NN Inc. (USA; NASDAQ: NNBR) released results for second quarter 2008, ended June 30, 2008.
NN is the world's largest dedicated manufacturer of bearing components -- antifriction bearing balls, rolls, seals and retainers -- for a wide variety of bearing manufacturers worldwide. The company also produces highly engineered plastic components to customer specification.
Due to its position, NN is considered both a long-lead indicator and bellwether for the international bearing industry as a whole.
Sales in first quarter were USD $122.2 million, up 14% from $107.3 million in 2007. Of the $14.9 million gain, NN said $10.4 million was due to foreign exchange currency effects, while $4.5 million came from organic sales growth across the core metal bearing components business.
COGS in the first quarter dipped slightly from 2007, to 79.6% of sales from 80.0%. NN credited its Level 3 cost reduction program with offsetting some significant increases in direct and indirect manufacturing costs, labor, and energy expenses.
Net income for second quarter was $9.2 million, reversing 2007's loss of $10.4 million. Excluding one-time effects, second quarter was $5.0 million, from $3.1 million in 2007.
James Dorton, NN's VP and CFO, said: "During the second quarter, we continued to benefit from improved performance at three operations: Whirlaway, Slovakia and China, that experienced profitability problems in 2007. Each of these operations recorded improved operating margin and profitability as compared to the prior year. This improvement has resulted mainly from operational improvements at all three locations as well as increases in production volumes in Slovakia and China. Additionally, our core Metal Bearing Components operations continue to perform well and are running slightly ahead of our business plan through the first half of the year. Our Plastics and Rubber operations had lower than expected sales and earnings due to the continued reduction in North American automotive demand."
Rock Baty, Chairman and CEO, said: "Given the current global economic uncertainty, we are encouraged by the strong results from our operations in both the second quarter and the first six months of 2008. The demand from our customers for the second quarter continued to reflect strong global industrial end markets in both North America and Europe. Automotive demand in Europe was at healthy levels and essentially consistent with the first quarter of the year. As a result, our core Metal Bearing Components operations in both the U.S. and Europe experienced good performance, exceeding our beginning of the year forecast for both revenue and earnings. Our Level 3 program continued to deliver excellent results, offsetting significant global inflation we experienced in energy and steel related costs. In North America, our Rubber, Plastics and Precision Metal operations were negatively impacted by the continuing reductions in North American automotive demand during the second quarter."
"Looking forward," Mr. Baty commented, "we anticipate overall good levels of industrial end market demand in North America and Europe continuing for the remainder of 2008. However, we will experience the impact of a significant acceleration of reduced North American automotive demand for the last half of 2008. In addition, European automotive demand is forecasted to weaken over the last half of 2008, although not at the current rate of decline seen in North America."
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