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Diversified supplier Commercial Vehicle Group Inc. reported a sharp decline in net profit and revenue in the first quarter due to inflationary headwinds, COVID in China and Russia’s war on Ukraine affecting production.
The main effects of inflation it felt were higher prices for steel, ocean freight and labor, the New Albany, Ohio-based company noted.
Net income fell to $3.9 million, or 12 cents per diluted share, from $8.4 million, 26 cents, a year earlier. Revenue was nearly flat at $244.4 million, down from $245.1 million a year earlier.
“It is important to note that we have made significant progress in re-evaluating our old supply contracts and have achieved better pricing with our two major Class 8 truck manufacturer customers,” CEO Harold Bevis said during the talk. the call for results. The two clients represent approximately 30% of its annual turnover.
Most of its new pricing goes into effect July 1.
CVG’s commercial vehicle products include wiper systems, mirrors, seats, sleeper and cab structures, trim and electrical systems.
Bevis said the company recently launched its Unity line of seats in the United States, Mexico and China, and made changes to its production facilities.
“It was a bit more difficult to do than expected, but we are approaching the finish line. And our Unity seat allows for a high level of customization based on customer needs and is a real source of competitive advantage for CVG over our competitors,” he said.
“We believe this seat will allow us to take market share in a wide range of targeted areas, including last mile delivery vans, construction equipment and trucks, but also position CVG to take over a part that we’ve lost out in the aftermarket segment over the last few years,” Bevis added.
CVG expected supply chain challenges to limit production and North American Class 8 builds to be in the range of 275,000 to 295,000 trucks, down from 270,000 in the fourth quarter.
CVG announced in the first quarter that it won $89 million in annualized new business – with the majority of those in electrification and electric vehicles and the bulk of its gains in that area.
Where in the world is CVG?
Manufacturing operations are located in:
• United States
• Czech Republic
Several projects are underway to redesign its manufacturing systems with new capacity, repositioned capacity and lower total cost locations, CVG reported.
Bevis said the company is building inventory with increased domestic production in light of COVID shocks.
“And the biggest impact we’ve had has been in our vehicle solutions business, because 70% of our company’s revenue is in North America, and this company has been sourcing parts from China forever,” a- he declared. “And so we ordered robotic welding, powder coating and metal fabrication equipment. We install it in our factories as it arrives.
“And we will eliminate this transport in transit [time] That we have. So the supply chains from China are 22 weeks, and they’ve been running six weeks, eight weeks for years. And so that really put a crease in what we were doing.
Segment results include:
• Vehicle solutions: Revenue jumped to $140.2 million from $124.3 million a year earlier, mainly due to the pass-through of material costs and new business gains offset by lower shipments caused by the blockages of the COVID in China. Operating profit was $6.3 million, compared to $7.5 million in the same period a year earlier.
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• Electrical systems: Revenue fell to $39.9 million from $46.5 million for the 2021 period due to lower volume caused by the war in Ukraine, supply chain constraints and semi chip shortages. -drivers in customer factories. Operating profit was $1.8 million, compared to operating profit of $4.9 million a year earlier, mainly due to new business start-up costs, lower volumes and a lag in price-cost compensation. A program is underway to invest in its footprint in this segment and prices have been increased for large accounts.
• Warehouse automation: Revenue fell to $34.1 million from $44.4 million a year earlier due to lower demand levels. Operating profit slipped to $3.7 million from $3.9 million.
• Spare parts and accessories: Revenue rose slightly to $30.2 million from $29.9 million a year earlier. Operating profit fell to $2.6 million from $4.2 million, primarily due to supply chain constraints and material cost inflation experienced prior to price increases.
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