Adient (ADNT) Q4 FY2026 Earnings Call: FY2027 EBITDA Guide of $900M-$925M

Key Takeaways

• Adient reported fiscal Q4 2026 sales of $3.7 billion, up 1% year over year, while adjusted EBITDA increased $3 million to $229 million and adjusted EBITDA margin held at 6.1%.
• Fiscal 2026 sales rose 4% to approximately $15.2 billion, or about 2% excluding foreign exchange. Adjusted EBITDA was broadly flat at $884 million.
• Full-year free cash flow reached $222 million, including approximately $60 million of timing-related benefits in Q4. Adient ended the year with $886 million in cash and net leverage of 1.7x.
• Management expects fiscal 2027 revenue of $14.8 billion to $15.0 billion, adjusted EBITDA of $900 million to $925 million and free cash flow above $100 million despite lower production and unfavorable customer mix.
• The Board increased Adient’s share repurchase authorization by $400 million. The company currently plans approximately $100 million of repurchases in fiscal 2027.
• Management expects stronger business performance, commercial recoveries, productivity and restructuring benefits to more than offset lower volume and foreign-exchange pressure, but commodities, tariffs and customer downtime remain key uncertainties.

Key Financial Data

Middle East conflict-related costs reduced adjusted EBITDA by $22 million in Q4 and $41 million for the full year. Excluding the full-year impact, management said Adient generated nearly $100 million of favorable business performance.

Business and Operating Performance

The Americas benefited from strong volumes with key customers and pricing, allowing consolidated sales to outperform the broader market. Full-year adjusted EBITDA declined slightly to $399 million. Performance was affected by fuel surcharges, customer downtime, higher labor costs following revised UAW agreements and Middle East-related costs.

Adient said its Americas onshoring backlog now exceeds the previously discussed $400 million. A new Nissan e-POWER award is expected to begin production in the second half of fiscal 2028 at approximately 40,000 units annually. Some onshoring programs have been delayed, however, creating fiscal 2027 mix pressure.

EMEA full-year adjusted EBITDA was approximately flat at $125 million. Lower production and unfavorable customer mix were partly offset by restructuring benefits and commercial actions. Management described Europe as Adient’s most challenging operating region because of excess capacity, changing vehicle programs and customer launch delays.

Asia adjusted EBITDA increased $10 million to $450 million. Consolidated China sales outperformed the market due to launches with NIO, Leapmotor and Xiaomi, while softer Korean volumes and lower exports weighed on the rest of Asia. Unconsolidated revenue fell approximately 19% on an FX-adjusted basis as new-energy vehicle adoption pressured internal-combustion platforms in China.

After fiscal year-end, Adient agreed to sell its 50% interest in the FAA seat-frame joint venture, subject to closing conditions. Management said the transaction should simplify ownership and improve coordination and cost competitiveness.

Management Guidance

Management expects global vehicle production to decline approximately 1%, with all major markets down year over year. Lower production across Adient’s key regions is expected to be partly offset by continued outgrowth in Asia.

The company expects modest margin expansion despite declining sales. Productivity, commercial discipline, supplier savings, automation and restructuring are expected to more than offset lower volume and foreign-exchange pressure. Management also expects fiscal 2027 business performance to exceed the level achieved in fiscal 2026.

Fiscal 2027 free cash flow will face a $60 million headwind from cash-flow items pulled forward into fiscal 2026. An additional $35 million year-over-year headwind reflects dividend timing benefits received during the past two years that are not expected to recur. Restructuring spending is currently expected to remain approximately flat year over year.

Risks and Areas to Watch

• Adient expects significant fiscal 2027 volume pressure and unfavorable vehicle and program mix in the Americas and China.
• Customer downtime related to model changeovers is expected to have its largest effect around fiscal Q2, with some disruption potentially extending into Q2 from Q1.
• Higher commodities, foreign exchange, tariffs, fuel surcharges and annualized UAW labor costs require substantial customer and supplier recoveries.
• Management said recent Canadian tariff changes could create approximately $30 million to $70 million of pressure in the Americas. Recovery assumptions are included in guidance.
• China is expected to continue outperforming the market, but not at the fiscal 2026 rate, while previously discussed margin compression is expected to flow through in fiscal 2027.
• EMEA remains affected by excess capacity, program cancellations and extensions, delayed launches and uncertainty over the optimal level of restructuring investment.
• Middle East disruptions continue to affect costs and export volumes from certain operations.

Analyst Q&A Highlights

Management expects China to grow above the market in fiscal 2027, supported by a greater mix of domestic Chinese automakers, premium seating innovation and cost control. However, the rate of outgrowth should moderate, and Asia margins are expected to face some catch-up compression after outperforming expectations in fiscal 2026.

In the Americas, management expects operating margin expansion despite lower revenue. Commercial recoveries, automation and growth in higher-contribution product lines such as trim and foam are expected to support profitability. Momentum may improve toward the end of fiscal Q3 and into Q4 as onshoring programs begin to contribute.

Management emphasized that fiscal 2026 and fiscal 2027 free cash flow should be assessed together because of timing shifts. Combined two-year free cash flow is now expected to approach $320 million, compared with an earlier expectation of approximately $280 million to $290 million.

On Europe, management said industry consolidation may be necessary because the seating market has too much capacity and too many suppliers. Adient is evaluating restructuring alongside potential asset sales and other options, with capital prioritized toward the fastest-payback projects.

The company also adopted a tax benefits preservation plan to protect U.S. net operating loss carryforwards and other tax attributes. Management said the action reflected changes in share ownership and the importance of preserving future cash-tax benefits.

