ZEELAND — Citing fallout from the COVID-19 pandemic — particularly how the global crisis has affected worldwide light vehicle production — Gentex Corp. reported rough financial results for the second quarter of 2020.
The Zeeland-based supplier of digital vision, connected car, dimmable glass and fire protection technologies generated net sales of $229.9 million for the quarter, a 51-percent drop from $468.7 million in revenue for the second quarter of 2019.
Gentex (Nasdaq: GNTX) finished the quarter with a net loss of $2.4 million, or 1 cent per share, compared to net income of $109 million, or 42 cents per share, at this time last year.
“The impact of COVID-19, government enacted shutdowns in certain countries and states, and the resultant economic impact led to the most severe change in demand in a very short period of time that Gentex has ever experienced,” Gentex President and CEO Steve Downing said in a statement.
“In fact, our forecast in early March for the second quarter of 2020 was estimating a 6 percent growth rate for the company,” Downing said. “A deeper dive into the global vehicle production environment provides compelling information about what happened in the quarter.”
The anemic sales align with the trend for global light vehicle production, which ended the second quarter down 45 percent compared to 2019. The brunt of the shutdowns and disruptions occurred in Europe and North America, which are two of Gentex’s primary markets.
China’s market for vehicle production expanded 9 percent for the quarter, but the country only makes up 10 percent of Gentex’s overall sales.
Gross margins for the quarter sat at 19.1 percent compared to 37.7 percent in the second quarter of last year. Gentex cited lost sales and manufacturing inefficiencies spurred by the pandemic and subsequent shutdowns as a reason for the drop. Similar dynamics led to operating expenses rising to $50.7 million for the quarter compared to $48.6 million last year.
Gentex also had to contend with $8.8 million in severance costs that came with two waves of layoffs over the course of the pandemic. The layoffs ultimately led to $35 million in annual savings.
Through the first half of the year, sales for Gentex plummeted 27 percent to nearly $683.7 million. The company said net income for the first six months was $87.1 million, or 35 cents per share, which compares to $213.2 million, or 82 cents per share, in the prior year.
The company ended the quarter with $343.8 million in cash on its balance sheet.
Gentex now expects net sales to reach between $865 and $915 million for the remainder of the year.
“Given the magnitude of changes this year, the Company believes this guidance is a more accurate representation of the new cost structure and financial performance not only for the remainder of 2020, but should also provide better visibility heading into 2021,” according to the earnings release.