NEW YORK Timken Co. has yet to see signs of an anticipated recovery heading into the second half of the year, executives said.
Customers who had overstocked in 2012 had been expected to use much of their inventory by the second half of 2013 and then begin restocking, leading to a stronger second half, but that has not yet occurred, executives told investors during the companys quarterly earnings conference call.
"By now we had expected to see signs of a robust recovery leading into the second half of the year," Timken president and chief executive officer James W. Griffith said. "Instead, we see slow growth into the second half. We now anticipate a limited recovery in the second half but are well positioned to leverage a rebound.
Canton, Ohio-based Timken reported lower earnings and sales in the quarter, but still sustained double-digit operating margins despite sluggish economic conditions.
"We continue to perform very well, maintaining double-digit operating margins despite weak demand lingering in many global markets," Griffith said in a statement. "Although our outlook for the year now reflects a more modest market recovery in the second half, we continue to expect strong financial performance for the remainder of the year."
The steel and industrial bearings manufacturers steel segment sales totaled $354.1 million, down 29.2 percent from $499.8 million a year earlier, generating earnings before interest and taxes (Ebit) of $42.3 million, down 52.4 percent from $88.9 million, Timken said.
The steel segment results reflected reduced shipments to the industrial and oil and gas sectors, partially offset by improved sales to the mobile on-highway sector, it added.
Timken during the quarter completed its buy of Standard Machine, which provides new gearboxes and gearbox service and repair, particularly aimed at customers in the Canadian mining sector, and Smith Services, expanding its industrial service capabilities into power generation, paper, steel, nuclear and mining.
Steel margins in the current quarter will be impacted by upcoming maintenance at the companys Harrison and Faircrest steel plants in Ohio, as well as volume decreases of at least 15 percent for the year, partially due to tepid demand, Timken said.