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Apr 30, 2020
Donaldson Q3 2020 Earnings Report
Donaldson's Q3 2020 sales declined due to the COVID-19 pandemic, but cost controls mitigated the profit impact. The company maintains a strong financial position and ample liquidity.
Key Takeaways
Donaldson Company reported a decrease in sales and earnings for the third quarter of 2020, primarily due to the impact of the COVID-19 pandemic. However, cost control measures helped to mitigate the profit impact. The company's financial position remains strong with ample liquidity.
Third quarter sales declined by 11.7 percent, or 9.7 percent in local currency.
Operating margin decreased by 0.6 percentage points, while EBITDA margin was flat compared to the prior year.
Net earnings were $63.4 million, or $0.50 per share, compared to $75.2 million, or $0.58 per share in Q3 2019.
The company maintains a strong financial position with ample liquidity to support operational and strategic needs.
Forward Guidance
While the magnitude and duration of the impact from the COVID-19 pandemic on certain aspects of the Company’s financial performance remains uncertain, Donaldson expects May 2020 sales to be down about 24 percent, reflecting relative outperformance in replacement parts versus new equipment, and, on a regional basis, Asia Pacific sales are expected to be the strongest while sales in the Americas are expected to be the weakest, To maintain a strong financial position, which was further augmented with an incremental 364-day facility that provides an additional $100 million in liquidity, The pace of capital expenditures will continue to slow as strategic projects related to capacity expansion and research and development capabilities near completion, and Fiscal 2020 share repurchase will total 1.6 percent of outstanding shares, reflecting what has already been completed year-to-date through the third quarter.
Positive Outlook
- Replacement parts are outperforming new equipment.
- Asia Pacific sales are expected to be the strongest.
- The company will maintain a strong financial position.
- Liquidity was augmented with an incremental facility providing an additional $100 million.
- Fiscal 2020 share repurchase will total 1.6 percent of outstanding shares.
Challenges Ahead
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