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SUP Superior Industries International

Participants
Clemens Denks Vice President, Treasury
Majdi Abulaban President and Chief Executive Officer
Tim Trenary Executive Vice President and Chief Financial Officer
Gary Prestopino Barrington Research
Michael Ward Benchmark
Call transcript
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Operator

Good day and welcome to the Superior Industries' Third Quarter 2021 Earnings Teleconference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Clemens Denks. Please go ahead, Sir.

Clemens Denks

you. Thank and third everyone call. XXXX to welcome morning quarter our earnings Good

available Relations Chief our be joined President with Chief Vice which, is will today, on Executive the Trenary, our Executive Officer. the to release, During Majdi we and presentation, the referring call discussion Abulaban, website. of section Superior's our Financial by earnings earnings Officer; and on I'm Tim Investor our President along and

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 I contained that annual of company's Slide the Safe Reform and statements Private Before SEC discussion Form factors. the statements more would any turn 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

presentation. found over the in turn I'll also to update. discussing U.S. U.S. provide items business measures can Majdi GAAP of certain measures a the this most to directly call measures non-GAAP With not exclude to be these the various today. of comparable non-GAAP are of be measures in Reconciliations These accordance impact GAAP. that, therefore calculated with and appendix will the portfolio We and

Majdi Abulaban

X. our everyone joining of providing thanks call. and results overall Clemens or our begin Thanks Slide I'll summary Thanks. an on by

the and other by aware, particularly supply and OEM material pressures decline you industry volatility This chain same caused impacted volume aluminum grow inflationary other probably higher, are raw unprecedented shortages factors. saw time prices as cost quarter constraints. At we chip and

premium long-term commercial another be we agility with growth our sustained our to specific. Superior quarter protect laser creation tailwinds, XX% double-digit by XX-inch our in A will as growth headwinds secular is the and declining product This our wheels initiatives market by cost electrification, quarter. XX% than portfolio XX%, roadmap. reported over the launches responded markets well more OEM with case to our accelerated reduction product demand focus towards these team while executing on third maintaining value vehicle I capturing shipments commitment market; to later. COX Despite that content differentiation. represented actions, in margins. of point and several and as reduction driven through larger discuss on Our including continues expand various of Further over

million our we is EBITDA. For XX% aluminum attributed Further, decline schedules cost decline of expect working over our volatile increase normalize the to capital, the which in we in time. the The $XX the year-on-year and delivered increased to in quarter unit have volumes. rapid

to believe tailwind declines on. severe And transitory the due to and impacted is volume we that While vehicle to being headwinds by underlying chain expect prepared capitalize industry pent-up we we consumer growth back loss industry well the fulfill across very demand as strong subside, the strong. for demand are disruptions, at supply is

to outlook production lower our adjusted reflect volumes. have we year full the For industry

of to cost. commodity We our to reflect low-end guidance are adjusted our guidance escalating and EBITDA narrowing flow cash range adjusting the previous

significant decline detail with EBITDA beginning the will margins our XX% Our such At of and combined as at slide. global a volume discuss on the of increase supply reflected in same with is is I provided in the right of same this driven than provide increases demand for the at reflects lesser year; midpoint, chart. remainder ports refresh have details guidance line of the and the further and an Tim more in other prices and flow ability later impacting at guidance in on to the continues in in and cash and expectation volumes. demonstrate the nimble to profitability. to OEM schedule extent quarter, will Flex and we the highlights match our a remarkable volatility constraints, IHS X side remain aluminum volume specifically This team time, to energy the during experience this. the severe declining our Slide costs delays Overall cost shortages China year. the

operations impacted severe In earlier in flooding that addition, of Werdohl. our the of by the Europe caused manufacturing shutdown a partial German in by quarter in City operation were our was

to expect strong industry to from macro anticipate regions. our pent challenges across the as impacting Slide for premium well X tailwind move demand highlight persist the we we up While production as industry of manufacturing XXXX. the the wheels, balance

still sales the compared added down market. global value Our represent to XX% but were XX% prior period,

continued have for market now. several over of legacy We years a consistent growth

true on measures fronts putting to into manufacturing we operational responding discipline, X, highlighted we tried world action. and We exercise to operations costs and and multiple have In post-COVID are on inventory that with our management. at Slide Flex cost to capital ensure a playbook as to commercial are a prudent reduce

