Borgwarner Inc ((BWA)) has held its Q4 earnings call. Read on for the main highlights of the call.
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BorgWarner’s Recent Earnings Call Reflects Balanced Performance Amidst Challenges
The latest earnings call from BorgWarner indicates a balanced performance for 2024. The company showcased robust free cash flow, improved operating margins, and secured important new product awards. However, challenges such as stagnant sales growth, issues in China, and significant impairment charges were also highlighted. Looking forward to 2025, BorgWarner is preparing for industry volume declines and economic headwinds but remains committed to cost control and strategic growth initiatives.
Strong Free Cash Flow
BorgWarner demonstrated its strong cash flow generation capabilities by delivering $729 million in free cash flow, surpassing the full-year guidance. This robust performance underscores the company’s ability to generate liquidity and support its strategic initiatives effectively.
Adjusted Operating Margin Above 10%
The company reported an adjusted operating margin of over 10% for the full year, marking a 50 basis point improvement from 2023 and exceeding initial guidance. This achievement reflects BorgWarner’s effective cost management and operational efficiencies.
New Product Awards
BorgWarner secured several new product awards, including a variable cam timing system with an East Asian OEM and turbocharger programs with a North American OEM. These awards signify strong growth in the company’s foundational and e-product portfolios, reinforcing its innovative capabilities.
Earnings Per Share Growth
The company reported a 15% growth in adjusted earnings per share, indicative of its strong operational performance and disciplined cost control measures, contributing to overall financial stability.
Flat Sales Growth
Despite achieving approximately $14 billion in sales for 2024, BorgWarner experienced flat sales growth when compared to 2023. This was attributed to a 3% decline in industry production, highlighting challenges in maintaining sales momentum.
Challenges in China
BorgWarner faced difficulties in China, primarily due to lower volumes on an existing EV program and declining foundational sales. These challenges negatively impacted year-over-year performance and remain a concern for the company.
Goodwill and Fixed Asset Impairment
The company recorded a substantial $646 million impairment charge, attributed to delayed BEV adoption. This significantly impacted the PowerDrive system and Battery and Charging Systems business units, posing a challenge to future performance.
Declining Industry Volumes Expected
Looking ahead to 2025, BorgWarner anticipates declining industry volumes, with significant headwinds from global tariffs and economic challenges in key markets like North America and Europe. These factors are expected to impact the company’s performance.
Forward-Looking Guidance
BorgWarner’s outlook for 2025 suggests continued outgrowth compared to industry production, with expectations of maintaining an adjusted operating margin above 10% and strong free cash flow generation. The company’s strategic focus includes leveraging core competencies, expanding its product portfolio, and enhancing financial performance through cost management and margin expansion.
In summary, BorgWarner’s earnings call reflects a balanced yet challenging performance in 2024. The company showed strengths in cash flow, margins, and product development, while facing hurdles in sales growth and market conditions in China. Looking forward, BorgWarner is setting its sights on strategic growth and cost control to navigate anticipated industry challenges in 2025.
