Adient projections lower, but turnaround faster

All,

Adient’s Q4 numbers were better than their outlook. However, we seem to have underestimated the speed with which the company has already begun its cost improvements (we had expected to reach that point in H120). Thus to us the call was good news. Management seem in full control and as regards the endogenous factors, we have little reason to doubt those forecasts.

We will update our model in due course.

Q4 numbers:

- Sales were disappointing in Americas and EMEA, but EBITDA was on target - due to better cost management and a faster turnaround in those areas than we had modelled.

- Sales and EBITDA in Asia were each 15% better than model. Apparently the downturn we had built in is still going to come, but it will take longer.

2020 Guidance:

- Sales for next year were are guided another E300-500m lower than we had modelled so far, reflecting the already lower than anticipated revenues in the Americas and Europe, as well as lower volumes anticipated across the globe and further FX headwinds.

- Net Cashflow is likely to remain slightly negative next year, propped up by expected inflow from WC. The main areas of anticipated improvement are of course the SS&M business, the substantial sale of the Aerospace business, the common architecture in metal seats and savings already achieved in opps waste (express freight charges), launch cost reductions and general commercial activities.

Leverage:

- Thus the company expects EBITDA to grow next year and cash levels to be only slightly lower, which would point to deleveraging.

Notes:

- Given the relatively strong Q4 performance, 2020 is starting from a higher base relative to our model.

- Most cost saving targets have either already been achieved or are entirely within the company’s trajectory.

- Management have admirable control over their numbers.

Wolfgang