Financial Results and Initial Public Offerings and Allison Transmission and Manufacturers and Manufacturing & Technology

Allison Transmission profits tripled in 2011

February 21, 2012

Interest in Allison Transmission’s initial public stock offering may shift to a higher gear with the Speedway manufacturer disclosing this month that it more than tripled profits in 2011.

Profit of $103 million last year compares with a profit of $29.6 million in 2010 and a loss of $323.9 million in 2009, according to a document Allison filed Feb. 17 with the Securities and Exchange Commission as part of its planned IPO.

Allison cited stronger demand for global on- and off-highway transmissions and parts.

Sales last year rose 12 percent, to $2.2 billion.

In the short term, analysts say, truck engine and transmission companies stand to gain as the economy rebounds and fleets that deferred truck purchases start buying again.

“These are companies coming back pretty strong, particularly in North America,” said Mark Foster, chief investment officer at Kirr Marbach & Co. in Columbus, Ind.
Longer term, Allison should see growth in markets in China and India, where automatic truck transmissions are relatively rare.

Given the higher price of automatic transmissions, however, it remains to be seen whether Allison will benefit in some price-sensitive markets in other countries, Foster said.

Allison cites Frost & Sullivan estimates that, in 2010, fully automatic transmissions represented 37.8 percent of transmissions sold in the North American medium- and heavy-duty commercial vehicle markets, compared with 6.1 percent in Western Europe. By 2017, they are expected to grow to 41.8 percent and 10.9 percent, respectively.

Dragging down Allison's results last year were military sales, which fell 14 percent.

The company has nearly 2,800 employees, most of them in the Indianapolis area.  However, in 2010, Allison opened a plant in Chennai, India, and has teamed with GM Powertrain on a plant in Hungary.

General Motors spun off Allison in 2007 for $5.6 billion. Holding a controlling interest are the private-equity groups Onex and Carlyle Group.

Allison officials declined to comment on last year’s financial performance, citing restrictions involving the pending IPO.  The company disclosed previously that it hopes to raise $750 million by going public.

Allison dominates the U.S. market in the sale of automatic transmissions in categories such as firetrucks, school buses and garbage trucks.

“We believe the anticipated increase in global commercial vehicle production, together with pent-up demand in the North American market that resulted from the deferral of purchases during the economic downturn, will support our continued growth and result in increased net sales,” the company said in the recent filing.

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