Timken Co. of Canton on Thursday reported a 55 percent drop in second-quarter profits as the company reduced its earnings estimate for the full year.
The steel and bearings maker, one of the region’s largest manufacturing employers, now projects that full-year profits will range from $3.30 to $3.60 per share, including 15 cents per share for previously announced plant-closing costs.
Timken CEO James W. Griffith said in a prepared statement that the company continues “to perform very well, maintaining double-digit operating margins despite weak demand lingering in many global markets.”
Griffith said the company expects “strong financial performance” for the rest of the year, although the revised earnings forecast reflects a “more modest market recovery in the second half.”
Wall Street responded negatively to the news. Shares dropped $2.95 (4.9 percent) Thursday to close at $56.99.
Griffith, in a conference call with analysts early Thursday, noted the “strategy committee” that the company’s board of directors set up last month. It is charged with looking into separating Timken’s bearings and steel businesses into distinct, publicly traded companies.
Timken’s board established the committee after the California State Teachers’ Retirement System pension fund got enough votes at the company’s annual meeting in May to pass a nonbinding resolution calling for the separation.
The retirement system, working with investment firm Relational Investors, argues that having two publicly traded companies would unlock shareholder value.
The Timken strategy committee is expected to report its recommendations to the full board by Sept. 30, the end of Timken’s third quarter.
For the second quarter, Timken reported a profit of $82.8 million, or 86 cents a share, a decrease from $183.6 million, or $1.86 a share, in the second quarter last year.
Excluding one-time charges, per-share earnings were 93 cents, compared with $1.35 a year ago.
Second-quarter sales of $1.1 billion were down 16 percent from the prior year.
Timken reported that all of its segments had lower sales in the second quarter, with sales from its steel business declining the most: 29 percent to $354.1 million.
Sales from Timken’s mobile industries segment dropped 12 percent to $393.1 million. Process industries sales were down 6 percent to $317.4 million. Timken’s aerospace segment sales were down 6 percent to $82 million.
Timken has its headquarters, a research center and several plants in Stark County. It employs about 4,500 workers in Northeast Ohio.
The company noted Thursday that it had started up a second ladle refining station at the Faircrest Steel Plant in Perry Township, saying it was the third major system to come on line in the company’s steel business. The investments are designed to make for more efficient operations and create new markets.
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