SUP - Earnings call transcript Q2 2024 | Superior Industries International, Inc.

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Operator

Welcome to Superior Industries Second Quarter 2024 Earnings Conference Call. This call is recorded.

We are joined this morning by Majdi Abulaban, President and CEO; Tim Trenary, Executive Vice President and CFO; and Tom McGill, Vice President, Investor Relations.

I will now hand you over to your host, Tom McGill, to begin today's conference. Thank you.

Tom McGill

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

available will call with to is Relations this our website. be of our the Superior's section morning, release, along During which, we referring Investor presentation, our earnings on earnings

call on Trenary, and Tim Majdi Abulaban, Vice President and I'm Chief the our Officer; Executive joined by today Officer. and Executive President Chief Financial

are forward-looking turn subject statements provisions Private Majdi, that I I remind commented harbor to on the the or to over today in safe of contained Securities any Act call this Litigation presentation Before of everyone the Reform XXXX.

to a to presentation for the more forward-looking statements complete refer on factors. company's the and filings, X SEC report statement the discussion including of harbor Please of risk company's current and Slide for full XX-K, this annual safe Form

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

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

Majdi Abulaban

call and XXXX X. Tom, you, joining review today with our you quarter all our second Thank results. to begin for will I thank Slide

efforts highlights the our quarter growth This the to culmination in position and years recent of company profitability. for sustainable

lead these local sustainable Combined, products solutions our transformed strong to the manufacturing our earned as footprint. a have in winning competitively have portfolio premier and place have on advantaged our industry. wheels and We refocused operations into put provider position best-in-class the its actions Superior

industry margin softer sales delivered on a sequential significantly production basis. outpaced our and quarter, the performance. solid second EBITDA team Adjusted the a expanded adjusted value-added despite broader In

our our supply shorter highlighted, we transformation advancing this off by chains. transitioning into footprint regard, elevate execution value for customers global footprint on have strategic European seeking and derisked of As OEM and our track. low-cost additional we manufacturing executed locations, capacity local-for-local our creating to our our transform actions on previously In remains

manufacturing our exited are a completely of position up now by on us and operations in our well uplift have year. profitability ramping end We the significant German this both. This for will way,

execution far. proud transform of our this on so team's I flawless am

customers very, these Superior more you on recently expansion with very Our in been give have and I'll of this actually have with wins technology results pleased a business partnerships. recognized bit. our and color

In with Superior increased And in deconsolidation terms the environment adjusted In and adjusted X% points currently, X%. production expansion. EBITDA operating exchange delivered contrast, key foreign of declining by margin quarter quarter, value-added sequential the we industry XXX this X%. declined production sales customer for basis with solid

successfully for supported have the price highlight increases. our like I that performance customers inflation. we by dialogues On price price to with OEMs point, real pricing cost This from onetime negotiations for to was with successful would increases recoveries this pivoted permanent

regard plans to capital with our to structure. Now address our

will and advanced We in to sheet company are long-term for very notes with in discussions our near retire unsecured balance the our action future. This position senior growth. lenders strengthen the

information more of couple in on announce to this expect We a weeks.

are of As look updating XXXX, at the year we remainder full we outlook. our

We lower to declines volumes. due and and in net are for pricing industry value-added reducing outlook aluminum sales production sales

margins. our we while job While recovering flexing customers are adjusted maintaining done inflation, inefficiencies teams for guide, from have and (disproportionately, excellent EBITDA reducing our an costs and is) price that

provide Tim in this Unlevered lower flow We cash a capital expenditure side. volume we more free focused outlook. unchanged flow will as laser reduce on color on our cash remains are environment.

on Slide Moving X. to

are recognize getting competitively with our technology in manufacturing competitive We the advantaged leader customers make, have a some underscore to they with as a position very, very which exciting unique footprint. we our news as Europe momentum

with awarded customer our even we crossover slide, the Volvo a of platform. wheel on left program the long-standing record premium billion on Turning a midsized X.X

program This to fourth million expected in valued is and aerodynamic quarter about the $XXX and premium and is technologies launch at lightweighting of includes our XXXX.

winning Our team Volvo. is very proud our forward relationship to We them. with achievement this of with look

