TI Fluid Systems PLC (LSE:TIFS) saw its shares drop nearly 11% after the FTSE 250-listed firm said it will review the carrying value of certain fixed and intangible assets at the year's end which is likely to give rise to a material non-cash impairment charge.
The company, a leading global manufacturer of highly engineered automotive fluid storage, said this reflects recent 2022 reductions and revised medium-term lower global light vehicle production (GLVP) forecasts as well as the rising interest/discount rate outlook.
In a trading update for the year ended 31 December 2022, TI Fluid Systems also highlighted an unexpected negative sales impact in China during Q4 primarily due to the government's COVID-19 policy changes which caused unexpected production shutdowns.
It said that whilst market conditions, particularly in China, are expected to remain challenging in the short term, the group's strong market position, product leadership and clear strategy leave it well-positioned to deliver on its long-term objectives.
The company noted that whilst inflationary headwinds have continued, the group has made good progress on managing ongoing cost increases, with cost recoveries from OEM customers in 2022 in line with management expectations at about 70%.
TI Fluid Systems said it expects to report adjusted EBIT for full-year 2022 of circa €180mln, with full-year 2022 revenue expected to be circa €3.26bn at actual rates representing growth of approximately 10% compared to 2021.
The company said the revenue growth is set against 2022 GLVP volumes of 82.0mln units, an increase of 6.2% compared to 2021, with group constant currency revenue growth anticipated to be behind GLVP growth by approximately 100 basis points(bps), mostly the result of the rapid transition of domestic Chinese OEMs to battery electric vehicle (BEV) platforms which presents a short-term mix issue for the group in that market.
TI Fluid Systems said progress on BEV business awards continued in Q4, with a further €0.4bn lifetime revenue booked, bringing the total to €1.3bn for the full year. Bookings for hybrid electric vehicles (HEVs) for the year were also €1.3bn, with €0.3bn in Q4.
Adjusted free cash flow for 2022 is expected to be approximately €80mln, and its net debt to adjusted EBITDA leverage ratio 1.9 times. the company added.
In early morning trade on Wednesday, TI Fluid Systems were down 10.9% at 120.80p.