Q4 2022 Superior Industries International Inc Earnings Call
Speaker 2: Hello and welcome to the Superior Industries fourth quarter for your 2022 Earning Study Conference call. My name is Caroline and I'll be your coordinator for today's event. I'm joined this morning by Maasti Aboulaben, President and CEO , Tim Trenary, Executive Vice President and CFO .
Speaker 2: Joanne Finne, Senior Vice President, Investor Relations, Sustainability Corporate Secretary. Please note this call is being recorded and for the duration of the call your lines will be on listen only mode. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your questions.
Speaker 2: If you require assistance at any point, please press star zero and you'll be connected to an operator. I will now hand over the call to your host, Joanne Finan, to begin today's conference. Thank you. Thank you. Good morning, everyone, and welcome to our fourth quarter and full year earnings call. During our call this morning, we will be referring to our earnings presentation, which along with our earnings release is available on the investor relations.
Speaker 2: 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 of forward-looking statements and risk factors. We will also be discussing various non-GAAP measures today.
Speaker 2: These non-GAAP measures exclude the impact of certain items and therefore are not calculated in accordance with US GAAP. Reconciliations of these measures to the most directly comparable US GAAP measures can be found in the appendix of this presentation. With that, I'll turn the call over to Majdhi to provide a business and portfolio update. Thanks, Joanne, and thanks everyone for joining our call today to review our full-core and full-year results. Starting on slide 5 with the full-year highlights.
Speaker 3: During 2022, the superior team faced unprecedented industry challenges head-on, including lower volumes, inflation, schedule volatility, and challenging dialogues with customers related to customer recovery. I am truly proud of the hard work of our teams and the results we have delivered. These results are the culmination of our efforts in executing priorities laid out in our value creation roadmap. We hope to see more of these results in the coming years.
Speaker 3: building on a solid foundation, driving operational excellence, and delivering profitable growth. Our portfolio strategy continues to play out. Demand for our premium products has enabled us to deliver content outgrowth for the fourth year in a row. In 2022.
Speaker 3: We delivered 8% growth in value-added sales, driven by demand for favorable wheel mix and by customer recovery. During the year, we realized 14% content growth per wheel and saw continued increase in demand for larger and premium wheels. On the profitability front, we saw a growth in sales growth in the last year. We saw a growth in sales growth in the last year.
Speaker 3: Our team tackles an exceptionally challenging operating environment, successfully negotiating customer recovery and responding to cost pressures, with ever-increasing focus on lean and continuous improvement.
Speaker 3: Our collective efforts resulted in a strong multi-year high adjusted EDR of $194 million and 25% vice margin, a significant year on year growth in earnings and margin expansion.
Speaker 3: I am also pleased with the results of our team's continued focus on cash flow through improved profitability, working capital management, and improvements in capital expenditures.
Speaker 3: We generated more than $80 million in pre-cash flow, improved our cash position to $213 million, and reduced net debt to $434 million, a $68 million reduction versus the prior year. These improved results have strengthened our financial position and increased our cash position to $9.5 million.
Speaker 3: enabling us to attract 400 billion dollars in capital to refine and our term load. Extended maturity of our term load and the strong cash balance provides us with confidence and flexibility in the coming years as we execute our strategies and tackle industry challenges. In terms of 2023.
Speaker 3: We remain cautious about how macroeconomic factors, including hyping interest rates and input costs, will affect automotive industry production. While some of the industry supply chain challenges are abating, we are still seeing continued choppiness and volatility. The industry is not out of the woods yet.
Speaker 3: In fact, we are anticipating very little growth, if any, in our markets. Specifically, we expect a declining market in Europe and a flat one in the U.S. Further, tackling cost inflation, especially energy, through continuous improvement and109.3% investable supply chains are, had to £80m onPurple Models. On top of thebersports Inc.
Speaker 3: will be paramount. Now, on to slide 6 with the fourth quarter highlights. Despite a volatile and choppy production environment, our team's commercial and cost disciplines deliver solid performance in the core. While industry volumes increase 11% versus the prior year,
Speaker 3: We actually grew FX adjusted value at sales by 22% while also driving substantial earnings growth and margin expansion. Successful negotiations with our customers for cost recovery in the quarter.
Speaker 3: which by the way tend to be very choppy, and for prior periods, contributed to these results. Further, as I noted at the beginning of this call, we continue to leverage our innovative portfolio to drive content growth, with content per week increasing 26% versus the prior year. Thank you.
Speaker 3: which highlights industry production by region and how our differentiated portfolio of product technologies is driving content growth. In the fourth quarter of 2022, while we find notable increases in industry production on a year-over-year basis in both North America and Europe , we are performing in both regions.
Speaker 3: Combined, we achieved 11% growth over market in the fourth quarter and normalizing for child recovery in three-year character of 8% growth over market. Moving on to slide 8 and looking further in our current operating environment. I'm JonathanHuh hurricanes, everybody.
Speaker 3: Globally, industry production has finally started to rebound for the first time since 2020, yet remains far below pre-COVID levels. We continue to face a difficult operating environment marked by headwind noise on the slide.
Speaker 3: Most notably, elevated input costs and ongoing disruption in Europe . That said, substantial tailwinds remain, including the aging of semiconductor supply constraints coupled with solid demand for premium wheels and the benefit of our local-for-local manufacturing footprint, which I'll touch on in a bit later. We will continue our efforts to capture these long-term tailwinds in 2013 to position superior for long-term growth.
Speaker 3: Moving on to slide nine to address progress on our multi-year value creation roadmap. Our team has continued to consistently execute on our strategic priorities laid out here. From an operational excellence standpoint, we continued our focus on cost discipline and continuous improvement initiatives. Further, commercial discipline has also been a key success factor for us.
Speaker 3: supporting our multi-year solid margin expansion. Beyond operational excellence, we have maintained focus on driving profitable growth. We truly believe we have the broadest portfolio in the industry, enabling us to benefit from the continued secular trends towards larger and lighter wheels with linear finishes. Further, our local for local manufacturing footprint.
Speaker 3: is well established and remains a tailwind as major customers seek to de-risk long supply chains. Due to recent updates in EU legislation, substantial duties are now imposed on wheels imported into Europe from both China and Morocco, two key regions where our competitors operate. In line with our local for local strategy, we manufacture wheels.
Speaker 3: in proximity to our key customer facilities, and do not face the same terror, resulting in a competitive advantage. Slide 10 is more telling and quantifies the progress we have achieved since we first rolled out our value creation roadmap back in 2019.
Speaker 3: This foundation has enabled our recent financial performance, delivering earnings growth despite a significant decline in industry production. Further, we have made the right adjustments to our business and implemented changes to the hard structure to support profitability.
Speaker 3: Against an 18% decline in industry unit shipments since 2019, our FX adjusted value at sales has increased 8%. The EBR margin has expanded by 280 basis points.
Speaker 3: And content for real has expanded 33%, collectively enabling us to reduce net debt by $120 million. And hence, to refinance a significant portion of our capital structure.
Speaker 3: This remarkable performance emits one of the more challenging operating environments our industry ever-fake gives the great confidence and superior ability to deliver long-term, profitable growth.
Speaker 3: Slide 11 highlights the culmination of our portfolio strategy since 2019, manifesting in 33% content growth for real. We have continued to deliver technologies that meet increasing demand for larger and larger real-looking and finishes with H&B technology technology steadily.
Speaker 3: making up a larger share of our portfolio. Flight 12 highlights how new launches have continued to reflect the continuing adoption of our technology and the growing diversity of our customer base.
Speaker 3: Over two thirds of our launches you see on this chart in 22, included, launched, I am Erwin. And more than 50% included, lighter and premium wheels. Flight 13 highlights progress towards our sustainability goals for the year. Our team's focus on taking, has enabled us to reduce the high affordable interest rates.
