Motorcar Parts of America Inc. (MPA) has reported record sales for its fiscal 2018 second quarter and six-month period – despite widely reported industry softness and associated customer ordering dynamics, both of which now appear to be reversing.

Net sales for the fiscal 2018 second quarter increased 2.7 percent to $111.8 million from $108.8 million for the same period a year earlier.

Adjusted net sales for the fiscal 2018 second quarter increased 1.7 percent to $114.3 million from $112.4 million a year earlier. The company’s adjusted sales performance for the fiscal 2018 second quarter reflects continued strength of its rotating electrical business, as well as contributions from its other product lines.

Net income for the fiscal 2018 second quarter was $6.3 million, or 33 cents per diluted share, compared with $9.1 million, or 47 cents per diluted share, a year ago.

Adjusted net income for the fiscal 2018 second quarter was $9.7 million, or 50 cents per diluted share, compared with $12.4 million, or 64 cents per diluted share, in the same period a year earlier.

Gross profit for the fiscal 2018 second quarter was $27.2 million compared with $30.7 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2018 second quarter was 24.3 percent compared with 28.2 percent a year earlier – reflecting the impact of return accruals related to new business, higher returns as a percentage of sales and lower purchasing volume impacting overhead absorption.

Adjusted gross profit for the fiscal 2018 second quarter was $32.3 million compared with $34.5 million a year ago. Adjusted gross profit as a percentage of adjusted net sales for the three months was 28.2 percent compared with 30.7 percent a year earlier. The current quarter adjusted gross profit as a percentage of adjusted net sales was impacted by higher returns as a percentage of adjusted sales and lower purchasing volume impacting overhead absorption.

Net sales for the fiscal 2018 six-month period increased 6.5 percent to $206.8 million from $194.2 million a year earlier.

Adjusted net sales for the fiscal 2018 six-month period increased 1.5 percent to $209.3 million from $206.2 million last year.

Net income for the fiscal 2018 six-month period was $13.9 million, or 72 cents per diluted share, compared with $16.7 million, or 86 cents per diluted share, in fiscal 2017.

Adjusted net income for the fiscal 2018 six-month period was $17 million, or 88 cents per diluted share, compared with $22.5 million, or $1.16 per diluted share, in fiscal 2017.

Gross profit for the fiscal 2018 six-month period was $53 million compared with $51 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2018 first half was 25.6 percent compared with 26.3 percent a year earlier – reflecting the impact of return accruals related to new business, higher returns as a percentage of sales and lower purchasing volume impacting overhead absorption.

Adjusted gross profit for the the six-month period was $59.4 million compared with $64.8 million a year ago. Adjusted gross profit as a percentage of adjusted net sales for the six months was 28.4 percent compared with 31.4 percent a year earlier. The current six-month period adjusted gross profit as a percentage of adjusted net sales was impacted by higher returns as a percentage of adjusted sales and lower purchasing volume impacting overhead absorption.

“The first half of fiscal 2018 was a challenging period, even though we achieved market share gains. As widely reported by industry observers, we are experiencing industry softness and related headwinds. Nonetheless, we remain enthusiastic about our longer-term prospects within the $125 billion aftermarket hard parts industry – supported by organic growth, product line expansion and complementary acquisition opportunities,” said Selwyn Joffe, chairman, president and CEO of Motorcar Parts of America.

Joffe added that sales for the fiscal year 2018 second quarter were adversely impacted by a general softness in the market, as indicated above, and by approximately five percent due to certain customer inventory reduction initiatives.

Joffe noted that adjusted gross margins were negatively affected by lower purchasing volume impacting overhead absorption and higher returns as a percentage of adjusted sales related to existing business. “We expect gross margins will improve as sales volume increases,” Joffe said.

“Our acquisition in July of D&V Electronics, which designs and manufactures leading edge tester systems utilized for a variety of applications, offers an exciting additional market for accelerating sales of diagnostic equipment related to our current products and growth of diagnostic equipment for the emerging electric vehicle market. The sales opportunities for D&V testing products that directly relate to our existing product line are significant. We expect to realize substantial growth over the next few years. In addition, D&V has developed leading-edge testing capabilities for the key components of electric and hybrid vehicles. We continue to see significant interest for our technology from original equipment manufacturers and Tier 1 suppliers. In addition, this specialized business complements our commitment to innovation and customer support, all of which further distinguishes Motorcar Parts of America’s position within the non-discretionary automotive parts market. The outlook for the automotive aftermarket remains strong, and we remain encouraged by the numerous opportunities for growth as we harness our distribution relationships, leverage our scale, global footprint and financial strength to deliver growth and profits to shareholders,” he added.

“We are encouraged by our recent market share gains and anticipate further increasing our overall sales volume in the second half of our fiscal year. As always, we thank our entire team for their day-in and day-out commitment to excellence as we continue to build shareholder value,” said Joffe.