EDITOR'S NOTE: An earlier version of this story overstated Linamar's decline in net earnings. They were down nearly 41 per cent.
Canadian supplier Linamar Corp. reported steep drops in first-quarter sales and net earnings as a result of the COVID-19 pandemic, the company said Wednesday evening.
Linamar, based in Guelph, Ont., said its first-quarter net earnings fell 40.7 per cent to $55.7 million (all figures in USD).
Several global auto suppliers have reported quarterly earnings this month, and many of them have cited hits to revenue and profits amid the coronavirus crisis.
The supplier of transmission gears, all-wheel-drive systems and e-axles said Wednesday that overall sales decreased nearly 22 per cent to $1.09 billion in the first quarter.
Industrial segment product sales dropped almost 36 per cent to $212.1 million, while transportation segment sales fell 17 per cent to $921 million.
The company said sales declines were primarily due to the COVID-19 pandemic, reduced access equipment volumes from certain key customers that experienced decreases greater than the market. Lower agricultural sales were also a factor.
Earnings before interest, taxes, depreciation and amortization fell nearly 21 per cent to $161.7 million.
Free cash flow was approximately $104.33 million in the first quarter.
“We are laser focused on cost reduction, cash generation, finding new business opportunities and supporting our global team and communities and delivering on every one of these counts,” CEO Linda Hasenfratz said in a statement Wednesday evening.
The company said in March that the COVID-19 outbreak would have the single largest impact on the first quarter, with an estimated hit of $14.5 million to $21.7 million on operating earnings. The supplier also said the coronavirus could also impact the second quarter, but to a lesser extent, and that impacts from the outbreak were not fully determinable as of March.
As of April 20, Linamar said all of its manufacturing sites in China were back up and running with 95 per cent of employees having returned to work. In Europe, nearly all manufacturing sites were shut down for several weeks in line with government orders there, but have been back on line since May 4.
In North America, most of Linamar’s operations across industries were deemed essential per provincial and state guidelines and were not mandated to shut down, but the majority of its transportation and industrial segments sites were shuttered in alignment with customer demand, the company said. Linamar's North American operations will start back up on May 18.
The company also withdrew its outlook on 2020 segmented financial expectations April 20.
Linamar said Wednesday that it is “conserving cash by swiftly implementing cost reductions, making necessary workforce adjustments, implementing our highest level payment controls, and creating a global team to pursue additional cost and waste reduction initiatives.”
The company’s COVID-19 task force was formed in March and has since been gathering best practices and safe work protocols.
“Our focus right now is very much on recovery,” Hasenfratz told investors Wednesday night. “We need to shift from fear to hope.”
Linamar Corp. ranked No. 57 on the Automotive News list of the top 100 global suppliers, with worldwide sales to automakers of $4.07 billion in 2018.