Furon Cost-Cutting Strategy Produces 64% Increase in 3rd-Quarter Earnings : Comeback: The parts manufacturer has reduced its work force by 19% and is selling unprofitable businesses.
Furon Co., which makes rubber and plastic parts for manufacturers, posted greatly improved earnings for its third fiscal quarter in spite of a slight slip in sales.
The company said its strategy of selling off money-losing businesses and cutting costs is working.
Specifically, the work force of 2,300 people is 19% smaller than that of a year ago, and manufacturing floor managers have been given more authority to make decisions, which has made operations more productive, said Ron Bissell, a Furon spokesman. The company, based in Laguna Niguel, now employs about 450 people in Orange County.
For the quarter that ended Oct. 31, Furon posted a profit of $1.97 million, or 23 cents a share, a 64% increase from earnings of $1.2 million, or 14 cents a share, for the same period a year earlier. Quarterly sales were $76 million, down 1.8% from $77.4 million.
“They’re starting to get things back together,” said David L. Rose, a research analyst for brokerage L.H. Friend Weinress & Frankso in Irvine. For its fiscal year that ended in January, Furon had a loss of $22 million.
Rose said he expects investors to begin paying more attention to Furon as the economy picks up. In late October, the company’s stock was trading at about $11 a share. It closed Monday at $13.25, up 25 cents, on the NASDAQ market.
During the latest quarter the company also launched new products, increased its share of some markets and continued international expansion, J. Michael Hagan, Furon’s chairman and chief executive, said in a prepared statement.
Bissell noted that Furon produced new cable tubing products for the pollution control industry, which continues to grow, and made inroads with Boeing Co. and Douglas Aircraft Co. Furon makes interior parts for passenger planes, Bissell said, and is in a position to sell those parts to manufacturers that are moving from defense-related construction to commercial.
He said Furon bolstered its distribution network in Europe and continues to seek new customers in the Pacific Rim countries.
Earlier this year, the company sold two unprofitable divisions--one in Santa Ana and another in Houston. Four more are for sale, Bissell said, and there is hope that the deals will be completed by the end of the company’s fiscal year in January.
For the latest nine months, the company earned $5.94 million, or 69 cents a share, contrasted with $2.97 million, or 35 cents a share, for the same period a year earlier. Nine-month sales were $229.5 million, down slightly from $233.2 million.
