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Allison Transmission cuts 2013 sales outlook

February 19, 2013

Allison Transmission Inc. predicted 2013 sales declines after it closed 2012 with an inflated $514.2 million annual profit and a massive slide in sales for a key market during the fourth quarter.

Full-year revenue at the Indianapolis manufacturer dipped 1 percent, to $2.14 billion, the company reported Tuesday morning.

The $514.2 million profit, which exploded almost 400 percent from $103 million in 2011, had a lot of help from $298 million in tax benefits.

The last quarter alone saw profit plummet 75 percent, to $11.2 million.

Sales dropped 5.6 percent in the fourth quarter, to $487 million, after business plummeted in one of Allison’s biggest markets.

Allison primarily makes automatic transmission for mid- and heavy-duty commercial and military vehicles, as well as hybrid-propulsion systems for city buses. The manufacturer also makes off-highway products such as farm and energy equipment.

The company said unfavorable natural gas pricing reduced demand for its North American off-highway products. The business segment’s sales dropped to $17 million in the fourth quarter from $70 million a year earlier.

A 7-percent sales increase, to $188 million, in the single largest market, North American on-highway products, offset some of the off-highway losses as other, smaller business areas grew.

But the company still has a gloomy outlook for 2013 and said it expected net sales to drop in the range of 6 percent to 8 percent.

Allison expects early 2013 to be the worst part of the year because of disappearing demand in the North American energy market, notably for the company’s hydraulic fracturing products.

Concerns about military cutbacks and weaker global demand for vehicles have fueled concerns.

“Given the continued heightened level of uncertainty in our end markets, we are taking a cautious approach to 2013,” Allison CEO Lawrence Dewey said in a prepared statement. “Consequently, we have implemented several initiatives to proactively align costs and programs across our business with the lack of near-term visibility and confidence in certain of our end markets.”

Allison shares were down 3.6 percent in early trading Tuesday, to $23.10 each.

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