ADNT - Earnings call transcript Q3 2021

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Operator

Welcome, and thank you all for standing by. [Operator Instructions] Today's call is also being recorded. If anyone does have any objections, you may disconnect at this time. And I would now like to turn the call over to Mr. Mark Oswald. you. Thank

begin. may You

Mark Oswald

slides Good website review and thank Officer; President third Adient's XXXX. joined Investors Del and fiscal Sue. been Doug President Vice today who Vice the us the to by adient.com. prepared our Executive the Financial posted Americas Officer; quarter for Chief This On results as and Executive our Jeff year the presentation release will Stafeil, by press we Doug will remarks, on Dorlack, we results of Jerome The Adient's Chief QX our of financial fiscal morning, questions. you, Executive call you an have and President, our and section joining Seating. year. of Jeff, for at to Thank Grosso, and our for business I'm call open the morning, your followed update of outlook After Head review remainder will for today's call, provide the

I Jeff, items there to discuss. are Doug turn and few like to I'd over a the Before call

safe conference caution call actual could based therefore, X we made statements differ Please to statement. risks the These from call. and refer harbor statements complete I it include the our Slide environment of First, today's as forward-looking on for see uncertainties. and forward-looking these involve you today, will that would statements. are materially results our on the presentation

found to concludes for full appendix we measures the will our I'll the is earnings the evaluating addition these discussing turn In useful results the Doug? comments. financial that Reconciliations now can of release. GAAP on Doug. over equivalent to operating basis, to call the believe non-GAAP performance. This be closest company's be GAAP my in presented non-GAAP information a we in

Doug Del Grosso

the for analysts review Thanks, Mark. investors investors, fiscal quarter our third results Thank morning joining Good you morning. we our this XXXX. call and to prospective Great. as

Slide to X. Turning

to related our comments few a with begin third me Let quarter.

significantly customer deeper heading combined to As escalating the industry quarter time pressures $X.X lessen supply the just operating the impact the our prices, the stoppages disruptions Adient's billion, of items slide. on commodity the production for across year's were anticipated production for stoppages, the into from Adient focused quarter, difficult ongoing lost left-hand those to team chain the resulting same sales. with landscape and and vehicle a significantly proactive I'll actions related we side the was Americas aware, and of control, semiconductors production fiscal up and took COVID-XX. due the a by the Adient. $X.X executed Starting successfully remained minute. the the challenges, while within dig billion to revenue results, Last in reported in many as at 'XX. impacted Despite you're macro shutdowns provided QX Europe and to

assets just inefficiencies, year-over-year, include a by deposit by headwinds, over point included in revenue as the YFAS from quarter line at driven I'll out cash to the out billion. Adient in part that joint temporary stoppages. unplanned disruptions. totaled balance pointed held acquiring $XX Adient's And China does Although specifically slide, $X transformation. balance Adjusted assets supply increased to as shortages June $XXX venture other again, due this million. on year's is XX totaled chip this numerous for as and the significant top EBITDA was our cash primarily and premiums not semiconductor the the our also million stoppages $XXX of production related operating strategic impacted about certain customers million production

portion company's a the to of repay million debt. $XXX was In during cash quarter addition, used of the about

occurred Achieving Approximately storm $XXX few industry just our results disruptions during the net freight capital the billion QX. minutes. on and costs, team impacted and the began costs a debt speaking implement will prepayment in additional including ahead These especially Adient. help that stoppages, $X.X lessen Jeff headwinds dwell and to the over in just actions of and supply totaled than the a increased Finally, gross respectively. debt associated structure COVID-XX, to impact. the provide production chain results, just and of unplanned near-perfect included significant prices Adient's discussed billion, Adient's Rather just commodity $X.X principal color debt, considering hard-fought, financial temporary million few. to negatives, with name looked of continued and increases on was

drive Actions implementing we've involuntary/voluntary resources the actions on on measures. taken but which the The those company limited keeping our controls certain provide layoffs included: team within salaried including highlighted and our is discretionary slide, hiring. preventive of members side forced shown tight On not reallocating vacations U.S. ahead exhaustive, should control. plants Canada, launch for at to the and spending, of essentially forward, pulling an is proactive business that to and essentially maintenance, our impacted travel, right-hand executing the list idea of plants, the very between activities continues in are how you

Turning to Slide X.

business slightly Let in results. operating QX spend the term a me minutes few environment discussing as slide as on really the evidenced and influencing shown current dominating shift and are near the our the factors gears

finally, and vehicle of SUVs; as driving economies. the as inventory; generally COVID quarters reopening trucks strong; continue near are including: mix, look a their remains will protect are demand, strong the influence rebuild the continue impacting for several number many and which consumer which historic inventories, of to or remains manufacturers to industry, many to vaccines and drive strong of reduction negative there despite treatments profitable levels manufacturers production are First, vehicle and extremely which headlines, positive at most

