NOVI – Stoneridge Inc. (NYSE: SRI), the Novi-based supplier of electronics to the mobility industry, reported 2018 net income of $53.8 million or $1.85 a share, up from $45.2 million or $1.57 a share in 2017. Revenue was $866.2 million, up 5.1 percent from $824.4 million a year earlier.
The company predicted sales of $855 million to $875 million for 2019, and “adjusted” earnings per share of $1.70 to $1.90. The company said its 2018 “adjusted” earnings per share was $1.99. Adjusted earnings per share exclude transaction costs, restructuring costs and the impacts of tax law changes in the United States.
Jon DeGaynor, president and CEO, said in a press release: “In 2018 we continued our transformation of the Company while delivering consistent financial performance throughout the year. We outpaced our underlying markets growing revenue by 5 percent despite macroeconomic challenges in Brazil and China as well as the continued and anticipated ramp-down of our legacy shift-by-wire programs. We expanded our EBITDA (earnings before interest, taxes, depreciation, and amortization) margin which drove EBITDA improvement of 8 percent year-over-year translating to adjusted earnings per share growth of 27 percent compared with 2017. We have positioned Stoneridge to continue to deliver sustainable, profitable growth and we reiterate our expectations to eclipse both $1 billion in revenue and a 15.5 percent EBITDA margin in 2021.”
Company officials said Control Devices segment sales fell 0.6 percent, primarily as a result of decreased sales volume in the North American automotive market as a result of certain program volume reductions, partially offset by increased sales volume in China and our commercial vehicle markets. Control Devices gross margin decreased slightly due to lower sales and higher direct material costs as a percentage of sales and the adverse impact of additional tariffs of approximately $2.4 million, which were partially offset by lower overhead costs from a reduction in warranty costs. The segment’s adjusted operating income decreased by 8.6 percent.
Electronics segment sales increased 18.6 percent, primarily due to an increase in European and North American commercial vehicle and off-highway product sales. Electronics gross margin increased due to higher sales and favorable product mix partially offset by the adverse effect of U.S denominated material purchases at non-U.S. based operations. The segment’s adjusted operating income increased primarily due to the higher sales and lower SG&A expenses resulting in adjusted operating margin for the segment of 9 percent, compared with 7.4 percent in 2017.
PST segment sales decreased 15.7 percent, primarily due to unfavorable foreign currency translation of $11.9 million, or 12.6 percent, as well as lower volumes for audio products and the Argentina aftermarket channel. PST gross margin improved slightly due to a favorable sales mix related to the lower volume of audio products that resulted in lower direct material costs as a percentage of sales. PST adjusted operating margin increased from 5.5 percent in 2017 to 6.7 percent in 2018, primarily due to lower SG&A costs as a percentage of sales.
As of Dec. 31, Stoneridge had cash and cash equivalent balances totaling $81.1 million. Total debt as of Dec. 31 was $98.5 million.
Added CFO Bob Krakowiak: “We expect revenue to remain relatively flat as compared to 2018 with midpoint revenue guidance of $865 million. As we have discussed previously, 2019 will materially conclude the ramp-down of our legacy shift-by-wire programs creating a revenue headwind of approximately $35 million relative to last year. The ramp-down of shift-by-wire in the second half of the year should be offset by new product launches, including the rollout of our MirrorEye retrofit program. With respect to adjusted earnings per share, we expect incremental net tariff expenses of $1-$2 million in the first half of the year and incremental design and development investment of approximately $5 million in 2019. We expect that favorable product mix, structural cost initiatives and operational improvements will approximately offset these additional costs in 2019 leading to flat operating income.”
To listen to a replay of a conference call discussing these results, visit www.stoneridge.com.