SOUTHFIELD, Mich. – Federal-Mogul today reported financial results for the second quarter ended June 30, 2013. Net sales for the second quarter were $1,772 million, an increase of $97 million or 6 percent (with negligible exchange impact) on a continuing operations basis, versus the second quarter of 2012.
Net income attributable to Federal-Mogul in the second quarter of 2013 was $56 million or 57 cents per share, up from a net loss in the second quarter of 2012 of $(59) million or $(60 cents) loss per share. Net income was comparable to second quarter 2012 net income of $60 million when excluding the impact of a non-cash impairment of $(119) million recorded in the second quarter of 2012.
"Federal-Mogul’s second quarter results show the benefit of cost reductions and restructuring actions implemented to eliminate loss-making units and improve overall operating leverage," said Rainer Jueckstock, Federal-Mogul co-CEO and CEO Powertrain Segment. "The cash flow in Q2 2013 is also an important sign of improved working capital stability. While the results are encouraging, we are continuing to implement restructuring actions to raise capacity utilization and improve operating performance."
Federal-Mogul Completes Rights Offering
Federal-Mogul, on July 9, 2013, concluded a shareholder rights offering generating proceeds of $500 million. The offering was conducted to raise equity to further strengthen the company’s balance sheet and facilitate the company’s debt refinancing. The company will continue to evaluate market conditions and other relevant factors in connection with the potential refinancing of all or a portion of its outstanding indebtedness.
Federal-Mogul’s Powertrain (PT) segment had revenue of $1.1 billion, a $68 million or 5 percent increase versus the second quarter of 2012. Revenue in North America was up 6 percent, while light vehicle production grew by 5 percent in second quarter 2013 and commercial vehicle (CV) production declined 9 percent versus second quarter 2012. In Europe, where PT derives approximately 50 percent of its revenue, second quarter 2013 revenue was up 1 percent despite a decline in light vehicle production of 3 percent and decline in CV production of 8 percent. PT revenue in ROW was up 13 percent, including an increase in Federal-Mogul China revenue of more than 30 percent during the quarter while Chinese light vehicle production increased 12 percent when compared to the second quarter of 2012.
Powertrain segment EBITDA was $106 million or 9.7 percent of sales, compared to $102 million in the second quarter of 2012. The PT business continues to be negatively impacted by slower commercial vehicle and industrial equipment production. The CV market in the North America in the second quarter of 2013 was down 9 percent versus second quarter 2012, and the CV market in Europe was down 8 percent during the same periods of comparison. Product mix due to the European market shift to a higher percent age of gasoline power vehicles continued to negatively impact the segment in second quarter 2013.
"We see some encouraging signs of European market stabilization and, combined with our ongoing capacity rationalization, the company will be positioned for increasingly favorable performance as volumes improve," said Jueckstock.
Federal-Mogul’s Vehicle Components Segment (VCS) business had revenue of $783 million in the second quarter of 2013, up $34 million or 5 percent versus the second quarter of 2012. The VCS revenue in North America was down 1 percent versus second quarter 2012 due to the planned cessation of selected business contracts. The VCS segment in Europe increased revenue by 10 percent on a comparable business basis, or 20 percent when including the favorable impact of the BERU ignition distribution agreement.
"We had a very solid quarter in the EMEA region in the second quarter of 2013 due principally to market share gains. We are leveraging our well-known brands and rapidly expanding the portfolio to drive improved sales in this region," said Kevin Freeland, Federal-Mogul co-CEO and CEO Vehicle Components Segment. "Our sales are also stronger due to an intense focus on improving order fill rates through better inventory management and improved distribution systems."
VCS segment EBITDA in Q2 2013 was $57 million or 7.3 percent of sales, up from $55 million in Q2 2012. Several restructuring actions have been implemented within the VCS segment, including the closure or downsizing of seven sites in the previous 18 months. These actions will increasingly impact results as these restructuring programs are completed.
"Restructuring and downsizing actions, combined with stronger volumes are improving the VCS bottom line. We are implementing several important strategies to improve our presence in developing markets, raise distribution efficiency and gain greater premium brand awareness. These actions will further reinforce our capability to deliver profitable growth," said Freeland.
