TROY, Mich. –Horizon Global Corporation has reported third quarter results. The company also provided an update on its action plan, including activities related to its Kansas City aftermarket and retail distribution facility. With new leadership in place in its Europe-Africa segment, the Company continued to identify business improvement initiatives for this region.
“Having recently been named to the permanent role of President and CEO, I am just as encouraged about our Company as I was when I took over the interim role in May of this year,” said Carl Bizon, president and CEO of Horizon Global. “Our primary 2018 selling season in the Americas did not deliver the desired revenue and earnings result due mainly to ramp-up challenges in our Kansas City distribution facility.”
He added, “That being said, Kansas City proved during the third quarter that we now have the capabilities, processes and resources to support future growth in next year’s season. At quarter end, we had past due orders of approximately $8.5 million, down from a peak of approximately $26 million early in the quarter. With the Americas Action Plan items now complete, we have a greatly reduced cost structure to leverage in the region. We have also announced price increases to address rising input costs and tariffs. We will start to see the full impact of these actions in our financial results as volume ramps up with our normal seasonality in the second quarter of 2019.”
Bizon continued, “Operational challenges continued during the third quarter in our Europe-Africa segment and results came in below expectations. The new leadership team has made additional organizational and structural changes, and we identified further initiatives expected to improve the long-term performance of the business. With the revised view of full-year performance, we recorded a non-cash goodwill impairment for the segment of approximately $26.6 million in the quarter. I have great confidence in our leadership and am working closely with this team to ensure we are initiating near-term operational improvements that will lead to longer-term transformation of this region.
“As we look across our global business, Asia-Pacific continues to perform well, the Americas is poised to capitalize on efforts made this year, and we are fully engaged in improving performance in Europe-Africa. As a company, Horizon Global is focused on performance improvement and accountability at every level, which led to a number of significant management changes and operational shifts over the past year. Ultimately, I remain convinced of the underlying strengths of Horizon Global — our leading brands, performance products, dedicated team members, loyal customers and diverse channels and geographies — which will help see us through these near-term challenges and set our company back to a path of growth and returning value to our shareholders.”
2018 Third Quarter Segment Results
Horizon Americas. Net sales were substantially unchanged from the third quarter of 2017, with increases in aftermarket and OE offset by a decline in the retail channel, which was impacted by supply constraints from overseas vendors and the fourth quarter 2017 divestiture of the Broom and Brush business. Operating profit decreased $3.7 million to $7.3 million, or 6.3 percent of net sales, primarily as a result of unfavorable input costs in advance of pricing actions and the costs of executing the Company’s Action Plan in the period. Adjusted operating profit(1) increased $0.4 million to $12.2 million, or 10.5 percent of net sales.
Horizon Europe-Africa. Net sales decreased 10.7 percent (9.5 percent in constant currency(3)), primarily resulting from higher-than-normal volume of a program with a major OE customer in 2017 that did not repeat in the third quarter of 2018. The aftermarket channel declined due to limited product availability resulting from the production shift to Romania. Operating loss in the quarter was $31.4 million, or 40.0 percent of net sales, attributable to the impairment of the remaining goodwill balance in the segment. The adjusted operating loss(1) of $3.3 million, or 4.2 percent of net sales, reflects a decline of $7.3 million from 2017 driven by an unfavorable margin mix impact from weaker aftermarket sales, input cost increases not fully recovered by pricing actions, and the incremental costs incurred with production transfers between facilities.
Horizon Asia-Pacific. Net sales decreased $2.9 million, or 7.9 percent, primarily attributable to $2.1 million in unfavorable currency impact and a small decline in existing programs in our Thailand operation. Operating profit increased 1.4 percent to $6.0 million, or 17.6 percent, as the impact of operational improvements were mostly offset by increased costs of purchases in U.S. dollars and Thai baht.
Horizon Global announced a business improvement plan on March 1, 2018, with targeted initiatives to drive operating results in its Americas and Europe-Africa segments. Action Plan updates include:
Completed ramp-up of the Kansas City distribution center and, at quarter end, reduced shippable past due orders to approximately two days’ sales
De-layering of organization and consolidation of facilities in the Americas is now complete
The Action Plan items previously identified for Europe-Africa will now be included as part of a set of ongoing business improvement initiatives that will be the primary focus of the region for the foreseeable future.
Bizon concluded, “We see significant long-term opportunities for our company and remain focused on the near-term difficulties that persist in our European operations. We are pleased with our accomplishments under the Action Plan, but we recognize there is much work ahead, particularly as we address the necessary business improvement initiatives in Europe. With that in mind, we expect the next two quarters to be difficult. We are fully engaged in identifying a seasoned financial executive to serve as the Company’s permanent CFO, but until then I will be working closely with our interim CFO to ensure we have the resources and flexibility needed to continue the substantial progress made over the last six months. Achieving a performance turnaround is a large task and takes time, but we are committed to this effort that will ultimately benefit our customers, end-users and our shareholders.”
SOURCE: Horizon Global press release