Timken shares fall after 2009 forecast lowered

By Rob Delaney
Bloomberg News

POSTED: 11:06 a.m. EDT, Apr 27, 2009

Shares of Timken Co. (NYSE: TKR), a supplier of bearings to the world's top car makers, fell the most in six months in New York after the company lowered its 2009 earnings forecast on concern the slump in demand will last longer than it expected.

Timken plunged $3.41, or 20 percent, to $13.44 at 10:17 a.m. in New York Stock Exchange composite trading, the largest intraday decline since Oct. 24. The shares dropped 14 percent this year before today.

Results in 2009 will range from a profit of 15 cents a share to a loss of 15 cents, Canton-based Timken said today in a statement. On Jan. 29, the company forecast 2009 profit excluding one-time items of $1.30 to $1.60 a share.

Chief Executive Officer James Griffith has lowered production and laid off workers as the global economic slowdown cut demand for cars and other manufactured goods. The average price of hot-rolled steel sheet, the benchmark product used in cars and appliances, fell by more than half to $471 a ton in March from a record in July, according to Purchasing Magazine.

''It's now clear that the impact of the recession on the demand for our products will be deeper and longer lasting than we anticipated,'' Griffith said in a statement.

The company will have eliminated 7,000 jobs, or more than 25 percent of its work force, by the end of this year compared with the start of 2008, and expects to incur a $70 million charge related to the layoffs, Timken said in the statement. The company had cut 2,500 jobs as of Jan. 29, according to Timken's fourth-quarter earnings announcement in January.

First-quarter net income fell to $870,000, or 1 cent a share, from $84.5 million, or 88 cents a share, a year earlier, Timken said, while sales dropped 33 percent to $960.4 million.

The company also cut its dividend by 50 percent to 9 cents and will ''significantly'' reduce capital spending from 2008 levels.

Global steel output might drop 15 percent to 1.02 billion metric tons this year as an economic slump curbs demand, before beginning to recover next year, the World Steel Association said today in a presentation in London.

Demand will fall the most in the U.S., with a 37 percent decline, while usage in the 27-member European Union will be about 29 percent lower, the group said. Excluding the emerging economies of Brazil, India, China and Russia, demand will drop about 22 percent. Output in China will slip 5 percent.

Steel demand in the U.S. is ''virtually non-existent,'' Dan DiMicco, chief executive officer of Nucor Corp., the second- largest U.S.-based steel producer by 2008 sales, said after Nucor announced the company's first quarterly loss on April 23.

Shares of Timken Co. (NYSE: TKR), a supplier of bearings to the world's top car makers, fell the most in six months in New York after the company lowered its 2009 earnings forecast on concern the slump in demand will last longer than it expected.

Timken plunged $3.41, or 20 percent, to $13.44 at 10:17 a.m. in New York Stock Exchange composite trading, the largest intraday decline since Oct. 24. The shares dropped 14 percent this year before today.

Results in 2009 will range from a profit of 15 cents a share to a loss of 15 cents, Canton-based Timken said today in a statement. On Jan. 29, the company forecast 2009 profit excluding one-time items of $1.30 to $1.60 a share.

Chief Executive Officer James Griffith has lowered production and laid off workers as the global economic slowdown cut demand for cars and other manufactured goods. The average price of hot-rolled steel sheet, the benchmark product used in cars and appliances, fell by more than half to $471 a ton in March from a record in July, according to Purchasing Magazine.

''It's now clear that the impact of the recession on the demand for our products will be deeper and longer lasting than we anticipated,'' Griffith said in a statement.

The company will have eliminated 7,000 jobs, or more than 25 percent of its work force, by the end of this year compared with the start of 2008, and expects to incur a $70 million charge related to the layoffs, Timken said in the statement. The company had cut 2,500 jobs as of Jan. 29, according to Timken's fourth-quarter earnings announcement in January.

First-quarter net income fell to $870,000, or 1 cent a share, from $84.5 million, or 88 cents a share, a year earlier, Timken said, while sales dropped 33 percent to $960.4 million.

The company also cut its dividend by 50 percent to 9 cents and will ''significantly'' reduce capital spending from 2008 levels.

Global steel output might drop 15 percent to 1.02 billion metric tons this year as an economic slump curbs demand, before beginning to recover next year, the World Steel Association said today in a presentation in London.

Demand will fall the most in the U.S., with a 37 percent decline, while usage in the 27-member European Union will be about 29 percent lower, the group said. Excluding the emerging economies of Brazil, India, China and Russia, demand will drop about 22 percent. Output in China will slip 5 percent.

Steel demand in the U.S. is ''virtually non-existent,'' Dan DiMicco, chief executive officer of Nucor Corp., the second- largest U.S.-based steel producer by 2008 sales, said after Nucor announced the company's first quarterly loss on April 23.