Meritor reports Q3 results, Blue Horizon garners attention

Updated Aug 5, 2021
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In addition to Meritor reporting its Q3 results, the company also announced it was selected by Hyliion to supply Blue Horizon electrification technology, and Hino is to evaluate Blue Horizon zero emissions solutions.

For the third quarter of fiscal year 2021, Meritor posted sales of $1,016 million, up $502 million, or approximately 98 percent, from the same period last year. The increase in sales was primarily driven by higher global truck production in all markets, Meritor reports.

Net income attributable to Meritor and net income from continuing operations attributable to Meritor, were each $42 million, or $0.58 per diluted share, compared to net loss of $36 million, or $0.50 loss per diluted share, in the same period last year. Higher net income year over year was driven by higher sales volumes, partially offset by higher freight, steel and electrification costs.

Adjusted income from continuing operations attributable to the company in the third quarter of fiscal year 2021 was $45 million, or $0.62 per adjusted diluted share, compared to net loss of $26 million, or $0.36 loss per adjusted diluted share, in the same period last year.

Adjusted EBITDA was $107 million, compared to $7 million in the third quarter of fiscal year 2020. Adjusted EBITDA margin was 10.5 percent, compared to 1.4 percent in the same period last year. The increase in adjusted EBITDA and adjusted EBITDA margin was driven primarily by higher sales volumes, partially offset by higher freight, steel and electrification costs.

Cash provided by operating activities was $39 million in the third quarter of fiscal year 2021, compared to cash used for operating activities of $102 million in the third quarter of fiscal year 2020. The increase in operating cash flow year over year was driven primarily by higher earnings and the impact of accounts receivable factoring as a result of higher balances available under the company’s factoring programs, partially offset by an increase in working capital requirements.

Q3 segment results

Commercial Truck sales for the third quarter of fiscal year 2021 were $800 million, up $464 million, or 138 percent, compared to the same period last year. The increase in sales was primarily driven by higher global truck production in all markets.

Segment adjusted EBITDA for Commercial Truck was $69 million, up $92 million, compared to the third quarter of fiscal year 2020. Segment adjusted EBITDA margin was 8.6 percent in the third quarter of fiscal year 2021, compared to negative 6.8 percent in the same period of the prior year. The increase in segment adjusted EBITDA and segment adjusted EBITDA margin was driven primarily by conversion on higher revenue, partially offset by higher freight, steel and electrification costs.

Aftermarket & Industrial sales for the third quarter of fiscal year 2021 were $258 million, up $55 million, or 27 percent, from the same period a year ago. The increase in sales in the third quarter of 2021 was primarily due to higher volumes across the segment.

Segment adjusted EBITDA for Aftermarket & Industrial was $36 million, up $5 million, compared to the third quarter of fiscal year 2020. The increase in segment adjusted EBITDA was driven primarily by higher sales volumes, partially offset by higher freight costs. Segment adjusted EBITDA margin was 14.0 percent in the third quarter of fiscal year 2021, compared to 15.3 percent in the same period of the prior year. The decrease in segment adjusted EBITDA margin was due primarily to higher freight costs, which more than offset conversion on higher sales.

Capital return and new share repurchase authorization

In the third quarter of fiscal year 2021, the company repurchased approximately 1 million shares of common stock for $25 million. In July 2021, the company repurchased approximately 1.5 million shares of common stock for an additional $34 million, completing the remaining equity repurchase authorization.

In July 2021, the Board of Directors authorized the repurchase of an additional $250 million of the company’s common stock subject to compliance with legal and regulatory requirements and the company’s debt covenants.

Outlook for fiscal year 2021

The company is revising its guidance from its prior outlook for fiscal year 2021, as follows:

  • Revenue to be approximately $3.9 billion (prior outlook of $3.650 billion to $3.8 billion)
  • Net income attributable to Meritor and net income from continuing operations attributable to Meritor to be approximately $175 million (prior outlook of $145 million to $155 million)
  • Diluted earnings per share from continuing operations to be approximately $2.40 (prior outlook of $2.00 to $2.15)
  • Adjusted diluted earnings per share from continuing operations to be approximately $2.45 (prior outlook of $2.15 to $2.30)
  • Adjusted EBITDA margin to be approximately 10.7% (prior outlook of 10.6 percent to 10.8 percent)
  • Operating cash flow to be approximately $210 million (prior outlook of $205 million to $220 million)
  • Free cash flow to be approximately $115 million (prior outlook of $110 million to $125 million)

“We are pleased with our performance in the third quarter and are raising sales and adjusted EPS guidance for the full fiscal year 2021,” says CEO and president Chris Villavarayan. “As market adoption grows for electric commercial vehicles, we remain focused on expanding growth opportunities as demonstrated by the new relationships we announced with Hyliion, Hino and SEA Electric.”

More earnings information is available.

Hyliion selects Meritor

Meritor announced it will provide electric drivetrain sub-systems for Hyliion’s Hypertruck ERX electrified powertrain for Class 8 trucks.

Hyliion’s powertrain system will feature Meritor’s Blue Horizon 14Xe ePowertrain integrated drive axles as the standard position propulsion and regeneration hardware on Hyliion vehicle upfits. Hypertruck ERX provides a practical, clean, long haul powertrain solution capable of operating in all-electric mode.

“Being selected as a long-term partner to power the Hypertruck ERX is extremely exciting. We pride ourselves on providing innovative technologies and this is a perfect fit for such a game-changing vehicle,” says Villavarayan.

“Like Hyliion, Meritor is committed to providing industry-leading, zero-emissions transportation solutions, and is a strong supply partner to deliver on this goal. Meritor’s expertise in electric drivetrain technology is an exciting addition as the Hypertruck ERX moves forward along its path to commercialization,” said Hyliion CEO Thomas Healy.

Meritor’s 14Xe ePowertrain for medium- and heavy-duty commercial vehicles will be produced in Asheville and Forest City, N.C.

Hino to evaluate, test Meritor’s Blue Horizon

Meritor announced Hino will be evaluating and testing Meritor’s ePowertrain for its development path to zero emissions vehicles (ZEV).

Meritor has been a long-standing key supplier for Hino Motors Manufacturing North America for dressed axles on its medium-duty truck models. With this new collaboration both companies look to expand advanced, electrified drive systems to further zero-emissions development.

Examples of Meritor’s electrified solutions include its all-electric, fully integrated, ePowertrain for medium- and heavy-duty commercial vehicles. It is designed to provide efficiency, performance, weight savings and superior space utilization.

Key advantages of Meritor’s ePowertrain over remote mount systems include:

  • Tighter turning radius due to a shorter wheelbase
  • Increased room between frame rails for additional battery capacity, which extends the range of the vehicle
  • Lighter weight (up to 800 lb.)

“We are pleased to work with Hino to accelerate the early commercial application of electric vehicles, which in turn will help further sustainability in the areas where these electric trucks will operate,” says Villavarayan.

“We have a long relationship with Meritor, and we are excited to be working together in evaluating Meritor’s ePowertrain for our development path to ZEV,” says Davey Jung, executive vice president, Hino Motors Manufacturing U.S.A. Inc.

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