Net income at Decoma International plunged to $US3.5 million in the third quarter of 2004 from $14.6 million in Q3 2003. For the nine months to September 30, net income was $55.3 million, down from $75.5 million the previous year.
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Q3 operating income was $10.2 million (Q1 03: $28.7 million) while the nine month result was $97.9 million, down from $132.3 million.
Third quarter sales rose to $620.1 million ($556.4 million in ’03). Nine month sales were $1,990.7 million ($1,709.7 million).
“We continued our top line growth in the quarter and despite a difficult industry environment, Decoma has a strong book of future business. We are disappointed with our earnings in the quarter which were significantly impacted by new facility and program launches, operating losses at certain divisions in both North America and Europe, continuing customer pricing pressures and increases in raw material costs, primarily steel, “ said Decoma president and CEO Al Power.
“We are taking active steps to address losses at our underperforming divisions and, with the majority of our new programme launches and new facility investments behind us, our long-term prospects remain positive.”
Decoma said third quarter sales benefited $30.1 million from currency translation. Excluding the impact of currency translation, sales grew $33.6 million or 6% over the third quarter of 2003. Strong growth at new facility start ups in Europe accounted for much of the increase.
During the third quarter of 2004, vehicle production volumes declined 1% in North America and rose 2% in Europe. Decoma’s production sales grew 5% to $360.8 million in North America and increased 36% to $206.6 million in Europe. Average content per vehicle grew $5 to $99 in North America and $13 or 31% to $55 in Europe.
In Europe, sales and content growth were driven by the ramp-up of sales at recent new facility start-ups, including VW Golf component production at Belplas in Belgium and the launch of Mercedes A class parts production at Innoplas in Germany. Sales at new European facilities collectively added approximately $36.4 million to production sales and $9 to European content per vehicle. European sales and content growth also benefited from the translation of euro and British pound sales into the Company’s US dollar reporting currency, which added approximately $14.5 million to European production sales and $4 to content per vehicle during the period.
Operating income in the third quarter of 2004 declined to $10.2 million. North American operating income of $26.7 million was significantly impacted by increases in start up costs at Decostar and at the company’s new specialty vehicle facility in Shreveport, Louisiana. In addition, launch costs at the Co-ex-tec facility and increased losses at the Anotech anodising facility contributed to the decline.
Operating losses in Europe rose to $13.8 million from the third quarter of 2003, largely reflecting challenges at the Belplas facility, including continued paint line performance issues, launch issues related to various Porsche fascia programmes and lower than anticipated production volumes on the Golf programme.
