Earnings call transcript Q2 2023

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Operator

Welcome to Superior Industries Second Quarter 2023 Earnings Call.

We are joined this morning by Majdi Abulaban, President and CEO; Tim Trenary, Executive Vice President and CFO. I'll now hand over the call to Tim Trenary. Thank you.

Tim Trenary

Good morning, everyone, and welcome to our second quarter 2023 earnings call.

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

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

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

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

Majdi Abulaban

excellence. good our today continued Tim, Slide focus on quarter highlighting morning, while you you, discipline our am portfolio Thank This very operational call our drive I X. growth. and Thank I will joining results our to quarter, this for second our continues on review everyone. results. begin pleased to and with commercial

above we are pre-COVID and delivering levels. seriously, value-add margins More sales

supply shortages. of tandem Europe, both the easing We chain in of recovery are North reflective production, semiconductor industry and constraints and seeing continued in America

strong nearly of During all the our OEM with customers. growth we a quarter, saw

value-added area last soft portion was FX European we growth remains content these X% quarter, The sales the aftermarket rates. consecutive where the North to year-over-year recessionary an wholesalers and interest do quarter, pricing supporting our due to retail at of in looming America the rental challenges, growth. in the the inventory have not content. adjusted substantial Despite companies, XXth as grew of significant However, concerns, high driven quarter by by in a

achieved near of million, EBITDA $XX adjusted high. XX%, all-time margin an a also of We along strong EBITDA with

in rising successful our way, all-time also costs. with customers portfolio-driven This, been with the growth an in for in by have aligning collaborative value-added pricing our strong dialogues high the quarter. input We content sales has resulted with and near combined

our of assessing discussed that approach portfolio we quarter, Further, business long-term book we XX/XX to profitability. optimize strategically our our current prune to are further are we to Last underperforming. parts continuing support where are

have done now this speak to holistically shifting business We focus our this are the more in in presentation. America European operations. I and our America in to will North later North

continues. cost focus In overhead addition, our global reduction on

in track to on with We reduction are XX% achieve expenses. our a overhead plan

Demand Content vehicle wheels XX% shipments with basis represent larger grew over now for premium OEM parameter customers. lighter to and on of our per wheels XX% premium wheels and finishes year-over-year continues. large a

and management to capital a our approach financial expenditures to overall secular capital profile. ability with our combined to these capture tailwinds, disciplined Finally, continues working enhance

quarter. The will we quarter, Tim a of way, third will CapEx reverse position the this which year-to-date capital in with to by a maintained to the For the $XX is spending prudent strong almost contributing $XXX low million. effort million. speak payables, reduction later, liquidity at in significant

versus down have we to since industry. Slide performance achieved while production delivered XXXX substantial These environment. the here four that in results vehicle, our meaningful per develop challenging are a same frame. margins, and the our the remains debt key we expanded all operations XX% in point time highlights key is growth ago, improvements years strong reduced very that value-add broader net The in sales, X the content underscore compared increase this to

is highlights have the side and increase new of how the Moving our adoption this our on success the business resulted combined XXXX. portfolio quarter strong launches improving a how wins. and costs technologies driving in product to The content in a had has of commercial of continued with Slide our discipline, illustrate X, These to differentiated accelerated launches and input drivers, premium content right we since which few sustained our showcases reflect adoption pricing combined XX% content growth.

plays story continue We into expect and our the this to future trajectory out. well content

remain first provides in production, the Moving by operating perspective on current the Global environment. QX momentum has which XX% the continued driven over on the two of in that, increased production decline volatility, in segment our chain our North regions America constraints to Slide to operating said industry aftermarket the quarter. Having the below the and easing from mix continued X, yet supply levels. previous environment. in pre-COVID Europe challenge year, unfavorable

of with demand the challenges, and larger supporting light talent Despite the We the North the America are into move UAW as given Europe for our backlog destocking. we industry in supply potential footprint second half, preference see by in that gains inventory pent-up negotiations contract in recent constraints, these the we and we the As and for there guarded chain long-term profitable stabilization pleased driven our our premium looming the believe localized and growth. wheels. we was pullback are assumptions

