Johnson Controls Inc. ( JCI ) has signed an agreement to form a joint venture (JV) with MAC S.A., an automotive battery manufacturer in Yumbo, Colombia. The JV will sell lead-acid batteries in the Central and South American regions.
Johnson Controls’ batteries are well known in Latin America. It markets its batteries under Heliar, VARTA, LTH and OPTIMA in the region. However, the JV will help the company to accomplish two strategic objectives of its Power Solutions business.
No doubt, the JV will support the company strengthen its position in the fast-growing emerging markets. Secondly, it will help it gaining vertical integration in the lead business, as MAC owns a recycling facility in Yumbo, Colombia , apart from manufacturing facility producing batteries. The Yumbo facility currently recycles 30,000 tons of lead annually, which is equivalent to 3 million batteries per year.
Recently, Johnson Controls announced its plan build a third automotive battery plant in China by investing $118 million. The 30,000 square-meter plant, located in Fuling, which is in the central part of Chongqing , will manufacture automotive lead-acid batteries using Power Solutions technologies of Johnson Controls, including the patented PowerFrame grid technology.
The plant will have an annual production capacity of 6 million batteries. The company will perform the groundbreaking for the plant in January 2011 and production is scheduled to begin a year after.
Johnson’s existing two automotive battery plants are located in Shanghai and Changxing. Among these, the automotive battery plant in Changxing is yet to launch production in early 2011 with an annual capacity of 8 million batteries.
Together, these three plants are expected to produce more than 18 million automotive batteries annually within three years. In late 2010, the company plans to locate its fourth automotive battery plant in the northern region of China , with an annual production capacity of 6 million batteries. By 2015, the company plans to install annual capacity of 30 million batteries in the country.
Johnson Controls showed a profit that more than doubled to $367 million or 54 cents per share in the third quarter of its fiscal 2010 ended June 30, 2010, from $154 million or 25 cents per share in the year-ago quarter (all excluding non-recurring items). However, the company barely missed the Zacks Consensus Estimate by 1 cent per share.
The improvement in earnings was attributable to higher sales in each of its segments, driven by recovery in the global markets. Net sales in the quarter rose 22% to $8.54 billion, exactly meeting the Zacks Consensus Estimate.
Despite the strong results and notable contract wins, the company’s results can be negatively affected by raw material/price squeeze and poor performance by the Building Efficiency segment on the back of a worsened residential market. As a result, the company maintains a Zacks #4 Rank (Sell) on its shares for short term (1–3 months).
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