Johnson Control Buys Turkish Stake

Johnson Controls Inc. ( JCI - Analyst Report ) announced that it will acquire a 49% stake in Karat Guc Sistemleri Sanayi & Ticaret AS, a Turkey-based distributor of car-batteries. Karat sells batteries including Varta and Energizer brands, both owned by Johnson.

The company will acquire the stake through its two subsidiaries CRH Otomotiv Sanayi & Ticaret Ltd. and Johnson Controls Hybrid & Recycling GmbH.

Recently, the Wisconsin-based battery maker raised the prices of lead-acid batteries by 8% in the U.S. and Canada in order to support increased investments for meeting environmental, health and safety standards. The new price will be applied for orders starting on May 1, 2012. The company has last raised the price of its batteries by 5%–9% in April last year on the back of rising raw material prices and delivery costs.

Johnson Controls continued to invest in upgrading its manufacturing facilities after U.S. Environmental Protection Agency issued stringent air standards for lead emissions in 2008 and in January this year.

The company plans to invest $162 million in its North American recycling centers to make them compatible with the recent environmental standards. It also announced an additional $50 million investment to improve the company’s employee blood lead levels at its battery manufacturing plants.

Johnson Controls is a supplier of automotive interiors, batteries, and other control equipment. The company functions through three segments: Automotive Experience, Building Efficiency and Power Solutions. Its main competitors include Magna International Inc. ( MGA - Analyst Report ) .

The Zacks #3 Rank (Hold) company posted a 9% increase in profit to $410 million or 60 cents per share in the first quarter of its fiscal 2012 from $375 million or 55 cents per share in the same quarter of the prior fiscal year. However, the profits were lower than the Zacks Consensus Estimate by 2 cents per share.

The higher profits were attributable to higher earnings in the company’s Power Solutions and Automotive Experience segments. Net sales in the quarter rose 9% to $10.4 billion, which is slightly lower than the Zacks Consensus Estimate of $10.5 billion.

Johnson Controls lowered its earnings guidance for the second quarter and the fiscal year 2012 due to a decline in automotive production in Europe, weak demand for aftermarket battery due to weather-related factors, indefinite shut down of the Shanghai, China battery plant and lower demand for residential Heating, Ventilation and Air-Conditioning (HVAC).

The company anticipates earnings in the second quarter of fiscal 2012 to be 52 cents–54 cents. For the fiscal year, the company lowered its earnings guidance to $2.70–$2.85 compared with the earlier guidance of $2.85–$3.00.