First Quarter Results and Business Update
- BorgWarner’s (the “Company”) organic sales were relatively flat compared with first quarter 2024, which equated to a U.S. GAAP net sales decrease of approximately 2%. This performance was despite a 3.6% decrease in the Company’s weighted light and commercial vehicle markets. The Company’s outgrowth of approximately 3.7% was primarily driven by strong light vehicle eProduct sales, which increased 47% year over year.
- The Company achieved an adjusted operating margin of 10.0% during the first quarter of 2025, which equated to a U.S. GAAP operating margin of 6.7%. The Company’s strong performance and focus on cost controls allowed it to expand its adjusted operating margin by approximately 60 basis points compared with first quarter 2024, despite a 20 basis point headwind from tariffs.
- The Company announced a number of portfolio actions that are intended to drive focus and enhance its future long-term profitable growth including:
- Exiting its Charging business during the second quarter of 2025. This action is expected to create a more focused portfolio and eliminate approximately $30 million of annualized adjusted operating losses.
- Consolidation of its North American Battery Systems business, which is expected to align the business’s cost structure to current market dynamics. This action is expected to result in annual cost savings of approximately $20 million by 2026.
New Business Awards Across Portfolio
The Company secured multiple new business awards that are expected to support its future long-term profitable growth, these include the following:
- High-volume hybrid eMotor award with a major North American OEM. The eMotor will be used on a series of hybrid full-size trucks and SUVs, as well as a performance vehicle application. This business is expected to launch in 2028.
- High-voltage coolant heater (HVCH) award in North America with a global OEM for their plug-in hybrid electric vehicles (PHEV), including mid-size pickup trucks, SUVs and minivans. This business is expected to launch in 2027.
- Four program extensions for exhaust gas recirculation (EGR) components including valves, coolers and modules with a major North American OEM used in their passenger and light commercial vehicle platforms. Production of these components is expected to continue through the end of 2029.
- Two dual-clutch transmission (DCT) awards in China, including a seven-year extension with a German OEM in China and a new award with a prominent transmission manufacturer with production expected to start the end of 2025.
First Quarter Highlights (continuing operations basis):
- U.S. GAAP net sales of $3,515 million, a decrease of approximately 2% compared with first quarter 2024.
- Excluding the impact of foreign currencies, organic sales increased 0.1% compared with first quarter 2024.
- U.S. GAAP net earnings of $0.72 per diluted share.
- Excluding $(0.39) of net losses per diluted share related to non-comparable items (detailed in the table below), adjusted net earnings were $1.11 per diluted share.
- U.S. GAAP operating income of $237 million, or 6.7% of net sales.
- Excluding $115 million of pretax expenses related to non-comparable items, adjusted operating income was $352 million, or 10.0% of net sales.
- Net cash provided by operating activities of $82 million.
- Free cash flow of $(35) million.
Financial Results (continuing operations basis):
The Company believes the following table is useful in highlighting non-comparable items that impacted its U.S. GAAP net earnings per diluted share. The non-comparable items presented below are calculated after tax using the corresponding effective tax rate discrete to each item and the weighted average number of diluted shares for the periods presented. The Company defines adjusted earnings per diluted share as earnings per diluted share adjusted to eliminate the impact of restructuring expense, merger, acquisition and divestiture expense, other net expenses, discontinued operations, other gains and losses not reflective of the Company’s ongoing operations and related tax effects.
Net sales were $3,515 million for the first quarter 2025, a decrease of approximately 2% compared with the first quarter 2024, primarily due to declining market production volumes, partially offset by strong eProduct sales growth. Net earnings for the first quarter 2025, were $157 million, or $0.72 per diluted share, compared with net earnings of $213 million, or $0.93 per diluted share for the first quarter 2024.
Adjusted net earnings per diluted share for the first quarter 2025, were $1.11, up approximately 8% from adjusted net earnings per diluted share of $1.03 for the first quarter 2024. Adjusted net earnings for the first quarter 2025, excluded net non-comparable items of $(0.39) per diluted share, while adjusted net earnings for the first quarter 2024, excluded net non-comparable items of $(0.10) per diluted share. These and other non-comparable items are listed in the table above, which is provided by the Company for comparison with other results and the most directly comparable U.S. GAAP measures. The increase in adjusted net earnings per diluted share was primarily due to the impact of higher adjusted operating income and lower share count.
Full Year 2025 Guidance Update: The Company has provided a 2025 full year guidance update. Net sales are expected to be in the range of $13.6 billion to $14.2 billion in 2025, compared with 2024 sales of approximately $14.1 billion. This is a slight increase from the Company’s previous range as a result of favorable impacts from foreign exchange and tariff customer recoveries which were mostly offset by lower industry production expectations. The Company expects its weighted light and commercial vehicle markets to be in the range of down 4% to down 2% in 2025. This is a reduction from the Company’s prior range of down 3% to down 1% primarily due to the potential impact of tariffs on global industry production. The Company’s sales guidance implies a year-over-year change in organic sales of down 2% to up 2% or estimated outgrowth above market production of approximately 200 to 400 basis points. The increase in the Company’s estimated outgrowth compared to its previous guidance of 100 to 300 basis points reflects anticipated tariff customer recoveries. Stronger foreign currencies are expected to result in an increase in sales of $250 million compared to the Company’s previous guidance.
The Company expects operating margin to be in the range of 8.1% to 8.6% in 2025. Excluding the impact of non-comparable items and the add back of intangible asset amortization expense, adjusted operating margin is expected to be in the range of 9.6% to 10.2%, which includes a 20 basis point dilutive impact from anticipated tariff customer recoveries. The change compared to the Company’s previous adjusted operating margin range of 10.0% to 10.2% is due to expected lower industry production and the dilutive impact of anticipated tariff customer recoveries on the Company’s margin profile. Net earnings are expected to be within the range of $3.44 to $3.85 per diluted share. Excluding the impact of noncomparable items, adjusted net earnings are expected to be in the range of $4.00 to $4.45 per diluted share, compared to the Company’s previous adjusted net earnings range of $4.05 to $4.40 per diluted share. Full-year operating cash flow is expected to be unchanged and in the range of $1,323 million to $1,375 million, and free cash flow is expected to be unchanged and in the range of $650 million to $750 million.
SOURCE: BorgWarner