Audi. Again, on in research rating for the reflecting technology this with as automotive European leadership top in Audi, as achievement major relationships. the slide, the received side long-standing We're our our of strength of momentum supplier industry-leading capabilities. as a with we technology us recognition the this an strength This for innovation, our R&D in right is portfolio have Now space. from grateful positions customers they underscores footprint, recently as and well and and A recognize a of very brand development customer this our our significant our transformed leader the OEM a from

our on detail further provides X transformation. European Slide

As Poland, North will we closing between we in the of production launching ramp second be Europe in and this America the up gap half year.

in benefit improvement Polish up. and will We higher absorption from production our cost operations as ramps

Europe In our warehouses overall overhead. by we consolidating continuing improve and aftermarket in addition, are fractionalizing cost structure to

pleased in progress are teams have long-term recent with we reflect recover nature the of costs. customers price implement times the inflationary conversations OEMs These collaboration our increases and the made European relationship. all with our to Further, negotiating wheel our to with

on inventories, inflation Turning complex environment, increased further shutdowns, mix by customer volume unfavorable Europe. key shaped highlight dealer in volatility production to higher and current X. the a continues our landscape industry to and To Slide operating ongoing face

we recovery industry key regions seeing our pre-COVID declined customers on slowdown. production X Industry our level continues, versus while X%, X%. are While production a declined in

below production remains said, That levels. COVID

continued by tailwinds. industry We the term demand expect pent-up long recovery in supported

high. case A point an fleet that age here the U.S. in is all-time at remains

in as to highlights key second industry customers Global while the which on well increase quarter. compared adjusted Superior's sales, declined, production exchange deconsolidation. in growth we delivered value-added both as foreign X% production Turning among X, industry to the for broader Slide and

by OEM production Regionally, was North American increased European softer among production offset but OEMs.

both our European respective America quarter. said, grew operations of the the market that and ahead Now North in

Further, we programs. our have strategically portfolio underperforming pruned and parts of exited

well environment. actions these of performing benefit the our in challenging are we in seeing results. Overall, are a We

of X, and Slide technologies positioning which these continued our Moving products the growth. premier of driving the portfolio on is how adoption of accelerated highlights to

the launches quarter. long-term side the growth since slide in XX% side XXXX. the some left content with right highlights of highlights second The trend per slide historical wheel of exciting The the of

these the well macro future. the trends expect continue We to into space driving wheel

grateful closing, to team the I Superior In the have for am position we company. our for created

our have strengthening on we for profitable manufacturing we more best-in-class, Through products, the now many sustainable, sheet local footprint, our as our We execution refocused portfolio to and team, of transform footprint competitively is our retire our outstanding positioned are growth. advantaged [indiscernible]. Superior ever than balance

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

C. Trenary

Page footprint Majdi. announced Europe last remaining of cost update. a structure. the an and transformation transformation of recall I action, our on a footprint local-for-local manufacturing more August competitive you, XX, strategic On XX X% of our the optimization continuation Thank important to the that year, we manufacturing

known court the accounting our Industries' Germany, Werdohl, Superior administered in of sheet otherwise to proceedings Generally or SPG's facility the reorganization with for be production commencement process. production beginning More in Germany principles balance operations protective required Superior specifically, statements. an of consolidated accepted a entered statement financial as SPG, Industries proceedings, German shield and

at results SPG is excluded affects quarter year-over-year deconsolidation as of quarter SPG comps. the statement from sheet end. financial income of the is XXXX The second the balance Accordingly, the

