Adient net income plummets 69% in fiscal Q3 amid delayed launches, Europe troubles

Automotive seating supplier Adient said net income plunged and revenue slipped in its fiscal third quarter partly because of weak demand and inventory issues in Europe.

However, deals with Chinese automakers could signal blue skies for future growth.

Adjusted net income plummeted 69 percent to $29 million, and revenue dropped 8 percent to $3.7 billion during the quarter ending June 30.

"We believe much of this underperformance is timing related to launches and specific customer inventory management," CEO Jerome Dorlack said in an Aug. 6 earnings call.

The company, domiciled in Ireland with a base in Plymouth, Mich., reported significant declines in the Europe, Middle East and Africa region. The adjusted earnings margin there tumbled to 1.9 percent from 7.2 percent.

"In Europe, we're proceeding with increased caution due to declining volume in sourcing and weakening customer programs," Dorlack said.

Adient is shifting its long-term strategic focus to Asia, particularly China, where it has experienced growth.

Dorlack said evolving the portfolio will reduce the pressure of excess inventories in Europe. China has delivered improving margins: Sales in Asia grew by about 1 percent, driven by a 6 percent increase in China.

In its analyst presentation, the company said it secured new business deals with Chinese automaker Guangzhou Automobile Group Co., or GAC, to supply seat systems for the GAC Trumpchi ES9 and a GAC sedan. Additionally, Adient is supplying trim and foam for the BYD Dolphin, which launched in July in Thailand.

In the Americas, adjusted earnings rose 4 percent to $99 million despite a $34 million hit due to adverse customer mix and delays in key program launches by Adient's partners. However, Dorlack said the company expects volumes to recover as customers clear excess inventories and advance their new product launches.

U.S. competitor Lear Corp. in July reported record sales and a modest gain in second-quarter net income as it increased automation, reduced head count and shifted production to lower-cost countries.

Adient is also advancing automation and investing in artificial intelligence tools.

"Automation continues to transform operations by reducing labor costs, improving accuracy and achieving repeatable and reproducible results to transform operations for the future," Dorlack said.

The company continued its shareholder buyback, purchasing $75 million worth of shares, totaling 2.6 million in the quarter.

Shares in Adient dipped 6.3 percent to $21.39 in midday trading Tuesday.

Adient ranks No. 16 on the Automotive News list of the top 100 global suppliers, with worldwide parts sales to automakers of $15.4 billion during its 2023 fiscal year.