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Rabu, 13 Mei 2020 19:51:00

Johnson Electric reports results for the year ended 31 March 2020

Highlights of FY2019/20 Results
 
For the financial year ended 31 March 2020, total sales were US$3,070 million -- a decrease of 6% compared to the prior financial year.  Excluding the effects of foreign currency movements, underlying sales decreased by 4%
Gross profit was US$672 million -- a decrease of 11%
Operating profits decreased by 1% to US$341 million or 11.1% of sales (compared to 10.5% of sales in FY2018/19)
Goodwill and other intangible assets were impaired by US$796 million
Net loss attributable to shareholders was US$494 million -- compared to a net profit of US$281 million in the prior financial year
Underlying net profit, excluding the impairment of intangible assets and other significant non-cash items, was US$191 million -- a decrease of 17% Free cash flow from operations increased by US$185 million to US$241 million
As of 31 March 2020, cash reserves were US$384 million and the Group's net debt (total debt less cash) was US$31 million

HONG KONG, - 13 May 2020 - Johnson Electric Holdings Limited ("Johnson Electric"), a global leader in electric motors and motion subsystems, today announced its results for the twelve months ended 31 March 2020.
 
Group sales for the 2019/20 financial year totaled US$3,070 million -- a decrease of 6% compared to the prior financial year.  Excluding the effects foreign currency movements, underlying sales decreased by 4%.  After including an impairment charge against goodwill and some other intangible assets, the Group recorded a net loss attributable to shareholders of US$494 million.  Underlying net profit, which excludes the impairment of intangible assets and other significant non-cash items, decreased by 17% to US$191 million.
 
Sales Performance
 
The Automotive Products Group ("APG"), Johnson Electric's largest operating division, achieved sales of US$2,439 million. Excluding currency effects, APG's sales decreased by 1%.  This represents a substantial outperformance relative to the total production volume of the global light vehicle industry, which declined by approximately 10% over the same period.  The primary drivers underpinning demand for many of APG's subsystems and components are the industry's long-term imperatives to accelerate the adoption of innovative technology that enables electrification, reduces emissions, and heats, cools or lubricates critical vehicle systems.
 
In addition, key enduring strengths of the Group in the automotive components industry are its highly diverse base of customers and an almost equal balance of sales across the world's three main geographic regions.
 
On a regional basis, the strongest performance was in the Americas where APG increased sales by 8% in constant currency terms against a market where light vehicle production volumes fell by 6%.  In Europe, APG sales decreased by 2% in constant currency compared to a decline of 8% in the region's car production.  Asian automotive markets experienced the weakest demand during the period under review.

Even prior to the COVID-19 outbreak, China -- the industry's greatest source of demand growth for the past two decades -- saw an economic slowdown partly due to the effect of escalating trade tensions with the United States that has increased uncertainty and weakened consumer confidence.  COVID-19 related factory shutdowns in late January and February pushed the industry further into recession, with China auto production volumes falling by nearly 17% in the period under review. 

Across Asia as a whole, automotive industry production decreased by 12%.  Against these exceptionally difficult operating conditions, APG's Asia sales decreased by 9% in constant currency terms.
 
The Industry Products Group ("IPG") achieved sales of US$632 million, which represented 21% of total Group sales.  Excluding currency effects, IPG's sales declined by 15%. A combination of factors contributed to this disappointing performance.

These included depressed demand across a number of end markets due to the US-China trade dispute, market share losses in some more commoditized application segments, and customer-specific programme delays or cancellations. COVID-19 had a mixed impact on the division in the fourth quarter of the financial year. 

On the one hand, the closure and then gradual ramp-up of IPG's production capacity in China significantly constrained the division's ability to fulfil some customer orders.  On the other hand, even as the consumer lockdowns became more widespread during March, there has been sustained and, in some instances, growing demand from selected consumer sectors such as medical devices and home improvement products.
 
Impairment of Goodwill and Other Intangible Assets
 
As required by the Hong Kong Accounting Standards, management has undertaken its annual assessment of goodwill and other intangible assets on the Group's balance sheet as of 31 March 2020.
 
Management believes that in the near term, high unemployment caused by the COVID-19 health crisis will adversely affect disposable income and consumer confidence. This is expected to lead to weak consumption that will outlast the social and economic lockdowns related to the coronavirus outbreak itself. Although growth in demand can be expected to return in the medium to long term, the immediate impact of the global pandemic on certain segments of the Group's business, especially automotive, is to reset the base for growth and cause future cash flow to decline before gradually improving.
 
Considering these conditions, as well as an increase in the Group's weighted average cost of capital, the estimated recoverable amount of goodwill and some other intangible assets is less than their carrying value. As a result, the Company has recorded an impairment charge of US$796 million.
 
After including the impairment of intangible assets, the Group reported a net loss attributable to shareholders of US$494 million (compared to a net profit of US$281 million in the prior financial year).
 
The impairment charge is a non-cash item and does not have an impact on the Group's cash flows, operations, liquidity and debt covenant compliance.  It is, however, a sobering acknowledgement of unprecedented market conditions that will have a significant negative impact on sales, especially in the first half of the financial year ending 31 March 2021. (*).