Stanley Black & Decker reported Engineered Fastening organic revenues dropped 9% in the first quarter of 2020 as share gains were more than offset by lower global automotive light vehicle and general industrial production.

“As you would expect, Asia led the declines with auto being more impacted than general industrial customers,” stated CFO Donald Allan during a conference call.  “The automotive manufacturers were forced to make tough decisions to close their plants and began shutting them down in Q1, as humanitarian and economic crisis moved across the globe, leading to North American shutdowns late in March.”

Many Chinese auto plants have reopened at significantly lower volumes, Allan noted.  And most of the other auto manufacturers are planning to reopen North American and European plants within the next several weeks. The commercial model in Engineered Fastening is sound.

“We continue to partner with our customers on new content, which we believe will provide a pathway for share gains as production levels improve,” Allan added.  “We are prepared to ramp up once our automotive customers solidify their new production dates across Europe and North America.

“We are seeing that the hardest-hit businesses will be automotive and aerospace.  Both have seen OEMs shut down production. Our customers are at varied stages of restarting in Europe and the United States.”

Stanley Black & Decker’s auto fastening business is 25% CapEx-driven, with the remainder based on production, whereas its aerospace exposure is close to 90% commercial, with the vast majority of that tied to new-builds.

“We expect general industrial portion of fasteners to be somewhat less impacted as the customer base is diverse, and we serve some essential industries that have remained operational during this time.”

Overall Q1 sales fell 6% to $3.1 billion, as acquisitions (+2%) and price (+1%) were more than offset by volume (-8%) and currency (-1%).  Operating income declined 16% to $274.6 million, while net earnings were down 21.8% to $133.1 million.  Gross margin rate for the quarter was 32.7%.

The company’s cost reduction program, announced on April 2, is expected to deliver $1 billion in annualized cost savings. Measures include reducing employees, cutting compensation and taking advantage of raw material deflation.

In addition, the company is cutting capital expenditures and temporarily suspend acquisitions and share repurchases.  Web: StanleyBlack&Decker.com