Johnson Controls predicts record 2016 profits

NOW

Johnson Controls’ headquarters in Glendale.
Johnson Controls’ headquarters in Glendale.
Johnson Controls’ headquarters in Glendale.

Leaders at Glendale-based Johnson Controls Inc. predicted record profits and higher revenues in 2016 at its recent Analyst Day in New York City.

The company is in the process of spinning off its Automotive Experience business into a new, publicly traded company, which it now expects will be complete by Oct. 3, 2016. The new company will be based in Milwaukee.

“We expect higher revenues and record profitability in fiscal 2016 as we manage through the significant work required to split into two world-class companies after the end of this fiscal year,” said Alex Molinaroli, chairman and chief executive officer. “We believe our strategic and operating plans will continue to drive strong performance in all of our businesses as we firmly position both new companies for growth.”

For the 2015 fiscal year, Johnson Controls reported net income of $1.7 million, up from $1.3 million in 2014. Full-year revenue totaled $37.2 million, down from $38.7 million in 2014.

The company reported fourth quarter net income of $349 million, up from $309 million in the fourth quarter of fiscal 2014. Revenue totaled $8.7 billion in the quarter, down from $10 billion in the fourth quarter of 2014.

Molinaroli hinted at RSM’s 2015 Executive Summit in Milwaukee in October that the costs of spinning off the automotive segment will be significant next year, so revenue is not expected to reach record levels. However, on Analyst Day the company said it expected to post “higher revenues” in fiscal 2016.

Excluding the separation/transaction/integration costs and non-recurring items, Johnson Controls expects about 10 percent organic sales increases in both its Building Efficiency and Power Solutions divisions. The company anticipates diluted earnings per share will be about $3.70 to $3.90, up 8 to 14 percent year-over-year. And consolidated revenue is expected to be about $38.6 billion, up about 4 percent over 2015.

A 37 to 39 percent increase in Building Efficiency division sales is expected to be driven by the company’s recently completed Hitachi joint venture, as well as increased non-residential construction spending. In the automotive battery business, higher sales of Absorbent Glass Mat (start-stop) batteries are expected to drive a 9 to 11 percent increase in sales.

Johnson Controls believes Automotive Experience sales will decrease by 2 to 3 percent. The company expects automotive production increases of 11 percent in China, 2 percent in North American and a slight decrease in Europe. The China business in not reflected in the Automotive Experience revenue forecast because most of that business is generated by non-consolidated joint ventures.

Johnson Controls expects fiscal 2016 capital investments of about $1.3 billion, about $200 million higher than in fiscal 2015. Those capital investments will include investments in Absorbent Glass Mat batteries, China plant capacity and product line expansions in the Building Efficiency division.

“We are confident in our fiscal 2016 outlook as we continue to focus on execution and delivering on our commitments,” Molinaroli said. “Most importantly, we are creating two great companies, both with exceptionally bright futures, and positioned to lead in their respective markets. We expect both companies to deliver sustainable growth, improving margins and consistent capital returns resulting in compelling long-term value to our shareholders.”

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Molly Dill, former BizTimes Milwaukee managing editor.

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