How Has Adient Performed For Johnson Controls?

-0.50%
Downside
65.32
Market
64.99
Trefis
JCI: Johnson Controls logo
JCI
Johnson Controls

As announced on July 24, 2015, Johnson Controls (NYSE:JCI) will spin off its automotive seating and interiors business into a stand-alone public company named Adient. This company will be incorporated in Ireland, and its first day of trading as a public company is expected to be October 31, 2016. Adient aims to implement new strategies to drive higher levels of growth and profitability, along with strong cash flows, and to raise investment in innovation, to gain market share, and to increase value to customers and shareholders. Alex Molinaroli, CEO of Johnson Controls, cited two reasons for the proposed spin-off. The cyclical nature of the auto industry wreaked havoc on the company’s cash flows. Furthermore, the enormous capital investment needed by the seating business was not something JCI was willing to make.

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Currently, Adient is the largest global automotive seating supplier, providing its products to all major automakers. Its FY 2016 (ended September 2016) estimated consolidated revenue is $17 billion, with unconsolidated seating revenue of $7 billion and unconsolidated interiors revenue of $8 billion.

Adient-1 Adient-2

In the third quarter of FY 2016, if the impact of the Interiors deconsolidation and foreign exchange is excluded, the sales are expected to be down 1%, versus the third quarter of FY 2015. The expiring programs in North America offset the growth in the Asian and European markets, resulting in a fall in revenues. The Chinese market is increasing at a rapid pace for the company, with a growth of 49% expected in the quarter, with revenues reaching $2.9 billion. The growth in the EBITDA was driven by cost savings, generated from restructuring programs, operational efficiencies, and other cost reduction initiatives.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Johnson Controls.

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