American Axle & Manufacturing Holdings, Inc. (AAM), (NYSE: AXL) today reported its financial results for the second quarter 2022.

Second Quarter 2022 Results

• Sales of $1.44 billion
• Net income of $22.9 million, or 1.6% of sales
• Adjusted EBITDA of $195.1 million, or 13.6% of sales
• Diluted earnings per share of $0.19; Adjusted earnings per share of $0.22
• Net cash provided by operating activities of $146.7 million; Adjusted free cash flow of $114.3 million

“AAM delivered solid second quarter financial results and cash flow conversion while operating in a volatile industry environment,” said AAM’s Chairman and Chief Executive Officer, David C. Dauch. “In addition, we are excited to close on our recent Tekfor acquisition and begin the integration process. We also remain focused on our future to be the supplier of choice in electric propulsion while maintaining our leadership position in our existing product segments.”

AAM’s sales in the second quarter of 2022 were $1.44 billion as compared to $1.28 billion in the second quarter of 2021. AAM estimates, on a year-over-year basis, sales for the second quarter of 2022 were favorably impacted by supply chain improvements, volume and mix, and the Tekfor acquisition. In addition, metal market pass-throughs to customers and foreign exchange added approximately $27 million in sales to the quarter.

AAM’s net income in the second quarter of 2022 was $22.9 million, or $0.19 per share, as compared to $16.0 million, or $0.13 per share in the second quarter of 2021.  Adjusted earnings per share in the second quarter of 2022 was $0.22 compared to $0.29 in the second quarter of 2021.

In the second quarter of 2022, Adjusted EBITDA was $195.1 million, or 13.6% of sales, as compared to $222.6 million, or 17.3% of sales, in the second quarter of 2021.

AAM’s net cash provided by operating activities for the second quarter of 2022 was $146.7 million as compared to $167.1 million for the second quarter of 2021.

AAM’s Adjusted free cash flow for the second quarter of 2022 was $114.3 million as compared to $136.1 million for the second quarter of 2021.

AAM’s 2022 Updated Financial Outlook
AAM’s full year 2022 financial targets are as follows:

• AAM is targeting sales in the range of $5.75 – $5.95 billion vs. $5.6 – $5.8 billion prior.
• AAM is targeting Adjusted EBITDA in the range of $790 – $830 million vs. $785 – $830 million prior.
• AAM is targeting Adjusted free cash flow in the range of $300 – $350 million; this target assumes capital spending of approximately 3.5% – 4.0% of sales.
• The updated financial outlook now reflects the acquisition of Tekfor Group which became effective on June 1, 2022 with cost synergies on track for 2023.

These targets are based on the following assumptions for 2022:

• North American light vehicle production of approximately 14.3 – 14.7 million units and the current operating environment.

Gates Industrial Reports Second-Quarter 2022 Results

Second-Quarter 2022 Highlights

• Net sales of $906.8 million, including core revenue growth of 3.6%, compared to a record prior-year period.
• Net income attributable to shareholders of $53.1 million, or $0.19 per diluted share.
• Adjusted Net Income of $90.2 million, or $0.32 per diluted share.
• Adjusted EBITDA of $180.1 million.

Gates Industrial Corporation plc (NYSE: GTES), a leading global provider of application-specific power transmission and fluid power solutions, today reported results for the second quarter ended July 2, 2022.

Ivo Jurek, Gates Industrial’s Chief Executive Officer, commented, “I’m pleased with our performance, which represents solid improvement from the first quarter under difficult operating conditions. Underlying demand trends for our products are constructive across most of our markets and our backlog has continued to grow. We have targeted capacity additions underway to support the progress we’ve made with our growth initiatives, which will alleviate capacity constraints we’re facing in certain product lines. Also, the pricing actions we’ve taken have allowed us to offset the significant inflation and deliver solid sequential margin expansion.”

Jurek continued, “We are experiencing more significant FX headwinds and navigating operational challenges arising from external factors, primarily the persisting unreliable supply of certain key raw materials. While we see our business in China steadily improving, it will take additional time to fully recover as our customers and suppliers progress towards more normal operating levels. Our business model is resilient, focused on delivering mission-critical, highly engineered solutions for demanding applications. Over the past several years, we’ve steadfastly invested in innovation and our growth initiatives, which are contributing to the solid order flows we’re seeing. We have a strong team in place and are focused on managing through the present challenges to support our customers’ needs. With targeted capacity coming online and continued benefit from pricing actions, we believe we are well positioned to continue to deliver sequential revenue and margin improvement in the second half of the year.”

Second-Quarter Financial Results

Second-quarter net sales of $906.8 million decreased 0.9% over the prior-year quarter’s record net sales of $915.1 million, including a 3.6% core revenue increase offset by unfavorable foreign currency impact of 4.5%. The core revenue increase was led by the industrial end markets and achieved despite the negative impact of the suspension of the Company’s business in Russia and strict COVID lockdowns in China. The Mobility and Diversified Industrial end markets generated the highest growth rates, while the Off-Highway and Energy end markets also performed well in the quarter.

Net income attributable to shareholders in the second quarter was $53.1 million, or $0.19 per diluted share, compared to net income attributable to shareholders of $96.9 million, or $0.33 per diluted share, in the prior-year period. Adjusted Net Income was $90.2 million, or $0.32 per diluted share, compared to $125.6 million, or $0.42 per diluted share, in the prior-year period. The diluted weighted-average number of shares outstanding in the second quarter of 2022 was 286,038,818 compared to 297,774,142 in the second quarter of 2021.

Second-quarter Adjusted EBITDA was $180.1 million compared to $216.0 million in the prior-year quarter. The decline was primarily the result of the negative impact of the suspension of the Company’s business in Russia and strict COVID lockdowns in China, as well as operational inefficiencies stemming from supply chain challenges. Pricing actions offset the impact of significant inflation. Second-quarter Adjusted EBITDA increased by 14.9% compared to the prior quarter, with more favorable pricing offsetting the impact of the aforementioned headwinds related to Russia, China and the supply chain.

Liquidity and Capital Resources

During the second quarter of 2022, the Company generated $23.6 million of cash from operations. Second-quarter capital expenditures decreased to $20.1 million from $23.8 million in the prior-year period.

As of July 2, 2022, the Company had total cash and cash equivalents of $393.2 million and total outstanding debt of $2.6 billion, as well as committed borrowing headroom of $404.3 million.

2022 Outlook

To reflect the current market conditions, the Company is updating its full-year 2022 outlook. The Company continues to see the demand environment as constructive and now expects core revenue growth in the range of 6% to 9%. Adjusted EBITDA is now expected in the range of $705 million to $755 million, reflecting the negative impact of larger foreign currency headwinds from a stronger U.S. dollar, continued supply chain challenges and China exhibiting a slower pace of recovery from the COVID lockdowns. Adjusted Earnings per Share are now expected to be between $1.15 and $1.25, reflecting the negative impact of the aforementioned items partially offset by favorable impact from tax, non-controlling interest and other items. The updated Adjusted Earnings per Share range continues to include tax and other headwinds of $0.27 per share at the midpoint, primarily due to benefits from certain discrete tax items in 2021. The Company expects capital expenditures to be approximately $100 million and Free Cash Flow conversion is now expected to be greater than 75% of Adjusted Net Income, reflecting higher inventory levels to mitigate the supply chain reliability challenges.