Canadian auto parts maker Linamar Corp beat quarterly profit estimates on Wednesday, helped by a cut in capital expenditure, while also boosting its liquidity despite the COVID-19 pandemic that forced automakers to halt production.
The company said it cut capital asset expenditure by 25 per cent to $90.7 million in the first quarter and was conserving cash by implementing cost reductions.
Linamar said operations in Europe have been back for a week and that it expects North American operations to resume on May 18.
Ford Motor Co, General Motors Co and Fiat Chrysler Automobiles NV, all plan to reopen North American factories on May 18 as well.
The reopening of the U.S. auto sector will be a closely watched test of whether workers across a range of industries can return to factories in large numbers without a resurgence of COVID-19 infections.
Linamar forecast significant double-digit declines in 2020 sales and earnings due to plant shutdowns and demand slump related to the pandemic.
Despite the impact, the company said on a post-earnings call with analysts that it expects full-year result to be profitable with positive free cash flow.
As of March 31, Linamar’s liquidity, measured as cash and cash equivalents and available credit, improved to $1.2 billion.
However, sales in the company’s industrial unit fell 35.7 per cent to $299 million in the quarter, while transportation sales dropped 17.1 per cent.
“The company experienced lower sales and operating earnings in both segments which was primarily attributed to the adverse conditions associated with the global COVID-19 pandemic,” Linamar said in a statement.
Canadian peer Magna International Inc posted a 51 per cent fall in quarterly adjusted profit last week, hurt by a decline in global automobile production.
The company’s net earnings fell to $78.5 million, or $1.20 per share, in the first quarter ended March 31, from $132.3 million, or $2 per share, a year earlier.
Sales fell 21.5 per cent to $1.55 billion.
Excluding items, the company earned $1.04 per share, above the analysts’ average estimate of 99 cents.
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