CHICAGO (DOW JONES)--Industrial conglomerate Emerson Electric Co. (EMR) said Tuesday a severe downturn in its businesses will erode the company's sales and income as the year goes on.

Despite posting better-than-expected fiscal first-quarter income, the company warned that the slump will be prolonged.

"We are not banking on a second-half recovery here at Emerson," David Farr, chairman and chief executive, told analysts during a conference call. "This cycle will get progressively worse as the year goes on."

The company, which makes industrial-automation equipment, motors and systems and components for heating and cooling gear, said it expects 2009 sales to fall 5% to 8% to about $23.7 billion.

Emerson lowered its 2009 per-share earnings to $2.70 to $2.95 from its November forecast of $2.80 to $3.20 per share on sales of $23.5 billion to $25.5 billion.

Nevertheless, Farr pledged to remain aggressive in pursuing complementary businesses during the slump and predicted Emerson will make "one or two marquee acquisitions" in the next 12 months to 18 months.

"We have the financial balance-sheet strength that our competitors don't have," he said. "We've been getting ready for this for the last couple of years."

The St. Louis-based company reported net income of $458 million, or 60 cents a share for the quarter ended Dec. 31, down 19% from $565 million, or 71 cents a share, a year ago.

Revenue slipped 1.9% to $5.52 billion. Excluding impacts from foreign-exchange rates and acquisitions, sales were down 7% in the U.S. and up 7% internationally.

Operating margin decreased 0.2% to 14.8% as high commodity prices and low volumes offset cost-reduction and restructuring initiatives.

Wall Street analysts expected the company to earn 57 cents a share on revenue of $5.27 billion.

First-quarter sales in Emerson's process management business, which accounts for a quarter of the company's total sales, rose 8% in the quarter to $1.55 billion. The business, which supplies valves, measurement gear for oil refineries and chemical plants, is typically sensitive to capital spending levels by businesses.

Meanwhile, sales in the consumer-driven appliance and tool unit, which produces motors, controls and components for appliances, fell 17% to $771 million.

Emerson was last up 1.88% at $51.57 a share. The stock price has fallen almost 40% in the past year.

Emerson's shares were last up %6.3 at $33.70.

 
   (Shirleen Dorman, contributed to this report.)

-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com

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