Superior Industries(SUP) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net sales decreased to $316 million for the quarter compared to$381 million in the prior year period, primarily due to the normalization of aluminum costs and the deconsolidation of the German facility [42] - Adjusted EBITDA for the quarter decreased to $31 million compared to$45 million in the prior year period, with an adjusted EBITDA margin of 18% compared to 22% [19][42] - Unlevered free cash flow for the first quarter of 2024 was $8 million, a decrease of$26 million compared to the prior year period [20] Business Line Data and Key Metrics Changes - Value-added sales decreased to $172 million for the quarter compared to$203 million in the prior year period, reflecting the deconsolidation of the German operations and lower unit sales [42] - The transfer of wheel production from Germany to Poland is expected to yield an annualized EBITDA uplift of approximately $23 million to$25 million [36] Market Data and Key Metrics Changes - Industry production declined by 2% in the company's markets, while production at top customers declined by 8% due to launch delays and software issues [9][38] - The average age of car parks in the USA is at historical lows, which is expected to drive future growth [13] Company Strategy and Development Direction - The company successfully exited high-cost German operations and relocated production to Poland, enhancing profitability and establishing a low-cost manufacturing footprint [7][11] - The focus is on delivering value to OEM customers seeking localized supply chains, with expectations of improved earnings power and competitive positioning [33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position despite industry challenges, citing ongoing discussions with customers to recover costs associated with labor and energy inflation [12][22] - The company anticipates a stronger second half of 2024 as supply chain disruptions ease and new product launches occur [67] Other Important Information - The company maintained a net debt of $439 million, which is near historical lows, and is in compliance with all loan covenants [10][21] - The full-year 2024 financial outlook includes expected net sales in the range of$1.38 billion to $1.48 billion and value-added sales in the range of$720 million to 770 million [46] Q&A Session Summary Question: When will the financial results of the German facility start showing back up in the numbers? - The financial results of the German facility are permanently deconsolidated, and benefits from the transfer to Poland will start showing up in Q2 and stabilize in Q3 [25][64] Question: What is the expected cost to complete the transfer of production? - The expected cost to complete the transfer is between 20 million to $35 million, which will be reflected in cash flows but not in adjusted EBITDA [66][78] Question: What factors contributed to the production decline in Germany? - The decline was attributed to significant disruptions, particularly within the VW Group, and launch cadence issues, with Audi experiencing a 26% production drop [66] Question: What is the outlook for the second half of the year? - The company expects to see growth in the second half of the year as supply chain disruptions are resolved and new product launches are implemented [67]