Superior Industries International, Inc. Common Stock (DE)

Q3 2021 Earnings Conference Call


spk_0: the day and welcome to the superior industries third quarter two thousand and twenty one earnings teleconference call today's conference is being recorded at this time i would like to turn the conference over to mr clem instincts please go ahead sir
spk_1: thank you the morning everyone and welcome to a third quarter twenty twenty one building call during our discussion today we will be referring to go in his presentation which along with the only to leave is available on the investorrelations section of the periods website i'm joined on the call by march the able to ban or president and chief executive officer and ten canary i'll accept it as vice president and chief financial officer before to end the call over to mark the i would like to remind everyone that any forward looking statements contains and it's presentation or commented on today are subject to the say power provisions of the private securities litigation reform act of nine ninety five please refer to fly to have this presentation for a fourth a public statement and to the company's sep fine including the company's current annual report on form and mk for more complete discussion of forward looking statements and respect we will also be discussing very of none get up today he is non get measure exclude the impact of certain items end of the therefore not calculated in accordance with us get reconciliations of these measures to the most directly comparable us gap measure can be found in the appendix of this presentation
spk_2: what that i'll turn the car over to my feet to provide the portfolio and business updates thanks i think glennon been thank everyone for joining our our call i will begin by providing an overall summary a lot of votes on like five at this quarter as you are probably aware we are unprecedented in the sea volume declined and volatility caused by only and to curious and other supply chain good thing at the same time inflationary pressure group raw material prices higher you're the only when i'm and impacted other contractors our team responded with agility by executing one several pa conduction action as well as commercial initiative to protect our margin this while maintaining laser focus on our long term value creation road map despite the one and would market declining twenty eight percent we reported another quarter of sustained double digit google one market thirteen percent growth over market to be specific superior is capturing the accelerated canal toward premium content driven by secular tier one including electrification fuel to reduction and vehicle differentiation a case in point nineteen inch and larger we have represented more than forty eight percent of our only m shipment in the third more further our commitment to expand our product portfolio continues to convey a product launches that i will discuss later for a quarter we delivered thirty million dollars in either know the you on your decline is attributed to the twenty percent decline in our unit voice further the rapid increase in the off the woman him and bama now scheduled an increase i wouldn't capital which we expect to they never to normalize over time wow the industry big impacted by severe volume declined due to supply chains disruption we believe that the underlying consumer demand for vehicle is very strong and as transitory head will subside we expect from gold across the industry to put her back on and pent up demand i feel when we are well prepared to capitalized on for the full year a we have adjusted our outlook to reflect more into see production volumes we are narrowing or just leave it or guidance to the little and about be good range and i don't think our school guidance to reflect escalating commodity caught i'll rephrase guidance and reflect the same even on margins of twenty two percent ethnic one and in line with our guidance provided at the beginning of the year i will disgusted and more a detailed in a later flight over all our team continues to demonstrate remarkable ability to remain nimble and flex caught them as declining volumes my kids are typically highlight the severe oh young schedule lot of money and volume decline we experienced during the war and the expectation for the remainder of the year this is reflected in the i have to volume on the right side of the chart at the dance i'm an increase in global demand combined with supply could bring such as delay that food and energy shortages and china have proven significant increases in a minimum prices and to a lesser extent other got impacting august one of the doing him will provide further details on it in addition our operations in europe or impacted by or partial shutdown of our german manufacturing operations earlier in the water that was caught by severe flooding in the city of ago while the anticipate fraught from finland from pent up demand as well as the move to premium we have we expect the macro challenges in banking industry to put for ballot for twenty twenty one like seven highlights industry production across our manufacturing reasons our value added sales were down sixty percent compared to the prior period but still represent thirty percent growth of the market we have continued and like appeal consistent growth over market for several years now we are responding on multiple friends and highlighted was like eight would measures deflect manufacturing costs and our operation exercise commercial discipline to reduce pot and to ensure pool capital and inventory management in a book called the world we have a tried and pool operators non playbook that we are putting into action i'll response included temporary lay in mexico short time what program in germany and hiring freeze we are also prudently planning operating volume based on experience and visibility on the ground so that we can most efficiently meet the production need of our customers and avoid