“Severe deceleration in demand”

Source: ControlGlobal.com

By Andrew Bond, Industrial Automation Insider

Feb 27, 2009

Just how much the discrete sector of the automation industry is now hurting can be judged from the first quarter figures from Rockwell Automation. Revenue for the quarter was down 11% on the same period in 2008 at $1.2 billion, while segment operating earnings were down more than 30% at $178 m. And, to judge from chairman and CEO Keith Nosbusch’s comments, it could have been worse without the process side of the business. What Nosbusch’s comments underline is just how sudden and dramatic the downturn has been. “After a very solid October, we experienced a severe decline in customer demand during the second half of the quarter,” he explained. “Deteriorating economic, financial and credit market conditions affected all regions and most industries, aggravated by an unusual number of customer plant shutdowns. As a result, our performance in the first quarter was below our previous expectations. In the face of this challenging environment, we nevertheless are encouraged by the continued success of our process business and 10% organic growth in Latin America.”

Architecture and Software

Most adversely affected was again the Architecture & Software segment of the business, which saw sales fall by 12% to $506 million, operating earnings fall 26% to $110 million and operating margin decline from 25.7% to 21.6%. Sales at Control Products & Solutions fell 9% to $683 million, but operating earnings were down 38% at $68 million and operating margin was down from 14.5% to just 10.0%. Seriously worrying, but surely not sufficient to give credibility to the suggestion in one quarter that Rockwell is preparing to dispose of the software business.

Nevertheless, Nosbusch doesn’t expect much improvement in the foreseeable future, citing “a significant deceleration in customer demand” and predicting “a revenue decline between 12% and 17% in fiscal 2009, excluding the effects of currency.”

Much of this was, of course, anticipated earlier in the quarter with the euphemistically entitled “restructuring actions,” for which Nosbusch gives himself some credit. What he isn’t prepared to do is change the long-term strategy. “We remain committed to executing our growth and performance strategy and will preserve investments in core technologies and the globalization of our business.” That is, presumably, unless someone else intervenes.

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