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Cooper Standard(CPS) - 2024 Q2 - Earnings Call Transcript
CPSCooper Standard(CPS)2024-08-03 17:53
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Financial Data and Key Metrics Changes - Second quarter 2024 sales were 708.4million,aslightdecreaseof2.1708.4 million, a slight decrease of 2.1% compared to the second quarter of 2023, primarily due to the divestiture of the Technical Rubber business and unfavorable foreign exchange [9][10] - Gross profit for the second quarter was 82.9 million, or 11.7% of sales, compared to 77.7million,or10.777.7 million, or 10.7% of sales in the second quarter of 2023, reflecting a 100 basis points improvement in gross profit margin [10][11] - Adjusted EBITDA in the quarter was 50.9 million, up from 47.9millioninthesecondquarteroflastyear,drivenbyleansavingsandfavorablevolumeandmix[10][11]−Netlossforthesecondquarterwas47.9 million in the second quarter of last year, driven by lean savings and favorable volume and mix [10][11] - Net loss for the second quarter was 76.2 million, compared to a net loss of 27.8millioninthesecondquarterof2023,impactedbyanon−cashchargerelatedtothepensionplantermination[11][12]BusinessLineDataandKeyMetricsChanges−Thecompanyachieved27.8 million in the second quarter of 2023, impacted by a non-cash charge related to the pension plan termination [11][12] Business Line Data and Key Metrics Changes - The company achieved 16 million in savings through lean initiatives and cost-saving programs during the second quarter [6] - The company was awarded 61millioninnetnewbusinessawardsinthesecondquarter,indicatingstrongdemandforitsproducts[6][7]MarketDataandKeyMetricsChanges−Globalautomotiveproductiondeclinedby0.561 million in net new business awards in the second quarter, indicating strong demand for its products [6][7] Market Data and Key Metrics Changes - Global automotive production declined by 0.5%, while the company’s net sales, excluding divestitures and foreign exchange impacts, increased by approximately 1% [9][10] - The company continues to see strong opportunities in the EV segment, particularly with its Frameless Sealing Systems, which are expected to grow at a 30% CAGR over the next five years [21][24] Company Strategy and Development Direction - The company is focused on operational excellence, cost optimization, and sustainability, with a commitment to reducing energy consumption and developing sustainable products [6][7] - A new product line-based organization structure has been implemented to optimize costs and improve financial strength, with expected salary cost reductions of 20 million to 25millionin2024[18][19]−Thecompanyaimstoachievedouble−digitEBITDAmarginsandreturnoninvestedcapitalbytheendof2025,despiteprojectedslowgrowthingloballightvehicleproduction[19][28]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementacknowledgedchallengesfrommacroeconomicfactors,includinginflation,unfavorableforeignexchange,andreducedlightvehicleproductionestimates[26][27]−Despitethesechallenges,managementremainsconfidentinthecompany’soperationalperformanceandcostreductioninitiatives,expectingimprovedprofitabilityandcashflowinthesecondhalfof2024[27][28]OtherImportantInformation−Cashusedinoperatingactivitieswasapproximately25 million in 2024 [18][19] - The company aims to achieve double-digit EBITDA margins and return on invested capital by the end of 2025, despite projected slow growth in global light vehicle production [19][28] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from macroeconomic factors, including inflation, unfavorable foreign exchange, and reduced light vehicle production estimates [26][27] - Despite these challenges, management remains confident in the company’s operational performance and cost reduction initiatives, expecting improved profitability and cash flow in the second half of 2024 [27][28] Other Important Information - Cash used in operating activities was approximately 12 million in the second quarter, with a total liquidity of approximately $267 million as of June 30, 2024 [15][16] - The company plans to make cash interest payments on its notes in December 2024, which will impact its free cash flow outlook for the year [17][40] Q&A Session Summary Question: Have the restructuring actions been completed? - Most restructuring actions are in the final stages and are expected to yield significant savings in the second half of the year [29] Question: Is the current margin performance a trend towards double-digit rates? - The company is on track to achieve double-digit EBITDA margins and return on invested capital next year [30] Question: What is the expected cash flow for the year? - The company now expects slightly negative free cash flow due to cash interest payments, but operational performance remains strong [31][32] Question: What are the risks associated with current guidance? - Management is confident in their control over pricing and cost reductions, but acknowledges potential production cuts by manufacturers [44][45] Question: Any updates on the deployment of Fortrex? - The company continues to see positive results from Fortrex and anticipates it will contribute more significantly to the bottom line in the future [46]