SOUTHFIELD, Mich. – Federal-Mogul Corp. has announced first quarter 2013 (Q1 2013) results with sales of $1.7 billion, 2 percent lower than first quarter 2012, due to lower European light vehicle and reduced global commercial vehicle production, with negligible exchange impact.
Operational EBITDA in Q1 2013 was $141 million or 8.3 percent of sales, down from $165 million or 9.5 percent of sales in Q1 2012. When compared to the fourth quarter 2012, the company had 8 percent higher sales and stronger Operational EBITDA as a result of incremental volumes, cost reductions and restructuring actions. The company recorded $8 million in restructuring charges during Q1 2013 related to its ongoing restructuring programs. Further restructuring actions are underway, potentially resulting in approximately $80 million in restructuring charges and related payments for 2013.
The company had a cash outflow of $(186) million in the quarter, including
$(46) million in net payments related to divesture and restructuring actions, $(23) million additional working capital to support a new global aftermarket distribution agreement and normal seasonal working capital requirements.
"We are coming out of a fourth quarter 2012 earnings trough with improved operating performance in the first quarter 2013," said Rainer Jueckstock, co-CEO of Federal-Mogul and CEO Powertrain Segment. "We now have the majority of our operations running at a more balanced load and we have further opportunities through restructuring plans. Our Q1 operating results show the benefit of our strong drive for operating efficiency, in spite of continued European headwinds."
"We are continuing to make business decisions to align our commercial and operational strategies for better profitability," said Michael Broderick, co-CEO of Federal-Mogul and CEO Vehicle Components Segment. "While growth remains a priority, we will also reinforce and differentiate Federal-Mogul brands with strong service and delivery performance, supported by effective marketing programs and commercial strategies to reinforce our premium position."
Restructuring Program Update
The company, as previously announced, divested its Sintertech business, consisting of three manufacturing plants in France, during the first quarter 2013. The transaction resulted in a cash outflow of $(42) million, which contributed to the loss from discontinued operations of $(53) million during the quarter. In 2012, the Sintertech business contributed negative Operational EBITDA of $(13) million and a net loss of $(21) million to Federal-Mogul results. This divestiture eliminates a substantial non-core business from the company’s portfolio and positively impacts reported operating performance.
Federal-Mogul announced in July 2012 the downsizing or closure of selected North American facilities in line with a program to increase capacity utilization in its braking and wipers business lines. During the quarter, the company ceased manufacturing operations at its Winchester, Va., braking plant. The company says it is on schedule to complete additional restructuring and migration of its global braking and wipers manufacturing footprint to low-cost countries in line with the previously announced plan.
As part of Federal-Mogul’s multi-year restructuring program, the company during Q1 2013 began discussions with employee representatives at several European plants regarding actions to restore competitiveness.
Powertrain Segment Revenue and Operating Results
Federal-Mogul’s Powertrain Segment (PT) in Q1 2013 had total segment revenue of $1,062 million, down $(25) million, or (2) percent lower on a constant dollar basis versus Q1 2012. In the North American market, where 34 percent of PT revenue is derived, revenue was slightly favorable compared to Q1 2012, while light vehicle production rates were slightly below Q1 2012 levels. Commercial vehicle production in the region was (13) percent lower in Q1 2013, contributing to softer segment revenue for the PT business.
In Europe, the Powertrain Segment had (5) percent lower revenue during Q1 2013, compared to (13) percent lower light vehicle and commercial vehicle production in the region. The company continues to adjust labor and closely manage other cost factors to absorb the negative mix impact of slower diesel sales in Europe, which compounds the margin impact of lower overall European revenue.
PT Recorded
Operational EBITDA of $90 million from continuing operations in Q1 2013, down $(17) million from the same period in 2012 on $(25) million lower sales. The EBITDA result for Q1 2013 was $58 million higher than the $32 million recorded in Q4 2012, demonstrating the positive impact of cost reduction and portfolio restructuring actions.
Vehicle Components Segment Revenue and Operating Results
The Vehicle Components Segment (VCS) had $737 million total revenue in the quarter. The North American revenue was down (7) percent, with the U.S. aftermarket down (3) percent due to cessation of selected non-strategic business contracts and the decline of export shipments into Venezuela.
VCS experienced higher total revenue in Europe, with lower OE revenue offset by 22 percent higher constant dollar aftermarket revenue versus Q1 2012, including a 20 percent increase in revenue from a distribution agreement implemented during the quarter.
VCS had Operational EBITDA of $51 million in Q1 2013, down $(7) million from Q1 2012 on $(17) million lower sales. When comparing Q1 2013 EBITDA to Q4 2012, VCS continues to increase operating profitability through restructuring and stronger execution to drive improved business performance.
