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Gentex's Q3 beats on 30% rise in sales, warns of margin decline on Thai flooding

Published: 20:35 20 Oct 2011 BST

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Gentex (NASDAQ:GNTX) said Thursday a 30 percent rise in its third quarter revenues helped push the company's results, which beat analyst estimates. However, the maker of specialty rearview mirrors said flooding in Thailand could cause supply chain disruptions that may impact its margins for the rest of the year.

For the three months ending September 30, the company posted net income of $43.4 million, or $0.30 per share, up 27 percent from the $34.3 million, or $0.24 per share, it earned a year ago.

Revenues rose 30 percent to $269.5 million, from $206.8 million in the same period last year.

Analysts polled by Bloomberg Businessweek estimated earnings of 29-cents per share, on $259 million in sales.

CEO Fred Bauer said: "Gentex set a number of 'records' in the third quarter of 2011. Strong global demand for our auto-dimming mirror products and advanced electronic features in the third quarter of 2011 resulted in record auto-dimming mirror shipments of 5.6 million units, representing the highest quarterly mirror production in the company's history."

Indeed, shipments of the company's auto-dimming mirrors increased 31 percent in the quarter to 5.56 million units, for $264.0 million in sales.

Other sales, like its dimmable aircraft windows, rose 32 percent, offsetting a seven percent drop in fire protection products, for total sales of $5.5 million, Gentex said.

Gross margins, however, shed 30 basis points to 35.4 percent, from 35.7 percent in the same period a year ago, as customer price reductions were only partially offset by the company's ability to leverage costs.

Still, Gentex said that Thai floods could result in supply chain disruptions, though it still forecast an increase in net sales of between 20 and 25 percent for its fourth quarter.

"Based on the September 2011 IHS forecast for light vehicle production levels and the company's anticipated product mix, we currently believe that the company has secured an adequate supply of parts for the balance of calendar year 2011," said Senior Vice President, Enoch Jen.

"However, the company continues to work to gain access to additional parts which may be at a higher cost due to anticipated changes in purchasing channels.

"The company currently estimates that the additional costs associated with these supply chain disruptions will negatively impact the company's gross margin in the fourth quarter of 2011 by approximately [25 to 50 basis points]."

Early last month, the U.S. Department of Transportation said it will require all vehicles to be equipped with a rear camera display by September 2014, under the Kids Transportation Safety Act.

Gentex said it intends to meet these specifications with its Rear Camera Display Mirrors, which display high-resolution, color images of the area directly behind the vehicle through an automaker-specified camera.

On the Nasdaq Exchange, Gentex shares fell 5.69 percent to $27.01 as of 3:10 pm EDT.

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