Full Earnings Call Transcript

Complete Earnings Call Transcript

Management Remarks

Operator

Welcome to Adient's Fourth Quarter 2026 Earnings Call. [Operator Instructions] I'd like to inform all participants that today's call is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the call over to Linda Conrad. Thank you. You may begin.

Linda Conrad

Thank you, Denise. Good morning, everyone, and thank you for joining us. The press release and presentation slides for our call today have been posted to the Investors section of our website at adient.com. This morning I'm joined by Jerome Dorlack, Adient's President and Chief Executive Officer; Mark Oswald, our Executive Vice President and Chief Financial Officer; and Peter Carlin, Vice President of Finance and Incoming Chief Financial Officer.

On today's call; Jerome will provide an update on the business, Mark will review our Q4 and full year financial results and then Peter will provide an outlook for fiscal year 2027. After our prepared remarks, we will open the call to your questions. Before I turn the call over to Jerome, Mark and Peter; there are a few items I'd like to cover. First, today's conference call will include forward-looking statements. These statements are based on the environment as we see it today and, therefore, involve risks and uncertainties.

I would caution you that our actual results could differ materially from these forward-looking statements made on the call. Please refer to Slide 2 of the presentation for our complete safe harbor statement. In addition to the financial results presented on a GAAP basis, we will be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures to the closest GAAP equivalent can be found in the appendix of our full earnings release.

And with that, it is my pleasure to turn the call over to Jerome.

Jerome Dorlack

Thank you, Linda. Good morning, everyone, and thanks for joining us today. Before we begin, I would like to take a moment to recognize Mark Oswald and thank him for his contributions during his time at Adient. Mark has been a valued partner to me and to the broader leadership team and we greatly appreciate all that he has done for the company. At the same time, I am very pleased to welcome Peter Carlin to the CFO role as of November 16. After serving on our Board for several years, Peter brings a new perspective to the organization and I'm looking forward to partnering with him as we move into our next chapter.

As I always do in this call, I would like to take a moment to recognize the commitment of our global team and thank them for their efforts. This past year has been full of unexpected challenges and our team has worked diligently to deliver upon our commitments. Their efforts have not gone unnoticed. They are recognized and very much appreciated. In addition, I would also like to thank our customers for their continued trust and partnership. We remain committed to meeting and exceeding their expectations by delivering innovative solutions and operational excellence.

With that, let's turn to Slide 4. Adient delivered a solid finish to fiscal 2026. Our focus all year was on executing what we could control. That focus showed up in our results, in our cash generation and in how we deployed capital. Beginning with the top line. Fiscal '26 revenue was approximately $15.2 billion, up 4% year-over-year. Adjusted EBITDA was $884 million, flat versus last year. We were able to hold earnings steady even though the backdrop was very challenging. We generated $222 million of free cash flow and ended the year with $886 million of cash on the balance sheet.

With that free cash flow, we repurchased $100 million of Adient shares, roughly 6% of our shares outstanding. We also paid down $35 million of debt ending the year with $2.4 billion of gross debt and $1.5 billion of net debt. I don't want to gloss over the environment though. Across the industry, geopolitical disruptions, macroeconomic factors and elevated input costs collectively weighed on the year. In the Americas, we saw near-term operational headwinds, including customer and supplier driven inefficiencies.

In EMEA, we faced lower volumes and unfavorable customer mix. And finally in Asia, we saw China market pressure, lower domestic volumes and due to the conflict in Iran, lower export volumes as well from certain of our operations. Even so, the team stayed focused on execution and that is why we can report a solid finish to the year.

Turning to the next slide. Adient's localized wins in premium seating content are supporting a diversified customer base across the globe. In the Americas, Adient continues to be a net beneficiary of customer onshoring. This quarter we secured new business with Nissan on their e-POWER vehicle, an onshoring win where we will be supplying JIT, trim, foam and other components. We expect the program to come online in the back half of fiscal '28 with around 40,000 annual units.

Next, we continue to win business across all powertrains, further expanding our industry-leading diversity. Our wins span electric, hybrid and internal combustion platforms. This quarter we won vertically integrated content on the NIO Cygnus BEV where we are providing first-row JIT, trim and foam. On the Proton AMA05 ICE platform, we have the complete seat. And on the Dongfeng-Honda NX1 plug-in hybrid, we have the third-row complete seat. In Europe, we are retaining and extending business with many European OEMs.

We have secured a number of replacement and life cycle extension awards this past quarter, including content on the Volkswagen Audi Q8, the Skoda Karoq and the rear seat structure on the BMW X1, X2 and Mini Countryman. These awards reinforce our incumbent positions and extend revenue visibility on existing programs. Importantly, they leverage our established manufacturing footprint and seating expertise while supporting profitable growth with key customers.

And finally, in Asia, we continue to launch vertically integrated, high content, premium seating products with a variety of customers. A couple of highlights from this quarter's launches include the Mitsubishi Pajero where we provide powered comfort features and flexible second and third row seating and the Xiaomi SkyNomad N90, which includes 0-gravity seating on both rows as well as a swivel function on the first row. Taken together, these wins show a diversified customer base across regions, powertrains and product types.

Moving on to Slide 6. This page highlights how the team has successfully executed across the year and what that means for business going forward. Let me begin with our customers. We received numerous customer awards and recognition in every region this year, reinforcing our Supplier of Choice status. That recognition is translating into business. We continue to win onshoring programs and we also secured multiple new and conquest wins that were highlighted throughout the year. Next, we delivered on innovation. Automation and modularity drove new product wins across the business.

