Gentex sees signs of improvement

August 24, 2009
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ZEELAND — Gentex Corp. (NASDAQ: GNTX), a manufacturer of automatic-dimming rearview mirrors and commercial fire protection products, reported results for the second quarter and six months ended June 30, 2009.

The company reported in a news release that for the second quarter of 2009, net sales declined by 31 percent to $117.3 million compared with $170.5 million in the second quarter of 2008. The gross profit margin declined on a year-over-year basis from 34 percent in the second quarter of 2008 to 30.5 percent in the second quarter of 2009, primarily due to the company's inability to leverage its fixed overhead costs due to decreased revenues. The impact of annual customer price reductions was offset by purchasing cost reductions.

The company's revenues increased by 25 percent on a sequential, quarter-to-quarter basis, from $93.8 million in the first quarter of 2009 to $117.3 million in the second quarter of 2009. The gross profit margin of 30.5 percent in the second quarter of 2009 increased sequentially from 23.8 percent in the first quarter of 2009. Approximately two-thirds of the sequential, quarter-to-quarter increase was due to the company's ability to leverage fixed overhead costs due to increased revenues. The balance of the increase was due to direct labor productivity, foreign exchange rates and product mix.

Income from operations declined by 55 percent in the second quarter of 2009 to $16.1 million, compared with $35.8 million in the second quarter of 2008. Income from operations declined by 76 percent for the first six months of 2009 compared with the same prior-year period. The decline in operating income during both year-over-year periods was primarily due to the decline in the gross margin.

"We're hopeful that the global automotive market is beginning to recover, based on our improved sequential quarterly results," said Gentex chairman and CEO Fred Bauer. "Despite reporting lower year-over-year comparisons, we are pleased to report a profit in this still challenging automotive environment.

"We hope that the market continues to improve, as we have a number of new program launches, including many SmartBeam and Rear Camera Display programs, during the balance of the year. The interest in those products remains at a high level," said Bauer, "and an improving production environment can only help."

Total auto-dimming mirror unit shipments decreased by 33 percent in the second quarter of 2009 compared with the second quarter last year. Automotive revenues decreased by 32 percent from $164.8 million in the second quarter of 2008 to $112.2 million in the second quarter of 2009.

Total auto-dimming mirror unit shipments decreased by 42 percent for the first six months of 2009 compared with the first six months of 2008.

Gentex Senior Vice President Enoch Jen provided certain guidance for the third quarter of 2009.

"Based on CSM Worldwide's end-of-June light vehicle production forecast, we currently expect our revenues in the third quarter of 2009 to decline by approximately 10 percent compared with the third quarter of 2008," said Jen.

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