Release Date: November 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• American Axle & Mfg Holdings Inc (NYSE:AXL) reported adjusted EBITA of $174 million, reflecting strong operational improvements and cost controls.
• The company secured new business wins, including an electric beam axle supply contract with a Chinese OEM and electric vehicle components for a European luxury OEM.
• Despite lower sales, American Axle & Mfg Holdings Inc (NYSE:AXL) achieved year-over-year margin expansion driven by productivity and operating efficiencies.
• The sale of the India commercial vehicle axle business for $65 million is expected to be margin and leverage favorable, providing additional financial flexibility.
• The company is well-positioned to support various propulsion needs, including ICE, hybrid, and electric vehicle platforms, reflecting a comprehensive product portfolio.

Negative Points

• Sales decreased to $1.5 billion from $1.55 billion in the same quarter last year, impacted by lower customer production volumes.
• North American industry production was down approximately 5% year-over-year, affecting overall sales performance.
• The company is experiencing some production schedule variability and inventory management challenges from OEMs.
• Adjusted EBITA guidance for the full year reflects a tightening range, indicating potential challenges in meeting previous expectations.
• R&D expenses increased year-over-year, impacting overall profitability despite efforts to optimize spending.

Q & A Highlights

• Warning! GuruFocus has detected 6 Warning Signs with AXL.

Q: Can you provide more details on the North American production outlook and any potential risks? A: Chris May, CFO, explained that their guidance is based on a North American production of 15.5 million units. They consider current customer releases and production schedules, especially for large programs undergoing launches. While there is some intermittent downtime, they have accounted for these in their guidance, reflecting the impact of customer schedules and macro assumptions.

Q: What is the impact of the sale of the commercial vehicle axle operations in India? A: CEO David Dauch stated that they are selling two of their three facilities in India, focusing more on light vehicle systems. This strategic decision allows them to concentrate resources on light vehicles, improving financial liquidity. They will maintain a presence in India with their remaining facility and technical office.

Q: How should we interpret the implied fourth-quarter EBITDA margin compared to the first three quarters? A: Chris May noted that the fourth quarter should not be used as a launching pad for 2025. The year should be viewed in totality, considering the production nuances and elements experienced throughout 2024.

Q: Can you elaborate on the $28 million positive performance in the third quarter's EBITA bridge? A: Chris May highlighted that $13 million was due to a favorable warranty adjustment, with the remaining $15 million from performance improvements across both Driveline and Metal Forming groups, driven by productivity and cost control efforts.

Q: How does the potential for an extended ICE tail impact your resource allocation? A: Chris May mentioned that an extended ICE tail aligns well with their existing capabilities, minimizing the need for new capital investments. They expect R&D spending to moderate, balancing between electrification and ICE/hybrid applications, leveraging their strong footing in both areas.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.