SUP - Earnings call transcript Q4 2018 | Superior Industries International, Inc.

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Operator

Good day, and welcome to the Superior Industries Fourth Quarter and Full Year 2018 Earnings Teleconference. Today's call is being recorded. At this time, I would like to turn the conference over to Mr. Troy Ford. Sir, please go ahead.

Troy Ford

you. Thank and call. fourth everyone, year and to earnings XXXX welcome morning, quarter our full Good

discussion we Investors our which website During today, www.supind.com. is earnings to at available presentation, our on the section our will of be referring

any ended on the more in of commented to Tim to to XX, may materially December year safe and year forward-looking start results Joining or evaluating XXXX, uncertainties like to XXXX, Chairman; released events report our to risk subject company's presentation where today Securities financial on this actual for in the considered our factors Vice cause forward-looking forward-looking Form including annual may and Slide as differ our harbor no today are on represent Financial Private statements unknown that forward-looking publicly the for Chief outlook. the Specific like the Masanovich, the Executive Litigation President Matti X, SEC could be for obligation these Form assume McQuay, and I need XX, me because remind be as issues and Officer. call provisions any XXXX. a of statements on on Executive statements. complete XX-K the that noted of on Reform to Act discussion contained soon Actual We everyone are and ended update December factors that from well differ conditions, to issues I I'd company's the that will point detail you slide. are forward-looking statements filings, statements. XX-K in to would

appendix value-added and, of measures adjusted or non-GAAP have financial with be tables Reconciliations sales in measures these items accordance not These the the calculated certain financial with directly may impact will in included providing comparable press non-GAAP therefore, with our and release be XXXX this full accordance the presented year fourth GAAP. today, discussing in We exclude GAAP measures and been presentation. found earnings most of the in also of to EBITDA. quarter certain including financial data and

North comparative additional inclusion to compared with of operations reminder, week and operations XXXX months for an the year align Superior's by Executive an in now to year. to our compared of McQuay, Tim? to a results fiscal American of XXXX over the I North calendar our the turn the the of X Chairman. year to impacted XXXX European like were As call would Tim XXXX full operations additional American

Timothy McQuay

face and Thanks, XXXX joining the of European in in with with regions, starting addition production competitive WLTP. as diversified full the however, XXXX Troy. company thank due did, to of marked overview year operations. us year, particularly begin headwinds results, of both today. Good globally everyone, our in We and softening some second terms of of our implementation the industry half the part morning, full in X year-over-year of our the for a presentation. Slide you, our first on an year all, I'll

XXXX. new challenges billion $X.X addition, sales electrical XX experienced year. third launch Mexico units in with In in we million also net reached these Despite and increases shipped rate challenges, the of the quarter in product

In addition, value-added sales nearly value-added $X.XX were wheel $XX. $XXX to million sales per with increasing

EBITDA adjusted million. reported we of Additionally, $XXX

available and favorable in minority by acquisition for the year, impacted working to of during All Also, operations reduction, during these $XX quarter. million of dividends. compared months generated operations, the we debt We driven of expenditures, XXXX European cash invested by leaving $XX favorably in shares of capital from XXXX. items X million additional the were capital the $XXX million

Turning to Slide X.

shipments on unit overall market. to Let the as compared touch our me

Europe in adjusted been versus also prior North adjusted results We the believe for North market. align to basis shipped As this this to assembly. did comparative to performance the XXXX XXXX for provides to America have in results year. and shipments slide for then America, fiscal units show year-over-year which The year comparison noted, on produced Superior's to not are a calendar better

Our shipments production by first overall declined driven softer for offset a the North region, American with strong in line half quarter. a by industry fourth

year, OEM will lower growth moment North when did additional select Superior he see production detail provide due primary to financial in were the volumes OEMs in American the for While by American outlook. primarily customers. the over Matti softer quarter fourth our a discusses company's volumes North

production. That be the decline beneficial in a with vehicle of expect our further this Europe Western we in bolstered into Superior OEMs share, gains as that addition Central expect X% to in into continue market said, However, operations delivered plant XXXX. Poland of diversification by shipments, despite demand. in light enabled the capacity This European premium German over XXXX with saw which growth of trend and which a add increase to helped we XXXX. was to we our to programs proved our Furthermore, slight and on higher-than-expected continue in opened

of sales complex North to support America production towards continued XXXX, Europe in our on headwinds, terms to larger, declines will the per industry performance, and execute more will value-added wheels, both compared in to leverage In wheel. these which in strategy we're industry continue we XXXX. growth expecting Despite shift

in we are remain wheel new we were North new production committed launches, of our awarded shareholder value. in future wheel that with flow programs our OEM and to American continue invest anticipating as base customer include premium recently laser launch terms several deliver In enhancing formed well and we'll America, specifically capabilities our our etch as global and firsts, Europe. to including XX-inch support for for Toyota Also first North in a AluLite premium to efficiencies, program operational We wheels a first OEM.

on Finally, let a for provide our Executive brief new a me Officer. search Chief update

the the With that, operational of very Matti? We've for candidates proven at look with record on focus finding turn track the been of manufacturing far. financials. with me and Matti to success. is pleased expertise Our thus the strengths let closer call company's over and an individual a a interest

Matti Masanovich

I'll overview Tim. a the of and provide fourth detailed year quarter now financial results XXXX. full more for our Thanks,

Slide to Turning X.

