Earnings call transcript Q3 2022

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Operator

Hello, and welcome to Superior Industries Third Quarter 2022 Earnings Teleconference Call. My name is Priscilla and I'll be your coordinator for today's event. Please note this call is being recorded and your lines will be on listen-only.

However, you’ll have the opportunity to ask questions at the end during the Q&A session. [Operator Instructions]

Relations. this Executive Majdi and Vice Senior President today CEO; President Joanne joined Vice Trenary, Tim President Investor are morning Abulaban, by and Finnorn, We and CFO;

your I host, today's will Thank you. you now over conference. Ms. Finnorn to hand Joanne begin to

Joanne Finnorn

everyone morning, to and third welcome quarter Good call. earnings our

the Relations will am call our available is President earnings we to by section Superior's Officer. earnings I be call Investor website. of our on our Chief and Tim During Chief morning, presentation Abulaban, our joined release Officer; on referring Financial Executive Vice this Trenary, President which with Majdi the along Executive our and and

SEC turn safe the and Litigation Reform remind current the commented of and presentation a I would XXXX. or Securities call any to safe this presentation XX-K I statements the today Form discussion Please Private for more in Majdi, like company's including everyone factors. X subject are of for harbor complete refer this Before of harbor statement to report on to provisions to on filings, forward-looking over full forward-looking the risk Act the to slide that statements of the annual company's contained

can non-GAAP various to the calculated most exclude and therefore discussing found Reconciliations measures these in GAAP. the be be measures of in this today. of presentation. are accordance directly also certain will US These non-GAAP measures not measures appendix impact We the items with GAAP of US comparable

to and update. I'll turn provide to the a that, call business Majdi With over portfolio

Majdi Abulaban

the begin our everyone on our first I'll results. to highlights. thanks today joining review for and Joanne, Thanks slide X with quarter call

industry substantial and along of growth supply including increases. quarter chain double-digit volumes per commodity continued depressed this in cost results, with value-added content adjusted sales and Our and expansion; facing wheel team disruptions, while delivered another EBITDA, margin solid

the enterprise reduction other we and inflationary focused laid with collaborate driving while our across customers the out recoveries have remained continuing value suppliers with cost on and map, operational solutions. road In we to improvements in line on plan creation cost

differentiated for achieve capture These persistent with the demand also to cost margins have wheels while to increases pre-pandemic FX. us on quarter inflationary our content unfavorable leverage We levels wheel continue par macroeconomic headwinds, expanding portfolio in enabled by EBITDA XX%. combined on to well efforts premium as including as overcoming

capabilities This of strength. as testament our as team the well is to our leadership a operational

we into industry we While improvement these headwinds on are to of which continue our environment, XXXX. some production, weigh heading continue to in signs in operating seeing expect

focus historic maintain to capital of has preservation During to net cash quarter, working strong $XXX we us achieve capital of liquidity prudence and low maintained on through generation million. with $XXX million debt This also the expenditures an and enabled management. and

production. regional on which slide industry Moving X, highlights to

in is increases to improving supply production point industry basis, While year-over-year on chain North with continued industry America a sequential both and Europe, notable actually challenges. comps

that, portfolio manifesting our sustained said out products play market. to continues Having above growth for in of demand itself innovative

growth. profitable has time, and necessarily linear, trajectory long-term been last not mentioned I to As but this it equated has outperformance

XXXX. fact, has portfolio since our X% of compound rate a early In delivered growth annual

We expect this continue further. recover as trajectory to markets

demand market. recovering long-term our portfolio to tailwind finishes our this ability for key focus and continue enhancing serve has a wheels In addition Consumer will premium growth been as our our has remained with to to markets driver technology driving in and meet on a outperformance. lighter over ongoing larger demand strong

slide to our environment. to address operating on X Moving current

production some our supply part supported prior below easing to we pre-COVID levels volumes significantly challenges the in year, XX%, to improvements. beginning markets on left semiconductor in While due production the global the global of lingering are addressed chart, side see by of remains industry this chain to increased constraints. Compared

here, scenario shown business low plausible, demand tailwinds pent-up destruction we record including And inflation-driven we out. propel demand forward. to inventory said, our an fleet expect and is that to while dealer the and do continue aging That see playing not

On our creation against our road value to map. slide progress discuss X to

to laid This out priorities have outstanding year. Our delivered an this job by executing we do evidenced strong on continues is throughout performance team the slide. financial the the on

