Perth-based company aiLimited has revised the earnings outlook of its South Australian subsidiary aiAutomotive after a series of production cutbacks from its customers.
Perth-based company aiLimited has revised the earnings outlook of its South Australian subsidiary aiAutomotive after a series of production cutbacks from its customers.
The company produces medium to large automotive stampings and assemblies to car bodies in the white stage of vehicle production, and last year announced to the stock exchange that company management had focussed on diversifying the customer base to lessen its dependency on its largest customer, Holden.
ai Ltd predicted a fall in sales revenue for the 2006-2007 financial year in September, as some of the high volume products, in particular Monaro components, would come to the end of their model life.
Nonetheless, the company predicted an end-of-year profit for ai Automotive of around the 2006 level, of $5.5 million before tax. The December first half reported result was $3.4m.
The company announced today that it did not believe a $2.1 million operating result for the second half would be achievable, after an announced cutback in production volumes of Holden's VE and bringing forward the discontinuation of the Holden model VZ.
The full text of a company announcement is pasted below
Many shareholders would have seen recent media coverage regarding difficulties in the Australian automotive industry. The board of aiLimited wishes to advise of its concerns regarding the outlook for earnings at its subsidiary aiAutomotive for the remainder of the current financial year.
Financial results for January and February 2007 have been adversely impacted by decisions by its major customer to remove a further 5 days production from schedules. Further, the announcement by Holden last week of a cut back in production volumes for VE prior to the uplift due to the G8 Pontiac export program will impact adversely until September 2007. The unexpected decision to bring forward discontinuation of VZ models to September 2007 will also reduce the revenue and earnings outlook.
In the last Annual Report it was stated that expected earnings for 2007 for aiAutomotive would be maintained at the 2006 level of $5.5m pre tax. The December first half reported result was $3.4m. The board does not believe a $2.1m operating result for the second half is now achievable.
On a positive note several new business opportunities are being worked up at present. These will have a positive impact on future financial years.
The recent 4D release restated the company's strategy to pursue acquisition driven growth for the automotive division. We believe the automotive components sector will continue to be an important contributor to the multi billion dollar automotive manufacturing industry. Component manufacturers, however, will need to amalgamate with others to survive and prosper. aiAutomotive wishes to play a leadership role in this industry consolidation. The recent successful acquisition and integration of Henderson Components has reinforced belief in this strategy. Several other acquisitions are currently under due diligence which if successfully concluded will enhance the performance of aiLimited's automotive division.
