Superior Industries International Inc

Please stand by, we're about to begin. Good day and welcome to the Superior Industries fourth quarter and year-end 2021 earnings teleconference. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Clemens Dinks. Please go ahead, sir.

Thank you. Good morning, everyone, and welcome to our fourth quarter and full year 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 on the call by Majdi 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 Majdi, 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 two 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 a more complete discussion on 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. The conciliations of these measures to the most direct comparable U.S. GAAP measures can be found in the appendix of this presentation. With that, I'll turn the call over to Marci to provide a portfolio and business update.

Hey, thanks, Clemens, and thanks, everyone, for joining the call today as we review fourth quarter and full year 2021 results. 2021 marked a year of significant progress for Superior as our team demonstrated great agility in delivering profitable growth in a challenging production environment. We are now realizing the benefits of several years of execution against our value creation roadmap. In terms of revenue, this is the third consecutive year of growth above markets. And in terms of profitability, our earnings in 21 are at pre-pandemic earnings levels, despite substantially reduced industry volumes. I will now start on slide five with our full-year highlights. In 2021, we delivered double-digit year-on-year increases in revenue, earnings, and continued growth of our market. This clearly is the result of our operational strength in an environment with OEM production volatility and decline and elevated raw material costs. Our performance was also further enabled by the continued shift to premium products, enabling us to deliver an impressive 29% increase in EBITDA in 21 on 6% increase in unit shipments. We are. successfully capturing the growing demand for premium, larger, and lighter wheels as OEMs seek products to meet secular trends for electrification, CO2 reduction, and vehicle customization. Our portfolio of differentiated technologies has supported content growth and, in turn, long-term margin expansion. Further, we maintained a strong cash balance of $113 million despite the decline in full-year operating cash flow driven by increasing material costs, which in turn impacted our working capital requirements. This combined with our revolvers provide ample liquidity to support our business and make Superior exceedingly well positioned to drive further growth in 2022 and beyond. Slide six highlights production levels over the last year across our manufacturing operations. Truly an impressive testament to how our differentiated portfolio of product technologies is enabling us to capture content growth in both regions for a combined growth over market of 17% in 21, continuing the trend we have delivered since 2019. Slide seven illustrates how years of operational focus have paid off for Superior. In 2021, volumes for both Superior and the larger automotive industry were significantly lower than 2019, which is the last full year of normal operations prior to the onset of the pandemic. Despite this substantial decline, we achieved EBITDA and EBITDA margins nearly in line with our 2019 results. These figures are most encouraging, and in addition to demonstrating our ability to drive performance in the face of a volatile macro environment also convey how well positioned Superior is to deliver earnings growth once industry volumes return to pre-pandemic levels. I'll now move to slide eight to address the current state of our operating environment. Looking at the left side of the chart, many of the same challenges and tailwinds that impacted our operations during 21 will continue into 2022. As I addressed on the last slide, demand for premium wheels continues to support a favorable shift in product mix. Further, we have also seen solid performance from our aftermarket business driven by strong European demand, which is benefiting from our localized footprint in Europe. As the industry continues to look to de-risk long supply chains, we expect to continue to benefit from our footprint of being local for local for our customers. This is another favorable tailwind that we expect to continue in the coming years. As you can see on the right, 2021 industry production fell significantly short of what we expected earlier in the year due to the lingering effect of macroeconomic challenges. We are taking a conservative approach for forecasting our estimates for the industry in 2022. And our forecasts are well below that of IHS current predictions. Should industry production recover faster than our current estimates, there will be a substantial upside for our performance during the year. As shown on the right side of the chart, current production remains far below that of historical levels in 2019. And as such, we are confident that underlying consumer demand remains quite strong. That said, I will provide further detail on our 2022 expectations later in my remarks. Moving on to slide nine. Our legacy of consistent growth over market has been continually supported by execution on our value creation roadmap. Throughout the year, we work to drive enterprise-wide operational improvements to mitigate ongoing