Adient plc Q3 FY2025 earnings call

Tariff Climate

• Adient views itself as a net beneficiary from current tariff policies and onshoring dynamics, expecting a reset of the competitive landscape with the company as a winner.

Q3 Results

• Strong third quarter with improved business performance across regions, outperforming industry volumes in the Americas, and generating strong free cash flow of $115 million in Q3.

Regional Performance

• Americas: Leveraging growth opportunities, navigating tariff dynamics, with tariff impact manageable. EMEA: Seeing improving business performance with restructuring benefits, expecting mid-single-digit EBITDA margins. Asia: Executing at high levels, profitable and cash generative, with growth expected from new business with local China OEMs.

Onshoring Growth

• Proactively analyzed customers' U.S. footprint, identified overlapping footprints, winning new business with Asia-based OEMs, with U.S. presence enabling future growth.

New Business Wins

• Nissan Rogue with additional volumes from Japan to Murfreesboro, Tennessee; Asia OEM moving production from Canada to U.S.; Mercedes VAN C-Large in EMEA; BYD in Asia; Toyota 560B in India.

In the Americas, improved business performance was seen, with tariffs being a $4 million headwind, volume and mix providing a slight tailwind, and commodities a $4 million headwind. For EMEA, positive business performance of $6 million was offset by lower volume and mix of $5 million, FX being a $2 million headwind, and commodities a $3 million headwind. Asia's results improved year-on-year by $12 million, with EBITDA margin expanding 150 basis points due to positive business performance and favorable FX.

• Raised fiscal year '25 revenue guidance to $14.4 billion and adjusted EBITDA to $875 million.
• Maintaining free cash flow guidance of $150 million to $170 million.
• Expecting elevated cash restructuring this year due to timing of payments related to previously announced actions.

• Tariff uncertainties and their impact on expenses.
• Commodity headwinds and timing of recoveries.
• Uncertainty in production volumes affecting performance.

Q: Joe Spak from UBS asked about onshoring opportunities and net opportunity for Adient.

A: Jerome Dorlack responded about Nissan business being incremental revenue, $150 million to $200 million incremental revenue from certain business starting in '26, and $600,000 units potential with Adient's advantaged footprint.

Q: Colin Langan from Wells Fargo asked about guidance and bid process for F-Series.

A: Mark Oswald explained difference between sales and EBITDA due to FX, and Jerome Dorlack declined to comment on Ford's bid process but focused on providing solutions to customers.

Q: Edison Yu from Deutsche Bank asked about equity income and China market parity.

A: Mark Oswald mentioned equity income impacts from renegotiated pricing agreements, and Jerome Dorlack discussed China market parity depending on BYD's performance and new business launches.

Q: Emmanuel Rosner from Wolfe Research asked about reshoring competitive advantage and cost performance.

A: Jerome Dorlack talked about cost and intimacy with customers as advantages, and Mark Oswald discussed margin targets and regional margin opportunities.

Q: James Picariello from BNP Paribas asked about commodities and tariffs.

A: Mark Oswald explained net basis of commodities and tariffs, and discussed guidance elements like volume mix, FX, and business performance.

Q: Dan Levy from Barclays asked about Europe margins and vertical integration.

A: Mark Oswald discussed Europe margin improvement over years with restructuring and new business, and Jerome Dorlack talked about vertical integration dis-synergies and Adient's focus on JIT, trim, and foam.