Garrett Motion (US:GTX)2021-07-29 18:11Financial Data and Key Metrics Changes - The company reported net sales of $935 million for Q2 2021, an increase of 83% at constant currency compared to the previous year, outpacing global auto production by approximately 32 percentage points [7][20] - Adjusted EBITDA for Q2 2021 increased by 167% year-over-year from $63 million to $168 million, with an adjusted EBITDA margin of 18% [21][29] - Adjusted net income for Q2 2021 was $90 million, compared to $21 million in Q2 2020 [22] Business Line Data and Key Metrics Changes - Gasoline products accounted for 37% of net sales in Q2 2021, down 2 percentage points from Q1 2021, while diesel products declined by 1 percentage point [24] - Commercial vehicle sales increased year-over-year by $82 million or 81% at constant currency, and aftermarket sales improved by $28 million or 40% at constant currency [27] - Overall, all product lines increased year-over-year, primarily due to the impact of the pandemic in 2020 [26] Market Data and Key Metrics Changes - The company maintained a net sales percentage of 32% in Asia, while Europe and North America changed marginally to 52% and 15% respectively [23] - The semiconductor shortage impacted volumes, leading to a decline in gasoline and diesel products by 12% and 9% respectively on a sequential basis [28] Company Strategy and Development Direction - The company aims to enhance its technology growth strategy, focusing on differentiated solutions as the automotive industry evolves, with light vehicle turbo production expected to grow at an annual rate of approximately 6% from 2020 to 2025 [14] - The company is investing in new product launches and has plans for mass production of its E-Turbo technology, which is rooted in Formula 1 technology [15] - The company is also focusing on fuel cell technologies and has received a new business award for its GEN II e-compressor for fuel cells in China, with production starting in 2023 [16] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the second half of the year due to ongoing semiconductor shortages and supply chain disruptions, which may affect production levels [40][41] - The company anticipates global light vehicle auto production to grow between 10% and 11% for the year, with reported net sales expected to range between $3.7 billion and $3.9 billion [41] - Management highlighted the importance of maintaining operational excellence and adapting to macroeconomic challenges [12][51] Other Important Information - The company completed its Chapter 11 restructuring, significantly improving its balance sheet and reducing gross debt from $1.57 billion in June 2020 to $1.25 billion in June 2021 [13][33] - The company launched its first sustainability report, emphasizing its commitment to environmental, social, and governance (ESG) management [44][50] Q&A Session Summary Question: What kind of traction is the company getting for VNT for gasoline? - Management noted strong traction in Europe and good traction in China, with expectations for increased adoption in the U.S. due to new CO2 regulations [56][57] Question: What is the timing of the software business ramping? - Management explained that the software offerings are fragmented and highlighted their differentiation through model-based algorithms and cybersecurity solutions [58][59] Question: What is the plan for capital return policy? - Management indicated that unrestricted cash is expected to be released by the end of Q3, and discussions regarding capital return will be ongoing [65] Question: How should the company be thinking about seasonality this year? - Management expressed caution regarding Q3 and Q4, noting contradictory information from the marketplace about the semiconductor situation [67][68] Question: What is the outlook for working capital? - Management acknowledged challenges due to the semiconductor shortage but indicated a return to a normalized working capital position is expected [70][73] Question: How does the company view leverage going forward? - Management stated that they aim to achieve a normalized capital structure over the next two to three years while focusing on deleveraging [78][80]