BorgWarner reports Q1 net earnings up at US$200.0M from US$65.0M a year ago, with net sales down 3% year-over-year to US$3.9B; drop in sales due to decline in industry production, weaker foreign currencies

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AUBURN HILLS, Michigan , May 5, 2022 (press release) –

BorgWarner Inc. (NYSE: BWA) today reported first quarter results.

New Program Awards and Charging Forward Highlights:

  • BorgWarner announced the first OEM business win for the Company’s flexible battery management system (BMS) technology. The Company’s BMS has been selected by a leading global vehicle manufacturer to equip all of its B-segment, C-segment and light commercial vehicles, expected to begin in 2023.
  • BorgWarner has been selected to provide high-voltage hairpin (HVH) eMotors for a leading electric vehicle brand in China. The eMotors will be used in an 800V propulsion system platform, expected to start mass production in 2023.
  • BorgWarner will supply a leading Chinese OEM with a dual Inverter to be used in hybrid vehicles expected to launch in 2023. The award further strengthens the Company’s leadership position in China’s dedicated hybrid transmission (DHT) and hybrid inverter market.
  • Based on new business awards and actions announced to date, BorgWarner believes it is already on track to achieve more than $3.3 billion of electric vehicle revenue by 2025. The Company continues to expect its 2022 electric vehicle revenue to grow to more than $800 million, which is more than double what it was in 2021.

First Quarter Highlights:

  • U.S. GAAP net sales of $3,874 million, down 3% compared with first quarter 2021.
  • Excluding the impact of foreign currencies and the impact of divestitures, organic sales were up 1% compared with first quarter 2021.
  • U.S. GAAP net earnings of $0.84 per diluted share.
  • Excluding the $(0.21) per diluted share related to non-comparable items (detailed in the table below), adjusted net earnings were $1.05 per diluted share.
  • U.S. GAAP operating income of $352 million, or 9.1% of net sales.
  • Excluding the $37 million of pretax expenses related to non-comparable items, adjusted operating income was $389 million, or 10.0% of net sales.
  • Net cash provided by operating activities of $116 million.
  • Free cash flow was $(61) million.

Financial Results:
The Company believes the following table is useful in highlighting non-comparable items that impacted its U.S. GAAP net earnings per diluted share. The Company defines adjusted earnings per diluted share as earnings per diluted share adjusted to eliminate the impact of restructuring expense, merger, acquisition and divestiture expense, other net expenses, discontinued operations, other gains and losses not reflective of the Company’s ongoing operations, and related tax effects.

Net sales were $3,874 million for the first quarter 2022, down 3% from $4,009 million for the first quarter 2021, due primarily to the impact of the decline in industry production and weaker foreign currencies. Net earnings for the first quarter 2022 were $200 million, or $0.84 per diluted share, compared with net earnings of $65 million, or $0.27 per diluted share, for the first quarter 2021. Adjusted net earnings per diluted share for the first quarter 2022 were $1.05, down from an adjusted net earnings per diluted share of $1.21 for the first quarter 2021. Adjusted net earnings for the first quarter 2022 excluded net noncomparable items of $(0.21) per diluted share. Adjusted net earnings for the first quarter 2021 excluded net non-comparable items of $(0.94) per diluted share. These items are listed in the table above, which is provided by the Company for comparison with other results and the most directly comparable U.S. GAAP measures. The decrease in adjusted net earnings was primarily due to the impact of lower revenue, higher commodity costs, and the AKASOL AG acquisition. 

Full Year 2022 Guidance:
The Company has provided 2022 full year guidance. Net sales are expected to be in the range of $15.5 billion to $16.0 billion, compared with 2021 sales of $14.8 billion. This implies a year-over-year increase in organic sales of 10% to 13%. The Company expects its weighted light and commercial vehicle markets to increase in the range of approximately 2.5% to 5% in 2022. Foreign currencies are expected to result in a year-over-year decrease in sales of approximately $650 million primarily due to the Euro, as well as the weakening of the Korean Won and Chinese Renminbi against the U.S. dollar. The acquisition of Santroll’s light vehicle eMotor business is expected to increase year over- year sales by approximately $60 million to $70 million. The divestiture of the Water Valley, Mississippi business will decrease year-over-year sales by approximately $177 million.

Operating margin for the full year is expected to be in the range of 8.5% to 9.0%. Excluding the impact of non-comparable items, adjusted operating margin is expected to be in the range of 9.8% to 10.2%. Net earnings are expected to be within a range of $3.39 to $3.77 per diluted share. Excluding the impact of non-comparable items, adjusted net earnings are expected to be within a range of $3.90 to $4.25 per  diluted share. Full-year operating cash flow is expected to be in the range of $1,500 million to $1,550 million, while free cash flow is expected to be in the range of $650 million to $750 million.

At 9:30 a.m. ET today, a brief conference call concerning first quarter 2022 results and guidance will be webcast at: https://www.borgwarner.com/investors" target="_blank" >https://www.borgwarner.com/investors. Additionally, an earnings call presentation will be available at https://www.borgwarner.com/investors" target="_blank" >https://www.borgwarner.com/investors.

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