Commercial Vehicle Group Inc. (CVG) has reported financial results for the second quarter ended June 30, 2017.
Second quarter 2017 revenues were $195.1 million compared to $178.3 million in the prior-year period, an increase of 9.5 percent. The company said increase in revenues period-over-period reflects higher heavy-duty truck production in North America and improvement in the global construction markets we serve. Foreign currency translation adversely impacted second quarter 2017 revenues by $2.1 million, or by 1.2 percent when compared to the same period in the prior year.
Net income was $0.1 million for the second quarter 2017, or 0 cents per diluted share, compared to net income of $2.7 million in the prior year period, or 9 cents per diluted share. Earnings per share, as adjusted for special items, were 8 cents per diluted share in the second quarter 2017 compared to 10 cents per diluted share in the prior year period.
Patrick Miller, president and CEO, stated, “As seen by our top line performance, both our truck and construction segments are seeing increased sales in the core markets we serve resulting in a 10 percent improvement in sales in the second quarter as compared to the same period last year. Our largest end market, North American Heavy Duty Truck, is showing particularly strong demand ‒ OEM truck orders are up 37 percent in the first half of this year compared to last year. As a result, second quarter truck build was 30 percent higher quarter-over-quarter and we expect the improvement in orders to continue to be reflected in build for the remainder of this year and perhaps into next year. With respect to our construction and agriculture segment, heavy construction equipment build volumes continue to improve in every geography we serve contributing to approximately 14 percent segment sales growth in the second quarter as compared to the same period last year.”
Tim Trenary, chief financial officer, stated, “Conversion of improving sales into operating income, or pull through, in the second quarter was well below our past experience. This is primarily attributable to a shortage of labor in our North American wire harness business and the associated cost to satisfy customer production demand. We have increased our wire harness production capacity by maintaining production capability in the Monona, Iowa, facility and by establishing a new facility in Mexico with better access to labor. Admittedly, it is taking longer than previously anticipated to manage down the cost associated with the labor shortage ‒ the burden on second quarter results was on the order of $4 million and there may be another $3 million to $6 million of cost coming in the last half of the year. Additionally, rising commodity prices and some production inefficiencies from the spike in North American truck build adversely impacted pull through in the second quarter.”
Miller continued, “For the most part, our cost-reduction and facility restructuring efforts have been very successful. Notwithstanding the difficulty we are experiencing with the wire harness business, we continue to expect savings resulting from the cost reduction and facility restructuring to be at the upper end of the range initially disclosed; that is, $8 million to $12 million annually. Importantly, our two largest end-markets continue to improve, sales are up and we expect pull through on the improving sales to return to historical levels in due course.”
2017 End-Market Outlook
Management estimates that the 2017 North American Class 8 truck production will be in the range of 220,000 to 240,000 units, as compared to 228,000 units in 2016; North American Class 5-7 production is expected to be up slightly year-over-year. The global construction markets in Europe, Asia, and North America are improving, according to CVG.