Lear's Slovak seat plant keeps 1.2% of its sales as operating profit

More seats sold, less profit kept

Lear Corporation Seating Slovakia s.r.o., the Prešov unit of the American car seat maker Lear, took in EUR 515m of revenue in 2025. That was EUR 33.8m more than the EUR 482m of 2024, a rise of 7.0%. Operating profit went the other way. It fell from EUR 7.8m to EUR 6.0m, a drop of 22.9%. (An s.r.o. is the Slovak limited liability company.)

The operating margin, the share of each euro of sales left after the costs of running the business, slipped from 1.6% to 1.2%. In a business this size, that is a thin cushion. It means that on every hundred euros of seats delivered, the plant keeps roughly a euro after paying for materials, people, energy and the wear on its machines.

The tension is simple. The plant grew, and the growth did not pay for itself. A larger order book produced a smaller operating profit.

The squeeze came from running costs, not the machines

The first explanation to rule out is depreciation, the annual charge for the wear on equipment and buildings. A new production line can lift that charge and drag operating profit down for a few years without anything being wrong. That is not what happened here. Depreciation and amortisation fell from EUR 14.7m in 2024 to EUR 13.2m in 2025.

That makes the picture worse, not better. EBITDA, which is operating profit with depreciation added back, shows how much the plant earns from making seats before it pays for its equipment. It fell from EUR 22.5m to EUR 19.2m, a decline of 14.6%, or EUR 3.3m in money. That is a larger fall than the EUR 1.8m lost at the operating line. The lower depreciation charge softened the blow. Without it, operating profit would have fallen further.

Measured against sales, the EBITDA margin dropped from 4.7% to 3.7%. So the cost of materials, wages, energy and services rose faster than revenue in 2025. Each extra euro of sales came with more than a euro of extra running cost attached.

Why this happens to a seat supplier

Automotive suppliers usually sell on long contracts. A carmaker nominates a supplier for a vehicle programme, and the price per seat is set for years, often with an agreed annual price reduction built in. Costs do not sign such contracts. Steel, foam, fabric and leather move with their markets. Wages in eastern Slovakia have been rising. Energy bills follow their own path. When costs rise faster than the contract allows prices to move, every extra seat carries less margin than the one before.

A second pattern fits a plant inside a global group. Prices for parts bought from sister companies, and sometimes for seats sold to customers through the group, are set by internal rules. Those rules often aim the local unit at a narrow, steady margin rather than a large one. A margin as thin as this one is consistent with that, though it does not prove it.

A third possibility is the cost of the growth itself: overtime, temporary staff and extra freight while new volumes ramp up. These costs tend to fade once a line runs at its normal pace.

Which of these applies to Prešov, the headline figures do not say. The line that would settle it is the cost of materials as a share of revenue, set against personnel costs as a share of revenue, in both years. If materials took a larger slice, the plant is absorbing input prices. If wages did, it is paying more to produce each seat.

Net profit followed the same direction, more gently. It fell 14.0% to EUR 3.5m, a net margin of 0.7% against 0.8% a year earlier. Cash at the year end fell 20.6% to EUR 6.4m, from EUR 8.0m. Against total assets of EUR 185m, that is a small cash balance, which is common for a subsidiary whose group manages money centrally. I would not read alarm into the cash line alone, but I would watch it next to the margin.

What to check in your own company

If you sell on agreed prices, whether to a carmaker, a retail chain or a public client, the same mechanism can be at work in your accounts without showing up in the revenue line.

Start with two figures you can work out tonight. Take operating profit and add back depreciation for the last two years. Divide each result by that year's revenue. If the percentage fell while revenue rose, your growth is costing more than it earns, and depreciation cannot be blamed.

Then open your income statement and put each cost line next to revenue. Work out how much each one grew. Any line that grew faster than sales is a candidate. Materials, energy and wages are the usual suspects.

Finally, pull your three largest customer contracts and read the price clauses. Ask your finance team a plain question: when our material or wage costs rise, which contract lets us pass that on, how soon, and how much of it? If the answer is none, or only after a year, you already know where next year's margin is going.

Lear's Prešov plant became bigger in 2025 and earned less from each euro of seats it sold. Growth that costs more than it brings in is still growth on the revenue line, and that is the only place it looks good.