grew Europe, in in The our in a second key in our North the produced In aftermarket top half. our unfavorable in pressured industry to sales Slide in significant abate X our share of almost close These Industry grew in shutdown plant. fleet highlights the with contrast, wider combined X% further around value-added and quarter XX% by from second XX%. the expected production production in during growth TXXX for again grew quarter. quarter quarter XX% line factors, as customers the the regions, America grew mix the GM lines declines second OEM the have we the our the to and that relation our in with to market. are business adjusted core

overall focus European prune approach. a XX/XX to in with on our business performance to I'm our we speak on going portfolio region. broader Further, next. to our through related is profitability this our continued improving efforts This to subset of a focus have our

Again, growth it in note the industry recent which now up we in of years, significant important is sales to. value-added to catching is rest delivered the that

we our at our on significant We to we want a As and North to our and optimize the America business and placement. capacity new Europe. term portfolio move operations, This Slide America XX/XX in basis. XX, motion holistic region is narrowing I between It carefully with using the similar our approach for starts business as assessing on we a our see to approach to opportunity look ago. few years had the initiatives gap a discuss current North utilization

plans is flexibility. paint of to in plants There's improving capabilities another the improving is of Further, are of constraints the for quality, capabilities product one example focus where quantity are of eliminating all in on our way, wheels. our pruning We An our this or specialized to our relative create all not plants. customer. portfolio,

is high-cost example An extremely wheels low-volume consume complex, in here that ascended locations. capacity

aftermarket we consolidating centers. manufacturing Poland service to will low-cost around optimizing Further, In approach our reviving our the addition, here, be are we will warehousing operations we wholesalers. business our and footprint functions in of administrative be around our

seen customers, costs. input In benefit we reflect discipline have commercial terms to focus the and of on pricing the of improving

duties wins the with also wheels capitalize Morocco, on to a recent to anti-caking supply. becomes produced leveraging short-term footprint as our local-for-local our are on localize their of competitive OEMs We position real footprint advantage look in Poland further

customers, for LWPC lightweighting to OEM our Lastly, commercializing further are enable as especially This accelerates. lower as cost lightweighting for our momentum it our relates technology to broadens electrification the Europe, available we customers. options

Europe to these will serve We are technology we our our customer enable us a a leading with customers, base customers position competitive leader this by diversified premium confident further are in in region. that actions elevating of

am our In results quarter. this conclusion, I with pleased

continues and to to continues the and strategy execute business. growth, portfolio deliver manage Our team our

second of look on we on and industry year, recovery. strengthening optimizing are costs, the the the generation we squarely capitalizing focused As cash half through

our to detail to performance. will Tim? Now provide call Tim the turn over more I on financial

Tim Trenary

to up below industry levels our constraints vehicle inflation for costs, continue and vehicle by market pricing still consumer concerns be has recession Majdi. endured to XX% the the continue markets. but forecasted The Thank chain industry. pre-COVID and as to recent IHS you, in forecasted financing is production vehicle supply a Elevated on be automotive about moderate that XXXX, drag

to will opportunities of light adjust and and structures have to pursue continue manufacturing cost reduced to the We administrative vehicle our level reflect production.

annually. This force reduce in This arising $X.X This by manufacturing costs $XX Europe quarter, million initiative force reduction $X.X reduce a larger and a recognized Europe. will is in payroll annual by further million part million. in we of to overhead reduction charge approximately in administrative from a

