PHINIA Navigates Challenging Market Conditions, Maintains Positive Long-Term Outlook

PHINIA, a leading manufacturer of integrated components and systems for the automotive industry, has reported its financial results for the three and nine months ended September 30, 2025. While the company faced headwinds from supply chain disruptions, economic uncertainty, and other macroeconomic factors, it remains focused on strategic investments and new product development to drive long-term growth.

Financial Performance Overview

For the three months ended September 30, 2025, PHINIA reported net sales of $908 million, an 8% increase compared to the same period in 2024. Cost of sales rose to $708 million, or 78% of net sales, up slightly from 77.7% in the prior year quarter. Gross profit increased to $200 million, with a gross margin of 22%.

Selling, general and administrative (SG&A) expenses decreased to $105 million, or 11.6% of net sales, down from 12.9% in the prior year quarter. This was driven by R&D savings and lower IT-related costs, partially offset by higher employee costs.

Restructuring expenses were $4 million, down from $6 million in the prior year quarter. Other operating expenses, net, increased significantly to $57 million, primarily due to a $39 million loss related to the settlement of separation-related claims with the company’s former parent, BorgWarner.

Net earnings for the quarter were $13 million, or $0.33 per diluted share, compared to $31 million, or $0.70 per diluted share, in the prior year quarter. Adjusted net earnings per diluted share, a non-GAAP measure, was $1.59, up from $1.17 in the prior year quarter.

For the nine months ended September 30, 2025, PHINIA reported net sales of $2,594 million, a 1% increase compared to the same period in 2024. Cost of sales rose to $2,025 million, or 78.1% of net sales, up slightly from 77.9% in the prior year period. Gross profit increased to $569 million, with a gross margin of 21.9%.

SG&A expenses remained flat at $324 million, or 12.5% of net sales. Restructuring expenses were $11 million, consistent with the prior year period. Other operating expenses, net, increased to $49 million, again primarily due to the $39 million loss related to the settlement of separation-related claims.

Net earnings for the nine-month period were $85 million, or $2.10 per diluted share, compared to $74 million, or $1.63 per diluted share, in the prior year period. Adjusted net earnings per diluted share was $3.79, up from $3.15 in the prior year period.

Segment Performance

PHINIA’s business is organized into two reportable segments: Fuel Systems and Aftermarket.

The Fuel Systems segment reported net sales of $549 million in the third quarter of 2025, up from $484 million in the prior year quarter. Segment Adjusted Operating Income (AOI) increased to $73 million, with a margin of 13.3%, up from 11.4% in the prior year quarter. The improvement was driven by R&D savings, customer pricing, and overhead cost control measures, partially offset by unfavorable product mix.

The Aftermarket segment reported net sales of $359 million in the third quarter of 2025, up from $355 million in the prior year quarter. Segment AOI decreased to $54 million, with a margin of 15.0%, down from 15.8% in the prior year quarter. The decline was primarily due to unfavorable product mix.

For the nine-month period, the Fuel Systems segment reported net sales of $1,559 million, up from $1,529 million in the prior year period. Segment AOI increased to $180 million, with a margin of 11.5%, up from 10.6% in the prior year period. The Aftermarket segment reported net sales of $1,035 million, down from $1,041 million in the prior year period. Segment AOI decreased to $163 million, with a margin of 15.7%, down from 16.2% in the prior year period.

Key Trends and Economic Factors

The automotive industry is currently facing several challenges, including renewed semiconductor shortages, supply chain disruptions, and economic and geopolitical tensions. These factors have affected production, pricing, and consumer demand. Additionally, new trade restrictions and tariffs could have a material impact on PHINIA’s business, potentially increasing input costs and decreasing demand in the commercial vehicle (CV) and light vehicle (LV) markets.

PHINIA expects these macroeconomic headwinds to continue in 2025, with LV volumes in its key markets expected to decline by low-single digit percentages and CV volumes expected to be flat. The company anticipates flat to a modest decrease in sales, excluding the impact of acquisitions, and expects earnings and cash generation to be challenged as operational efficiencies and Aftermarket sales growth may not fully offset the softening of the original equipment markets.

Outlook and Strategic Initiatives

Despite the near-term uncertainties, PHINIA maintains a positive long-term outlook for its global business. The company is committed to new product development and strategic investments to enhance its product leadership strategy. Several trends are expected to drive the company’s long-term growth, including market share expansion in the CV market, growth in the overall vehicle parc that supports aftermarket demand, increased consumer interest in hybrid and plug-in hybrid electric vehicles, and adoption of additional product offerings enabling zero- and lower-carbon fuel solutions for combustion vehicles.

PHINIA also believes it is well-positioned to continue expanding its differentiated offerings and capabilities across electronics, software, and complete systems. The company’s recent acquisition of Swedish Electromagnet Invest AB (SEM), a provider of advanced natural gas, hydrogen, and other alternative fuel ignition systems, is expected to generate approximately $50 million in annual revenue and $10 million in annual adjusted EBITDA, further strengthening PHINIA’s portfolio.

Use of Non-GAAP Measures

PHINIA’s financial reporting includes the use of non-GAAP financial measures, such as adjusted net earnings per diluted share. These measures are intended to provide additional information to investors and facilitate the comparison of the company’s performance over time. Management believes these non-GAAP measures are useful in analyzing the company’s business and operating performance.

Liquidity and Capital Resources

As of September 30, 2025, PHINIA had liquidity of $848 million, comprising $349 million in cash and cash equivalents and $499 million in available credit under its $500 million revolving credit facility. The company paid off the remaining $24 million of its 5.000% Senior Notes on October 1, 2025.

Given its strong liquidity position, PHINIA believes it will have sufficient liquidity and maintain compliance with all covenants through at least the next 12 months. The company remains focused on prudent capital allocation and maintaining a healthy balance sheet to support its long-term growth strategies.

Conclusion

PHINIA faced a challenging operating environment in 2025, with supply chain disruptions, economic uncertainty, and other macroeconomic factors impacting its financial performance. However, the company remains committed to its long-term growth strategy, investing in new product development and strategic acquisitions to strengthen its market position and capabilities.

Despite the near-term headwinds, PHINIA’s positive long-term outlook is supported by several industry trends, including the increasing demand for hybrid and alternative fuel solutions, as well as the company’s ability to expand its differentiated offerings across electronics, software, and complete systems. With a strong liquidity position and a focus on operational excellence, PHINIA is well-positioned to navigate the current challenges and capitalize on future growth opportunities.