Milwaukee-based Rexnord Corp. announced Tuesday it will exit its Rodney Hunt Fontaine product line, a business that accounted for roughly 2 percent of Rexnord’s revenue in fiscal 2016.
The company had sought to transition the Massachusetts-based water management valve and gate maker to “a less-vertically-integrated operating model,” but said in a statement announcing the decision it became clear those efforts “would not deliver acceptable near-term and longer-term returns.”
“We would like to thank our dedicated employees for their efforts to develop a sustainable model for RHF going forward, but we are convinced that the planned exit from this non-strategic product line will be in the best interest of Rexnord’s shareholders,” said Todd Adams, Rexnord president and chief executive officer.
Rexnord acquired Rodney Hunt in 2008 as part of the purchase of GA Industries. Fontaine was acquired in 2009.
A call to Rexnord seeking additional information on the exit was not immediately returned.
With the product line exit, the company also previewed its fourth quarter and fiscal year earnings. Including approximately $7 million in revenue from RHF, Rexnord is expecting to report $492 million in fourth quarter revenue, down 5.2 percent from the previous year. With RHF excluded, the company expects its core revenue for the year to be down 3 percent.
Diluted earnings per share for the quarter are expected to be between zero and 1 cent, down from 34 cents the previous year. Adjusted earnings are expected to be between 35 and 36 cents per diluted share.
Rexnord had expected the RHF business to generate $14 million in revenue for the quarter and have $0 in adjusted EBITDA. Instead, the business generated $7 million in revenue and a $10 million loss in adjusted EBITDA. For the full year the RHF business brought in $39 million and a loss of $21 million in adjusted EBITDA.
The RHF EBITDA figures do not include costs associated with exiting the business.
Rexnord had total revenue of $1.9 billion for fiscal 2016.
The company plans to report its full earnings after the market close on May 18, with a conference call the following day.