We have year sales shipments, full of provided the value-added both XXXX. net sales quarter and and region by unit breakdown a for

the respectively. see, our benefit benefits full acquisition XXXX can to North impacted Earnings for business and of in you more quarter share Europe some were fourth the offset per diversified results As and strength year the by and $X.XX, of of overall America. as has our $X.XX weakness onetime in helped has bolster

a was fourth preferred impacted a stock, year for impact correction The $X.XX or -- a interest $XX.X Tax based $XX.X and asset redemption not to the in which rate of full for interest also for deferred guidance tax million to on expense the per Specifically, the the was was tax valuation which recorded in allowed on million of expense, deferred Jobs allowance a benefit Act. fourth had the XXXX. the be quarter determined and primary IRS the share. from Cuts the asset by revised to onetime related diluted Superior quarter November impact

an provision XXXX the was was XXXX, no $X.X resulting effective of was year. in recorded tax The the year. full to during for income for rate XX.X% for Given there taxes impact million, this

X. Slide to Turning

and million were look period, sales fourth a of the an U.S. sales and $XXX approximately for volumes. $XX value-added XXXX. on the closer by the while basis increased take from increase sales Let's The a the million, lower dollar euro quarter of year-over-year at prices by million. rate million to driven during prior quarter quarter mix, partially $X exchange Net higher increase to offset $XXX was aluminum weaker improved a for

Turning accruals, The EBITDA to performance Adjusted EBITDA lower primarily America, in decrease for million in adjusted quarter Slide $XX was and volumes million product improved Europe. driven was of and adjusted by lower XXXX. the fourth $XX to quarter mix offset EBITDA fourth partially production sales of compared by in the in North strong compensation X. XXXX

increase and as activities driven primarily support As cash the favorable Tim year net addition was expansion provided our programs. accounts by of working impacted OEM passenger during in lower million. and by production mentioned was and prior the by The ongoing the On enhancement $XX quarter of inventory. quarter $XX quarter, Cash off operating technologies to quarter from in American maintenance portfolio receivable company's operating to for This during operating of North Slide used our products primarily in the million customers cash lower roll from car compares for capital market to cash activities production X, by was the the $XX activities totaled million. fourth well in previously, fourth period. CapEx of certain as

the to $XX of and interest During outstanding shares the acquired dividends Europe. from is The still related amount approximately quarter, additional $X.X of Europe we an Superior of in million $X shareholders million fourth Industries Superior minority paid Industries million. minority

X. diameter U.S. inclusion prices. Superior XXXX, addition and euro Net were sales from to from benefits Slide weaker the year, value-added $XXX increase high stronger in were rate. $X.X for of the in These dollar Europe million, product X operations an of sales by increase exchange and million XXXX. sales an was comprised to offset of million an a wheels additional of of $XXX The months were by mix driven billion to larger aluminum $XXX Moving partially increase

inclusion The well diameter adjusted Slide offset million you XX, primarily EBITDA was as XXXX lower in for on see $XXX wheels, by mix partially as XXXX wheel by the additional in compared was $XXX volumes. of of months improved X adjusted five -- European to on driven As EBITDA can XXXX. million in increase operations larger

costs and facility of North in performance operational our launch inefficiencies half wheels first than Mexico. in rather offset specifically electrical stronger addition, QX, QX by U.S. America in incremental and higher In production was production in

Slide cash XX. Turning slide to flow the on

provided and December the of driven including $XXX months December working in North in management, cash increase by of year from XX, America. accounts European million of an flow. activities in capital the favorable cash activities XX, receivable $XX.X from by The the to factoring was operations For increase operating generated net was cash Globally, incremental program 'XX full approximately XXXX, additional operating million. introduction 'XX, an X

X globally. ways totaled the months our the capital was working on CapEx to portfolio million. the additional year focus $XX to products continue in to European of technologies company's up year of This expansion well $XX ongoing We for prior operations. support optimize during as million of used from maintenance the as Cash due enhancement and to

dividends we in was preferred X% the X dividend to the of year. business days million Note the during a year, the interest common that the which $XX.X result $XX.X paid During on paid. additional X% will XXXX, in the includes common million of dividends dividends with dividends -- a $XX.X preferred per at Normally, million $XX.X of dividend million stockholders timing participation dividends rate. timing there as due $X.X preferred XXXX, preferred million, to of dividends $X well of of as million, totaling in

We in relatively also minority basis. million a will the of during of shares $XX Industries Industries million small $XX Europe Superior of Superior to be dividends go-forward remaining only conjunction shareholders, paid with of year. Europe $X million With repurchase to dividends stockholders on minority of minorities worth our

management, end remain facilities million in was Europe. capital In terms our U.S. the liquidity unused and of debt the and liquidity hand of our on the our available of inclusive and XXXX in business Both credit the portions profitable $XXX investments of priorities. cash allocation reduction top total at committed

XXXX outlook our XX. on review me let Slide Now

'XX unit year in to $X.XX versus million in Europe. business $XXX America offset in our in XX.X anticipated our to production of we to European gains programs. range of be as trim specifically by are year-over-year million range the Net net decline performance This XX.XX our business. we market new softness units. on The as is billion by business, take our volumes the platforms North market market expect notwithstanding shipments and as level The importance America driven For demonstrates million on region in be the of and XXXX, of to 'XX sales higher well wheels be the decline to are the $X.XX in the diversification to in expected well in be the in rates as share the overall partially million. volumes North is full $XXX down are to Value-added in sales expected range anticipated unit, of billion.

