Iochpe-Maxion SA :IOCJY-US: Earnings Analysis: 2016 By the Numbers : March 31, 2017

Iochpe-Maxion SA reports financial results for the year ended December 31, 2016.

We analyze the earnings along side the following peers of Iochpe-Maxion SA – Superior Industries International, Inc., Tata Motors Limited Sponsored ADR, General Motors Company, Randon S.A. Implementos e Participacoes, Tupy S.A. and Plascar Participacoes Industriais S.A. (SUP-US, TTM-US, GM-US, RAPT3-BR, TUPY3-BR and PLAS3-BR) that have also reported for this period.

Highlights

  • Gross margins widened from 13.03% to 14.26% compared to the same period last year, operating (EBITDA) margins now 11.23% from 10.94%.
  • Year-on-year change in operating cash flow of 65.42% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 1992.11 2048.6 2512.23 2826.46 2919.46
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 6.29 14.77 28.8 78.58 34.26
Earnings Growth (YOY) -57.4 -48.72 -63.35 129.4 -74.5
Net Margin 0.32 0.72 1.15 2.78 1.17
EPS 0.02 0.05 0.1 0.26 0.12
Return on Equity 1.01 2.41 4.74 13.72 6.68
Return on Assets 0.3 0.66 1.17 2.92 1.65

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Earnings Growth Analysis

The company’s year-on-year earnings decline did not come as a result of a contraction in gross margins or because of any cost control issues. Both gross margins and operating margins (EBITDA) margins actually improved over this time frame. Gross margins went from 13.03% to 14.26%, while operating margins improved from 10.94% to 11.23% over this period. For comparison, gross margins were 13.03% and EBITDA margins 10.94% in the immediate last period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

IOCJY-US‘s change in operating cash flow of 65.42% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 6.54% to 6.59% and (2) one-time items. The company’s pretax margins are now 2.40% compared to 0.91% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Iochpe-Maxion SA engages in automotive business. It involves in the production and distribution of auto parts and railway equipment. It operates through the following segments: Maxion Wheels, Maxion Structural Components, and AmstedMaxion. The Maxion Wheels segment is the production and sale a wide range of steel for light and commercial vehicles and agricultural machinery and aluminum wheels for light vehicles. The Maxion Structural Components segment is the production of side rails, cross members and full frames for commercial vehicles and structural components for light vehicles. The AmstedMaxion segment is the production of freight cars, railway wheels, and casting as well as industrial castings. The company was founded in 1918 and is headquartered in São Paulo, Brazil.

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