Timken’s revenue fell by 19.7pc to $803.5mn in Q2 2020 compared with the same period a year ago due to the COVID-19 related economic slowdown and unfavorable currency exchange rates.
The negative effect on sales was cushioned by acquisitions and cost-saving measures, the company indicated in its second-quarter earnings report. The company noted that the uncertainties in the current market prevented it from making any sales and earnings forecasts for H2 2020.
Timken proceeded to reduce net debt by $200mn compared with the debt level at the end of Q1 2020 despite the lower revenue and net income. It expects to continue to reduce net debt throughout 2020.
The firm is expanding cost reduction initiatives to align the internal cost structure with the present demand expectations and improve margins. The cost reduction initiatives are expected to result in savings of $50-60mn in H2 2020 which will narrow or remove the net income gap in the next two quarters against the same period last year.
Timken’s process industries segment decreased sales by 9pc to $461mn in Q2 2020 while sales fell more sharply by 30.6pc in the same period to $343mn in its mobile industries segment compared with the previous year.
The US component maker’s net income dropped by 33.1pc to $61.9mn in Q2 2020 from $92.5mn in the same period last year, while volumes of the material sold declined in the midst of weaker steel demand, input material costs, personnel compensation. Logistics costs also declined in Q2 2020, thereby, limiting the effect on net income despite lower sales revenue the company indicated.
Timken manufactures power transmission components and engineering bearings that are used across industries including energy, industrial, and automotive.