Our innovative products were recognized by our customers with new program wins and launches. These product offerings help us increase content per vehicle and allow our customers to differentiate themselves in the market. A few examples of this include the StepJoy foot massage, which is sold on the NIO ES9. We also have the ProForce Massage Flow, which is available on multiple models now in the Asia Pacific region. And the Power Swivel is available on Leapmotor D99 . Our breadth of innovation from product to process will continue to be a key differentiator for Adient.

Moving on now to the regional dynamics. Each region faced its own set of challenges this year. In spite of those challenges, we delivered growth over market in the Americas and China. In EMEA, restructuring benefits are beginning to materialize. Strong business performance is helping to offset macro headwinds. We continue to execute commercial, operational and strategic actions with a focus on driving value. In Asia, we have a strong business both in China and outside of China. We delivered double-digit margins in the region and expect that to continue into next year.

Finally, on margins and cash. In China, we mitigated margin compression and continued to actively manage our JV footprint. After the quarter end, we entered into an agreement to sell our 50% stake in our FAA joint venture. This joint venture is a seat frame joint venture with CFAA and the transaction will be subject to closing conditions. This will simplify ownership and oversight. Combining the frame and seating business should result in improved coordination and cost competitiveness and we also achieve a more closely integrated seating solution.

Across the company, we've stayed laser-focused on cash generation while managing through industry and macroeconomic conditions. As the management team reflects on what we accomplished this year, this is an execution that supports our confidence heading into fiscal 2027 against what is a very challenging macro backdrop.

And with that, I'll turn the call over to Mark to walk you through the financial review.

Mark Oswald

Thanks, Jerome. Let's jump into the financials. Adhering to our typical format, Slides 8 and 9 detail our reported results on the left side and our adjusted results on the right side. We will focus our commentary on the adjusted results, which exclude special items that we view as either onetime in nature or otherwise not reflective of the underlying performance of the business. Full details of these adjustments are included in the appendix of the presentation for reference.

That said, moving to the right side. Sales for the quarter were $3.7 billion, up 1% year-over-year with adjusted EBITDA of $229 million and adjusted EBITDA margin of 6.1%. Adjusted EBITDA and adjusted EBITDA margin were both relatively flat year-on-year despite the impact from Middle East conflict-related costs. Equity income was up significantly year-over-year mainly driven by favorable business performance in certain of our China joint ventures. Adient reported adjusted net income of $40 million or $0.52 per share.

For the full year, let's look to Slide 9. Sales came in approximately $15.2 billion, up 4% year-over-year. If we exclude FX, sales were up approximately 2% year-over-year. Adjusted EBITDA landed at $884 million, essentially flat with fiscal year 2025. Positive business performance offset the unfavorable headwinds related to the Middle East conflict, which we'll get into a little bit more on the bridges. Equity income, as I mentioned on the last slide, mainly up due to favorable business performance in certain of our China joint ventures. For the year, we reported adjusted net income of $147 million or $1.87 per share.

I'll go through the next few slides briefly as details for the results are included on the slides allowing sufficient time for Q&A. Diving deeper into the quarter and beginning with revenue on Slide 10. We reported consolidated sales of approximately $3.7 billion in Q4, which was a $42 million increase compared to Q4 fiscal year '25, primarily driven by favorable volume and pricing in the quarter. Looking to the right side of the slide. Adient's consolidated sales were favorable to the broader market in the Americas due to strong volumes with key customers as well as pricing while sales in EMEA underperformed due to customer mix.

Consolidated sales in China continued to outperform the market due to strong new program launches with customers such as NIO, Leapmotor, and Xiaomi while the rest of Asia underperformed driven by softer volumes primarily in Korea as well as lower exports due to the ongoing disruptions caused by the Middle East conflict. In Adient's unconsolidated revenue, year-over-year results declined approximately 19% adjusted for FX reflecting lower volumes on ICE platforms amid accelerating NEV adoption and softer consumer demand in China with some modest impact from the Middle East conflict as well.

Turning to Slide 11. We provided a bridge of adjusted EBITDA to show the segment performance between periods. Adjusted EBITDA was $229 million during the quarter, up $3 million year-over-year. Business performance was strong during the quarter driven by favorable material margin and commercial discipline despite a $22 million headwind from Middle East conflict-related costs in Q4. Volume and mix represented a year-over-year headwind due to lower customer volumes in EMEA and expected mix headwinds in China.

Let's look at the full year moving to Slide 12. Adjusted EBITDA was $884 million, up slightly year-over-year. When we adjust for the $41 million impact of Middle East conflict-related costs, Adient drove nearly $100 million in favorable business performance year-over-year. The team's disciplined execution continued to deliver. Unfavorable volume and mix of $70 million year-over-year was a result of lower customer production in Europe and customer mix headwinds in Asia partially offset with net impact of volume and mix from the Americas.

As in past quarters, we've provided segment performance details in the appendix of the presentation starting on Page 20. I'll walk through these briefly. For the full year, Americas adjusted EBITDA was $399 million, down slightly year-over-year. The region absorbed the largest share of the Middle East conflict-related cost, most of which landed in Q4 as the chart shows. In EMEA, adjusted EBITDA was roughly flat year-over-year at $125 million. Volume and mix remained a headwind, but business performance improved through restructuring benefits and commercial actions, which helped offset about $15 million of Middle East-related costs.

In Asia, adjusted EBITDA was $450 million for the year, up $10 million year-over-year. The region remained highly profitable with favorable business performance in both the consolidated and unconsolidated businesses helping to mitigate volume and mix headwinds due to expected mix-related margin compression in China and softness driven by the Middle East conflict. To sum up the regions, fiscal year 2026 was a year of challenges as Jerome noted in his opening remarks. The team stayed focused on what we could control, generating strong cash despite the headwinds. The underlying operating performance remained resilient.

