CVG Reports Q2 Net Loss, Lower Revenue
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Commercial Vehicle Group Inc. reported a second-quarter net loss and a decline in revenue as end markets contracted in a difficult quarter marked by the coronavirus pandemic.
For the period ended June 30, the company reported a net loss of $12.5 million, or a loss of 40 cents per diluted share, on revenue of $126.9 million. That compared with net income of $6.1 million, or 20 cents, on revenue of $243.2 million a year earlier.
Quarterly revenue fell primarily because of lower heavy-duty truck production in North America and in the global construction markets, according to the New Albany, Ohio-based company. That partially was offset by an increase in industrial and military revenues primarily attributable to its First Source Electronics business (an electronics systems integrator acquired in 2019).
Bevis
“We had temporary closures of our facilities,” Harold Bevis, CEO of CVG, said during the earnings call. “We reconfigured our offices in our 25 plants to add barriers and create social distancing for our approximately 7,000 employees. It’s a lot of work.”
There were 5,250 employees laid off in the quarter, and the company has rehired about 4,000, he said Aug. 10.
Bevis said the expectation is for commercial vehicle production to recover back to pre-COVID levels.
CVG cited an ACT Research forecast that third-quarter 2020 North American heavy-duty and medium-duty truck build is expected to increase approximately 50% and 30%, respectively, compared with the second quarter of 2020.
“And we will be recovering back to those levels with a lower cost structure. We’ve permanently lowered the break-even point of this company and our cost structure, and we do expect to have better margins as this unfolds,” Bevis said.
At the same time, the company is growing its warehouse automation business, and that was a key reason why it acquired FSE.
“We are leveraging their know-how and relationships. We have brought into play three other factories within CVG to make their products, expanding to four from one,” Bevis said during the earnings call.
“This market is absolutely essential to what we are trying to be and add to our commercial vehicle heritage. This business is growing nicely,” he said.
The company also reported “a big seating win” with its Unity model seat at an undisclosed startup company that is focused on using electric vehicles for last-mile delivery.
Meanwhile, all its broader business segments posted lower revenue.
For the electrical systems segment, revenue fell to $74.2 million compared with $141.9 million in the 2019 period, a decrease of 47.7% primarily resulting from market and COVID-19 related declines, partially offset by an increase in revenues attributable to the FSE business.
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Revenue for the global seating segment dropped to $53.9 million compared with $105.3 million a year earlier, a decrease of 48.8%, also primarily resulting from market and COVID-19 related declines.
As of June 30, the company reported liquidity of $106.6 million, $63.4 million cash and $43.2 million available from the revolving credit facility.
For the six-month period, CVG posted a net loss of $37 million, or a loss per diluted share of $1.20, on revenue of $314 million. That compared with net income of $16.1 million, or 52 cents, on restated revenue of $486.3 million a year earlier.
Commercial Vehicle Group, through its subsidiaries, is a supplier of seating systems, electromechanical assemblies, engineered material products and warehouse automation subsystems. Its markets include trucking, military, warehouse automation, bus, agriculture, specialty transportation, mining, industrial equipment and off-road recreational.
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