in range by the in also driven a is Adjusted year-over-year adjusted expect to million would be as wheel to lower largely The offset sales imply. the anticipated ranges We in EBITDA $XXX will mix volumes XXXX decline in increase per million. favorable North in in $XXX expected guidance of EBITDA volumes partially America, in year-over-year Europe. with value-added be

performance expect the including the second operational to year in we of half rate due development XXXX, higher adjusted at electrical North weighted take America, be to look continue the XXXX. we of the heavily cadence first improved to of towards increases a EBITDA As into we in our half the expected the more

operations be the approximately with Our $XXX that, be outlook the $XXX operator for back million, the to the now expenditures cap cash range while is expected flow to to of for from million in questions. $XX to will anticipated I up are over And turn million. open to call

Operator

Instructions]. [Operator

Our be question would Chris B. first Riley with from VanHorn FBR.

Christopher Van Horn

some things just along I kind differential is that then takes in of on other that, EBITDA for million jump to there, that range on? related much what maybe guidance, adjusted wanted that million? you And guidance. The North get versus to the are going of and $XXX the how $XXX to puts with America the

Matti Masanovich

put perspective we out by driven $XX range primarily volume. range -- an essentially Well, is from million EBITDA there our

the ranges we based the and provided. it's So unit off of unit

kind math back that of the more our can as of ranges, if a today. at volume -- is unit in kind I'd the America get do go of you kind North view. you of than and look concern volume European you if of tell So you probably to to our the

Christopher Van Horn

Got you adding then And Or numbers, when volume your then are those from look and are anything how it. you about projections? mix? a of as at IHS using Okay. thinking volume you baseline kind

Matti Masanovich

as to customers. but have a forecast, weeks we So you also from we've a XX IHS use as the basis, detailed benchmark, forecast, out got able go customer

We longer-range forecasts. customer also have

know. we what embed we So

our as our historical future know rates, so take take those kind forecast rates, into well. of we also the and We

it know the we're for programs our at take future. the IHS, off know and what of rates, overall the we're that of the So think kind we do the the of governor IHS. behaving. is IHS looking experience we at how going against We -- the comes transpire -- end we and know day, it's us. are to actual into is actually we Yes, But on, platforms benchmark

just So than than taking IHS more intelligence I we've think got say would numbers. I

know, on platform, per we of a you As wheels subset don't all wheels entire win the platform. an win we

might XX of different might variants, So be those on XX we wheel for instance, TXXX wheel have variants.

parts on vehicles understand get go-forward take as that levels, as in they So we the levels have the trim for us really we rates America, rates produce trim and to North provide different basis. our specifically a and take put on

Christopher Van Horn

Got it.

your seems share it -- some affecting here America the it Is somehow? well. really the share? on there other to are able What European Congrats like are share get the reducing running And Chinese see gains. in Or to driving of business some is that the Okay. are due North competition of ability tariff driving just is maybe factors you is to the that that -- activity that's due to it those gains? that of factors

Matti Masanovich

in player OEM three number the we're Europe. Well,

there's So us. ahead major competitors of two are other competitors European that

and We've customers, third I certain we've we inroads market we with to in we make gains the got can go approach well. how we when to that a largest natural think, advantage and got on can as how customers being we make certain Europe. at so platforms And share look our

other side they -- The and China aluminum on out so a of tariff a wheels is into that Chinese in that imports, there's XX.X% Chinese of Europe. there's coming tariff tariff Europe have

in bay Europe. at competition China the keeps of kind that So

of in we So say, XXXX SPPX hitting run on what there. capacity. -- and as Tim the go through and now kind will in expanded I kind addition, rate full We're facility we that brought have capacity of, mentioned we

for comes X that So upwards And share this business and the come business seeing we've us. gains on, we're booked those true as ago. X years of

a the as would guess, answer how question. I outline, brief that's I So

Operator

from Our Barrington. next question with comes Prestopino Gary

Gary Prestopino

cellphone? Can me I'm you because on hear a

Timothy McQuay

Yes, we can hear you, Gary.

Gary Prestopino

Okay. Couple Great. of questions here.

that all, a inches where you breakdown units of year now at or give the of could us year? the of First of were you XX end last percentage are higher the versus

Matti Masanovich

higher, wanted correct? you think, inches or XX I So

Gary Prestopino

sorry. I'm sorry, correct or XX inches higher,

Matti Masanovich

we're of XX were And the or about... end at at this Yes, we year. higher XX% approximately inches

Timothy McQuay

ago. We were a about XX year

Gary Prestopino

other that's a good a here. there. great, shift of Okay, so couple questions then And that's

-- you particularly on correcting is terms mean, for do Mexico, in I you that CEO of Mexico? what issues, basically that this program in in that of things was these are ongoing kinks you're of some of know XXXX, in on that, you hit of guys issues terms you got where launches, program terms nature, I and the of out cost or but think most in all looking that In going a impacted an worked the XXXX? you meaning

Matti Masanovich

that's in primary was we've I and and we've two we're secondary applied the us that as headwind I'll still had and buy electrical of impact which QX. think, and in we rates, electricity So XXXX, say now primarily And discussed, to QX we've in issues markets. gotten the permission that, a

we're which been utility engage. second traditionally got those, buying out the We'll out, public had CFE, XXXX. will in applications suggested the allows and get secondary then in and those us in from buying We go bids that proffer So of now directly and to electricity see that is markets. the Mexico. half be We've