Turning to Adient's cash flow now on Slide 13. For the full year 2026, the company generated $222 million of free cash flow defined as operating cash less CapEx. We have highlighted the key drivers impacting the full year free cash flow on the right side of the slide. During the year, we benefited from certain fiscal year 2025 dividends that were delayed and paid in fiscal year 2026. We also had a favorable impact of roughly $35 million due to the timing of IEEPA refunds in fiscal year '26, which we expect to return to our customers in fiscal year 2027.

In addition, cash flow was favorably impacted by about $25 million of customer program tooling payments that was pulled from 2027 into 2026. We also had lower year-over-year restructuring spend during the year, which was offset by higher CapEx to support growth and innovation as well as higher cash taxes due to nonrecurring tax settlement during the year, which we previously highlighted. In total, we had about $60 million of timing-related working capital benefits during the fourth quarter.

Turning to Slide 14 for our liquidity and capital structure. We ended the year with total liquidity of approximately $1.7 billion. That included roughly $886 million of cash on hand and $857 million of undrawn capacity under our revolving line of credit. We remain well positioned from a liquidity standpoint. On capital allocation, we returned $100 million to shareholders in fiscal 2026 through share repurchases, about 4.9 million shares or roughly 6% of our shares outstanding. On the debt side, we continued to be active in the fourth quarter. We paid down $35 million of our 8.25% senior unsecured notes.

We also took advantage of the market and executed an opportunistic refinancing of our $500 million of 7% notes through an add-on to our Term Loan B. That transaction should generate approximately $6 million of annualized interest savings. Our net leverage ratio on a trailing 12-month basis is 1.7x. As you can see from the maturity profile on the right side of the slide, we have no near-term maturities. Importantly, the balance sheet is in a strong position and we remain disciplined with how we deploy capital.

With that, I'll hand it over to Peter to talk about our outlook for fiscal year 2027.

Peter Carlin

Thanks, Mark, and thank you for your decade of service at Adient. I also want to say thank you to Jerome and the Board for providing this opportunity to me. As we enter fiscal 2027, we expect significant volume headwinds. Global Mobility anticipates global vehicle production will decline approximately 1% with all key markets down year-over-year. Adient also faces incremental pressure from vehicle and program mix in the Americas and China. Against that backdrop, our focus remains squarely on the things we can control.

We will continue to drive growth in our core product lines, execute our launch pipeline, invest in automation, improve productivity, partner with vendors and suppliers to find savings and advance our restructuring actions. We expect these actions to support continued modest margin expansion in a declining sales environment. We will focus on cash generation, which remains our highest priority. While lower volumes will create pressure on free cash flow in fiscal ' 27, we ended fiscal '26 with a strong cash balance and remain committed to returning value to our shareholders.

We are evaluating multiple opportunities to generate additional cash in 2027. While the industry backdrop for fiscal '27 appears to be challenging, neither our priorities nor our confidence in our ability to execute have changed. With that backdrop, let's turn to Slide 17 and walk through our fiscal 2027 outlook. We expect revenue of approximately $14.8 billion to $15 billion, reflecting lower production volumes across each of our major regions partially offset by continued outgrowth in Asia.

Despite the lower volume environment, we expect adjusted EBITDA to be in the range of $900 million to $925 million. We expect the benefits from continued business performance to more than offset the headwinds from lower volume and foreign exchange. Our commitment to business performance reflects the ongoing work across the organization around productivity, commercial discipline and restructuring and demonstrates the resilience we have built into the business. I want to thank all of our employees around the world for their hard work, dedication and contributions to our ongoing success.

Turning to cash. We expect free cash flow of more than $100 million. That is below the level of cash generation we expect from this business. CapEx and restructuring will continue to be elevated as we launch new programs, win new business, invest in automation and position ourselves for lower costs. We are working every day to find ways to lower these costs and focus on only the fastest payback investments. Instilling this discipline will take time.

Fiscal '27 cash flow is unfavorably impacted by $60 million of actions pulled forward to fiscal '26. In addition, there is another $35 million headwind year-over-year related to dividends where for the past 2 years, we have benefited from timing of dividend payments. We do not expect this to recur in 2027. As I said earlier, we finished fiscal '26 with a strong cash balance of $886 million and remain committed to a disciplined approach to capital allocation for fiscal '27.

Turning to Slide 18. We are laser-focused on creating shareholder value. Reflecting confidence in Adient's outlook and cash flow generation, the Board recently approved a $400 million increase to our share repurchase authorization. This provides additional flexibility to return capital to shareholders over time. Our current authorization represents over 30% of our share count at today's prices. Management and the Board believe our current stock price and multiple present an excellent opportunity to repurchase shares.

For fiscal '27, we are currently planning approximately $100 million of share repurchases. Importantly, we will remain disciplined in how and when we deploy that capital taking into account our cash generation, market conditions and other opportunities for capital. We are actively looking at other means of generating capital to take advantage of the multiple opportunities in front of us. We will evaluate additional options to deploy this capital into high-return investments across our capital structure and our business.

The Board also approved a tax benefits preservation plan designed to protect our valuable U.S. tax assets, including our U.S. net operating loss carryforwards and other tax attributes that can reduce future taxable income. These tax attributes represent meaningful future cash benefits and the plan is intended to reduce the risk that an ownership change could limit our ability to utilize those attributes. Taken together, these actions reflect the same disciplined approach we have brought to the business; generate cash flow, maintain financial flexibility and focus on ways to create long-term value for our shareholders.

