(Reuters) - Vehicle parts maker Delphi Automotive Plc (DLPH.N) reported a 20 percent drop in first-quarter profit on the back of lower sales in Europe and North America, and increased its cost cutting.
Shares of the company, once the largest U.S. auto parts supplier, were down 3 percent in midday trading.
Although U.S. light vehicle production continues to rise, a slowing commercial vehicle market and a weak European economy are dragging down the company’s performance.
Delphi said on Wednesday it expanded the restructuring program it began in the fourth quarter of 2012 by $75 million to about $375 million.
More than three quarters of its restructuring costs are in Europe and include job cuts and plant closures. The company has not disclosed details of the job cuts.
Delphi, which was spun off from General Motors (GM.N) in 1999 and emerged from bankruptcy in 2009, recorded about $34 million in restructuring costs in the first quarter.
The company said it expected vehicle production in Europe to fall by 5 percent in 2013, steeper than the 4 percent it forecast in February.
Delphi forecast revenue growth of 4 percent to 7 percent in 2013, while it expects global production to rise by 2 percent.
However, Guggenheim Securities analyst Matthew Stover said he expects Delphi to underperform global vehicle production in 2013.
“In order for Delphi to sustain its (earnings) multiple company needs to begin to show relative revenue growth to global production through 2013 and into 2014 and beyond,” he said.
Delphi’s sales in Europe fell 17 percent in the quarter ended March 31, while North America sales dropped 2 percent, primarily due to lower production by one of its large customers.
Company executives declined to name the customer in an interview with Reuters, but said it was a light vehicle manufacturer.
Europe, the Middle East and Africa together accounted for about 41 percent of Delphi’s total revenue in 2012. The company did not provide geographical breakdown of sales for the quarter.
Net income attributable to Delphi fell 20 percent to $276 million, or 88 cents per share from $342 million, or $1.04 per share, a year earlier.
Excluding items, Delphi earned $1.07 per share.
Revenue fell 6 percent to $4 billion, adjusted for currency rate differences, commodity price movements, acquisitions and divestitures.
The company initiated a quarterly cash dividend of 17 cents per share, payable to shareholders of record at the close of business on March 15.
Auto parts supplier Dana Holding Corp (DAN.N) last month also reported a drop in quarterly profit due to lower sales of axles, drive shafts, ceiling and thermal components in North America and Europe.
Delphi's shares gained almost 10 percent to Tuesday's close since April 23 when the Wall Street Journal reported the company had expressed interest to buy Johnson Controls Inc's (JCI.N) automotive electronics business. (r.reuters.com/kyp77t)
Delphi Chief Executive Rodney O‘Neal declined to comment on the matter on a post-earnings conference call on Wednesday.
The shares were down 3 percent at $44.77 in midday trading on the New York Stock Exchange.
Reporting by Sagarika Jaisinghani in Bangalore; Editing by Joyjeet Das, Maju Samuel