Speaker 3: by 50% since 2018 and in the free benchmark. We also continue to focus on sustainability using renewable energy. 82% of our electricity is now from fuels to renewable sources.
Speaker 3: Further, our focus on green products to our core strategy is yielding results. Our videos on average actually deliver less than 50% CO2, footprint, and the global movement of industry average.
Speaker 3: Progressing issues in areas that continue to make us more attractive to global holy ends that are looking for partners with sustainable operations. We are planning to provide more detail on these achievements in our upcoming sustainability report.
Speaker 3: which we plan to publish later this year. I will conclude my remarks by addressing our two-year 2023 Outlook on slide 14. As I noted at the beginning of the call, we remain cautious about how macroeconomic factors...
Speaker 3: including high-painter straight and input cost will impact auto-loader industry pressure levels. While some of the industry supply chain challenges are abating, we are still seeing continued sharpening and volatility. We are anticipating very little growth in any, if any, in our markets. Specifically, as I mentioned earlier, we expect that declining markets in Europe and a slightly new U.S. For the year, we expect adjusted EBITDA in the range of $170 million to $200 million, and casual from operations in the range of $110 million to $130 million. Our adjusted EBITDA and cash generation will still above the historical levels.
Speaker 3: will be impacted primarily by a lower customer recovery versus 2022. The team will provide more cover on this list. And closing, I am very pleased with the impressive results our team delivered this year.
Speaker 3: in the face of unprecedented challenges. I would like to thank every member of our superior team for their efforts and hard work. We look forward to continue our progress in 2023 as we generate long-term value to our shareholders.
Speaker 4: And now I'll turn the call a little bit to Tim. Tim. Thank you, Mashi, and good morning, everyone. By any measure, 2022 is a challenging year for our company. Light vehicle building our markets remains oppressed for the third year in a row, and almost 20% for pre-COVID levels. Supply chain destruction, including some I conducted with the availability, gave rise to significant OEM vehicle production volatility.
Speaker 4: The cost of aluminum in our wheels skyrockets. As did the cost of energy to manufacture the wheels, especially in Europe . General inflation, including wage inflation and the cost of resins in the wheel coatings, ramped up in the back half of 2021 and continued throughout 2022.
Speaker 4: About half of our business is in Europe . The euro crashed during the year, dropping to as low as 98 cents, the lowest in 20 years, thereby deflating European sales and profits. And finally, the capital markets became choppy during the year and still are. Notwithstanding these headwinds, the Superior Management team, in large part through the extraordinary efforts of our commercial and procurement organizations, protected the company's margins. As a consequence, funds managed by Oak Tree Capital Management LP provided the capital for a $400 million Senior Secure Term Loan.
Speaker 4: extending our momentum and advancing our growth strategies drive shareholder value. Let's have a look at how the company performs financially in the aforementioned business environment. The number of wheels sold sales and profit for 2022 can be found on page 16, fourth quarter in full year 2022 financial summary. In the fourth quarter, wheels sold for 3.7 million down 5% compared to the prior year period. For the full year, wheels sold for 5.6 million down 3% compared to the prior year.
Speaker 4: More than all the decline in wheeled souls is attributable to Europe , primarily because of the aftermarket business. The company is European aftermarket business benefited in 2021 from problematic logistics experienced by exporters of aftermarket wheels in the Europe , primarily the Asian manufacturers.
Speaker 4: Because of the 2021 aftermarket wheel supply constraints, aftermarket sales in 2021 were about 15% higher than expected.
Speaker 4: Conversely, in 2022, the company's European aftermarket sales were at all 20% lower than expected because it improved logistics for the aftermarket wind borders, a warmer winter, recession worries, and the impact of consumer inflation on the ability of consumers to afford winter wheels.
Speaker 4: Net sales increased to $4.2 million for the quarter compared to $368 million in the prior year. For the full year, net sales were $1.6 billion compared to $1.4 billion in the prior year. The increase in net sales is primarily due to the past through a high-rolym cost to our customers.
Speaker 4: especially earlier in 2022. Through a year or a wait on a net sales in 2022. The IUI sales increase to 218 million per quarter compared to 189 million in the prior year a 16 percent increase. For the full year, the IUI sales were 7171 million compared to 754 million in the prior year a 2 percent increase.
Speaker 4: The IOS sales in 2022 benefited from the past due of cost inflation to our customers, especially in the fourth quarter, and higher premium we don't have.
Speaker 4: In the fourth quarter, with the reported net income of 17 million or earnings per division of 25 cents, compared to a net loss of 4 million or a loss of 48 cents for the new chair in the prior period. For the full year 2022, and reported net income of 37 million or earnings per division of 25 cents for the new chair at just that, compared to a net income of 4 million.
Speaker 4: A loss for the Moody Chair of $1.17 in the prior to appear to it. A loss for Moody Chair in 2021 arises for value accretion of and dividends paid on the preferred equity. Page 17. Fourth quarter, your over-year sales rich. The value added sales increased to $118 million from $189 million, an increase in 15%. Now, we'll see if you were sales of wheels and in the prior year could. Before giving an effect to the impact of currency, the value added sales were up 22%.
Speaker 4: $38 million, benefited from pass-through cost inflation to our customers and higher premium wheel content. The weaker yield weighed on value-added sales by $9 million and the higher cost of aluminum, $5 million, was passed through to our customers. The full year 2022 year-over-year sales break is on page 18. Value-added sales were $771 million, up 2%, notwithstanding fewer wheel sales in the prior year period. Before it affected the impact of currency, value-added sales were up 8%.
Speaker 4: Volume, price, mix, 58 million, benefit from pass-through and cost inflation to our customers and higher premium will content. The week or year will wait on value when it sales by 42 million. Iyer aluminum cost of 239 million in 2022, compared to 2021, pass-through to our customers. On page 19, the fourth quarter of 2022, we'll be going to you over here, adjust the name of that bridge.
Speaker 4: The adjusted EBITDA to the quarter increased to 58 million, a 26% margin expresses a percent of value at sales compared to 37 million, 80% margin in the prior year period. The improvement in adjusted EBITDA and the associated margin expansion is comprised of 36 million in performance, offset in product by 8 million of unfavorable volume price mix and 7 million of unfavorable metal price.
Speaker 4: The unfaithable volume price makes for you select fewer real sales in the quarter, primarily aftermarket wheels. The metal-finding reflects a mismatch in the quarter of the cost of metal to superior, and the amount of that cost passes through to customers. In periods of rapidly changing aluminum costs, this mismatch will occur a tensed net over time. In this instance, in 2021, the cost of aluminum rolls dramatically, and in 2022, the cost declining your battery. The metal-finding was favorable, 7 million, 2021, and unfaithable, 7 million,22.
Speaker 4: With respect to the favorable performance, passed through a big increase cost to our customers does not necessarily match the timing of the cost inflation. The cost of OEM production schedule volatility and lower fixed cost absorption on lower-life vehicle bill. Some of this performance in 2022 is recovery of the cost inflation inflation and OEM production schedule volatility that began to ramp up in the back half of 2021. The full year 2022 Euro-Re year adjusted even dot rich is on page 20.
Speaker 4: Adjusted EBITDA increased to $194 million, a 25% margin expressed as a percent of value I have sailed, compared to $167 million, a 22% margin of the prior year of division. This improvement of adjusted EBITDA and the associated margin extension is comprised of $57 million in performance, offset in part by $16 million of unfavorable volume price mix.
Speaker 4: 13 million of unfavorable metal timing and 1 million of unfavorable currency. The unfavorable volume price mix reflects fewer wheel sales in 2022, again primarily after market wheels. The metal time was unfavorable 13 million in 2022, but favorable 9 million in 2021. So 4 million net unfavorable 2 years 2021 and 22.
