Superior Industries International (SUP) 4 May 232023 Q1 Earnings call transcript

Welcome to the Superior Industries First Quarter 2023 Earnings Call.

We are joined this morning with Majdi Abulaban, President and CEO; and Tim Trenary, Executive Vice President and CFO.

My name is Carolyn, and I will be your coordinator for today’s event. Please note, this call is being recorded. [Operator Instructions]

over today’s to conference. hand Trenary host, now begin to will the your call Tim I Thank you.

Carolyn. welcome quarter to you, our Thank Good first XXXX morning, earnings everyone, and call.

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

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

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

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

will joining for everyone, first Slide today on I call thanks, results. and our to Tim, Thanks, begin Thanks. quarter X. our review

to financial delivered and growth focus while maintain generating to are recoveries our We results. enhance flexibility. a in on pleased with our environment tough quarter continue strong first customer We cash

America in America significant to That modest supply Europe to remains recovery and North industry other environment was volatile, sales X% factors a seen limited chain our the XX%. we driven by grew due Superior said, constraints That one in I’ll sales industry an have per rental of said, and in fleet content. FX-adjusted in content seen a companies, wheel production North growth Although Europe begin discuss portion in quarter, ease. as Further, to by in value-added more and the where by aftermarket winter later. we has we area declines year-on-year have

what mix. performance with of team continuing shifts sales commercial focused control, [real], in to our pleased on cost execute continued to while stay and mitigating strategy. supported I especially in operational can our macro value-added discipline input we to with unfavorable made we ongoing growth the progress Our pricing align portfolio continues product and impact which has am have while headwinds the

result, a markets. have last our months, the sales XX As over value-added outgrown larger the

Adjusted lower EBITDA in levels, near $XX despite the unit high shipments. of quarter historically remains million first

to XXXX. However, margin captured value-added as substantially higher year-over-year, first we largely the of the sales contracted a quarter percent of due in recoveries

to take the continue portfolio our we In actions to long-term addition, to profitability. necessary support enhance

to Here, are we to are are We book XX-XX growth. look that refer taking long-term that offerings those supporting our close underperforming business of proven to a cultivate at and this and process. our as parts

to play grown, continued Further, shipments. capture EVs. of Content quarters grown demand for consecutive secular for XX% out. year-over-year has lighter as up wheels making XX wheels for dialer Further, by to our our large differentiated our wheel to strategy per events now portfolio shift the has over secular has with bolstered

has content XX% weighting annually, light increased Our roughly XXXX. since

to expenditures trends in financial capital turn, management secular while working these disciplined has and cash taking on capitalize to approach strengthening profile. capital to generation, solid translated also a our efforts Our

cash net $XX in delivered X million million, years. debt to over operating we In flow, lowest level QX, the $XXX reducing in

of ‘XX, industry the remain we of what terms for In in remainder concerned. we see the

America, seeing in uncertain Europe environment. sales and an are we coupled challenges mixed macro with increasingly aftermarket the in Given North lower

until conservative outlook. We year to our be clarity on have regions. we our are We trends full it prudent more narrowing within the believe is

such, As and our sales EBITDA markets our sales, limited are ranges. narrowing in expect vehicle value-added growth adjusted and production we now

spend. guidance on management flow provide remains CapEx capital cash more will through we unchanged, Our Tim this. which disciplined plan to details lower and maintain working

Slide to on X. Moving

towards has chart. Our finishes. platforms by strong with continued evidenced position as some the on left consumer premium sophisticated preference the side more larger, see you launches of of recent moves is This wheels premium this on

our per right Importantly, in as with you wheel. aligning can resulted have been product of has cost we improved successful pricing combined the premium input content with pricing, in customers growth growth in see of side content on business. the This with in chart, substantial

our discipline continue improved our price compared long-term portfolio of has underpin trajectory the XX% to by Specifically, profitability contract XXXX. growth and Fundamentally, content expansions to content per our wheel commercial and business. and of

wanted Moving operating perspective give X. current some We Slide on on to environment. to the

chain We pre-COVID global below easing remaining This volumes, industry with QX are previous improved year, levels. XX% over headwinds. has seeing supply the production yet still been supported the growing by of recovery

continue that, leverage said, and challenge our to chain supply through shorter for the be inflation the for along unfavorable America industry Now continue in aftermarket the preference we positioned uncertainty secular particularly Europe. demand wheels. to volume in environment, having well That volatility, persistent of premium mix local-for-local and said North footprint with operating decline to

On to Slide X.

