Adient(US:ADNT)2023-02-07 21:46Financial Performance - Adient recorded net sales of $3,699 million for Q1 fiscal 2023, an increase of $219 million or 6.3% compared to Q1 fiscal 2022, driven by higher production volumes and favorable material economics recoveries [113]. - Gross profit for Q1 fiscal 2023 was $231 million, or 6.2% of net sales, up from $173 million or 5.0% in Q1 fiscal 2022, reflecting improved production volumes and commercial settlements [114]. - Net income attributable to Adient was $12 million for Q1 fiscal 2023, a significant recovery from a net loss of $54 million in Q1 fiscal 2022, primarily due to higher production volumes and lower SG&A expenses [116]. - Total net sales increased to $3,699 million in Q1 fiscal 2023, up 6% from $3,480 million in Q1 fiscal 2022, with notable growth in the Americas segment [135]. - Comprehensive loss attributable to Adient was $127 million in Q1 fiscal 2023, compared to a loss of $39 million in Q1 fiscal 2022, driven by various factors including foreign currency adjustments [131]. Segment Performance - Adient operates in three reportable segments: Americas, EMEA, and Asia Pacific/China, leveraging its global footprint to drive growth in the automotive seating industry [110]. - Adjusted EBITDA for the Americas segment surged to $69 million in Q1 fiscal 2023, compared to $9 million in Q1 fiscal 2022, reflecting a more than 100% increase [137]. - EMEA segment net sales decreased by 4% to $1,182 million in Q1 fiscal 2023, primarily due to unfavorable foreign currency impacts [143]. - Asia segment net sales increased by 5% to $821 million in Q1 fiscal 2023, supported by higher production volumes despite foreign currency headwinds [145]. Costs and Expenses - Selling, general and administrative expenses decreased by $24 million, or 15%, in Q1 fiscal 2023 compared to Q1 fiscal 2022, attributed to lower engineering and administrative spending [122]. - Cost of sales increased by $161 million, or 5%, in Q1 fiscal 2023, driven by higher production volumes and increased utility, labor, and freight costs [120]. - Restructuring and impairment costs rose to $7 million in Q1 fiscal 2023, a 75% increase from $4 million in Q1 fiscal 2022 [123]. - Other pension expense rose by $10 million in Q1 fiscal 2023, primarily due to an $8 million curtailment loss related to employee termination benefits [126]. - Income tax provision increased by 48% to $31 million in Q1 fiscal 2023, influenced by valuation allowances and foreign tax rate differentials [127]. Operational Challenges - The automotive industry is expected to face challenges in fiscal 2023 due to supply chain disruptions, inflationary pressures, and softening consumer demand [111]. - Adient expects higher overall operating costs to persist for the remainder of fiscal 2023, influenced by inflationary pressures on input costs [144]. - The company experienced input cost increases due to price volatility in commodities, which may not be fully offset through customer negotiations [162]. Financing and Capital Structure - Adient maintains an asset-based revolving credit facility (ABL Credit Facility) with a revolving line of credit up to $1,250 million, including $950 million for North America and $300 million for Europe [148]. - As of December 31, 2022, Adient had not drawn down on the ABL Credit Facility and had availability of $971 million, net of $13 million in letters of credit [148]. - Adient's Term Loan B Agreement provides for a $985 million senior secured term loan facility, amortizing at 1.00% per annum, with a final maturity on April 8, 2028 [149]. - Net financing charges decreased to $41 million in Q1 fiscal 2023, down 18% from $50 million in Q1 fiscal 2022, due to lower outstanding debt levels [125]. Restructuring and Workforce - The company committed to a restructuring plan of $7 million in fiscal 2023, expected to reduce annual operating costs by approximately $4 million [156]. - Approximately 12,000 employees have been separated from Adient as part of the restructuring plans, which also included twenty-seven plant closures [157]. - Adient's board authorized a share repurchase program of up to $600 million, with no shares repurchased during the three months ended December 31, 2022 [160]. Cash Flow and Working Capital - The company reported cash provided by operating activities of $44 million for the three months ended December 31, 2022, compared to cash used of $14 million in the same period of 2021 [152]. - Adient's working capital as of December 31, 2022, was $669 million, slightly up from $662 million as of September 30, 2022 [155]. - As of December 31, 2022, Adient had $181 million funded under supply chain financing programs, down from $269 million as of September 30, 2022 [161].