Speaker 4: As previously described, some of these favorable performance is recovery of the cost inflation and OEM production-steady volatility that began to ramp up in the back half of 2021. An overview of the company's fourth quarter and full year, 2020-23 cash flow is on takes 21.
Speaker 4: Cash flow from operating activities improved because of higher earnings in 2022 compared to 2021, but also with respect to the full year improved working capital performance in 2022. Cash used by investing activities in similar 2022 and 2021.
Speaker 4: It continues to run lower than three COVID levels. 50 on since the virus in 2019, we have run the business with an elevated focus on reducing capital intensity and therefore fewer capital expenditures.
Speaker 4: Recashflow of 63 million for the fourth quarter and 80 million for the full year 2022 is significantly higher than the 2021. In a nutshell, free cash flow improves significantly in 2022 because of higher earnings, more effective management of working capital and lower capital expenditures.
Speaker 4: An overview of the company's capital structure has been the end of 2022 and they found on great 2022
Speaker 4: Cash on the balance sheet at year end was 213 million, an increase of 100 million from the prior year. Funded debt was 647 million at year end and net debt, 334 million, a decrease of 68 million. We intend to continue to focus on leveraging the balance sheet. As of the end of 2022 liquidity,
Speaker 4: including availability under the revolving credit facility was 231 done. Superior Secretary Profile, as of December 31, 2022, is depicted on page 23. The revolving credit facility was undrawn herein. Presented compliance with all loan components and had no significant near-term atturories of funded debt.
Speaker 4: Page 24, you'll find a company's full year of 2023 outlaw. Vehicle production in our market is not expected to return to pre-COVID models in the foreseeable future, so we expect flat light vehicle building our markets in 2022. Almost somewhat diminished, the headwinds I spoke of earlier, more specifically supply chain destruction than the associated oil and vehicle production volatility, and cost inflation, especially energy in Europe , remain a challenge. The Euro has recovered some, but at $1.6 it's still well-beloved, recent historical levels. We enjoyed considerable success in recovery and cost inflation.
Speaker 4: it's 15 million.
Speaker 4: Resulting in an adjusted EBITDA of $170 to $200 million. The associated adjusted EBITDA margin expresses a percent of value-add sales expected to be 23 to 25 percent. Cash flow from operations is expected to be in the $110 to $130 million range, a decrease from 2022 primarily because of higher debt service costs. We respect the capital expenditures, we plan to invest $70 million in our business this year.
Speaker 4: including in some carry-offs in 2022, as we continue to strategically invest in our business, especially finishing capabilities. The Somatos Fed, however, will depend in part on the out-of-the-use of the business environment during the year and our ability to continue to reduce cataloging times today and therefore capital expenditures. The model, a 20 to 30 percent effective tax rate for 2020. In closing, superior delivered, very solid financial results in 2022, notwithstanding extremely challenging business conditions, and we attract this 400 million capital to our company. Enterprise cost improvement and continuous improvement programs continue to ensure an increasingly arbitrary cost reduction.
are commercial and procurement organizations to protect it to companies, margins, and cost increases, and the men and women who make our wheels effectively manage the OEMs production volatility. Our discipline operating teams, and the operating number to this business, take it together with our premium wheel making capabilities, and therefore our product portfolio, positions that's well for the future, especially at light vehicle production and recongers. Do you mind if you hire most happy to take your question, Caroline?
Sure, thank you. As a reminder, if you would like to ask a question, please signal by pressing star one on your telephone keypad. We will take the first question from line. Mike Ward from Benchmark. The line is now please go ahead. Thanks very much. Good morning, everyone. Maybe you would wind it off. You're good morning. Your margin assumptions in South American Europe seem to be well below what IHS is looking for. I'm just curious, is that something you're here from your customers or is that just being conservative on your part? Mike, I think your question is not related to margins. I think it's related to growth outlook. Correct. What do I say margin? I meant your market industry environment industry production. I'm sorry. No, I listen Mike. You know, we have, you know, we have been using, you know, multiple sources to, you know, pro-clanded waste. IHS is just one of them. IHS.
and predicting five percent a year, and you know, the last three years they have been off. So we tend to take low attention to our customer schedule, we call them call us, but we see I personally talked a lot of the leaders in the industry, and I would tell you, at this point, there is no prediction at a high level about how industry production will play out. I mean, we are, we are in a third year talking about our third year as recession level demand, and there is no recession. Corporations now today are up 28 percent.
in five or six years, and you know, the last three years they have been off. So we tend to pay close attention to our customer schedule. We call them call offs, what we see. I personally talk to a lot of the leaders in the industry. And Mike, I would tell you, at this point, there is no conviction at a high level about how industry production will play out. I mean, we are in a third year, talking about the automotive industry, third year at recession level demand. And there is no recession. Car prices now, today, are up 28%. So you've got a massive affordability factor.
The average payment is $750. That's up 35% versus what people used to pay that's along with. So I mean people would argue that these types of macro factors will weigh in on demand and some would say that you're looking at a 15 billion million dollars. Inventory is up, right? Yeah demand is there but inventory is up. So we're very concerned. We're not seeing it from our customers. We're still seeing the volatility. We're still seeing the choppiness. The rest of the leadership in the industry is very skeptical. We have always taken a cautious approach. Matthew's guy at this time we did, the year before we did and we continue to do the same thing. So we're thinking Europe is going to continue to be challenged and North America will be flat. But Mike this is really about planning for our business, right? You know, our guy does. Hey, if it comes, you have a fantastic business here. I mean, I saw. I mean, we're waiting. We make, we'll get what we do. We make money. So so we are hopeful that the high end of the guy. And that that 5% the IHF is talking about will come will come back. Okay. And then it were.
If you look at the European business in the fourth quarter, where your unit shipments positive to the vehicle manufacturers and negative to the aftermarket, is that what we saw on a unit basis under performance relative to the market? The unit, the unit story in Europe is cloudy, right? It took last year, last year, the fantastic year with the aftermarket, or aftermarket business was up 35%. And that's largely, as you know, because of all these logistics and supply chain issues from Thailand and China. So this year, it's reversed the other way around. Now, I would tell you, I think, you know, the internal...
How our business does from a growth standpoint, we like to look at our sales, our value added sales and the content. The content story of this company is phenomenal, right? You go to chart 11, 33% growth in content every year, right? We have been very consistent with our strategy, about certain products, we're following certain micro trends, lightweighting, larger wheels, and the numbers. If you don't want to use content for real, use growth over market, you look at virtually what this company won in 21, we're up 20%. You look at the whole year, even though we had a fantastic growth year in 21, you know, this year just a load excluding the 20% growth in 21, we're still growth above market company. So the unit, the unit is cloudy and the growth global market narrative for our company is not very clear on the quality basis.
Yeah. Now, I assume the content, the value of the content per wheel on the aftermarket side is lower than OE. Flassy. Okay. And just one last question. When you look at them on your charts with you and you have the bridge on the EBITDA, there were two things you mentioned. You mentioned the lower customer recoveries. Is there a way, I assume that like on the fourth quarter, the 7 million metal timing?
where the volume price makes $8 million. Or the recovery is netted out against that. And so when you say that, recoveries will be lower in 2023. What is, can you put any numbers around that? So the recovery is just so you know, my argument, the performance category, the customer recovery. Okay. Let me give you some publicism color here on this. For commercial and other reasons, not the least of which.
to it, frankly, which side you're in.
