TI Fluid Systems revenue rises as it revises capital strategy

(Sharecast News) - Automotive sector player TI Fluid Systems reported significant revenue growth of 15.1% at constant currency in its first half on Tuesday, to €1.77bn, surpassing light vehicle production volume growth by 390 basis points. The FTSE 250 company said it saw revenue outperformance across all of its regions, with China's development aligning with its expectations.

It recorded notable increase in its adjusted EBIT margin by 210 basis points to 7.5%, while the statutory operating profit margin rose to 5.4%.

Adjusted EBIT came in at €131.9m for the period, up from €83.7m year-on-year, while statutory operating profit jumped to €95m from €48.3m.

TI said efficiency enhancements contributed around 100 basis points to its margin expansion.

The firm said it had successfully concluded a significant majority of its 2023 price and cost recovery agreements, adding that new business bookings and battery electric vehicle (BEV) awards had surged to €1.36bn and €649m respectively on a lifetime basis, with China accounting for nearly 45% of BEV awards.

On the strategic front, TI Fluid Systems said it was continuing its momentum with its 'Take the Turn' (T3) strategy.

As part of the initiative, two E-Mobility Innovation Centres (eMICs) had been inaugurated in Japan and South Korea, with technological advancements proceeding as scheduled.

The company also announced a revision in its capital allocation policy to further enhance shareholder value on Tuesday, confirming that starting immediately, it was adopting a progressive dividend policy.

It would begin with a dividend of €35m for 2023, making for a significant increase from €13m in 2022, along with an interim dividend of €11.8m.

A share buyback programme worth up to €40m was meanwhile set to start in the second half, pending regulatory and shareholder approval.

The firm said it was planning to diminish gross leverage through a term loan prepayment of €100m in the second half of the year, using available cash reserves.

Looking ahead, TI said that while it was wary of an unpredictable global climate and anticipated only modest global economic growth, it was optimistic.

It estimated global light vehicle production (GLVP) of around 85 million units for the year, making for a 3.3% increase from the prior year.

That figure was slightly lower than the latest predictions from S&P Global, and as a result, its second half performance could be somewhat lesser than the first six months of the year.

Still, for the entire year, the company said it anticipated revenue outstripping projections.

Additionally, TI projected that full-year adjusted EBIT margins would exceed 7%, thanks to operational improvements, cost recoveries, and volume boosts.

Adjusted free cash flow conversion was anticipated to be around 30% of adjusted EBITDA.

"We continued to make good strategic progress, in line with our plans, pivoting towards electrification whilst continuing to drive strong performance in our ICE business," said president and chief executive officer Hans Dieltjens.

"Two new eMIC facilities were opened in South Korea and Japan in line with our strategy to bring local support directly to our customer base, increasing the speed of development and improving efficiency and collaboration.

"This progress was reflected in the continued growth of new business awards on BEV platforms."

Dieltjens said he was also pleased to announce TI's "new, optimised and balanced" capital allocation strategy.

"This reflects our focus on organic and inorganic growth, improved shareholder returns and deleveraging, whilst retaining a strong and sustainable financial position for the business.

"This change in policy will further support the business strategy and our pivot to electrification."

Reporting by Josh White for Sharecast.com.