TIDMTIFS
RNS Number : 2993E
TI Fluid Systems PLC
05 November 2020
5 November 2020
TI Fluid Systems plc
Q3 2020 Trading Update
TI Fluid Systems plc, a leading global manufacturer of highly
engineered automotive fluid storage, carrying and delivery systems
for light vehicles issues a trading update for the third quarter
and nine months ended 30 September 2020.
Summary
-- Group Q3 revenues continued to outperform global light
vehicle production volumes by 2.2%, despite Q3 revenues decreasing
5.1% year over year (down 1.3% at constant currency)
-- Results supported by strong performances in the Asia Pacific region and FTDS segment
-- All production facilities in every region remain open and
continue to support customer production demands
-- Continued business resilience demonstrating effective cost
flexibility, free cash generation, balance sheet strength and
liquidity
-- Further progress with respect to electrification strategy,
with the launch of thermal management products on Volkswagen's
newly released ID.3 and ID.4 battery electric vehicles ("BEVs") and
additional new BEV business wins at accretive value per vehicle
content
-- 2020 full year guidance reinstated with an expectation of consistent year over year market outperformance and positive adjusted operating margins and free cash generation
-- Commitment to resume annual dividend payments in accordance
with policy as well as expectation of a 2020 interim dividend in Q1
2021 based on the strength of the Group's financial position and
prospects
Q3 Trading Results
Overall, global light vehicle production volumes trended better
in Q3 2020 compared to H1 2020 with OEM production activity
resuming in all regions following the COVID-19 related factory
shutdowns in H1. Q3 2020 Group revenue is recovering and decreased
by 5.1% year over year compared to an H1 2020 revenue decrease of
30.7%. At constant currency, revenue declined 1.3% compared to a
global light vehicle production decrease of 3.5%, representing an
outperformance of 220 bps for the quarter.
By region, on a constant currency basis, Europe and Africa
revenue decreased 11.4% compared to the same quarter last year with
continued weakness in Europe markets. North America had a marginal
increase of 0.8% compared to the same quarter last year while Asia
Pacific demonstrated solid revenue growth of 10.7% year over
year.
By division, on a constant currency basis, year over year, FCS
Q3 revenue declined 3.8% while FTDS Q3 revenue increased 1.9%,
benefitting mainly from new business launches particularly in the
Asia Pacific region.
Nine months ended 30 September 2020
The Group achieved revenue of EUR1,950.7 million in the nine
months ended September 2020, a decrease of 22.5% year over year. At
constant currency, revenue declined 21.5% compared to the same
period last year despite global light vehicle production declining
by 23.2% year over year. This 2020 year to date revenue
outperformance of 170 bps was mainly driven by solid performance in
the Asia Pacific region where the Group continues to benefit from
new business launches.
EURm 9 months 9 months % Change % Change
ended ended at constant
September September currency
2019 2020
Group Revenue 2,516.6 1,950.7 -22.5% -21.5%
----------- ----------- --------- -------------
By Region
----------- ----------- --------- -------------
Europe and Africa 1,016.6 727.4 -28.5% -28.2%
----------- ----------- --------- -------------
Asia Pacific 737.0 680.7 -7.6% -5.6%
----------- ----------- --------- -------------
North America 708.6 515.6 -27.2% -27.2%
----------- ----------- --------- -------------
Latin America 54.4 27.0 -50.4% -35.1%
----------- ----------- --------- -------------
By Segment
----------- ----------- --------- -------------
Fluid Carrying Systems ("FCS") 1,428.0 1076.9 -24.6% -23.3%
----------- ----------- --------- -------------
Fuel Tank and Delivery Systems
("FTDS") 1,088.6 873.8 -19.7% -19.1%
----------- ----------- --------- -------------
Source: October IHS Markit and company estimates
Revenue by Region
In Europe and Africa, revenue decreased 28.2% year over year at
constant currency while volumes decreased 28.6%.
