TI Fluid Systems PLC (LSE:TIFS) shares revved up 13% to 126.8p in early trading on Thursday after the automotive components company posted higher profits than expected and expressed confidence about expanding profit margins.
In the run-up the results the shares had recently fallen to a 17-month low.
Adjusted earnings before interest and tax of €135.5 million was reported for the first six months of 2024, up 2.7% from a year ago and exceeding the City consensus estimate of €131 million.
Despite a 1.4% drop in revenue to €1.7 billion on a constant currency basis, EBIT margins increased to 7.9% from 7.5%, above the targeted 7.4%.
Bookings increased 11% to €1.5 billion, including €0.6 billion of electric vehicle awards.
On the outlook, the FTSE 250-listed group said the productivity and efficiency measures implemented at the turn of the year "reaffirm our confidence in expanding our adjusted EBIT margin".
"As a result, we are increasing our full year adjusted EBIT margin expectation to above 7.6% notwithstanding a slight decline in revenue at constant currency due to the recent softening of the 2024 industry outlook."
Auto market shifts
CEO Hans Dieltjens said the first half performance demonstrated strong operational execution and "the resilience of our propulsion agnostic portfolio", as the automotive market had shifted into a "demand-driven cycle", with overall volumes healthy as global light vehicle production (GLVP) reduced 0.2% to 43.6 million units in the first half.
"The short-term volume outlook for the industry has softened in recent weeks. Some markets also experienced short-term destocking in June," he said, with forecasts from S&P pointing to a 2024 GLVP decline of 2.0% as volumes fall in most regions as OEMs increase their focus on inventory management.
"The key feature of our industry today is rising uncertainty as to the shape and speed of the EV transition. BEV growth has slowed, while forecast demand for hybrids has increased," he said, with signs that hybrid and plug-in hybrids may play a larger role in the transition than previously anticipated.
Industry forecasts also indicate increasing demand for range extender BEVs which utilise a small combustion engine for battery charging as well as a slower pace of near-term decline in ICE production volumes.