US: Federal-Mogul plunges to US$11m loss in Q3
Federal-Mogul third quarter 2012 sales fell 2% year on year to US$1.6bn.
Sales in Europe fell 7% as vehicle production and aftermarket demand decreased due to the overall market downturn. Sales in North America were 2% higher, partially offsetting European market weakness.
The supplier booked reported a net loss of $11m or $0.11 per share versus $34m ($0.34) in Q3 2011 due mainly to the impact on margins of lower European volumes combined with adverse regional and product mix.
"Federal-Mogul had a good quarter in North America, but we are again reacting to challenging market conditions in Europe, where customers are reducing vehicle production in response to weak economic conditions," said Rainer Jueckstock, co-CEO, Federal-Mogul and CEO powertrain segment.
"We are reducing headcount and production schedules at several sites while at the same time ensuring that we maintain readiness to respond to improved industry volumes when the European market returns to normal levels," he added.
US: Federal-Mogul posts loss of US$11m in Q3
Federal-Mogul today (19 October) announced third quarter 2012 financial results. Total sales were US$1.6bn, down 2% versus Q3 2011, or 8% when including the negative impact of currency exchange. Constant dollar sales in Europe fell by 7% as vehicle production and aftermarket demand decreased due to the overall market downturn. Sales in North America were 2% higher, partially offsetting European market weakness. Federal-Mogul reported a net loss of $11m or $0.11 per diluted share in Q3 2012, versus $34m or $0.34 earnings per diluted share in Q3 2011. The lower income was primarily due to the impact on margins of lower European volumes, combined with adverse regional and product mix. As a result of these factors, Operational EBITDA was $101m or 6.3% of sales. The company's cash outflow of $192m includes a $50m contribution to the US-funded pension plan and a $52m payment for the BERU spark plug business.
Federal-Mogul recorded a non-cash gain on other post-employment benefits (OPEB) of $51m in Q3 2012, and due to the segmentation, the company re-measured and reallocated goodwill and other intangibles resulting in non-cash intangible impairment charges of $36m. Additionally the company recorded fixed asset impairments of $17m.
The company had a cash outflow of $192m in Q3 2012 reflecting increased working capital to facilitate commercial programmes in the aftermarket, the payment of $52m for the BERU spark plug business and $50m in pension contributions. The company ended the quarter with $541m cash and an undrawn revolver of $500m.
Federal-Mogul began operating with two end-customer focused business segments, each with a chief executive officer reporting to Federal-Mogul's board of directors in Q3 2012. FederalMogul's Powertrain segment focuses on original equipment products for automotive, heavy-duty and industrial applications. The vehicle components solutions segment sells and distributes a broad portfolio of products in the global vehicle aftermarket, while also serving original equipment (OE/OES) manufacturers with products including braking, chassis, wipers and other vehicle components.
Federal-Mogul's Powertrain segment had global revenue of $982m, down 4% in constant dollars, or down 10% including the impact of negative exchange. Powertrain sales were largely flat in North America and Rest of World (ROW), while in Europe revenue fell by 8% as a result of reduced light and commercial vehicle production. The powertrain segment recorded Operational EBITDA of $52m or 5.3% of sales, compared to $109m or 10% of sales in Q3 2011.
"Federal-Mogul had a good quarter in North America, but we are again reacting to challenging market conditions in Europe, where customers are reducing vehicle production in response to weak economic conditions," said Rainer Jueckstock, co-CEO, Federal-Mogul and CEO powertrain segment. "We are reducing headcount and production schedules at several sites, while at the same time ensuring that we maintain readiness to respond to improved industry volumes when the European market returns to normal levels," he said.
Vehicle Components Solutions Segment
Federal-Mogul's vehicle components solutions segment had total revenue of $725m up 1% on a constant dollar basis, or down 4% including the impact of negative exchange. North American revenue increased by 4%, offsetting a 4% decline in Europe. The softer sales were driven by macroeconomic factors impacting all OE and aftermarket customers in the region. The VCS segment recorded operational EBITDA of $49m or 6.8% of sales, compared to $52m or 6.9% of sales in Q3 2011.
"We are encouraged by stable volumes in North America and are keeping pace in Europe in spite of significant market pressure. We are implementing previously announced restructuring actions to improve our manufacturing footprint in key product areas while simultaneously realigning the organisation to increase speed to market," said Michael Broderick, co-CEO Federal-Mogul and CEO vehicle components solutions segment.
"We have implemented actions to reduce the impact of current European softness and are beginning similar moves to adjust for slower growth rates in other markets," said Alan Haughie, Federal-Mogul chief financial officer. "We continue to see long term vehicle production rates climbing, although at slower rates than previously forecast. We will strengthen our focus on margin improvement and return on assets as we begin to more fully realise the opportunity to refine our business models in line with the company's segmentation."
Significant Events in Q3 2012
During the quarter, Federal-Mogul closed the acquisition of the BERU spark plug business with plants located in Chazelles, France and Neuhaus, Germany. The acquired units will add approximately $80m annualised sales to the powertrain segment and increase FederalMogul's annual spark plug production capacity to more than 350 million spark plugs per year, firmly establishing Federal-Mogul among the largest spark plug manufacturers in the world.
Original source: Federal-Mogul