the production relation XX%, XX%. global growing our the production industry with in growth the where our among see can operate, In customers key wider regions during to quarter. you we almost grew Here, industry

here, aftermarket saw customer, value-added as [further has mostly growth our the driven issues. here. seen decline inventory, America consumer the driven we has currently right noted wholesaler Adding the gains, North mentioned of general has fleet the X% the As sales side Europe, significant decline warm by by North higher the declines in during main unlined and for America production winter post-COVID aftermarket color] quarter. earlier, content. In and mix with a sales Superior quarter. been a summary, on GM drivers a is I In Further, chart, in affordability trading largest growing are FX-adjusted where X% low our

on industry not Slide to on Moving we X. recovery. Generally, are betting

taking We action. are

plan in that both administrative several laid expenses. of initiatives macroeconomic these execution shifts our improvements to launched overall we chart, on to priorities drive begins have impacted to reducing and response portfolio This with overhead business. has this our Through operations. We and out our the

Our is we well and here XX%, way. target our are on

in quarter. and a have continue use to us Further, restructuring we focus portfolio We the take the charge our further to taken XX-XX on approach profitability. prune

generation. aggressively strengthen We manage to will continue to capital capital expenditures optimizing working while cash

inventory. are consolidating Europe warehouses example, to For we reduce aftermarket our in

voyage focused business, benefit capabilities with of of initiatives our have the matured terms are reaping continuous [GM] payback we periods. to of [Light we in being In are Belt implemented investment and on short are impact CapEx, offset inflation. improvement the our and Green in Bus]. ECI investments

driving we to plans are in portfolio. Finally, flexibility the across business our support

can Mexico in example, production. of For plants support X-inch all our wheel now

In operating we how quality, pleased year headwinds. am continued started and the manage through I teams how with our to have

playing Our pricing progress we making are getting content great out, is right. story on and our

our building to cash better this Moving value coming is strengthening forward on optimize momentum flow. quarters. portfolio look to the shifting ahead, focus our create to on We costs, pruning and shareholder in

results. details will to our turn provide the more on now And over to call Tim? Tim I

moderated conservatives. good constraints Vehicle and is somewhat. the markets. perhaps costs, XX% improved, pre-COVID in our Thank morning, higher financing chain levels everyone. and although industry supply significantly recent endured returning still production, pre-COVID has automotive new you, the vehicle the consumer recession The production, vehicle is to inflation light higher The levels somewhat and barrier about now prices, Majdi, below

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

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

a recession and or to per $XXX compared and quarter earnings the loss of or million year year net premium the respect for period, quarter a the units, have $XXX Europe, loss in in because year first the due incurred weather, million units America, of North prior of compared were look $XXX the the the concern. of standard first at quarter diluted of net in wheels. in business, value-added vehicles decreased than Wheels summary. income higher sales million sales to usual unfavorable $X.XX decline period prior tires increased use of million cards Page financial inflation $X.XX X% order aftermarket which sold of XX, down year period. With tend was is increased production quarter consumer an share first Let’s year-over-year million for $X to for and with $XX the of and to marble million In to soft in to very diluted quarter period. per share fleet prior to mix X.X the quarter, to is all-season the Net compared from prior million $XXX a have

content. ago. X% The XX. to prior and $XX first premium the aluminum the year Value-added has down cost from XX% increase declined sales or The was increased compared bridge than far year on by year More $X costs period. inflation passed compared to quarter of wheel or million significantly was a year-over-year through net million. this The of to all To by sales higher recovery million is prior period. $XX customers of the aluminum Page on sales cost is right, impact currency of

million in real to bridge. sales was quarter to and in EBITDA Adjusted year the of the decline. first was prior million compared recoveries. contributed margin prior customer year period. the decreased period. in period by EBITDA On the year metal quarter last the of $XX $XX quarter year EBITDA to Page in timing to The XX, the quarter for Fewer year-over-year compared the to XX% the The prior adjusted for the margin adjusted XX% first timing quarter boosted compared

activities activities for from XXXX $XX year million activities $X to in $XX XX. million the million. the operating An decline used reflects payments performance capital the from from This flow net the free year working million. declined was quarter improved earnings $XX $XX is overview million was therefore increased quarter $XX $X financing to period. compared for investing Cash the prior cash million. on Cash period. million to to Cash company’s flow of lower of Free first prior flow by cash non-debt Page compared

balance of $XXX found Cash million $XX of at $XXX from sheet is prior million million, the was of in structure net $XX lowest overview the euro. $XXX decrease prior euro-denominated notes end, the was decrease to the March Page attributable XX, decrease The an on at XXXX. partially debt compared be Funded end capital XX. on a of quarter to since million, weaker year. increase to million company’s the and and XXXX, due a the was debt An quarter the year may as

under availability including As of the liquidity, the revolving was of end credit facility million. the quarter, first $XXX