Our short-time response Mexico, work Germany hiring in layoffs and freezes. temporary program included in

also production ground We customers that on of and can experience needs are so prudently we on our most avoid inventory and operating based visibility efficiently the pilots. volumes planning meet the

contracted recent same We Furthermore, looking the recovery protection focused increases. on purchasing provided are remained manufacturing we continuous has discipline improvement commercial the the time, timely cost by against At also with focused of our enterprise aluminum level. on in our execution at escalation terms. line ensuring forward

important graduates class an As Mexico. our Sigma first our is just a belt across Six had an last continuous in This enterprise. improvement Black culture in example, creating of we milestone week entire

profitable align our schedule, adjusting will Slide X production cash our that flow. of production and conservative driving enhance expenditures which to initiatives highlight Lastly, growth our our long-term are growth. products. differentiated critical with to we is are reprioritizing levels to over further key component market portfolio capital customers' our A are continued

Slide premium technology, shift this well we capture as highlights our tailwind as space of wheel to I products, PVD further features is attractive where advancements electrification automotive continue more expected technology later. the light-weighting tomorrow, that speak produce and upon and to positioned including our and XX to secular which in have over sustainable business. accelerate We aerodynamic time. wheels, innovate our the such to shift as The of continues portfolio industry will to expanding

Here portfolio Larger, will the to continue one Superior. of premium we incredibly aerodynamic of with ultimately this are and more broadest for with content products. finishes, well more lighter positioned wheels premium drive

continues Here's another Slide technologies proof XX our differentiated point globally recognized. how be of on portfolio to

versus previously has American further has pleased demanding to growth and environmentally over discussed award-winning market. some launches reducing tests Our OEM. most our case COX an Slide stress the this a report the improving technology am quarter. fuel Superior's and complex This process that technology durable of mass pounds the is offer. to some and auto we second testament that a makes of has average the is the to an friendly, highly XX scoring is reduction future differentiation, Chrome, major XX approval deficiency of It North passed industry emissions. I and offers innovation product from foundation sustainable gained the for showcases for CBD

these on of models, technologies. Audi, the differentiated once again, portfolio continued launches our Aston to Our speak Martin, of and adoption BMW other content

Six this will chart now outlook For the eight advantage. XX. year light and you see be to technologies. finishes. our I a have are Fundamentally on technology our continues large competitive have electric are of premium address example, weighting seven launches vehicles, on full portfolio Slide Eight wheels. nine

Our unpredictable North outlook in has Europe. decline largely production, regions: been in America affected by both and

the cash narrowing expect million are the from flow we for and be million of EBITDA end range such to adjusted million to As for the the to $XX year million $XXX XXXX. range at to of $XX $XXX operations

earlier, decline underscoring represents margin team strength As in in incredibly issued unit challenging despite shipment, narrow an the environment. mentioned of I with EBITDA our X% adjusted guidance our their guidance our in a year, this and earlier execution EBITDA an line

to chain we the While raw and believe are we these supply costs anticipate through remainder persist rising of headwinds year, temporary. the challenges material

As capitalize we're content. this conditions portfolio hard fulfill look facing. response confident In turn the forward work support backlog to I entire I demand. expect secular to am will to financial the that pleased to their team our premium will on over I once the and off and the the through Tim? finishing normalcy, now like quarter, am the we to for pent-up Tim demand for economic would team this to to results. the the conditions Superior Superior very, overwhelming and very continuous pent-up thank that demand I of trends conclusion, return strong. for continued our call challenging environment I year improve across industry walk

