Auto supplier Gentex Corp. said Friday it swung to a second-quarter net loss as sales plunged due to extended industrywide plant shutdowns related to the coronavirus pandemic.
The maker of high-tech rearview mirrors and cameras reported a net loss of $2.4 million compared with net income of $109 million a year earlier. Net sales fell 51 percent to $229.9 million.
Adjusted for severance-related costs net of tax, net income was $4.6 million, the company said. Gentex recorded positive cash flow from operations of $39.2 million despite the loss of production.
Gentex is one of several auto suppliers expected to release second-quarter earnings in the coming weeks.
"While the China market expanded by 9 percent in the second quarter, our historical revenue from China has been less than 10 percent of sales, so this provided very little help to offset the losses in our primary markets," CEO Steve Downing said in a statement. "The Company's primary markets include North America, Europe, Japan and Korea and together these regions were down approximately 59 percent for the second quarter of 2020. While these production numbers are incredibly sobering, the silver lining is that we are continuing to find ways to significantly outperform our primary underlying markets."
Shares of Gentex closed Friday's trading up a penny to $26.29.
Gross margin for the quarter was 19.1 percent compared with 37.7 percent from the year before. The decline was due to shutdowns that led to "lost sales and manufacturing inefficiencies" as well as $3.9 million in severance-related costs and annual customer price reductions. When adjusted for severance expenses, gross margin for the quarter was 20.8 percent.
Automotive net sales declined 51 percent to $222.1 million due to a decrease in interior auto-dimming mirror unit shipments stemming from the drop in global vehicle production, the company said.
Other net sales, including dimmable aircraft windows and fire protection products, dropped 35 percent to $7.9 million.
Gentex said that it received a tax benefit of $1.5 million in the second quarter compared with a tax expense of $21.3 million in the year before.
Neil Boehm, chief technology officer, said in a Friday earnings call that there were 33 launches of interior and exterior mirrors and electronic features in the second quarter. The products were for brands such as Chevrolet and Toyota, he said.
Looking ahead
Gentex estimates that light-vehicle production in its primary markets will decline by about 7 percent in the second half of 2020 and 20 percent for the full year. The company also estimates its net sales for the second half of 2020 will be between $865 million and $915 million.
The supplier said that it is withholding its 2021 revenue forecast due to the uncertainty over the COVID-19 pandemic.
"Despite the fact that the second half of 2020 revenue will be lower than we were expecting at the beginning of this year, we are optimistic that the forecasted improvements in light vehicle production throughout the second half of the year, in addition to our significant cost initiatives achieved during the second quarter, will allow the Company to return to more normalized gross and operating margins during the second half of the year," Downing said.
Gentex, of Zeeland, Mich., ranks No. 91 on the Automotive News list of the top 100 global suppliers, with worldwide parts sales to automakers of $1.81 billion in 2019.
