CLEVELAND-- Remaining in the NACCO Industries fold, Hamilton Beach registered a strong third quarter and appears to be ready for what is shaping up to be an uncertain retail environment for the remainder of the year.
The housewares unit, which NACCO decided not to spin off after all, registered net income of $6.3 million in the third quarter, an increase of 26 percent over the third quarter of 2006. Hamilton Beach's profit pickup easily outperformed NACCO as a whole, which posted net income of $21.1 million for the third quarter, up 12.2 percent from the third quarter of last year.
Third-quarter sales for Hamilton Beach totaled $140.4 million, 3.2 percent ahead of last year's third quarter.
In a Webcast to financial analysts, Alfred Rankin, NACCO's chairman, president and chief executive officer, said Hamilton Beach enjoyed both improved gross margins and reduced selling, general and administrative expenses in the quarter. Indeed, Hamilton Beach's operating profit jumped 51.1 percent in the quarter to $14.2 million. Hamilton Beach and Kitchen Collection, both of which are part of the NACCO Housewares Group, "are operating quite well," Rankin told the analysts.
Rankin also said Hamilton Beach has gained "important retail positions" that will help it weather what could prove to be a difficult holiday season. "Current economic factors affecting consumers, such as high gasoline prices, a declining housing market and mortgage concerns, create a challenging environment at the retail level," he said. "We still expect improvements in the last quarter, which is generally a strong season for the housewares business."
Rankin also said new products in the Hamilton Beach line will offer revenue opportunities for the brand through the fourth quarter and into 2008. In addition, it has focused on cost-reduction and margin-enhancement programs, and has completed its move to exclusively contract manufacturing.
"Hamilton Beach should be a sound cash-flow generator in the future," Rankin said. "U.S. market conditions are unclear at this point, but we will be addressing any future issues from a position of strength."
NACCO decided against going through with the Hamilton Beach spinoff in late August. Rankin said it was called off because of "unsettled market conditions, and not just with equities but with debt as well. These are tricky times in the financial markets. There are issues with smaller-company valuations when you have a spinoff. These issues are still unsettled. You see it every day with disclosures about subprime mortgages, specialized investment vehicles and their implications for banks." -- David Gill
