Lear swings to strong Q3 earnings as industry catches up to demand

Lear Corp. produced strong third-quarter results as the seating and electronics systems supplier caught up from COVID-19 related closures during the last quarter.

The supplier on Friday said net income fell 19 percent to $174.4 million while revenue ticked up 1 percent to $4.9 billion.

Even though net income fell year-to-year, the net gain was a dramatic swing from the $294 million net loss posted amid the pandemic in the second quarter.

The improvement in sales is hinged on increased market share, considering global production for Lear declined 3 percent during the quarter compared with a year earlier. Global vehicle production declined 4 percent in the quarter, with North American and China being the bright spots with production up 1 percent and 9 percent, respectively, as automakers race to catch up from COVID-19 related shutdowns in both countries.

Lear’s e-systems segment was the main driver in better sales as the supplier increased third quarter earnings in the segment to $1.21 billion from $1.11 billion during the third quarter in 2019. Margins remains steady at 7.7 percent, up from 7.6 percent in the quarter last year.

The company’s seating division felt the impact of lower global volumes. Lear reported seat revenue of $3.69 billion during the quarter, down from $3.72 billion in the quarter last year. Margins in the quarter decreased to 7.8 percent from 8.2 percent during the third quarter last year.

Lear also repaid a $1 billion credit line after drawing on its full available credit during the last quarter to combat the financial impact of COVID-19 related shutdowns.

Shares in Lear fell 3 percent to $121.18 in midday trading.

“The steps we took to prepare our plants to safely ramp up production following COVID-19-related shutdowns and position the company for success resulted in significantly improved third quarter performance,” Ray Scott, Lear’s president and CEO, said in a statement.

“Despite lower industry volumes versus a year ago, we generated operating margins near pre-COVID levels in both business segments. I am very pleased with how quickly the industry recovered and our business rebounded after the second quarter shutdowns, and, barring any COVID-19-related disruptions or a significant change in industry demand, I am optimistic that our positive momentum will continue for the balance of the year.”

For the full year, Lear projects revenue between $16.35 billion and $16.65 billion, down from $19.8 billion in 2019. The up to 17.4 percent decline in sales still outpaces the projected 20 percent drop in global vehicle production for the year.

Lear, based in suburban Detroit, ranks No. 9 on the Automotive News list of the top 100 global suppliers with worldwide sales to automakers of $19.8 billion in 2019.

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