Release Date: January 30, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Exco Technologies Ltd (EXCOF, Financial) reported strong quoting activity and new program awards, indicating robust demand for its products.
- The company is benefiting from secular trends such as the increasing use of aluminum across industries and the growth of OEM vehicle accessories.
- Despite high transaction prices, consumer vehicle sales in the US remain robust, with an annualized sales rate of around 16 million units.
- Exco Technologies Ltd (EXCOF) is implementing measures like automation and headcount reductions to mitigate margin pressures.
- The company's financial position remains strong, with a solid balance sheet and availability on its credit facility supporting strategic initiatives.
Negative Points
- Exco Technologies Ltd (EXCOF) faced challenges due to lower automotive production levels, with a 3% decline in the US and over 10% in Europe.
- Sales in the Automotive Solutions segment decreased by 13% due to lower production volumes, customer-driven delays, and unfavorable vehicle mix.
- Margins were compressed due to lower overhead absorption from weaker volumes, higher labor costs, and severance expenses.
- The company experienced uneven volumes in the Casting and Extrusion segment, with lower activity in December due to extended plant shutdowns.
- Exco Technologies Ltd (EXCOF) faces challenges from rising labor costs in Mexico, particularly due to significant minimum wage increases.
Q & A Highlights
Q: You maintained your 2026 fiscal targets. Has your view on how you get there or the timing changed at all?
A: Darren Kirk, President and CEO: Despite a softer quarter, we remain firm in our 2026 outlook. The quarter was impacted by production dislocations and extended plant shutdowns, making the target more aggressive. However, our strategy remains the same, focusing on capacity utilization, margin improvement, and accessory sales growth.
Q: Any indication of how the second quarter has been relative to the first?
A: Darren Kirk, President and CEO: It's early, but January signs are more normal compared to December, which was abnormal. We expect benefits from delayed big-ticket items early in the second quarter.
Q: How do you see M&A being part of your fiscal targets, and has the pipeline changed?
A: Darren Kirk, President and CEO: The pipeline remains unchanged. We are looking for niche acquisitions, but M&A is not part of our 2026 target formula.
Q: Given the minimum wage increase in Mexico, what is your ability to offset these increases?
A: Darren Kirk, President and CEO: We are focused on improving labor efficiency, resulting in headcount reductions and looking to automation to reduce labor intensity. New program quotes account for sustained higher wages.
Q: How do you see tariffs impacting your ability to reach your 2026 guidance?
A: Darren Kirk, President and CEO: Tariffs are uncertain, but a broad-based 25% tariff would be catastrophic and likely short-lived. Our 2026 target assumes no tariffs, and we believe common sense will prevail to avoid unsellable cars due to compounded costs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
