CEO Ray Scott: "We expect to benefit from continued industry volume recoveries, stabilization of production and higher (vehicle) content as EVs continue to displace traditional ICE vehicles."
Lear Corp.'s adjusted net income increased four-fold in the fourth quarter to $118 million, capping a year of steady financial improvement as market constraints ease — for the most part.
The seating and electronics supplier saw a 10 percent top line increase to $5.4 billion in revenue for the quarter, according to its financial earnings report Thursday.
For the full year, Lear had a 9 percent adjusted net income gain to $523 million on revenue of $20.9 billion, up 8 percent from the year prior, beating the market and landing within previously targeted projections.
"Looking out past 2023, we expect to benefit from continued industry volume recoveries, stabilization of production and higher (vehicle) content as EVs continue to displace traditional ICE vehicles," CEO Ray Scott said on a call with investors.
Still, the company is continuing to deal with production stoppages due to microchip shortages and lower production volumes for some vehicles.
For example, Lear anticipates production of the Ford Explorer to be down 4 percent, the Jeep Compass down 24 percent and the Audi Q5 down 20 percent, which will weigh on Lear's balance sheet, CFO Jason Cardew said.
Lear shares slipped 2.5 percent to $145.76 in afternoon trading.
The company achieved a $1.8 billion backlog in its core seating business through 2025 and about $1 billion in its e-systems segment, which it is working to grow with the rise of EVs.
Lear landed an unexpected conquest late last year to supply an undisclosed automaker's SUV platform in North America with just-in-time thermal comfort seating. The contract will require a new plant and $25 million build-out, with production expected by the end of the year, executives said.
Lear declined to offer details on the new business.
More than 75 percent of the company's seating backlog is for EVs, highlighting the industry's rapid transition toward electrification. More than half of its e-systems business is for EVs, and with more content and wiring demand by OEMs, the segment has potential for big growth, executives said.
"As EVs accelerate, we are in a very good position both in e-systems and in seating based on the backlog we've seen and the percentage of wins that we've gotten in the EV market," Scott said.
The supplier faced about $335 million in headwinds last year related to production volatility, parts shortages and inflation in materials and wages. Cardew said about $30 million of that will unwind in 2023, while margin improvements, cost reductions and continued market negotiations would lead to additional recoveries.
Scott said the microchip shortage that has hammered the industry for the past two years is improving but not yet over, as the supplier continues to see customer shutdowns in the first quarter. Scott said automaker customers are indicating that the supply problem will be resolved by the second half of the year.
"Even though the industry as a whole has improved, there are pockets where we're finding a shortage of particular chips," Scott said. "I do know more capacity is coming on line this year."
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