Tim Trenary

good Well, everyone. thank you, morning, and Majdi

the shortage supply financial Superior lines another This quarter's commodity manufactured chain This costs include for market top and not semiconductor these vehicle has Superior automotive production, Furthermore, manufacturing challenges. customer's number and of especially are industry. of immune impacted quarter disruption growth turn The freight is our over consecutive costs despite within vehicles certain and costs. increasingly the auto of has results affected stability to the in and up. schedules. production utility global supplier’s

extent have to structure and actions administrative permitted cost company to margins manufacturing the practicable. However, protect the

and step semiconductor structure light We temporary example the the a contributing post in Germany to layoffs, changes we strike vehicle the shortage. company here. ability but program compromise significantly to want Our intend hiring of considered, short-time not to surge are should costs. labor a have labor unduly more respond implemented cost balance being and to Other a do to been minimizing production in freeze are

to bring impacted driving Our Absent the we late trajectory growth momentum and more and financial environment. current and improvement, stakeholders programs programs ECI program importantly, with company's adversely Sigma lean accretion our should of or these results our in when business waste would are Superior's both program market these company. value over Six be call what sales last future. cost more the out year Perhaps continuous improvement our the launched by gaming coupled enterprise

EBITDA X% results reported increased of $X.X loss of XX. the the net by in today. of adjusted Superior XX.X%. on or deliberate is vehicle prior a of net and added the financial resulting The per XX in diluted net $X.XX shipments Slide Both share value of year per business reflect million sales. We compared million company $XX.X operates Slide lower to Slide margin share per decline year-over-year million down a Unit production. is EBITDA adjusted $X.XX a bridge. bridge bridges delivered XX Our environment, of of added sales, sales $XX.X period. sales XX% XX% and on or associated year-over-year value difficult The in million loss reflect a which earnings $XXX.X income

onto far aluminum bar, XXXX. the QX the balance On to XXXX the in magnitude way the the sales of in the same higher in higher it working note the XXXX the almost compare the in sales capital. sales QX of leftmost investment is right form sheet to bridge, bar, cost in the of finding metric This its XX%

and the on capital process a EBITDA production this related chain On outlined et where in-efficiencies negative. Slide Slide with the aluminum debt in company's business capital arising cost the EBITDA on in Funded of with structure be liquidity coming inventory XX Moreover, depicted from flow. is unstable of not extent hand end, out shutdowns quarter Most the $XXX on future our bridge, sheet net of production for the production impact including million, aluminum inventory coming cash and today, remains That we amounts the vehicle on result $XXX XX. actions $XX XX. to of available on at and on been will committed, near the on OEM results Also is facilities to time. lesser and The quarter, million size to cost to the debt the of was time maturity $XXX is higher The in shutdown profile aluminum revolving This into schedules an year-over-year and inflated working benefited costs supply was environment a the at inability objective production Deleveraging approximately the have XX, pass and high and working aluminum of $XX XXXX manufacturing those key that as flat. disruption cash specifically, capital last covenants company at million, under depicted the this, impacted bridge were temporary. the free temporary loan term cost year all with OEM. should more Slide high third quarter working million. should cash The release XX, cost was debt normalize goods is structure Slide of credit as finished adversely through company cash from COVID-XX also schedules. no maturities. balance difficult remained debt schedule out by would year-over-year and September the lower compliant boost has COVID higher in attendance and year flow impact unstable noteworthy through that million. the

on year full Slide Moving the on XXXX XX. to outlook

We elevated XXXX in vehicle production on of impact aluminum today. cost refresh assumes vehicle somewhat about advertised. due light schedule, also decline This in what year, increase than quarter XX% the and adjusting guidance significant lower cost unstable has are the the guidance of to expected the the aluminum. light production It manufacturing reflects the of this fourth IHS production in operations

