Auto-seat supplier Adient (ADNT -0.17%) 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.

Adient's logo is shown displayed outside Cobo Center, the convention hall in Detroit, Michigan.

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.