That watch continue in closely discussed. our number customers. They the in positive include ongoing headwinds headwinds, and production variant of masking there just which Delta result to focusing as we benefit the are disruptions influence that We are variants which view said, shortages, certain column, as way. at result such along of semiconductor the as temporary could on limiting supply downtime full the chain continue to or the a

our improved the course the months. our from chips we short production past not to a suggest call-out of stoppages downtime, has could rest experience coming impact unplanned unfortunately, leading schedules Discussions fiscal and cetera, business, efficiencies, and be and far network. the we limited Also continues disruptions and on production and even freight, on in premium chain of As XXXX, Unfortunately, have will and billion it's $XXX and operating few continue of and right, customers inefficiencies months. significant into and in prices. mentioned year results, as production be the adjusted net the et you top I resulting a through with weeks the XXXX, in for customers' on having very the likely approximately line of premiums XXXX. I call, visibility by escalating QX supply this shown the chemical our in fiscal are notice our seen steel said, earnings this and production, supplies lost to estimate across That production QX will commentary continue about the to as our box EBITDA wish of trend the our improving will schedules these to of $X.X QX impact million. our tell operating

pass-through are approximately were although And noted movements of with and beginning up Xx the Adient this long versus As year. certain the duration. the magnitude our intended of of to on the in mechanisms customer, slide, has cover this never Americas agreements steel prices they for

shared what impact we For about $XX in million, our consistent net XXXX, we with be to estimate QX call. the

they chain Although Our likely his Jeff and will placing in are commodity of having Adient persist these as to will costs time, deeper near-term strain increased a when business. remarks. prepared nature is subside? pressures these the temporary over disruption The will dig the amount significant XXXX. items appear we impact should lessen on commodity question on the best remains, prices be in the is guess supply into rising and enter

let related X. within our executing objectives. few Turning provide theme long-term Adient's of a actions Slide to to back me Shifting control, the to comments

additional in includes, equity we other in This China. strategic with YFAS agreements, among on an the First, joint and track of termination of XX% are transformation the acquisition venture the interest our interest Langfang. of the in I of to news the not-so-distant future. us in XX% YFAS equity in share and completion XXX% CQYFAS, hope in interest the agreements CQ the owning resulting

where As after enable XXXX Adient remaining the with our proceeds billion a first $X.X of cash Adient's drive tranche variety certain dividends The relative and tax a capturing transaction China in value of and benefits, expanding of at the generated allowing realization proceeds collected is are independently, result the and of completed not about cash reminder, improving prior in to Adient more integration strategy is expecting the which in to will status segments, profitable to calendar control. the quo, in growth year-end. entities to the closing value including company's proceeds operations at collected China the for from and expected

As seat our X market under the this Adient's in the structure. essentially to a March, suppliers work a just Based in transformation leader Equally par the XX%. top in China capital and position underway the part enabled estimates, to exciting we to market, mentioned a China remain by and in with expect share the among market. on on is equates transform of

you structure prepayment prepaid company far bringing the Bank lot structure to first of remaining. during earlier, in also the beginning capital voluntary million company's total, 'XX, total and paydown XXXX, in million end In fiscal European principal the company loan, I'd prepayments the has QX final to $XXX lien the debt the in note in Adient's has of paid voluntary capital fiscal the $XXX combining of of made When approximately made since $XXX a million flexibility mentioned remind debt. the million X% of callability down 'XX. year QX, transformation As so debt the $XXX the and our fiscal we at notes. X% Investment paydown

Launch this forward. of Performance Supplier bottom and the GM's award, awards process execute for few ways Quality provide the to continues award, Shipping seen the to the drive proof on Stellantis' the business on award, well. to positive looking push that day-to-day Excellence Toyota's on and on the and recently At to slide, our Adient's improve that Whether initiatives. customers value-added with Adient Nissan. in a included operation to The team are proceeds. Competitiveness the Best continually the we've On-Time We've launches, Supplier and Adient industry. just customers completion expect discussed continued as impacting control as our had transaction temporarily improving is within impact China the continue executing related flawlessly plant relationships such collection a strategies the efforts despite business the it's longer-term headwinds executing actions the received, our has I mention many recognize Outstanding of macro fronts, award finally, or from only of Diversity We including: points recognition product initiatives, deleveraging Superior our

to Turning Slide X.

to a provide me business leading Adient's has Let strengthening we wins and on business quarters clear targeting key continues is that been and capital business. position. our few has wins the how the comments secure ability several not as wins focus allocation, last fact new to over capital reported new when Adient incumbent our What we're return on or on hopefully market our limited

business recent both GLA past targeted new a the A-Class, wins program Tacoma, line business is key this our of highlighted wins Our number quarter, replacement Nissan targeted and of year-to-date Patrol. Mercedes including win here, with rate Mercedes in a tracking number Toyota expectations. for We've incumbent including: and

China new also trim in SUV a In and wins, of It JIT, platform foam, the replacement should our combination program a new and noted metals with recent EV that addition to secured business. be good XPeng these include awards Honda. mix, CUV Adient at wins,

in to margin balance As out to our launch, new we business continues platforms further book and to of expect enable balance expansion.

