
In the fourth quarter, GAAP net sales decreased by 8% to US $4.6 billion, and basic sales decreased by 9%, in line with management expectations. For the whole year, the net sales volume of GAAP was 16.8 billion US dollars, down 9%; the basic sales volume decreased by 8%, which was also in line with the management's expectation.
GAAP earnings per share in the fourth quarter was $1.20, up 3% year-on-year; adjusted earnings per share (excluding restructuring and specific tax incentives) was $1.10, down 4%. The annual GAAP earnings per share was $3.24, down 13% year-on-year, higher than the expected value of $2.80 to $2.95; the adjusted earnings per share was $3.46, down 6%, higher than the expected value of $3.20 to $3.35.
Operating cash flow was strong in the quarter, up 2% to US $1.23 billion and US $3.08 billion, an increase of 3%.
Free cash flow was strong in the quarter, up 2% to US $1.02 billion and US $2.55 billion, up 6% for the whole year.
The restructuring and related measures of US $73 million were launched in this quarter, totaling US $304 million for the whole year. We continued to actively implement the comprehensive cost replacement plan to restore the previous adjusted EBIT margin.
It has achieved 64 consecutive years of dividend growth and plans to announce a dividend increase of 2 cents in 2021 after today's board meeting.
St. Louis, Missouri (November 3, 2020) - Emerson (New York Stock Exchange: EMR) today announced the company's fourth quarter and full year results for the fiscal year ended September 30, 2020.
GAAP net sales fell 8% in the fourth quarter, of which basic sales fell by 9%. Currency translation had a negative impact of 1%. The overall decline in sales was in line with the management's expectations, with the performance of automation solutions at the low end of expectations, while commercial and residential solutions were at a high level. Overall, the company's business demand in the North American market is still the most challenging, with a decline of no more than 20% (mid teens). The European market showed a medium single digit decline, while the Asian, Middle East and Africa markets recovered strongly with low single digit declines.
Emerson's fiscal year 2020 ended with an 11% decline in the base order rate for the three-month tracking period in September, in line with previous expectations for the second half of the year, as strong momentum in the residential market, life sciences, healthcare and food and beverage sectors was offset by continued weak demand from most other processes and discrete industries. It is worth noting that basic orders for commercial and residential solutions increased by 6% in the three-month tracking period, boosted by the resumption of growth in residential and large retail business and cold chain business orders.
The gross profit margin in the fourth quarter was 41.3%, down 150 basis points year on year, mainly due to the deleveraging of sales volume and portfolio effect. The profit margin before tax was 16.8%, while the profit margin before interest and tax was 17.7%, up 20 basis points and 30 basis points respectively. Excluding restructuring and related expenses, the adjusted EBIT margin was 19.3%, up 80 basis points, thanks to the accelerated implementation of cost reduction measures.
Based on GAAP, earnings per share for the quarter was $1.20, compared with $1.10 per share after adjustment. Earnings for the quarter benefited from continued restructuring and cost cutting initiatives.
Operating cash flow was $1.23 billion, up 2% year-on-year. The operating cash flow for the whole year was 3.08 billion US dollars, an increase of 3%. Free cash flow increased by 2% to US $1.02 billion in the quarter, resulting in a free cash flow conversion rate of 140%. The annual free cash flow was US $2.55 billion, an increase of 6%; due to the strict operation and implementation of the two business platforms, the conversion rate of free cash flow reached 128%.
"This year's performance has reversed significantly since March, as the new crown epidemic has hit all of our key markets." David n. Farr, Emerson's chairman and chief executive, said. "Despite unforeseen and rare challenges and economic environment, Emerson has made relatively adequate preparations and adjustments. As we said on investor day in February 2020, we have long been focusing on cost control measures and making annual plans for slow growth. In the face of increased uncertainty and economic stagnation, our well-developed regionalization strategy - to maximize the sourcing, manufacturing and distribution of products and solutions in regional end markets - helps to maintain the integrity of our supply chain. Despite the challenges, we still exceeded our adjusted financial expectations for the second quarter in terms of sales, EBITDA and cash flow.
"We focus on ensuring the safety of water, safety and safety of our customers, as well as the safety and safety of our customers, and the safety and safety of our customers, and our business team focus on safety, safety and safety of our customers. I am very proud that our staff have the courage to meet the challenges and spare no effort to help our customers tide over the difficulties. As we enter the new financial year, we still have a lot to shoulder, but I want to thank our employees, customers, shareholders and board of directors for their strong commitment and support and for working with us through this turbulent period. "
Despite the fact that novel coronavirus pneumonia has not yet subsided, Emerson global team has been able to experience pro, safe and effective business in the current environment. All Emerson's offices and facilities are in normal operation, and employees are working safely and normally. "
Business platform performance
Automation solutions net sales fell 11% in the quarter, while base sales also fell 11%. Underlying sales fell 23% in the Americas and more than 20% in North America. Despite growth in life sciences, food and beverage and semiconductors, there was continued widespread demand.
Basic orders for the three-month follow-up fell 19% in September, reflecting continued weakness in most end markets except life sciences, healthcare, food and beverage and semiconductors. Geographically, the Americas continued to face challenges, down nearly 30%. Asia, the Middle East and Africa were down 11%, while Europe was down 8%. However, orders from China increased by 2%. Importantly, business inventory was converted earlier than expected, with a decrease of $400 million compared with the previous quarter, and the balance was about $4.7 billion. Overall, we believe that the automation solutions business has reached the bottom of the demand curve and is still hovering at the bottom. While the demand environment appears to be stabilizing, there is no clear sign of a pick-up in demand in key North American markets.
The EBIT margin of the business decreased 140 basis points to 17.0% as cost measures and price cost gains were offset by volume deleveraging and portfolio effects. Excluding restructuring and related expenses, the business adjusted EBITDA margin decreased by 80 basis points to 18.7%, while the business adjusted EBITDA decreased by only 20 basis points to 23.5%. Restructuring and related initiatives totalled $52 million in the quarter and $244 million in the whole year.
Net sales of commercial and residential solutions fell 3% in the quarter, and basic sales also fell 3%. Underlying sales fell 1% in the Americas, reflecting improvements in residential and large retail channels. Similarly, basic sales in Europe fell slightly by 1%, offset by continued strong demand for heat pumps due to sustainability regulations and customer technology preferences. Base sales in Asia, the Middle East and Africa fell 13%, with China showing a low double-digit decline.
The 6% increase in basic orders in the three-month tracking period in September reflects a sharp rebound in the housing market and an initial recovery in the cold chain market. Meanwhile, as we enter the first quarter of 2021, the precision tools market remains relatively weak, but is improving.
Geographically, the North American market grew by 12% with a sharp rebound in the residential and large retail markets. In addition, the cold chain market showed signs of stabilizing. Orders fell 9% in Asia, the Middle East and Africa, while orders in China fell in low double digits. Demand for heat pump solutions continues to grow due to sustainability regulations and customer technology preferences, with European orders up 8%.
After business adjustment, EBIT margin decreased by 10 basis points to 20.7%, as deleveraging was effectively offset by cost cuts and price cost benefits. Excluding restructuring and related expenses, the business adjusted EBIT margin increased by 50 basis points to 22.1%, while the business adjusted EBITDA increased by 120 basis points to 26.6%. Restructuring and related initiatives totalled $21 million in the quarter and $52 million in the whole year.