86 cents analysts
had hoped for. Revenue fell 6 percent to $1.06 billion.
"The second quarter is an aberration beyond our control,"
Harman's net income fell to $47 million, or 68 cents per
share, from $59 million, or 82 cents per share, a year earlier.
In November, the company said weakness in Europe will extend
through its full year ending June 2013.