In quality just and fact, to improvement in whole visit where new came team I levels our where we at taking operating a continuous is operations level. Mexico, from back to our a are best-in-class

belts, from black award named savings. case and Supplier problems black exciting Dozens received was solving of GM a Mexico, belts, in of recently delivering A bottom green plant Nissan our in belts and line Year. master point, quality and oldest the

of proud achievements. very are We their

Equally priority collaborating of we reduction a Teaming entire This priority It company. only. the not with discipline, of instituted commercial have our customers as on the the is organization. cost the important well is ideas team up recovery is on as dialogues. sales throughout cost

Here, made good we have very progress.

play than here localization last And more I to out. now profitable continues mentioned choice and pursuing the global-to-local terms footprint customers our to continues region. for it's ever In as time manufacturing growth be of in exciting our portfolio

strategic this our footprint. major North of another program a our evolution of US. European a In we value in-region America launched fact, for a exciting OEM the operating Again just week, localization footprint in here of in effort the

bit of a per wheel growth. our provides on more drivers nine long-term the color Slide content

electrification, case consumer finishes lightweighting, premium larger for aerodynamics, preference point. with of in So, wheels accelerate. adoption to continues and A

And look wheels and Further, if XX larger lightweighting Europe. in wheels XXXX, gone has doubled we fact the than mix XX% same the with the you XX%. tripled North in now. that number grew in inches from from XXXX applications in at XX% to premium of wheel XX% America our Since have to

deliver wheel few staggering total So, has us increase content a technologies last these adoption of enabled to in the per years. XX% in over

consumer our key of shown market electric the our move this to continues recent of a customers G-Class among internal launches on the offerings to Mercedes most traditional combustion slide. and Slide XX platforms some on preference These evolution as increasing wide continue reflecting Mach-E showcases vehicles to premium launches Ford offerings. towards the of including product vehicles of our premium reflect OEM adoption range from

the to on margins EBITDA improve. a net which With demonstrates team. of pre-COVID upside sales industry tangible of per we substantial results priorities. shipments demonstrates and wheel compared strategic and slide are content expanded are highlights tangible also our collective per market wheel. levels of these the we results still Turning to These This Superior unit historically in executing XX, as our effort environment as the business ahead volumes agility results the achieving volatile low

back It couple in actually rate more it's customer volume but if the the information our slide a It of XX% year-to-date nature of historically But highlights year. it lumpy highlights of is EBITDA is environment things. So, normal the you on a basis. importantly, recoveries. same which a about highlights XX a business go run

So, we're there.

Slide XX addresses outlook. our full year XXXX

versus million. we not these a elaborate further of to to anticipated cash range industry $XXX We outlook in vehicle production improvements volumes in modest conservative has with and adjusted expectations the remains current will our EBITDA and changed IHS operations million unchanged all year his $XXX expectations million our the of view $XXX from and of of for remarks. Tim flow on million industry line $XXX expect remainder In guidance with the are maintaining year.

year. of throughout closing, am in I this proud team's past performance In our the quarter and

chain disruptions. year in the industry third supply volumes depressed and are of We

these We and day-in forward our this continuing face executed to and value the have the day-out for shareholders generating We challenges. look close. to as of to comes in a further momentum year

And Tim. now to I Tim? will turn the call over

Tim Trenary

chain to the everyone. good and company's structure. cost morning Majdi general cost and instability to energy of cost cost especially global continue Commodity you, supply burden alloy and increases constraints and the Thank aluminum the inflation

however of vehicle supply continues has production down vehicle recent to in our improved. depressed to customers' Light shortages from generally The and affecting cost of the energy production. has stability be due chains come our component global highs markets

Lean Cost Enterprise what Improvement Sigma operations business performance this or established capabilities our internally ECI, support to environment. Six to expanding and and continues supported in financial our continuous CI by refer as improvement, we our program disciplined

and execution teams. our the pleased We procurement programs of cost-out are with performance of manufacturing our and commercial the

slide sales to in at to to million Quarter year cost customers. our prior period. Let's the the for sales million in million more $XXX compared the higher Third is primarily quarter pass-through the than Summary. in net X.X Financial sold increased increase The The quarter in prior $XXX X% Net period. aluminum look XX, company wheels year from

