Amotiv faces weaker 4WD demand as buyback adds balance sheet pressure

FY27 outlook cut after weak 4WD quarter

Amotiv Limited (ASX:AOV) has taken the knife to its FY27 outlook after a difficult opening quarter, with like-for-like revenue down 5% and the 4WD Accessories & Trailering division bearing most of the damage. The company now expects FY27 revenue and underlying EBITA, excluding the consolidation of Vietnamese filtration business VAFI, to be up to 5% below FY26 continuing operations.

That is a marked shift from the modest growth forecast issued in August alongside the August FY26 result, which reported revenue of $1.02 billion and underlying EBITA of $195.1 million. Amotiv said conditions had deteriorated as fuel prices remained elevated, interest rates rose, consumer sentiment weakened and cost-of-living pressures intensified.

Thailand flooding compounds softer vehicle demand

The first-quarter revenue decline was concentrated in 4WD, where subdued new-vehicle and pick-up sales collided with flooding in Thailand that disrupted OEM plant production days. Amotiv expects the flooding effect to normalise in the second half, but says demand for pick-ups and medium-plus SUVs is likely to remain subdued.

Lighting, Power and Electrical revenue was broadly flat, while Powertrain and Undercar revenue grew marginally. Gross margins improved year on year, but operating costs were hit by one-off expenses, inflation and warehousing and logistics costs. The company cited a US customer dispute, Hi Viz lighting and heightened caravan and recreational-vehicle risks among the one-off items.

Buyback signals confidence despite earnings downgrade

Amotiv will conduct a further on-market buyback of up to 5% of issued capital, funded through existing cash flows and debt facilities. It follows the completed 5% buyback, which was reported in earlier coverage, and takes total shareholder distributions across FY25 and FY26 to $180.2 million when dividends and buybacks are included.

Chair James Fazzino said the board believed Amotiv’s share price substantially undervalued the company and that buying its own shares at current levels represented an attractive investment. The decision comes with leverage at 1.85 times and after FY26 cash conversion improved to 93.1%, although the buyback will compete for capital with the group’s international expansion and productivity programs.

H2 recovery depends on savings and international growth

Management’s offsets are heavily weighted to the second half. Amotiv is targeting a further $10 million in net annualised benefits from its Amotiv Unified program, adding to the $15 million already delivered by the end of FY26. Pricing actions across all three divisions, favourable US dollar hedging and a Thai baht tailwind are also expected to help, partly offsetting higher steel costs.

“Graeme Whickman”

The group expects the outlook to be broadly in line with FY26 continuing operations once VAFI is included. Amotiv took control of 50.1% of the Vietnamese filtration supplier from 1 October, with the investment expected to contribute mainly in H2. A memorandum of understanding with Holley Performance Brands (NYSE:HLLY) is also intended to open North American channels for Ryco high-performance filters, DBA brakes and XClutch products, although the company describes additional opportunities as still under evaluation.

The company is also preparing for a leadership change: Graeme Whickman will step down as managing director and chief executive in December after more than eight years, with the search for his successor nearing its final phase. That transition will place the incoming CEO in charge of proving whether cost savings, VAFI and new overseas distribution can offset a softer core market, rather than simply waiting for vehicle demand to return.