CORRECTED – UPDATE 5-Johnson Controls sees revenue above Wall St view

(Corrects analyst quote in paragraph 16; analyst indicated
difficulty for large companies to do acquisitions that are big
enough to matter, not that they’re having trouble finding
willing sellers)

* Sees FY 2011 EPS $2.30-$2.45 vs Street view $2.37

* Sees FY 2011 rev $37 bln vs Street view $36.27 bln

* Says to increase capex in FY 2011

* Shares slip 0.5 percent
(Adds CEO and analyst comments, updates shares)

By Nick Zieminski

NEW YORK, Oct 12 (BestGrowthStock) – Johnson Controls Inc (JCI.N: )
forecast revenue above Wall Street estimates in its new fiscal
year, helped by demand for auto batteries and systems to cut
energy use in buildings, especially in emerging markets, and
said it would increase capital spending to boost growth.

The company said all three of its businesses — building
efficiency, auto interiors and batteries — would benefit from
robust economies in markets like China and the Middle East. All
three will show improved profit margins, in part from
cost-cutting introduced during the downturn.

Johnson Controls, one of the world’s biggest auto
suppliers, said auto production in the United States was likely
to rise moderately next year, would be flat in Europe, and
would grow in China at a slightly slower pace.

In North America, the biggest issue remains the strength of
consumer spending amid high unemployment, Chief Executive Steve
Roell said in an interview. He added there is a high
correlation between new car sales and home values.

“It hasn’t stabilized,” he said about the U.S. housing
market. “It’s getting better. I think we’re still a ways off
and that’s why we’re still cautious in 2011 relative to the
consumer. It’s going to take throughout the year for the
consumer to build confidence.”

The company, which is retrofitting New York’s Empire State
Building to reduce its energy use, forecast revenue of $37
billion for its 2011 fiscal year, now under way. Analysts
expected $36.27 billion, according to Thomson Reuters I/B/E/S.

Johnson Controls said it expects earnings of $2.30 to $2.45
a share for the year. Wall Street expects $2.37.

Revenue in the automotive interiors segment, which makes
car seats, will grow about 5 percent, it said. It forecast a
sales gain of 8 percent to 10 percent for the building
efficiency segment, and expects 10 percent to 15 percent growth
in its battery business, in part because of emerging markets.

Shares of Johnson Controls were down 0.5 percent at $31.49
in late trading.


Johnson Controls forecast 2011 capital investments of $1.2
billion — a jump of about 60 percent from 2010 — to increase
manufacturing capacity for its batteries and to expand in
emerging markets. Last week, the Milwaukee-based company said
it would spend $118 million to build a plant in Chongqing,
China, for capacity of up to 30 million car batteries a year by
2015. [ID:nWNAB2520]

Roell said Johnson Controls would not discuss specific
areas where it might make acquisitions. While it is interested
in businesses with global capability and strong management, the
company — which gained share in many markets when its
competitors failed — does not buy distressed properties.

In recent months, the company has several times “gone to
the altar” on deals but walked away at the last minute, Roell
told analysts and investors at the New York Stock
Exchange. He said the building efficiency segment would get the
lion’s share of M&A investment in coming years.

The company has the capacity to make a $3 billion
acquisition, CFO Bruce McDonald said.

“There’s a lot of opportunity to buy in that sector,” said
analyst Alex Blanton of Ingalls & Snyder, who does not follow
Johnson Controls but covers a rival, Ingersoll-Rand (IR.N: ).

Blanton said the building efficiency segment could benefit
from greater vertical integration, since right now it sells a
lot of components, such as lighting, made by others.

“They have to find somebody who wants to sell who is big
enough to make a difference,” Blanton said. “That’s not always
easy for a $30 billion company.”

The 125-year-old company’s long-term goals include growing
at twice the pace of its markets and increasing net earnings 10
percent to 15 percent a year. Its criteria calls for
acquisitions to return 15 percent within four years.


Investments in its battery business are one of the key
reasons why the company plans to boost 2011 capital
expenditures to $1.2 billion from about $750 million in 2010.
Capital spending will stay above $1 billion over the next
several years, McDonald said.

The company, which makes about 4 million batteries a year
in China will more than triple that capacity by 2012 so it no
longer has to import batteries into China’s booming vehicle
market, said group President Alex Molinaroli.

“We’d rather export out of China,” Molinaroli said.

Johnson Controls, which makes about 120 million batteries a
year, is also looking to increase capacity for so-called
“start-stop” batteries that allow a car engine to shut off
instead of idling when a car is stopped, cutting fuel use as
much as 12 percent.

Global demand for such batteries is seen tripling between
2011 and 2015 to about 20 million units annually. In Europe,
start-stop batteries “will almost be ubiquitous for all
vehicles by 2015, 2016,” Molinaroli said.
(Additional reporting by Divya Sharma in Bangalore; Editing by
Maju Samuel, Lisa Von Ahn, John Wallace, Dave Zimmerman)

CORRECTED – UPDATE 5-Johnson Controls sees revenue above Wall St view