Yahoo Finance Superior Industries International Inc (SUP) (Q1 2024) Earnings Call Transcript Highlights: ...
Net Sales: Decreased to $316 million in Q1 2024 from $381 million in the prior year period.
Adjusted EBITDA: $31 million in Q1 2024, with a margin of 18%.
Net Loss: Reported at $33 million for Q1 2024.
Value-Added Sales: Decreased to $172 million in Q1 2024 from $203 million in the prior year period.
Net Debt: Remained near historical low at $439 million.
Free Cash Flow: Unlevered free cash flow was $8 million in Q1 2024.
Full-Year 2024 Guidance: Net sales expected between $1.38 billion to $1.48 billion; Adjusted EBITDA forecasted at $155 million to $175 million; Unlevered free cash flow projected between $110 million to $130 million.
Capital Expenditures: Approximately $50 million planned for 2024, focusing on finishing and light weighting capabilities.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Successfully exited high-cost German operations and relocated production to Poland, enhancing profitability and advancing a local-for-local footprint.
Achieved a 400 basis points sequential margin improvement in adjusted EBITDA compared to the previous quarter.
Maintained net debt near historical lows at $439 million despite the restructuring actions in Germany.
Anticipated significant improvement in adjusted EBITDA to approximately $190 million by the end of 2024 due to the European transformation.
Strong competitive position with a diversified customer base and leadership in both Europe and North America.
Negative Points
Industry production declined by 2% and production at top customers declined by 8%, impacting value-added sales and adjusted EBITDA.
Temporary distortions in financial results due to the transfer of wheel production to Poland, impacting content, cost absorption, and volumes.
Incurred costs associated with the reorganization of European administration and logistics functions.
Challenges with volume volatility, higher dealer inventories, and unfavorable production mix creating a difficult operating environment.
Deconsolidation of the German facility (SPG) affected year-over-year financial comparisons, removing its income statement and balance sheet from Q1 2024 results.
Q & A Highlights
Q: Majdi, you've talked about a couple of things with the European transformation. So operations were deconsolidated. When would they be put back in your numbers? A: Majdi B.Abulaban, President and CEO of Superior Industries, clarified that the transfer of wheels will begin to show up in Q2 and will fully stabilize in Q3. Tim Trenary, CFO, added that the financial results of the German facility SPG are out forever, and the benefits will show up in the remaining financial results as production transfers to Poland.
Q: And then the $20 million to $35 million of cost to complete, that's just showing up on some of these revenue numbers or is that actual? A: Tim Trenary, CFO, explained that these are largely restructuring or other charges associated with the activity, and they are not reflected in adjusted EBITDA but set aside.
Q: German production was down, I think, 8% in the first quarter. And you mentioned about your key customers and everything -- was there something going on in Germany in January and February in particular? And what are your customers telling you for the rest of the year? A: Majdi B.Abulaban noted that VW was down significantly, attributing it to a combination of factors including disruptions and the launch cadence of VW Group, especially Audi and Porsche. He mentioned that the schedules provided by customers give confidence in a stronger second half.
Q: So the second half you get the combination of production coming back online, low-cost facility, get rid of the inventory. So two, three, four things started to really set up nicely late '24 into 2025. That's what you're looking at? A: Majdi B.Abulaban confirmed that the timing of the transition was fortunate with German production being down, and the second half of the year looks promising with several positive factors aligning.
Q: Just on the cost of $20 million to $35 million for the transfer. Just wanted to clarify, is that cash cost? If so, when is this going to be in the cash flow statement? A: Tim Trenary confirmed that these are cash costs and are at the very end of those cash costs, with very little yet to spend. He indicated that these costs are set aside for purposes of discussing adjusted EBITDA.
Q: And then well, as I've asked also in the previous calls about the refinancing process. As you also said, you're too early in the process to discuss the cap structure, but you dropped the narrative there where you said in a previous presentation that the refinancing of the notes is likely to involve preferred equity. Is there a reason for the change in the wording or can you give us some color there? A: Tim Trenary mentioned that the refinancing of the notes may impact other elements of the capital structure, and the discussions are ongoing. He noted that preferred equity could very well be a part of the transaction in some form or fashion.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