Year-over-year, in SPG. and, $XX were by expenditures and quarter respectively. sales wheels The facility. value-added million from the associated specifically, sales $XX net of More capital XXXX adjusted closure and EBITDA, second the sold million, financial quarter and capital working therefore, XXXX, second were XXX,XXX the results benefited

million over capital $X million and more, EBITDA $X respectively. capital expenditures Adjusted and working million less, was $XX

to Germany margin European Capital sized less of should benefit wheels approach contribution at to expenditures North We million million of year. Superior's approximately step that the transfer from Superior $XX change be $XX Poland million of $XX should variable America. the annually. per

cost to million. the be to wheel transfer the expect $XX to We complete $XX million

to Bottom of free SPG line, a flow The successfully in facility closure transfer that unlevered of a high-cost on in in a capital executed higher wheels significant in because country, the and of earnings. increase cost-effective and cash closure reduction company Poland. regarding employed the results the

in And of of quarter deconsolidation XX. than accounts financial decline $XX slightly all SPG at quarter normalization more this Let's of of on $XXX $XXX and the summary. The million XXXX for prior period. cost look million Net second million compared for the to decreased sales quarter or million. the aluminum to the Page year $XX

to million sales for compared the year Value-added the deconsolidation of $XXX quarter for of accounts million The this $XXX foreign and for $XX exchange decreased decline. period. prior million SPG million $XX

percent margin Adjusted $XX of value-added The million. EBITDA a XX%. sales, as expressed was associated

quarter, net loss For was million. the $XX

Page second sales year-over-year quarter bridge XX. of The is XXXX on

declined mentioned, deconsolidation of foreign exchange. compared As reflecting year the $XX quarter, to million just of and impact SPG prior value-added sales to

cost lower was cost pass of [indiscernible] To $XX of the deconsolidation through far aluminum million down customers the because to SPG. and right, of

for the prior EBITDA million second year-over-year period. in EBITDA XX, XXXX quarter compared $XX Page the to quarter adjusted On Adjusted million to decreased $XX [indiscernible]. year

The last quarter nonrecurring price XX% adjusted right, benefited EBITDA declined. reasons And performance lower primarily sales, adjusted year. by was product margin for XX% the the EBITDA year compared the favorable because quarter the Lower and to recovery unit primary far offset partially last are mix. second to of cost from inflation

to cost has a factors. on large the in company inflation completed offset structure other pricing of into the pivot and the necessary part, extraordinary incorporate to substantially cost wheel impact Importantly, amounts

was the immaterial. the The embedded timing quarter final impact in of foreign exchange to period compared

flow quarter, company's primary the decrease reasons is operating of the offset compared this Page used by period. in overview in $XX second the An cash XXXX in Lower working for on million partially $X in XX. activities investment year, year cash the activities. operating to second of Cash for unleveraged are capital the by earnings was in by free lower quarter million the the quarter used quarter prior

for the activities this than prior quarter. million, higher Cash used because year by somewhat million was more the period of investing quarter $X capital the $X expenditures

company non-debt financing second cash dividends the the in for in paid of opted preferred were activities There and shares were because The cash. dividends PIK the no year payments to kind. payable this maximize to quarter

of year operating the to improvement increase activities. in for $XX million the XXXX of flow period, because prior primarily compared million, used quarter cash free Unleveraged of $X an by was cash second the

quarter net the $XXX review funded a remains at found structure June top the unleveraged debt the XX, $XXX be million, and balance on company's $XXX million at Deleveraging on Cash therefore, XXXX, and, of sheet priority. million. A flow, was free end, cash end may of was balance debt sheet quarter XX. capital Page as

of quarter is company's the maturity XX. on debt after Page The the profile end

lenders we in discussions with end, in retire noted, weeks. quarter coming at with all facility The and Majdi notes are undrawn As was the are we senior companies. unsecured compliance advanced to loan the [indiscernible] in

on outlook is full XX. XXXX The year Page financial

to million For now value-added billion $XXX billion sales the range of $XXX the in the expect full net million. sales year we $X.XX of and range in $X.XX XXXX, to of

lower production. in reflects light Reduction expected vehicle OEM and expected sales lower aluminum costs

are adjusted to lowering $XXX lower $XXX to sales We EBITDA to [indiscernible]. million due million

of We the free still to in be $XXX range capital expect because lower, adjusted flow primarily deliver leveraged cash to million, million $XXX expenditures offsetting are on expected to EBITDA. the lower

company $XX the capital intensity the for business. million, outlook million in continues expenditures million modeled The strategically the as of to lower, investing $XX the reduce $XX approximately We tax is now while for expense year. capital

done great teams us European In track priorities. transformation and executing have a on closing, operational and our keeping to our financial job achieve our

our Alan? to I are questions. concludes remarks. This prepared take and Majdi happy

