Dana Inc. has announced strong preliminary financial results for 2017 and guidance for 2018. Preliminary sales and adjusted EBITDA for 2017 are in line with the company’s previous guidance. The 2018 guidance reflects significant sales, earnings and cash flow growth. The increased outlook for 2019 represents a significant improvement from the prior targets. The company also announced it will increase its quarterly dividend from 6 cents to 10 cents per share, and its board of directors has authorized the repurchase of up to $100 million of common shares over the next two years.
Preliminary sales for the year approximated $7.2 billion, about 24 percent higher than 2016, primarily due to strong end-market demand, acquisitions, conversion of sales backlog and favorable currency.
Preliminary adjusted EBITDA for 2017 approximated $835 million, or 11.6 percent of sales, a 30 basis-point improvement over 2016.
“Over the course of this past year, we made great strides in positioning Dana for long-term success. By delivering profitable organic and inorganic growth in 2017, we have established the foundation for our future as we continue to execute our enterprise strategy,” said James Kamsickas, Dana president and CEO.
The company’s 2018 Guidance includes:
- Sales of $7.5 to $7.7 billion
- Adjusted EBITDA of $910 to $960 million
- Adjusted EBITDA as a percent of sales of 12.1 to 12.5 percent
- Diluted adjusted EPS1 of $2.60 to $2.90
- Operating cash flow of approximately 7.5 percent of sales
- Capital spending of approximately 4.0 percent of sales
- Free cash flow of approximately 3.5 percent of sales
Strong end-market demand and new-business backlog are driving an expected 6 percent sales growth in 2018. Continued strong demand for key light-truck programs is expected into 2018, as is higher end-market demand for off-highway equipment and commercial vehicles. Increased sales from the new-business backlog are expected to add approximately $300 million, and improved end-market demand is expected to accrete $100 million.
Adjusted EBITDA in 2018 is expected to improve by approximately $100 million, or 70 basis points of margin improvement. Dana says this improvement is driven primarily by higher sales levels, ongoing efficiency improvements and acquisition synergies.
“The combination of our strong financial performance in 2017 and outlook for the future provides increased confidence in our cash flows, allowing us to increase our quarterly dividends by 67 percent,” said Jonathan Collins, executive vice president and CFO of Dana. “Our new share repurchase authorization, which extends through the end of next year, will allow us to mitigate the ambient level of dilution.”
Company Updates 2019 Targets
Dana’s sales, adjusted EBITDA and diluted adjusted EPS are expected to increase by $700 million, $90 million and 40 cents, respectively, compared with the prior 2019 target ranges, due to the impact of stronger than expected end-market demand, increased sales backlog and continued cost discipline. Adjusted EBITDA margin and free cash flow as a percentage of sales are expected to remain in line with prior target ranges at 12.8 percent and 5 percent.
Share Repurchase Program
Dana announced that its board of directors approved a new share repurchase program, authorizing the purchase of up to $100 million of common shares over the next two years. The company expects any shares repurchased to be in the open market or through privately negotiated transactions and expects to have sufficient free cash flow and liquidity during this period to support this initiative. Execution under this program is subject to prevailing market conditions, available growth opportunities and other considerations.
