BorgWarner(US:BWA)2022-08-03 16:30Financial Data and Key Metrics Changes - The company reported approximately $3.8 billion in sales for Q2 2022, representing a 7% organic growth despite a slight decline in global production [6][28] - Adjusted operating income for Q2 was $348 million, or 9.3%, down from $421 million, or 11.2%, year-over-year [29] - Free cash flow generated during Q2 was $62 million, impacted by elevated inventory levels due to supply chain challenges [32] Business Line Data and Key Metrics Changes - The company experienced strong organic growth in North America and Europe, outperforming the overall industry [6][27] - The planned increase in eProducts R&D investment negatively impacted margins, with a $56 million increase in eProducts-related R&D [30] - The eHybrid sales are expected to reach approximately $1.1 billion by 2025, indicating substantial revenue opportunities [15] Market Data and Key Metrics Changes - The global light vehicle and commercial vehicle end markets are expected to increase by 2.5% to 5% in 2022 [33] - The company anticipates a $820 million headwind from weaker foreign currencies, primarily due to the strengthening U.S. dollar [34] Company Strategy and Development Direction - The company completed the acquisition of Rhombus Energy Solutions to enhance its charging business, particularly in high-value DC fast-charging hardware and software [19][20] - The Charging Forward strategy aims to generate 45% of revenue from electric vehicles by 2030, with a target of $3.7 billion in electric vehicle revenue by 2025 [11][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving double-digit organic growth for the year despite external headwinds [24][40] - The company is focused on negotiating pricing recoveries with customers to mitigate the impact of material cost inflation [37][41] Other Important Information - The company has formalized its commitment to diversity, equity, and inclusion with measurable targets [12] - The first units of the new fast-charging station, Iperion-120, have been installed in Italy, marking progress in the charging capabilities [18] Q&A Session Summary Question: On the need for M&A if organic growth continues to outperform - Management indicated that M&A is viewed as a strategic necessity for technology and product leadership, independent of organic growth performance [43] Question: Structure of pricing and commercial settlements with customers - The company is negotiating price adjustments linked to material cost inflation, with potential discussions to unwind price increases if inflation eases [45] Question: Visibility on the Rhombus acquisition and its revenue trajectory - The focus of Rhombus is on commercial vehicles, with expected synergies in customer profiles and growth vectors [53] Question: Impact of current market conditions on divestitures - The company has temporarily paused disposition projects due to unfavorable market conditions but remains confident in resuming when conditions improve [59] Question: Competitive advantages of the Rhombus acquisition - Rhombus is recognized for its bidirectional charging technology and strong local presence, which will enhance the company's capabilities in the charging market [69]