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CVG, a supplier to the utility and other vehicle industry, reported an increase in net profit and revenue in the fourth quarter on the strength of its vehicle solutions business, its largest segment.
For the quarter ended Dec. 31, the company reported net income of $2.6 million, or 8 cents per diluted share, compared with a net loss of $4.1 million, or a loss of 13 cents, a year earlier.
Revenue was $228.9 million, compared to $216 million for the 2020 period.
Fourth quarter results were impacted “by multiple legacy Class 8 supply contracts” that failed to account for COVID and rapid cost inflation, as well as the truck production shortfall due to disruptions in the supply chain, CVG CEO Harold Bevis said on the earnings call. .
Bevis said about 20% of the company’s existing revenue is in operating profit breakeven. CVG is in the process of renegotiating these agreements.
“We are actively ending the practice of entering into agreements that have mandatory price cuts or that do not have mechanisms to combat inflation and earnings stability,” he said.
CVG, based in New Albany, Ohio, is also moving to vertical integration with certain materials to be less reliant on global supply chains.
The Vehicle Solutions segment reported quarterly revenue of $126.4 million, an increase of 13.9% over the prior year, primarily due to the pass-through of material costs, a noted the company.
The warehouse automation segment reported revenue of $37.5 million, an increase of 0.4%, due to slightly higher sales volumes.
The Power Systems segment saw revenue decline to $38.2 million, down 7.4%, due to lower shipment volumes caused by supply chain constraints and supply shortages. semiconductor chips in customer factories.
The aftermarket and accessories segment reported nearly flat revenue at $26.7 million from a year earlier due to supply chain constraints and labor shortages.
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CVG is expanding its aftermarket presence, particularly with seats and windshield wipers, and adding an e-commerce platform allowing it to ship from inventory for the first time.
For the full year, net income was $23.7 million, 72 cents, compared to a loss of $37 million, or a loss of $1.20, for the 2020 period.
Revenue hit a record $971.5 million from $717.6 million a year earlier.
CVG brought in about $200 million in new business in 2021, adding to about $200 million earned in 2020, and added about $75 million more in the first two months of this year with more than 100 new products.
In 2021, about 79% of new wins were in the electric vehicle industry, Bevis said, and the segment is expected to become its largest and fastest growing business. CVG sees itself as an emerging leader in the electric vehicle industry for low and high voltage systems in the upcoming conversion to electric vehicles and fuel cell vehicles.
“Currently, our largest end market remains the North American Class 8 truck market,” he said.
CVG’s commercial vehicle products include wiper systems, mirrors, seats, sleeper and cab structures, trim and electrical systems.
“We estimate the industry will be able to manufacture approximately 270,000 trucks, roughly flat through 2021, the company noted in the earnings release. “Class 5-7 production in 2022 is expected to be of 261,000 units.”