Ingersoll-Rand CEO: housing demand bottomed

NEW YORK (Reuters) - Retail orders for Ingersoll-Rand Co. Ltd.'s (IR.N: Quote, Profile, Research, Stock Buzz) Bobcat construction equipment have stabilized, but the extent of demand from equipment rental companies is not yet clear, Ingersoll's chief executive said on Wednesday.

"We have seen retail (numbers) that are at this point in time no longer decreasing. They have really stabilized," Herb Henkel said at the Reuters Manufacturing Summit in New York. "The biggest upside that you have to look at in the first quarter is what happens with rental orders."

Ingersoll's first-quarter earnings forecast takes into account a 20 percent drop in capital spending from a year ago by rental firms, but mild U.S. weather in January may alter those numbers.

"I think they've been pleasantly surprised as to the amount of activity going on during the winter months because of weather," Henkel said.

Sales of Bobcat machines -- compact, maneuverable vehicles used in construction and farming -- have fallen abruptly in recent months, reflecting the U.S. housing downturn.

Ingersoll's compact vehicle segment, which also includes Club Car golf carts, reported 2006 sales of $2.6 billion, making it the company's second-biggest segment behind climate control.

The slowdown, which also hit Ingersoll's security technologies unit that makes Schlage locks, is now near a bottom, Henkel said.

Housing is "stable at a low level to slightly improving," Henkel said.

Meanwhile, demand for compact vehicles remains strong in Europe, and the company is on track for a May opening of a Bobcat plant in the Czech Republic.

The Czech plant will cut transport and tariff costs, take advantage of lower wages, and put Ingersoll closer to European customers, making it possible to avoid building up inventory.

By saving about $1,000 each on 20,000 Bobcats that until now were shipped from North Dakota, annual profit improves by $20 million, or about 5 cents per share.

Ingersoll has no plans to cut more jobs in North Dakota if demand stays at current levels or picks up, he added.

Separately, Henkel said the company was benefiting from lower copper prices, though prices for zinc and nickel remained high.

Raw material costs will run about $30 million to $50 million higher than last year, he added, compared with the company's earlier forecast of $50 million to $70 million in additional costs.

"It's still nowhere near the kind of drop-off that we would expect," Henkel said.

In terms of overall demand for Ingersoll's products, which range from supermarket displays and air compressors to biometric systems and microturbines, Henkel said the company was on the upslope of a U-shaped curve, but weather was a factor across its range of businesses.

"We're clearly coming out of bottom of the U going forward, and the question in my mind gets to be how steep is the slope," Henkel said. "I'm not ready to declare victory yet, but directionally I would say we are at least at the activity level we were seeing going into this year."