American Axle earnings rise 21% to $71M
American Axle & Manufacturing Holdings Inc. executives expect to follow a “knockout” second quarter with strong financial numbers through the remainder of 2016, despite industry fears of a plateauing sales market.
The Detroit-based auto supplier on Friday said it earned $71 million in the second quarter, an increase of 21 percent over the $58.6 million it earned in the same quarter a year ago. The improvement was attributed to to higher-than-expected production from new business with a number of automakers.
It also reported earnings per share of 90 cents a share and record sales of $1.025 billion. As a result, the supplier raised its full-year guidance on its earnings before interest, taxes, depreciation and amortization margins from 15 percent to between 15 percent and 15.5 percent. It expects full-year sales of $4 billion.
“AAM’s second-quarter results were highlighted by record quarterly sales and gross profit. As a result of our strong operational and financial performance in the first half of 2016, we are increasing our full-year profitability and free cash flow targets for 2016,” AAM’s Chairman and Chief Executive Officer, David C. Dauch, said in a statement. “AAM continues to earn new business featuring our latest innovative driveline solutions and expects customer demand for our advanced technologies to fuel greater business diversification and profitable growth.”
American Axle’s stock rose early Friday following the announcements. It was up 5.5 percent to $17.55 a share shortly before noon.
Its optimistic forecast stands in contrast to a gloomy picture painted Thursday by executives at Ford Motor Co., who predicted slowing sales in the U.S., China and trouble in Europe would temper its own profits.
“We remain bullish on the macro trends in the near-term,” Dauch said. “We’re very confident of our ability to operate at robust levels.”
Chris May, American Axle’s chief financial officer, said its core platforms, including GM’s full-size trucks, the Nissan Titan and other crossovers, continue to sell well and shield it from any slowdown in the overall retail market.
“That allows us to run very strong,” he said.
During the second quarter, American Axle began a share repurchase program of 100,000 shares at an average price of $15.02. As of June 30, the supplier said it had repurchased $1.5 million worth of shares, and there was approximately $98.5 million remaining for future repurchases under the program. It expires on Dec. 31, 2018.
The company’s second-quarter numbers were helped by a $1 million investment gain related to the final distribution of the Reserve Yield Plus Fund. Its adjusted EBITDA, which excludes that $1 million investment gain, totaled $164.8 million this quarter, or 16.1 percent of sales.
Last year, American Axle said it would lose 25 percent of GM’s next-generation full-size truck and SUV program to provide axles and drive shafts. Dauch said Friday the supplier has now replaced 60 percent of that lost business. The effects won’t be fully realized until 2020, and May said American Axle was “very confident” it would make up the entire amount of that lost business.
America Axle is expected to begin 16 new programs and product launches this year with automakers like Nissan, Mercedes-Benz, Ford and Fiat Chrysler; executives on Friday said it completed about half of those launches in the first two quarters of 2016. It’s working to increase its non-GM work, which currently makes up about 66 percent of its business. Executives hope GM will make up 50 percent of its business by 2020.
Its non-GM sales were $333.9 million this quarter, down from $343.1 million in the second quarter of 2015. Executives said lowered non-GM sales were due to ending a commercial vehicle program.
“This was a great, knockout quarter,” May said. “Our growth trajectory ... continues to be well in line with what we would hope. We have a very favorable view for the balance of 2016.”