BorgWarner beats second quarter profit estimates, lifts 2021 forecast despite supply headwinds

The supplier attributed the increases to economic recovery from the COVID-19 pandemic as well as its acquisition of Delphi Technologies in October. However, continued supply chain disruptions, such as the global microchip shortage, and increased commodities costs are expected to negatively impact the business for the remainder of the year.

“I’m very proud of our strong performance in the quarter, despite the ongoing components supply headwinds,” CEO Frédéric Lissalde said Wednesday during a call with investors. “We’re increasing our full-year guidance as we believe higher outgrowth and synergies are offsetting commodity and other headwinds.”

BorgWarner’s financials rebounded in the first quarter with $4.1 billion in sales, up 76 percent from the year-earlier period. At that time, the company forecasted sales to be in the range of $14.8 billion to $15.4 billion. Following its second quarter performance, it increased that outlook to a range of $15.2 billion to $15.6 billion.

The company is bracing for a $45 million to $65 million hit in the second half of the year caused by the increased costs of raw materials and supply issues, CFO Kevin Nowlan told investors.

“We’re anticipating a net negative impact from commodities in the range of $70 (million) to $90 million, which is worse than we previously expected,” Nowlan said.

He said the company’s acquisition of Akasol AG, finalized in June, is expected to reduce full-year margins by 10 basis points but that its margin projections are in line with prior guidance.

BorgWarner shares fell 3.4 percent to $47.76 per share as of late morning Wednesday. In tandem with the onset of COVID-19, its stock price cratered in March 2020 to $20.50 per share.

The company posted sales of $10.17 billion in 2020. The acquisition of Delphi Technologies had an additional pro forma impact of $2.63 billion in sales.

While the company outperformed the market in Europe and China by double digits, it underperformed in North America primarily due to customer exposure, the company said. BorgWarner’s customers include major automakers such as Ford Motor Co. and Volkswagen Group, both of which have slashed production due to the microchip shortage.

“This reduction from our prior market outlook reflects the ongoing impact of the semiconductor shortage on industry production, which is reducing our expectations for North American and European industry growth,” Nowlan said.

BorgWarner highlighted on Wednesday progress in its quest to boost revenue from electric vehicle platforms from 3 percent to 45 percent of its overall sales by 2030. It announced a contract to supply dual inverters for two Chinese manufacturers, which will be featured on hybrid EVs and plug-in hybrid electric vehicles. Financial terms were not disclosed.

“These new contracts showcase the trust and confidence we have built in our electrified applications from these customers and will aid us in continuing to lead the dual inverter technology trend in China and beyond,” Tom Tan, vice president of BorgWarner Inc. and president of BorgWarner China, said in a news release.

BorgWarner ranks No. 23 on the Automotive News list of the top 100 global suppliers with estimated worldwide sales to automakers of about $10 billion in 2020.

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