Allison Earnings, Revenue Fall Amid Pandemic Disruptions

Allison Transmissions via YouTube

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Allison Transmission Holdings Inc. reported second-quarter net income and revenue were sharply lower after the novel coronavirus pandemic upended supply chains and demand.

For the period ended June 30, net income plunged to $23 million, or 20 cents per diluted share, on revenue of $377 million compared with $181 million, or $1.46, on revenue of $737 million a year earlier.

“Our second-quarter results reflect the pandemic’s significant impact on global supply chains and customer demand,” CEO David Graziosi said during the recent earnings call. “Despite these ongoing disruptions, all of Allison’s global facilities are currently producing transmissions and components, and the majority of our manufacturing operations have run continuously throughout 2020. To date, we have achieved uninterrupted delivery of our products and continued to generate earnings and positive cash flow.”

Graziosi

He continued: “We’re staying very close to original equipment manufacturers in a very targeted way. We also have a number of different internal, external milestones targeted for early next year that we’re working toward relative to alternate propulsions.”

The company reaffirmed its full-year 2020 capital expenditure target of 35% below 2019. It noted, too, its recently completed Vehicle Environmental Test Center already is being leveraged to accelerate the development of its next-generation propulsion solutions, including Allison’s portfolio of electric propulsion systems.

Revenue at its largest segment, North American on-highway, fell 59% to $164 million compared with $398 million in the 2019 period. Graziosi on Aug. 5 said the level of demand improved throughout the second quarter in the on-highway segment and has carried into the third quarter so far.

The next largest revenue decline, 39%, was in its service parts, support equipment and other segment, falling to $89 million compared with $147 million a year earlier.

“It continues to be very much a 24/7 operation in terms of managing our supply chain, which is not only North America but global,” he added. “And I would say outside of North America, there continued to be a number of so-called hot spots that we’re staying close to. Having said that, the vast majority of our supply chain is still in North America.”

Meanwhile, revenue from its defense business rose 14% to $42 million compared with $37 million a year earlier. Allison partnered with the U.S. Army’s Tank-automotive and Armaments Command to support the Army’s light-armored-vehicle fleets. It began delivery of the X200 cross-drive transmission in June. The X200 is designed for light-tracked combat vehicles weighing up to 16 tons, including the M113A3 armored personnel carrier, which remains the Army’s single largest armored-vehicle fleet with nearly 5,000.

@AllisonTrans relaunches production of the X200-4A transmission with the @USArmy - https://t.co/QnL3c7ybqZ pic.twitter.com/pFEV6tTEyl — Allison Transmission (@AllisonTrans) July 13, 2020

The earnings report noted the company is well-capitalized and positioned to realize future growth opportunities that may emerge from the current environment.

For the six-month period, net income fell to $162 million, or $1.41, on revenue of $1 billion compared with $348 million, or $2.78, on revenue of $1.4 billion.

Indianapolis-based Allison is the world’s largest manufacturer of fully automatic transmissions for medium- and heavy-duty commercial vehicles and is a leader in electric hybrid-propulsion systems for city buses.

Although 77% of revenue was generated in North America in 2019, the company has customers in Europe, Asia, South America and Africa. It has an independent network of 1,500 independent distributor and dealer locations worldwide.

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