KWHIY Kawasaki Heavy Industries Ltd (PK)

Briggs & Stratton Corp. (BGG) announced a 9% (1 cent) hike in its quarterly dividend to 12 cents. The increased dividend will be paid on October 1, 2012, to stockholders of record as of August 20, 2012.

The dividend hike is expected to be well received by the shareholders as the company increased the dividend payout after a hiatus of three years. Back in 2009, the company had halved its dividend to the current level of 11 cents in order to preserve cash during the recession.

Briggs & Stratton reported adjusted net income per share of 99 cents in the third quarter of 2012 compared with $1.02 per share in the year-ago quarter. Sales for the quarter dipped 0.3% year over year to $720.1 million, from the year-ago quarter due to weaker sales in Europe arising from the uncertain economic environment, which has impacted consumer spending. At the end of the third quarter, Briggs & Stratton had cash and cash equivalents of $16.4 million.

The soft housing market in the U.S. and lower demand in Europe have taken its toll on the company’s results. Since 2004, the U.S. lawn and garden market has declined over 33%. The company has been taking steps to reconfigure and reduce its capacity and costs, diversify its portfolio and expand in other regions of the world. The company also announced further cost reduction initiatives in the third quarter.

Among other initiatives, production facility of horizontal shaft engines will be shifted from Auburn, Alabama to its existing production facility in Chongqing, China or sourced from third parties in Southeast Asia. The company had previously shifted smaller horizontal shaft engines to the Chongqing plant in 2007 where these types of engines can be manufactured more competitively.

Portable generators will be continued to be manufactured in Auburn this year and the company is evaluating alternatives with respect to manufacturing, assembling or sourcing cost effective portable generators beyond 2012. The company also intends to reduce its headcount by approximately 10% in fiscal 2012.

Earlier in January 2012, the company had announced its plans to reduce manufacturing capacity by closing its Newbern, Tennessee and Ostrava, Czech Republic plants as well as the reconfigure its plant in Poplar Bluff, Missouri. The total pre-tax costs of these actions are expected to be $60 to $70 million, of which approximately $45 to $50 million of total charges will be recognized in fiscal 2012.

The company anticipates annualized pre-tax savings from these restructuring actions to be $30 to $35 million in fiscal 2013 and $40 to $45 million in fiscal 2014.

For fiscal 2012, the company expects adjusted net income in the range of $58 million to $68 million, or $1.15 to $1.35 per share.  Net sales for fiscal 2012 are expected to grow by 2% to 4%, depending on the level of recovery of consumer sales of lawn and garden equipment in the U.S.  The Zacks Consensus Estimate is currently pegged at $1.24 for fiscal 2012 and at 28 cents for the fourth quarter.

Milwaukee, Wisconsin-based Briggs & Stratton is the world's largest producer of gasoline engines for outdoor power equipment. Its wholly owned subsidiary Briggs & Stratton Power Products Group, LLC is a top manufacturer of portable generators and pressure washers, and is a leading designer, manufacturer and marketer of lawn and garden and turf care through its Simplicity, Snapper, FerrisMurray and Victa brands.

Briggs & Stratton competes with Honda Motor Co., Ltd. (HMC) and Kawasaki Heavy Industries Ltd. (KWHIY). Briggs & Stratton retains a short-term Zacks #3 Rank (Hold).

 
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