Reduced demand stability - Net earnings significantly decreased by over half
In a recent announcement, automotive supplier Stabilus has revised its annual targets downward, citing a weaker third quarter and a challenging market situation. The company now expects sales to be around 1.3 billion euros, down from the previously planned up to 1.45 billion euros. Operating profit margin expectations have also been lowered from up to 13% to about 11%.
The third quarter saw a significant decline in sales for Stabilus, with revenue falling by almost 10% year-on-year to 316 million euros. The company attributes this decline to subdued demand from automotive manufacturers and the negative impact of US tariffs on its business.
CEO Michael Büchsner expects the indirect effects of tariffs to be significant, with industrial customers postponing investments, especially in the Americas automotive sector. To address these challenges, Stabilus plans to intensify cost-cutting measures.
The company is experiencing the effects of reduced demand from automakers and US tariffs, which have resulted in an adjusted EBIT of over 23% lower than the previous year, falling to around 33 million euros in the third quarter. Net income also took a hit, decreasing from 24.3 million euros in the previous year to 10.1 million euros.
Stabilus has initiated measures to reduce expenses and increase productivity. This includes negotiating prices with its own suppliers and increasing automation. The company performed poorly in the Americas and Asia, but managed to keep revenue almost stable in Europe.
The general uncertainty in the market is causing industry customers to hold back on investments, particularly in the automotive business in the Americas. This uncertainty, along with ongoing negative growth trends in parts of the automotive market due to the shift toward electric vehicles, global price pressures, competition from Asian suppliers, rising input costs, and tariff uncertainties, all strain profit margins and market demand.
In response to these challenges, Stabilus has appointed Andreas Jaeger as the new CFO, who will start on November 1. Jaeger was previously CFO and acting CEO at the Forbo Holding. With these changes and cost-cutting measures in place, Stabilus aims to navigate the challenging market conditions ahead.
Unfortunately, the revised revenue and operating result expectations have taken a toll on Stabilus's stock, with it falling around 9% in early trading. Year-to-date losses for the company's stock are now over a quarter. Despite these setbacks, Stabilus remains committed to delivering quality products and services to its customers.
[1] Source: Stabilus press release [2] Source: Financial Times, "Stabilus faces higher labor and material costs due to tariffs and electric vehicle shift" (2022)
The challenging market situation, with subdued demand from automotive manufacturers and the negative impact of US tariffs, has resulted in reduced revenue for Stabilus, a leading supplier in the automotive industry. The company, in response, has appointed Andreas Jaeger as the new CFO to navigate the challenges and plans to intensify cost-cutting measures, aiming to stabilize its financial position in the transportation sector.
The negative growth trends in parts of the automotive market, such as the shift towards electric vehicles, global price pressures, competition from Asian suppliers, rising input costs, and tariff uncertainties, strain profit margins and market demand, particularly in the Americas automotive sector.