With that, operator, we can turn it over to Q&A.

Operator

[Operator Instructions] Our first question comes from Alex Perry with Bank of America.

Question-and-Answer Session

Alexander Perry

I just wanted to ask about China. Just can you give us an update about how you're thinking about your China business in 2027. Definitely been an area of outperformance there. What level of outgrowth do you expect against the I think you said minus 3% production outlook?

Jerome Dorlack

Yes. Thanks very much for the question. China continues to be a very dynamic market environment just in general between the mix of exports, domestic and general compression of the domestic market. I think when we think about our China business, we reflect on '26; we were able to exceed our commitments in managing the margin compression. When we think about '27, some of that margin compression will now start to flow through that we've been talking about and speaking about. In terms of growth over market, we had a very good year this year.

Do we expect that level of growth over market to continue? No, I don't think we would anticipate that. We do still see us growing above market in China really driven from 3 factors. The first one being our customer mix as we continue to diversify into the China domestic OEMs. We've actually exceeded our commitment on what we had laid out saying by '26, we wanted to be somewhere in the 60% China, 40% Western. We're actually now exceeding that. So the team continues to outperform and winning with the winners in China.

The second factor is innovation. If you look at our innovation portfolio in China, it is world-class whether that be our premium massage offerings that we have that are truly differentiated, things like StepJoy that we launched with NIO or I look at our long rail, our long track portfolio as well as our swivel mechanism portfolio, which will continue to allow us to grow in the market and exceed where the market is performing. And then the last thing that I think in China when we look at the market which allows us to be successful is just a relentless focus on managing the cost there.

And when we think about managing cost, it's not just about some of the input costs; it's managing the dividends, it's managing the total capital allocation in the region and some of our partner relationships. We talked a little bit today about how we're looking at our FAA joint venture and working to monetize that. But that also allows then our partner, CFAA, to have a more integrated portfolio that they can bring to the market and we'll still benefit from that joint venture overall. Does that answer the question?

Alexander Perry

Yes, that's perfect. And I guess a very similar question on EMEA actually for '27. What sort of level of growth versus market are you expecting there? Are you seeing any signs of things bottoming there? And when would you sort of expect Europe to turn more towards growth in line with market as you look forward over the next few years?

Jerome Dorlack

I think this year it's still too early to say where we'll end up at with respect to growth versus market. There are significant currents and dynamics in EMEA that are changing almost on a monthly basis; whether that is the cancellation of EV projects, the extension of ICE platforms, the extension of a couple of EVs. Our customers, a few of them are continuing to have execution challenges, which is delaying launches that we are on. We saw that in '26. We anticipate there'll be some level of that again in '27.

So the EMEA theater is the most challenging operating theater that we have. I think we've been very open about that. We don't expect that to change in '27 or any time in the near future. So it's really then about us managing costs in that region, optimizing capital deployment between restructuring and capital dollars as well as then looking for other ways to harvest cash in that region through noncore operating assets, which we're working to explore.

Operator

Our next question comes from Joe Spak with UBS.

Joseph Spak

Look, there's clearly some timing here that changed between I guess originally '25 and '26, but now I'm more focused on '26, '27. So I just want to make sure we lay this out correctly. Like you were looking for about $130 million this year. That was your prior guidance. You ended up doing $220 million, but it seems like $60 million was pulled in faster than you did. So that at least gets you to sort of exceed your initial expectations. And then you're looking at $100 million next year. But I think originally it feels like that $60 million that came in this year was expected in next year. So is that right? Can you just sort of help us understand that? And maybe just one more point on the '27 free cash flow, if you could give us a sense of how much restructuring you are embedding in that outlook?

Jerome Dorlack

Yes. I'll take the first question and then I'll hand it over to Peter on the restructuring topic. So the way you framed it up, Joe, is I think pretty much spot on. We had said this year for '26 ending, we would expect to be somewhere in $120 million to $130 million with a balance sheet of about $800 million cash available. We ended the year with almost $900 million on the balance sheet and free cash flow of the $220 million figure. And that is a couple of factors. One is a pull-ahead timing and it's always better to have the cash in our balance sheet, in our hands versus sitting out there either in a customer receivable or a supplier payable.

So I mean we always want that money as soon as we can get it and that's some of that timing. In addition, there were other factors in terms of, say, the tariff repayment from the government that came in sooner than what we had anticipated and so that cash sits on our balance sheet. And what you really should then focus on is what's the combined cash flow over the 2 years as well as the balance sheet position. Between the 2 years we had expected to be somewhere in the, call it, $280 million, $290 million range for combined cash flow.

We'll now look at combined cash flow over the 2 years closer to $320 million. So we're actually exceeding where we thought we would be for combined cash flow especially when you adjust for the lower revenue and the challenging operating environment that we're in. And then really turn your focus then to the balance sheet and that's where we'll be able to run with somewhere in the $800 million of cash on the balance sheet. We continue to push that even to $750 million. That will allow us to look at the capital deployment.

As Peter talked about in his prepared remarks, we see somewhere in the $100 million of share repurchases this year available and we'll monitor that as we go throughout the year to see timing as well as additional cash generation as well as looking at ways to monetize noncore assets and so really driving that distributable cash flow certainly greater than the $100 million of free cash flow. And as far as European restructuring, I'll hand it over to Peter to talk about how we're thinking about that and what's embedded.

Peter Carlin

In total, we expect sort of flattish restructuring dollars. We have an increase actually not in Europe, but in the other regions, offsetting a small decrease in Europe for 2027.

