Automotive supplier prepares for covenant breaches

The semi-conductor shortage that is impacting the global automotive market threatens to short-circuit the pandemic recovery plans of manufacturer Autins.

The Rugby-based company specialises in acoustic and thermal insulation products for car makers, which have been hit by a second wave of disruption resulting in lower sales.

Autins has warned this could result in it breaching covenants in September and has secured waivers from its two lenders.

If the supply problems continue, it forecasts it may breach UK covenants from the end of the year although the group would remain with a positive EBITDA and “strong” cash headroom.

Its options at that point would include waiving specific covenants, resetting the levels of the UK covenants, or enabling covenants to reflect Group performance as a whole.

Autins is also applying for a recovery loan from the Government and is pursuing commercial sales opportunities which, through its invoice finance facility, would “improve cash and covenant headroom immediately”.

Gareth Kaminski-Cook, chief executive of Autins, said: “During Q2 and Q3, our sales have been significantly impacted by the well-publicised semi-conductor supply issues. However, the strong underlying demand for cars and reassuring statements from semi-conductor manufacturers that they will begin to meet automotive demand during the summer suggests that we should start to see a recovery later this calendar year.

“Despite the challenges posed to our auto customers by the global semi-conductor shortage and the likely impact on automotive revenues in H2, we remain positive on the outlook for the medium to long term.”

The semi-conductor supply issues have overshadowed Autins’ progress in non-automotive areas as it continues to diversify its revenues.

Non-auto sales now account for 17% of the group’s turnover, up from 7% a year ago. Its flooring division delivers almost all of these revenues, but it is seeing progress in the office pods market which it believes is “a nascent market set to grow over the coming years”.

There is also progress on reducing its reliance on its main customer, Jaguar Land Rover, which is now less than half of its revenus.

“We continue to successfully execute our strategy to diversify outside the UK and into new sectors,” said Kaminski-Cook.

“Sales in the flooring business more than doubled during H1 and by leveraging the unique qualities of our Neptune technology we have won 29 new projects in the first half, notably to supply new customers such as Volvo for the all-electric Polestar and Scania and DAF trucks in Sweden and Germany respectively.”


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