(Reuters) - Audio systems maker Harman International Industries Inc, whose brands include JBL and Harman Kardon, raised its earnings forecast for the year ending June, and said it will shift more jobs to lower-cost countries in the next five years.
Shares of the company jumped 14 percent to a year-high of $50.52 in morning trade on the New York Stock Exchange on Thursday. They were later trading at $47.49, up 7.4 percent.
The company is looking to have about 70 to 75 percent of its employees in “best cost” countries such as China, India, Brazil, Hungary and Mexico in the next five years, up from 50 percent at present, Chief Executive Dinesh Paliwal told Reuters.
“Most of the growth in next five years for our jobs would be in best-cost countries,” he said.
The company said three months ago it would cut 500 jobs in high-cost countries in Europe and America as part of a restructuring program.
“We are on track and we’ll have these 500 full-time jobs out before June 30... starting July 1, on an annual basis, we’ll be booking $30 million to $35 million profitability improvement just because of that,” he said.
In addition, Paliwal said it is transferring most of the production from its recently closed facility in Germany to Hungary. In January, it had said it would sell or close a manufacturing site in Europe, affecting another 500 jobs.
The company said it now expects fiscal 2013 earnings of $3 per share, up from its previous forecast of $2.70 to $2.90 per share.
Harman had slashed its full-year earnings estimate from $3.67-$3.92 per share in January due to lower sales to European carmakers.
The company also said on Thursday revenue for the full year would be in the upper half of its forecast range of $4.18 to $4.25 billion.
The audio systems maker also expects a more favorable product mix to boost profitability next fiscal year.
“In 2014, almost 50 percent of our automotive business would come from our high-margin backlog. This year only 25 percent of the revenue is coming from high-margin backlog,” Paliwal said.
Baird Equity Research analyst David Leiker said the results and higher forecast affirmed the second-quarter miss was a one-off due to extreme production cuts at Audi.
Third-quarter revenue fell 3 percent to $1.06 billion, in line with analysts’ expectations, due to lower automotive production in Western Europe.
Harman’s biggest business - infotainment - which provides integrated navigation, entertainment and communication systems for luxury carmakers such as Daimler AG, Fiat SpA’s Ferrari and Volkswagen’s Audi, reported a 6.7 percent drop in revenue.
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.
Carmakers are bracing for a tough 2013. Volkswagen and Daimler reported lower first-quarter earnings last week.
While Daimler scrapped a profit target for the second time in six months, Europe’s No. 1 automaker Volkswagen said last week all regions except North America and China were marked “by often significant uncertainty.”
Paliwal expects the European market to pick up in the December quarter of 2013. “My expectation is second and third calendar-year quarters would be challenging.”
Harman’s net income fell to $35 million, or 50 cents per share, in the third quarter from $173 million, or $2.38 per share, a year earlier.
Excluding one-time items, Harman earned 79 cents per share.
Analysts on average expected earnings of 61 cents per share on revenue of $1.06 billion, according to Thomson Reuters I/B/E/S.
Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Joyjeet Das, Sreejiraj Eluvangal