Given rapid changes in the market caused by the effects of the coronavirus outbreak, Veoneer has updated indications of its first quarter 2020 results, current business situation and short term responses.
It said special health and operational crisis management teams had been working since February and continuously.
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First quarter sales were expected to see limited negative impact from the coronavirus outbreak, mainly from the second half of March, and in the range of US$350m to $370m, including sales from VNBS Asia for January.
Underlying sales for January and February were stronger than anticipated, despite negative effects from the initial coronavirus outbreak in China.
Cash balance at the end of February was around $970m, up from $894m the end of 2019, following the previously announced completion of the sale of the Asian brake control business (VNBS Asia) on 3 February.
New order intake to the end of February was around $160m average annual sales but the supplier now expects March activity to be limited.
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By GlobalDataOEM production downtime or lower production rates are expected in Europe and North America for the next two to four weeks commencing now.
"We are adjusting our production according to customer demand and local government initiatives, and anticipate that our production facilities in Europe and North America will operate in the range of 20 to 30% of capacity during this two-four week period, including potential temporary facility closures. It is highly uncertain how long the production reductions will last," Veoneer said in a statement.
"Our Asian business is recovering and our manufacturing facility and engineering centre in China are operating at increasingly high levels and general local business activity is increasing."
As an extension to its Market Adjustment Initiatives launched during Q1 2019, Veoneer will take further actions to preserve cash and focus on its core product range and customer launches, including:
- Reductions in professional services
- Adjusting to market conditions in direct labor and production overheads
- Reductions in SG&A
- Focus on all actions that are not driving up-front cost
- Cuts in discretionary spending
- Capital expenditure reductions.
"Through these actions we expect to improve the current run rate of cash flow before financing activities during the remainder of the year, achieved improvements could potentially not suffice to offset the effects of the coronavirus outbreak," the supplier said.
"The strategic reviews of the priorities for Zenuity, our software joint venture with Volvo Cars and our North American brake control business (VBS), have been accelerated and we expect to reach a conclusion shortly."
Veoneer said major customer launches for 2020 were progressing mainly according to plan, however volumes and timing were currently difficult to estimate due to the unpredictability caused by the coronavirus outbreak.
Veoneer sales growth was increasingly driven by new vehicle launches and increasing content per vehicle, rather than light vehicle production levels.
It was too early to detail the negative effects from the coronavirus outbreak to the supplier's full year 2020 outlook.
It would provide further updates to full year expectations when Q1 earnings were announced on 24 April.
