Racine-based Modine Manufacturing nearly posted a profit for the full year after it reported net income of $7.8 million for the fourth quarter.
The maker of thermal management systems for vehicles, HVAC and industrial equipment ended fiscal 2016 with a $1 million loss after reporting a $22.8 million profit in 2015.
The company’s year included a $22.5 million loss in the second quarter after it recorded a $39.2 million loss from a lump sum pension payment intended to reduce the size, risk and volatility associated with its pension plan.
For the year, revenue was down 9.6 percent to just under $1.4 billion. That included $343.7 million in revenue during the fourth quarter, a decrease of 5.3 percent from the same time in 2015.
The company’s results were hampered by weakness in off-highway, commercial vehicle and building HVAC markets, while the automotive segment has been a bright spot. Revenue was down in the Americas, while it was up slightly in Asia and Europe.
The $7.8 million profit in the fourth quarter was an improvement from a $3 million loss in 2015. The company reported diluted earnings per share of 16 cents, up from a loss of 7 cents per share last year.
“We are pleased that we were able to deliver significant earnings improvement in the fourth quarter despite the headwinds across many of our end markets that continue to challenge the top-line,” said Thomas Burke, Modine president and chief executive officer. “Our strong operating performance was driven by continued cost-control during the quarter, and resulted in year-over-year improvements in gross margin and adjusted operating income.”
The company is targeting $40 million to $50 million in gross cost reductions through its Strengthen, Diversify and Grow initiative. About 50 percent of the savings are expected to come through procurement improvements, with $15 million already identified and negotiated, 25 percent from selling, general and administrative and personnel-related reductions and 25 percent from improving the manufacturing footprint.
Burke said the company had realized $5 million in annual savings from SG&A actions already, including limited reductions, not filling some salaried positions and 65 early retirements.
The company has recognized $1.8 million in manufacturing savings and expects another $5 million to $10 million in fiscal 2017. The activities have included closure of the Washington, Iowa facility, expansion of the Nuevo Laredo, Mexico facility and expansion of a facility in Hungary.
For the year, earnings were 3 cents per diluted share, down from 45 cents in 2015. Adjusted earnings for the year were 76 cents, up from 63 cents last year. The adjustment excluded pension settlement charges, restructuring expenses and certain other items.
The company projected its fiscal 2017 revenue would be down 1 percent to up 3 percent with adjusted earnings per share between 77 and 87 cents.
Burke noted the company was recently awarded a contract for cooling modules on Oshkosh Defense’s joint light tactical vehicle contract with the U.S. Army and Marine Corps. He also said the company received a bus contract and said there is also potential for growth in electric and hybrid vehicles.
“If you look at the trend, it went from a fad, to maybe a question mark of where is this market going to a number of entrants now,” Burke said of electric vehicle market. “We feel very well positioned to really capitalize on this trend.”