Gentex Reports Slight Earnings Dip

November 1, 2004
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ZEELAND — The cost to implement manufacturing upgrades, soft automotive production in North America and Europe and persistent pricing pressures from automakers combined to push Gentex Corp.’s quarterly earnings down slightly.

The Zeeland-based automotive supplier recently reported a 2 percent earnings decline on a 7 percent sales gain for the third quarter that ended Sept. 30.

Gentex, which is accustomed to reporting strong quarterly sales and earnings gains, anticipates gross margins rebounding partially once the automation and process improvements at its three Zeeland production plants are fully implemented during the fourth quarter. The goal is to increase productivity and efficiency and offset the effects of annual price cuts demanded by automakers.

“It’s definitely going to improve our cost structure and improve our margins, but we all have to keep in mind that these relentless price reductions are occurring every year also,” Chief Financial Officer Enoch Jen said during a conference call last week to discuss quarterly results.

Gentex reported third quarter sales of $120.4 million. That compares to $112.8 million during the same period in 2003.

Year to date, Gentex reported sales of $379.4 million, up 10 percent from the $345.1 million during the first nine months of 2003.

Quarterly net income dipped to $25.2 million, or 32 cents per diluted share. Gentex reported net income of $25.6 million, or 34 cents per diluted share, during the third quarter last year.

Net income through the first nine months of 2004 totaled $84 million, or $1.09 per share, a 10 percent increase over the $77.6 million, or $1.02 per share, during the same period in 2003.

Soft vehicle production in North America and Europe tempered Gentex’s growth in the shipment of auto-dimming automotive mirrors, which in North America declined 1 percent in the third quarter but are up 5 percent for the year. A strong 23 percent increase in vehicle production in Asia led to a 26 percent increase in unit shipments to offshore customers for the quarter and 29 percent increase during the first nine months of the year.

Overall, worldwide mirror shipments were up 11 percent for the quarter and 16 percent for the year for Gentex, which in recent years has placed a greater emphasis on sales to foreign automakers.

With forecasts showing continued softness in North American and European vehicle production, the company projects fourth quarter unit shipments to grow overall by 5 percent to 10 percent over last year.

Gentex Executive Vice President Garth Deur called the July-to-September period “a very challenging” quarter. In the long term, the company believes it can return to the annual growth rate of 15 percent to 20 percent that it has enjoyed in the past, he said.

“We feel that there’s still a lot of great potential here, a lot of interest on the part of current and prospective customers and the things that we do and the value that we bring to the automotive market, but it is a tough environment in which to be a supplier,” Deur said.   

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