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By Susan Kelly
CHICAGO, Nov 13 (Reuters) - Auto parts maker ArvinMeritor Inc. on Thursday said quarterly earnings were knocked lower by higher steel prices, product-launch costs and restructuring expenses.
But results beat the company's lowered profit forecast, sending shares up by more than 7 percent on the New York Stock Exchange.
"The operating numbers were a couple of pennies better (than expected)," said David Leiker, analyst with Robert W. Baird & Co.
ArvinMeritor benefited from cost cuts and higher sales driven by acquisitions.
Troy, Michigan-based ArvinMeritor, which is waging a hostile takeover bid for larger rival Dana Corp. , said net income in the fiscal fourth quarter ended Sept. 30 declined to $33 million, or 48 cents a share, from $41 million, or 61 cents a share, a year ago.
Excluding a charge of 6 cents a share for an accounting rule change, the company said it earned 54 cents a share, 3 cents above the upper end of its previously projected range for earnings of 48 cents to 51 cents a share.
The U.S. auto industry is struggling amid stiff global competition and production overcapacity. ArvinMeritor said it would respond to the tough market conditions by further restructuring its work force and facilities.
ArvinMeritor Chairman and Chief Executive Larry Yost expressed disappointment with the company's full-year performance.
"Although we are pleased with the progress we made in fiscal-year 2003, our financial results did not achieve the higher expectations set by our management team," he told analysts and investors on a conference call.
Yost said the company expected to improve its performance in 2004, based in part on early signs of a U.S. economic recovery and evidence that some of its markets are improving.
The maker of axles, brakes, exhaust and suspension systems forecast North American production of heavy-duty trucks would rise 35 percent next year, to 220,000, and projected light-vehicle output would dip 1 percent to 15.8 million.
The company said sales in the fourth quarter rose 13 percent to $1.98 billion, but would have fallen 1 percent excluding acquisitions and the impact of the weaker dollar.
Sales declined by 3 percent in North America and Europe but rose more than 20 percent in the rest of the world, driven primarily by gains in Asia.
ArvinMeritor also stood by its earnings forecast of 25 cents to 30 cents a share, on sales of $2 billion, for the first quarter, and $2.20 to $2.40 a share for full-year 2004.
Yost said ArvinMeritor remained committed to a Dana acquisition, calling the two companies a "perfect fit" and a "logical business combination."
"In order to thrive in the ever-changing automotive industry, I believe the supply base is going to need to consolidate. It is inevitable. Suppliers cannot just restructure and cut costs to create long-term value," he said.
Shares of ArvinMeritor closed up $1.27, or 7.3 percent, at $18.76 on Thursday.