Supplier Federal-Mogul on Tuesday reported strong Q4 2009 profitability, with higher gross margin (16% vs 13.9% a year ago), improved net income of US$43m, or $0.43 per share (Q4 2008: $530m loss), and $251m record cash flow with increased sales of $1.41bn compared with Q4 2008’s $1.32bn.
“The company improved financial performance in each consecutive quarter of 2009 as restructuring and cost reduction initiatives enhanced Federal-Mogul’s operating leverage,” it said in a statement. “Stronger demand in Q4 2009, coupled with savings from prior restructuring initiatives lifted gross margin and operational EBITDA percent of sales back to levels approaching those attained prior to the automotive market downturn.”
“The strong and profitable fourth quarter shows the benefits of higher sales combined with significant operational improvements throughout the year,” said president and CEO Jose Maria Alapont.
Federal-Mogul said 17% of total revenue was generated outside the United States, Canada and Europe in Q4 2009, a 24% increase over the fourth quarter of 2008. It said continued to expand its market share, manufacturing capacity and engineering presence in China, India, Brazil and other growth markets which had performed better during the global automotive downturn.
No single customer accounted for more than 5% of global revenue in 2009.
“We have reduced the run-rate of the company’s global cost base by approximately $460m annually, while simultaneously making strategic investments in leading technology and innovation, best cost global manufacturing and better processes and systems for world-class quality, cost competitiveness and customer support,” Alapont added.
Operational EBITDA for Q4 2009 was $170m or 12.1% of sales, a $57m or 3.5 percentage point increase, compared to $113m or 8.6% of sales in Q4 2008.
Full year sales declined about $1.5bn year on year to $5.3bn.
The company reported a net loss of $45m for full year 2009, an improvement on the net loss of $(468)m in 2008. Adjusted for impairments and restructuring charges relating to the company’s capacity rationalisation, Federal-Mogul achieved break-even results in 2009, it said, adding this showed the effectiveness of the variable cost strategy to maximize earnings and cash flow performance.
“We are well positioned to meet market demands for improved fuel economy, reduced emissions and greater vehicle safety. Our strong cash flow and significantly improved liquidity provides the necessary flexibility to pursue portfolio enhancements or footprint realignment to accelerate our progress in spite of changing market conditions,” said Alapont.
“Further, we are implementing strategies to increase our sales to customers in the energy, industrial and transport (EIT) market segments, where we generate about 9% of our total revenue today. We believe business segments like the expanding wind energy market, improving industrial markets and growth in the global supply chain will increasingly benefit Federal-Mogul, due to our specialised products to serve these segments.
“We remain optimistic that the global markets will strengthen in 2010 and we expect to continue to drive further earnings efficiency within our existing infrastructure, while capitalizing on increasing sales in mature and new growth markets.”