Lear has reported a sharp swing to profit in the second quarter. Net income for the second quarter increased to US$123.6m, or US$1.58 a share, compared with a loss of US$6.4 m, or 10 cents a share, in the same period a year earlier.
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But net sales were down. Lear reported net sales of US$4.2bn and pretax income of US$143.9m, including restructuring costs of US$34.8m and other special items of US$3.4m. For the second quarter of 2006, Lear reported net sales of US$4.8bn and pretax income of US$31.5m, including restructuring costs and other special items of US$24.3m.
“The Lear team was able to deliver improved financial results as benefits from restructuring activities, ongoing cost and efficiency actions and new business globally more than offset lower production in North America,” said Bob Rossiter, Lear Chairman and Chief Executive Officer. “Going forward, we plan to continue with our strategy of global restructuring and further sales diversification to improve our longer-term competitiveness.”
Lear said the decline in reported net sales for the quarter reflects primarily the divestiture of Lear’s Interior business and lower production in North America, offset in part by the benefit of new business mainly outside of North America and favorable foreign exchange. Operating improvement reflects favorable cost performance, the benefit of new business and the divestiture of Lear’s Interior business, offset in part by lower production in North America.
In the seating segment, operating margins improved, reflecting favorable cost performance from restructuring and ongoing efficiency actions, selective vertical integration and the benefit of new business primarily outside of North America. In the electrical and electronic segment, operating margins declined, reflecting unfavorable net pricing, lower volume in North America, the roll-off of two programs in North America as well as litigation costs and other commercial items.
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By GlobalDataDuring the second quarter, Lear said it continued to make solid progress on its global restructuring initiative, including actions related to low-cost country sourcing, capacity alignment and further administrative consolidation actions. Also during the quarter, the company continued to win new business in Asia and with Asian manufacturers globally.
In addition, Lear announced an industry first with its agreement to supply Ford Motor Company with SoyFoam(TM) for the seats in the 2008 Ford Mustang.
Lear anticipates 2007 core operating earnings to be in the range of US$600m to US$640m. This is unchanged from the last full-year outlook provided, but the company now sees earnings at or near the high end of this range.
Restructuring costs in 2007 are estimated to be about $100 million.
Key assumptions underlying Lear’s full-year financial outlook include expectations for industry vehicle production of approximately 15.1m units in North America and 19.7m units in Europe as well as an exchange rate of US$1.34/euro.
See also: US: Shareholders kill Lear deal