This revenue outperformance of 40 bps was due to new business
launches in both divisions offsetting the impact of lower
volumes.
In Asia Pacific, revenue decreased 5.6% compared to last year at
constant currency while volumes decreased 17.8%. The region
achieved strong revenue outperformance of 1220 bps compared to the
market. The double digit outperformance was driven by the continued
success of our new business launches in fuel tanks, particularly in
China where the Group is benefiting from the automotive megatrends
of reduced evaporative emissions and increased fuel efficiency.
In North America, revenue decreased 27.2% year over year at
constant currency while volumes decreased 26.5%. The region's
revenue growth was 70 bps below market growth. Revenue was impacted
unfavourably by the lower volumes for the region as a result of the
customer shutdowns earlier in the year and also certain platforms
reaching end of production.
Revenue by Segment
FCS revenue decreased 23.3% compared to last year at constant
currency broadly in line with market performance. The overall
decrease in revenue was mainly driven by lower volumes in Europe
and North America regions where the segment is weighted more.
FTDS revenue decreased 19.1% year over year at constant currency
and outperformed the market by 410 bps. Strong performance in FTDS
is mainly driven by new business launches in Asia Pacific partially
offset by some programmes reaching the end of life in North
America.
Financial Position
The Group continues to demonstrate the resilience of its
business model and ability to generate solid adjusted cash flow
during these unprecedented times. Net debt is expected to continue
to reduce and liquidity strengthen as light vehicle production
volumes increase over time, with net leverage expected to also go
down steadily as earnings normalise. This dynamic provides the
Group with a solid platform and sufficient financial capacity from
which to continue our focus on investment to support growth and
positive returns.
The Group is pleased to announce that on 30 September 2020 it
successfully completed the amendment and extension of its existing
credit and debt facilities, moving maturity dates out to 2024.
Completing this transaction maintains existing levels of liquidity
and increases flexibility to support the Group's continued
resilience through all economic cycles and execution of its
electrification growth strategies.
COVID-19 Response
In response to the ongoing global COVID-19 pandemic, the Group
has continued to take steps to protect and prioritise the safety of
our employees, their families and our communities. Health and
safety remains our number one priority. This response includes the
donation of protective face masks, hand sanitation supplies and
other personal protection equipment to support communities in areas
we operate. We also are proud to supply our 'one size fits all' air
flex tube solution for the Ford/ 3M powered air-purifying
respiratory systems (PAPR) helping to meet the need for protective
equipment for front line health care workers in the United
States.
The Group is also following detailed health and safety protocols
with enhanced workplace and manufacturing measures such as
temperature checks, protective facial coverings, social distancing,
improved hygiene procedures and modified work proximities and
altered shift patterns.
We believe that these efforts have greatly limited the impact of
COVID-19 infection across our employees and has enabled all of the
Group's production facilities to safely re-open and remain
operational.
Electrification Strategy Progress
We are pleased to see the continued results of the successful
execution of our organic growth strategy and focus on BEVs. We have
launched into production a range of products for thermal fluid
management on Volkswagen's newly introduced ID.3 and ID.4 BEVs. In
addition to supplying Volkswagen various thermal coolant
assemblies, the Group is also proud to be the sole supplier of the
cabin comfort Co(2) heat pump valve unit assembly on this BEV
platform, an exciting new technology which delivers increased
operating efficiency and supports extended driving range over that
of a traditional refrigeration based cabin comfort system. We look
forward to the success of these vehicles and our growing content in
this important strategic BEV segment.
As further evidence of the Group's positive transition to
electrification, we are excited to see the continued growth in our
awarded value per vehicle ("VPV") for BEVs. VPVs for new BEV
business wins have increased from an average of EUR120 per vehicle
and a maximum of EUR400 per vehicle in 2018, to an average of
EUR135 per vehicle and maximum of EUR480 per vehicle in 2020,
clearly illustrating the upside contribution to the Group's growth
provided by the transition to electrification.