inventory pilots we are also focus on commercial disciplined by ensuring time the recovery of aluminum escalation in line with our contract the term furthermore our forward looking purchasing execution had provided protection against the recent manufacturing costs increase at the same time we remain focus on continuous improvement at enterprise level as an example your last week we had our first glass of six sigma blackmail graduates in mexico this is an important milestone in creating a continuous improvement culture across our entire enterprise lastly we already prioritizing capital expenditures and lot further adjusting production levels to align with our customers conservative production schedule which will inherit outcast like nine hi like our long term initiatives that are critical to driving profitable go a key component god continued growth over market is are differentiated put your products we continue to innovate and produce technologies that capture that secular tailwind of tomorrow including expanding upon order to produce your portfolio of light waiting an aerodynamic features as well advancement in our more sustainable products such as dvd technology which i will speak to later like been further highlight the attractive state where we have positioned our business god what a willingness to continue to shift the premium wheel and this ship is expected good summary overtime here we are incredibly well positioned with one of the broader portfolio a premium product larger lighter and more aerodynamic wheels would bring in finishes this will ultimately continue to drive more content was a you here the another viewpoint on flight eleven of how our portfolio differentiated technology continues to globally be recognized our award winning pvt technology we previously this guy is an environmentally friendly highly durable complex scoring broader that offered an average mass production of ten pounds versus grown improving fuel efficiency and reducing e o two emissions it has that some of the most demanding fact that the all interfere too often i am pleased to report that this technology has been approval from a second major north american william north american liam prepared a pet them as superior innovation and differentiation and the foundation for future sustainable growth of market like wow makes the case further and showcase of some of our dog launches for the more our current than one out he aston martin b m w and other models once again the want you speak to the continued adoption of our portfolio of differentiated that molly for example seven of the i now seven a benign launcher you see on the chalk up large wheel eight rpm finishes six or electric vehicles and eight have lightweight a technology fundamentally our portfolio technology continues to be a competitive advantage i did not address our food your outlook on life thirteen our outlook has largely been affected by unpredictable decline in production in both region north america and europe as such we are narrowing range for adjusted either to the range of one hundred and sixty million to one hundred and sixty five million for the you and expect cash flow from operations to be twenty five million to fifty five million at the end up twenty twenty one as i mentioned earlier our narrowed adjusted either are guidance represent and even are margin in line with our got has issued earlier this year despite a nine percent decline in unit shipments underscoring the strength of our team and their execution and an incredibly challenging environment while we anticipate supply chain headwind and rising raw material caught the british food remainder of the year we believe these these challenges of temporary as conditions and pool we expect overwhelming demand across the industry to fulfill that love and support and up the man in conclusion i am pleased that the continued response of our team that is very very challenging environment we're facing i am confident that one economic conditions return to normalcy superior will capitalized on the front of the man who our portfolio air the continued secular third print for your content
spk_3: i would like to thank the entire superior theme for that hard work with war and i look forward to finishing the heat off from i will matter and apollo but for them to walk through the financial results him about the last be a good morning everyone
spk_1: this quarter's financial results include a model consecutive quarter of global of a market for superior of spite supply that say with in the oil industry
spk_3: what of the like a doctor shortage of increasingly impacted our customers vehicle production especially the nobler vehicles manufactured and the stability of production schedule this in turn has affected automotive suppliers top line or manufacturing costs furthermore certainly commodity caught and utility a way cause ah appeared to was not a new to these challenges our lady thatcher is an administrative costs are to actually have permitted the company to put that largest to the extent possible
spk_1: valid example get really lay off a short time later program and germany
spk_3: and a hiring freeze or conservative with the evidently the minimize the labor costs other stuff changes to the cost of to have the little knowledge and more being a peter but we intend to strike a balance you would didn't want the unduly compromise the ability of the company the response should like vehicle production pillar thirds post the semiconductor shortage
spk_2: our easy i program or enterprise cause people that were largely a similar program what we call continuous improvement both was late last year and are gaining momentum of and gliding way out about coconut with these programs superiors financial results would
spk_3: the more adversely impacted by the at current business been perhaps more importantly these programs sleep coupled with the properly they all global the market for just do it should worry bad you appreciate your stakeholders in the future our financial results on flights fifty with what it's about this is the bio violent looks superior outward today