Turning X. Slide to

to highlighted planned considering for complete, very focus term. launches the heading months process to level on we near into launches load begin we're team and scheduled the do, of and around of the and of performance, discipline the As this process especially are that year. has the happy we've in several continues high year, a complexity report in typically launch fiscal or to the that final launch few critical were driven readiness I'm

of processes. In of though. number to challenges team the layer another managed successfully addition discipline launches through around to disruption to a complexity, that our and testament the production Again, the the schedules presented

fiscal year We scheduled the of and the that forward begin letting in with strong entering have process launches intention are finishing no up and to look to XXXX.

important. Before The while comments Adient and and flipping principles X, to with most turning business forward what's me guiding people, our inform discipline, conclude and culture. my remarks community Jeff, strategy drive to let key over our the on focusing just about a are call intended quality, Slide to principles. Adient's drivers, few These customer, guide financial

drivers take ahead. we team financial remaining forward And Jeff I'll we're as wrap accomplished even the to that, environment to on out bit Adient's excited drive in currently a challenging I'm performance and what's enable on us a these today, what with pointed we've while proud provide about XXXX business lies focused what As of XXXX. the color and the through operating over to third turn quarter up expected little call facing. more

Jeff Stafeil

Doug. morning, everyone. Thanks, Good

jumping which, Before commodity ongoing last operating into discussing operations let year, to abnormal financial the year a environments insight and minutes extent, inflation. the both this few in provides the QX me results, certain a given into less of spend

company the it Specifically, is to what the seeing relates the impacting taking as to especially lessen steps and today, out-years. how we're the impact, it's business

provided XX, chart North illustrating Slide a for price expected hot-rolled movements in and on we've steel movements America. First, price

can forecasts for you fall, to pushed prices repeating despite continued see, out. while prices will be decreases price increase that to continue As have forecast

For than Adient, resulted more this XX a cost Xx over last the in the months has steel. for increase in

approximately on net the hot-rolled conditions, The would impact If excess $XXX be cost our based on we steel chemicals price commercially ton. commercial of pass to prices XXXX in than 'XX higher versus as be current or prices prices do million $X,XXX increase paid market conditions for would a more beyond current headwind for this hold million our XXXX. is steel through $XXX remain our Assuming XXXX. fiscal in and constant, current approximately to agreements, million customers in such nothing $XXX and the market commodity

which Adient's this are realized recovery the at much cost be place expect, XX. to further spoken on you length We've discuss impact, calls for in recover with However, will reason, prior that as for how would mechanisms know of we're premature Slide that aggressive to to mitigate us material taking to actions it's on headwind I'll XXXX. And regard changes. in

attributes, As by of key lag and agreements differ a our reminder, pass-through X in percentage recovery. customers contractual

For nearly lag an Others, This Japanese-headquartered essentially lag, a lag. a customers Adient more in trued basis than X to of such customers, are up or quarters. average annual as little certain be tend immediate. X-quarter for on our results an

commodity XX% lag while been effective pass-through. others not For with have might These short the contractual to some for have piece, price company prices The customers have fluctuated. tend only the as business pass-through a the best the work impacting over cycle designed pass-throughs have XXX% extreme mechanisms against protecting duration minor, generally movements. today. are lag, the in increases They the contractual despite

Turning XX. Slide to

the reverted how Adient's positively have On financial to the as Adient's mean. results. you prices the Important illustrative the decline. general, left-hand movements provided cycle In negatively in through are we've to of results example expect, point as of generally impact would prices prices an slide, financial side but rise, out, as commodity prices impacted impacted

revenue material commodity Only recover XX% the in and change will from goes recaptures a lost customer, automatic up the revenue XX% down when the hard-fought, negotiated resulting while change, through the vice generally profits reduced lags be cost and negotiations. As true-up when approximately EBITDA. sleeves inflation goes the type Adient versa. will remaining up, lag, through mechanisms, we cost must again of roll the

movements included have call plus the a commodity XX%, on lines, minus. a as over pair see which chart, it, we also in dotted we view somewhere You'll cycle, normal or around of prices

Adient's we're being renegotiating today commercial commodity value-add aggressive the company all agreements, the not indices the the pain this the making in nearly time combined customers commercial increases underlying cost. And a the position of ideally As in Adient's recognizing place impact finally, true-ups These the the is aligned time to company to associated negotiations, with attempt environment slide, Unfortunately, of include, in but with discussed purchased. underpin share actions today, enabled are that reason Adient's to, over with and sure rising lags commodities as this with cost are true-ups is the actually in have not limited our and to is executing environment. eliminating the agreements an in reduce manual prior supplier. portion mechanisms recapture mitigate

For is on where one true-up based have with place index, we in the customer not the reflective example, being currently which steel a steel agreement is an scrap of purchased.

