BorgWarner Inc (BWA)

BorgWarner Inc Q1 2025 Financial Analysis

Report Date: May 7, 2025
Period Covered: Three months ended March 31, 2025

1. Overview

BorgWarner reported net sales of $3,515 million in Q1 2025, down 2.2% from $3,595 million in Q1 2024. Net earnings attributable to BorgWarner were $157 million (EPS $0.72 diluted), compared with $206 million (EPS $0.93) in Q1 2024.

2. Profit & Loss Analysis

• Revenue Drivers:
  • Foundational products sold $2,878 million (82% of total).
  • E-products (electrification & hybrid solutions) grew to $637 million (18% of total).
• Gross Margin: 18.2% vs. 17.9% in prior year, slightly improved from mix and cost savings.
• SG&A: $315 million vs. $329 million, reflecting lower incentive and R&D costs.
• Restructuring & Charges: $35 million of restructuring and exit-business charges (including $19 million exit‐charging business).
• Operating Income: $237 million vs. $295 million, impacted by lower volumes and portfolio actions.
• Net Interest & Tax: Net interest expense rose; effective tax rate was 26.5% (including discrete charges).

3. Debt & Liquidity

• Total Debt: ~$3.86 billion (long-term $3.80 B + short-term $0.06 B).
• Quarterly Change: Debt increased ~1% Y/Y.
• Cash & Equivalents: $1,707 million; undrawn revolver $2,000 million.
• Liquidity Position: Strong covenant headroom; ample funding for operations, dividends and buybacks.

4. Key Drivers & Reasons for Profit Decline

• Currency headwinds (weak euro, KRW, BRL vs. USD) reduced sales by ~$80 million.
• Lower light‐vehicle production in certain regions.
• Portfolio actions (exit of battery charging business) incurred one-time losses.
• Partially offset by new business wins, e-product growth and cost-recovery actions.

5. Pros and Cons

Pros:

• Rapid e-product revenue growth (+26% Y/Y).
• Robust cash flow and high liquidity.
• Diversified global footprint and customer base.
• Active cost-reduction and restructuring plans.

Cons:

• Lower production volumes in western markets.
• Impact of foreign‐exchange and tariffs.
• One-off charges related to business exits.
• Ongoing supply-chain / raw material cost volatility.

6. Outlook & Next Steps

Management expects full-year sales to be flat to modestly up (ex-FX), driven by new electric‐drive platforms and cost recovery. Continued focus on e-mobility, further structural cost savings and portfolio realignment should support margins in H2 2025.

Revenue breakdown by product line for Q1 2025:

• Foundational products (ICE & hybrid): $2,878 million (82%)
• E-products (EV traction motors, battery charging, power electronics): $637 million (18%)

BorgWarner is transitioning toward greater electrification content, with e-products now representing nearly one-fifth of quarterly sales. Strong free-cash-flow generation and a fortified balance sheet provide room for strategic M&A or further buybacks. Key challenges include hedging FX volatility, navigating tariff risks and integrating recent portfolio exits. Continued margin expansion hinges on supply-chain optimization and successful rollout of next-generation electric powertrain platforms.