CVG Posts Lower Earnings, Revenue in Q3
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CVG reported lower net income and revenue in the third quarter as a result of a drop in commercial vehicle build rates offset by results from warehouse automation initiatives in the expanding e-commerce environment.
Net income for the period ended Sept. 30 fell to $4.2 million, or 13 cents per diluted share, compared with net income of $7.2 million, or 23 cents, a year earlier.
Revenue dropped to $187.7 million compared with $225.4 million in the 2019 period.
“[The period] was a good quarter for us and a strong bounce back from [the second quarter], which was slammed by COVID,” CEO Harold Bevis said during CVG’s earnings call.
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“We’re 7,000 strong and getting stronger. In fact, while some companies were laying off people, we were hiring,” he said. “And we have hired approximately 1,000 people in the last few months, and we’re still hiring.”
Meanwhile, revenue for the electrical systems segment in the quarter dropped to $121.1 million compared with $131.4 million a year earlier. Revenue for the global seating segment slipped to $68.9 million compared with $95.7 million in the 2019 period.
Sequentially, total third-quarter revenue was up $60.8 million, or 47.9%, compared with the second quarter.
Sharp declines in truck sales due to the pandemic and associated production drop-offs, specifically, less heavy-duty truck production in North America and in global construction markets, hurt CVG’s third-quarter revenue, according to the New Albany, Ohio-based company.
At the same time, CVG reported it is having success lessening its historical dependency on the North American combustion-engine, commercial truck market. It is looking for future revenue from warehouse automation subsystems, last-mile delivery vehicles, electric vehicles, specialty vehicles and nonvehicle markets.
“We are pleased with our third-quarter performance and our near-term outlook. We are achieving results from our new sales strategies,” Bevis said in the CVG release.
The quarterly revenue declines were offset by an increase in warehouse automation and military revenues primarily attributable to its First Source Electronics business unit. It acquired First Source, an electronics systems integrator based in Elkridge, Md., in September 2019.
For its warehouse automation business, Bevis said, CVG is mainly making subsystems that “form a piece of the puzzle” in these warehouses. “Think control boxes like a motor control center or panel that has conveyors connected to it, and in some cases, at least half the time elevators elevate and move material around.”
Meanwhile, the company noted it expected above average absenteeism, occasional shutdowns, and flexible work schedules, and quarantining during the pandemic.
Bevis is hopeful for a vaccine to COVID in the near future.
“But it is a concern to us at the moment,” he said, “We’re dealing with it. And it could impact the outlook.”
Looking ahead, he said electrification is a vital market for the industry and for CVG, noting the company has a “meaningful” bundled product offering for startups, including seating.
“There’s a little over 20 startups globally that are properly funded. We’ve secured two marquee positions, one in this quarter, one in second quarter,” Bevis said. “And they have greater than $200 million of business potential with future start dates. And we secured three smaller electric vehicle contingent awards also in the quarter and have pending business opportunities at several other electric vehicle companies.”
CVG is attacking multiple classes of vehicles, he said, all through Class 8 and special purpose vehicles such as garbage trucks and marine terminal vehicles.
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