American Axle’s net income rises 38% in Q3

Michael Martinez
The Detroit News
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American Axle & Manufacturing Holdings Inc. said Friday its net income rose more than 38 percent to $60.9 million in the third quarter compared to the same period a year ago.

The Detroit-based auto supplier’s net income translated to 78 cents a share. Sales rose about 2.2 percent in the quarter to $971.6 million. The company said sales of its non-General Motors Co. customers grew by 8.4 percent to $321.6 million, highlighted by increased production of the Jeep Cherokee, a driveshaft program with Fiat Chrysler Automobiles, and new programs for Ford Motor Co. in Thailand and Jaguar Land Rover in Europe.

Its earnings before interest, income taxes, depreciation and amortization was $149.2 million, or 15.4 percent of sales, up from the 13.4 percent of sales it represented in the third quarter of 2014.

“AAM's financial results in the third quarter of 2015 reflect strong operating cash flow generation and profitability driven by solid production volumes across many of our major product programs supporting the North American light vehicle segment and continued operational execution,” Chairman and CEO David C. Dauch said in a statement.

"As we progress towards our 2015 financial targets, our team remains committed to improving our capital structure while leveraging AAM's technology leadership to develop innovative solutions that will allow us to profitably grow while exploring strategic growth opportunities."

GM makes up about 66 percent of American Axle’s business. Chris May, its chief financial officer, said the supplier will continue to increase its non-GM customers and expects GM to make up only 55 percent of its business by the end of 2017. FCA makes up about 20 percent of AAM’s business, while Ford is less than five percent.

Analysts were expecting earnings per share of 68 cents. They had predicted slightly lower revenue than American Axle delivered.

The supplier’s operating margin was 9.5 percent in the third quarter of 2015, up from 8.1 percent in the third quarter of 2014.

Dauch said the supplier was finalizing a new business award that will make up between 35-40 percent of the revenue from the loss of 25 percent of GM’s next generation full-size truck and SUV program to provide axles and driveshafts on the trucks and SUVs.

“This is fantastic news and further demonstrated our ability to win new business,” he said of the new program, which he described as global in nature.

Dauch also said the supplier was beginning the initial move-in phase at its new technical center in Detroit. Currently between 30-40 engineers and other workers are at the site, said May. He said he expects to complete the initial move-in phase of about 100 workers by the end of the year.

American Axle said it expects full year sales to reach $3.9 billion, down from its previous outlook of $4 billion to $4.1 billion.

“We’re confident on our ability to finish the year strong,” Dauch said.

Citi Investment analyst Itay Michaeli, in a note to investors Friday, said it was a “solid Q3 with EPS comfortably ahead of consensus demonstrating that American Axle continues to execute and deliver on its 2015 guidance.”

American Axle’s stock was up early Friday 3.25 percent to just over $22 a share.

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