margin cost EBITDA range the million protection. at $X.XX EBITDA million, unit pleased year. same $XXX below sales Finally, margin of shipments. we expected this billion range be beginning now primarily the million flow in is the sales, added decline in $X.XX investment our unit value working the million expect significantly to of the Cash is Using decline XX XX.X to to at billion, million, the XX% shipments million X elevated in the to $XX refresh in the ranges, of range the added of of the $XXX X% a of I'm million net value is due $XX in sales end $XXX $XXX the on adjusted of capital a in beginning the million, of of operations the to million lower That and midpoints guidance to aluminum. reflects from X% the to guidance EBITDA with and year. of in prior range because guidance,

the $XX XX% cash finishing portion our repairs capabilities rate approximately investment capital in extending floods wheel Law to of which a This to year. Europe in for expanding of We through We year, million manufacturing in the some to earlier the million effective premium closing, $XX In is a expect and million carry with XX% victim from pleased over largely spending the capacity. XXXX. I'm premium is for our wheel year $XX German facility, model tax for in in and to and taxes. semiconductor which have challenging men these the And wheels heading and management facility chain women we supply occasion. make manner the our and times shortage disruption the the in our risen who although to will operators, persist other the to not intend to call in you, distant support XXXX, believe recovery we in vehicle turn which the I'll lower future industry pent-up dealer back that in and demand expect With we Majdi. too to prepared capitalize. stocks be is

Majdi Abulaban

operator I'd Thanks the Tim. like for now. Thanks. over to Q&A it turn to

Operator

question Instructions] you. Our Gary from Prestopino Thank Research. [Operator first comes with Barrington

Gary Prestopino

morning, Good everyone.

Majdi Abulaban

Gary. morning Good

Gary Prestopino

Could timing, than certainly that me with bit of to My working understanding in working of at of your through, been it use this a least narrative past. capital basis, seems capital it's was aluminum? some on it increases the more possibly but whole you a this bigger a in explain that metal a just that on little price issue guys pass was had

you that all just how could works? explain So

Tim Trenary

so. to Gary Hi. Tim. do happy it's I'm Sure.

I any very with aluminum past OEMs effective for costs agreed as to our the of would very so occur. great P&L That, them aluminum of the not North time. characterize Europe both at on is they in America We point as have through and therefore or in rising mechanisms effect what the changing prices declining

they those – we increased those costs to go and in extent offset more to they to money. to reside our are and extent owe up, inventory costs some However receivables payable the will the smoke extent and resident working capital aluminum specifically in are

very that in in and we're the be little balance sheet unfavorable today. that's on or working impact environment can impact capital, the So there's the an while on there P&L, favorable

metric of Just weeks about it's you high aluminum an $X,XXX. couple bit round the at as $X,XXX as little idea, was year. to numbers per now to ton rose give ago, beginning the back a pulled It and to a $X,XXX

and about today's So as much weeks ago, up it XX%, a XX%. couple was as

little an very XX%, on working capital. about statement on average income our on So impact impact and

Gary Prestopino

aluminum of just this that anticipating said Is are come the with you to issue and aluminum aluminum as Or will go function this forward. equal that a to going you you normalize think out we – they're will prices liberalize? So in whole down? flows begin prices or

Tim Trenary

I Generally that past in some it has aluminum economy. time, more anticipate when as number, up us the over normalize I per aluminum the will back shock down I and to the disruption other that ton. will metric think or there's chain be, will it'll global is to the supply as go it but disruptions, I $X,XXX think behind closer believe is towards dramatically, and

it's experiencing temporary. today what an is we're I aberration, think So

Gary Prestopino

Okay. went new but down of product Majdi fast you XX, it couldn't your launches, write all And I then on Slide through enough.

of of were what; wheels, had And – it eight are were eight couldn't the were You nine greater. was I capture? things eight up of the of which said the some I the there larger you or seven nine that just then XX-inch assume nine six nine what,

Majdi Abulaban

Yes. Sure.

have said larger eight have premium are eight wheel nine the seven finishes, we So six nine sizes. technologies. Gary, of lightweighting vehicles and the of electric are

Gary Prestopino

Okay.

you're seeing ahead, a I'm good still go proliferation got, then Majdi. sorry, PVD there. So And you've the

Majdi Abulaban

space. continues Yes. No, adoption exceed very It's expectations. because a the exciting our to

Gary Prestopino

are That's actually second major you now for hear. you OEM. you you from on great waiting PVD said producing approval And business then with Are a new to got wheels PVD lastly, or front?