spk_1: unit jet would decrease yoga you by twenty percent with left field down to push the resulting in succeed was about equality value evaluated sale
spk_3: the company deliver twenty nine point eight million of adjusted ebitda on one hundred and sixty two point two million a value added sales a margin of a people or percent he reportedly a lot of seven point two million or a deluded lot for show and sixty one son
spk_2: compare the at a time of eleven point one million or early the prospects for the new a chill and apply your european
spk_3: like six he is a year over year sales bridge
spk_2: the associated adjusted a baton rouge his on flight seventeen
spk_3: both virgins leaflet like the lower vehicle production on the flails bridge know to the far like a negative to of the cost of aluminum in the queue three twenty twenty one flails by
spk_1: compare to the thing that drifting a lot more are acutely twenty twenty males
spk_2: almost twenty percent higher than twenty twenty one
spk_3: if the finding it's way onto the balance sheet in the form of on your investment and working capital on the eve of the average a company benefit of year over year from high cost aluminum in inventory last year
spk_1: coming out of the cold at night to shut down and the inability at that time the past flight and aluminum costs through to the oh yeah
spk_3: also on you the bad words you have a your results were adversely impacted by colbert what would related temporary prospects are actually coming out of a shutdown that we may last year in the third quarter
spk_4: and also made is actually an efficiency realizing that the gop as as my own today
spk_3: what's the good of a low a vehicle production and unstable only on production schedules white de
spk_1: we cash flow for the corner with negative was more or not or the as depicted on fly nice too
spk_3: the size of get a pack of the higher cost of a woman among monopoly capital to a lesser extent prior finished goods and work and process inventory and the unstable production schedule at approximately fifty million what not to the net that would have been flat this should be tougher bad as the high cost of aluminum and supply chain disruption that the production schedules should normalizing time while both this will result in in the lives of working capital in the future with an italian mostly cash flow the company's capital structure of outline on flights why why did that with six hundred and twenty four million your corner and cash on hand and seventy six million not that was therefore father or late night the lava just about she remains the key objective as of september thirtieth twenty twenty one liquidity including cash and available out and under committed revolving credit facilities
spk_2: was two hundred and seventy three nine
spk_3: the duck maturity profile it depended on july twenty one
spk_2: the company of comply with all own cabinet and heavy on your temperature
spk_3: moving on to the pony or twenty twenty one outlook on flights one two
spk_1: yeah we're just a a twenty twenty one guy is delivered to the together a declining like vehicle production expected this year
spk_2: the impact on manufacturing operations of unstable production schedule
spk_3: and the about fifty percent increase in the path of a loner was reversed died at the food somewhat lower like vehicle production in the fourth quarter than what i just as advertised it also reflects the only the cost of aluminum tonight boiling we now expect we'll get a shirt making a range of fifty point six the sixteen know net sales in the late at one point three three one point three thirty billion yeah you added say of in the range of celebrity twenty five the seven forty nine then adjusted a the diana of one of them as sixty one and sixty five million the lower out of them to be the bad guy at the beginning of the year using the midpoint of the range it's the reverse guidance with what's the same effect or margin or that the beginning of the year that is twenty two percent on a four percent decline invalid fails and and nine percent decline of shipments i'm pleased with his margin protection cash flow from operation is expected to be the twenty five fifty five million range for the evidently blow up our guide is primarily because the definitely working capital even the elevated cost of aluminum it's like approximately thirty five million the capital studies and year some of which is periodically twenty twenty this investment is largely widespread in our premium we have that issue capabilities and expand a premium the ah manufacturing capacity lol portion is for repairs to a german facility
spk_5: them have a flood be year earlier in the here
spk_2: we model a thirty five point five was that that the factory for the year and ten to thirteen million in cash taxes
spk_3: because they i'm pleased with the theater which ah facilities management and operators the men and women who make our wheels are these challenging times and regularly occasion
spk_2: and although we expect a semiconductor shortage another supply chain is roughly the preschools peddling twenty twenty two he believed and lower dealer stock and of vehicle been a on will support industry covered in the not too distant future which we intend to be prepared the capitalized
spk_0: with that upturned a call back be a massive thanks tom hanks can i can ah have like to turn it over to the operator put you on a now thank you if you would like to ask a question please signal that pricing star one on your telephone keypad if you are using a speaker phone please make sure they function is turned off to allow your signal to reach our equipment
spk_6: can press star one to ask a question were posed for just a moment to allow everyone an opportunity to signal for questions
spk_7: our first question comes from gary press the piano with barrington research