So, some of the recoveries that we experienced in 2022 actually relate to cost that were incurred in 2021. Now, it's not a lot. The mining share is 2022, but for sure, our performance in this year, the 2022 was boosted somewhat because of this mismatch in.
in cost versus recovery, in period in which they incurred. Now, to your point about 2023, we have, as I mentioned, we have now pivoted in our discussions with the customers.
to instead of one off recoveries of cost and vision, incorporating into the pricing in the wheels, an appropriate amount, an amount that reflects the inherent increased costs in our cost structure, labor, material, energy, especially with respect to Europe , and frankly, the fact that they're building 15 to 20% fewer vehicles.
instead of one off recoveries of cost and vision, incorporate into the pricing in the wheels and appropriate amount, an amount that reflects the inherent increased costs in our cost structure, labor, material, energy, especially with respect to Europe . And frankly, the fact that they're building 15 to 20% fewer vehicles. So.
That dialogue, those dialogue are ongoing with respect to both the energy and the real price of the rest of the cost inflation. And I would suggest to you that the best way to sort of get a handle on where we think all of that will end up is to use our guidance as a barometer, a measurement. So, you know, at 755 million, 815 million of value at a sales, you know, assuming that we continue to be successful with respect to our commercial activities, we would expect a margin of between, let's say, 23 and 25%. Now, having said that, I do expect that we're going to see some lumpiness from quarter to quarter, if these negotiations are completed. So, I think that's a good example. You know, we'll have some variation, I expect the quarter to quarter. Okay. Thank you. That's very helpful. I really appreciate that. Thank you very much. Thank you, bye. Thank you. We will take the next question from LINE Gary Prestopino from Berngton Research. The line is up and out. Please go ahead.
Hey, good morning, everyone. Can you give us some idea with the new facility, what your annualized interest expense is going to run at? Sure. The pricing Gary is so far, which today is about 450 basis points, plus a third basis points. So that's 12.5%. Now, importantly, a year ago, we had the foresight.
to enter into 250 million of interest rate swaps at 300, so for 300. So we are getting some benefit directly today, about $4 million a year benefit from those swaps. 150 basis points on 250 million of 250 million. So the 250 million of swaps. So I would say if you wanted to take a number setting the side future fed rating increases, I'd use 2012 for second.
On the 12% on the total data, that's a lot there. I mean, all I'm really looking for is you. Sorry. What am I talking about? We were looking at year-over. All right. So it would be absent the swap. All right.
On the term loan, about 25 million, but because the slaps are in place at Curriclar, you can think of about 20 million to zero. So that's not incremental. That's just a total amount of, well that's that would be kind of an increase in interest expense year over year. 20 million incremental.
Now, as soon as no further, as soon as Jerome Powell doesn't raise the Fed funds rate, which probably is a little bit of a dollar of the assumption. But again, the good news is any increase in the Fed fund rate so great, which, you know, has just manifested itself in silver, 250 million or the 400 million is insulated from the swap. It would only impact.
100 and 50 million other that. Okay, and then a couple more questions here. You know, you've got kind of a very sanguine outlook for this year. I'm understanding fully the puts and takes and the challenges.
But, you know, everybody I speak to in the industry is saying that they're seeing a better man or improvement, at least on the retail side. You know, inventories are moving up. Sales are still pretty good. I mean, is your, so far in Q1, is your, you know, sanguine outlook coming up to play in what, what you're generating in terms of units and sales?
It's a tough call. I do understand your pull. There's a lot of noise actually here, right? There is variation in the impact of what we just talked about with affordability and vehicles and type of production. There's variation in customers. You look at what schedules were they're facing. You've heard Nissan announced, you know, a shantargo, a practical, you know, a install public GM shut down the port wind plant GM shut down the core wetland because of supply chain issues.
plan shutdown was presumably because of inventory, for that issue that are very public. So, you know, you talk to everybody, and I said, like, I said, I talk to my colleagues in the industry, and at the very highest level, there is no conviction about how this will play out. It's great, it's very fun. So we're taking a conservative approach. We're seeing a lot of sharpiness in this schedule. It's not the same level as it was 12 months ago, but it's still problematic, and what's unique about it is the variation between customer. So it's very much depends on our customer base. For this specific, why is customer base? But again, the guy is showing growth, and I'm hopeful that this is the year we're wrong. Well, I mean, we hope so too. I mean, you're not really looking at any kind of betterment in your financials that, based on the guidance you're giving, and it just appears that the industry probably bottomed in 2022, and starting a slow movement higher.
All right, so let me just ask another thing. I'm trying to get a handle on these cost recoveries here. You're saying these negotiations are ongoing, but again, it would appear that the peak levels of inflation and input costs and whatever are in the rear view mirror. And as you're going into 2023, you're in 2023. Can you just help help us out there with this whole issue where you're trying to get cost recovery from the client, your end users and and.
It's obviously going to affect your margins and then I guess to date how well has that been going? Gary, let me talk to you about this in 10 consecutive months. The cost recovery story, I can imagine when everybody is complex, it's easy-faceted. Three to two points I want to make with you. Number one is at the highest level, at the highest level, the company's normalized margin is what Tim mentioned, it's 23 to 25%. From there you can back into what recovery is going to be in the year, what recovery is going to be in the year. But the second point I think is more clear. For us, Gary costs recovery to mostly from. Look at the details, look at the bridges Tim showed you, 80 to 85% of the year on year recovery are commodities.
You put back into anywhere between 240 to 280 million dollars per year. That all that, as you see in Tim's bridges, 85% of our recovery is either aluminum or aluminum aditives or silicon. That leads you with a balance which is the dialogue we have with customers. On the rest, call it the 16-metre wall, a little bit more maybe, and that's non-commodity inflation, including energy. And by the way, Tim has been consistent in the last few calls. We have fair very well on energy because we hatched. We did a good job of hedging energy in 2022. And then what's left there is paint and other obviously labor and manufacturing costs. And the first piece of that, you know, the 15 to 20% is volatility and cancellation. So what we're telling you is, the 85% was indexed, you know, it's been indexed.
Our work with customers was on the 15%. We have fed well. We have to shift some of that focus now from one time recovery to put it in the piece price. And he asked it on some carry, all from 21 that we're saying is not carry into 23. So I can't really improve on that, but I would like to for a moment, the area if I may just go back to your previous question, which is the guide in 2020, Vee, the company's performance in 2022. And I think you may reference to how it compares to certain other companies. As we said, our performance in 2022 was somewhat boosted by customer recoveries that were really associated with 2021. I think if you go back and you compare the company's performance last year 2022, compare it to the previous one. As compared to our peers, you'll find that we for the most part outperform because of.
We have a team that is executing on how to learn this correctly and get one. We have what we believe to be the most competitive, unique footprint in industry. Gary, if you look at just this industry from a low cost standpoint, you could argue that we have made it.
of all the capacity in North America. Remember, 50% of wheels comes from China, with 27% duties. If you look at only the capacity in Mexico, we have 50% of the wheels of capacity in Mexico. You could look at North America, that's 30%. That's a competitive advantage, you know, one who has a customer that's trying to localize. Now, I shipped you over to Europe , and I don't know if you caught it in my comments. But last month, the EU Commission imposed duties on wheels coming out of Morocco. In addition to duties that were on wheels coming out of China. So obviously Morocco was concerned for us, right, from a pricing standpoint. So now we're back to what we were three years ago.
And it just so happens that 90% of my capacity in Europe is in low cost, it's in Poland. If you assume Poland and the Czech Republic are low cost, and we have 25% of the low cost capacity in Europe . So we have the product, we have the technology, we have the competitive cost, and then now we have very much a differentiated footprint where we expect the sale with that. And you write the Dowels with customers, Dowels with the supplier that they value very much, and they're collaborative Dowels. But we also have to demonstrate our customers that we have our Dowels. So I'm very, I'll tell you, I'm very encouraged with how constructive the Dowels have been.
and our progress for 23. Okay. Thank you. Welcome, Mary. That's, thank you. There's no further questions. So I will hand back over to host, Mastery Abu-Lawban, to come through studies conference. Thank you. Thank everyone for joining our call today, including, I am very encouraged by our robust score and throughout the year when you look forward to continuing to execute on our strategic priorities, delivering long-term, profitable growth. To the superior team, I am very proud of what we have accomplished. Thank you for your perseverance, hard work and execution, through these challenging times. Thanks again for joining the call and having us say. Thank you for joining today's call. You may now disconnect.