So that XXXX. and so rate is second we'll in and our improvement electrical that's place, from decrease see working the being some that an natural plan half earnings -- executed. of is And in in

rates the end have good around QX. of increases end -- high So rate confidence somewhat electrical QX their we have as off of of electrical as well subsided the at

in actual seen and XX% rate, XX% saw about we've electrical the or in XX% spike to QX. rate So we in a decline

rate we've at a So as natural we increase. all-time so high, had ended QX, were we

try we're entering impacting to of for that's as market, secondary in markets and 'XX. into the before, the in I those approvals the buy electricity now mentioned, we and primarily buy to second half contracts the and the secondary Now and ability have

there. good we're think position I in So a

also on of decreases. usage say as spending we're As our some what well CapEx I'll

at we've we shift if as off So lighting, as can running lighting our either patterns facilities, got basic cetera. looking turn et for machines, and bulbs lighting, our machines,

So on how we to the decrease we're issue focusing in the had. at usage. launches, other looking then And

was as customer, performance. to it But rate North higher QX, impact we I to wheels, didn't larger impact premium and a in I think and in continues -- never we function historically customer think, wheels, of our the we stabilized. high, scrap we But in was that's we the maybe performance mentioned, we're the launching. out the one operations XXXX half didn't didn't of premier unlike it remain and the dynamics internal the We the had and issues 'XX. has figured impact where around that been those back airfreights finishes we the American us, second

you expertise I of to so, one going to So it's half perspective. good execute us bring And up some think now acquisition management second in I now a there's is start got and so that leverage on we've of was and meetings the we're action of from improvements Chihuahua. the place. gains Mexico, those We've to I I reasons say in think, of what But those in it is the team handle UNIWHEELS did engaged, plans, European the can operational and kind would there got that get tell program in we to those on a see 'XX. to

Gary Prestopino

mean, terms relative call, Okay. you product in record. looking launches, XXXX? in last terms was I it, How a then are mentioned get That's I year of don't coming great. of And you up, new the year I this this know to -- for those in didn't if

Matti Masanovich

Two the modestly to are They're were issues North really two -- issues, that's when in the good launching. a were America it's year. And question. than cycle one is Europe. as little where lower just it's issue programs and at a so OEMs a those in higher Well, launches our Gary, there's prior

as know, model think I to timing So we're subject you and on refresh I've mentioned, a launches.

-- where they X-year model when they're year -- subject around say and X X, a refresh, it's and X- So midcycle it's model between wheels. year they do so refresh program to refresh a the to

say, -- just good I on launch XXXX we're what to in America Europe so going launches to your experience global directly in and and higher see we're North question, But answer to kind modestly good and basis. versus lower think of, 'XX. And in in a we're I continue XXXX will

Gary Prestopino

increase question mean, a to And leads during I CapEx you then now and last a to -- $XX the I and to do I period sluggish mean, year, in it's the think is year regard industry? auto CapEx. obviously be going have you're time what pretty of about did but $XX million for what's last that sluggish million. going I to

Matti Masanovich

did and approval though on CapEx and mentioned, to CapEx Tim think, and as you approve we'll has million tell $XX there's the million, basis. still is review aged look in Obviously, SLT, planning we I $XX XXXX projects. and plan we're it case-by-case our to for Even for a Well, of at of have to I a level, kind What do myself of million. to come $XX all to it cycle Executive the equipment. I'd we natural

maintenance and operations, so money repairs from the healthy spend So to slug. a that's have continue we to standpoint,

we've say think et new $X when about million liquid with balance kind booths, being booths, CapEx paint tag. of expansion the facility and cetera, new per and issues price growth, with a new type those on And repairs and finishes, of I paint growth. to I discussed maintenance come

to of we company. as so of the And and in continue to kind future invest look we this have

say, it the so back really comes And on I OEMs. program what growth for will of,

perspective, you so the But high that that level it a balance individual payback we've shareholder target a to and of scrutiny of programs, here that goes -- I can from at generate through individual and in company, the you target can can tell looked perspective. and CapEx we're from return looking you a so accomplish trying And CapEx. we're to the finishes the

Operator

with Richard from question next Our Deutsche Phelan Bank. comes

Richard Phelan

Couple of questions.

into the or receivables that were was at the year-end amount outstanding sold program in What factoring. First, the total?

Matti Masanovich

America North sold. outstanding We of Europe total $XX had have between total about that and we a million

Richard Phelan

in of quarter. taken after Great. fourth was had stake purchases $XX million in I in UNIWHEELS, QX And thought to additional minority the shares completed up that million. million of $XX.X stake the the the $X.X

now? So what there do? of Or where process as to view do And a is plan sort you you look need at XXXX? to to do this a point from of stand anymore is point the

Matti Masanovich

million So we've that X.X% worth represents got $XX outstanding, about today. outstanding

we exact you the I'm It's the to out just exact from and million but to percentage, us, worth. us soliciting it's give number can so So then it, there -- payment. get not going I and they memory, put know put and -- we're $XX we make the

here So they that's if come shares and how as trail the in get -- in. as they

So them always the but around there's perspective, from a quarter remaining I $XX $XX next cash of million, planning put million in kind that and that, outstanding. playing

Richard Phelan

clear. that's Got okay, it.

behind because Thirdly, the mentioned quarter X third just by terms the sort have the growth company JLR. impacted or growth achieved the in those in in last the that terms issues, On in was terms experienced? ebbed in say call and you WLTP negatively you Europe. of that impact you of would you of also the of outperformance Obviously, those of that

Matti Masanovich

I don't think so.

