BorgWarner reports Q2 earnings, net sales increase

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BorgWarner Inc. announced net sales were $3,758 million for the second quarter 2021, up 164 percent from $1,426 million for the second quarter 2020, due to the recovery of global markets from the negative effects of COVID-19 on 2020 production, the acquisition of Delphi Technologies and increased demand for the company’s products.

Net earnings for the second quarter 2021 were $247 million, or $1.03 per diluted share, compared with a net loss of $(98) million, or $(0.47) per diluted share, for the second quarter 2020. Adjusted net earnings per diluted share for the second quarter 2021 were $1.08, up from an adjusted net loss per diluted share of $(0.14) for the second quarter 2020. Adjusted net earnings for the second quarter 2021 excluded net non-comparable items of $(0.05) per diluted share.

Adjusted net loss for the second quarter 2020 excluded net non-comparable items of $(0.33) per diluted share. The increase in adjusted net earnings was primarily due to the impact of higher sales, and earnings from the acquisition of Delphi Technologies. The impact of foreign currencies increased net sales by approximately $217 million and increased adjusted operating income by approximately $30 million for second quarter 2021, compared with the second quarter 2020.

For the first six months of 2021, net sales were $7,767 million, up 110 percent from $3,705 million for the first six months of 2020, due to the recovery of global markets from the negative effects of COVID-19 on 2020 production, the acquisition of Delphi Technologies and increased demand for the Company’s products.

Net earnings for the first six months of 2021 were $312 million, or $1.30 per diluted share, compared with $31 million, or $0.15 per diluted share, for the first six months of 2020. Adjusted net earnings per share for the first six months of 2021 were $2.30, up from $0.62 for the first six months of 2020. Adjusted net earnings for the first six months of 2021 excluded net non-comparable items of $(1.00) per diluted share.

Adjusted net earnings for the first six months of 2020 excluded net non-comparable items of $(0.47) per diluted share. The increase in net earnings was primarily due to the impact of higher sales, and earnings from the acquisition of Delphi Technologies. The impact of foreign currencies increased net sales by approximately $411 million and increased net earnings by approximately $55 million for the first six months of 2021, compared with the first six months of 2020.

Net cash provided by operating activities was $622 million for the first six months of 2021, compared with $327 million for the first six months of 2020. Net cash used in investing activities increased to $1,099 million during the first six months of 2021 from $147 million during the first six months of 2020. This increase in cash used in investing activities was primarily due to cash outflows related to the 2021 acquisition of AKASOL and higher capital expenditures. Compared with the end of 2020, balance sheet debt at the end of the second quarter 2021 increased $574 million, while cash and cash equivalents decreased by $97 million. 

Air management segment results: The Air Management segment net sales were $1,854 million during the second quarter 2021, compared with $826 million during the second quarter 2020. Excluding the impact of foreign currencies but including the estimated growth in Delphi Technologies-related revenue over pro forma 2020 Delphi Technologies revenue, organic sales were up 82% from the prior year. Adjusted earnings before interest, income taxes and non-controlling interest (Adj. EBIT) were $277 million, or 14.9 percent of sales, during the second quarter 2021, compared to $28 million, or 3.4 percent of sales, in the prior year. The increase in Adj. EBIT was primarily due to the impact of higher sales and savings arising from the Company’s restructuring initiatives.

e-Propulsion & drivetrain segment results: e-Propulsion & Drivetrain segment net sales were $1,337 million during the second quarter 2021, compared with $607 million during the second quarter 2020. Excluding the impact of foreign currencies but including the estimated growth in Delphi Technologies-related revenue over pro forma 2020 Delphi Technologies revenue, organic sales were up 68% from the prior year. Adj. EBIT was $132 million, or 9.9 percent of sales, during the second quarter 2021, compared to $1 million, or 0.2 percent of sales, in the prior year. The increase in Adj. EBIT was primarily due to the impact of higher sales.

Fuel injection segment results: The Fuel Injection segment’s net sales and Adj. EBIT in the second quarter 2021 were $480 million and $38 million, respectively. Excluding the impact of foreign currencies but including the estimated growth in Delphi Technologies-related revenue over pro forma 2020 Delphi Technologies revenue, organic sales were up 78 percent. The Adj. EBIT margin was 7.9 percent in the second quarter 2021. This is a new segment following the Delphi Technologies acquisition.

Aftermarket segment results: The Aftermarket segment’s net sales and Adj. EBIT in the second quarter 2021 were $226 million and $32 million, respectively. Excluding the impact of foreign currencies but including the estimated growth in Delphi Technologies-related revenue over pro forma 2020 Delphi Technologies revenue, organic sales were up 69 percent. The Adj. EBIT margin was 14.2 percent in the second quarter 2021. This is a new segment following the Delphi Technologies acquisition.

Full year 2021 guidance: For the full-year 2021, net sales are expected to be in the range of $15.2 billion to $15.6 billion, under the assumption that there are no additional production disruptions arising from COVID-19. This implies a year-over-year increase in organic sales of 14 to 17 percent. The company expects its weighted light and commercial vehicle markets to increase in the range of approximately 8.5 percent to 11.0% in 2021. The acquisition of AKASOL AG is expected to increase year-over-year sales by approximately $75 million. Foreign currencies are expected to result in a year-over-year increase in sales of approximately $520 million primarily due to the strengthening of the Euro, Chinese Renminbi and Korean Won against the U.S. dollar.

Operating margin for the full year is expected to be in the range of 8.7 to 9.3 percent. Excluding the impact of non-comparable items, adjusted operating margin is expected to be in the range of 10.2 to 10.5 percent. Net earnings for the full year are expected to be within a range of $2.80 to $3.21 per diluted share. Excluding the impact of non-comparable items, adjusted net earnings are expected to be within a range of $4.15 to $4.40 per diluted share. Full-year operating cash flow is expected to be in the range of $1,525 million to $1,675 million, while free cash flow is expected to be in the range of $800 million to $900 million.        

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