Majdi Abulaban

fourth the this Ford to global We, Ford Gary. quarter. recognition has And pace FXXX been automotive is in innovation the January highest from are award which excellent award, the since from the as that won in award award actually absolutely as industry a finalist subsequent on qualified XXXX. product We in an it our

step major is which is Superior really most a is a exciting we a this now as recognition OEM that a – company. excited technology And were the of So the really product. a about great very is finalist,

Ford to astonished very on going soon OEM that and we're you just in now, we're were speaking in customer is at another more come, and will we And was technology to technology guys aspects I front. the the it have where talking more excited approval. best our and industry. – got tell many the that PVD They second here soon the come were to to the of to

Gary Prestopino

right. That's Great. much. news. you good very Thank All

Majdi Abulaban

welcome. You're

Operator

Our Instructions] Benchmark. question from Michael Ward [Operator with next comes

Michael Ward

everyone. morning, Good a Thanks. follow-up... Majdi, just

Majdi Abulaban

morning, Michael. Good

Michael Ward

kind is at you're If if think at today, Good XX, morning. content? or overall the compared looking average, global To revenue of in business, online you What on looking you're take – $XX you follow-up the to wheels which at somewhere these you're going look I historically? somewhere if total what that, are where is revenue, compared average are value are the of average units vehicles Page on $XX, added around of the you – those we the if the the the you're you to range.

Majdi Abulaban

depends. really really, it Mike,

to tends level it be now wheel. than higher significantly So base the

So the an it out, lightweighting. it XX% replacement. you lightweighting, is is eight adds, so value is, eight nine orders in When the application. PVD is of the With process. increase of process taking the said Chrome special what Chrome, it's [indiscernible] wheel. added wheel, have of extremely a but cost a we a mass have require actually magnitudes, because technology wheel you we a expensive PVD it nine our get said, essentially does lightweight Chrome yes, an of That stretching

the average close to adds waiting the on XX% of light to value So wheel.

– XXX. that's company an really XX, premium anywhere to wheels average between depends the XX the board, but across the could it go So

Michael Ward

that cost vehicles a They to to And FXXX are of I of much for lightning, side, to the mean, similar type in on wheels larger. guess one out you increase well? weight. the the types the as the is the those I carry Is need be, stands things EV

Majdi Abulaban

significant. it – is you sizing. listen, talk about it Yes, And I No. mean, is

would believe have not We day navigator. XX-inch the XX-inch just; come the it We wheels. we won or thought never on that

used were XXXX, XX-inches So use fast XXX% our or sizing demarcation XX-inches of mic. larger. to We is wheels a moving of line in

have you will to that. think change I Now

we're Now talking talking of it's the more time to XX-inch, added and XX-inch XX% wheels and content. substantially now close XX-inch, most we're

Michael Ward

next... As we look

Majdi Abulaban

are selling wheels Mike, fee, fast. We

got You it.

Michael Ward

we years, to the absolutely. go average out And over Yes, three five look to Yes. as is going the north… next

Majdi Abulaban

Yes.