the As you size not one-size-fits-all. customer, might discussions based expect, the are tailoring exposure, relationship discussions cetera. We're with the the the of on et

escalation outcomes to why prices continued of next ultimately a steel time. imperative quickly headwind timing the determine address it's move magnitude it's year why Adient's and discussions lesser of commodity and said, the entering chemical prices appears purchases and commodity this remain will of headwind headwind. we us it extent, XXXX. to prices, will Given in the for That's at premature risk to the this these ongoing That dimension that's a

is the XXXX, discussed unknowns, one plan. 'XX of developing big team We've commodities. our of process Speaking fiscal the in of

driver will be other vehicle production. The

our earlier, customer XXXX results sharing XXXX anticipate 'XX low. as financial currently assumptions production in fiscal especially it conference visibility you mentioned we supply We Doug As hope as into schedule QX to improves, is planning our as typically relates I call our visibility exit November. fiscal our early do enter during the and chain. semiconductor with we quite

our gears side format, with the to let's to our Adient's of adjusted the page on page. results the right-hand Now and in to move reported results Slide and results. formatted QX is Adhering the the XX shift financial typical left

focus special view our important either which that performance. in adjusted skew otherwise will We as items or onetime nature trends in we results, commentary on exclude the underlying

to transaction other One accounting between and resulting restructuring Brazil, to our derivative financing difference write-off on reported charges costs purchase deferred debt tax biggest For amortization. important the repayment, costs, the quarter, relates significant results Yanfeng the and adjustment relate in to note of from loss a the recoveries of indirect drivers adjusted transaction.

associated a in and loss. adjustments negotiated were a noncash of in resulted China are the with cash RMB. transformation proceeds, CNY between these movements presentation. Adient strategic As protect of the our executed USD proceeds the the Details reminder, hedge to appendix the a in

$X.X down sales of COVID. production quarter the compared to For Europe our was results year, up America quarter, across where shut were last to much significantly billion, due third and our

explained by Adient's $XXX by the Although primarily driven increase benefits up more ongoing for were chain year-on-year, operations. increased supply the volume made to an by was impacted EBITDA the inefficiencies, related lost the quarter by numerous were to core mix. recent in the million and than sales quarter operating temporary in volume masked million, up Unfortunately, $XXX performance disruptions production, offset from semiconductors. year-over-year, improvements significantly business most Adjusted which, by way, significantly

than For example, sales million advance, less received we received notification $XXX of X the more the we operation. X our lost than the This difficult time. in days days Americas of operation, environment JIT in a notice reduction run in obviously to of is approximate less than XX% in while a

lower in negative drivers on rising commodity also I'll a just in these and key income equity a expand costs quarter. addition, impact the In had minute.

Finally, $XX per at share. loss the of reported bottom a or of $X.XX line, net loss a Adient million

sales the much increase primary in 'XX an a and Now driver a let's about of periods of to offset volume positive year-over-year a quarter was $XX attributed impact XX. on movements period revenue currency our fiscal very FX, Portfolio detail, increase of billion in minor Slide $XX million. billion, call the it, and provided same about to extent, X benefits with reported year billion, executed of The lesser more the between million. $X.X adjustments higher consolidated third mix, and the call volume the it, results starting break ago. of down to $X.X of compared $X.X We to

semiconductor on to was can and the table were mix, side on you EMEA. customer heavily that Focusing weighted included manufacturers VW. in with right-hand keep of the by shortages. and failed driver up primary our Daimler, consolidated which production the impacted significantly see to was Ford, the These Americas the Stellantis, slide, Renault Adient's customers The sales both

volume it's forecast, Americas production third-party the was the portion XX% of Adient's various estimated in respectively. lost the at QX XX% about and EMEA, and production Looking

and we year-over-year as again, all an course, recorded changes. were regard last X%, Significant In results, were year-over-year at operations sales at Of with seating this were up reverse revenue, heavily by of year. decline with relatively and supply to executed but and for as shuttered the their unconsolidated to view approximate in QX supply sales EMEA, that were these disruptions at China, should largely results increases adjusting temporary portfolio by X% line were YFAS. Adient's YFAS stabilizes. driven With FX fact saw consolidated both chain impacted Similar the chain approximately in what despite in we unconsolidated production our customers. industry Americas

Adient's current couple of last the periods. adjusted The back bridge is the to a but office, semiconductor the to detailed Moving loss driver costs $XXX Texas XX. and Compared information. in-depth corporate that fallout movements this million earlier proof marketing. give last some and factors. outside Last Adient's was comfort bucket me between or control, $XX this million in to turnaround the show XXXX was or expense, our $XXX are and launch just points significant in and quarters. go last And chemical into communications, to X on lower in premium a finance, versus segments of to do XXXX Slide were of Therefore, overwhelmed legal year cost represents past the without allocated of labeled page, but year. shortage while on the We've said provided and outlined by our the its operation, this Big ops The compares 'XX waste that comparing expense quarter, QX our couple executive to external business. on this impacted million million. related to the the I page, of by by obviously very quarter detail for plan freight better EBITDA such impact COVID-related was some suboptimal while give was factors a discussion not year effectively storm to performance central corporate and as as period admin name QX increase in QX shutdowns, approximately picture, adjusted years, quarter year-over-year the EBITDA your supply also that let not statistics materially we've the externally of QX, primary generated such of $XX to the to shock