I you.
Hello and welcome to the Superior Industries Port Quarter for your 2022 Earning Study Conference School. My name is Caroline and I'll be your coordinator for today's event. Ajoin this morning by Masthi Abulavan, President and CEO , team.
Trinari, Executive Vice President and CFO , Joanne Finan, Senior Vice President in Western Relations, Sustainability, Corporate Secretary. Please note this call is being recorded and for the duration of the call your lines will be on Listen or Limon. However you will have the opportunity to ask questions at the end of the call. This can be done by pressing Star 1 on your telephone keypad to register your questions.
If you require assistance at any point, please press star zero and you'll be connected to an operator. I will now hand over the call to your host, Joanne Finnon, to begin to this conference. Thank you. Thank you. Good morning, everyone, and welcome to our fourth quarter and full year earnings talk. During your call this morning, we will be referring to earnings presentation, which along with our earnings release is available on the Investor Relations section of Superior's website. I am joined down the call by Maasya Buluban, our President and Chief Executive Officer and Tim Troneri.
factor Yeah,
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 US cap. Reconciliation of these measures to the most directly comparable US cap measures can be found in the appendix of this presentation. With that, I'll turn the call over to Mauchee to provide a business and portfolio update. Thank you very much. Thanks, Joanna. Thanks, everyone, for joining our call today.
to review our four-quarter and four-year results. The start-up was light-spied with a four-year highlight. During 2022, the superior team faced unprecedented industry challenges, hailing, including lower volumes, inflation, schedule volatility, and challenging dialogues with customers related to customer recoveries. I am truly proud of the hard work of our team.
and the results we have delivered. These results are the combination of our efforts in executing priorities laid out in our value creation roadmap, building on a solid foundation, driving operational excellence, and delivering profitable growth. Our portfolio strategy continues to play out. Demand for our premium products has enabled us to deliver content outgrowth for the four year in a row. In 2022, we deliver 8% growth in value items sales.
driven by demand for favorable wheel mix and customer recovery. During the year, we realized 14% content growth per wheel and saw continued increasing demand for larger and premium wheels. On the profitability front, our teams tackled an exceptionally challenging operating environment, successfully negotiating customer recovery and responding to cost pressures, with ever increasing focus on leading and continuous improvement.
Our collective efforts resulted in a strong multi-year high adjusted e-bidup of 194 million and 25% by margin a significant year-on-year growth in earnings and margin expansion. I am also pleased with the results of our teams' continuous focus on cashflow.
through improved profitability, working capital management, and wouldn't in capital expenditures. We generated more than $80 million in pre-cashable, improved our cash position to $215 million, and reduced that debt to $434 million. A $68 million reduction versus the prior year.
These improved results have strengthened our financial position, enabling us to attract 400 billion dollars in capital to refine our firm load.
The extended maturity of our turn loan and the strong cash balance provides us with confidence and flexibility in the coming years as we execute our strategies and tackle industry challenges.
In terms of 2023, we remain cautious about how macroeconomic factors, including hyping interest rate and input cost, will have our modern industry production.
While some of the industry supply chain challenges are available, we are still seeing continuous shopping and volatility. The industry is not out of the woods yet. In fact, we are anticipating very little growth if any in our markets.
Specifically, we expect a declining market in Europe and a flat one in the US. For over, tackling cost inflation, especially energy, through continuous improvements and the Gorshira for permanent price adjustments will be paramount.
Now, on to slide 6 with a fourth quarter highlight. Despite a volatile and choppy production environment, our team's commercial and cost-discipline delivered solid performance in the quarter.
While industry volumes increase 11% versus the prior year, we actually grew effects adjusted value at sales by 22% while also driving substantial earnings growth and margin expansion.
Successful negotiations with our customers, full cost recovery in the quarter, which by the way tends to be very choppy and for prior periods, contribute to these results. Further, as I noted at the beginning of this call, we continue to leverage our innovative portfolio to drive content growth, with content where we increase 26% versus the prior year. Thank you.
Starting on to slide seven, which highlights industry production by region and how our differentiated portfolio of product technologies is driving content growth. In the fourth quarter of 2022, while we found notable increases in industry production on the hero of real business, in both North America and Europe .
We offer for both regions. Combined we achieve 11% growth over market in the fourth quarter and normalizing for children's coverage in 3-year cattle of 8% growth over market.
Moving on to slide 8 and looking further in our current operating environment. Globally industry production has finally started to rebound for the first time since 2020, yet remains far below three COVID levels. We continue to face a difficult operating environment marked by headwind noise on the slide. We continue to face a difficult operating environment marked by headwind noise on the slide.
Most notably, elevated input cost and ongoing destruction in Europe . That said, substantial tailwind remains, including the easing of semi-conductor supply constraints, coupled with solid demand for premium wheels, and the benefit of our local for local made-faction pushments, which I'll catch on in a bit later.
We will continue our efforts to capture these long-term tailwinds in 23 to position superior for long-term growth. Moving on to slide 9 to address progress on our multi-year value creation roadmap. Our team has continued to consistently execute on our strategic priorities they are here.
From an operational excellence standpoint, we continue to focus on cost disciplines and continuous improvement initiatives. Further, commercial discipline has also been a key success factor for us supporting our multi-year solid margin expansion. Beyond operational excellence, we have maintained focus on driving profitable growth. We truly believe we have the bright portfolio.
In the industry, enabling us to benefit from the continued secular plans towards larger and lighter wheels with premium finishes. Further, our local, core local manufacturing footprint is well established and remains atail wind as major customer seats to dearest long supply chains. Due to recent update in EU legislation.
Substance of duties are not imposed on wheels imported into Europe from both China and Morocco. Two key regions where our competitors operate. In line with our local for local strategy, we manufacture wheels in proximity to our key customer facilities. And do not face the same thing resulting in a competitive disadvantage.
Slide 10 is more telling and quantifies the progress we have achieved since we first rolled off our value creation roadmap back in 2019. This foundation has enabled our recent financial performance, delivering earnings growth despite its significant decline in the street production. Further, we have made right adjustments to our business.
and implemented changes to the cost structure of the poor profitability. Against an 18% decline in industry unit shipment since 2019, our FX has adjusted value as sales has increased 8%. Adjusted even our margin has expanded by 280 waveforms.
and content for real and expanded 33% collectively enabling us to loosen that debt by 120 million dollars. And hence, 3-pian significant portion of our capital structure.
This remarkable performance and makes one of the more challenging operating environments our industry ever faced. Give the great confidence and superior ability to deliver long-term, profitable growth.
Slide 11 highlights the culmination of our portfolio strategy since 2019, manifesting in 33% content worth for real.
We have continued to deliver technologies that meet increasing demand for larger and larger wheels with clean and finishes. With each of these technologies, technology steadily making up a larger share of our good souls.
Likewise, highlight how new launches have continued to reflect the continuing adoption of our technologies and the growing diversity of our customers. Over two thirds of our launches, you see on this chart in 22, included, LARSA and RUILS, and more than 50% included, LARSA and premium wills.
Twice 13 highlights progress towards sustainability goals for the year. Our team's focus on safety has enabled us to reduce the recordable incidence rate by 50% since 2018 and in the three benchmark. We also continue to focus on sustainability using renewable energy.