Operator

[Operator Michael Instructions] question Capital. from our Freedom first you. will Thank take We Ward,

Michael Ward

vehicle I manufacturers? Is there change in I it. catch and mentioned something, you the pricing didn't the Majdi, a quite with think

Majdi Abulaban

for was referring the increases. I Mike, negotiations, really to price

have recall, our this to to and talked year, recover We our with inflation. we've it price about And you with permanent -- success. shared on pivoted year, wheels customers we increases last you we

price have you tell is way are increases. price reflecting would answer say, And for have with our inflation I discussions very been the of referring successful reflecting customers in that will the now, yes, with and XX% we been through in agreements So to I'm customers. productive, our our I we negotiations

Michael Ward

of new in with deal your cost what the a Volvo, Is these -- Europe, manufacturers that is that structure? luxury-based is? to come of sign more And that given the with some

Majdi Abulaban

German -- with is This JLR, position customers an because long-standing been And strong think position. with our relationship well we've as culmination of global a competitive one and competitive sign, in a of the a and Absolutely. Volvo, far by I excellent position. as -- always our

really I rating and what's A new shared presentation the Audi. with you is in The Audi with to also the developments highest of come. technology indicative with

to footprint -- what have -- and dialogue the customers continue from in we actually We a been grow business have dialogue, with standpoint. standpoint portfolio advanced and to leverage a

right? wheels Europe resides the of Austria, Mike, Germany, have heard X little you The bit Italy. refer in this. in for the may majority countries, me either a Spain to of capacity and

a And for So know Customers at standpoint, now from least ultra it. in wheels. it's all Poland. we're XXX% really cost manufacturing high

very, I Poland very plant, just transformation a disruption. the out operation, a And major on without couple time, in "It's one would as said pleased ago. very we and a the with the seen We recent any flawlessly this meeting in of they've that one." seen closing largest a and you with insolvency been executed tell They were days of short executed not came Audi moving they had into has execution they times a

actually this elevated. So

our So way our this executed position has competitive elevated the [indiscernible]. has with and position team customers

Michael Ward

separated America Europe? what shipment it unit That's Tim, do like. between North data you sounds have the and

C. Trenary

pages. me is I right now. total, it on It the one Mike, do have have of it. in I with don't

Michael Ward

was just by number. total region. the saw I curious I

C. Trenary

region, don't it I right? by have

Michael Ward

the --? or in be queue it Will Okay.

C. Trenary

I believe yes. it is,

Majdi Abulaban

it. [indiscernible] have

Michael Ward

talked margins, and did like will closer to the it about sounds like it getting second margins look half Okay. What a Europe substantial half? When North America, the the in in the be you change. in that's first

that And we're what -- to We're of the pretty going million start in we're to see getting savings. million second Is of what that going the to annual to half? $XX quickly? rate the $XX in see type

C. Trenary

in are wheels the right starting right now. little We are a the Yes, now. the the heavy second to bit launches -- started quarter. of half [indiscernible] ongoing Very

right Poland extremely So these are the consumed guys with wheels. launching new in busy now

new and the but guys we know it's built something Poland. to before, Germany mean, to build We've going I for so these in how mills. them we're

So brand-new, launch, does but require -- it's the some it retention. [indiscernible] not brand-new is a there

will little of launches while them third So their some all those have processes. to it we take arms of quarter. the expect probably end the to done by around in a get the And fairness,

wheels a this full -- the the to in to year will change, quarter the of million $XX XXXX. for present and step all by million annually, will Poland $XX manufactured So be $XX fourth itself

it won't We have benefit the of quarter. [indiscernible] full

Michael Ward

Right.