operating in was divestiture is our lessen of equity stoppages in positive at performance allocated unplanned mentioning our joint QX all a Americas of primarily income to enough been presentation. ensure area performance and EMEA, temporary $XX SJA pieces, the from also by The moving the year-over-year however, of appendix of QX the regions. realized in more million issues, semiconductor in team in versus we've $XX hard direction, to $XXX the operating million is decline material time YFAS We deliver level, XXXX the extent, to in has of million the slides decline detailed trend production roughly inefficiencies given improvements. resulting a but the other improvement. One Ongoing and approximately unfortunately in To offset to to and masked segment to masked others. the end, chemical of Q&A approximately inefficiencies mix the comparison the to impact in $XX and related many metrics, XXXX each provided were than the improvements portion and headwinds million worth chain million. lesser worked the call, due venture. $XX of performance improved benefited $XXX operating temporary volume million performance in business net of environment these the Clearly, improvement. overall the and supply FX, commodities, continued High these In lower million the volume, year-over-year challenging from among the $XX economics

some net volatility with shift of improvement focus now our Adjusted cash some and operating million. Slide movements. less in Starting XX in on working capital flow, liquidity smooth and CapEx, XX, frame adjusted million helps I'll defined in flow million as of $XX significant was as me on the free year-to-date The cash Slide spending longer structure commercial of trade an of progress and of cash reduction the results equity, through will capital cash, XXXX on paid the specifically EBITDA, improvement VAT in to to to we'd time continue cap XX. non-income-related was offset VAT expected approved government expect we COVID to and year-to-date million, $XX to as capital elevated the by fiscal activity. 'XX restructuring million, larger-than-normal out of payments, With outflow while regard accommodations. $XX payments reverse QX, in working in increase delays fiscal due $XXX $XXX partially related interest outflows increase taxes, of Let in timing

undrawn $X line more right-hand during XX which includes about in Also debt of total As and million, paid. $XXX ended noted with billion page, balance revolving $XXX to Adient's of June approximately capacity of the assets other principal assets $X.X the used acquire YFAS. of related certain the on excludes noted of and premium approximately cash quarter we the side call-out, about the million than billion voluntarily down deposit $XXX under of the as in liquidity comprised credit. to cash hand to pay funds held totaled quarter on both million on Cash

Speaking of debt XX. and to flipping Slide

In addition XX, $X.X capital June totaled our $X.X net provided respectively, also structure. Adient's and of just and snapshot at debt billion, we've positions, which billion debt over to showing a

principal paid final first the repaid in the $XXX quarter As you the can see, million were was as entirely during at quarter. notes lien end X%

million to 'XX. million of the complete The balance debt Adient's good is was European $XXX news of transformation addition, of In done. fiscal Investment the of prepayment sheet well of QX loan we're not also underway $XX Bank It's with clear principal repaid QX. is, in going approximately back

market impact consolidated to our outlook paydown to executed sales decline. paydown for our expected for June, received through production of we stoppages With has as that, expected significant portfolio costs stoppages, our the through The lower-than-expected on Slide billion downward EBITDA. Expectations adjusted and been calendar Adient's expected and elevated place XXXX $XX.X voluntary company's updated to the debt flip at proceeds driving $XX.X guidance semiconductor have transformation. unplanned pressure remainder shortages of let's of fiscal sales, results to China Adient's continued production Additional 'XX. freight, reduced inefficiencies resulting combined and debt XX with of current driven The XXXX to be and the is completed with from customers operating temporary progress year-to-date is between by review Adient's billion. transactions, been the conditions. reflect is fiscal impact increased commodity from

Our is current $XXX between and forecast million. $XXX million

to consistent expect Moving with our earlier which modestly, $XX equity on 'XX, to fiscal be at based which million $XXX be million, it, pressures. line has offset 'XX in team to line million. revised $XXX Cash Based for EBITDA, to top income, cash And flow expenditures position, be worked in free to plans, the which launch in fluctuations been now one Adient's last included the Interest about expense, we down million to expectations. total as expected continues approximately the to our modeling. expect $XXX and mentioned cash fiscal between finally, taxes in have item tax on debt continue for capital year. $XX of between quarters with for previous is to $XXX EBITDA your the mid-XX% about million with To rate on and call customer our is range forecast your although million. our assist is be and hard year. and about $XXX is in to earlier, we range. modeling, We volatile effective expect million The adjusted

reduced was or typical less. which $XXX forecasted for to year, of restructuring, million compared now remains around to $XXX cash our about previously The been elevated addition, has million. at spend million total the $XXX In our

restructuring out In XXXX addition to an elevated cash VAT $XXX XXXX. been $XX the impacted negatively free Operator, approximately let's question-and-answer flow million the from call. that, Adient's spend, With the last question, is of approximately cash would of to please. portion were these that into free deferred first one-offs, payments guide have flow year million. by move Stripping