82% of our electricity is now procured from renewable sources. Further, our focus on green products to our core strategy is yielding results.
Our videos on average actually deliver less than 60% CO2, footprint, and the global aluminum industry average. Progress in each of these areas has continued.
to make us more attractive to global OEMs that are looking for partners with sustainable operations. We are planning to provide more detail on these achievements in our upcoming Sustainability Report, which we plan to publish later this year. I will include my remarks by addressing our 2020 Outlook and on 514.
As I noted at the beginning of the call, we are getting cautious about how macroeconomic factors, including height and interest rates and input costs, will impact automotive industry fashion levels. While some of the industry supply chain challenges are debating, we are still seeing continued sharpening and volatility. We are anticipating very little growth in any, if any, in our markets. Specifically, as I mentioned earlier, we expect that equiating market in Europe and a platform in the US.
Our adjusted e-biddle and cash generation, while still above the historical levels, will be impacted primarily by a lower customer recovery versus 2022. Tim will provide more cover on this later. In closing, I am very pleased with the impressive results our team delivered this year in the face of unprecedented challenges. I would like to thank every member of our superior team for their efforts and hard work. We look forward to continuing our progress in 2023 as we generate long-term value to our shareholders.
Thank you, Mashi, and good morning, everyone. By any measure, 2022 is a challenging year for our company. Life vehicle building our markets remain depressed for the third year in a row, and almost 20% for pre-COVID levels.
Supply chain disruptions, including some eye conductor availability, gave rise to significant OEM vehicle production volatility. The cost of aluminum in our wheels skyrocket, as does the cost of energy and manufacturing the wheels, especially in Europe .
General inflation, including wage inflation in the cost of rising to the wheelcoating, ramped up in the back half of 2021 and continued throughout 2022. About half of our businesses in Europe .
The Euro crash during the year dropping to as low as 98 seconds the lowest in 20 years thereby deflating European sales in process and finally the capital markets became choppy during the year and still are Notwithstanding these Segwins the superior management team in large parts you need extraordinary efforts of our commercial and procurement organizations Protected the company's margins
As a consequence, funds managed by Oak Tree Capital Management's LP provided the capital for a 400 million senior secure term loan extending all momentum and advancing our growth strategies drive shareholder value. Let's have a look at how the company performs financially in the aforementioned business environment. The number of real sold sales and profit for 2022 can be found on page 16, 4th quarter, and the July Campaign ??? Unidos
We'll sold with 3.7 million down 5% compared to the prior year period. For the full year, we'll sold with 5.6 million down 3% in the prior year. More than all the decline in we'll sold as attributable to Europe , primarily because of the aftermarket business. The company's European aftermarket business benefited in 2021 from problematic logistics that experienced by exporters of aftermarket wheels in the Europe , primarily the Asian manufacturers. Because of the 2021 aftermarket wheels supply constraints, aftermarket sales in 2021,
were about 15% higher than expected. Conversely, in 2022, the company's European aftermarket sales were about 20% lower than expected because it improved logistics for the aftermarket wind borders, a warmer winter, recession worries, and the impact of consumer inflation on the ability of consumers to afford winter winds. Net sales increased to $2 million for the quarter compared to 368 million in the prior year.
For the full year, net sales were 1.6 billion compared to 1.4 billion in the prior year. The increase in net sales is primarily due to the past through a high-resistant cost to our customers, especially earlier in 2022. Through a year or a week on net sales in 2022.
The IU-S sales increased to 218 million with a quarter compared to 189 million in the prior year of 16 percent increase. For the full year, the IU-S sales were 771 million compared to 754 million in the prior year of 2 percent increase. The IU-S sales in 2022 benefited from the past due of cost inflation to our customers, especially in the fourth quarter.
and higher premium we don't have. In the fourth quarter, with a 40-dead income of 17 million or earnings per delumination of 25 cents, compared to a net loss of 4 million or a loss of 48 cents for delumination in the prior year period.
For the full year 2022, we reported that income of 37 million or earnings per limited share of two cents, compared to net income of 4 million, a loss per limited share of $1.17 in the prior period.
The loss for Newtonshane in 2021 arises for value accretion of and dividends paid on the preferred equity. Page 17, fourth quarter, your over-year sales rich. The value added sales increased to 118 million from 189 million and increased from 16 percent. Now, we're standing fewer sales of wheels than in the prior year. Before giving effect to the impact of currency, value accretions sales were up 22 percent. Volume, price, 6, 6, 6, 8, 9.
benefited from transfer of cost inflation to our customers in higher premium wheel content. The weaker yield weight on value of sales by 9 million and the higher cost of aluminum 5 million was passed through to our customers.
The full year 2020 you over your sales records on Pay JT. The calculated sales were 7171 million of 2% notwithstanding if you were real sales in the prior period. In the prior period.
Before it affected the impact of currency, value added sales were up 8%. Volume, price, mix, 58 million, set a bid for pass-through and cost inflation to our customers and higher premium will content. The weaker year will wait on value added sales by 42 million. Higher aluminum costs of 239 million in 2022, compared to 2021, pass-through to our customers. On page 19, the fourth quarter of 2022, you'll hear, adjust the name of that bridge.
The adjusted EBITDA to the quarter increased 58 million, a 26% margin expresses a percent of value at sales compared to 37 million, 80% margin in the prior year period. The improvement in adjusted EBITDA and the associated margin expansion is comprised of 36 million in performance, offset in product by 8 million of unfavorable volume price and 7 million of unfavorable metal price.
The unfaithable volume price mixed reflects fuel real sales in the quarter, primarily aftermarket wheels. The metal-finding reflects a mismatch in the quarter of the cost of metal disappear and the amount of that cost passed through to customers. In periods of rapidly changing aluminum costs, this mismatch will occur a tensed net over time. In this instance, in 2021, the cost of aluminum rose dramatically and in 2022, the cost declined dramatically. The metal-finding was favorable 7,021 and unfaithable 7,021.
which are expected favorable for for us. Pastor will may increase cost to our customers if not necessary, and ask the timing of the cost inflation.
The cost of OEM production schedule volatility and lower fixed cost absorption on lower light vehicle bill. Some of this performance in 2022 is recovery of the cost inflation inflation and OEM production schedule volatility that began to ramp up in the back half of 2021. The full year 2022 Euro-reviewed adjusted even dot rich is on page 20.
Adjusted EBITDAH increased to $494 million, a 25% margin expressed at the percent of value I have failed, compared to $167 million, a 22% margin of the prior year of COVID. This improvement in adjusted EBITDAH and the associated margin expansion is comprised of $57 million in performance.
Offset in part by 16 million of unfavorable volume price mix, 13 million of unfavorable metal timing and 1 million of unfavorable currency. The unfavorable volume price mix reflects fewer real sales in 2022 again primarily aftermarket wheels. Metal time with unfavorable 13 million in 2022.
The favorable 9 million in 2021. So 4 million net unfavorable of two years 2021 and 22. As previously described, some of these favorable performance is recovery of the cost inflation and OEM production-steady volatility that began to ramp up in the back half of 2021.
An overview of the company's fourth quarter and full year, 2022-3 cash flow is on page 21. Cash flow from operating activities improved because of higher earnings in 2022 compared to 2021, but also with respect to the full year improved working capital performance in 2022.
cash used by investing activities in similar 2022 and 2021, it continues to run lower than three COVID levels. 50 onset of the virus in 2019, we have run the business with an elevated focus on reducing capital intensity and therefore fewer capital expenditures.
Recash flow of 63 million for the fourth quarter and 80 million for the full year 2022 is significantly higher than the 2021. In a nutshell, free cash flow improves significantly in 2022 because of higher earnings, more effective management of working capital and lower capital expenses. An overview of the company's capital structure.
