BorgWarner supplies its DualTronic transmission and controls for Fiat's Alfa Romeo MiTo.
Early returns from some key automotive suppliers such as Federal Mogul, American Axle, BorgWarner and Tenneco indicate the sector continues to benefit from the modest increase in production and from huge restructuring and cost cutting as results surpassed the expectations of securities analysts.
Federal-Mogul Corp. of Southfield, Michigan has reported a 23% increase in sales and 17.1% increase in net income for the second quarter, beating estimates of analysts by a substantial margin by posting sales of $1.6 billion and earnings of $49 million.
“Federal-Mogul’s results in the second quarter of 2010 show our ability to deliver strong financial performance by converting incremental revenue to profitability due to our continued focus on efficiently managing our cost base established during 2009,” said Jose Maria Alapont, president and chief executive officer.
Federal hit $1.6 billion versus $1.3 billion recorded during the same period one year ago. Net income was $49 million or 49 cents per share. Analysts’ consensus earnings expectation was 32 cents per share, according to the company’s second quarter financial statement.
Federal Mogul’s stronger sales performance stemmed from share gains in all regions and markets, on top of a significant improvement in global automotive demand, Alapont said.
BorgWarner Inc. of Auburn Hill, Michigan also reported a second quarter profit of $83 million or 68 cents per diluted share as sales surged 55.2% to $1.42 billion, prompting the company to raise its outlook for the balance of the year.
Timothy Manganello, Chairman and CEO of the Auburn Hills-based automotive supplier, said growing demand for its fuel-efficient technologies drove the company’s strong results, which reversed the 31-cent-per-share loss it suffered in the same period in 2009.
“The primary driver of our out-performance was new business growth as our product technology continued to penetrate the global market. Favorable macroeconomic trends, such as the continued volume shift in Europe toward vehicles with higher BorgWarner content,” Manganello said.
“In addition, a continued sharp focus on managing costs while sales grew resulted in an operating income margin of 9.7% in the quarter, which is the highest quarterly operating income margin that we have achieved since 2002,” Manganello said.
BorgWarner also raised its earnings guidance for 2010 to a range of $2.60 to $2.80 per share from a previous range of $2.20 to $2.50. Both the current guidance range and the previous guidance range exclude non-recurring items. Revenue growth in 2010 is now expected to range from 32% to 35%.
“Our outlook for vehicle production in North America, Europe and China has improved since we last provided guidance,” Manganello said. “More importantly, we expect our growth to outpace the market as demand for our products continues to gain momentum. It is our expectation that 2010 will be a record earnings year for the Company.”
Detroit-based American Axle & Manufacturing Holdings Inc, a key supplier for General Motors Company and Chrysler Group, reported doubling its sales in the second quarter on its way to a profit of $25.9 million or 34 cents per share.
“The second quarter of 2010 marked AAM’s fourth consecutive quarter of sequential sales gains and improved profit and cash flow performance,” said Richard Dauch, Detroit-based AAM’s Chairman of the Board and Chief Executive Officer.
“AAM is benefiting from a recovery in market demand for full-size pickups and SUVs, as well as a strong cadence of new product launches that is rapidly enhancing the diversification of our customer base and served markets.
“We expect these favorable conditions to continue throughout the second half of 2010, positioning AAM for full year sales growth of 40% – 45% and profit margins that rank among the best in our company’s history.” Dauch said in statement accompanying the company’s quarterly financial report.
AAM’s sales in the second quarter of 2010 of $559.6 million were more than double the $245.6 million reported in the second quarter of 2009. On a sequential basis, net sales in the quarter increased approximately 7% compared to the first quarter of 2010.
Meanwhile, Tenneco posted second quarter profit of 62 cents per share, which was well above the 24 cents per share predicted by analysts on higher production, improved manufacturing efficiencies and a lower tax rate. “We are encouraged by the strong aftermarket performance, especially in the Americas. Recent launches should stimulate demand across all regions except for Europe, in our view,” Standard and Poors analysts noted.