$XXX The weaker more wheels from but inflation down in million cost year alloy aluminum to and of the recent in part highs. the also part in the to sold, $XXX come to customer increased large euro. cost offset elevated, recoveries of prior the by due the to period metal compared quarter has sales million for Value-added remains

share of year of or compared of diluted of third net loss We $X.XX quarter a the a or in loss loss period. diluted million $X.X $X reported for per prior the net share loss to million a per a $X.XX

XX. bridge quarter sales compared by benefited inflation. of is cost year price, wheel value-added sales the part mix year-over-year the sales $XX third in last recoveries to because large quarter the The of in million and slide of on and higher Volume,

up cost weaker passed And costs customers the $XX million. was aluminum. the Aluminum of our prior through million to $XX because euro value-added the elevated burden of year by sales compared to

value-added acceptable for sales. On in XX% EBITDA to in the quarter margin The the EBITDA margin million $XX million compared adjusted year slide $XXX was period. million XX, $XX on prior increased an of to the adjusted quarter

a Volume, and overtime. $XX change to of was out period. extraordinary the QX million. fixed the mix inflation timing prior Metal burn million net from supplemented performance compared in cost year to and price, customers benefit of timing $X of Recovery our in inconsequential. The were metal quarter, impact tends million $X a

flow flow, performance in $XX by better $XX to to working the million, due Slide compared improvement prior was period. XX, quarter the year provided to prior the period. compared of activities provided significantly by capital cash flow This million negative operating quarter year operating cash is cash third largely in activities

compared of for order $XX in on low, year. cash expenditures. We $XX year used million million period. to is in activities expenditures timing still quarter this of investing prior spending to expect the the million $XX because Capital Net decreased the of capital

negative financing payment prior $XX Free prior $X was million flow activities compared in of cash was flow quarter the to flat the cash compared $X for cash free period. for therefore year. million, A year non-debt million to the

$XXX was company's depreciation primarily results less the from debt than XX. weaker million overview debt. is year-end slide The and at of capital of the Funded decrease euro XXXX. million An the euro-denominated $XX quarter-end on therefore structure

less Net decreased million $XX lowest year-end have year the continued are to since this $XXX and to and acquisition. XXXX. debt the Funded UNIWHEELS debt million, than debt decline net

to back has We million normal. size sheet is as the in cost this metal on normalize. quarter-end. was aluminum elevated investment This million will than at somewhat a come about Liquidity at balance larger $XXX investment company of incremental quarter-end. us cost $X At the present at aluminum to continues the

The debt maturity profile is depicted XX. slide on

mature company impending have XXXX debt. of October and maturities undrawn. of compliance covenants. in We no is with facilities funded all in credit which loan were May The Revolving

back, The pulled capital public markets market. especially leveraged have finance the

with to company And stay intend close delever appropriate our to Fortunately the improve time continue do balance refinancing the at to our performance at pursue model, the financial company anything moment. to financing intend passage operating of of relationships We and this improve isn't compelled the to we time. our a the and to sheet.

the our is recovery on Ukraine of have the The of industry light could slide on timing vehicle company's financial impact the therefore, The conflict outlook year XXXX production performance. meaningful the remainder financial in a and and XX.

dollar The and funded but chains affected debt. adversely have has is improved. EBITDA, Global the to the has sometimes continue but benefited vis-à-vis supply unstable and are sales constrained be euro depreciated and

prices inflation recent from manufacturing have of however Energy of and come amount recovery from cost energy our is timing highs. down also inputs extraordinary cost the customers The are especially of The uncertain. uncertain.

$XXX in year net billion expect XX range to million $X.X $X.X million the Having in to of sales light value-added the beginning in next sell sales billion year. XXXX the and that, modest a in do of recovery to production XX expect in range. with million we and vehicle the said all $XXX of We to wheels remainder million

of We in be $XXX adjusted million $XXX to million $XXX the cash expect $XXX range from operations million. to and flow EBITDA to million

million. We a We tax expect capital XX% $XX model expenditures to XX% for year. order on of rate now the effective the

extraordinary and Value-added was regarding up, down. delivered cost Discussions a was quarter. up, of with closing, were we up content was our are sales ongoing. wheel In EBITDA per net debt customers inflation recovery solid

will that can have extraordinary There programs be recoveries no lumpy. Customer inflation assurance supplement and may CI. continued and success we ECI recoveries be our the self-help cost of

build should ability put the vehicle when our and business demonstrated operations commercial, company's benefit the a in with discipline leverage from to Superior light to significantly together procurement taken This recovers. maintain operating in position

concludes Priscilla, and back are your happy to to I take our prepared you. Majdi This remarks. questions.

