November 2, 2012 / 12:51 PM / in 5 years

UPDATE 2-Harman warns of weak Europe after revenue miss

* First-quarter adjusted earnings $0.79/share vs est $0.78

* Revenue $998 mln vs est $1.08 bln

* Declares a cash dividend of 15 cents

* Shares rise 2.5 percent

By Sruthi Ramakrishnan

Nov 2 (Reuters) - Audio systems maker Harman International Industries Inc said it expects weakness in Europe to extend through its full year after missing first-quarter revenue expectations on lower sales to the region.

Carmakers dealing with economic gloom and weak consumer appetite in the battered European market have talked of capacity cuts, with several executives indicating that there would be no rebound within two years.

“We should probably prepare ourselves for the next three quarters that Europe will not come back as strong as last year in terms of growth rate,” Chief Executive Dinesh Paliwal told Reuters.

Sales in Harman’s biggest business, infotainment, which provides audio systems to luxury carmakers such as Daimler AG , Ferrari and Volkswagen’s luxury division Audi fell 7 percent to $561 million in the first quarter including currency changes.

Daimler AG warned last month that it would miss its earnings forecast this year and revealed plans to cut 2 billion euros in costs.

Europe is in the same situation that the United States was in two years ago, Paliwal said.

“I think that is definitely going to be a phenomena. I hope it is not a long-term phenomena.”

Sales to German carmakers accounted for 43 percent of Harman’s revenue for the year ended June 30, with rest of Europe bringing in another 20 percent.

Harman, which owns brands such as JBL and Harman Kardon, declared a cash dividend of 15 cents per share for the quarter ended Sept. 30.

The company said it won contracts from new customers such as Ford Motor and Volvo Car Corp.

Harman’s net income rose to $55 million, or 79 cents per share, in the first quarter, from $48 million, or 67 cents per share, a year earlier.

Excluding items, earnings were 79 cents per share.

Revenue fell 5 percent to $998 million.

Analysts on average had expected earnings of 78 cents per share on revenue of $1.08 billion, according to Thomson Reuters I/B/E/S.

Shares of the company, which competes with Bose, Panasonic Corp, Sony Corp and Denso Corp, were up 2.5 percent at $44.49 on the New York Stock Exchange on Friday.

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