Federal-Mogul achieves record sales results for eighth consecutive quarter

In a struggling economy, any growth is good. And to report the eighth consecutive quarter of year-over-year growth is better than good — it's excellent. But that's just what Federal-Mogul Corporation reported recently, adding that second quarter sales have seen a record $2 billion dollars and net income has reached $90 million.

"We experienced another record sales quarter with strong earnings performance. We have anticipated and reacted to changing market conditions including a market downturn in mature automotive markets.  We implemented numerous successful actions to offset macro-economic factors and benefited from our strong market, customer and product diversification," says José Maria Alapont, Federal-Mogul's president and chief executive officer.

Sales for the three-month period ending June 30, 2008, were a record $1,995 million, an increase of 13 percent, compared to $1,763 million for the same period a year ago.  Federal-Mogul reported a gross margin of $396 million or 19.8 percent of sales, compared to $322 million or 18.3 percent of sales, representing an increase of $74 million, or 23 percent over the prior year. Federal-Mogul’s Operational EBITDA1 was $257 million or 12.9 percent of sales, compared to $212 million or 12.0 percent of sales during the same period in 2007, representing an increase of $45 million or 21 percent.  The company recorded net income of $90 million or earnings per share of $0.90, up from $4 million in second quarter 2007. 

"Federal-Mogul's global market presence and customer base is well diversified. We serve over 250 vehicle platforms and over 700 vehicle powertrain programs. No single customer represents more than six percent of our global revenue and over 60 percent of our revenue is generated from sales outside the United States and Canada," Alapont adds. "Further, we have a significant global aftermarket business with well recognized leading brands and we generate over 10 percent of our revenue from a global commercial and industrial customer base.  This diversification strengthens our performance and compensates for market and customer volatility."

Federal-Mogul reported sales of $1,995 million for the three-month period ending June 30, 2008, up from $1,763 million in the same period of 2007. Sales increased by $232 million or 13 percent and were positively impacted by favorable foreign exchange of $125 million.  The company has reported year-over-year quarterly sales increases for eight consecutive quarters as a result of expanding sales to customers in Europe, Asia and South America.

Gross margin for the quarter was $396 million or 19.8 percent of sales, as compared to $322 million or 18.3 percent of sales during the same period a year ago, an increase of 23 percent or $74 million. The automotive market has faced decreasing regional production volumes, rising energy prices, inflationary raw material costs and other economic challenges. The company effectively offset the impact of these and other macro-economic factors through profitable incremental revenue from new business contracts and improved productivity from operations. Gross margin was also favorably impacted by reduced depreciation and foreign exchange.

Selling, General and Administrative (SG&A) expenses were reduced to 10.6 percent of sales during the quarter, compared to 12.1 percent of sales in the same period of 2007. The company realized a reduction in SG&A expense despite an adverse foreign exchange impact of $11 million.

Federal-Mogul's Operational EBITDA for the second quarter was $257 million, a 21 percent or $45 million increase, compared to $212 million during the same period in 2007. The company's net income was $90 million in the second quarter 2008, with earnings per share of $0.90, compared to $4 million of net income in second quarter 2007.

Federal-Mogul continued to make progress executing its sustainable global profitable growth strategy by growing in emerging markets and strengthening its presence in mature markets. The company achieved 50 percent growth in sales to customers in BRIC (Brazil, Russia, India and China) markets during the quarter. The company recently completed the successful launch of a new powertrain component plant in Araras, Brazil and launched its new portfolio of wipers and brake pads in the Russian market. 

"Federal-Mogul's results demonstrate the solid foundation we have put in place through our sustainable global profitable growth strategy.  Global customer, regional and product portfolio diversification, together with leading product technologies and brands, development in best cost locations and strong commitment to customer service differentiate Federal-Mogul and contribute to our strong performance in this challenging market environment," Alapont says.

For more information about Federal-Mogul, visit the company's Web site.