Meritor Reports Lower Profit, Revenue; Transition Plan Announced
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Meritor Inc. reported lower fiscal fourth-quarter net income and revenue, pointing to the COVID-19 pandemic’s effect on customer demand. The company also announced President and CEO Jay Craig will transition to executive chairman of the board of directors Feb. 28.
Chris Villavarayan, executive vice president and chief operating officer, will succeed him in both roles and join the board.
For the period ended Sept. 30, net income attributable to Meritor was $1 million, or 1 cent per diluted share, compared with $42 million, or 50 cents, a year earlier.
Revenue fell to $758 million compared with $1.02 billion in the 2019 period.
Craig
“While fiscal-year 2020 brought unforeseen headwinds, Meritor implemented cost containment actions early, bolstered our liquidity and maintained a strong balance sheet, which helped offset the financial impact of the pandemic and enabled us to continue making long-term investments,” Craig said in a release.
In an earnings call, he added: “While certain countries and states where we have operations are experiencing rising case counts, we remain fully operational globally with no limitations at this time.”
Commercial truck sales were $560 million in the fourth quarter of fiscal 2020, down 28% compared with the 2019 period.
Aftermarket and industrial sales were $226 million, down 22% compared with a year earlier. The decrease in sales was driven by lower volumes across the segment, according to the Troy, Mich.-based company. Aftermarket sales also decreased due to the impact from the termination of the distribution arrangement with Wabco Holdings Inc., which occurred in the second quarter of fiscal 2020.
Meanwhile, Meritor is winning new business in every market it serves and across its product portfolio, Chief Financial Officer Carl Anderson said.
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“[That includes] in air disc brakes, drivelines and specialty axles for off-highway and defense,” Anderson said. “And as we go into production with our 14Xe electric powertrain in 2021, we expect revenue will continue to expand in this growing business for us.”
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Craig said Meritor will be in production with its electric powertrain in 2021, noting he believes the company will be the first supplier to begin production of electric powertrains for Class 8 electric vehicles.
“We are very excited that we are only months away from delivering under the contract we secured with Paccar Inc. for its heavy-duty electric trucks [Kenworth and Peterbilt], and we anticipate additional production contracts in 2021,” he said. “We are taking an electric motor and a multispeed transmission and integrating them into the ‘carrier.’ We are not just bolting on a motor.”
He estimated that for 2022, Meritor should have about $100 million of incremental revenue for electrification.
Meritor has reported that 33% to 40% of its business is from the brakes segment, and Craig noted even with electrification, air disc brakes are needed.
For the full fiscal year, net income attributable to Meritor was $245 million, or $3.23, compared with $291 million, or $3.36, a year earlier.
Revenue in the 12-month period fell to $3 billion compared with $4.3 billion in the 2019 period.
Meanwhile, in the upcoming succession, current Chairman William Newlin will become lead director of the board as part of the transition plan.
Meritor is a global supplier of drivetrain, mobility, braking and aftermarket solutions for commercial vehicle and industrial markets. It has 7,000 employees in manufacturing facilities, engineering centers, joint ventures, distribution centers and global offices in 19 countries.
Villavarayan
Villavarayan, a 20-year company veteran, said he looked forward to building on strategic plans to further solidify Meritor’s leadership position in “our traditional businesses while also investing in future technologies, such as electric drivetrains.”
In a 2018 interview with Transport Topics, Villavarayan said, “There are technologies that roll across borders or regions. There are cost efficiencies that come from Asia that we bring into North America and Europe. Then there are technologies we develop in North America that we take into other regions.”
Meritor named Craig CEO and president in June 2014. Before that, he was a senior vice president within Meritor and president of its commercial truck and industrial segment.
Craig said it was an honor to lead Meritor and he was “humbled by the team’s unwavering commitment to our strategic direction.”
“We remain steadfast in our drive for innovation and superior customer service,” Craig said.
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