BorgWarner(US:BWA)2021-05-05 16:44Financial Data and Key Metrics Changes - BorgWarner reported first-quarter revenue of over $4 billion, representing an organic increase of over 18% compared to a market increase of less than 13%, resulting in an outgrowth of approximately 570 basis points [6][15][16] - Adjusted operating income for Q1 was $444 million, yielding an adjusted operating margin of 11.1%, up from 10.3% in the same quarter of the previous year [17][21] - Free cash flow for the quarter was $147 million, which was flat year-over-year despite increased investment in working capital [17][21] Business Line Data and Key Metrics Changes - The company saw strong outgrowth in North America and Europe, particularly in small gasoline turbochargers and fuel injection businesses [15][16] - The e-propulsion and drivetrain segment experienced a 36% year-over-year growth, driven largely by increased business in China [37] Market Data and Key Metrics Changes - Global light vehicle and commercial vehicle markets are expected to increase by 9% to 12%, down from previous estimates of 11% to 14%, primarily due to semiconductor shortages [18][21] - North America is projected to see a market increase of 17% to 20%, while Europe is expected to increase by 9% to 12%, and China is anticipated to remain flat year-over-year [18][21] Company Strategy and Development Direction - BorgWarner's new strategy, Project Charging Forward, aims to derive over 25% of revenue from electric vehicles by 2025 and approximately 45% by 2030, compared to under 3% today [10][12] - The planned acquisition of AKASOL is a key part of this strategy, enhancing the company's capabilities in electrified vehicles [8][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's long-term positioning and ability to navigate supply chain challenges, particularly in light of the semiconductor shortage [12][23] - The company has increased its full-year revenue and adjusted earnings per share guidance despite a lower industrial production outlook [12][21] Other Important Information - BorgWarner achieved Great Place to Work Certified Status for the second consecutive year, highlighting its positive workplace culture [11] - The company is targeting combustion-related dispositions with annual revenue of approximately $1 billion over the next 12 to 18 months [22] Q&A Session Summary Question: EV demand and lead times - Management indicated that the start of production for a major new program is expected in the second half of 2023, with typical lead times being around three years for production awards [26][28] Question: Impact of semiconductor shortage on OEM build schedules - The semiconductor shortage is expected to have a larger impact in the second quarter, with less effect anticipated in the third quarter [33] Question: Drivers of organic growth in the e-propulsion and drivetrain segment - Growth in this segment was significantly influenced by increased business in China, where production levels rose substantially compared to other regions [37] Question: Revenue growth from partially built vehicles - Management acknowledged that some revenue growth in Q1 was likely linked to partially built vehicles, although quantifying this impact was challenging [41] Question: Insights on silicon carbide and high voltage inverters - Management expressed confidence in their competitive positioning in the silicon carbide market, emphasizing the efficiency and performance advantages of their products [44][45] Question: Variability in production schedules among customers - Management noted that production schedule changes vary significantly across regions and customers, influenced by their sourcing strategies [58] Question: Impact of raw material costs - The company is experiencing some inflation in raw material costs, but has mechanisms in place to pass through a portion of these costs to customers [48][69]