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Amid Coronavirus Shutdowns, Auto-Seat Supplier Adient Is Burning $175 Million Per Month

By John Rosevear - Apr 22, 2020 at 5:06AM

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But it's raising $600 million more this week.

In a preliminary release of its results for the quarter that ended on March 31, auto-seat supplier Adient (ADNT 3.60%) said that its revenue probably fell to $3.5 billion, from $4.2 billion a year earlier, on lower volumes as auto factories shut down amid the coronavirus pandemic.

Adient also said it's raising $600 million via an issue of senior secured notes, in an effort to bolster its balance sheet. 

Adient's earnings: The preliminary numbers

Not surprisingly, Adient's preliminary earnings release was incomplete, and the numbers it did release were approximate. That said, here's how they compare with Adient's results from the same period in 2019.

Note that Adient uses a fiscal year that begins on Oct. 1. The quarter that ended on March 31 was the second quarter of Adient's 2020 fiscal year. 

Metric Q2 FY 2020 (Estimated) Q2 FY 2019
Revenue $3.5 billion $4.228 billion
Adjusted EBITDA Between $200 million and $210 million $191 million
Free cash flow (negative) Between ($140 million) and ($160 million) $60 million

Data source: Adient. "Adjusted" figures exclude the effects of one-time items. Adient took $178 million in one-time charges in the quarter that ended March 31, 2019. EBITDA = earnings before interest, taxes, depreciation, and amortization.

Adient expects its free cash flow for the first half of fiscal 2020 to be about breakeven, versus negative-$212 million for the same period a year ago. It said that the impact of the coronavirus pandemic was about $100 million at the adjusted-EBITDA level; that impact is included in the range above. 

Adient's logo appears on the outside of a convention center in Detroit.

Image source: Adient.

Adient is burning $175 million a month

Adient also updated auto investors on its cash situation. With most of the world's auto factories outside of China shut down since March, Adient's revenue has fallen sharply; it's burning cash while waiting for factories to reopen. 

Adient said that it had about $1.8 billion in available liquidity as of March 31. That consisted of $1.64 million in cash, including $825 million drawn from its revolving line of credit earlier in March, and about $175 million remaining on its line of credit. 

Adient estimates that while auto factories in Europe, North America, and South America remain closed, its cash-burn rate will average about $175 million per month. It said that it's cutting costs to stretch its cash as long as possible.

Adient's factories in China reopened in March. About half of its factories in Asia outside of China remain closed. 

About that $600 million raise

In a separate announcement, Adient said that it will raise $600 million through an offering of senior secured notes this week. The notes will yield 9% and will mature in 2025. The offering is by private placements; Adient expect the deals to close on Thursday, April 23.

Adient didn't disclose which of its assets were pledged to secure the notes.

What's next for Adient

We'll learn much more when Adient reports its complete quarterly results. That's currently scheduled to happen before the market opens on May 5.

John Rosevear has no position in any of the stocks mentioned. The Motley Fool recommends Adient. The Motley Fool has a disclosure policy.

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