Auto-seat supplier Adient (ADNT +4.34%) said that it lost $1.36 billion in the quarter that ended Sept. 30, 2018, due to a series of one-time accounting charges that didn't affect the company's cash position.
Excluding those one-time items, Adient earned $1.30 per share, down 44% from the year-ago period. Revenue of $4.15 billion was up 4% from a year ago.
Along with its earnings report, Adient announced that it will suspend its quarterly dividend, one of a series of actions intended to improve its cash flow and allow it to focus on debt reduction.
Image source: Adient PLC.
Adient earnings: The raw numbers
Adient uses a fiscal year that begins on Oct. 1. The quarter that ended on Sept. 30 was the fourth quarter of Adient's 2018 fiscal year.
| Metric | Q4 FY2018 | Change vs. Q4 FY2017 |
|---|---|---|
| Revenue | $4.145 billion | 4% |
| EBIT | ($1.044 billion) | Decline of $1.433 billion |
| Adjusted EBIT | $149 million | (50%) |
| Adjusted EBIT margin | 3.6% | (3.8 ppts) |
| Net income (loss) | ($1.355 billion) | Decline of $1.699 billion |
| Adjusted net income | $122 million | (44%) |
| Adjusted earnings per share | $1.30 | (44%) |
Data source: Adient PLC. "EBIT" is earnings before interest and tax. "Adjusted" figures exclude the effects of one-time items. Adient took $1.48 billion of one-time items in the quarter ended 09/30/18, most due to asset impairments and the recording of valuation allowances against certain deferred tax assets. "Ppts" = percentage points.
Adient's new CEO is working on a turnaround plan
Adient is in the early stages of a turnaround effort. The company, spun off from Johnson Controls in 2016, is the world's leading manufacturer of automobile seats. But Adient fell on hard times after a botched new-product launch, leading to the departure of its chief executive officer.
As of Oct. 1, Adient has a new CEO: Douglas DelGrosso, most recently the CEO of auto supplier Chassix. DelGrosso knows Adient's market well: Earlier in his career, he spent two decades at Lear Corporation, Adient's primary rival in the global auto-seating market.
DelGrosso is in the midst of a "100-day plan," visiting plants, talking to key customers, and overhauling the company's business plan for fiscal 2019. DelGrosso said that he has already taken a series of steps to reduce the company's spending and raise cash:
- Adient's quarterly dividend will be suspended starting in the second quarter of its 2019 fiscal year. (That's the quarter that will begin on Jan. 1, 2019.)
- Adient's credit agreement has been amended, boosting the amount it can borrow.
- Adient has sold its corporate aircraft and its headquarters building in Detroit.
How Adient's business segments performed in the quarter
Adient reports income for three business segments: Seating, meaning auto seats; Seat Structures and Mechanisms, or "SS&M"; and Interiors, which is the equity income from Adient's joint venture with Chinese auto-industry supplier Yanfeng. Results in all three segments were down year over year.
- Seating generated $301 million in adjusted earnings before interest, tax, depreciation, and amortization (adjusted EBITDA), down from $403 million in the year-ago period. Higher costs related to new-product launches, unfavorable exchange-rate movements, and higher prices for key commodities all weighed.
- SS&M lost $34 million on an adjusted EBITDA basis, down from a profit of $4 million a year ago. As with Seating, higher product-launch costs and external factors largely explained the decline.
- Interiors generated $6 million in adjusted EBITDA, down from $22 million in the year-ago period. Unfavorable changes in product mix and competitive pressures on pricing explained the decline.
Looking ahead: Adient will provide guidance in January
Although Adient's 2019 fiscal year began on Oct. 1, the company said that it won't provide detailed guidance until January, after DelGrosso's 100-day review concludes. But the company warned that the challenges it faced in fiscal 2018 will continue to have a "significant impact" on its results in the upcoming fiscal year.
