Adient: Accelerating on costs efficiencies while volumes disappoint

​Adient, the world’s largest automotive seating supplier, held a conference call today to discuss its robust 1Q17 results (ending Dec-31). A slower pace of product investments prior to the separation led to lower volumes which reflected in the top-line decrease of 3.8% to $4,038m. More positively, adjusted EBITDA showed a different trend with a 17% increase to $293m (7.3% margin), entirely achieved on company specific measures delivering faster than planned. As the company remains in a transition period from being Johnsons' subsidiary to a standalone company, further margin expansion is on schedule. Free cash flow showed a negative -$39m when adjusted from the unexpected working capital outflow covered by Johnson’s. We continue to expect it positive for the year, supported by further EBITDA growth and slower capex spending. Our more conservative EBITDA definition leads to net leverage of 2.4x (against 1.8x as reported by the company), already below the 2.5x we expected at the end of FY17.

Most of the questions on the conference call were geared towards next...