2nd UPDATE: TRW Net Up On Cost Cutting, Safety-System Demand

Feb.21, 2008 in Market Outlook

Last Update: 2/21/2008 11:27:32 AM

(Updates throughout to include comments from executives, and share price.)

By Terry Kosdrosky
Of DOW JONES NEWSWIRES

DETROIT (Dow Jones)–TRW Automotive Holdings Corp. (TRW) reported a 70% increase
in fourth-quarter net income on cost-cutting and global demand for its safety
systems. The supplier also said it is working to offset expected lower production
from U.S. auto makers in North America in 2008.

TRW Automotive expects sales and net earnings per share growth in 2008, but
warned the year will be a challenge as it deals with high commodity costs and
stress among its smaller suppliers, along with the Big Three production cuts.

Still, the company said its results in 2007 exceeded its objectives and it has
plans to deal with the tough conditions in 2008. Sales outside North America
represent about 70% of TRW’s revenue.

Shares of TRW were up 13.1% to $24.73 recently, with trading volume already
exceeding the five-day average.

The Livonia, Mich., company reported net income of $56 million, or 55 cents a
share, compared with $33 million, or 32 cents a share, a year earlier. Earnings
excluding tax items from both periods were $45 million, or 44 cents a share, in
the fourth quarter of 2007, compared with $16 million, or 16 cents a share, in
2006.

Revenue increased 19% to $3.89 billion. Excluding foreign currency translation,
the gain was 8.7%.

The mean estimates of analysts surveyed by Thomson Financial were for earnings of
39 cents a share on revenue of $3.7 billion.

“We have established a consistent track record of achieving our objectives,”
Chief Executive John Plant said during a Thursday conference call.

For 2007, TRW Automotive reported net income of $90 million, or 88 cents a share,
compared with $176 million, or $1.71 a share, in 2006. Excluding debt retirement
charges and tax items from both periods, earnings were $234 million, or $2.28 a
share, in 2007, compared with $216 million, or $2.10 a share, in 2006.

Free cash flow for 2007 was $224 million, compared with $120 million in 2006.

Though the majority of TRW Automotive’s sales are outside North America,
production from General Motors Corp., (GM), Ford Motor Co. (F) and Chrysler LLC
is expected to be down sharply in the first half of the year.

Plant said he expects North American auto production of 14.5 million in 2008, the
lowest level since 1993. The company expects production from the Big Three to
fall by 800,000 vehicles.

The sharp North American production decline in the first half of the year will
stress smaller suppliers that provide smaller components to companies like TRW
Automotive, Plant said.

European production is expected to be flat while the Asian and South American
markets are expected to grow.

TRW Automotive expects earnings in 2008 to be between $2.15 to $2.45 a share and
sales of $15.6 billion to $16 billion.

The estimate reflects pre-tax restructuring expenses of about $50 million, with
$7 million coming in the first quarter.

Free cash flow in 2008 is expected to be break-even to slightly positive, Chief
Financial Officer Joseph Cantie said during the conference call.

Plant said that growing global markets, continued strong demand safety products
and cost-cutting will help the company mitigate the issues in North America.

Cantie also said he doesn’t expect North American production to stay at this low
level long term.

“I’d be shocked if 14.5 million is the trend going forward,” he said.

Meanwhile, Plant said TRW Automotive will be looking for “bolt-on” acquisitions
that would bring in a new technology, new customers or better cover a geographic
region.

-By Terry Kosdrosky, Dow Jones Newswires; (248) 204-5532;
terry.kosdrosky@dowjones.com

(END) Dow Jones Newswires

February 21, 2008 11:27 ET (16:27 GMT)

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