spk_6: morning everyone
spk_3: ah but my here guys could you guys have possibly explain a little bit more of this whole issue with with metal time in a price increases and aluminum you know my understanding was that that this was just a pass through but it seems to me and some your narrative that at least on a working capital basis it's it's certainly a bigger use of working capital there have been in the past so could you just explain how that works
spk_8: good idea it's them on happy to do that
spk_3: ah we have what i would characterize as a very effective mechanisms and green liberal yams them both north america and europe the path lived in ah defining costs of aluminum through to them on as as late as they occur that so therefore the effect of changing aluminum prices on the piano is it not very great any point in time however to the that aluminum costs go up they those increase costs our our residents in are working capital more specifically on a day well reside in inventory receivable over the some extent or last that be payable to the extent we have it's not as money so loud very little it on the tnl the can be a good a and and
spk_1: david or or unfavorable on the balance sheet and working out one that the environment that we're in today are just to give you an idea
spk_7: an aluminum was about round numbers now twenty one hundred dollars us dollars per metric ton at the beginning of the year it well as to as high as thirty one hundred and fifty dollars a couple weeks ago and has pulled back a little bit to twenty nine hundred sell it was up as much as sixty percent a couple weeks ago today about forty percent on average about fifty percent very little impact on income statement the little or know what is happening so you said you get you you think this the this whole issue with aluminum prices are aluminum will begin to normalize as we go forward
spk_3: to that just a function of outflows in and out when equal liberal equal liberalize or
spk_9: are you anticipating on prices are going come down
spk_10: i'm i'm i anticipate that aluminum well it has a they added have been in the past the management some shot
spk_1: he or
spk_3: yeah the global economy
spk_6: yeah i'm generally aluminum will go up or down dramatically i in but it it will overtime i say as the supply chain is watching as is behind us food and other disruption of i believe it'll it'll normalize back toward the number i think more closer to two thousand thousand metric tons of i think what we're experiencing to it is it is that is an aberration at supper
spk_2: okay and then of maggie on slide twelve you went through all of your do on product launches but i couldn't write it down fast and episode seven of the nine were larger wheels which i assume are nineteen ensure greater and then you had some eight eight ups or eight of the of the nine were watch six of been i'm a lot eight and nine there was just something there that i couldn't capture
spk_7: yes sure at the weekend habit of the nine have to cloud your real faggot
spk_2: hearing aid have and finish it
spk_7: without electric vehicle an eighth of then i'd have like waiting technology
spk_2: okay
spk_1: south so you still see and and proliferation their arm and then the p not younger got i'm sorry got magic
spk_2: yeah not good at the that doctor continued fix your expectations very kind of faith that's great to hear and then lastly you said you got tbd approval from a second major only am or are you actually producing wheels now with t v d are you waiting for you know but no added miss i am sharp yeah the absolutely are gary leah this product has been on the f one fifty feet january twenty twenty tie and actually award from coordinate global excellence award and he pointed out award from for her a qualified and finally is the be awarded with you get the high elevation recognition in automotive industry
spk_7: and in a fourth quarter so we were finally we could really a great recognition
spk_11: ah an absurd period of technology company and now and i'm not really a pretty exciting scabbard isn't a major we am very excited about the product they're for will tell you it is the best pdt technology in the industry and now we're not talking to guys that were speaking to the guy
spk_0: customer and where we got the up the second approval they they were just as polished as them in many as picture the technology and we're kind of now we're gonna happen another oh yeah i'm here soon breakthrough hair and more mortar more to come more to come on that front
spk_12: right that's good news i thank you very much you're welcome and as a reminder if you do have questions please dial star one on your telephone keypad or next question comes from michael ward with benchmark
spk_13: that's good morning everyone
spk_12: much out there are like the morning to follow up on line or and page twelve ah what kind of the average contact if you're looking at those we have to start where your today you're looking at the overall business
spk_2: are we going i think if you look at the global average or somewhere in that if you take the toll units the revenue the value of revenue somewhere on the forty six forty seven dollar range what does the aircraft
spk_14: vehicles compared to which are historically it mike it really really depends so now the victim could be significantly higher than a base level real so orders of magnitude or our d technology the cream replacement grown comic extremely and expand can application would be you get can you know
spk_0: no to that fifty percent increase in the value of the wheel how would you like week and we have so we had eight of the line of like when i should be subjected a benign of likely ah not profit occasionally when it aired it's pretty a we'll pick math out but it adds it's an added cost because it does require and stuff