As of the end of 2022, they be found on page 22. Cash on the balance sheet at year end was 213 million, an increase of 100 million from the prior year. Funded debt was 647 million at year end, and net debt, 334 million, a decrease of 68 million.
We intend to continue to focus on the emerging the balance. As of the end of 2022, the liquidity, the including availability under the revolving credit of the city was 231 down here.
The Superior Secretary of State, Popeye, as of December 31, 2022, is depicted on page 23. The revolving credit facility was withdrawn, year-end. The remaining compliance with all loan components and had no significant near-term attorneys offended debt. Page 24, you'll find a company's full year of 2023 outlook. Page 24, you'll find a company's full year of 2023 outlook.
Vehicle production in our market is not expected to return to pre-COVID levels in the foreseeable future, so we expect flat light vehicle building our markets in 2022. Almost somewhat diminished, the headwinds I spoke of earlier, were specifically supply chain construction and the associated oil and vehicle production volatility.
and cost inflation, especially energy in Europe , banana challenge. The Euro has recovered some, but at $1.6, it's still well below recent historical levels. We enjoyed considerable success in recovery cost inflation from customers in 2022, and had now pivoted to negotiating appropriate pricing increases to audit the cost of inflation, the cost of oil production's scheduled volatility in lower fixed cost absorption on lower light vehicle bill. These these negotiations are ongoing.
and there is no assert that we will be able to complete them successfully. But this is a backdrop. We expect the sales 15 to 16.0 million wheels in 2023. Net sales are expected to be in the range of 1.6 to 1.7 billion and value added sales in the range of 75 to 815 dollars.
Resulting an adjusted EBITDA of 170 to 200 million. The associated adjusted EBITDA of margin expressed as a percent of value-ad sails, expected to be 23 to 25 percent. TESTful open operations is expected to be in a 100 to 10 to 130 million range, a decrease from 2022 primarily because of higher debt service costs. Which respect the capital of the Stodeges?
We plan to invest 70 million in our business this year, including some carry-offs in 2022, as we continue to strategically invest in our business, especially finishing capabilities. If the Somatos spend, however, will be pet in part on the out-of-the-house of the business environment during the year.
and our ability to continue to reduce catalytic intensity and therefore capital expenditures. Demodel a 20 to 30% effective tax rate for 2020. Then call it in.
Superior delivered very solid financial results in 2022, notwithstanding extremely challenging business conditions, and we attracted 400 million capital to our company. Enterprise cost improvement and continuous improvement programs continue to mature and increasingly are delivering cost reductions. Our commercial and procurement organizations protect it in companies margins from cost increases as a men and women who make our will effectively manage the OEMs production volatility. Our discipline operating teams and the operating opportunities business take it together with our premium will make it capability.
and their more product portfolio, positions as well for the future, especially at light vehicle production and recombus. My skin higher, most happy to take your questions, Caroline.
Sure, thank you. As a reminder, if you would like to ask a question, please signal by pressing star one on your telephone keypad. We will take the first question from Line. Mike Ward from Benchmark. The line is now please go ahead. Thanks very much. Good morning, everyone. Maybe you would lend it off. You're good morning. Thanks. Your...
Margin assumptions in American Europe seem to be well below what IHS is looking for and I'm just curious is that Something you're here from your customers or is that just being conservative on your part? I think your question is not related to margins. I think it's related to growth outlook correct
I want to say margin I meant your market industry environment industry production. I'm sorry. I can't give it. No way. No, I listen Mike. You know, we have, you know, we have been using you know, multiple sources to, you know, product lens and waste. IHS is just one of them. IHS is predicting 5% a year and you know, the last three years they have been off. So we tend to take low attention to our customer schedule. We call them call us.
what we see, I personally talked a lot of the leaders in industry. I would tell you, at this point, there is no conviction at a high level about how industry production will play out. I mean, we are in a third year talking about the automotive industry, third year as recession level demand. And there is no recession. Corporations now today are up 28%. So you got a massive affordability factor. The average payment is $750.
That's up 35% versus what people used to be, that's wrong with them. So I mean people would argue that these...
types of macro factors will weigh in on demand and some would say that you're looking at a 15 billion million dollars. Inventory is up, right? Yeah, demand is there, but inventory is up. So we're very concerned. We're not seeing it from our customers. We're still seeing the volatility, we're still seeing the sharpiness, the rest of the leadership in the industry is very skeptical. We have always taken a cautious...
approach, Matthew's guide at this time we did, the year before we did, and we will continue to do the same thing. So we're thinking Europe is going to continue to be challenged and Northern Ireland will be flat, but Mike, this is really about planning for our business, right? Our guide does, I said, hey, if it comes, you have a fantastic business here. I mean, I'm hoping you can take care of Lead Action team, be yourself.
We make money. So we are hopeful that the high end of the guy and that that 5% of the IHS is talking about will come to pass. Okay. And then we're, if you look at the European business in the fourth quarter, where your unit shipment is positive to the vehicle manufacturers and negative to the F market. Is that what the, is that why we saw the unit basis under performance relative to the market or is it?
Yeah, the unit, the unit story in Europe is cloudy, right? It took last year, last year, we had a fantastic year with the aftermarket, our aftermarket business was up 35%. And that's largely, you know, because of all this logistics and supply chain issues from Thailand and China. So this year, it's reversed the other way around. Now, I would tell you, like, I think, you know, that in terms of how our business does from a growth standpoint, we like to look at our sales, our value out of sales and the content. The content story of this company is phenomenal, right? So you go to chart 11, 30% growth in content every year, right?
We have been very consistent with our strategy. It's about certain products. We're following certain macro trends, Black waiting, larger wheels, and the numbers. If you don't want to use concept for real, use growth over market, you look at virtually what this company won in 21, we're up 20%. You look at the whole year, even though we had a fantastic growth year in 21, you know, this year just a load, excluding the 20% growth in 21, we're still growth of our market company. So the unit, the unit is cloudy and the growth...
Google market narrative for our company is not very clear on the quality basis. You need more than a quarter. Now I'm putting the, I assume the content.
The value of the kind of per wheel on the aftermarket side is lower than OE. Flappy. Okay. Just one last question. When you look at Tim on your charts with you and you had the bridge on the EBITDA, there were two things you mentioned. You mentioned the lower customer recoveries. Is there a way, I assume that like on the fourth quarter, the 7 million metal timing where the volume price makes the 8 million or the recovery is netted out against that. And so when you say that, recoveries will be...
the cost that we believe are subject to recovery and the time period for which we are seeking those recoveries is not specific in the negotiations. The way the negotiations end up is they evolved into an amount.
and there isn't any specificity in really what's respect to which costs they pertain to, and frankly which time period. So, some of the recoveries that we experienced in 2022 actually related to costs that were incurred in 2021. Now, it's not a lot. The mining should always 2022, but for sure, our performance in this year, there are 22 with boost in somewhat because of this mismatch in.
Incorporated into the pricing in the wheels.
an appropriate amount, an amount that reflects the inherent increased costs in our cost structure, labor, material, energy, especially with respect to Europe . And frankly, the fact that they're building 15 to 20% fewer vehicles. So those dialogues are ongoing.
with respect to both the energy and the real price of the rest of the cost inflation. And I would suggest to you that the best way to sort of get a handle on where we think all of that will end up is to use our guidance as a barometer, a measurement. So, you know, at 755 million, 815 million of value by the sales.
You know, assuming that we continue to be successful with respect to our commercial activities, we would expect a margin of between let's say 23 and 25%. Now, having said that, I do expect that we're going to see some lumpiness from quarter to quarter if these negotiations are completed. So, you know, we'll have some variation. I expect the quarter to quarter. So, we'll have some variation.
assuming that we continue to be successful with respect to our commercial activities, we would expect a margin of between let's say 23 and 25%. Now, Heather said that. I do expect that we're going to see some lumpiness from quarter to quarter if these negotiations are completed. So, we'll have some variation. I expect the quarter to quarter. Okay, thank you. That's very helpful. I really appreciate it.