I we group the I easing think move Europe. through saw think Europe So will first in and fully primarily into of for our cars process, in customers more the XXXX. customer WLTP of as the WLTP some But half largest in subside one

be 'XX, say, think WLTP. back exit we QX I we'll to, and normalized as I'll rates of so what And

announced again down I'm for Europe April JLR, so a in you've for they've week, shut X news As that in sure that. recent factory seen they've

the think works of don't ours, it. how But I pending issues Brexit about through sales. customer I X% represent guess, a outcome that and, our will JLR they of small is of JLR with very so And determine

our So within portfolio. manageable it's certainly

Richard Phelan

should higher would general Obviously, equal well, midpoint XXXX numbers, I of you'd X.X% a aluminum which sort is of worse for arguably other question, Okay. of wheels, guidance expect which in that's as penetration a And might, to continued decline wheel volumes, help your shift last at all the market. diameter consensus. the market versus things wheels that the demand be if there than being

certain of I'm of trying in guess this what of sense restructuring a obviously, to customers? have, seems Are amongst I expectations. is announced too. the factors that Some somewhat So get actions, terms here key some driving there volume your of bearish those

Matti Masanovich

Yes, in so rates. primarily I think, but my as it's take I section, mentioned

you the of when are obviously, market platform decline. of we're and you element get penetration platforms region, of the also that there's so market an and on. the so -- there's, each into, negative There's decline kind seeing those growth And in platforms of

on beating basis, a Europe, as -- in although North know, And softness is right this in a year-over-year the And because all ultimate so seeing And there the we're decline market market in okay. was we're above you now, that platform. overall America we're growing market.

North So we've I platforms There's North offset story good in But a on America. there's with -- got market Europe. America decline the as in in a so the market think there's well. also a that we're

year-on-year a So decline the on platforms. we're seeing

know, our trucks, of crossovers, that's business. SUVs you So primarily, XX% as and that's

GM, -- Toyota. primarily So and and that's Ford

the we're we further, believe of they're don't extent at if to go order lower wheels just the be premium premium we have platforms versus side getting because take the lower-end look can we're to on, premium wrong think more to the on be but side build we'll and back and I going when the and overall that if we're -- of end, they're you lower-end So on going segment segment, that. the more to explained. selling I program more platform into there's from that And in perspective even you so on what the we're wheels that going peel rates

perspective. I then a primarily as it's units -- issue it's and said, offset a from being originally North with Europe and So American favorable in volume

Operator

question from next Khorsand with comes Hamed Our financial. BWS

Hamed Khorsand

could this for fall program you scheduled are a quarterly in on give if when question. they First launches many How year? And cycle? you the in, breakdown

Matti Masanovich

forecast something that number not the guidance a from I I that give to historically But of perspective. perspective I can that's fall or and don't tell in tell can you QX. we've program launches, QX want primarily exact you given they

Hamed Khorsand

low then looks unit America, But has it at North North the looking American XXXX. in just at its like your performance volume prior And in know it since I it. Got been is larger that would calls required about larger your industry moves true? wheels. volume moves and unit still output build we've the because of to Is wheels, to the how what's that lower talked drag

Matti Masanovich

I'm XX -- premium premium up targeting So in so finishes. bigger the or going to in move inch are to ladder bills, we yes,

numbers, kind our you're think North produced QX, if as looking customers prior I look QX to of numbers perspective. unit you at through see the from and what a unit look to have As in volume correlation QX year. at America the at direct they specific And versus go the a you'd you'll

Hamed Khorsand

got to as wheels, larger previous necessarily I to and to conversations you though sales wouldn't it back value-added unit goes was so the volume your that. trying equipment manpower even build just higher? I be your usage the those to same circle more larger wheels, takes move of

Matti Masanovich

No.

think I evolve I put wheels and as more larger does so that's we longer, it finishes, takes as we fair. think down I and somewhat. our size mean, as premium -- the capacity plants come

can invest floor on strategic automation, at pinpoint we the times. time, we Now same to can increase make in investments more production the and cycle

your return. previously for the term as launch medium I we at and we we premium get that's as, absolutely and and But comment, strive that better short more these wheels with we've and operational agree improvements, term, as So capacity should more I it, think, what discussed. over

Hamed Khorsand

Okay. And my question. last then

basis? on there are hit you apply I you that maybe XX% guess, side, everything there so going overhang America is performance on what North above even the performance still going that in learning in adjusted happened can forward can of a you out EBITDA margins in QX consistent North and an America Given forward and,

Matti Masanovich

That's a question. good

-- the I will it scrap our at I'll driving starts go at do So and it need rates just what I what rates I'll back, efficiencies just to or, XXX, on starts our call, XXX think manufacturing yield we is what down.

as over So less I'll align compare process, we as the North is plant efficiencies manufacturing to key parts and, our the think get yield to as in at to simple and that. the European for North and in in as Xx look the versus and as less less the metrics at higher business America across say, is have better yield mean, quicker are the is North -- manufacturing high drive rates Europe we than historically I is scrap, had America perspective. manufacturing is a in America yield those business offsetting our from it then through we or It's I the scrap Europe, it yield with and our we time. scrap what that almost rework, have I -- mentioned

to fix. The think, bought I that's about all ultimately challenge good is I UNIWHEELS. only up up it's that to that's to So We and it's internal, mean, us management. thing our

got lives in-house. we've manufacturing and resident it does So knowledge got it expertise, every We've the it day.