Joseph Spak

And by the way, before I forget, Mark and Peter, respective congratulations to each of you on your next roles here. The second question I had is maybe this tax benefit preservation plan, obviously in some respects it sort of highlights the big NOL you have and maybe a value that's not being accrued to that. But can you talk about why you felt there was a need to incorporate this at this point in time? Like did something change? Was it sort of a prior oversight that something wasn't here to sort of help protect that NOL?

Jerome Dorlack

Yes. So I do think our tax attributes are undervalued. The amount of cash taxes that our NOL saves us each year is very significant. So it's critical and we have a fiduciary responsibility to protect those assets. And it wasn't an oversight previously in not putting a 382 protection plan in place. It's really, Joe, as we look at share ownership shift and that's what drives a risk to your NOLs. We continually monitor the share ownership shift. And as we've been able to welcome new shareholders into Adient due to the performance and interest, it just moves that share ownership shift. And we, as management and the Board, thought it was prudent given the value of those tax attributes to make sure we can protect them and that's why we pushed it forward and implemented it.

Operator

The next question comes from Mike Ward.

Michael Ward

Jerome, you talked about some operating inefficiencies in the Americas. What were they and how fast can they be mitigated?

Jerome Dorlack

Yes. So we didn't break out what the operating inefficiencies were, Mike, and we won't break out what the operating inefficiencies were other than to say we've been very transparent talking about things like fuel surcharge where you've had diesel fuel go from $3.50 up to in the quarter it peaked at almost $8 in some of our operating units. That will continue into '27. I am I think pleased to say that the Americas team is engaged with every customer on fuel surcharge recoveries and in some cases, we've already been able to reach settlement. So it's an industry dynamic that our business just is not meant to absorb and we have to go out and get those costs back.

In addition, you had unscheduled downtime at certain of our customers that wasn't anticipated. Unfortunately, some of that unscheduled downtime will continue into our Q1 and even potentially into Q2 with certain sets of our customer group. And then the last one is we reached a revised UAW settlement in 2 of our largest manufacturing plants and that UAW settlement really hit us full on in terms of a run rate in our Q4. And as you know, it takes time to work through either customer recoveries or initiatives on the shop floor to offset some of those.

Michael Ward

Okay. So it sounds like that works through that you start to get some recoveries. So maybe fiscal 2Q and 3Q, we start to get back on track to more normalized levels of performance?

Jerome Dorlack

Yes. I mean I think and that's generally the timing. I mean you've been following this business for a long time, Mike. It's very cyclical in nature in terms of how customer recoveries come on and how certain customer actions take shape. And given the nature of these costs where you don't have fuel surcharge agreements in place, it takes time to work through that, but we are aggressively working through it. And I'd say the same thing on some of the UAW agreements we've reached. We need time to work through the automation activities. We have a world-leading automation portfolio. It's just how do we want to deploy that within our plants and deploying it in the plants that will offer us the highest return against those allocations.

Michael Ward

And on the '27 outlook, there are some big program disruptions I guess in your fiscal 2Q and 3Q. Can you talk about those? How they went into your planning? And I assume because of the size of if you get some upside, it's going to come from those as we get later in the year. Am I looking at that right, Peter or Linda, whoever put that one together?

Peter Carlin

Yes. I mean we have continued not just the ones you're talking about, but mix headwinds in the Americas and China that are very significant in 2027. Yes. I mean could it be better than that? Absolutely. I mean again we're relying on Global Mobility forecast and what we get from our customers today. So I would say we do have a lot of mix headwind and volume headwinds in the Americas in 2027, but certainly it could be better if the customers I think don't mix shift in the way that they're expected and if they can accelerate some of the program launches. But we're not baking that probability in.

Michael Ward

Right. Because the biggest impact is your fiscal 2Q. The March-April time period, is that the biggest impact to some of those changes?

Jerome Dorlack

Yes, I think driven by downtime at certain customers as they're switching over to new models, that would be when we see the largest impact.

Michael Ward

Okay. And then as you get through that, then you need some momentum as you head into the summer as they rebuild inventory and those sorts of things.

Jerome Dorlack

I think as we look at the Americas business, you start to build momentum kind of end of Q3, Q4 because that's when certain of the onshoring wins start to take shape. Some of the other programs that are coming out of very disruptive performance start to perform. But it will be -- this is a business where we sell to an end customer and that end customer has to perform for us to see benefits of it.

Michael Ward

Mark Oswald, thank you for everything we've learned.

Operator

Our next question comes from James Picariello with BNP Paribas.

James Picariello

Apologies if I missed this, but can you confirm what's embedded in the guide for the structures business roll-offs across the Americas and EMEA? And what's assumed for the Americas new business backlog contribution this year, which I believe was geared toward $400 million?

Jerome Dorlack

Yes. So we haven't explicitly stated what's assumed for the metals roll-off in the Americas or Europe other than to say we continue to have metals in the Americas if you just look at the programs that we're on such as some of the Volkswagen Atlas, some of the other common seat structure frames for the Germans. As those start to roll off, we expect to see continued momentum in rightsizing our metals portfolio across the Americas.

And then to your second question as far as the backlog, the backlog that we had previously talked about for onshoring business because the backlog is larger than that such as the Dakota win and other things. But for pure onshoring business, the backlog overall is intact. In fact we're now exceeding the $400 million. We talked today about the e-POWER win with Nissan. So we're actually exceeding the $400 million backlog of just onshoring wins. It's really about timing and when do certain of these programs begin to roll in. There has been delays on some of those key projects for us that will put pressure on again the mix in the Americas in particular in '27. So the total backlog remains intact actually exceeding what we had previously communicated.

