Q4 2024 Superior Industries International Inc Earnings Call
Thank you for standing by and good day, everyone. My name is Argy and I will be your conference operator today.
At this time, I would like to welcome everyone to disappear your Industries 4th quarter and full year 2024 Earnings Call.
We are joined this morning by Majdi Abulaban.
President and CEO , Dan Lee, Senior Vice President and CEO . All lines have been placed on mute to prevent any background noise.
After the speaker's remarks, there will be a question and answer session.
If you would like to ask a question during this time, simply press char followed by the number one on your telephone keypad. If you would like to withdraw your question...
Prestopino again.
Speaker Change: Thank you. I would now like to turn the call over to Dan Lee. Please go ahead.
Dan Lee: Good morning and welcome to our work quarter and full-year 2020 work earnings conference call.
Dan Lee: During our call this morning, we will be referring to our earnings presentation with, along with our earnings release, is available on the Investor Relations section of Superior's
Speaker Change: I'm joined on the call today by Majdi Abulaban, our president and chief executive officer.
Speaker Change: Before I turn the call over to Majdi, I remind everyone that any board looking statements contained in this presentation were commented on today.
Speaker Change: Our subject to the paid harbor provisions of the private security litigation reform act of 1995.
Speaker Change: Please refer to slide two of this presentation for the full State Harbor Statement and to the company's SEC filing, including the company's current annual report on form 10K for more complete discussions, public board, looking statements, and risk factors.
Speaker Change: We will also be discussing various non-GAF measures today. Non-GAF measures exclude the impact of certain items and therefore are not calculated in accordance with U.S. GAF.
Speaker Change: Reconciliation of these measures to the most directly comparable US gap measure can be found in the appendix of this presentation.
Majdi Abulaban: I now turn the call over to Majdi to provide a full business and portfolio update.
Majdi
Majdi Abulaban: Thank them. Good morning, and welcome to our fourth quarter in two years, 2024 Ernest
Majdi Abulaban: Let's begin with an overview of the ear on slide four.
I am incredibly proud of our team's achievement in 2044.
Majdi Abulaban: We have positioned our company for success, like no other time to reach an answer.
Majdi Abulaban: Our business is fully structured, well-invested, and successfully financed. We are now the global technology and cost leader in the wheel of this.
Majdi Abulaban: In a geo-political environment that favors local everyday manufacturing, superior standards of among the seniors.
Majdi Abulaban: In a challenging industry environment, we execute a major reproxoring initiative, successfully negotiated price adjustments with customers and transport our footprints.
Majdi Abulaban: This five industry production declined. We delivered strong e-data modules in line with the fire e-testaments to our team's solid execution.
Majdi Abulaban: Our value I have served was inlined overall industry as partners only in production continued to pressure growth.
Majdi Abulaban: We completed our European Space Fashion Transformation in 2024, and with that, all productions have been consolidated in our low cost highly automated operations in Poland.
Majdi Abulaban: Our local, local, and manufacturing footprints, in Mexico and in Poland, is now a competitive advantage and position superior to capturing and from OEM customers, he can shorten the
Majdi Abulaban: Ladies last year, we have drafted 520 million dollars in new capital, hand refinements, all of our debts, extending all majorities to 2028.
Majdi Abulaban: This significant milestone is strengthen our financial foundation and providing flexibility for user growth.
Majdi Abulaban: We are now more than ever focused on generating cash, accelerating debt reduction, and optimizing our equity base to enhance long-term shareholder value.
Turning to our results for the whole year.
Majdi Abulaban: Adjected by the United States Declined 4% year-over-year, which was in line with the overall industry
Majdi Abulaban: Adjusted even of margins was $21,000, and lined with the Pioneer Dispike, top to industry production.
Majdi Abulaban: This model of instability highlights partial benefits from the solid execution of our restructuring and infestation actions as well as the successful negotiation for customer
Majdi Abulaban: Looking ahead to 2025, we anticipate a 4% decline in industry production based on recent
Majdi Abulaban: Despite this, we expect to unperform the market and achieve substantial margin expansion
Majdi Abulaban: I would add that our 2025 industry production volume and needed our functions do not reflect the impact of recent tariffs.
