Auto-seat supplier Adient (ADNT 5.01%) said that it lost $149 million in the quarter that ended March 31 on a series of charges related to an ongoing restructuring of the company's business.
Excluding one-time items, Adient earned $0.31 per share, down sharply from $1.82 per share in the year-ago period. Revenue of $4.23 billion was down 8% from a year ago.
The raw numbers
Adient uses a fiscal year that begins on Oct. 1. The quarter that ended on March 31 was the second quarter of Adient's 2019 fiscal year.
| Metric | Q2 FY 2019 | Change vs. Q2 FY 2018 |
|---|---|---|
| Revenue | $4.228 billion | (8%) |
| EBIT | ($22 million) | $121 million better |
| Adjusted EBIT | $117 million | (53%) |
| Adjusted EBIT margin | 2.8% | 2.7 ppts lower |
| Adjusted EBITDA | $191 million | (47%) |
| Net income (loss) | ($149 million) | $19 million better |
| Adjusted net income | $29 million | (83%) |
| Adjusted earnings per share | $0.31 | (83%) |
Data source; Adient PLC. EBIT = earnings before interest and tax. EBITDA = earnings before interest, tax, depreciation, and amortization. "Adjusted" figures exclude the effects of one-time items. Adient took $178 million in one-time charges in the quarter ended March 31 and $339 million in one-time charges in the year-ago period. Ppts = percentage points.
Image source: Adient PLC.
How Adient's business segments performed in the quarter
Adient has changed the way it reports results by segment. In the past, it reported results for each of its three business lines: seating, seat structures and mechanisms, and interiors. Starting with this quarter, it is instead reporting results (for all of its business lines) for three regional "segments": Americas; Europe, Middle East, and Africa (EMEA); and Asia.
Results for all three segments were down year over year:
- Americas generated $34 million in adjusted EBITDA, down from $98 million a year ago. Higher costs (for shipping and commodities) and unfavorable product mix weighed, partially offset by pricing gains.
- EMEA earned $59 million in adjusted EBITDA, down from $130 million a year ago. Spending related to the launch of a new front-seat architecture weighed, as did higher commodities costs and unfavorable product mix.
- Asia generated $123 million in adjusted EBITDA, down from $157 million a year ago. The principal driver of the decline was a $23 million drop in equity income from Adient's joint ventures in China, attributable to lower sales volumes. China's new-car market is in a cyclical sales slump, and local automakers have reduced production in line with demand. However, excluding equity income, the Asia segment's adjusted EBITDA margin improved to 10.7% in the quarter from 10.1% a year ago.
Special items, cash, and debt
As of March 31, Adient had $491 million in cash and cash equivalents, up from $406 million as of Dec. 31, 2018. Against that, it had $3.383 billion in total debt, versus $3.41 billion at the end of the prior quarter, for net debt of $2.892 billion.
The company took restructuring-related one-time charges of $178 million in the quarter.
What Adient's CEO said
During the company's earnings call, CEO Douglas DelGrosso said that Adient has the potential to achieve best-in-class margins, once it overcomes significant operational challenges.
"The team is really focused on the basics," DelGrosso said. Those include changes in the company's culture and mind-set, addressing what he calls "operational waste," and more discipline around pricing. "I'm personally involved in many of these discussions, which speaks to the importance of resolving them," he said.
Looking ahead: Adient's guidance
Adient reiterated the guidance around revenue and capital expenditures that it gave in February. For the fiscal year that will end on Sept. 30, Adient still expects:
- Revenue between $16.5 billion and $16.7 billion (fiscal 2018 result: $17.44 billion)
- Capital expenditures between $550 million and $575 million (fiscal 2018 result: $536 million)
- Adjusted EBITDA will be higher in the second half of the fiscal year than it was in the first half
