American Axle and Manufacturing Inc. (AXL) posted a profit of $34.9 million or 47 cents per share in the fourth quarter of 2010, surpassing the Zacks Consensus Estimate of 38 cents per share.
The profit rose from $8.3 million or 14 cents per share (excluding special items) in the fourth quarter of 2009 driven by higher content per vehicle or CPV (dollar value of its product sales supporting GM’s North American light truck and SUV programs and Chrysler’s heavy duty Dodge Ram pickup trucks). The company’s CPV improved 8% to $1,508 from $1,401 in the fourth quarter of 2009.
Revenues in the quarter appreciated 26% to $583.3 million. In the North American light truck and SUV programs, the customer production volume went up by 12%. The growth was seen as the company’s measure to support General Motors Company (GM) and Chrysler.
The company progressed well in diversifying its customer base during the quarter. The company had a high exposure to customers, including GM and Chrysler. However, the company’s non-GM sales grew 52% to $156.6 million (27% of sales) in the quarter from $102.9 million (22%) a year ago.
American Axle’s gross profit was $101.6 million (17.4%) compared with $68.4 million (14.7%) in the fourth quarter of 2009. The company’s operating profit was $51 million (8.7%), up from $29 million (6.25%) in the prior year.
Full Year Results
For full year 2010, American Axle reported a profit of $115.4 million or $1.55 per share in contrast to a loss of $66 million or $1.25 per share (excluding special items) in 2009. Revenues soared 50% to $2.28 billion from $1.52 billion in 2009.
Non-GM sales swelled 70% to $563.0 million (25%) from $331.2 million (22%) in 2009. CPV improved 3% to $1,441 from $1,403 a year ago.
Financial Position
American Axle had cash and cash equivalents of $244.6 million as of December 31, 2010, up from $178.1 million in the prior-year period. Long-term debt increased $61.4 million on a year-over-year basis to $1.01 billion as of the above date, reflecting a debt-to-equity ratio of 1.86.
In 2010, American Axle’s operating net cash flow improved significantly to $240.3 million from $15.9 million in 2009 due to higher income. Meanwhile, capital expenditures reduced to $108.3 million from $137.7 million a year ago.
In the same period, the company’s free cash flow was $136.9 in contrast to an outflow of $89.8 million in the prior year. The free cash flow was influenced by cash payments of $46.9 million for restructuring actions related to the company’s obligations under hourly and salaried attrition programs and the buy-down program for United Auto Workers-represented associates at its manufacturing facilities in Detroit, Michigan; Three Rivers, Michigan; and Cheektowaga, New York.
Outlook
American Axle expects sales to grow more than 5% to $2.4 billion in 2011, driven by the rebound in U.S. auto sales and turnaround of both of its highly exposed customers, GM and Chrysler. The company has forecasted 2011 U.S. light vehicle sales to increase to 12.5 million–13 million units in the year from 11.6 million units in 2010.
Further, the company intends to diversify its business by reducing its dependence on GM. It expects its non-GM sales to account for at least 40% of total revenue by 2013. These factors along with the strong results have led the company to retain a Zacks #1 Rank on its stock, which translates to a “Strong Buy” rating for the short term (1 to 3 months).
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