Johnson Controls Inc.'s automotive parts business expects to boost profits and investments in 2017 after it is spun off following the Milwaukee company's merger with Tyco International PLC, executives said.

The world's largest maker of car seats, which will be known as Adient when it becomes independent, forecasts adjusted net income between $850 million and $900 million for the fiscal year ending Sept. 30, 2017, company executives said.

Adient Chairman and Chief Executive Bruce McDonald briefed analysts and investors Thursday on the pending independent company's financial projections. The merger between Johnson Controls and Tyco was completed earlier this month. Adient is poised to start trading on the New York Stock Exchange Oct. 31.

Adient predicts capital expenditures to reach up to $575 million and free cash flow of $250 million, with the latter squeezed from some $400 million in costs associated with new internal technology systems and other financial outlays associated with getting the new company on its feet. The company also expects improved margins.

Adient, which employs some 75,000 people, will have a tax rate between 10% and 12% as a Dublin-based company, among the wrinkles associated with the so-called tax-driven inversion deal making Johnson Controls an Irish firm. Shares in Adient will be treated a taxable dividend for recipients, according to a previous regulatory filing, cutting the company's tax bill.

Adient's sales in the 2017 fiscal year are expected to reach up to $17 billion, relatively flat compared with the forecast for the current year. The company expects sales to grow once freed from capital expenditure constraints tied to being housed within Johnson Controls. The automotive parts business logged $20 billion in sales last year, which included $3 billion from its interiors business. The company controls more than a third of the global seating market.

"We were constraining investment in the business and, as a result of that, we were sort of flatlining it from a revenue perspective," said Mr. McDonald, currently Johnson Controls' vice chairman and executive vice president, in an interview. He said boosting capital expenditures as an independent company would "get the business back on a growth trajectory."

Johnson Controls decided to spin off the bulk of its automotive parts business as part of the Tyco merger to focus on heating and air-conditioning equipment and car batteries.

Adient provides seats to auto giants including General Motors Co., Ford Motor Co., Volkswagen AG and Nissan Motor Co., with diversified sales that top out at 14% of its business for any one car manufacturer.

The company also has 45% of the seating business in China, the world's largest car market, with 17 joint ventures operating 60 manufacturing locations in 32 cities. It owns a 30% stake in China's Yanfeng Automotive Trim Systems Co., a venture creating the world's largest producer of instruments, door panels and other interior components that reaps about $8.5 billion in annual sales.

Adient is looking to get another foothold in Silicon Valley, where traditional auto makers, technology giants and startups are racing to develop autonomous-driving technologies and electric cars, with parts suppliers investing in radar systems and other components.

Adient has an office in the San Francisco area in an effort to collaborate with the likes of Alphabet Inc. and Apple Inc. depending on how driverless car efforts develop. Mr. McDonald likened the forays to early relationships developed with Japanese companies in the early 1980s that solidified business with Toyota Motor Corp., Honda Motor Co. and Nissan when they made inroads in the U.S. and challenged Detroit's auto titans.

"We want to be the first ones out there, introducing ourselves," Mr. McDonald said of auto industry activities in Silicon Valley. He said significant opportunities exist for supplying driverless cars that could require seats to swivel and face one another, and interiors with workspaces or other configurations should motorists eventually be out of the loop.

In the short term, Adient is booking gains in the U.S. amid low gasoline prices that send consumers flocking to less-efficient sport-utility vehicles that feature more seats than passenger cars. "That's a huge benefit," Mr. McDonald said, adding that U.S. car sales are likely to start plateauing after a record total of 17.5 million light vehicles last year, but remain at elevated levels.

Corrections & Amplifications: The merger between Johnson Controls and Tyco International was completed earlier this month. An earlier version of this article incorrectly stated that the merger was expected to close Oct. 3.

Write to Mike Spector at mike.spector@wsj.com

 

(END) Dow Jones Newswires

September 15, 2016 14:55 ET (18:55 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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