Gates Industrial Corporation plc (GTES) Bundle
A Brief History of Gates Industrial Corporation plc
Gates Industrial Corporation plc, a leading global manufacturer of engineered power transmission and fluid power solutions, has undergone significant transformations since its inception in 2017. The company was established following the acquisition of the Gates Corporation by Blackstone Group, which aimed to leverage Gates' strong market position and innovative product portfolio.
Corporate Structure and Ownership
As of September 28, 2024, Gates Industrial Corporation has a total outstanding share count of 254,699,987. The company has seen fluctuations in its share count due to share repurchase programs, with 11,690,303 shares repurchased and canceled in the nine months leading to September 2024.
Financial Performance
For the nine months ended September 28, 2024, Gates reported net sales of $1,588.1 million, a decrease of 4.2% compared to $1,658.4 million in the prior year. This decline was primarily driven by lower sales volumes across various segments, particularly in the Power Transmission segment, which experienced a 4.2% drop in sales volume. The Adjusted EBITDA for the same period was $355.8 million, reflecting a 3.7% increase year-over-year.
Key Financial Metrics
| Metric | 2024 (9 Months) | 2023 (9 Months) | Change (%) |
|---|---|---|---|
| Net Sales | $1,588.1 million | $1,658.4 million | -4.2% |
| Gross Profit | $1,023.2 million | $1,021.2 million | +0.2% |
| Adjusted EBITDA | $355.8 million | $343.2 million | +3.7% |
| Net Income | $158.3 million | $170.0 million | -6.9% |
Cost Management and Profitability
Gates has focused on optimizing its cost structure, resulting in a gross profit margin improvement from 39.5% in the previous year to 39.7% in 2024. Selling, general, and administrative (SG&A) expenses for the nine months ended September 28, 2024, were $649.9 million, down from $666.2 million in the prior year, indicating effective cost control measures.
Share Repurchase and Capital Management
In February 2024, Gates initiated a share repurchase program of up to $100 million, which was later expanded to $250 million in July 2024. This strategic move is aimed at enhancing shareholder value and optimizing the capital structure amidst fluctuating market conditions.
Debt and Financial Obligations
As of September 28, 2024, Gates' total debt stood at $2,394.9 million, comprised of secured and unsecured debt. The company has maintained compliance with its debt covenants, allowing for continued operational flexibility and growth opportunities. Interest expense for the nine months ended September 28, 2024, was reported at $121.7 million.
Market Position and Future Outlook
Gates continues to strengthen its market position through innovation and strategic acquisitions. Despite recent challenges with declining sales volumes, the company remains focused on long-term growth and profitability through operational efficiency and an expanding product portfolio.
A Who Owns Gates Industrial Corporation plc (GTES)
Major Shareholders
As of 2024, the ownership structure of Gates Industrial Corporation plc (GTES) includes a mix of institutional investors and individual shareholders. The significant shareholders are as follows:
| Shareholder Name | Ownership Percentage | Type of Ownership |
|---|---|---|
| Blackstone Group Inc. | Approximately 20.1% | Institutional Investor |
| Vanguard Group Inc. | Approximately 8.5% | Institutional Investor |
| BlackRock Inc. | Approximately 7.3% | Institutional Investor |
| State Street Corporation | Approximately 4.9% | Institutional Investor |
| Other Institutional Investors | Approximately 30.2% | Various |
| Public Float | Approximately 29.0% | Individual Shareholders |
Recent Share Repurchase Activity
In 2024, Gates Industrial Corporation has executed significant share repurchase transactions, impacting its ownership structure:
- February 2024: Repurchased 4,151,100 ordinary shares from Blackstone for $50.0 million.
- August 2024: Repurchased 7,539,203 ordinary shares from Blackstone for $125.0 million.
Board of Directors
The Board of Directors includes representatives from major shareholders, which influences strategic decisions. Key members are:
- Michael M. McGarry (Chairman)
- W. James McNerney Jr. (Director)
- Bob M. Simpson (Director)
Ownership Trends
Ownership trends show a slight increase in institutional ownership, reflecting confidence in the company's strategic direction:
- Institutional ownership increased from 60% in 2023 to approximately 62% in 2024.
- Public float decreased due to share repurchase activities.
Shareholder Composition
The composition of shareholders as of September 2024 is depicted in the following table:
| Category | Percentage of Total Shares |
|---|---|
| Institutional Investors | 62.0% |
| Individual Investors | 29.0% |
| Insider Ownership | 9.0% |
Market Capitalization
As of September 28, 2024, Gates Industrial Corporation's market capitalization stood at approximately $4.2 billion, reflecting the company’s financial health and investor confidence.
