SOUTHFIELD, Mich. – Federal-Mogul Corp. has announced first quarter 2012 financial results, including record first quarter original equipment (OE) sales. Total sales were $1.8 billion, up 2 percent versus the first quarter of 2011, reflecting 5 percent growth in constant dollars, partially offset 3 percent by weakness of international currencies, primarily the euro, against the U.S. dollar.
Original equipment sales were up 8 percent to $1.2 billion, the highest ever first quarter level, the company noted. Net income in the first quarter of 2012 was $32 million or 32 cents per diluted share and EBITDA was $168 million or 9.5 percent of sales. Investment in growth and manufacturing infrastructure increased 30 percent in the first quarter of 2012 versus the first quarter of 2011 to support customer demand for higher-content technologies to improve fuel economy, reduce emissions and enhance vehicle safety.
"Federal-Mogul’s highly diverse customer base and strong position on key powertrain and vehicle technologies enabled the company to continue to grow and even outpace global vehicle production growth in key technologies and regions in Q1 2012," said Rainer Jueckstock, Federal-Mogul CEO. "Strong global OE customer sales and stable aftermarket volumes resulted in another solid quarterly result. We continue on the same path with solid EBITDA performance while simultaneously investing in growth initiatives for the long-term to generate sustainable global profitable growth."
Total sales in the first quarter 2012 were $1.8 billion, up 5 percent in constant dollars, compared to the first quarter of 2011, primarily due to continued growth in OE vehicle production. Sales to OE customers of $1.2 billion reflect a constant dollar increase of 8 percent from $1.1 billion in the first quarter of 2011. All three of Federal-Mogul’s OE business segments had stronger first quarter 2012 sales versus the same period of 2011, with the powertrain business recording the largest gains. The company experienced OE sales growth in all major operating regions with U.S. and Canada up 10 percent, Europe up 3 percent and Rest of World up 16 percent, including BRIC growth of 13 percent. The company’s global aftermarket continued to have stable global sales in the first quarter of 2012 as compared to first quarter 2011, with U.S. sales at a consistent level as the prior year same quarter, lower Europe sales and higher BRIC sales.
Federal-Mogul’s first quarter 2012 gross margin was $277 million or 15.7 percent of sales as the company was impacted by unfavorable product and regional mix. These factors were partially offset by initiatives to improve efficiency, attain normalized production rates on new programs and reduce direct material costs. The company has maintained overall employment at 45,000 over the past 12 months while increasing sales by 5 percent during the same period.
The company’s selling, general and administrative expenses as a percentage of sales, except for unusual items in the quarter, were consistent with the first quarter 2011. The company invested 4 percent of OE sales for research and development in 2011 and this investment rate continued in the first quarter of 2012.
Federal-Mogul’s investment in leading technology and innovation has resulted in new business wins such as brake friction business for low- or zero-copper brake pad formulations. The new business award is with a European luxury vehicle OEM and the product is scheduled to enter the market as early as 2014. New regulations in certain U.S. states mandate ultra-low to zero levels of copper in brake pads and these formulations are expected to become the de facto standard throughout many national markets where vehicle manufacturers utilize common global platforms.
Another example of Federal-Mogul’s technology development is recognition in the annual Automotive News PACE Awards. This year, Federal-Mogul had two technology finalists in the annual competition: 2-D ultrasonic testing for automotive pistons and hybrid cylinder liners for automotive engines. The innovative 2-D ultrasonic testing process was awarded a PACE Award in the manufacturing process category in a ceremony on April 23.
"While original equipment automotive market production growth is forecasted to continue on a global basis throughout 2012, this rate of growth is more moderate than the double-digit increases experienced in some quarters during 2010 and 2011," said Jueckstock. "We expect to further optimize our manufacturing efficiency through productivity improvements as the rate of market growth stabilizes and we bring our recent capital investments into operation at higher levels of capacity utilization."
The company had a cash outflow of $(112) million in first quarter 2012, versus an outflow of $(109) million in the first quarter of 2011, including $130 million of capital investments in first quarter 2012, versus $100 million in first quarter 2011. The first quarter 2012 cash outflow reflects investment projects to increase production efficiency and new plant capacity as a result of market share growth. The company’s new friction factory in Chennai, India, continues to increase daily volume and previous investments in Brazil, Russia, China and other growth markets are maturing to planned capacity rates, resulting in higher sales revenue versus previous quarters. The cash outflow for the first quarter 2012 also includes seasonal working capital requirements. Federal-Mogul retains $850 million in cash and an undrawn revolver of $500 million for a total liquidity of more than $1.3 billion.
"We expect to benefit from overall market growth and continued demand for higher content powertrain and vehicle technologies in 2012," said Jueckstock. "Our customer and technology portfolio is diverse and we are well positioned to participate in market growth, and to strengthen market share through technology leadership. We are experiencing strong demand for technologies that improve fuel efficiency and reduce emissions, along with new vehicle safety technologies to meet regulations and provide greater vehicle differentiation. Federal-Mogul’s aftermarket business offers some of the world’s most widely respected premium brands, with clear advantages in performance and durability. The OE and aftermarket businesses of Federal-Mogul have a solid foundation from which to continue to grow as markets expand globally."
