Adient plc — FY2023 Form 10-K
Reporting period: Fiscal year ended September 30, 2023. Adient is a global automotive seating supplier, operating across the Americas, EMEA, and Asia. This is an annual filing; the provided filing text does not give clear standalone fourth-quarter financial results.
Financial performance
| Metric | FY2023 | FY2022 |
|---|---|---|
| Net sales | $15.395 billion | $14.121 billion |
| Gross profit / margin | $1.033 billion / 6.7% | $807 million / 5.7% |
| Net income (loss) attributable to Adient | $205 million | $(120) million |
| Diluted earnings (loss) per share | $2.15 | $(1.27) |
| Cash from operating activities | $667 million | $274 million |
| Capital expenditures | $252 million | $227 million |
| Cash and cash equivalents at year-end | $1.110 billion | $947 million |
| Long-term debt, including current portion | $2.533 billion gross | $2.575 billion gross |
| Working capital | $578 million | $662 million |
Sales rose 9%, mainly on higher production volumes and favorable pricing, partly offset by foreign exchange and unfavorable material-economics recoveries. Gross profit improved with higher volumes, pricing, insurance recoveries, and business performance; higher labor and utility costs and unfavorable material economics were offsets. Net income turned positive amid improved operations, lower SG&A and financing charges, higher equity income, and a one-time tax benefit, partly offset by pension expense, restructuring costs, and currency effects.
Operating cash flow increased year over year, with management citing higher earnings and favorable working-capital movements, including lower inventory and higher current liabilities. Cash used in investing activities was $229 million, versus $484 million provided in FY2022, when divestiture proceeds were significant. Cash used in financing activities was $271 million. Adient had approximately $900 million of availability under its asset-based revolving credit facility, net of letters of credit, and had not drawn on it at year-end. Management said available financial resources should cover liquidity requirements for at least the next 12 months.
Material changes and segment results
- Global light-vehicle production increased 7.6% in FY2023. Adient’s sales increased in all three segments; adjusted EBITDA also improved in each segment.
- Americas sales were $7.220 billion and adjusted EBITDA was $336 million, compared with $6.557 billion and $242 million.
- EMEA sales were $5.195 billion and adjusted EBITDA was $232 million, compared with $4.764 billion and $138 million.
- Asia sales were $3.085 billion and adjusted EBITDA was $464 million, compared with $2.926 billion and $383 million.
- Adient issued $500 million of 7.00% secured notes due 2028 and $500 million of 8.25% unsecured notes due 2031. Proceeds and cash were used principally to repay $350 million of term loans and repurchase €700 million of 3.50% notes due 2024. The remaining 2024 notes were $130 million at year-end.
- Adient repurchased $65 million of ordinary shares during FY2023 under a $600 million authorization; $535 million remained authorized at year-end. Cash dividends have been suspended since FY2019.
Outlook, commentary, and risks
- Management described the automotive outlook as modest volume growth, with continued uncertainty from fragile supply chains, wage inflation, higher interest rates, geopolitical risks, and foreign-exchange volatility. Commodity prices and availability could fluctuate and materially affect FY2024 results. The filing does not provide clear numerical company guidance for FY2024.
- The UAW strike that began in September 2023 was estimated to have reduced Adient revenue by $155 million through November 3, 2023. The filing warns that customer or supplier work stoppages can disrupt production and raise costs.
- Adient recorded a $114 million income-tax benefit from releasing valuation allowances on certain Mexican deferred tax assets; its reported FY2023 income-tax provision was zero. Further valuation-allowance changes could materially affect future tax results.
- The FY2023 restructuring plan carried $39 million of charges, primarily for EMEA workforce reductions. Adient estimated approximately $30 million of annual operating-cost reductions at completion, with approximately 15% expected to represent net savings; actions were expected to be substantially completed by FY2025.
- Other notable items included insurance recoveries that benefited results, $33 million of other pension expense versus $10 million of pension income in FY2022, and $6 million of non-cash impairments at partially owned affiliates. No goodwill impairment was recorded, although the goodwill valuation depends on significant assumptions.
- Key risks include customer concentration and vehicle-production cycles; incomplete recovery of input-cost increases; launch, quality, and restructuring execution; China competition and joint-venture exposures; foreign exchange, tax, pension, and debt-service risks; and cyber, product-liability, regulatory, and climate-related risks. Management considered pending lawsuits and claims not likely to have a material adverse effect; environmental reserves were $4 million.
- Leadership changes were announced after year-end: CEO Douglas Del Grosso was to retire effective December 31, 2023, with CFO Jerome Dorlack appointed CEO effective January 1, 2024, and Mark Oswald appointed CFO.
- The auditor issued an unqualified opinion on the financial statements and internal controls; the goodwill impairment assessment was identified as a critical audit matter.
Important facts for investors to verify
- Whether volume, pricing, and cost recovery sustain the FY2023 margin improvement, particularly amid UAW-related disruption and wage inflation.
- Debt maturity, interest expense, covenant compliance, and refinancing needs, including the $132 million due in FY2024 and the remaining euro notes.
- The durability of operating cash flow and working-capital movements, including the use of receivables-financing programs ($170 million funded at year-end).
- Whether the Mexican tax-valuation-allowance release and other deferred-tax assumptions remain supportable; Adient reported $4.7 billion of tax-loss carryforwards, much of which is valuation-allowance offset.
- Progress and realized savings from restructuring, and sensitivity of goodwill valuations to future volumes, margins, and discount rates.
- Execution of the announced CEO and CFO transitions and any material developments in litigation, product claims, supply-chain risks, or joint ventures.