America. North in Our Germany, cost as not flexible in structure Europe, is especially as in

structures. are in to manufacturing administrative We and exploring actions adjust additional further Europe our cost

income XX, decreased the Page Net look Adjusted prior period. in sales in quarter year Let's to the of on $X.XX at to year million in million quarter to compared a to We net EBITDA share of was $XX or period. per million incurred prior of second for diluted of sales. diluted $X.XX net $XXX,XXX per second for prior $XXX the $XXX increased of financial share quarter a the value-added summary. million loss XX% compared or value-added period, $XXX and loss compared earnings year quarter to or $XXX for the $XX million the the million quarter sales

the To was right, year-over-year period. compared The costs the bridge has customers far year to prior $XX passed on ago cost year a almost XX. to aluminum or significantly of Page aluminum down declined normalized. second sales from million has and through by XX% quarter is The

continues million the wheel, recovery by inflation is of than to increase $XX X% increased climb. which year. higher sales all per cost to and content Value-added this More or compared of prior

build negotiating and to to on the sales headwinds very and Europe of soft in lower to fixed year fleet price schedule align aftermarket in close. increases net lower sales North cost $X last inflation, drawing cost light production a and is currency volatility by be benefited to late pivot vehicle Elevated America Our million. cost a continued appropriate offset absorption

customer adjusted somewhat range. million of in compared year. second margin the XX% quarter period. timing of XX, the to to in recoveries. was prior boosted to Page $XX XX% The XXXX second quarter last the increased the for year-over-year prior EBITDA adjusted quarter year On the was for The EBITDA EBITDA Adjusted by $XX year million the in margin quarter compared

of aluminum at year million the aluminum a is overview prior pullback payables cash cash the the of payables operating to activities end, primarily of quarter from operating of Cash second a of activities of because in XXXX the use of a to flow on quarter. in cash most in free An was is reduction on period. Page flow back flow from million attributable This quarter XX. $XX company's compared purchases which decline is half $XX

period. at approximately by million snap back decline impact payables quarter. flow a investing quarter $XX end. for activities cash was financing $X third aluminate to activities the $XX million, year Cash were quarter of the fore to prior the for in used all in the year. more the quarter may $XX This to million compared the which in million Cash signed in described million, Free We decrease be payables the than prior to capital payments negative should which expenditures in $X $X represents attributed the at year. non-debt prior compared million was contraction compared

of turbo $XXX including from the million, Page partly on to million of year, sheet was the $XXX of company's prior $XXX second the of of capital was at million refinancing as be year. credit quarter overview decrease balance end, million. the of the XX, Funded An to year. liquidity, found June on facility end was an availability million $XX net and At company's $XX attributable the can $XXX end debt a increase under revolving the debt compared the quarter, XXXX, last quarter late structure million, prior at was Cash XX. the

debt June profile on undrawn quarter XX, of end. XX. was XXXX, credit as Page maturity Superior's at The facility revolving is

in of into We anticipation $X term SOFR-based defense the rate be. less expense ago entered or money covenants. loan Against than are hikes. interest The in about in compliance with otherwise is a loan $XXX the because swaps of year we of it would million million all rate refinancing

company's The XX. XXXX year financial is full outlook on Page

remains quarter quarter. this Our last outlook from financial unchanged

billion million. net maintaining of $XXX and million adjusted are million to million of million $X.XX for deals, our guidance $XXX of to of to million ranges value-added We billion, $X.XX $XXX XXXX $XXX to EBITDA sales XX.X sales $XX

We continue and operations of of to million expect $XXX cash flow $XX $XXX expenditures approximately million capital from million. to

a year. continue for XX% We to effective to tax model XX% rate the

teams. This are take teams, our solid operations, happy Caroline? pleased and procurement with In prepared our I closing, quarter. Majdi concludes we I'm delivered and especially very questions. a to commercial the remarks.

Operator

is ahead. Michael will now Ward the first Instructions] go The line from question please open, from Benchmark. take [Operator We

Michael Ward

Thank any getting the the Motors issues all General with you to you. Did have issues from some Good claims U.S. at at components? Mexico morning everyone. vehicles to border guys have

Majdi Abulaban

great Yes, that's significant question, still impact business, you we've Actually, unexpected. Motors actually. TXXX aftermarket the have vehicle than lot longer with in which America content described, a biggest just was is that expected Michael. North the was had addition on It a we [indiscernible] to is the General because It what we in

So Michael. yes, the is answer

Michael Ward

Okay.