Latest Financial Performance
For the nine months ending September 28, 2024, Gates reported:
- Net Sales: $2.578 billion
- Adjusted EBITDA: $580.3 million
- Net Income: $178.8 million
Conclusion on Ownership Dynamics
The ownership dynamics of Gates Industrial Corporation plc indicate a strong institutional presence with significant transactions that may alter the landscape moving forward. The company's performance metrics align with strategic initiatives that appeal to major shareholders.
Gates Industrial Corporation plc (GTES) Mission Statement
Mission Statement Overview
The mission of Gates Industrial Corporation plc is to provide innovative solutions in the power transmission and fluid power markets, aiming to enhance the performance and efficiency of their customers' operations. The company focuses on delivering high-quality products while ensuring sustainability and operational excellence.
Financial Performance Indicators
As of September 28, 2024, Gates Industrial Corporation reported the following financial metrics:
| Metric | 2024 (Q3) | 2023 (Q3) | Change (%) |
|---|---|---|---|
| Net Sales | $830.7 million | $872.9 million | -4.8% |
| Cost of Sales | $494.9 million | $529.5 million | -6.5% |
| Gross Profit | $335.8 million | $343.4 million | -2.2% |
| Adjusted EBITDA | $182.5 million | $189.4 million | -3.6% |
| Adjusted EBITDA Margin | 22.0% | 21.7% | +30 bps |
| Net Income from Continuing Operations | $55.2 million | $85.6 million | -35.4% |
Market Segmentation
Gates operates primarily in two segments: Power Transmission and Fluid Power. The breakdown of net sales by segment for the nine months ended September 28, 2024, is as follows:
| Segment | Net Sales ($ million) | Percentage of Total Sales |
|---|---|---|
| Power Transmission | $1,588.1 million | 61.8% |
| Fluid Power | $990.7 million | 38.2% |
Operational Highlights
Gates has implemented various enterprise initiatives aimed at improving manufacturing performance and pricing strategies, which have positively impacted their financial metrics. Despite challenges such as lower sales volume and adverse currency impacts, the company has focused on maintaining profitability through operational excellence.
Future Outlook
For the remainder of 2024, Gates anticipates stabilizing industrial markets and expects that ongoing execution of enterprise initiatives will enhance profitability and drive organic growth. The company aims to continue its strategy of delivering innovative solutions while managing operational costs effectively.
Shareholder Value Initiatives
In 2024, Gates has engaged in share repurchase activities, highlighting its commitment to returning value to shareholders. The company repurchased approximately $176.1 million worth of shares during the nine months ended September 28, 2024.
| Action | Details |
|---|---|
| Share Repurchase | $176.1 million (Q3 2024) |
| 2024 Unsecured Senior Notes | $500 million issued on June 4, 2024, maturing July 1, 2029 |
Conclusion of Mission Alignment
Gates Industrial Corporation's mission aligns closely with its operational and financial strategies, focusing on delivering high-quality products while maintaining a commitment to sustainability and customer satisfaction.
How Gates Industrial Corporation plc (GTES) Works
Overview of Operations
Gates Industrial Corporation plc operates primarily in the manufacturing of power transmission and fluid power products. The company serves a wide range of industrial and automotive applications, distributing products through both aftermarket and original equipment manufacturer (OEM) channels globally.
Financial Performance
For the nine months ended September 28, 2024, Gates reported the following financial metrics:
| Metric | Value (in millions) |
|---|---|
| Net Sales | $2,578.8 |
| Cost of Sales | $1,555.6 |
| Gross Profit | $1,023.2 |
| Selling, General and Administrative Expenses | $649.9 |
| Operating Income | $366.1 |
| Net Income from Continuing Operations | $179.3 |
| Adjusted EBITDA | $580.3 |
| Adjusted EBITDA Margin | 22.5% |
Segment Analysis
The company's revenue is primarily derived from two segments: Power Transmission and Fluid Power. The distribution of net sales for the three months ended September 28, 2024, is as follows:
| Segment | Net Sales (in millions) | Percentage of Total Sales |
|---|---|---|
| Power Transmission | $513.4 | 61.8% |
| Fluid Power | $317.3 | 38.2% |
Power Transmission Segment
For the nine months ended September 28, 2024, the Power Transmission segment reported:
| Metric | Value (in millions) |
|---|---|
| Net Sales | $1,588.1 |
| Adjusted EBITDA | $355.8 |
| Adjusted EBITDA Margin | 22.4% |
Fluid Power Segment
For the nine months ended September 28, 2024, the Fluid Power segment reported:
| Metric | Value (in millions) |
|---|---|
| Net Sales | $990.7 |
| Adjusted EBITDA | $224.5 |
| Adjusted EBITDA Margin | 22.7% |
Cash Flow Analysis
During the nine months ended September 28, 2024, cash flows were reported as follows:
| Cash Flow Activity | Value (in millions) |
|---|---|
| Cash Provided by Operating Activities | $188.7 |
| Net Cash Used in Investing Activities | ($80.3) |
| Net Cash Used in Financing Activities | ($253.5) |
Debt and Financing
As of September 28, 2024, Gates had the following debt obligations:
| Debt Type | Carrying Amount (in millions) | Principal Amount (in millions) |
|---|---|---|
| 2024 Dollar Term Loans due June 4, 2031 | $1,293.7 | $1,300.0 |
| 2022 Dollar Term Loans due November 16, 2029 | $550.4 | $564.9 |
| Revolving Credit Facility | $30.0 | $30.0 |
| 6.875% Dollar Senior Notes due July 1, 2029 | $503.6 | $500.0 |
| Total Debt | $2,377.7 | $2,394.9 |
Market Challenges and Opportunities
Gates faces challenges from global economic uncertainties, particularly due to geopolitical tensions and supply chain disruptions. However, the company continues to focus on enterprise initiatives aimed at improving manufacturing performance and pricing strategies to enhance profitability going forward.