XX ourselves of So we have premium will XX We wheels that see And an we average data. growing at believe IHS a grow X%. study between XX%. of and at the

industry, we we're that going to wheels, exceeded of is the the X% to have is growing XX%. So and years grow premium four subset And for which the be even fastest at support at the last going the that. history to we've subset

Tim Trenary

To across can one one Mike at you collection the for compared compared content Majdi's portfolio very platforms, another to that or any of vehicle when incremental it's platform Tim. another point wheel dramatically. look of vehicles to or

measure what in some for economic this affecting value looking our is added our content the VAS refer to you're measure how business, or premium unit. per wheels on of as If sales we is industry our one

So any one and period of five this, looked premium over four the of the that sales if you'll just up. unit per is simply I've last VAS some added number over takes just that it that which or to you or is some value are the find three What at units, divided standard. of years, by time,

a give of unit Let me per $XX.XX. that was for third same quarter number the you about ago XXXX was numbers, year just the VAS $XX.XX, two

of steady excess you'll over premium progression in content unit, spread, than but $X.X the additional it call the standard call it X%, is more not But the of you a the see up if what's Again reflects wheels, per portfolio. So wheels that in back, $X, this that's only VAS what which X%. look content.

Michael Ward

sounds ago, look like, basically back, gone you've I XX. years from mean, if I you five it from so And

be correct? away acceleration cars of and America, and trucks than number And a to all just the EVs, years, So increase there you're North towards this it another and sounds from in is like bigger that. like of factors for crossovers it in you XX, five up content up light at that and line sounds least them have one over the next moving at going higher

Majdi Abulaban

mean find having well need that referred agree and and terms plan impact inside that to been have we're I and pleasantly underestimated of here very actually ourselves in inclined some premium the growing very that's [indiscernible] of segment. a internally of we you. growing actually in segment done surprised model. we growing to, wheel We quite with study business. segment, on this frankly, handsomely this our I'm It in And

So reason I the have would that time any in decline believe year this to don't this would – or two. next any

Michael Ward

certainly It like it. seems

And – million, so Tim, looking that you on three to quarters the I you this it and unfolds? the where a Is capital items is transitory just working you're to as assume cited are like looking $XX what two unfolds, at normal is that at? it,

Tim Trenary

Yes.

I the boost end, bit, fairness, said down. be gone get to now that a all lesser a going that. believe exactly you schedule. because some working of that So when third cash in the you're I have flow. what you managing is we'd tell sheet by that it'll And that will can't it that has is can't it'll – about don’t, balance relief $XX process that come and of a I released, will production invested one-third like the we I inventory, little look, that third into in good of to And Mike. wondering to that this excess when and be we've be a and definitively tell quarter while extra million it's as from aluminum finished when extent that – inventory tell the XX you down year we'll a are having that I will

little equation, I it prices, side other with respect the this month aluminum a mentioned of think in On as bit. up past the went actually to I

when a investment. end, by be released So sheet. year be balance they It’s the offsetting. may exactly temporary don't it'll I know

Michael Ward

two Yes. nice next quarters, a for It's tailwind least. at the

Tim Trenary

come It come will back It to us. will back.

Michael Ward

And seen just up any in Okay. heard production – have you have lastly, schedules? you any firming

Tim Trenary

the That's question, haven't would a seen Mike. bottom, the bottom that we good maybe you I the yet. takeaways that tell Yes.

see We're got at vehicles QX the you really markets. they market. that. flat numbers, recovery a million look We in seeing our bottom more So got like don't X by in some IHS has a

as quarters. If be extrapolate of that XX% you for probably of will to to high down of maybe market think half first normalize for and our ahead the is can I going It teens we're at, in the year, be numbers, the from in will XXXX. several done had next real last recovery in the continue will perhaps saying more be second the we've half

Michael Ward

you That Well, you. sounds Thank like much. Yes. very thank it.

Tim Trenary

you. Thank

Operator

And will there turn no time. for at remarks. questions our are call any or I back closing this to further the additional speakers

Majdi Abulaban

and shareholders you. our Thank joining value for progress forward a on updating day. for to look continue to everyone Thanks we drive rest the as next you today. We our quarter, call Superior Operator. our have good of

Operator

Thank call. concludes today's This you.

disconnect. You now may