Superior Industries International Inc

Good day and welcome to the Superior Industries Second Quarter 2021 Earnings Credit Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Clemens Dengs. Please go ahead, sir.

Thank you. Good morning, everyone, and welcome to our Second Quarter 2021 Earnings Conference Call. During our discussion today, we will be referring to our earnings presentation, which, along with the earnings release, is available on the Investor Relations section of Superior's website. I'm joined today on the call by Marci Aboulaban, our President and Chief Executive Officer, and Tim Trenary, our Executive Vice President and Chief Financial Officer. Before I turn the call over to Marci, I would like to remind everyone that any forward-looking statements contained in this presentation or commented on today are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Please refer to slide 2 of this presentation for the full safe harbor statement and to the company's SEC filings, including the company's current annual report on Form 10-K for more complete discussion of the forward-looking statements and risk factors. We will also be discussing various non-GAAP measures today. These non-GAAP measures exclude the impact of certain items and therefore are not calculated in accordance with U.S. GAAP. Reconciliations of these measures to the most direct comparable US GAAP measures can be found in the appendix of this presentation. With that, I'll turn the call over to Majdi to provide a portfolio and business update.

Thanks, Clemens, and good morning, everyone. Thank you for joining our call to review our second quarter results. I will begin on slide five with the highlights. We are pleased with our results for the quarter. Our team responded to industry-wide instability and continued to deliver solid operating performance and substantial growth over market. Our focus on executing against our value creation roadmap has enabled us to deliver growth across the board with value added sales increasing 121% versus prior year. Well ahead of market, Adjusted EBITDA increased by $48 million for the quarter, driven by volume and cost performance. Our top-line growth has consistently been supported by our differentiated portfolio of product technologies, enabling us to capitalize on the secular trends driving our industry, including electrification, CO2 reduction, and vehicle differentiation, each increasingly demanded by OEMs and consumers alike. During the quarter, semiconductor shortages significantly impacted OEM production schedules, presenting operating challenges for us. Especially in North America, where sequential volumes declined 14%. Here, our teams responded very well. Furthermore, these shortages also drove OEMs to shift focus to premium vehicles, which partially, by the way, supported a favorable mix for us. This, combined with our disciplined portfolio strategy, has resulted in continued growth in our larger wheel segment. Here, 19-inch and larger wheels actually represented almost 50% of our shipments to OEMs, growing both sequentially and year over year. The same growth trend is reflected in the adoption of lightweighting and premium finishes. Collectively, our portfolio delivered 12% top-line growth over markets. As we continue to cultivate our portfolio of premium technologies and execute on our portfolio strategy, we expect to further solidify our leadership position and capture long-term sustainable growth. Turning to slide six, a few words on our current operating environment to just add more context to our strong results for the quarter. The right side of this slide highlights that the overall industry recovery in 2021 has fallen well short of initial expectations. Q2 production levels initially forecasted in January this year have dropped actually double digits in both North America and in Europe, as semiconductor and other supply chain shortages continued to impact OEM production schedules. We foresee these challenges as well as others, including rising commodity costs and increasing concerns about disruptions due to the Delta variant persisting throughout the remainder of the year. Further, we expect some impact from the partial shutdown of our German manufacturing site in the third quarter, as it was affected by a severe flooding event in July. I will say that our team there responded admirably. Despite this challenging environment marked by slower production rates and unstable demand, we have been able to maintain strong operating performance while delivering profitable growth. Slide seven shows more detail on how our premium portfolio has driven growth over market during the quarter. Across both of our manufacturing regions, value added sales adjusted for FX increased 121% compared to the period in the prior year, representing 12% growth over market. This trend has been further pronounced with the favorable mixed shift I mentioned earlier as OEM shifted focus to premium vehicles. Now having said that, our growth above market trend, as you see on the bottom left of the chart, is a continuation of the same we have seen since early 2019. I will now move to slide eight, which highlights our global product launches in the second quarter and really underpins my prior comments about the secular tailwind of electrification and consumer preference driving our growth. In North America, we launched content on the Mustang Mach-E GT, Lucid, and Jeep Compass. The wheels for the Mach-E, for the Mustang Mach-E, are made from low-carbon footprint aluminum and advance both Ford's and Superior's sustainability efforts. We're very proud of that. And we are, of course, exceptionally excited about welcoming Lucid as a new customer of Superior. In Europe, we launched content on the Porsche Macan and Cayenne, The VW Touran and the Daimler all-electric EQE, just to name a few. Now, here are a few interesting statistics from this slide. Three out of our eight launches support electric vehicles. Five are wheels 19 inches or greater. Another five apply premium finishes. And seven out of eight use our lightweighting technology. you can see the proliferation of our portfolio fundamentally is accelerating. Moving on to slide nine. We remain committed to executing our strategy to deliver shareholder value. Our focus now is on driving operational excellence across all of our business units and on executing our strategies to deliver profitable growth. In this regard, We are making progress on all the strategies highlighted on this slide. In terms of operational excellence, our teams have done an exceptional job driving efficiencies, leveraging global procurement, improving quality, and instilling commercial discipline before and after launch. This is reflected in our gross margins globally, but especially in North America. We have also invested in improving our manufacturing capabilities to support premium finishes and larger size wheels. And most recently, we initiated a cultural transformation to continuous improvement. This started with the deployment of a fully staffed organization of lean experts in both regions, driving Lean Six Sigma and problem solving across the business. We see much opportunity in this journey and are well on the way with many green belt and black belt certifications in both regions, driving process improvements and eliminating waste. We are also focused on executing our strategies to deliver long-term profitable growth. Here, we are well positioned to respond to the macro trends driving our industry. electrification, CO2 reduction, and consumer preference for premium finishes and larger wheels. In this regard, we now believe that we have the most comprehensive portfolio of technologies in the industry. This has manifested itself in consistent growth above market that is now accelerating, a solid book of business for the coming years, Continued growth in the electrification segment through our lightweighting and aerodynamic portfolio of products. And finally, most recently, our advancements on the front of offering green products with low carbon footprint. To this point, slide 10 highlights the progress we have made towards our environmental, social, and governance initiatives, which are critical in driving sustainable growth and furthering our long-term value creation. Through these initiatives, we have focused on reducing our environmental footprint, increasing safety standards, and protecting the health of our employees. Our efforts are now in full swing, with our progress to date captured in our UN Global Compact Sustainability Report published in June. We look forward to reporting on the advancement of our sustainability efforts as we further realize our commitments and enhance our corporate stewardship practices well into the future. I'll now address our full year outlook on slide 11. While we expect the industry recovery to continue, albeit at a slower pace than originally anticipated, we are maintaining our guidance for the year. Our focus remains on driving enhanced profitability and cash flow. For the full year, we expect to deliver adjusted EBITDA in the range of 160 million to 180 million and cash flow from operations in the range of 110 million to 130 million. In closing, despite the current industry headwinds, I am very pleased with our results for the second quarter. and remain confident that we will continue our momentum of growth above market, margin expansion, and cash flow generation as the year continues. With that said, I would like to thank the entire Superior team for their unwavering commitment and hard work during the quarter as we continue to deliver value for our shareholders. With that, I will turn the call over to Tim. Tim?