Operator

Wolfe from is with Instructions] Research. Rod Our Lache [Operator question first

Rod Lache

was I that of described is, clarify $XXX hoping XX% One A that's for I the the million, you next just million can year, couple you of $XXX believe. just commodity things. headwind

some absorbing XXXX of you just confirm, to that to because secondly, which the And on slide, $XXX year, think million I'm are once apples-and-apples. You included for million the should is that's the normalizes? basically, separately, for relative that $XXX we $XX tailwind talked at if production to $XX included But million some impact. XXXX may mentioned inefficiencies? discuss this then revenue relative impact not quarter, And Just view you not one million a nature which is is I have about sure can point the anything. or the year? about likely you

Jeff Stafeil

I'll Rod, on Yes, start those.

timing the have the $XXX inflation as the first $XX had And net that think it. about sort to material exactly, and then It's impact, XXXX we right, that you're and was XXXX. million it was in relates of of The the doesn't the question XX%. I a lag of to million recoveries. compared the It mix computation

be the we would if stand that through just ran agreements mechanical today. they as with So

we're As don't those the a add putting for just like supplier of is I make mechanisms value the with ourselves that mentioned, increases, materials. sense size essentially to working,

working actions and that, out that's put million with in XXXX. to we're our were forward, XXXX but no about where improve customers would our versus if So it fall $XXX help teams

issues type container freight to of of $XX sort get of over some there XX-ish. There's were issues, a There the of to supply balance to chain were million. And you million question the up bit $XXX COVID-related on north million, it of relates million. chemical about second some part were the the there's the $XXX it your $XXX still rest, and volume. that you can to relates are the issues As say which

Rod Lache

is reasonable with for of if you do I XXXX. Okay. bridging And EBITDA $XXX just kind of target of what aspirational recovery a maybe you'll little bit commodities? help mean, us this a million year. And could beyond

last $XXX so but about some disclosure X,XXX China you're I presume might $XX lose be million million million. from You'll reduction, commodities. least which recover your of this going maybe inefficiency the and $XXX was in XX-Q, of this at $XXX or income million And there then equity remaining to headcount about sale,

mid-X% as beyond but recovery as as of as longer-term margin, this? kind you think towards XXXX. far about sort the you've we level, just are of margin got know high we aspiring So think I maybe what

Jeff Stafeil

material improve. We get We'll production of if the think a questions, some bit we expand. few the at a XXXX would is coming next probably prices. further. at at inflation to of that couple reductions next obviously crumbs not for big $XX.X we in just us. process timing putting to running We'd I show hits least of a of we and to that's billion month No. or we're expect give lot benefit work that but and done our in Rod, in uncertain we'll certainly depressed It fully away would at and guess see of a here, in to if continue start I And some year. to lot it not chip hasn't expect volume go yet, if Yes. those to of some volume down. together, a quarter you to improve, inefficiencies so good highlight billion that away. months, still that's material back also the issues. I'll a now, start first $XX.X All the right expect here to challenges to the fashion, steel But or But start forecast, continues go chip We level. this I'd of everyone volume it's look created you with going

efficiencies, on program within place. We our the our VA/VE improvements continue I see control. cetera, on cost internally drive structure, our nice manufacturing the we've see are CI benefits, et to things our put improvements in that nice

from the margin there. have So we the restructuring and are the still expansion benefits

to inflation So success and have be largely going upon of dependent after underlying really material the the that of it's we market. on recovery going pace the

Doug Del Grosso

Doug group it Grosso. somewhat of to concentrated would just I I small a would material across is Rod, to this that, that inflation, customers. characterize relative Del add is

of wide we've got a agreements. mentioned, variety Jeff's As

why well others had working impact about are this and Some that's reasonably we've are talked the working that for less well, we've year. and

is after customer those we base that as have We're heavily approaching can not with number, on And X we're I to engaged but I'm ground can issues. kind peg we is, that, it concentrated we've We're so got of correct where confident those that it customer sitting would it's happen. this base feel with. waiting our make with as the pretty measured ways. a our level not now, customers anything hands Right we outlook be patience I super discussions. that because deal taking with done going issue with in relationships account in to a relationship have certain degree discussions. And on we not mind, engage keep a to these as would our and our I itself. in some One naturally go a a it's say is excellent those and on new to for here of we those to customers. that opportunities today business sustained longer-term we've we aggressive we into want customers call always backlog mind

Operator

Barclays. Our next Instructions] [Operator question with Johnson Brian from is

Brian Johnson

we It step get the do from the still a last a Yes. we day. $XX of topic if of inefficiencies, being the in Obviously, down quarters. EMEA? margins exclude like, business How million even looks sense

where have segment a back obviously, And getting what commodities. on down. happen has that eventually in about you're working course, that talked And help and to EMEA? footprint will your you, what's metal But of that of your to You level Americas in margins? in winding X% peer confidence

