Published in Manufacturing

Gentex withdraws revenue guidance for 2021 as earnings decline

BY MIBIZ STAFF Friday, April 24, 2020 04:08pm

ZEELAND — Gentex Corp. (NASDAQ: GNTX) reported first-quarter losses related to the ongoing shutdown of most vehicle production and the ensuing economic crisis caused by the coronavirus global pandemic.

Executives at the Zeeland-based automotive supplier reported net sales of $453.8 million in the first quarter of 2020, down 3 percent versus the prior year. The virus — and a 24 percent quarter-over-quarter reduction in global light vehicle production volumes — negatively impacted first-quarter sales by approximately 9 percent, or around $40 million, according to the company. 

Gentex president and CEO Steve Downing COURTESY PHOTO

For the first two months of the first quarter, top-line revenue growth was progressing in line with the company’s forecasts, with modest negative impacts coming from reductions in China as a result of the pandemic, according to Gentex president and CEO Steve Downing. 

However, by mid-March, the pandemic was negatively affecting European OEMs more significantly and “the North American production environment was brought to a grinding halt,” Downing said in a statement.

The vast majority of the company’s $40 million shortfall in sales occurred during the last two weeks of March.

In anticipation of volatile market conditions and “the unknown impact of the pandemic” on the company’s customers and industries, Gentex drew-down $75 million on its $150 million line of credit, which further increased the company’s cash and investments to $587 million as of the end of March. 

U.S. vehicle production has largely remained at a standstill through April.

Earlier this week, data firm IHS Markit sharply lowered its 2020 forecast for global light vehicle sales and warned that the U.S. will take the biggest hit from the new virus. The firm expects global light vehicle production to fall 21.2 percent in 2020 compared to 2019. 

Based on these forecasts, executives at Gentex said they estimate the company’s net sales for 2020 will be down 10 to 15 percent compared to 2019. Based on the difficulty and uncertainty of global light vehicle production data for 2021, the company withdrew its revenue guidance for 2021 until better data becomes available.

“Over the last several weeks, COVID-19 has created unprecedented circumstances for our industries, which include massive changes to production levels at our customers,” Downing said. “Our industries have also been significantly influenced by federal, state and local governments in each of the countries where our customers operate. Unfortunately, many of these changes have come with little or no advanced warning, which makes it very difficult to forecast sales or build a sustainable operating model.”

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