when So do the you revenue? crosses it now When General record revenue bridge. Motors records the the

Majdi Abulaban

in We the up the revenue record Mexico. wheels when they pick

Michael Ward

Vehicle in quarter. guys production you because And aftermarket then was could XX% right? the the in or up business German quantify Europe so, term, production can say the you

Majdi Abulaban

we're above there mean bulk our on XX% revenue We've and I that team standpoint that, represents done Europe in that market aftermarket only about Europe. up been business business of from really, right that's had. and the very with the in well the

Michael Ward

previously down aftermarket like Was it [multiple is XX% speakers]? and a bit, it's

Majdi Abulaban

all No, range. my around comment was that

Michael Ward

And down? it EBITDA you Europe quantify can performance then year-over-year? Was in the

Tim Trenary

We Mike. report SEC This the provide do EBITDA by by region. performance publicly don't publicly, the we report We Tim, our don't Well, in is statements. way.

The our income of published second and will margin. breakout sales a operating which today, quarter of regional be

performance from said has and years the our America in for his to of get as improved somewhat. can frankly, the filings you over So Europe regions, the a three different comments, the performance markedly public deteriorated two sense North past is of during Majdi

So a make attention some to have attention period to turn made we the to now our European changes. changes turned have for time operations the of our operations, and of number continuing already

the For example, by we took payroll to charge reduce $X mentioned I the million.

some the months, influencing So last the had work favorably few to in in Europe we margins have more we've success do. but in

Majdi Abulaban

you of we all performance in footprint or was North things technology. when it we to if whether portfolio recall this or and and was focus see started it's basis XXXX, that Michael, XXX look, America, that combination pricing team's in points out improve by the improving the on a the or or set you

of plants. So improve performance it been that opportunity see We've strong COVID, now at to as negotiating to in a holistically. the we busy to volatility, pricing, business look responding the we performance getting

shifting we're to the next Now phase.

Michael Ward

a sounds like is it Perfect. just payable And the merely timing difference?

Majdi Abulaban

Yes.

Operator

from line Barrington go question The please is ahead. next line open the take from will now, We Gary Prestopino Research.

Gary Prestopino

exercise you is looking in fiscal is and what that well? was impact the North but Good that's to North ago, of testament do and a you to America with on have will at in Really Europe, which flop. morning, business, margins how interesting Tim guess, that is to that your flip me lower 'XX kind Majdi. a couple years and to now going it you're continue doing fixed versus American well you of was think what were that European I something the as completed? when that Or going

Majdi Abulaban

right? been No, did started ago. like we in you've and eight this Gary, We month there, process America, North just

plan all to dimensions. We very, My clear on expectation the and North less there very hopeful in we'll with how is 'XX. We be have to know get a than America, actions year similar I'm early there.

Gary Prestopino

Okay.

inherently be you going is America So early feel margin Or profiles in Europe there always that could reason? margin Europe? a to 'XX. Do North whatever the and for basically between you equilibrize lower

Majdi Abulaban

let right me now, Well, bit. a step back

competitive is it's than different. look more technology you North complex. If business. our is the complexity complex and have we Europe at America there, landscape The The much

focus numbers, see go just more if the through margin really frankly, and basis Gary, now, that up XXX opportunity. our you you'll So bumping points

close to possible. is objective get as as So to that our

Gary Prestopino

lastly, about remind Germany? inflexible any on in And you of just a you Europe labor production pretty being your me, would Okay. then How Germany of Or talked issue. it? of much is out is

Majdi Abulaban

I'll less capacity let XX% is Germany. but of to add this, Tim than our in

Gary Prestopino

All much. right. you very Thank

Operator

will in closing hand questions Majdi further your remarks. back queue. to I for over Abulaban the no There's host, it

Majdi Abulaban

team today. for to like everyone, hard would thank and our you, work joining efforts. call for the Thank I their Superior

you challenging to rise. very and are everyone, Thanks, for continue in attending. We a environment operating

Superior Industries International (SUP) 3 Aug 232023 Q2 Earnings call transcript