Automotive seating supplier Adient said Friday its turnaround efforts are starting to show results, as it reported higher adjusted earnings in the quarter ended Dec. 31 even as revenue fell.
The company said adjusted earnings before interest, taxes, depreciation and amortization for its fiscal first quarter improved to $297 million from $176 million in the year-ago period. Its net loss widened to $167 million from $17 million, impacted by one-time noncash charges.
Adient said this was the first year-over-year adjusted EBITDA increase since the fiscal fourth quarter of 2017.
Revenue fell 5 percent to $3.9 billion in the quarter.
Adient, the world's largest seating supplier, also confirmed it sold its premium brand, Recaro Automotive Seating, at the start of the year.
CEO Douglas Del Grosso has been working to get the company on track and focus on its core business since he took the helm in October 2018, with the goal of bringing the supplier to breakeven this year.
Del Grosso said in a call with investors Friday that the Recaro sale further demonstrated Adient's commitment to the core business and focus on capital allocation.
Shares of Adient surged 33 percent to close the day at $25.70 -- on a day when the Dow Jones industrial average fell more than 600 points.
Adient also announced a restructuring of its joint-venture agreement with interior automotive components manufacturer Yanfeng. The Yanfeng Automotive Interiors unit was established in 2015 as a joint venture between the two companies. Adient said Friday the joint venture has been extended to 2038 and announced the sale of its 30 percent ownership stake in Yanfeng Automotive Interiors.
Del Grosso said turnaround efforts for launch management, operational improvement, commercial discipline and cost reduction are largely on track. But he also said adjusting the portfolio, evaluating the company's relationships in China and accelerating debt repayment will remain priorities.
"As we look to close the margin gap with our peers, it may be necessary to walk away" from programs and products that aren't profitable, Del Grosso said. "Our commitment to bring the business to cash-flow positive by 2022 remains on track."
Del Grosso said the company's financial overhaul is still going to be a "multiyear journey," despite its fiscal first-quarter outcome.
Adient said it continues to have a strong product mix, with SUVs and luxury platforms in different regions, with an estimated 70 percent market share of the electric vehicle market in Europe. Del Grosso also said the Americas continue to strengthen Adient's diversification across powertrains.
Still, CFO Jeff Stafeil said Adient's second-half 2020 revenue is expected to be approximately $400 million to $500 million lower compared with the first half, largely due to lower industry volumes.
Analysts see Adient's results as strategic but dependent on the company's future execution.
"The automotive industry is cyclical and highly impacted by economic activity," Robert W. Baird analyst David Leiker wrote in a research note Friday. "There is continued price pressure from OEMs to reduce costs. If a supplier is unable to generate sufficient cost savings to offset customer price reductions, margins could be adversely affected."
As for concerns over the coronavirus outbreak that began in Wuhan, China, Del Grosso said it's too early to forecast any impact to the company from travel restrictions and extended holiday shutdowns of facilities in the country.
Adient ranks No. 13 on the Automotive News list of the top 100 global suppliers, with worldwide parts sales to automakers of $17.4 billion in 2018.