Adient plc Q2 FY2025 earnings call

Bullet points:

• Strong Q2 results with improved business performance across regions, mitigating volume and headwinds. Achieved $233 million adjusted EBITDA, expanding margins by 40 basis points.
• Addressed tariffs by leveraging global footprint, with 95% of parts from Mexico and Canada being USMCA compliant, targeting 100% cost offsets/recoveries. Already 75% resolved with roadmap for remaining 25%.
• Won significant new business, including with FAW Hongqi H5, Kia K5, and Ram 1500. Earned multiple awards like GM Supplier of the Year, Toyota VA Achievement Award, etc.
• Focused on product innovation and automation, expanding China Technical Center and launching first mechanical massage system with GAC.

In Americas, there was improved business performance with outperformance vs industry volumes and margin improvement. EMEA had volume and mix headwinds along with a $333 million non-cash goodwill impairment due to share price decline and volume uncertainties. Asia had strong business performance mitigating near-term volume mix and headwinds. Adjusted EBITDA for the quarter was $233 million, up 3% year-on-year, with margins expanding 40 basis points to 6.5%. Revenue was $3.6 billion, down $139 million year-on-year, with Americas sales higher, EMEA and Asia lower.

Bullet points:

• Reiterated fiscal 2025 revenue and adjusted EBITDA guidance, excluding tariff-related volume impacts.
• Tariff expenses expected to be offset by actions with customers. Interest expense slightly higher due to refinancing.
• Adjusted free cash flow forecast to $150 million to $170 million from previous $180 million due to European cash restructuring costs and uncertainty around customer recoveries.

Bullet points:

• Uncertainty in tariff magnitude and impact on volumes.
• Macro volatility and volume pressure in EMEA and Asia.
• $333 million non-cash goodwill impairment in EMEA due to share price decline and volume uncertainties.

Q: Can you elaborate on tariff exposure and resolution?

A: Roughly 95% of parts from Mexico and Canada are USMCA compliant and not subject to 25% tariff. Annex 1 parts not shipped by Adient, with China parts facing 145% tariff. 75% of gross tariff position resolved with roadmap for remaining 25%.

Q: Update on European restructuring?

A: Cash restructuring in Europe expected to be north of $100 million, possibly higher with acceleration. Restructuring costs spent prudently with some accretive to EBITDA, others holding CERB with lost volume.