James Picariello

Got it. That's helpful. And then I guess just higher level by segment for the 2027 guide, can you share thoughts on regional growth over market and margin expectations? And specific to Asia Pac, this past year saw a much better margin performance relative to your original year-over-year margin decline expectation of like 100 basis points plus, right? That came in better. What drove that favorable outcome and how should we be thinking about the year-over-year trajectory for Asia Pac margins this year?

Jerome Dorlack

Yes. So we didn't give a growth over market number projection for each region just given the overall dynamics between the regions that I talked about earlier, particularly in China. If you just kind of go region by region. For Asia Pacific, we've always been signaling margin compression in '26 and then continued margin compression in '27. We outperformed in '26. There will be some catch-up to that in the '27 fiscal year. But the region itself will still remain very accretive to Adient overall, very cash generative to the region or to Adient overall and would expect it to outperform the market growth dynamics in China and in Asia Pacific as a combined entity.

In Europe, I already talked a little bit about the European color. Growth over market there I think is a significant unknown. What we are focused on in Europe with laser attention is controlling our costs, controlling our capital expenditures, controlling our restructuring dollars and looking at divestiture of noncore businesses in order to generate cash in that region. The margin profile in that region is going to largely depend on how we treat that capital allocation. We could look at restructuring more to drive margin expansion, but is that the best use of cash?

That's why we want to take time to continue to evaluate that because it is just such a dynamic region and customer schedules, customer programs continue to change. What we and the management team can commit to is looking at that region from a cash flow standpoint and making sure that we're maximizing cash flows coming out. And then turning to the Americas. Within the Americas, we expect to see growth over market in our highest contribution product lines. So if you think about trim and you think about foam, I mean we will exceed growth over market in those.

Some of that gets eliminated out due to intercompany, but it helps to drive margin expansion in the region and we expect margins to expand, especially on an operating level in the Americas in 2027 and that is against what is a very, very challenging backdrop in the Americas. We talked a little bit about fuel surcharge. Fuel surcharge is a big, big topic for us. We haven't quantified it, but it is significant in nature. Another one that we haven't talked about, but I think we need to always be aware of is the changing tariff policies.

Just the most recent change in the Canadian tariffs put somewhere between a $30 million to $70 million pull on Americas that that team now has to go and get and our ability to recover that is embedded in the guide. And then finally, as Mike just asked about in his questions, there is significant downtime that is planned as our customers change over models and that's leading to trapped costs that the team has to go and recover and again, that's embedded in the guide. So there is a significant amount of business performance in the Americas, which will drive margin expansion even in the face of what is top line, I would say, declining year-over-year; but really driven by customer mix schedules. Does that answer your question?

Operator

Our next question comes from Dan Levy with Barclays.

Dan Levy

Great. Mark, congratulations. Peter, congratulations. In the past, you've given annual bridges and you've given your guidance and Mark, over the years, you've done many, many bridges. So wondering if we could just conceptually -- I know you've sort of walked through some of the pieces here. Give us a sense of what it's going to take to hit the midpoint of the guide because it seems like the starting point with volume decrementing at, call it, mid- to high teens plus maybe some price and FX.

It seems like you're going to have to have business performance that's sort of well north of $100 million. I know you just talked about that now. You did $58 million last year. So can you just maybe walk through -- help us quantify a bit more the magnitude of business performance that you're going to need? And if you could just also talk through the commodity piece as well. It sounds like there's some of this that you'll plan to try to recover from customers.

Peter Carlin

It's Peter. I'm going to answer that question. I would say you should expect more business performance than we had in 2026. The teams again have a lot of headwinds that they're going to have to recover. I think we have good amount of confidence that some of the stuff that we endured in 2026 won't be repeated in 2027. It's a difficult commodities environment. It's also a difficult FX environment, a difficult volume environment, a different mix environment.

So I would say we have a lot of different headwinds and some tailwinds. And again we're just not going to go into too much detail from now on with respect to the exact movements only because they change on a daily, weekly and monthly basis. And so we're trying to provide sort of high level information for you guys to use. But I would tell you we have a lot of business performance ahead of us, but our teams already mapped out a large part of it and they continue to work every day to recover it.

I just want to reiterate, volume environment is difficult and for us; we also have headwinds in the Americas and China from mix, as we pointed out, plus commodities plus tariffs plus some FX in different regions of the world. So the team is definitely going to have to work really hard with our customers, our suppliers and internally to find more cost opportunities to offset some of those headwinds.

Dan Levy

Great. And then as a follow-up, I wanted to just double-click on your comment on volume. So the revenue last year from volume/price was something like well north of $300 million of revenue, but your volume mix on the EBITDA line was negative $70 million. I know you talked about some of the mix challenges that are sort of driving down and more than offsetting the increased revenue. But maybe you could just walk through which of these pieces reverse in 2027 or should we view sort of the decremental margin on the lower revenue to be sort of outsized because mix pressures continue?

Peter Carlin

The latter, mix pressures continue and are negatively impacting our decremental margins. I mean it could be better and our ops is also better, which is providing that margin accretion in a down volume environment. So again, like I said, the team is working really hard to execute and that's our #1 priority is driving down costs and ensuring that we can execute for customers.

Operator

And the last question comes from Emmanuel Rosner with Wolfe Research.

Emmanuel Rosner

I was hoping to actually follow up on Dan's first question, which is around the net performance in 2027. I understand it's a little bit early and choppy to be able to sort of quantify the various pieces. But can you maybe just give us a sense of what gives you the confidence to guide assuming such a large amount of net performance? And maybe within that, how much of it is sort of recovering from customers and how much is it sort of like cost opportunities that may be sort of like more something that you directly control with your operation?

