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US: TRW Automotive Q3 net profit drops 21% to $155m

By Simon Warburton | 2 November 2011

TRW Automotive Holdings third quarter 2011 net profit fell 20.6% from US$199m to $158m.

Nonetheless, the Tier one supplier booked sales up 14% year on year to $3.9bn.

TRW said the quarterly results included debt retirement charges while the prior year period included debt retirement charges and favourable tax benefits. Excluding special items, the company reported net earnings of $177m in the third quarter versus $189m last year.

"TRW's solid third quarter results and business performance achieved through the first nine months of this year provide evidence of the company's product and geographical positions," said chairman and CEO John Plant.

"We are confident in the future given the company's strong market position and profitable growth initiatives that are positioning TRW for long-term success."

Sales rose due to larger OEM vehicle production volumes, increasing demand for TRW's active and passive safety products and positive currency movements.

Q3 2011 operating income was $240m versus $269m in 2010.  The decline in profit was due largely to higher raw material prices, higher legal fees and planned increases in costs to support future growth, partially offset by higher sales.

Earnings before interest, taxes, depreciation and amortisation and special items (adjusted EBITDA) totalled $354m in the third quarter, compared to $385m a year ago.

For the nine months to 30 September, 2011, TRW reported sales up 15% to$12.3bn, an increase of US$1.6bn year on year.

Year to date operating income of $980m compared to 891m at this point in 2010. The 2011 result included a gain related to a favourable resolution of what TRW describes as "a commercial matter" totalling US$19m and a charge related to the termination of a service contract of $10m.

Restructuring and fixed asset impairment charges of $10m were booked in the 2010 period. Excluding these items from both periods, the company reported operating income of US$971m in 2011 versus $901m the previous year.

TRW also recognised a US$9m gain on an acquisition related to the purchase of a shock absorber manufacturing facility during 2011. The gain reflected the excess of fair value of the business in comparison to the purchase price.

Adjusted EBITDA was $1,313m for the first nine months of 2011 compared to $1,247m in 2010.

During the most recent quarter TRW took action to divest certain of its non-safety related businesses in Asia and entered into an agreement to sell its cold forming business in Japan.  The planned divestitures, with annual sales of around US$100m, are expected to be finalised in the fourth quarter of 2011.

TRW expects full year production of 12.9m units in North America and 19.9m in Europe. Based on these production levels and foreign currency rate forecasts, full year 2011 sales are now expected to be around US$16.2bn, including fourth quarter sales of around US$3.9bn.

"Although vehicle production schedules have moderated slightly in the second half of 2011 compared to the first half of the year, increased demand for TRW's products, continued growth in developing markets of the world and the company's business performance achieved through September will support a strong year for TRW," said Plant.