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Allison Transmission Holdings Inc. reported first-quarter net income and revenue slipped after a 19% decline in its largest market, North American on-highway.
The COVID-19 pandemic continues to disrupt global markets and supply chains, creating significant uncertainty and a weaker global outlook, the company noted.
Net income for the period ended March 31 was $139 million, or $1.20 per diluted share, with revenue dropping 6% to $637 million. That compared with net income of $167 million, or $1.32, and revenue of $675 million a year earlier.
“So we’re running and shipping to demand,” Allison CEO David Graziosi said during a conference call with financial analysts. “That being said, the amount of effort that it’s taken, our team and our partners, both at the customer and supplier level, to do that is absolutely extraordinary.
“So I know, because we’re involved with the team on a daily basis. They are doing things 24/7. I’ve been with this business over 12 years, and I will tell you, back in ’08 and ’09, that looks like an absolute walk in a park compared to what this team and everybody else in the industry is doing right now.”
The North American on-highway segment posted revenue of $352 million, down 7% compared with $377 million a year earlier.
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Outside North America, on-highway sales fell to $72 million, off 23% compared with $94 million in the 2019 period.
The service parts, support and other segment posed revenue of $138 million, up 5% compared with $131 million a year earlier. The increase was principally driven by aluminum die-casting component volume associated with the Walker Die Casting acquisition in 2019. Walker, an Allison supplier for 20 years, produced products that are critical components in the manufacture and quality of Allison’s on-highway transmissions, according to Allison.
The Indianapolis-based company experienced its largest percentage decline in revenue in its North American off-highway business, which fell 43% to $8 million compared with $14 million a year earlier, principally driven by fluctuations in demand for hydraulic fracturing applications.
Revenue in the defense business rose 25% to $40 million compared with $32 million a year earlier, and that was the largest percentage increase in revenue.
The company reported in March temporary production suspensions at select manufacturing facilities due to changes in customer demand, global supply chain disruptions from the novel coronavirus pandemic and a weaker global outlook. Allison also furloughed a portion of the workforce.
Meanwhile, its Indianapolis manufacturing plants have run continuously throughout 2020, and currently, all of its global plants are producing components and transmissions, Allison reported along with earnings May 4.
“The management of our supplier network has always been a priority for Allison,” Graziosi said. “Our ability to continuously produce transmissions over the past month, despite a relatively high percentage of purchased components, approximately 69% of our cost of sales, is attributed to our team’s abilities and relationships to effectively manage our supply base.”
At the same time, Allison lowered its full-year 2020 capital expenditures target by about 35% compared with 2019.
Allison reported that as of March 31, it had $114 million of cash, $595 million of available revolving credit facility commitments and a flexible and long-dated debt structure with the earliest debt maturity due in September 2024.
Allison Transmission is the world’s largest manufacturer of fully automatic transmissions for medium- and heavy-duty commercial vehicles and medium- and heavy-tactical U.S. defense vehicles. The company also supplies commercial-vehicle propulsion products, including electric hybrid and fully electric propulsion systems.
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