industry headwinds with the goal of positioning Superior for long-term profitable growth. Actions taken in 2021 have included flexing manufacturing costs at facilities in Mexico and Germany and enhancements of both costs and commercial discipline to mitigate the impact of increasing operating costs without compromising product quality and to enable commercial recoveries of inflationary costs. We have also focused on development of our culture of continuous improvement by utilizing Six Sigma training, graduating 125 green belts and black belts during the year. While we have been focused on improving operating metrics in the business, we have not taken our eye off the ball on ensuring the right investment in manufacturing capability to allow us to continue to deliver products that enable our customers to differentiate their vehicles. We have invested in more lightweighting capabilities in Mexico and Poland to enable electrification, more painting and machining capabilities to enable 24-inch wheel and ultra-premium paint finishes, and greener products with low carbon footprint that enable us to execute on our ESG strategies. Slide 10 makes the point further. Our broad portfolio has been the cornerstone of our growth over market. We expect to continue growing each of these technologies further in the coming years, positioning Superior to increase its penetration in the premium wheel space while expanding margins along the way. We will continue to leverage this content growth well into the future as OEMs continue to seek larger, lighter, and more premium wheels. Flag 11 showcases several of our product launches during the year and highlights the speed with which OEMs are continuing to adopt our technologies in North America and in Europe. These product launches continue to reflect the increasing diversity of our customer base, the continued growth of our premium technologies, and our success in adapting to the evolving trends in the industry. During the year, we continued to leverage our innovative portfolio with over 50% of launches incorporating lightweighting technologies, over 60% utilizing premium finishes, over 70% with larger diameter wheels, and over 25% for electric vehicles. Turning to slide 12, before moving on to our 2022 outlook, I would like to address the progress we have made towards environmental, social, and governance initiatives throughout 2021. This includes the establishment of our goal to be carbon neutral by 2039, the implementation of our Global Diversity, Equity, and Inclusion Council, and the launch of our inaugural UN Global Compact Sustainability Report. Further, I am pleased to announce that Superior recently joined the Aluminum Stewardship Initiative, a global organization dedicated to bringing together shareholders and stakeholders involved in the aluminum value chain to help drive responsible production and sourcing of aluminum within the industry. Slide 13 highlights the fact that our ESG focus and particularly the environment has been multifaceted. We are in the process of launching our R4 strategy. We're excited about that. Which will further enhance the sustainability initiatives of our operations and diminish the emissions produced in our manufacturing processes. With a focus on utilization of clean energy sources Coupled with our local-for-local manufacturing footprint, Superior is actually far ahead of global competitors on the emissions front. We currently deliver wheels with roughly 60% lower CO2 footprint than the global average and aim to achieve further reductions by 2025. In addition to helping us advance the sustainability of our operations, this progress also makes us an attractive partner to major OEMs that are looking to reduce the carbon footprint of their supply chains. We look forward to driving further progress in our sustainability efforts in 2022. I will now address our full year 2022 outlook on slide 14. Although we are seeing some stabilization of OEM production levels, visibility for the full year remains limited due to supply chain headwinds and uncertainties regarding inflationary cost pressures. Given these factors, we have taken a conservative approach to our industry assumptions for the year, which is reflected in our guidance. Further, we do anticipate some level of disruption associated with the Russia-Ukraine conflict. the full impact of which is currently unknown as the situation continues to evolve. Regardless, once the industry recovery accelerates, the high levels of pent-up consumer demand will materialize into substantial growth for both Superior and the wider automotive space. For the year, we expect continued industry recovery over 2021 with mid to high single digit growth in global light vehicle production. Adjusted EBITDA is anticipated to be in the 160 to the 190 million range with cashflow from operations between 105 and 150 million. This includes the expected benefits from further accelerating our cost recovery and continuous improvement efforts to mitigate inflationary headwinds. That said, we see substantial upside potential to earnings and cash flow should industry production volumes return stronger than anticipated. In closing, I am incredibly proud of the superior team for the progress we achieved in 2021. Heading further into 2022, I look forward to the many opportunities that lie ahead, and I am excited about our position as the industry rebounds and accelerates growth. With that, I will turn the call over to Tim.