Lear Q2 earnings: Supplier is cutting workforce, slashing ‘risky’ business amid economic uncertainty

The company’s net income for the quarter declined to $69 million, but sales outpaced global industry output and rose 7 percent over the past year to $5.1 billion, according to its quarterly earnings report.

Despite recession concerns, CEO Ray Scott said Lear has pushed through the darkest days of the COVID-19 pandemic and supply chain to become leaner and more resilient.

“I think we’ve been a particularly supply base in a recession for two years…,” Scott said Tuesday on a call with investors. “Since the onset of COVID … we were taking advantage of the slowdown to focus on strengthening our product portfolio, our talent and our balance sheet.”

liar share Tuesday afternoon rose nearly 2.6 percent to $155.25.

In order to maintain “operational excellence,” Scott said the company recently slashed its non-manufacturing, salaried workforce by about 3 percent and is working to make further cuts to cut costs. . According to the CEO, the global restructuring, which began early last year, puts the company in a better position to face economic pressures.

“As we weigh these risks and opportunities, we continue to take aggressive steps to position Lear to manage and improve our competitive position and financial performance across all scenarios,” Scott said.

Lear declined to say how many jobs were cut or where.

According to its website, the company employs over 160,000 people globally.

It said in May it cut its workforce by 7,700. On Tuesday’s earnings call, Scott said Lear would consolidate manufacturing operations in Mexico and Morocco after successfully doing so in South America.

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The company’s core operating income for the quarter fell 20 percent to $187 million in the second quarter, while earnings per share declined 60 percent to $1.14. Free cash flow in the second quarter was negative $161 million, compared to a positive $120 million for the same time last year.

Commodity costs and production shutdowns continued to disrupt Lear, as have almost all of their suppliers, although Lear executives said the situation was improving significantly.

“As far as collaboration (with customers), it is pretty much sustainable and fixed within a price going forward,” Scott said. “De-risking the copy is something we take as a priority to ensure that we are updating contracts for the increased cost pressures that we are seeing.”

While rising oil prices have increased transportation costs, the cost of other commodities, including steel, has plummeted back to earth after painful peaks last year.

“As the object moves, it’s amazing how quickly it’s changed,” Scott said. “All these things that were significant headwinds become tailwinds.”

Lear CFO Jason Cardue said the company’s actions to reduce SG&A (sales, general and administrative) expenses will result in annual savings of $35 million to $40 million.

“In addition, we see other opportunities that we are exploring that are likely to happen later this year, early next year,” Cardue said.

For its full-year financial outlook, the company narrowed its range to but estimated net sales of $20.6 billion to $21.1 billion and EBITDA (before interest, taxes, depreciation and amortization) of $1.41 billion to $1.51 billion. retained its mid-point with earnings of Rs.

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Scott said the company remains solid even if car production remains flat due to microchip shortages or declining demand.

“So, I think that even if volumes don’t necessarily increase, we have a more stable, stable environment with decreasing costs, which can help our margin profile significantly,” he said.

Lear, located in suburban Detroit, is number 10 on Automotive News 2022 list Top 100 Global Suppliers With worldwide sales to automakers worth $19.3 billion in 2021.