Leoni says Ukraine output of wire harnesses nearly at prewar levels

The German supplier Leoni has resumed production of wire harnesses in western Ukraine, and volume has nearly returned to pre-war levels, CEO Aldo Kamper said.

Leoni, a key provider of automotive wiring, was forced to shut two factories in Ukraine for about a week after Russia invaded the country on Feb. 24. 

The shutdown added to production pressures on the European auto industry, which was already struggling with a persistent shortage of semiconductors. Customers including Volkswagen Group and BMW were forced to also temporarily stop output of cars at some sites.

Workers at Leoni's Ukraine factories, fearful that their jobs might permanently be lost, petitioned to come back to work, drawing up a plan on how to revive operations.

Leoni swiftly overhauled how it operates in Ukraine -- from shifts to shelters to shipping goods across the border – to restart production under dangerous and unpredictable conditions.

“We can fully service customer demand out of our Ukraine facilities, which is fantastic news,” Kamper told analysts and investors Wednesday on Leoni's first quarter earnings call. “We hadn't expected that when the war broke out.” 

The supplier has about 7,000 employees in Ukraine, out of a total global work force of 101,000.

Leoni reported a 6.9 percent decline in sales to 1.26 billion euros ($1.33 billion) in the first quarter compared with the same time period in 2021. The company had a first quarter loss of 17 million euros, compared to a profit of 29 million euros in the first quarter of 2021.

Free cash flow increased to 105 million euros from minus 100 million euros in 2021, Leoni said, largely because of the sale of its industrial solutions unit for a 125 million euro book gain.

The most important factor in the sales decline was the effect of inflation on salaries and materials costs, Chief Financial Officer Harald Nippel said. The war in Ukraine and volume, mix and price also played a role, Nippel said. 

Volume was down due to the semiconductor shortage and the war in Ukraine, he added. The supplier is in “intensive discussion” about passing through inflation costs to customers, Nippel said.

Kamper said Leoni is working to duplicate its Ukraine capacity at other factories “as insurance for future developments in Ukraine.” 

That investment in new capacity will be shared with customers, he said. “When things calm down completely and everything is back to normal we'll talk with customers about how to deal with this additional capacity,” Kamper added. 

“Leoni stands with Ukraine and we continue to believe in the future of the country,” he said.