Adient, a global leader in automotive seating, has reported certain preliminary financial results for the quarter ended March 31, 2020. Revenue in Q2FY20 is expected to be approximately $3.5 billion versus $4.2 billion in Q2FY19.
Q2FY20 Adjusted EBITDA is expected to be between $200 million and $210 million (including ~$100 million impact from COVID-19), versus $191 million in the prior-year quarter.
Free cash flow (operating cash flow, less capital expenditures) for the quarter is expected to be between $(140) million and $(160) million, versus $60 million in the prior-year quarter. The negative impact of working capital movements (which is highly volatile to quarter close timing differences between periods) was the primary driver of the year-on-year decrease. For the March 31, 2020, YTD period, free cash flow is expected to be approximately breakeven versus $(212) million for the same period last year.
Additional details related to Adient’s second quarter results and outlook for the remainder of FY20 will be provided on May 5 during the company’s Q2FY20 earnings call.
“Adient’s preliminary Q2 results demonstrate the improvement phase of the company’s turnaround plan continues to accelerate. Excluding the ~$100M negative impact stemming from the COVID-19 crisis, Adient’s second quarter results were on pace to significantly outperform Q2FY19’s results,” said Doug Del Grosso, president and CEO. “The team is acting quickly and decisively to execute actions designed to reduce the company’s cash burn rate and increase liquidity. We will continue to execute actions designed to protect the long-term health of Adient.”
Exploring additional options to strengthen the balance sheet
In March, Adient announced plans to draw down $825 million in principal amount under its Asset Based Revolving Credit Facility. At March 31, 2020 Adient had approximately $1.8 billion of liquidity, comprised of cash on hand totaling $1,640 million (including $825 million of drawn revolver) and approximately $175M of remaining capacity under the revolving line of credit. As of April 20, 2020, the drawn portion of the revolver decreased to $688M and undrawn capacity totaled approximately $154 million. Due to the fact availability under the Asset Based Revolving Credit Facility (backed by pledged assets/receivables) is expected to shrink during the prolonged auto production shutdown occurring in Europe and Americas, Adient is assessing additional funding options to further strengthen its balance sheet.
Based on the current production environment in Europe and Americas, combined with actions executed to reduce the company’s cash burn rate, Adient estimates its cash burn rate (defined as net cash outflow associated with operating the company) will average approximately $175 million per month (excluding dividends received from joint ventures and previously announced transactions). Adient also is taking actions to resize its cost structure to address the post-crisis sales environment, which the company expects will be smaller than before the pandemic.