Superior’s profile is of depicted on as March XX. debt Page XX, XXXX, maturity

Our was revolving credit facility undrawn quarter end. at

maturities rate We the all million anticipation is, significant $XXX term because The interest compliance debt. it Annual be. SOFR-based of are refinancing hikes. rate we ago in Fed’s entered loan with would and less into swaps covenants no a in of in $X funded year the loan about are of otherwise million of near-term than past money December interest this the expense therefore, have

build. The and is the year lower in schedule to pivoted the outlook cost Page on offset price inflation XXXX negotiations late financial OEM vehicle in cost increases We on and appropriate of volatility lower cost absorption company’s year ongoing. last considerable light recovering fixed cost to are production XX. negotiating inflation, enjoyed full These XXXX of success

than cost North elevated North Europe impact an the The platforms, the energy, in aftermarket in come on sales. cost in it participation is Europe. we anticipated of gas seeing and are on remain has America, adverse dramatically, does we While in Conversely, electricity wheel America given negative softer our normalized. down energy far has of vehicle

vehicle natural billion, to light consumer continue this to of $X.XX of to in part narrowing million economic in for ranges XXXX million markets, inflation because our to EBITDA our XX.X production are Against $X.XX and $XXX with XX we prices, financing $XXX significantly concern to value-added somewhat higher and wheels, million to respect higher and uncertainty. be We pessimistic vehicle $XXX recovery increasing net costs, new million. sales backdrop, to $XXX of billion recessionary of sales guidance of adjusted million million

$XX $XXX [while] approximately $XXX from expect continue expected operations expenditures lowering We to to cash of million flow capital million, million. to

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

are remarks, questions. but back Carolyn? take closing, in In macroeconomic we the increasing half a quarter happy solid uncertainty of delivered year. wary and and concludes This your I our of Majdi are the to prepared

Research. Barrington the Gary Prestopino take from will We first Instructions] line from [Operator question

I’m Couple you here. would talking lower more wheel said Number that portfolio, about put back, be willing looking to just some point? some you’re or maybe Majdi, wondering, lower-margin doing step this I of just mix a to had questions you what that the pruning Or there. us one, capacity. to you the out believe into when prune you’re help And could is production up overhead at what while just you’re understand

excellent question. an It’s

Let give best pruning, think this. last X practice, team what of you and and So has years, me maybe fundamentally has just with What this what you’re this for the on intimately first color I and executing the team do backlog back Gary, it. if you the go been to on it’s been familiar focused right? more

And footprint right. the price obviously, customer base, to hard working to been hard been right. and the get the to have getting get working get hard portfolio working cost We’ve and the right. We to

you products industry. believe we know. Mexico. said very we opportunity We’ve the the not learning have view, our And I production we’re in talk deliver view see So in the well. I very, an of the more as of fruit. done maybe things the all the get most footprint now hanging and don’t industry because we times, We my is -- are in we no competitive granular my about, call with in in is business. I’ve what to those Poland many we best that that

our right has business. to pay price return has to deliver So -- on the

SKU with the and the XX-XX closely of Now granularity is your XX% your of with XX% at backdrop, more right? delivers portfolio what XX-XX, profit. So level that’s looking one

volumes pre-COVID we levels. returning concerned Now same time, the about this, not right? about while visibility, about at are concerned and to We’re visibility concern

done this So visibility. also into that get help? we right without improve see go to have to customers where And [dragon] have well things as when the detail, is as And we that underperforming. right. Does with we an going opportunity margins see opportunity this had on don’t an we products

Yes, it all right. into can’t detail. go does. you But I mean, know I granular much

as like So annualize being to that immediately reduction will the that in your -- as [$XX that savings that impact numbers? looking show back in does up of million] in look half ended? as an this something $X.X Or that’s million the of more back target, cost million $XX is to start you that year QX be going took, or annual well more are we -- payroll would

million reduction starts $X.X here without in payroll almost immediately The costs exception.

extent benefiting So we’re already to some from that.

of a broader So, $XX is basically starting now, million, million we’re our is getting the in. outlined, $X.X of a That The burden. layered administer Majdi objective, being that. reduce manufacturing part benefit as this to

million and even nonpayroll just reduce already $X.X expenses number So some actions, of and above the the we payroll taken a in have quarter to over expenses incremental that first mentioned. I

tough strive the a while get little to year. achieve the we be frankly, So it’s this to quarter, going during full will layer in And the $XX million, second to in there.

basis reasonably we running but won’t get annualized there on We an immediately. be will quickly,

don’t I or in out got an to that then helpful. highly more think in comment, company. trying needs would the of to growth much the narrative, they’re finding at at fact what going you cars of sweet your I the get the them. spot concur profitable I -- that mean, that kind and But one I are what just jump. levels I’ve in least million, a scarcity unit for producing consistent mean there’s impact on to vehicle you because idea is the is of to to kind XX with XX.X I’m up North America it you a that? pre-COVID million there to reading start America, least I in start mean be North vehicles positive And get think maybe that at to I’m putting just production, do wrong, more about of production, I’m seeing That’s Throughout guys start EBITDA? level, mentioned having process, thought possibly OEMs back with of that Okay.