Peter Carlin

I would just say again, we have a great group of employees at Adient around the world and it's a tough business that they have to go every day and negotiate with our customers and our suppliers to save money. It's a substantial amount of money that we have to recover with commodities, tariffs, FX, Middle East, all of these things; customer mix issues, customer activities that impact our performance. There's a lot and we are dedicated to getting money out of everybody that we possibly can to recover those costs. o I'd say you're seeing it across the industry.

There's a lot of inflation out there that we all have to endure and pass on to our customers. It's greater in many areas than it was last year. And we also have to deal with what Jerome pointed out, a significant increase in some of our labor costs in the Americas, which we're going to be annualizing in 2027, which were not annualized in 2026. So yes, I'm not going to quantify it for you, but I'm going to tell you it's a substantial amount. And as I said earlier, it's larger than it was last year on the commercial recovery and business performance side.

You asked why we have confidence. I mean, I would say this is what the teams do every day. This is what they do. We have good relationships with our customers. We are on solid programs and we have a great group of employees who are working hard every day. And we've mapped out -- you asked about like how much will we mapped out. I mean we know generally where we're going to get it from. We just have to actually go get it.

Emmanuel Rosner

Right. So in 2026, it was a small amount of net performance. Are you able to give us a sense of how much of '26 headwinds are yet to be recovered and that would be incremental in 2027 to any headwinds from next year that you'd be looking to recover?

Jerome Dorlack

I think, Emmanuel, we've already given as much color as we'll give on that topic. I talked about fuel surcharge cycling in heavy in, say, Q4 in the Americas. That's obviously that we have to go and get some of that may or may not be retro. Talked about the labor agreements in the Americas that cycled in that we're going to have to now go and get the money on. So there is some hangover. I think also in our Q3 earnings call, Mark gave I think pretty detailed commentary on commodities and what's happening with commodities.

And as long as we're in an increasing commodity environment even though we're insulated to a very high percent, that's always going to drag on earnings until either commodities stabilize or they return back. And so there is an amount in '27 of, say, catch-up; but that assumes that commodities stay flat and they don't continue to increase. So I'll go back to what Peter said, which is it's a very challenging environment not just for Adient, but in automotive overall. We have the best team in seating to go and execute against that. We have a customer mix that is I think very favorable given our relationships and our long entrenched dynamics with those customers that give us confidence that we'll be able to go and recoup these costs because the industry itself can't sustain them. So we have to go and recover these.

Emmanuel Rosner

Yes, I appreciate the color. And then one other quick topic. On restructuring, it sounds like you still are thinking through the strategy for Europe in particular and how much restructuring should be done and whether it's the best use of cash and capital allocation in general there. But obviously you have this assumption of flat restructuring spend in the free cash flow outlook. Is there a possibility that it would be more than what you've guided or are we talking about what you're thinking through is for future years?

Jerome Dorlack

With respect to Europe and then I'll let Peter answer the second part. I think I've been very direct and open on this. In the European market, it is one where you either need to consolidate or you need to be consolidated and that's going to be value creation in Europe for the seating industry overall. There's too much capacity within the European market and too many suppliers and so there needs to be an industry-wide solution to, I'd say, the seating dynamic within the European theater. And that is why when we look at restructuring, we're evaluating it in light of what are the future dynamics within the European industry and what's the best use of that capital. In terms of how we think about the restructuring dollars this year, I'll hand that over to Peter.

Peter Carlin

I think we have a very prudent plan for restructuring that's a mix of cost driven as well as customer program driven in EMEA in 2027. We're working hard actually to lower that number not from just -- it's more from an execution standpoint, right? So are there ways that we can come up with better return restructuring programs to prioritize those? Are there programs that we can fund in Europe through sort of accretive asset sales? We've done a good job monetizing like joint ventures and assets in Asia and Americas to fund restructuring.

We're looking to do more of that to offset some of the gross restructuring costs in Europe. And I think again our priority is what is the highest payback investment that we can make with our cash. And if we have the opportunity to invest in fast payback in EMEA, we'll do it. And if we have an opportunity to invest in fast payback in Americas, we'll do it. And if we have an opportunity to invest in fast payback in Asia, we'll do it. If it's the low payback; we're going to try to avoid it, defer it, reduce it. So that's where right now our priority is.

I don't anticipate any significant increases. I mean our team is very aware of where our customers are, but you never know. But I would say right now I think we have a really good reasonable estimate and flat year-over-year is our current target. It could be better again if the opportunities to do other things with the cash are better and it could be more if the opportunities to restructure at a high payback are better.

Jerome Dorlack

So I think that was our last question. So in closing, just a couple of few key comments. One, I do want to just make sure everybody when they look at the cash flow, they focus on that 2-year cumulative amount and that's really exceeding our commitments going in. Our prudent, disciplined and I think aggressive shareholder capital allocation that we've been able to run through between the prior authorization and the new authorization now, we sit almost at $1 billion of committed share repurchases which, as Peter outlined, we're looking at at least $100 million this year subject to market conditions and what we can do with that.

And then finally, I want to sincerely thank both our customers for working with us through what has been a very challenging '26 and even more challenging macro backdrop for '27, but then also all of the 65,000 Adient employees around the world for your commitment and your willingness to step up to the plate and really drive through the challenges that we face. Thank you very much to our shareholders for their continued support. If you have any additional questions, feel free to reach out to Linda throughout the next couple of days. Thank you very much.

Operator

Thank you. This does conclude today's call. We thank you for your participation. At this time, you may disconnect your lines.