• Revenue: Approximately $3.5 billion, a decrease of $165 million compared with Q1 fiscal year '24.
• Adjusted EBITDA: $196 million, down 9% year-on-year.
• Free Cash Flow: $45 million generated in Q1.
• Adjusted Net Income: $23 million or $0.27 per share.
• Cash on Hand: $860 million at the end of Q1.
• Share Repurchases: $25 million in Q1, totaling $300 million in fiscal '25 and '24.
• Net Leverage: 1.8 times, within the targeted range of 1.5 to 2 times.
• Total Liquidity: Approximately $1.7 billion, including $860 million cash and $875 million undrawn credit.
• Asia Segment EBITDA Margin: Greater than 14% in Q1.
• Fiscal 2025 Sales Outlook: Approximately $13.9 billion, revised down due to FX translation and lower production levels.
• Fiscal 2025 Adjusted EBITDA Guidance: Near the low end of approximately $850 million.
• Fiscal 2025 Free Cash Flow Guidance: Closer to $180 million due to FX impacts.

• Warning! GuruFocus has detected 5 Warning Sign with ADNT.

Release Date: January 28, 2025

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

Positive Points

• Adient PLC (NYSE:ADNT) achieved $196 million of adjusted EBITDA and generated $45 million in free cash flow for Q1 fiscal 2025.
• The company successfully contained decremental margins to approximately 12%, below the typical 18%, despite a 5% year-over-year decline in revenue.
• Adient PLC (NYSE:ADNT) has a strong balance sheet with $860 million of cash on hand and total liquidity of approximately $1.7 billion.
• The company continues to win new business, with $1 billion of annual revenue from new and replacement business in fiscal 2024, primarily with local OEMs.
• Adient PLC (NYSE:ADNT) is committed to sustainability, achieving a 38% reduction in Scope 1 and Scope 2 greenhouse gas emissions from its base year.

Negative Points

• Adient PLC (NYSE:ADNT) faced significant headwinds in Q1 fiscal 2025 due to inventory destocking at major customers in the Americas and production mix headwinds in Europe.
• The company experienced soft demand from its core customer base in China, including luxury and Japanese OEMs, leading to underperformance in the region.
• Adient PLC (NYSE:ADNT) revised its full-year sales expectations down to approximately $13.9 billion, primarily due to FX translation and lower production levels in Asia and EMEA.
• The company anticipates its Q2 results to be similar to Q1, impacted by seasonal factors like the China New Year and severe weather in North America.
• Adient PLC (NYSE:ADNT) is facing competitive pressures in China, with traditional European luxury and Japanese-based customers reducing their production targets.

Q & A Highlights

Q: Can you provide an update on your assumptions for different end markets, particularly in China and EMEA, and how they align with third-party data forecasters? A: Our current outlook reflects the latest production forecasts from S&P, with some adjustments based on customer insights. In China, the mix is affected by lower-margin EVs entering the market, impacting our guidance.

Q: What factors contributed to the business performance in Q1, especially in Asia, and how can you accelerate performance amidst macro headwinds? A: Business performance was driven by reduced launch costs, improved net material margins, and lower freight costs. We continuously work with customers and explore automation to enhance efficiency, which helped us maintain strong performance despite challenges.

Q: How might North American tariffs impact your business, particularly regarding manufacturing components in Mexico? A: We have significant operations in Mexico, and potential tariffs could affect us. We are engaging with customers to discuss recovery plans, as we cannot absorb these costs alone. We are prepared to manage through these challenges.

Q: How should we think about incremental and decremental margins for production shifts this year? A: Typically, our incremental and decremental margins are around 17-18%. However, we managed to reduce this to about 12% in Q1 by adjusting operating patterns. We aim to maintain lower decrementals by anticipating production changes.

Q: How does your tariff strategy today compare to 2017, and how are you handling potential new tariffs? A: In 2017, we effectively managed a $40-60 million gross exposure to tariffs, reducing it to single digits. Today, we need to address potential tariffs more quickly, leveraging our experience and industry preparedness to find solutions.

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