about Gary, subscribe in a Is lost? that vehicles connection buy and pent-up old the narratively the here right? demand Depends on it been old fleet I industry. where is them, question vehicle the will assuming it an is months mean, being to. this that there. play is Or clearly recent fact people so so which emerged that is it the out, will the have are eventually these expensive Eventually, on still has demand it impact

the tough back is from do cohort growth pricing just for time. North grow a our our actually, frankly, Europe had at levels, talking OEMs surprisingly immediately, standpoint. well business we’re us. take The some friend. from all we extremely will we’re solid piece the in what we volumes quarter, a catching eventually, you on content on America was discipline when have We described. very to X aftermarket in But get about mean, North believe And it still third fleet not in I is normally the X% more to the standpoint in did that do I business will Gary, And environment up. not these America. Mix seeing was friend. sales dimensions

us you’re what we’ll hearing from what So is see.

guide our prepare and in and hope take conservative for on the so best. being and action are worst go we the for cost ahead that can We

to jump. forward guys Okay. I speaking with you All right. got Look, I look to later.

Ward question next the the from line take Benchmark. will Mike from We

Two things.

in just I’m curious nonfleet, trends. then fleet on and the some about there fleet. bad in second depend in fleet fleet. difference what content growth in quarter the difference does fleet for Germany any I big America is North was especially you Is -- there know for it or seeing the you’re thing, and Europe, off, of any A of the First or there’s part good And first the vehicle?

Yes.

be Gary. cars statement, passenger difference, fleets to much tend larger less a actually, SUVs. premium, They lower So content, less be big or just there an Generally, to wheels is premium. less overarching tend on more

there mean, seeing look north of yes, what in IHS came So difference. I is XX%. XX%. Listen, strong. in obviously, Europe in numbers, we’re a you at We of Europe, I significant mean, came north QX,

both and aftermarket. And one reasons is that sales at is we have really And So that year these a out on surprisingly of warm as the for I where our the impact is wheels as inventory mean, significant a has high price. of issues the winter, the we us. these wholesalers more it that it’s so had was to the closed reason segment a in maybe case, affordability

So recovery. we I don’t Europe the X%. you offering]. in mean America, overall Europe, actual we IHS see And right if do at for X% And and look because we the would the year, see that, is North say mix [market X% the have in forecast Gary, okay, if combined not

So low single we’re guiding a for very very, digits.

like the -- looks started strong just that’s And out first that incredibly they in it is quarter. -- Okay. And Germany, in

correct. It says

to Okay. confident And now or... not you’re as in that’s the continue second going half

in it’s I’ll terms in numbers to stronger. going up just fairly second Again, -- to directly. the extent. year back continue outlook, was year on But the the the balance is to Europe my X%, No, be going of go IHS because some [XX%] flat is and to I and half -- last QX quoting say, let’s to QX average, think was IHS, of was

quarters. from terms of units, in to numbers? these the in gross types standpoint going see units No, of of coming you are So a similar

any with are manufacturers, as behavior change you Yes. forward. far as seeing looking their And

go continue to work They to been much. is to as continuing wheels? Or to push vehicle higher that’s is to the they in of envelope X didn’t to intriguing the they of push some X shelf. content side? of the the at on to it book Are push components and over as One premium-type content. envelope the last on might all take their that products, down years where still because far pushback the ATPs? Or manufacturers technology as that have the all are past, been the want systems And they backing things me

very launches all to with of [Technical now segment. continuing And of the the no. presentation towards in Europe, we’re they’re Actually, think EVs, you premium. in accelerating started in think actually. we where Europe. push positioned. can some you we it the Yes, our see When EV gain well see are We are and Difficulty] the No, share. that’s And

higher at And -- light significantly weighted the on the premium share. gaining technology be wheels lightweight are to those tend We content, same and time.

BMW I even see can’t content. are, didn’t they that. the the imagine Yes, iX, what Do I have you

Sorry?

that iX. one yours? The BMW Is of

I are, on I we are, think check to think Yes, have that. I we

[Operator no question. appears there’s Instructions] It further

call passing now Abulaban Thank are you. closing to Majdi the comments. We for

to also again continuing We day, deliver team execute to strategic all to Thanks Superior us to Have for and today. everyone. growth. our business like for to hard work of continuing a thank drive long-term joining priorities forward. you our their on look our I’d great to forward

Thank you for joining call. today’s

disconnect. now may You