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Tenneco Reports 8% Q2 Revenue Decrease For Motorparts Americas

For the second quarter of 2019, Tenneco Inc. generated $4.50 billion in total net sales and operating revenue, which was at the midpoint of the outlook management provided last quarter. On a constant-currency basis, this represented 1% growth year-over-year.

The company’s net income declined 28.6% to $45 million. Adjusted net income, however, decreased 1% to $97 million, and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 77.7% to $414 million due, in part, to cost control efforts.

DRiV … Total second quarter 2019 revenue for the DRiV business declined 5% to $1.54 billion. Excluding portfolio changes (the sale of the wiper business and the Ohlins acquisition), DRiV revenue was down 4% year-over-year.

The Motorparts (aftermarket) segment of DRiV saw its revenue decrease 8% to $835 million as higher aftermarket revenues in China and India (mid-single-digit growth) were offset by lower year-over-year sales in North America and Europe.

More specifically, Motorparts’ Americas revenue fell 8% in the second quarter as two significant retail customers reduced inventory positions (down collectively in the high teens). Also affecting the year-over-year comparison was lost business related to channel conflict, which management says Motorparts will lap by the end of 2019.

“In North America, we are beginning to see stabilization in the second half of the year in the aftermarket,” Co-CEO Brian Kesseler said on the company’s Aug. 6 quarterly report conference call. This is related to North American new business wins beginning to offset channel conflict losses and major retail customer year-over-year revenue declines reducing.

Motoparts’ European revenue declined 9% because of overall soft market conditions and distributors reducing their inventory levels. And, DRiV’s Ride Performance (OE) revenue decreased 2% to $709 million.

It’s worth noting that segment adjusted EBITDA came in at $151 million with growth from both the Motorparts and Ride Performance (OE) businesses and that adjusted EBITDA margin grew 110 basis points to 9.8%. Motorparts’ adjusted EBITDA margin increased from 13.4% a year ago to 15.1% for the three months ended June 30, 2019.

GUIDANCE … For the third quarter, management expects Tenneco’s total net sales and operating revenue to come in between $4.30 billion and $4.40 billion, which would represent pro forma year-over-year growth of 3% at the midpoint of that range and in constant currency. DRiV’s third-quarter revenue is expected to be approximately $1.50 billion, or down roughly 3% on a constant-currency basis.

Management anticipates that Tenneco will post total net sales and operating revenue of $17.60 billion to $17.80 billion for the full year — up 1% on a constant currency basis. DRiV’s revenue is expected to come in between $6.00 billion and $6.10 billion in 2019, or down 3% to 4% in constant currency.         — Marc Vincent

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