Adient plc's revenue grew in the second fiscal quarter thanks to a modestly improved business environment, but labor and steel costs and softening demand in China hurt profits, which fell short of Wall Street projections.
The automotive seating supplier saw revenue rise 11 percent year over year to $3.9 billion, though it finished the quarter $15 million in the red.
Even so, adjusted EBITDA increased 35 percent to $215 million for the quarter, which was in line with internal expectations, CEO Doug Del Grosso said Tuesday during a call with investment analysts.
"Adient's operational execution, positive commercial momentum and an extreme focus on containing costs continue to drive the business forward," Del Grosso said. "Adient's second quarter results, which provide very positive proof points of these actions, can be characterized as very solid."
While the automotive industry appears to be emerging from the worst of the supply chain woes unleashed by the COVID-19 pandemic, suppliers continue to struggle with inflation and production volatility.
In Adient's case, second quarter sales improvements were driven by better volumes and mix, improved business conditions, lower freight costs and successful commercial recoveries from customers, according to executives.
However, those benefits were offset by a $29 million headwind on overhead, primarily inflated wages and utility costs. Elevated steel costs in North America and depressed demand in China are also expected to continue impacting the business.
Adjusted profits for Adient (NYSE: ADNT) were 32 cents per share, 9 cents below investor expectations. Shares in Adient fell 6.5 percent to $34.73 in afternoon trading on Wednesday.
Its earnings loss was partially the result of restructuring and impairment costs, according to the company.
Adient's free cash flow improved to $70 million in the quarter from a $28 million deficit a year ago. Its improved cash position was driven by improved earnings and by lowering its debt level and reducing interest payments, which have become burdensome for many companies.
Despite missing investor targets, the company said it is maintaining its previous outlook of $15 billion in revenue for the full fiscal year.
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