I none the think on UNIWHEELS is bar probably wheels manufacturing for the globe. best

of daily half baked those we've second -- and And now, America going the we're We across that into down We've such you in a I North execution we've now performance. them -- ownership said, And teams like into European to brought in so Mexico, improvements said managed and on some improvement. mentioned, now place. second week-to-week got start this and meeting. as see had I half pollinating. is in replacing we're basis being the to And

Operator

[Operator Instructions].

next comes Brian Our question from Gabelli. with Sponheimer

Brian Sponheimer

round kind One, Couple past the talk you're of in search Can whether to on you of process? the candidates through just you are that where questions. of first reading just process.

Matti Masanovich

is not answer round? past perspective, I'll Do said are search he from to think a going -- I you answer we take I yes. want What to so the asked Tim? -- that, first that. I'm

ahead, I think understand go Tim. I as it --

Timothy McQuay

the a and and reading as the preferred move complete candidates candidates, and well was towards note. have purpose to we, said, we with phase. We're as past with I moving first we the process. I qualified very much as speed are apologize. I can had And

doing power everything expeditiously. that our to in So move we're along

Brian Sponheimer

you're when dividends $XX million common just at and at the And the high-end the numbers, Okay. looking and you've million the being cash free board level, you dividends. got got $XX in flow $XX million and end between preferred low at the the at

and down. pay on debt structure, top So flow free the the effectively there? thought thought you Well, address at what's we're at little the the cash best will of if how this capital your What's very for cycle be. is least, the

Matti Masanovich

I and the but the extra because 'XX cash the as assume in are mentioned, midpoint at just that we and are in $XX million, we flow -- for moment, if those Well $XXX guide of numbers I'll doesn't let's had reset at dividends take dividends operations total -- an a CapEx so our from $XX we million dividend, $XX million. 'XX, recur million so just

So -- is other we can that there would And is leave $XX actions million for that debt pay take. down. and

can perspective, accomplish. from management cash other things we from So perspective, a working there's capital a

And think in North well to -- It's drive again North so America. don't done. not earnings performance us conversation for where ends as enhancing as we're America, not the that's I in

capital was if So that's say. #XX, I well the the when our would on the list, From I schedule, a our out in it put you maturities Slide are future. maturity what maturities standpoint, look structure at on the debt,

is sorry, the loan notes term -- 'XX is and unsecured the in up in our out and So 'XX in the term and the 'XX. loan -- 'XX, are

time see of pay lots North ample time America. operational got we've improvements to the So and and down in debt

capital not lot structure cash today, our I enhancing focus do down enhancing think to a can from but standpoint, So clearly. think pay also debt more flow I there's a drive is and earnings and I

Operator

Our with Seix Kramer next question from Advisors. Investment comes Raymond

Raymond Kramer

questions answered. Most been have my of

imports? benefit threat other half of things I either the here. have all with in did of Just or second One, on tariffs to the year you the a respect of tariffs, from at Chinese couple tariffs

Matti Masanovich

No.

XX% rumor actively on North There we've still back did So is increase in that tariffs the won in benefit se, was to a OEM they given to And appears XX%, it customers we that go is be from did XX%. And America But XX% XX%. quote in it's table. here tariff XX% situation, off don't XX%. rumored Chinese the would up the We was the of going to believe any now we to going the not per current not programs. happen.

the -- that XX% been by So XX% away. and we'll if if that eaten deal there's then a go But XX% the competitors. and no would Chinese government stays, gets China, the with see was pretty much

was in second to us half there 'XX. the benefit So of no

Raymond Kramer

X% But just been it today. looks triangulate that's way a could America off All look you, in be are what just out wanted the know down, be work kind numbers, so take assumptions it -- lose wheels your I'm North favored? the that maybe -- North fourth in even America. it's mean, North to because -- I I the I I right. say that Or of in was of couple down. of volume, year, And by the but like how there it do or be year of math, or the the but impacting you were understand I come of American to terms going know, this clearly a share premium quarter your nonpremium And ahead -- kind the to would market don't to to rate times that's going terms back much just you're Is volume little loss. I something a discussed I bit,

Matti Masanovich

will Well, there. they we've some tell customers said got us, so

and we're -- We're that a going to put of XX-XX to to it came vehicle, So XX-X, to customer and we end, the car, had the lower fleet so instance, have wheel, XX-inch premium making out and a XX-inch going and X premium example. that the that team XX-XX vehicle, do on that and we've that reduce X%." a was come sell early Some going -- to out production, to sell come XX% and the platform. had and we're there's split wheel. wheel, we're February, said, have share an January of XX% and -- of for went "Listen, we're bigger and to as from the as split not going low with commercial there end only our a through rims, We XX-inch we them XX-XX, a fleet they communicated

-- actually I to we're close very we the as So said, customers.

intimacy. and what build, we those the are. forecast underlying issues, they're understand and We to know We have and have there's -- ability going can so changes what some customer we to

this our -- on history We also have side fleet on as our well.

take what know on we were those the So rates vehicles. historical

Raymond Kramer

to -- to one one move you'd I just -- mean, are your the would the a position way going do matter, Okay. how one you different or anything year, going forward market is way wheels other.