Doug Del Grosso

start. comment well. Jeff as I'll And obviously, can Well,

was, normal so I quarter talked a that when to occur completely that unusual. don't than what was not we calendarized want last just about bit, I year, period you high quarter-to-quarter margin an say occur It level to unusually you that margin They settle occurred. look every just a suggest and picture. of level to it's think because I than EMEA up commercial at higher I EMEA, at that think distorts a look over longer in phenomenon a have issues, little where lot a bit would on a we at of And of QX. of the tends settlements

Jeff Stafeil

QX. QX, Yes,

think look the I improving. EMEA you business at As SS&M has picture, been the

portions that's And highlighted had react very short a it's call-offs to to worker to in to think helpful the react less continue ability movements for from hit is to so and operating and my but even time I region The all the Americas, Europe in to metal not been, other there. in that, the metrics I there. frame flex cost similar those standpoint their a situation certainly we that is volume we've margin on are comments base.

much performance we're not metric in The an from think continuing sitting. environment for So standpoint, the sort pleased with will helpful on overall a drive operating a we've that that I environment. with current region. And through to But well. issues. But been to ideally, better mechanisms the has restructuring operating we're been we EMEA the as need where commodity inflation of operating continue more to quicker put there some stable improvements deal and

Brian Johnson

Okay. supply that. actually of a that just And was chain, point then plant one the made, iceberg. it the the secondly, when JIT I from your was upstream one plants, of including competitors, whole the There's cross-docking is plant toured tip your facilities manager freight,

can is your And be your recoveries? premium driving then freight? supply extent of the what of to nature that So chain part

Doug Del Grosso

Sure.

the freight, would in EMEA I we're components significant on exception both has pretty of, impact region, namely which us With U.S., this in say from I'll the impact bringing has relatively small and ocean say, stage. had a Asia, when been the at Americas

certainly, as will these mounting issue it. cases, we've In completely experienced we've talk suppliers to about chain. a of Now pressures But in it. want suppliers and supply direct lot continue, got immune any with from that who not our come associated were some

immediately. it's amount the in environment days fact notice, when so hits the operation we just I would issue, the of stop or down X mainly a customer JIT vertical It internal our X the characterize the fair us integration, and to that in got we've because all-inclusive. with inefficiencies hard Yes. So have shuts

further we ability chain, go effectively. We bit more inventory. a build have to the down little we an supply As that can manage

this you've quarter. we seen of in moved as I increase a think little bit inventory into

to want we So offset of some the operations can And Jerome? region. here got runs Americas add who that. to Jerome in Anything we've that, our you

Jerome Dorlack

numbers worked some because Coast on the our days. that JIT. Jeff even in Doug Coast, notification quoted West specifically we're not JIT impact West freight reroute into plants, really. really earlier West away X for into you within in there the the window delays constraint and down think said, we've and component But to from maybe around a as of port to such for the Yes. coming us. flows site flow of that Coast. and been actively has in integration, parts And real falls I vertical And down the mean, that, smaller Asia, The XX% I that challenge at puts X our it's an as from

in Coast down. or on the U.S. it bring into it Canada the East north bring in and further moving of now either it So

can impacts So think, Brian, JIT I down bigger we've really to the us. the done has supply everything been to really further those issue for mitigate of we manage in the chain. it actively aspects

Jeff Stafeil

paid we lot But a have of...

Brian Johnson

are Those dedicated? the backstop and

Jeff Stafeil

to And bump I were the sending demand. up, Yes. of airplanes driver shortages, I'd million the been all customer on us has hit kinds overall gone in expense has say meet the our to us, issues biggest $XX we supply of freight. issue Freight things. chemical cost. when chemicals Also, mentioned

definitely but more on an cost side. issue, So been freight the it's has been

Doug Del Grosso

Yes. embedded million $XXX in that that out. And put we number that's

Jeff Stafeil

Yes, in the beginning.

Doug Del Grosso

really that inefficiencies overall very that So into much was base, say, not but characteristic, of specific chip shortage. a incident drove those I'd supply the

Operator

question Capital RBC next Markets. Joe is with Spak The from

Joe Spak

headwind inefficiencies operational guess, of As Americas, get we back, a and the walks instance, launch. I well, believe EMEA look talking in from for in impact was from as I also temporary the through there the like year-over-year these I you're some in about. noticed, I

you're performed like So just costs higher more just launch I or launching lack this Is launch. have actual because launch guess execution programs? of are you like on on better guys a

Jerome Dorlack

Yes.

take you around, launch if volume of So really this the system. the the through particular, Americas, running in it's is that's

load. year-over-year launch So it it's with isn't inefficiency associated launch, just

like a we're programs for an the value and PXXQR you for so And look example, that's in at Tennessee program Nissan, us. as full launching if chain

have trim, the and metals. we foam the So the JIT, the

bit we the of it's was significant to awards. of we that the and a successive launch launch, But a had. from a in particular recent about coming Doug trend business. amount it's a that business. launch so terms And good standpoint. reflected, into And for continue customer Nissan launch well It's one load talked in inefficiency little very

so load launches. I'd level into just a have It's control the on And on our launch that's standpoint. of a the say we year-over-year high coming business

Jeff Stafeil

a no, there And no ago year COVID, in were launches.

