United Technologies Corp. is cutting costs aggressively, particularly at its Carrier heating and air conditioning systems manufacturer as the business unit reels from the downturn in construction and transportation refrigeration, the chief executive officer said Tuesday.
Still, CEO Louis Chenevert said at the Electrical Products Group conference in Longboat Key, Fla., that he expects earnings growth next year for the industrial conglomerate, which makes elevators, jet engines and airline electrical systems. He backed the company’s earnings and revenue guidance.
United Technologies expects to cut selling and administrative expenses this year at Carrier by 15 percent from 2008, research and development by 20 percent, labor costs by 25 percent, capital spending by 35 percent and other cost reductions, Chenevert said at an investor analysts’ conference.
“Carrier is right sizing for this environment,” he said.
United Technologies said in March it expects operating profit at Carrier to drop this year by between $375 million and $425 million, down from $1.32 billion in 2008.
Throughout the corporation, United Technologies will realize $1 billion in cost savings this year, half from cost reductions such as travel restrictions and a hiring freeze and the rest from restructuring this year and in 2008. It has cut its work force by 18,000, or about 8 percent of its global labor force, Chenevert said.
“This is the most restructuring we’ve done in a decade,” he said. “It will make us more competitive when the economy recovers with less overhead and a more streamlined structure.”
United Technologies expects a one-time gain of $70 million in the second quarter from restructuring costs, Chenevert said.
United Technologies, which also operates jet engine maker Pratt & Whitney, aerospace manufacturer Hamilton Sundstrand, Otis elevator and other businesses is pursuing a previously announced $750 million restructuring program for the year.
Chenevert said he is “cautiously optimistic” that housing starts will begin to improve next year and that government rebates are spurring consumers to buy high-efficiency furnaces and air conditioning units.
He backed United Technologies’ 2009 earnings guidance of $4 per share to $4.50 per share and revenue of about $55 billion.
Analysts expect earnings to be $4.08 per share on revenue of $54.1 billion.
“While the environment remains challenging and we’re not relying on markets to help us out I am comfortable with our guidance,” he said. “It relies on easier compares in the second half and tough cost actions.”
Shares of UTX edged down 63 cents, to $52.35 in afternoon trading. (AP)
