(Reuters) - Honeywell International Inc HON.N on Friday reported a better-than-expected quarterly profit as cost controls and higher demand for its warehouse automation equipment helped cushion a sharp decline in its main aerospace business.
The COVID-19 pandemic has dealt a heavy blow to Honeywell’s higher-margin commercial jet spares business, crushing demand as airlines stored or retired thousands of planes during lockdowns, but boosted its automation equipment unit as online shopping surged during the crisis.
The second quarter was challenging, but Honeywell aggressively managed costs and drove sales growth where demand was strong, Chief Executive Officer Darius Adamczyk said.
The diversified U.S. manufacturer said orders in its automation equipment unit, which counts Amazon.com Inc AMZN.O among its customers, rose by triple digits to $1.2 billion in the quarter.
Sales in the aerospace unit, which makes parts for planes produced by Boeing Co BA.N and Airbus SE AIR.PA, fell about 30% to $2.54 billion. About 40% of the unit's sales came from the jet spares business last year.
Several analysts have warned that maintenance spending by airlines may not fully recover to 2019 levels until 2023, unless a vaccine is found. (bit.ly/3jCD9J4)
Honeywell said it expects its third-quarter sales to fall more than 15%, compared with analysts’ expectation of a decline of 16.3%, according to IBES data from Refinitiv.
The company saved $500 million in costs in the second quarter by cutting board and executive pay and cancelling merit increases across the enterprise, while reigning in indiscretionary expenses and other costs.
It also raised its cost savings target for 2020 to a range of $1.4 billion to $1.6 billion, up from $1.1 billion to $1.3 billion.
On an adjusted basis, Honeywell earned $1.26 per share, beating analysts’ estimates of $1.21 per share.
The company’s net sales fell about 19% to $7.48 billion, but topped expectations of $7.29 billion.
Reporting by Ankit Ajmera in Bengaluru; Editing by Sriraj Kalluvila and Shinjini Ganguli
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