Joe Spak

timing at. when sort Yes. update of this, But I when close sort bit And sort on of if guess and was more that any morning. we I I refined then missed there can sheet? can what China sorry of see getting that's little is a all that transactions busy balance the new

Jeff Stafeil

at we expected in transaction Yes. March announced think, No. no XX good still same we news close we the this is outlined We're on the transaction. dynamic the when September, changes the of proceeds on the And point. The is target, still to by as end September.

end in we'd come the time the on dollars that date half and line. is roughly And that still expect of So the by paid December. rest then

Joe Spak

of 'XX? December

Jeff Stafeil

Correct. December. Yes, this

Operator

Instructions] question from Suisse. Levy with Our Dan [Operator Credit next is

Dan Meir

about your apologize little I commercial think your of in missed There's I up sleeves. roll a slides this mentioned if but bit negotiations. I you earlier, the

you a the which year. recoveries, be maybe then said the in when to you just comp how us input And given typical typical on on work I us how sense give could million that commercial negotiations dynamics you maybe give the timing able that? could you typical of So the would might $XXX of like is higher What's cost. recover a the versus latest think

And could call you've fruit, to exhausted? So it, then mostly what out is think hanging just I said the size which recoveries lower the, on be. left what's commercial trying

Doug Del Grosso

Yes.

at Del obviously, And some macro I'll then, start level. can a and So Grosso. this provide Doug Jerome Jeff additional details. Dan, is

during to first going I'd signaled our economic inflation commodity issue start was So we out, be call. an QX

gone we an felt been, mechanisms this of gotten That be one but issue 'XX, us, our of it I'll see the that say, that's what addressed. into in discussion at not it isn't have has front a their impact didn't a we've is single a shows of great to year What's had. versus recovery challenging higher needs period and extended been for we've forecast month it preceding costs of impact is we said, such our this each just for high been level with why in is if transparency And traditional one slide was to changing. be extremely and deck fiscal an explaining going inflationary not of continue in we what We've customer, every to of the relative has now that to customers. every anything time. one that 'XX, the amount coming. continually has only So This that the levels is

The that's cases. concentrated across it. these cases, it's a a In and are few just better this mechanism mechanisms As change is issue customers our that that I to right that place place It's mechanisms but felt have quite are enact. like these got they mentioned, a specific place, they have commercial most really mechanisms pretty causing understand that not they've fundamental customers. erratic work, have it They change for now And historic in for manage have we situation. to some issue. is, situation been in to that it's not we in the a some in time

we're they're with. well I think what about is pretty I that feel customers, good with customers positioned those

situation. put I impact still commodity is to would outstanding time be and value reason I'm got with, costs The peg only a pretty some it. the really it's think to going to a final brackets the put bring. on is, increase, relationships And say and I appreciate we've think what I as they continue to reluctant we hard it fluid it's around

we're this an visibility about our it's be QX talking So outlook, through better where it at on we of as start than we'll 'XX working more have but We'll go to and we will out the problems base that with significant work I'm be to customer a quarter with. time, to this fairly take we'll over where the resolve. But most issue confident able have that we quarter.

Dan Meir

I more follow-up, And to flagged. leverage to Xx be would you range below be What the far just a site closes, your allocation that on pursuing typically that then supply seeing? chain options below potentially as the, target think X.Xx capital that that forma Great. the going could side timing know the once other issues allocation the once a China on period the is I you're bit pro on transaction be the where given capital leverage get some of there we're or you conservative a

Jeff Stafeil

question. great Yes,

we'll little around volatile think to I or right, guide more we outline bit real and bit. past year, the the are that the here outlined for the element forward big have guys and to do good expectations a a we to we'd under as intentions get lot But delay see definition the in But we'll in path finish us at XXXX, little disruption our things the That the come market, think better we under a the primary this to where things. the more market cash more, of give start the think We I earmarked could to you is probably time, for for here. to for what guess, our situations, you indefinitely, and those I with point, we'll allocation see But delaying uncertain is a are, we've on deleverage. what same we don't metrics those that continue sure. here. you're path capital I a we expect your

Mark Oswald

Thank hour. the of we're it bottom like looks the at you. And

concludes available has be calls. again, Operator, I'll for additional out questions, So very me. much. feel reach for call to thank to there's if please the anybody conference follow-up you that This free today.

Jeff Stafeil

Thanks, everyone.

Operator

This time. and conference. you for today's conference in at today's disconnect Thank this participating you concludes may

Adient (ADNT) 8 Aug 212021 Q3 Earnings call transcript