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Visteon ‘vigorously’ passing cost increases to customers as chip shortage crimps business

Visteon Corp. noticed flat sales and stronger margins in the fourth quarter to cap an improved fiscal overall performance in 2021, but executives warned of a “peak headwind” on the horizon in the initially quarter.

The automotive cockpit electronics supplier posted net sales of $786 million in the fourth quarter, around equivalent to the very same position past yr, though its internet earnings amplified 70 percent to $31 million, in accordance to its earnings report submitted Thursday.

For whole-calendar year 2021, the supplier’s profits rose 7 % to $2.77 billion, with web cash flow of $116 million, in comparison with a $56 million reduction in 2020, when COVID-19 choked the industry.

Even so, the pandemic’s effects has dragged on with provide chain difficulties a world microchip scarcity and commodity price improves, all of which took a $40 million chunk out of Visteon’s enterprise previous yr.

“Due to the ongoing negotiations with our prospects and suppliers, we’re not disclosing the costs of recoveries we are anticipating in our advice,” Visteon CFO Jerome Rouquet said all through a simply call with buyers. “Having said that, we do intend to vigorously pass together the vast greater part of these charges to our consumers even though operating to maintain margins.”

The microchip-induced manufacturing shutdowns by automakers have hit their suppliers the hardest. The money strain has been especially brutal for tier-a person suppliers, which are caught in the middle of price raise calls for from their suppliers and making an attempt to claw again cost boosts from their consumers.

Visteon has been specially susceptible to the microchip scarcity for the reason that it takes advantage of so a lot of of the silicon wafers in its cockpit and dashboard methods.

“The semiconductor written content in autos continues to increase due to the digitalization of the cockpit…and an improve in share of electric powered autos,” Visteon CEO Sachin Lawande explained throughout the contact. “Even though this is great for Visteon in standard, it will influence the quantity of motor vehicles that can be built.”

World car or truck production declined virtually 11 per cent in the fourth quarter to 21.1 million. Creation for all of 2021 totaled 77.1 million, and Visteon executives are forecasting 84 million models this 12 months.

Assuming that forecast retains true, Visteon is predicting a 17 p.c 12 months-about-calendar year profits maximize to $3.25 billion. Lawande stated he is assured the corporation will continue to outperform the market place, pointing to a strong start cadence, $455 million in total funds move and $5.1 billion in new small business wins, though that was down a little bit than anticipated because of to pushouts of some awards by OEMs.

New business enterprise features a panoramic display for a German luxury OEM, SmartCore cockpit controller for a Chinese OEM, information and facts display screen for a European OEM and a cell monitoring controller for a luxurious German OEM, in accordance to the company’s earnings presentation.

The enterprise experienced 43 new launches final year, 20 percent of which were being on EVs. Launches include GM SUVs and trucks, GM Hummer EV, Nissan Ariya, Mahindra XUV700, Ford/Lincoln SUVs and JLR Group Variety Rover.

Rouquet said the organization expects a pinch on margins in the 1st component of the yr as provide challenges linger.

“We anticipate Q1 to stand for t a peak headwind on margins as we soak up higher fees from suppliers although we are still in the process of negotiating 2022 expense recoveries with our clients,” he claimed.

Regardless of the warning, shares of Visteon inventory shot up 13 p.c to near at $118.79 on Thursday — regardless of key losses on most stock exchanges.

Rouquet reported the provider was in a position to get well “a good sum” of cost will increase from shoppers past yr, largely in the second 50 percent, but are “nonetheless in the center of negotiating.” The company is forecasting a $20 million hit from value improves this calendar year thanks mainly to semiconductor shortages and freight value hikes.

“This functionality would not have been doable without the need of the proactive measures we took to enhance supply through the quarter, together with continuous dialogue with our suppliers and customers, a sizeable amount of purchases of semiconductors on the open marketplaces as very well as some products redesigns,” Rouquet mentioned.