Delphi Technologies PLC recently announced financial results for its third quarter 2019.
Q3 2019 Results
• Revenue of $1 billion decreased 11% from the year-ago quarter. Adjusting for currency exchange, revenue decreased 8%. The decline was primarily due to lower global production, particularly in China, the downward trend in passenger car diesel fuel injection systems in Europe, and the closure of certain customer production sites in North America.
• On a regional basis, adjusted revenue reflects decreases of 12% in Asia Pacific, 6% in Europe, 7% in North America and 7% in South America.
• Operating income was $45 million, compared to $81 million in the prior year period. Adjusted operating income was $71 million, compared to $108 million in the prior year period. The year-on-year decline in adjusted operating income was primarily due to unfavorable product mix, most notably between higher margin passenger car diesel fuel injection systems, and lower margin advanced gasoline direct injection fuel systems.
• Quarterly earnings per diluted share of $0.16 represents a 64% decline from the year-ago quarter. Excluding special items, earnings per diluted share was $0.56, compared to $0.72 in the prior year period.
• Cash flow from operating activities was $59 million, compared to $54 million in the prior year period. The year-on-year increase is primarily due to an improvement in working capital, offset by the decrease in net income.
CEO Comment
“Consistent with our first half performance, our Q3 results were impacted by ongoing industry and macro headwinds,” said Richard F. Dauch, CEO of Delphi Technologies. “While we continue to make solid progress in a number of key operational and commercial areas, we must act with increased urgency to improve our financial performance. Today we have announced a fundamental transformation plan, which is a direct response to the major transitions and challenges our industry faces, consistent with our priority to realign and reshape Delphi Technologies for future profitable growth. This important and necessary step is expected to reduce our annualized costs by more than $150 million over the next three years, while significantly improving our free cash flow and return on invested capital. As a pioneer in propulsion technologies, we remain focused on investing to support our longer-term growth, executing on our strong business wins, and delivering on our vision to make vehicles drive cleaner, better and further.”
Cost Reduction Plan
Over the next three years, the company plans to take a range of actions to reshape and realign its engineering footprint, as well as significantly reducing its overall cost structure, to accelerate its longer-term profitable growth.
In total, these actions are expected to result in restructuring costs of approximately $200 million through the end of 2022. The corresponding gross cost savings are expected to amount to more than $150 million in 2022, with approximately $50 million targeted in 2020.
The company plans to utilize these savings to improve its overall operating margin, while continuing to invest in key technologies to support longer-term growth.
In addition, the company expects the cost reduction plan to significantly improve its cash flow performance. Net of the restructuring costs referenced above, the company expects the plan to deliver an approximately $300 million cash benefit through the end of 2023.
As a result of these plans, and its focus on improving cash flow performance, the company is also suspending its existing $200 million share repurchase program.