The Group also continues to win new business awards for BEV
programs with a wide range of global and regional OEMs across all
three major light vehicle production regions. These continued wins
further demonstrate our ability to meet the fluid handling and
thermal management needs of all propulsion modes including
electrification. As mentioned previously in our half year results
for 2020 the Group has a significant representation of thermal
product content on key BEVs launching over the next three
years.
2020 Outlook
Following the strong performance in the third quarter, we
believe that we now have sufficient visibility to provide guidance
for our full year 2020 expectations. The Group's extensive cost
reduction and cash preservation activities continue to support the
optimization of returns in the current depressed volume
environment, and we expect our fixed cost reduction and
restructuring actions to provide ongoing competitiveness and the
ability to return to double digit profitability at lower overall
light vehicle production levels.
For 2020, excluding the impact of currency movements, we expect
revenue to continue to outperform global light vehicle production
volume levels with outperformance to be in line with the prior year
2019 outperformance of approximately 2.0%.
Despite the extremely challenging environment, our operating
flexibility is expected to deliver a full year Adjusted EBIT margin
in the mid-single digit range. Additionally, we expect Adjusted
Free Cash Flow conversion to remain solid and to be in the high
double digit millions.
We expect full year net debt to decrease from the prior year
2019 level of EUR738 million.
Dividend Update
As announced, the Group has initiated the restructuring of the
business and continues to deliver strong adjusted free cash flow
despite the pandemic and unprecedented challenging market
conditions. The Group expects to repay any previously received UK
employee furlough payments by the end of 2020.
In light of the unprecedented conditions and associated
uncertainty resulting from COVID-19, and the Group's 2020 H1
results, the Board did not declare an interim dividend for the 2020
financial year. However the Board is mindful of the importance of
dividends to the Group's shareholders and, given the continued
strength of cash generation and greater confidence in the outlook,
is committed to reinstating dividend payments.
As such, in March 2021, the Board intends to recommend a final
2020 dividend based on the 2020 full year results, subject to there
being no significant deterioration in market conditions. Any such
final dividend would be recommended in accordance with the
Company's existing dividend policy of paying 30% of Adjusted Net
Income, which the Board currently believes is both affordable and
sustainable, and will be subject to shareholder approval at the
Company's 2021 AGM.
In addition, and in light of the exceptional performance during
the past several months, the Board also anticipates being in a
position to declare a 2020 interim dividend in Q1 2021 based on the
strength of the Group's financial position and prospects. A final
decision on the amount and timing of any such interim dividend will
be communicated at the time of the Group's full year trading update
in January 2021.
The Group continues to remain confident in its business model,
cost flexibility, solid cash generation, experienced management
team, and successful transition to electrification.
Trading update call
TI Fluid Systems plc is holding a call for analysts and
investors at 09:00am UK time today.
Conference Call Dial-In Details:
UK: +44 (0)330 336 9105
Conference Code: 1616526
The audio recording will be available on www.tifluidsystems.com
later today
Enquiries
TI Fluid Systems plc
David J Royce
Investor Relations
Tel: +1-248-376-8624
FTI Consulting
Richard Mountain
Nick Hasell
Tel: +44 (0) 20 3727 1340
Cautionary Statement
This announcement contains certain forward-looking statements
with respect to the financial condition, results of operations and
business of TI Fluid Systems plc (the "Company"). The words
"believe", "expect", "anticipate", "intend", "estimate",
"forecast", "project", "will", "may", "should" and similar
expressions identify forward-looking statements. Others can be
identified from the context in which they are made. By their
nature, forward-looking statements involve risks and uncertainties,
and such forward-looking statements are made only as of the date of
this announcement. Accordingly, no assurance can be given that the
forward-looking statements will prove to be accurate and you are
cautioned not to place undue reliance on forward-looking statements
due to the inherent uncertainty therein. Past performance of the
Company cannot be relied on as a guide to future performance.
Nothing in this announcement should be construed as a profit
forecast.
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END
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