Okay. lastly, that is there And getting on negotiation, sounds Or coming implication just part like the all close pretty any is resolved. it's current to sheet? just the with the balance of which notes

C. Trenary

the the and discussions. Yes. balance affected the mills on being I sheet that current --

Operator

Prestopino, We Barrington will our take next Gary question Research. from

Gary Prestopino

Several questions here.

kind whatever I you of of are on that an inflation again with your of whatever negotiations tied you're all, terms contracts the prices renegotiate guess, OEMs, in the to going be that forward, negotiated metric you're they change contract? do First going in the pricing and these that inputs you've to how there, in or automatically putting structuring, terms if of -- you have to back get escalation? Or do some go

Majdi Abulaban

of That's the right? price customers, aluminum aluminum very Gary, relationship elements, So and contractual X think of automatic. You're cost. when you [indiscernible] as transfer well an aware -- pricing

that. You know

and we for -- costs else negotiated labor other for Everything have in manufacturing. is really costs mostly inflationary

are permanent. those So

say I'll but increases, to than related price price are some index. are negotiated energy less increases of XX% There the

increases ability price actually, get some plan in them and us to are our QX, see quarter we've you volumes in Gary. in the most these built enables the the the offset to part, for [indiscernible] that of our price So seen industry. in

answer direct most is, not the permanent for increases these So one-offs price not indexed the are for part, now. and and

Gary Prestopino

So they're indexed. permanent, not but

Majdi Abulaban

of Most them, yes.

C. Trenary

are the North more element, Europe, -- in to Poland gas Gary, and small volatile energy is and because electricity in primarily -- America. cost that's energy A indexed in

Gary Prestopino

with you Okay. shared us, And Volvo. the then over the the life data That jump that's with to program. win let's obviously of the

And that run? long would so program how

Majdi Abulaban

be so Poland. years, between our All from actually right? It's brand-new of localizations mean, X manufactured I going too not X So a to is midsize China. to one out far are it's SUV. plants of these It's a in programs, this X [indiscernible]. Gary,

Gary Prestopino

Volvo Is Okay. going eventually. is Because EV? this And EV? I an this think said they're entirely EV

C. Trenary

That's correct.

Gary Prestopino

I sorry, I'm didn't hear you.

Majdi Abulaban

It Gary. is that's correct, EV. Yes, an

Gary Prestopino

Okay.

the to us And retirement in Okay. conceptually retiring is -- could great, give made could be? what in, terms notes, going you've progress you you but which the is then these of

going be you rate get whatever, the debt to trying if to going -- with kind a for what's with going step of notes And going something, you're up another in the step them the new on work. how there be to a I to replace mean, guess. change or have debt? this I interest I'm structure to replace is change to is feel some

C. Trenary

done this not we're transaction with Gary, yet.

As we've in said, are. as we being characterize which it advanced we discussions,

construct So I'm we to discuss capital and not the liberty, complete structure. of at conclude frankly, until refinancing, these this discussions the

Operator

from [indiscernible] our We next question Bank. will Deutsche take

Unknown Analyst

hear you me Can well?

C. Trenary

Yes.

Unknown Analyst

of Yes, I a on fantastic. bonds. redemption have question, again, simple very actually, the the

the redemption the the give delay main That's first us Can or behind reason question. the the refinancing? for you

there started And [indiscernible] of ago said are about the you the bond. be then the talking new a broad give The are redemption few bonds involved? you going second loan? to guidance And to of after debt is, you can this going you new that, -- form Or this? about the new refinancing. this for structure, refinance us question a of Or seconds

C. Trenary

Yes.

I described, any we've comments capital activities to As until the to with the structure just completed we're on new refinancing. just not make prepared this respect

Unknown Analyst

Okay. Great. weeks few a will weeks. terms in And you color? guidance here? bit Can like? in more More you in September, details October be more with then in out you of said more going a a couple Is us give it come or timing, of to

C. Trenary

then Again, discuss complete can suggest to the capital I'm we the going structure. wait discussions, to that and we

Operator

closing back on Instructions] to will you further line. Abulaban the now Majdi [Operator There for remarks. questions are I hand no

Majdi Abulaban

close commitment. and of Thank to are have that for product your a Superior we extremely has Everything really have unwavering Thank difficult results everything done, you, that team. Alan, you. to joining you call impossible. our The the and thank everyone, been you, done,

everyone, and Have thanks, a great you, joining. thank day. for So

Operator

call. today's for you joining Thank

You may disconnect. now

Superior Industries International (SUP) 8 Aug 242024 Q2 Earnings call transcript