Matti Masanovich

Yes.

I anything do I mean, different? I I you're out. So it's -- would mean,

X, sizes. programs X, when sourcing You're is it. think, our ultimately thesis to and good. on there, in blips have our mean, I strategy you pretty to strategy here the Temporary winning X.X a wheels is going the and around I is think, happen. XX wheel certain strategy, And and years moving you're market larger months are advance I

of wave I a And think so don't future. it's the

larger the finishes. future think is I complex more wheels,

that, so as bigger total mentioned, our trying to our towards wheels building have XX-inch to part of portfolio. I we're as get as think we're so 'XX XX%, And or our by -- up I trying

board, and team clearly, think fully level. that is evolving and strategy is a portfolio we're our So at management endorsed our executing I by

And XX-inch Absolutely. so Yes, I regard. to hit would think, nothing that wheel? that I changes in like

Raymond Kramer

it thing, of implying million $XX I just per the the -- up inefficiencies that EBITDA just way, wheel, of your things like just right. understand to in the the about be manufacturing am maybe the EBITDA per the to did of maybe expect that because would have volumes $X.XX lower that some yes. you to see issues flat. wanted and that when of in doing a that calculation you per wheel that I'm to looks to be till that an absorption moving just just size wheel will going I year those and is to of you're And or quick manufacturing whatever, cuts of Because the wheel other maybe guidance, just working I North not XXXX that on you're walk to ask here's another America keeping said, me to EBITDA But electricity, issue? lost late looks like trying is I maybe if I it like the look show math in kind was the roughly addressed

Matti Masanovich

wheel. us, a the size from generate clearly, larger off sales wheel margin No, helps that perspective, and more value-added size we

going, have the absorption helpful also point. your it, is there's the accurate. with in a rates, I think which also take to we But business, about there overall is European offsetting down portfolio. can based benefit knowing we is said up as the think going think, I I off So definite fairly best also perspective. to not we're an But here sitting the that from from come just somewhat But put of just partially today, that. volume created then EBITDA to mean, everything and where then I you forecast together what range knowing standpoint an know well so overall be we

Raymond Kramer

questions. might you operate your last leverage and cash flow. leverage little go to the it's a one But have bit some is mid-Xs of prior is leverage higher a now, year follow-up to sort in or And you'd how next target Okay. right you EBITDA that there approach for me like Or do and But at? do that a depending on question? somewhere

Matti Masanovich

year ended I really the mean, X.Xx. down yes, ultimately feel think, We And to lower I Xs. comfortable Sure. at I getting

the next over so three And I say, so of the that's course next cycle, our goal. would years,

what today. a reconfirm get we've at we but, low going leverage Xs. than I to basis I'm lower from are to longer-term previously out down is perspective, Our a goal not comfortable put to feel yes,

so acquisition, in of actually was XXXX, when closed. we closed Now acquisition the January we that's just mind, in keep the did

acquisition we're year from the date. out So X

-- half electrical Our looked leverage X.Xx. the specifically a around spent capital sitting volume at in of by of about cadence ebb the generated, flow and this rates getting through in as back I get and at talked we to year headwinds, kind as and going America, those from We're is earnings of quarter. some our working perspective. being the North so CapEx

absolutely, down pay want to I priority for So is the management down, overall, and leverage think, yes, to come that's I debt. key

Operator

next John comes from with Our Sykes Nomura. question

John Sykes

that. think bonds? given I buying thought the now any It's XX bonds area. you -- to picking of on are the Just up back kind Have

Matti Masanovich

Yes.

John Sykes

them at to them pay some so not you why Seems back at discount. get got a point,

Matti Masanovich

Yes.

buy act as a I balancing the then I bonds, to it's if I them. cancel think

I it borrow no once ability So money, back. out So pay goes goes down I'm permanently right? putting -- down, pay have debt, to there's I it once it to -- the

we it, evaluate key us. But that mean, when yes, and it, -- I is we So it. think that's it's consideration evaluate we continue we -- a discuss I will for it, to look

that it put table, the off way. is nothing So

John Sykes

know holding value-added mentioned well in this you whether are don't thing? terms that relatively it's pricing, from or up downing above I you aggressive but of price the been that or even XX-Inch type And OEMs like more seeing Okay. of non-value-added, before, has if or

Matti Masanovich

quote think global year year. I pricing pretty over a requests have the basis. over on been We stable year

So when on global they buy leverage we pricing negotiate wheels.

So wheels. with it's we environment bid a for competitive which very

ago when the that's so North Chinese some And X started entered market years X, America. competitors the in

Specifically China XX% of the today. wheels from come

Generally, premium can't been future core is and But probably and larger So business lower as -- of we have logistics investments see is they that's It the they're up, the of they model. mean market. looked more more China they go kind and place serving wheels ability, service wheels. they're where in ship the we've our our -- across the the but doesn't around the the larger at as and difficult manage ocean. wheels going shipping smaller we've to finishes, from

on for XX-inch less premium more And so, XX, I think, go-forward less larger finishes. and wheels and smaller, basis us a

John Sykes

business the you not or terms more in have in lower it Can the I is wheel that the mean, -- it's so quality you future? much get because you or issue guess, about of size little Chinese talk now, it the competition? a bit a is a I just business but might

