Honeywell International Inc. (HON:US), the U.S. manufacturer selling products such as aerospace parts in China, is forecasting 2013 economic growth in the world’s most- populous country may decelerate to the slowest pace since 1990.
“It wouldn’t be surprising to us if China didn’t break 7 percent GDP growth in 2013,” Honeywell Chief Financial Officer Dave Anderson said in a telephone interview. “Our expectation is that there’s going to be relatively muted growth overall.”
Honeywell’s projections for China, as well as the U.S. and the euro area, are less optimistic than those of economists surveyed by Bloomberg. The Morris Township, New Jersey-based company plans to cut costs and introduce new products to keep earnings growth in 2013 at a similar level as this year.
The euro area will remain in recession next year, contracting 0.2 percent to 0.3 percent, and the U.S. growth will likely be 1.8 percent, Anderson said. Economists on average predict growth of 0.3 percent in Europe, 2 percent in the U.S. and 8 percent in China. The Chinese economy last increased less than 7 percent in 1990, when it expanded 3.8 percent.
“We’re not counting on positive macroeconomic conditions supporting our growth in 2013,” Anderson said.
Honeywell, which makes products ranging from thermostats to turbochargers, has reduced expenses across regions in sales, distribution and production, Anderson said.
The manufacturer also benefited from higher demand for aerospace parts and energy processing technology, fueling an estimated 11 percent (HON:US) gain in earnings per share this year, based on $4.50, the high end of Honeywell’s forecast range (HON:US).
Honeywell may achieve similar earnings growth next year if foreign exchange, which will shave about $700 million off revenue in 2012, is more neutral next year, Anderson said.
Cost savings measures will add about $150 million to operating profit in 2013, Anderson said. Sales growth from existing businesses may be lower than the estimated 3 percent for this year, he said.
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