Adient (NYSE:ADNT) reported third-quarter fiscal 2026 revenue of approximately $3.9 billion, up 5% from a year earlier, while adjusted EBITDA was flat at $225 million as conflict-related commodity and freight costs, customer production disruptions and operating inefficiencies weighed on profitability.
Adjusted net income was $38 million, or $0.48 per share, unchanged from the prior-year period. The automotive seating supplier generated $138 million in free cash flow during the quarter, bringing year-to-date free cash flow to $161 million.
Costs Pressure Margins, but Management Sees Stabilization
Chief Financial Officer Mark Oswald said Adient absorbed about $32 million of temporary costs in the quarter. Roughly $20 million was tied to the Middle East conflict, including higher freight, fuel and resin costs, while approximately $10 million to $12 million related to customer-driven operating inefficiencies.
Excluding those costs, adjusted EBITDA margin would have been in the mid-6% range, about 80 basis points above the reported 5.7% margin, according to Oswald. The company expects total Middle East-related costs for the full fiscal year to be about $35 million to $40 million. Adient has pass-through and escalation arrangements covering about 90% of its foam business, with recoveries generally occurring on a roughly two-quarter lag.
Oswald said the company expects customer-related disruption costs to begin subsiding in the fourth quarter, while Adient has begun to see signs that commodity and freight costs are stabilizing.
Regional Results Reflect Mixed Auto Market Conditions
In the Americas, adjusted EBITDA rose $13 million year over year to $125 million, supported by favorable volume, pricing and recent program launches. These gains were partly offset by temporary inefficiencies and conflict-related costs. Dorlack said Adient is engaged in discussions with customers about onshoring opportunities and believes its North American manufacturing and engineering footprint positions it to benefit over time.
EMEA adjusted EBITDA declined $7 million to $14 million as lower production levels and unfavorable mix continued to pressure the region. Management said restructuring benefits and selling, general and administrative cost discipline partially offset those pressures. The company also expects the roll-off of underperforming metals business to become a positive factor in fiscal 2027.
Asia adjusted EBITDA declined $6 million to $107 million. The region remained profitable, but results were affected by lower equity income, lower demand for internal-combustion-engine vehicle programs in China, launch investments and expected mix-related margin pressure. Consolidated China sales increased about 33% year over year, driven by production ramp-ups at customers including NIO, Leapmotor and Nissan.
Dorlack said Adient’s China business is increasingly aligned with local automakers, which now represent about 70% of the country’s production. The shift is expected to create further margin compression in fiscal 2027, though management said the effect has developed more gradually than initially expected. Oswald reiterated that the company anticipates roughly 100 basis points of China margin compression in fiscal 2026.
Free Cash Flow, Liquidity and Share Repurchases
Third-quarter free cash flow benefited from approximately $45 million of customer payment timing that Adient expects to reverse in the fourth quarter. The company said year-to-date cash generation also reflected working-capital discipline, accelerated customer recoveries and lower restructuring cash spending than in the prior year.
At quarter-end, Adient had approximately $1.8 billion in total liquidity, including $924 million in cash and roughly $834 million of revolver availability. Its leverage ratio was 1.7 times, within its 1.5-times to 2-times target range, and the company said it has no near-term debt maturities. Moody’s upgraded Adient’s corporate credit rating to Ba3 during the quarter.
Adient repurchased approximately 1.3 million shares for $30 million in the third quarter, bringing year-to-date repurchases to $55 million. About $80 million remains under the current authorization, and Oswald said the company expects its board to increase that authorization later this year.
Fiscal 2026 Outlook Maintained for Profit and Cash Flow
Adient raised its fiscal 2026 revenue outlook to approximately $15 billion, reflecting improved customer production schedules and favorable foreign exchange. It maintained adjusted EBITDA guidance of approximately $885 million and free-cash-flow guidance of approximately $130 million.
For fiscal 2027, management said it expects above-market growth in the Americas and China, aided by recent awards, onshoring activity and new program launches. That growth in the Americas will be partly offset by the planned exit of low-margin third-party metals business. The company expects about $90 million of that metals revenue to roll off in fiscal 2027, with a larger amount expected to roll off in fiscal 2028.
Management also expects automation spending to increase as it seeks to improve productivity, address labor-cost inflation and expand margins. Oswald said Adient generally targets incremental margins of roughly 16% to 17% on revenue growth. Formal fiscal 2027 guidance is scheduled to be issued in November.
About Adient (NYSE:ADNT)
Adient plc (NYSE: ADNT) is a leading global supplier of automotive seating and interior components. Established in 2016 through a spin-off from Johnson Controls, the company designs, engineers and manufactures complete seat assemblies, seat structures, mechanisms, foams, textiles, trim and electronics. Adient’s product portfolio spans a wide range of seating solutions, from entry-level designs to luxury and high-performance seats, and extends to interior modules such as door panels and center consoles.
Serving major original equipment manufacturers (OEMs) around the world, Adient works closely with automakers to develop lightweight, comfortable and safety-oriented seating systems.