How Gates Industrial Corporation plc (GTES) Makes Money
Revenue Streams
Gates Industrial Corporation plc generates revenue primarily through two segments: Power Transmission and Fluid Power. As of September 28, 2024, the breakdown of net sales is as follows:
| Segment | Net Sales (Q3 2024) | Net Sales (Q3 2023) | Change (%) |
|---|---|---|---|
| Power Transmission | $513.4 million | $536.4 million | (4.3%) |
| Fluid Power | $317.3 million | $336.5 million | (5.7%) |
| Total | $830.7 million | $872.9 million | (4.8%) |
Power Transmission Segment
The Power Transmission segment accounted for approximately 61.8% of Gates’ net sales for the three months ended September 28, 2024. This segment includes a variety of belts, hoses, and other power transmission components.
Net sales for the nine months ended September 28, 2024 were $1,588.1 million, down from $1,658.4 million in the previous year, reflecting a decline of 4.2%. The adjusted EBITDA for this segment during the same period was $355.8 million, with an EBITDA margin of 22.4%.
Fluid Power Segment
The Fluid Power segment represented about 38.2% of Gates’ net sales for the three months ended September 28, 2024. It offers hydraulic and pneumatic products used in various industrial applications.
For the nine months ended September 28, 2024, net sales were $990.7 million, a decrease from $1,048.5 million in the prior year, marking a 5.5% decline. The adjusted EBITDA for Fluid Power was $224.5 million, with an EBITDA margin of 22.7%.
Cost Structure
Gates’ cost of sales for the three months ended September 28, 2024 was $494.9 million, down from $529.5 million in the prior year, resulting in a gross profit of $335.8 million. The gross profit margin improved to 40.4% from 39.3% year-over-year.
Market Dynamics
The company's performance has been influenced by various factors including currency exchange rates, which adversely affected net sales by approximately $8.8 million in Q3 2024. The demand from industrial OEM channels softened, particularly in North America and EMEA, leading to an overall decline in sales volume.
Adjusted EBITDA and Profitability
For the three months ended September 28, 2024, Gates reported adjusted EBITDA of $182.5 million, representing a margin of 22.0%, slightly up from 21.7% in the previous year. This reflects the company’s focus on enterprise initiatives aimed at improving manufacturing performance and pricing strategies.
Geographic Sales Distribution
The following table summarizes Gates' net sales by key geographic region for Q3 2024:
| Region | Power Transmission Net Sales | Fluid Power Net Sales |
|---|---|---|
| U.S. | $140.9 million | $168.1 million |
| North America (excluding U.S.) | $56.6 million | $49.2 million |
| United Kingdom | $9.1 million | $16.0 million |
| EMEA (excluding U.K.) | $137.5 million | $46.1 million |
| East Asia and India | $70.4 million | $18.5 million |
| Greater China | $72.6 million | $8.8 million |
| South America | $26.3 million | $10.6 million |
Conclusion
In summary, Gates Industrial Corporation plc derives its revenue from its two primary segments, Power Transmission and Fluid Power, with a focus on optimizing profitability through operational efficiency and strategic pricing initiatives.
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Article updated on 8 Nov 2024
Resources:
- Gates Industrial Corporation plc (GTES) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Gates Industrial Corporation plc (GTES)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Gates Industrial Corporation plc (GTES)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.