A drop-off in sales of irons and tools in Brazil will slash profits at Black & Decker Corp. by about $12 million -- cutting expected earnings by about half -- in the current quarter, the power-tool company reported yesterday.
But the bad news was offset by an announcement that Emerson Electric Co. will buy one of Black & Decker's divisions for $90 million, giving the Towson-based company additional cash to help pay off its huge debt.
Black & Decker spokeswoman Barbara Lucas said last night that the company will sell its North American Mallory Controls business, a producer of electronic equipment with sales of about $100 million this year, to Emerson by early next year.
She said Black & Decker will continue to try to sell the Brazilian division of the electronics business, which had sales of about $50 million.
The sale brings to eight the number of divisions of the recently acquired Emhart Corp. that Black & Decker will have sold, Mrs. Lucas said.
When Black & Decker bought the Connecticut-based hardware company, which makes Price Pfister plumbing fixtures and Kwikset locks, it announced it would sell off about $1 billion worth of Emhart's divisions to help pay down the approximately $2.6 billion it borrowed to make the acquisition.
But Black & Decker has not been able to sell many of the divisions it had originally hoped to unload, and though yesterday's announcement brings the total cash raised to almost $800 million, the sales have taken months longer than the company expected.
In the last several months, some Wall Street investment analysts have said they were worried that the company's more than $3 billion in debt -- which represents more than 80 percent of the company's sources of funds -- might cause financial trouble if the weakening domestic economy significantly cut into tool and appliance sales.
Mrs. Lucas said the company now thinks that U.S. sales of its bread-and-butter items -- power tools, irons, coffee makers, blenders and the like -- will not meet its expectations.
But she said the company is cutting costs and that the weak economy should not affect earnings.
Instead, she said, the company wanted to warn investors that a severe decline in sales in Brazil, where the government has tightened credit to battle inflation, will cut profits at Black & Decker by about $12 million in the fourth quarter.
Mrs. Lucas said Black & Decker still expects to be "solidly profitable" for the quarter. Last year at this time, the company was recovering from its Emhart takeover and reported a $3.2 million loss.
Before yesterday's announcement, Wall Street analysts had predicted that Black & Decker would earn $16 million to $28 million in its final fiscal quarter, which is traditionally its best, Mrs. Lucas said.
In New York Stock Exchange trading that was completed before the announcement, Black & Decker's stock closed down 50 cents at $10.50.