Operator

Gary Instructions] now our Barrington you. Thank from Please We'll [Operator question from Research. take first go ahead.

open. is line Your

Gary Prestopino

Good morning, Hi. everyone.

Majdi Abulaban

Hi you? are Gary, how

Gary Prestopino

Good, some erratic and with Tier other just I speaking Hey. they've are very to have In said X that been improve. their would assume order you're some starting that fine. to orders suppliers, patterns saying same starting erratic Xs feel just Even end them then Tier users. of order automakers that are thing, the from less things your in time. up these don't pick and

Majdi Abulaban

nature Yeah. shortages. I'll felt year orders. and get would is mean, Actually that Gary, surprising. the to just this automakers I things on we a of microchip these two the erratic speak all handle

I'd be right? that moderated could surprisingly it of come in to be just expected, of nature you still erratic a the bit X% but short it it's year. And was of I have XX% would a has what Volumes expected short year The say orders supposed I year. there. what a guess, far

think largely into it's I and customers aware now And run of that have them. ago because couple not vehicles build other able that a Gary, It's months only actually to factors having microchip to you're broader a chain to some is supply problem. problem of ship be not XX,XXX the

are And we costs erratic say to frankly issue with would nature still is discussions the increase we us and moderated on it's that costs; there. causes to these the it orders for the our recovery. incur in I afford us So of for that customers but costs cannot has issue us

Gary Prestopino

is all then, on you premium highlight just lightweighting the within And various or when that there is Okay. with cetera et the X, that within growth of slide actual aspects industry? finishes your portfolio,

Majdi Abulaban

No, -- -- XXXX. The versus this that's versus no, are data blue the portfolio. Gary actually is industry bars our

So market XXXX that down show the you is that's empowers down if that right? So XX%. market, would on XX%,

you lightweighting drivers Our less others. in it our of remarks actually where months versus about of view doubles portfolio XX%. up my lightweighting lightweighting, it ago these when I in applications story. has XX%. applications remarks XX our just was is in into And a in accelerate. actually growth is content But cases in what it. and say than I couple compare our statistics they some triples you of percent It's the went what are very business, a now, exciting at didn't if It's in look And

far, far from we are we we as be adopted these can be where and by where our be So will technologies continue to customers.

Gary Prestopino

then else lastly, great a That's And you somebody with Toyota. deal in Okay. hear. big and I'll jump to signed let pretty

it does When up? quarter. In XXXX? that last start announced You ramping

Majdi Abulaban

up by we starts didn't -- not Q the in disclose up it's it actually. Toyota It's Yes, way. -- ramping customer the

starts not next Sorry about disclose it in year. that did it. QX We But Gary. of

Gary Prestopino

from Toyota – Okay. I heard got then some else. have know don’t where heard I must somewhere I

Okay. Thank you.

Majdi Abulaban

You’re welcome.

Operator

go Gary. you, have Instructions] Gary Thank Please again. [Operator We ahead.

open. line is Your

Gary Prestopino

proverbial senior the your are sheet. euros denominated have any balance right notes in number the Do the you at questions on some the Obviously, market you. They're in in now? on correct? what Thank elephant on trading Yes. room

Tim Trenary

Yes, they Tim. are, Gary. It's

Gary Prestopino

at looking Well, right. it. All

Okay.

Tim Trenary

if the of the marketplace's Gary another at reflection in types of notes perception at paper. may today -- capital our necessary of of funded a trade the senior bonds those it's a securities. that the Europe traded order are general. not marketplace you I a referred the and words have in of it elements reflection in debt of to which the in you term If other loan both decline marketplace unsecured they those our the the roughly as what of over way, of In to notes reflection the is the yield fact both markets by reflect Said amount the down, securities reflects amount look

Gary Prestopino

all? the XX, Slide million. market thing. I'm the in Right. They're But if is… trade what €XXX at to guess I books at at them I get a XXX on on But got they million. see do trying That's you've translation

Tim Trenary

They do. trade. do They

Gary Prestopino

trading Okay. above Are they par?

Tim Trenary

par. trading par at below discount they're No, a to

Gary Prestopino

flow Okay. buying of relative some the dollar notes to starting start all a if the possible Any at given use to is of cash thoughts back to excess where to bit little maybe the euro?

