Harman CEO says worst over for European car market

Reuters News
Posted: Sep 06, 2013 8:44 AM

By Harro Ten Wolde

BERLIN (Reuters) - U.S. audio systems maker Harman International Industries Inc said that Europe's automotive industry, which accounts for most of its sales, has already bottomed out and may show modest recovery in the current fiscal year.

There are indications that the European car market, where sales dropped to a two-decade low, might be turning the corner, with the region's two top carmakers — Daimler and Volkswagen —reporting healthy profits for the second quarter.

"The rate of decline has slowed down and is close to zero now," Chief Executive Dinesh Paliwal told Reuters on the sidelines of IFA, Europe's largest consumer electronics trade show, which opened its doors on Friday.

"For the current fiscal year we assume in our planning for the European auto sector a flat to 1 percent decline from last year. We hope it will be zero to 1 percent plus."

Harman, whose brands include JBL and Harman Kardon, is the largest player in the in-car entertainment market, which accounts for more than half its sales. It caters to luxury carmakers such as Daimler AG, Fiat SpA's Ferrari sports cars and Volkswagen's Audi brand.

Harman's sales to German carmakers accounted for 43 percent of its revenue for the year ended June 2012, with carmakers in the rest of Europe bringing in another 20 percent.

The global automotive audio market is expected to grow to $14.4 billion in 2016 at a compound annual growth rate of about 12 percent, according to research firm Markets & Markets.

Paliwal said its European consumer electronics division, which sells headphones and Bluetooth speakers, was also doing better.

"Nobody is saying they are going to have a huge growth rate. But the worst is behind us, we have bottomed out."

Harman, whose main competitors include Japan's Pioneer, JVC-Kenwood and Denso, has received orders totaling $19 billion for the next four to five years. In its 2012/13 fiscal year, Harman added $5 billion in new orders.

The Stamford, Connecticut-based company said last month it expected sales of around $4.7 billion and earnings per share around $3.85 for the fiscal year from July 2013 to end-June 2014 up from $4.3 billion and $3.07, respectively, the previous year.

(editing by Jane Baird)