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April 29, 2019

Lear Q1 2019 sales dip 10% to US$5.2bn

Lear Corporation has reported results for the first quarter 2019 showing a 10% dip to revenues .

By Sam Duke

Lear Corporation has reported results for the first quarter 2019 showing a 10% dip to revenues and net income down 35%.

Highlights include:

  • Sales of US$5.2bn, compared to $5.7bn in the first quarter 2018
  • Net income of $229m and adjusted net income of $253m, compared to $354m and $345m, respectively, in the prior year
  • Core operating earnings of $378m, compared to $491m in the first quarter 2018
  • Earnings per share of $3.73 and adjusted earnings per share of $4.00, compared to $5.16 and $5.10, respectively, in the prior year
  • Acquired Xevo, a leader in connected car software and data-driven user experiences
  • Replenished share repurchase authorisation to $1.5bn and increased quarterly dividend by 7% to $0.75 per share
  • Won 2019 Automotive News Pace Award for ConfigurE+, a powered, adaptable seat rail system
  • Moody’s upgraded Lear’s senior unsecured debt rating to Baa2

“In the first quarter, Lear faced challenging macroeconomic conditions marked by significant declines in industry production. In addition, we experienced planned, yet significant, downtime, as our customers shut down their operations to change over to new models. However, because of Lear’s strong execution capabilities, industry-leading cost structure and relentless focus on operational excellence, we were able to deliver solid results,” said Ray Scott, Lear’s president and chief executive officer. “Our financial and operational strength have allowed us to continue to invest for the future. The recently completed acquisition of Xevo reflects our ongoing commitment to developing capabilities and technologies that are aligned with the key trends reshaping the automotive industry.”

Sales in the first quarter decreased 10% to $5.2bn. Excluding the impact of foreign exchange, sales were down 5%, reflecting lower production on key Lear platforms, partially offset by the addition of new business.

Core operating earnings were $378m, or 7.3% of sales, compared to $491m, or 8.6% of sales, in 2018. The decline in margins primarily reflects the decrease in sales, partially offset by favourable operating performance. In the Seating segment, margins and adjusted margins were 6.4% and 7.6% of sales, respectively. In the E-Systems segment, margins and adjusted margins were 10.3% and 11.3% of sales, respectively.

Earnings per share were $3.73. Adjusted earnings per share were $4.00 per share, down from $5.10 per share in 2018, reflecting lower operating earnings, partially offset by a reduced share count.

In the first quarter of 2019, net cash provided by operating activities was $52m and free cash flow (1) was ($71m.

Xevo Acquisition

On April 17, 2019, Lear completed the acquisition of Xevo (“Xevo”), a Seattle-based, Tier-1 automotive supplier of software solutions for cloud, car and mobile devices that are deployed in millions of vehicles worldwide. Xevo’s Journeyware suite of products combines a user-friendly interface with a cloud-based framework that allows drivers to seamlessly interact with in-car content and mobile applications utilising real-time data. Xevo Market, an automotive commerce platform, connects consumers with popular food, fuel, parking, hotel and retail brands through in-vehicle touchscreens, voice assistance and OEM-branded mobile applications.

Xevo will enhance Lear’s capabilities in software, services and data analytics, as well as its market position in connectivity. In addition, Xevo’s 300 world-class employees bring tremendous talent and expertise to further strengthen the Lear team.

The transaction is valued at approximately $320m on a cash and debt free basis. Lear intends to fund the transaction through a debt financing.

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