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Diversified supplier Commercial Vehicle Group Inc. reported second-quarter net income and revenue fell, and new pricing began in July.
Net income for the quarter ended June 30 was $2.5 million, 8 cents per diluted share, on revenue of $250.8 million compared with net income of $5.1 million, 16 cents, on revenue of $257.9 million a year earlier.
New pricing began with its largest customer on July 1, and with several other customers in 2022, according to the company. It expects the price increases to benefit its profitability in the second half of 2022 by about $15 million, and $30 million annually, depending on inflationary and other pressures.
The company reported it continued to win new diversified business, especially in the electric vehicle market, and has won 29 new business platforms year-to-date worth an estimated $104 million of new annualized business when fully ramped. Annualized new wins are now at over $300 million per year, centered in electrical systems for electric vehicles.
CVG also continued its restructuring plan, which it noted includes part regionalization, part vertical integration and a modest head count reduction in July. The company is offsetting rapid inflation increases with a price increase program and a cost-reduction program. This environment is expected to continue, it noted.
“There continues to be more demand than supply in the North American Class 8 truck market,” Harold Bevis, CEO of CVG, said in a release. “As such, the company expects to be able to increase its revenues by contributing to solving these operational problems. In summary, while we are in a tough operating environment for vehicle production and a pause in the warehouse automation business, we expect an improved performance for the third and fourth quarter to deliver stronger earnings, free cash generation and debt repayment.”
At the same time, Bevis said there was a sudden pullback by an industry leader in the e-commerce fulfillment arena. “This is a bellwether event for many market participants like CVG and is expected to continue for a year. In vehicle building, we are still in a difficult operating environment with many parts and labor shortages and continued inflation.”
Segment quarterly results year-over-year:
- Vehicle solutions revenue was $142.8 million compared with $130.2 million, primarily resulting from material cost pass-through. Operating income for the second quarter of 2022 was $1.5 million compared with $8.2 million, a decrease of 81.7%, primarily driven by a lag in price-cost offsets and increased new business startup costs.
- Warehouse automation revenue was $28.5 million compared with $54.3 million, primarily due to lower demand. Operating income was $1.3 million compared with $8.5 million, primarily attributable to lower volumes. Adjusted operating income was $1.7 million, a decrease of 79.8%.
- Electric systems revenue was $47.3 million compared with $44.2 million, primarily resulting from material cost pass-through and contributions from new business wins. Operating income was $5.9 million compared with $3.1 million in the prior-year period, primarily attributable to volumes and material cost pass-through. Adjusted operating income was $6.5 million, an increase of 108.1%.
- Aftermarket and accessories revenue was $32.2 million compared with $29.2 million, primarily resulting from material cost pass-through. Operating income was $1.1 million compared with $3.7 million, primarily attributable to a lag in price-cost offsets. Adjusted operating income was $1.7 million, a decrease of 54.1%.
For the six-month period the company reported net income was $6.4 million, 20 cents, on revenue of $495 million, compared with $13.5 million, 42 cents, on revenue of $503 million a year earlier.
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