Moody’s Investors Service, an operating segment of Moody’s Corporation (MCO), has upgraded the credit outlook of Tenneco Inc. (TEN) to “positive” from “stable.” The rating upgrade was backed by Tenneco’s capability to display a continuous improvement in its financial health.
Under the present global restructuring plan (which includes flex operations at plants, plant closures and the elimination of 1,100 positions — 500 salaried and 600 hourly — worldwide), Tenneco expects to generate $58 million in annualized cost savings.
Working capital improvements, particularly in inventory, have helped the company improve cash flow. In 2009, the company’s cash flow from operations increased to $241 million from $160 million in the year-ago period. In addition, capital spending was reduced by 47% to $118 million in the year.
As of December 31, 2009, Tenneco’s leverage ratio under its senior credit facility was 3.43, below the maximum level of 6.60. The interest coverage ratio was 2.48, above the minimum of 1.60.
Tenneco drove past the Zacks Consensus Estimate by one cent per share with a profit of $7 million or 13 cents per share (before special items) for the fourth quarter of 2009 in sharp contrast to a loss of $24 million or 51 cents (before special items) per share a year ago.
Adjusted EBIT (earnings before interest, taxes and non-controlling interests) improved significantly to $57 million from a loss of $7 million in the prior-year quarter. This was attributable to operational improvements including restructuring and material cost management, volume growth in markets such as China and South America and favorable currency.
Excluding substrate sales and the currency fluctuation, revenue in the quarter rose 5% to $955 million driven by stronger original equipment (OE) production volumes in China and South America and higher aftermarket sales in North America.
Tenneco expects to achieve a 5-year average compounded annual OE revenue growth rate of 18% to 20% through 2014. This is driven by increasingly stringent and broader emission regulations that are being implemented globally, which will accelerate growth in the on-road and off-road commercial vehicle markets.
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