Thank you very much. Thanks, Mike. Thank you. We will take the next question from LINE Gary Prestopino from Berenton Research. The line is up and out. Please go ahead. Good morning, everyone. Can you give us some idea with the new facility, what your annualized interest expense is on running out? Sure. The pricing Gary is so far, which today is about 450 basis points, plus a basis points.
So that's 12.5%. Now, importantly, a year ago, we had the foresight to enter into 250 million of interest rate swaps at 300, so for 300.
So we are getting some benefit directly today about $4 million a year benefit from those slots 150 basis points on 250 million of
250 million. So the 250 million swaps. So I would say if you wanted to take a number setting the side future set rate increases I use 2012 for second.
On the 12% on the total data, that's a lot there. I mean, all I'm really looking for is what I'm sorry. I'm sorry. We're looking at year over year.
All right, so it would be absent the slots on the term loan, about 25 million, but because the slots are in place at Cursever, you can think of about 20 million, 2.0. So that's...
That's not incremental. That's just a total amount of, well, that would be kind of an increase and interest expense year over year.
20 million incremental. Now, as soon as no further assumes Jerome Powell to raise the Fed funds rate, which probably is a little bit of dollar of assumption. But again, the good news is, any increase in the Fed fund rate, so rate, which, you know, ends up manifesting itself in SOPR, 250 million as a 400 million insulated from the SWAT, but would only impact 150 million out of that.
Okay, and then a couple more questions here. You know, you've got kind of a very sanguine outlook for this year. And I'm understanding fully the, you know, the puts and takes and the challenges. But, you know, everybody I speak to in the industry is saying that they're seeing a betterment or improvement, at least on the retail side, you know, inventories are moving up. Sales are still pretty good. I mean, is your so far into one, is your sanguine outlook coming up to play in what, what your...
generating in terms of units and sales. Gary, it's a talk call. I do understand your report. There's a lot of noise actually, Gary, right? There is variation in the impact of what we just talked about with affordability and vehicles and type of production. There's variation in customers. You look at what schedules were they're facing. You've heard Nissan announced a new shutdown of electrical, you're in Seoul public. GM shutdown, near Fort Wayne plant. GM shutdown of Corvette plant because of supply chain issues. The Fort Wayne plant shutdown was presumably because of inventory.
that issues that are very public. So, you know, you talk to everybody, and I said, like, I said, I talk to my colleagues in the industry, and at the very highest level, there is no conviction about how this will play out. It's great. It's very fun. So, we're taking a conservative approach.
we are seeing a lot of sharpiness in the schedule. It's not especially mobile, it's quite problematical, but it's still problematic. And what's unique about it is the variation between customer. So it's very much depends on our customer base. For this specific client, customer base. But again, the guy is showing growth. And I'm hopeful that this is the year we're wrong.
Well, I mean, we hope so too. I mean, you're not really looking at any kind of betterment in your financials that, based on the guidance you're giving. And it just appears that the industry probably bottomed in 2022 and then starting a slow movement higher. All right, so let me just ask another thing. I'm trying to get a handle on these cost recoveries here. You know, you're saying these negotiations are ongoing, but again, it would appear that.
the peak levels of inflation and input costs and whatever are in the rearview mirror. And as you're going into 2023, you're in 2023. Just help us out there with this whole issue where you're trying to get cost recovery from the clients, your end users, and it's obviously going to affect your margins. And then I guess to date, how well has that been going? So Gary, let me help. Let me talk to this in 10 hours. Okay. So the cost recovery story, I do all you get to buy. Wow. That's
or commodities. Give it back into, anyway, between two hundred and forty, to two hundred and eighty million dollars.
That all that, as you see in Tim's bridges, 85% of our recovery studies. It's either aluminum, or aluminum additive, or silicone. That leads you with the balance, which is the dialogue we have with customers. On the rest, call it the 16-hectrel, a little bit more maybe. And that's not commodity inflation, including energy. And by the way,
The same has been consistent in the last few calls. We have paid a very well on energy because we hatched. We did a good job of hedging energy in 2022. And then we'll think of what's left there in Spain and other obviously labor and manufacturing costs. And the first piece of that, you know, the 15 to 20% is volatility and cancellation. So what we're telling you is the 85% was index, you know, it's been indexed. Our work with customers was on the 15%. We have faired well. We have to shift some of our focus now from one time recovery to put it in the piece price. And yes, there are some, some carry all from 21 that we're saying is not carrying into 20 weeks.
So, I can't really improve on that, but I would like to, for a moment, Gary, if I may, just go back to your previous question, which is the Guide in 2023, these are the company's performance in 2022. And I think you may reference to how it compares to certain other companies. As we said, our performance in 2022 was somewhat boosted by customer recoveries that were really associated with 2021. I think if you go back and you compare the company's performance last year, 2022,
compared to 2021. As compared to our peers, you'll find that we, for the most part, outperform because of those that mismatches the customer recovers. So a better comp is really 23, you know, compared to 21, these are the peers and I think you'll see that we still compare very reasonably in that regard. So that's a rattle about way saying, 2022 is a little unusual.
Okay, I guess, you know, the way of thinking is that you're so specialized high amount of technology, you know, in what you're producing in the wheels that you have and that, you know, you should have some modicum of success because of your portfolio and your technologies and getting these cost recoveries because, you know, where else would the OEMs turn to? Okay.
You know, that's Gary, that is a great point. That is it. We see ourselves as competitively as bad things in many ways. We have the technology, we have the portfolio, we have a team that is executing on also the industry and get what? We have what we believe to be the most competitive, unique footprint in industry. Gary, if you look at just this industry from a low cost standpoint,GLQ became the international industry because <expletive>
You could argue that of all the capacity in North America, remember 50% of wheels comes from China with 27% duties. If you look at only the capacity in Mexico, we have 50% of the wheels capacity in Mexico. You could look at North America that's 30%. That's a competitive advantage, you know, one who has got to the final localize. Now I shift you over to your open. I will keep calling in my comment. I will keep calling in my comment.
But last month, the EU Commission imposed duties on wheels coming out of Morocco in addition to duties that were on wheels coming out of China. So obviously Morocco was concerned for us right from a rising standpoint. So now we're back to what we were three years ago. And it just so happens that 90% of my capacity in Europe is in low cost, it's in Poland. If you assume Poland and the Czech Republic are low cost, and we have 25% of the low cost capacity in Europe .
We have the competitive cost and then now we have very much a differentiated footprint where we expect to take the tail with that. And you write the Dowlons with customers, Dowlons with a supplier that they value very much. And they're collaborative Dowlons. But we also have to demonstrate to our customers that we have our Dowlons. So I'm very, I'll tell you, I'm very encouraged with how constructive the Dowlons have been. And our prospect for 23. Okay, thank you.
And then now we have a very much differentiated footprint where we expect to take the tail with it. And you write the Dowels customers on Dowels with a supplier that they value very much. And they're collaborative Dowels. But we also have to demonstrate our customers that we have our Dowels. So I'm very, I'm very encouraged with how constructive the Dowels have been and our product for 23. Okay, thank you.
Thank you. There's no further questions. So I will hand back over to host Maasdi Abu-Laban to come through 30's conference. Thank you. Thank everyone for joining our call today including I am very encouraged by our robust score and to our day here when you look forward to continuing to execute on our strategic priorities delivering one-term profitable growth. To the superior team, I am very proud of what we have accomplished. Thank you for your perseverance, hard work and execution. To these challenging times.
Thanks again for joining the call and having us say.