spk_15: a special projects for like waiting on average add close to twenty pretend to the value of the wheel answer really depend the cross the board but you know an average the company that forty five know that the premium real could go anywhere between sixty two hundred
spk_12: on the east side
spk_1: the f one fifty like that
spk_2: that is the wheels are much larger
spk_16: yesterday carry the weight
spk_2: a similar type increase in the cost for those that vehicles as well
spk_12: who i created a very significant than their lives and i mean not about sizing we we have just we won be twenty four edge believe it or not play four inch wheels we never thought that they would come on be on the navigator your inner thigh the he is moving fast and twenty nineteen
spk_2: twenty eight percent of our wheels were making into the larger you to use nineteen inch or line of demarcation mike now i think would have to change that at know now it could be picky pretend the no no no to the time the talking twenty one inch twenty two reach now we're talking to one inch wheels substantially more added content at least can we might be a compelling
spk_3: with that the absolute yeah and as luck out of the next three five years the average north yeah so we have we have ah a study of or the i checked data ah we believe that between nineteen and twenty five premium we'll we'll grow at an average of six percent and with yourself growling at twelve percent for the subset of the industry which is the fastest growing up said premium wheels he's gonna go at six percent and we're going to be a twelve percent and we have the history for the last four years to support that would with you that exceeded that
spk_1: my get thought is can are lost his point yeah you look at any one platform or clutching a platform the equal level can't take the wheel across that be able to tell you another will of one portfolio vehicles the go to another vary dramatically if you're looking for some fm on that measure of how this premium content in our industry are we'll it's affected us douglas one measure is what mood for to like the van or value added sales per year
spk_12: so good if you if one to simply take the value added sales over any to redefine the divided by the number of units some of which are paid for much standard what you'll find is that over the last
spk_15: we are for five years and i've looked at ah that has for years is that let me just give you two numbers
spk_12: ah the best per unit after the third quarter twenty one was about forty six thousand thirty five sign that same number a year ago was forty three dollars and seventy five cents
spk_17: dog in all it's not and access to two hours call it to have thoughts are more than five caught six was that again that's the that it's bad yeah no way over the preliminary old but standard we in the portfolio but if you look back but you'll see that a steady progression of this is bad for him which with blood
spk_18: that additional found that it's or it sounds like a bike fact you basically from five years know you've gone from thirty seven separate forty seven and it sounds like of the next five years the at risk
spk_12: and just as liquor
spk_3: number of factors like up and another one the artist in north america cars
spk_12: acceleration torchlight trucks across or species of our country correct i'm in put on a plane to agree with you i'm a slightly i mean in terms of internal year when we plan the model we actually have underestimated the impact of the than our businesses that's really been very pleasantly surprised you haven't done some study on this that much not read virtue we find ourselves on a my opinion the outside my it's growing very handsomely i was growing quite well and by that normally sediment so i don't have any reason to believe that the on this would this
spk_3: well done would decline in only time in on the next year two it's at him on the and the working capital to transfer have decided to fifty million
spk_19: is this
spk_20: should just as it unfolds is it are you looking at a normal like
spk_3: two to three quarters without unfolds is that what you're looking at yeah so you're you're wondering land this fifty million ah i'm after the third quarter that have that we've invested in the balance sheet and aluminum yeah i'm gonna let that the inventory extra inventory them would like to have because it lots of schedule
spk_1: when that that you're not alone with their web
spk_3: yeah
spk_12: like i don't get in one it is released it'll be a boost to the cash flow i can't tell you what you know exactly when it's going to you
spk_2: we'll we'll get some relief from that i will tell you about a third of that yesterday
spk_1: yeah and i'm finished goods into a lesser extent what it costs us
spk_2: let me see our managing down and while i i can't tell you definitively that it'll be all about a year and i believe that that one third will come down a bit not having said that experiments like on the other side of the equation
spk_21: and ah not in the past month and i think i met you that respect to a nominal to the actually went up a little bit self a year and we met a lady offsetting i don't know exactly what it'll be releasing the balance sheet hit the capillaries about it
spk_2: i stay or what next importers at least a little combat that will come back to us just asked have you heard if have you seen any farming up in production schedules yeah that temperature good question like i would tell you that can maybe not the take away their we haven't seen the bottom the bottom yeah time to high a to god
spk_12: you look at your number they got can i'm recovery you for map bad about a murder in vehicles in our markets
spk_0: we we really don't see that we're seeing more like a flat
spk_2: i'm a full actor
spk_0: market and you don't you can extrapolate from our numbers were saying market and you know gonna be down pretty pretend who pretended to be ahead of that in heikki that we have done for the medical professional quarters

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