Tim Trenary

Yes.

are and given they that, There so is held so some that least consideration. two we illiquid market So doing because are them to in you downsides were therefore the at value for any transaction have tends closely if securities the significantly. move the these securities of

to is not exercise is would that just buy judgment ability these my a of we that's were way that because number roundabout securities. it at quickly saying in value of notes the the our it one. in meaningful very would price undertake of just the So a great, That's discounted move amount to

Having were the to bring just just said the now. in company the that that, enjoys it said I would create maintain it with to to small for if think what one of company its right consider considers flexibility might the I the a that I what better and it's liquidity undertake value amount notes,

So decided where down on that. given are or if trading, do balance If to-date the traded we've that change. versus notes might further the to notes the depreciated euro not further

Gary Prestopino

right those And yield on the what's notes now?

Tim Trenary

we Jack, get you We'll the call that here. can you that to for before have me? for do end

Gary Prestopino

all that Thank I even the Okay. you. That's call. get on follow-up can I No problem. have.

Majdi Abulaban

Thanks, Gary.

Operator

next Please go Thank you. question Advisors [Operator ahead. Instructions] our Investment We'll from from Graham Faze now take Kramer [ph].

Your line is open.

Unidentified Analyst

you. Thank Great.

that Is not I to a say North going let's XX% a it my or in you $XX, at here? bit. mix, the right Could here, it's trend? quite sales that has when up comment math this just been you like $XX value-add declined looks for -- doing on Europe the present year just whereas am look think adjusted I I wheel, obviously, question, per numbers that America

Majdi Abulaban

of couple a points. Graham,

to okay, are sure. for adjusted just be FX, First, these numbers

you in when the last look America, at mix very, was year-on-year strong very Second, North year. comp

out In blew the of guys fact water. these it

this you Europe catching comparable. So story But on up. in was of Overall, year you see Europe always see the both sides moderation very average some moderation, some higher the than very, North contented is growth and ocean a America.

Unidentified Analyst

Okay.

there's part And had I I unit big I hearing are Okay. again obviously, is going in of decline the in that on But just mean the shaking sales the or just XQ, the there. out? is of Europe lot in I we trends, what know pretty see weak. -- far terms a you looking What -- over at as your are which sequential demand think norm about how the world expectations as don't is just seasonally. a

Majdi Abulaban

that's a grew And very obviously of happened mean, XX%. you at surprise I given the Europe in Europe the been question. look us, year-to-date Graham, North for industry what good If right? Ukraine, right? grew So has look at industry America, at you especially X%, if all a at

So markets X% grew when you the year-to-date. combined our whole about

the year QX. think in struggle we're We the flat Gary's only still QX. will to more have OEMs with and continuing close much seeing not point, Graham. erratic What issues. was X%. more are QX schedules is the last to nature out there not there, than chain but we That is in seeing said, we Actually of implies a year America surprisingly Europe North potentially supply than like the also volume, stronger

Unidentified Analyst

is that or Europe aftermarket is far And at goes. not? here As affected Okay. all, as

Majdi Abulaban

and gained not and transportation of will growth rest issues say And of most of in just had is because us, of lot to -- a last served market that out us in well a help phenomenal lot bit XX% The the Asia customers. I a Asia. for China, share growth actually was our but year-on-year, quite aftermarket story a last for largely We of there process. were step year year, of of we the

where really what So a we were. of see you moderation is

Our are we the strong is in share-wise number Europe. position overall one. Market in aftermarket very we believe

market share actually is in Our to Germany close XX%.

in but volatilities to that. we And side. saw XXXX to always let's It's of served us, moderation were OEM levels. on has as to some you're the an continue back maintain we business the We say that where business some a for seeing good offset

Unidentified Analyst

That’s great. from me. That’s all Thank Okay. you.

Majdi Abulaban

Thank you.

Tim Trenary

euro the bonds bonds, The today XX%. yielding Tim. it's are Prestopino, Gary

Operator

the I'd this additional for appears the further It is any Thanks or there at remarks. turn questions. closing question Mr. for you Majdi no like Abulaban to to conference time. back

Majdi Abulaban

for today. by to To Thanks, your continuing for strategic to In long-term delivering throughout priorities am and I [indiscernible] quarter your thank the closing, you [Abrupt care year. encouraged for our forward our and everyone results joining and growth. to profitable of take for our very continuing We Superior End] on perseverance work call the team, this look hard

Superior Industries International (SUP) 3 Nov 222022 Q3 Earnings call transcript