Clarios Global L.P.

Overview Key strengths Key risks Maintains a dominant global market share in lead-acid batteries. Elevated debt level at 7x for 2021. Derives 80% of its sales from the traditionally more stable aftermarket. Margins exposed to volatile lead prices accounting for 55% of cost of goods sold. The entrance of new competitors as the industry transitions to electric vehicles (EVs). Clarios increased its revenue by 2% year over year in its fiscal first quarter, primarily due to aftermarket demand and better price and product mix. We expect revenues to grow 4%-5% for 2022, with margins remaining pressured owing to higher transportation costs, higher commodity costs coupled with inflation risks prior to improving in 2023. Furthermore, we expect free operating cash flow

...We expect the company's financial performance to remain pressured in 2022, then improve in 2023. Clarios increased its revenue by 2% year over year in its fiscal first quarter, primarily due to aftermarket demand and better price and product mix. We expect revenues to grow 4%-5% for 2022, with margins remaining pressured owing to higher transportation costs, higher commodity costs coupled with inflation risks prior to improving in 2023. Furthermore, we expect free operating cash flow (FOCF) to improve for 2022 as compared to 2021; however, we expect FOCF/debt to remain below 4% for 2022. We see the company's ongoing restructuring actions as laying the foundation for improvements in its margins and cash flow generation. Over the medium term, Clarios has targeted about $400 million of run-rate cost savings though improved manufacturing efficiency,...

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