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AP

Adient plc (ADNT)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY2025 was in line with internal expectations amid volume/mix headwinds: net sales $3.495B (-$165M YoY), adjusted EBITDA $196M (-9% YoY), adjusted EPS $0.27, GAAP EPS $0.00; free cash flow $45M .
  • Guidance: FY2025 sales revised to ~$13.9B (lowered by ~$200M FX and ~$150M Asia/EMEA volume), adjusted EBITDA maintained near low end of ~$850M, FCF trimmed to ~$180M; tax expense guided to ~$115M; earnings expected H2-weighted .
  • Operationally, decrementals contained to ~12% vs typical 17–18% through cost actions, commercial recoveries, and automation; Asia margins remained >14% despite softer China demand; Americas benefited from full-rate launches; EMEA still pressured pending restructuring tailwinds in 2026 .
  • Capital and liquidity remain solid: cash $860M, liquidity ~$1.7B, net leverage 1.8x; $25M buybacks in Q1; subsequent pricing of $795M 7.50% notes due 2033 to refinance 2026 notes supports liability management .
  • Stock reaction catalysts: maintained EBITDA despite lowered sales, visible H2-weighting, tariff recovery stance with customers, and continued China-local OEM wins could support sentiment; EMEA restructuring execution and tariff outcomes are risk factors .

What Went Well and What Went Wrong

What Went Well

  • Decremental margins contained to ~12% vs typical 17–18% as management executed cost reductions, automation, and commercial initiatives; adjusted EBITDA of $196M in a softer quarter .
  • Asia delivered >14% adjusted EBITDA margin and strong FCF despite China softness; >16 program launches in Q1 and >70 more planned for FY2025 .
  • Americas benefited from full-rate launches (GM Traverse/Acadia/Enclave), with volume/mix swinging to a $5M tailwind and improved freight/launch costs .

What Went Wrong

  • Consolidated sales down $165M YoY on lower customer production in EMEA and China; FX headwind ~$5M .
  • EMEA continued to face weak volumes/mix and underperformance; cash restructuring of $35M in Q1 with ~$100M expected for FY2025 .
  • China demand underperformed market due to mix (exports, BYD share) and pressure on traditional luxury/Japanese OEMs; one targeted new entrant ceased operations .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$3.716 $3.562 $3.495
GAAP Diluted EPS ($)-$0.12 $0.91 $0.00
Adjusted Diluted EPS ($)$0.32 $0.68 $0.27
Adjusted EBITDA ($USD Millions)202 235 196
Adjusted EBITDA Margin (%)5.4% 6.6% 5.6%

Segment performance (Q1 FY2025 and YoY):

  • Americas: Net sales $1,611M vs $1,647M YoY; Adj. EBITDA $85M vs $80M YoY; margin 5.3% .
  • EMEA: Net sales $1,129M vs $1,268M YoY; Adj. EBITDA $22M vs $45M YoY; margin 1.9% .
  • Asia: Net sales $772M vs $770M YoY; Adj. EBITDA $111M vs $114M YoY; margin 14.4% .

KPIs

MetricQ3 2024Q4 2024Q1 2025
Free Cash Flow ($USD Millions)$88 $191 $45
Cash and Equivalents ($USD Millions)$890 $945 $860
Net Debt ($USD Millions)$1,647 $1,460 $1,542
Share Repurchases ($USD Millions)$75 $50 $25

Notes:

  • Consolidated sales decrease primarily from lower volumes/pricing ($160M) and slight FX headwind ($5M) .
  • Decremental performance ~12% on $165M lower revenue .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Sales (Revenue)FY2025$14.1–$14.4B ~$13.9B Lowered (FX -$200M; Asia/EMEA volume -$150M)
Adjusted EBITDAFY2025$850–$900M Near low end of ~$850M Maintained (low end)
Free Cash FlowFY2025~$200M Closer to ~$180M Lowered (FX)
Adjusted Tax ExpenseFY2025~$125M ~$115M Lowered
CapExFY2025~$285M Not updated (efficiency focus reiterated) Maintained (no explicit change)
Earnings CadenceFY2025H2-weighted (implied) H2-weighted; Q2 seasonally like Q1 (China New Year, NA weather) Clarified

