By Ted Mann and Angela Chen
United Technologies Corp. cut its 2015 sales and profit
forecasts as the strengthening dollar takes a bite out of overseas
sales of its jet engines, elevators and other heavy equipment.
The company cut its 2015 sales expectations by $1.5 billion, to
a range of $65 billion to $66 billion, and said its earnings would
be hurt by foreign-exchange effects.
"It really is one word, and that's 'currency,' that we're
focused on," Chief Executive Greg Hayes said in an interview.
United Technologies is emerging from an abrupt leadership change
at the end of last year when longtime Chief Executive Louis
Chenevert retired amid concerns from directors that he was too
disengaged with the details of the conglomerate's operations. Mr.
Hayes, who had been chief financial officer, took over as CEO.
The executive shuffle comes as the company is facing a
challenging few years in some of its core businesses. Pratt &
Whitney is in the process of ramping up production of a new jet
engine that will weigh on profit margins for several years. And its
Otis elevator unit is struggling with a slowdown in real-estate
development in China.
Shares dropped 2% in after-hours trading.
United Technologies reported a 1.4% increase in sales to $17
billion in the period ended Dec. 31 from a year prior. Profit rose
0.7% to $1.47 billion.
Other than the effects of currency fluctuation, United
Technologies had seen strong performance in its business units,
said Chief Financial Officer Akhil Johri, who returned to the
company when Mr. Hayes was elevated to CEO. United Technologies
says 62% of its sales are overseas, meaning the company is very
exposed to a sudden change in the value of the U.S. dollar.
The company projected a 6% decline in the value of the euro
against the dollar when it briefed investors in its annual outlook
meeting Dec. 10. But the euro has fallen another 12% since that
time, Mr. Hayes said.
That decline shaved 24 cents off the earnings per share the
company anticipated in 2015. To deal with its effect, the company
said it was imposing additional efforts to cut costs at
headquarters and to buy back shares.
The Hartford, Conn.-based conglomerate moved its earnings report
to Monday from Tuesday, to avoid the blizzard that was bearing down
on New England Monday night.
Sales shrank by 2% at Pratt in the fourth quarter, and were flat
for the year. Pratt's shipments of aircraft engines from its large
commercial and its Canadian divisions also fell slightly, both in
the fourth quarter and overall in 2014.
The company's order rates in China were up 6% over the course of
2014, Mr. Hayes said, characterizing that pace as "a little bit of
a different story" than in previous years of torrid growth, but
"not awful." The company still predicts double-digit growth in
sales in China, because of a strong backlog of previously booked
orders.
As for the foreign exchange effect, the company is used to such
fluctuations because of its global footprint, Mr. Hayes said.
"We've seen big gyrations in currencies," he said. "These things
happen."
Write to Ted Mann at ted.mann@wsj.com and Angela Chen at
angela.chen@dowjones.com
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