Dana Incorporated reported robust sales of $2.7 billion in Q3 2023, marking a $134 million increase from the same period last year, as revealed in the recent earnings call. The growth was driven by strong customer demand, new business backlogs, including EV programs, and cost recovery efforts. However, the United Auto Workers (UAW) strike had a significant impact on the company's North American light vehicle business, prompting a modification to Dana's 2023 guidance.
Key takeaways from the call include:
- Dana's Q3 adjusted EBITDA was $242 million, a $50 million increase from the previous year.
- Free cash flow for the quarter was a use of $5 million, a decrease of $82 million from the previous year, due to higher working capital requirements and increased capital spending to support program launches.
- The UAW strike caused a $65 million decrease in Q3 sales and is expected to result in a $185 million decrease in October.
- The company's EV organic sales were $81 million higher than the previous year, improving overall margins by 20 basis points.
- The company modified its 2023 guidance to account for the uncertainty surrounding the UAW strike, with sales expected to be $10.7 billion and adjusted EBITDA expected to be about $850 million.
Despite the challenges posed by the UAW strike, Dana Incorporated has managed to execute well and is nearing the completion of several key launch programs. The overall operating environment is also showing signs of improvement, with moderating steel prices, cost inflation, and strong demand in heavy vehicle markets.
In the earnings call, CEO James Kamsickas discussed seasonal factors that typically lower Q4 margins, such as down production days around Thanksgiving and Christmas. He also mentioned that inflation has moderated slightly and the company has seen lower overall electric vehicle (EV) investment, but they are becoming more efficient in ramping up EV programs. Kamsickas emphasized the company's focus on operational efficiencies, commercial recovery, and managed spend to offset the impact of the UAW strike. He also expressed confidence in the company's ability to achieve break-even in the EV business by 2025.
Timothy Kraus, a representative from Dana, discussed the operational improvements and efficiency measures that have been implemented across the business. These measures have resulted in improvements in various segments, such as commercial sales in North America. However, he also mentioned that the company expects some challenges in 2024 and that the improvements seen in 2023 may not be as dramatic.
The company expressed readiness to adapt to any energy source but stated that electric vehicles (EVs) are not a major part of their current backlog. They mentioned that commercial vehicles were their first segment to electrify, and EV programs tend to have longer development periods, falling outside the current backlog. The company concluded by expressing gratitude and anticipation for future communication with investors.
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