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Americas inventory destocking and launchesDestocking and slow ramps pressured volumes; expected Q4 business performance to offset Destocking largely completed; key launches at full run rate (Traverse/Acadia/Enclave) aiding mix Improving
EMEA restructuring and margin pathAnnounced ~$145M 2024 charges; ~$100M cash restructuring expected in FY2025; trough margins near-term; 2026 tailwinds (balance in/out) $35M cash restructuring in Q1; continued weak volumes/mix; restructuring benefits building through 2027 Mixed near-term; improving in FY2026
China demand/mix and local OEM strategyOutgrowth target; exports skewed mix; strong local OEM pipeline; BYD JV exposure via KEIPER China revenue flat-to-down FY2025; mix shift to exports/BYD; pursuing growth with local OEMs; >14% Asia EBITDA margin Near-term challenging; medium-term positive
Tariffs and recovery playbookMonitoring; prior effective mitigation (2017) and recovery approach Customer-by-customer action plans; not absorbing 10–25% tariffs; recovery through value chain Active risk management
Automation/AI and cost actionsAI welding inspection; Paslin JV; modularity to improve margins Continued automation; lower launch costs; freight and ops waste improvement drive business performance Ongoing improvement
Decremental/incremental margins8% FY2024 decrementals vs typical high-teens Decrementals contained to ~12% in Q1; aim to keep lower if production timing clear Improving vs historical

Management Commentary

  • “We were able to contain decremental margins to approximately 12%… on a 5% year-over-year decline in revenue. We achieved $196 million of adjusted EBITDA and generated $45 million in free cash flow.” — Jerome Dorlack .
  • “Our Asia segment… achieved greater than 14% adjusted EBITDA margins in Q1.” — Jerome Dorlack .
  • “Adjusted EBITDA was $196 million, down 9% year-on-year… underlying equity income remains quite strong, despite… a one-time $12 million retroactive change to our KEIPER JV agreement.” — Mark Oswald .
  • “For the full year, we now expect sales to be approximately $13.9 billion… holding our guidance… adjusted EBITDA near the low end… we anticipate our free cash flow to be closer to $180 million.” — Mark Oswald .

Q&A Highlights

  • Outlook assumptions align generally with latest S&P production forecasts; near-term mix pressure from lower-margin EVs in China .
  • Business performance drivers include reduced launch costs, lower freight, ops waste reduction, net material margin and pricing recoveries; automation opportunities to enhance plant efficiency .
  • Tariff preparedness: significant Mexico footprint; Adient will seek customer recoveries and not absorb 10–25% tariff burdens; 2017 playbook reduced gross exposure from $40–$60M to single-digit net today; speed of mitigation is key .
  • Decrementals: typical 17–18% but contained to ~12% in Q1; better production visibility enables cost removal and containment .
  • China outgrowth: FY2025 sales flat-to-down vs earlier growth-over-market expectation; $1B of new business awarded in FY2024 launches in FY2026–FY2027 .
  • Q2 seasonality: China New Year and NA severe weather likely make Q2 look similar to Q1 .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 FY2025 EPS and revenue was unavailable due to SPGI daily request limit; therefore, beat/miss vs estimates cannot be determined from S&P in this report. Values would typically be retrieved from S&P Global.

Key Takeaways for Investors

  • Despite lowered FY2025 sales from FX and Asia/EMEA volumes, management maintained adjusted EBITDA near the low end (~$850M) and highlighted H2-weighting; near-term earnings cadence should improve as launches ramp and seasonality fades .
  • Americas execution and full-rate launches are tailwinds; EMEA remains the “burning platform” but restructuring and balance in/out set up for margin improvement in FY2026 .
  • Asia continues to anchor margins and FCF; strategy is pivoted to local OEMs (BYD exposure via KEIPER JV, broader local wins), with >14% segment margins in Q1 .
  • Operating playbook (automation, commercial recoveries, cost controls) is effectively lowering decrementals, supporting earnings resilience across softer volumes .
  • Tariff risk is actively managed with customer recovery plans; potential headline risk remains, but P&L protection stance reduces margin shock probability .
  • Balance sheet/liquidity are robust; debt refinancing via $795M 7.50% notes due 2033 enhances maturity profile; share buybacks continue ($25M Q1) .
  • Watch Q2 (seasonal softness) and H2 delivery against guidance; monitor EMEA restructuring milestones and China mix shifts for medium-term margin trajectory .

Additional Q1 FY2025 Press Releases

  • Sustainability Report: 38% reduction in Scope 1–2 emissions vs 2019; 29% renewable electricity; multiple verified metrics .
  • Debt Offering & Pricing: $795M 7.50% senior notes due 2033 to redeem 4.875% 2026 notes .
  • Call Scheduling: Jan. 28, 2025 earnings call details .