Meritor Acquisition and 2022 Financial Results
Table of Contents
2023 OUTLOOK
Supply Chain Disruptions
We continue to experience supply chain disruptions, increased price levels and related financial impacts reflected as increased cost of sales and inventory holdings. Our industry
continues to be unfavorably impacted by supply chain constraints leading to shortages and price increases across multiple component categories and limiting our collective
ability to meet end-user demand. Our customers are also experiencing supply chain issues. The Board continues to monitor and evaluate all of these factors and the related
impacts on our business and operations, and we are diligently working to minimize the supply chain impacts to our business and to our customers.
Business Outlook
Our outlook reflects the following positive trends and challenges to our business that could impact our revenue and earnings potential in 2023.
Positive Trends
We expect demand for pick-up, medium-duty and heavy-duty trucks in North America to remain strong.
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We believe market demand for trucks in India will continue to be strong.
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We expect demand within our Power Systems business to remain strong, including the power generation, mining, oil and gas and marine markets.
We anticipate demand in our aftermarket business will continue to be robust, driven primarily by truck utilization in North America and continued strong demand in our
Power Systems business.
We expect demand for trucks in China to improve from the low demand levels in 2022 as COVID-19 restrictions are eased. Significant outbreaks of infection among the
population, could, however, hamper the level of demand improvement through the year.
Challenges
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Continued increases in material and labor costs, as well as other inflationary pressures, could negatively impact earnings.
Our industry's sales continue to be unfavorably impacted by supply chain constraints leading to shortages across multiple components categories and limiting our
collective ability to meet end-user demand. Our customers are also experiencing other supply chain issues limiting full production capabilities.
We expect demand in construction markets in China to decline in 2023 due to emission changes and a build-up of inventory.
The completion of the Meritor, Inc. acquisition in 2022 impacted our liquidity and resulted in incremental interest expense for debt utilized in funding the transaction and
increased amortization of intangible assets which will negatively impact net income.
We expect the planned separation of our filtration business, into a stand-alone company, will continue to result in incremental expenses.
Increasing interest rates could increase borrowing costs and negatively impact net income.
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