Matti Masanovich

They think Chinese head make I few think, very capable. we've service have testing Yes, requirements through don't technologies have overall, for need think on, I and they we the go to I very the specs those -- we're don't our qualified mean, well do we the wheels OEMs all kind good mean, and of to the -- market. I I and that competitors but -- got I are -- a same

stood it's -- competition from ago. year new where So today there where we about are X from China or is a nothing

and big Prime. followed three America, about We Dicastal in is the shares. suggest Dicastal We're we're all us. North we're by XX% and #X closely Prime, So

wheels primarily And XX% in make of their of make So market. primarily we're wheels the we our they out Asia. about Mexico. And

manufacturing in I here there's So they niche do America. mean, -- North

got So base, Fayetteville, we've U.S. Arkansas.

competitors would Chinese. in is it see nothing you competition U.S. competing a there or win living America there continue. against -- why have that winning been don't successful facility tell each But out any reason think our of We've new wouldn't China the for a and North one standpoint. I that I and I from the in about we to

Operator

comes question from Prestopino next Barrington. with Gary Our

Gary Prestopino

said regime or [Technical realistic your Based that of XXXX. had to it there your inches Difficulty] higher be question. Is XX% XX% still a a sorry, of goal? that on [Technical realistic XX quick have by Just would over your Difficulty] prior

Timothy McQuay

Yes.

a you're think bit. up I little breaking

XXXX? to be question -- the a of is, we be and above wheels think expect by greater XX-inch of XX% be our to I do portfolio still portfolio to

Gary Prestopino

I to what I that's said still realistic say. prior think that a the used Is regime percentage? XX%,

Matti Masanovich

I to think book been of portfolio. XX% the XX% around business XXXX. That that XX% about may I we from. look of of don't kind we it's historically. be a as have, little and I know to the going discussed where came out forward XX% have it's at closer the it forward with you portfolio But our look think, will

Operator

comes Texakota. with question Steven next from Our Borick

Steven Borick

the those that the you founded don't father years know, company For my some of of and Superior almost ago. XX ex-CEO I'm

X.X still stock weren't, shares was holder are. But it be timed. million that that but may, action acquisition very of in I'm line those the are cut certainly listening on for As opinion family And in dividend. wish in of Quite feel we frankly, voicing a company. you as and the we this can we price poorly imagine, we're a highly as this stock the over the that we're disappointed

of wanted voice I a to So some get couple and opinions comments. today

a the coming various headwinds, debt for without about how which which future, future, years the that But they what for means ago. earnings, hear fact what significant gas. capabilities Mexico have crystal don't any big more the significant want in couple refinancings that create your ball look on the the electricity, obviously, Obviously, you future. of additional talk concerns when to issues real any the saw will truly But natural additional future about to EBITDA to is comments come will of down believe earnings to into are that the or company our we like talk you on there increases about us we price importantly, I probably is of You nobody based concerns are significance, significant a that as the has. your up in be that with particularly go in we which the in pay which in

look you at labor are the that than, when running As the of electricity know, cost and machinery. that operational melting with your obviously, all heat melts the and things two largest of your components treating natural aluminum go Mexico, all cost and factors other in the of on gas, obviously, and, basis, an you of

on doing the price on somewhat otherwise addressed What down to natural you're your through overall and to bring or markets the gas And is electricity. cost EBITDAs to of future's you the So lower affect are you potential will do future? try into issue? headwinds either what the trying your those long-term how feel you that

Matti Masanovich

and and Yes, question. do gas the we for program gas. started, through so program into the placed the We for -- thanks looking started that looking at now hedges at have we We It's hedging expanding natural the as Matti. the Steven, term. natural I since longer future of started XXXX hedge we're

forward the markets gas standpoint. from natural protect will using that a us So

risk we'll 'XX have contracts we and as the you're are a exposure as opened forward. as of the on program for -- is program, actively the well hedges, correct, process end driven as critical gas natural an look continue we've today we into that electricity. But the bought input to we manufacturing and active So program, through assess 'XX of the it going we've

Steven Borick

your certainly do $XX, going are different don't EBITDA and I Brian when how based well, gas, industry, concern on something years. things seeing Sponheimer $X, that that, but gas MCF the what was $X be be lot when we things had down at debt, Yes, were we side pay anticipate Okay. the that's you seems was were probably Obviously, in try low a gas to look looking us which those and we to asking. to where oil at $XX the on

place I'm CEO time And you just you would So to then when that in would not that Do quickly going new have you have follow-up. Tim, question. on year? reask line a this anticipate a

Timothy McQuay

we am announced X- that. can. the be said, I hoping of to moving Ferry, able time Korn as as when we CEO. accomplishing Stebbins stick a retirement still with of And hiring we first complete Steven, the Don we're Well, frame of expeditiously we'll as X-month negotiations gave hiring would announce year that to a and to I QX that I new this and those during and

Steven Borick

Great. realize ahead. tough all I on appreciate we'll had is. you And the days Again, better see you has Very it. level are guys and stock at very But shareholders. with again, battle. a of stick to a hope good. guys, certainly it I on see much. sorry we're Thanks uphill to impact significant our It the

Timothy McQuay

support. Steven, We your appreciate calling in. thanks for

Operator

ladies us. today's This conclude Thank you, teleconference. will and joining for gentlemen

rest now of day. disconnect, have and a may You great your

Superior Industries International (SUP) 7 Mar 192018 Q4 Earnings call transcript