Majdi Abulaban: I will shortly discuss the multi-faceted impacts of these tariffs on our company.
Majdi Abulaban: We are monitoring the situation closely, and as we have more visibility, we will update our outlook.
Dan Lee: Danley provides more details on how of 2045 guidance in his comments.
with regard to our preferred chance.
Dan Lee: We are engaged in advanced constructive discussions to address the preferred equity in a manner that benefits all of our stakeholders.
Dan Lee: Turning to slide five. At midpoint of our 2025 adjusted even off the 170 million dollars. This represents a 16% earnings growth versus 2024 on a relatively flat value added sale.
Dan Lee: This improvement is driven by the additional benefits of the remaining wheeled beam transfers from German to Poland, improved capacity utilization in Europe , and structural cost initiatives that we announced in the fourth quarter last year.
Dan Lee: The results of these initiatives represent a step-change improvement in our construction and
Dan Lee: Flight 6 highlights our progress on the initiative we announced in 2023, closing the margin gap between our two regions, North America and Europe .
Dan Lee: Finally, to share with you that we have now achieved this goal despite lower industry production.
Dan Lee: Who are European manufacturing operations now consolidated in Poland, margins in Europe are now relatively in line with those in North America.
Dan Lee: I would also add that on a contaminated basis, adjusted even a margin, wasn't lying in the last year, even with lower production noise.
Dan Lee: Turning to slide seven, which highlights the multi-faceted impact of tariffs on our business.
Dan Lee: Favorable and unfearable. First, the recent US shares on aluminum will have a neutral impact on Superior due to the vast explorers that we have with customers on all aluminum we purchase.
Dan Lee: Next, incremental tariffs on Chinese imports to the U.S. as well as the potential tariffs on Chinese imports into Mexico both have a favorable and background superior as this action accelerate demands for U.S. m. T. A. low-holy production.
Another idea is to go out looking for local footers.
Dan Lee: Further, as for the two tariffs related to Europe , tariffs on European imports into the US have a similar favorable impact on superior as they accelerate European OEM efforts to localize real imports utilizing our local wheel production in North America.
Dan Lee: Further, the EU Commission announced this week of increasing tariffs to almost 50% on Chinese wheels imported from Morocco and to the EU have a similar, favorable, empire on Superior, making production at our Poland facility more attractive for whole youngs.
Dan Lee: This localized production in Europe and in North America positioned us favorably compared to other supplies.
Dan Lee: I would also note that our readily available production capacity in both regions positioned us to benefit from short-term localization efforts.
Dan Lee: Moving down the slide, the Trump administration's announcement this week of duties on imports from Mexico have a fall-reaching impact on the entire automotive industry in North America given the integration between the two countries.
Dan Lee: The industry, supplier, and all else will not be able to bear these costs, and ultimately will pass these on to the consumer.
Then back to this, for Hinted 3D Echo Production, we'll be in on clear here.
Dan Lee: I would note that the mathematical and errors could potentially have an impact on less than 20% of our North America production.
Dan Lee: Here, our expectation is that these odds will be passed on into our customers.
Dan Lee: In summary, recent action in both regions have a multi-faceted impact on superior, potentially favorable and unfavorable.
Dan Lee: We are closely monitoring this fluid situation and will update our financial outlook accordingly as we gave more plans.
Dan Lee: Moving on to slide here, which highlights our company performance in 2019.
The King take over here.
Dan Lee: The Superior Team has delivered exceptional, consistent executions despite the many curve laws we pay, including declining industry volumes, COVID, microchips, and exponential inflationary pressures.
Dan Lee: Our focus on our differentiated technologies and delivering lighter and modern wheeled premium finishes has consistently enabled us to ask for the market.
Dan Lee: At the same time, our team responded to industry disruption in the past few years with absolute focus on cost discipline.
Executing Strategic Restruction Initiative, and successfully addressing product pricing.
Dan Lee: The Consistent Adjusted Even Our Modules, despite the challenging production environment, is
Dan Lee: Flight 9 highlights our key launches in 2024 which continues to drive growth.
Dan Lee: Larger and life and rehabilitation continues to make up a larger proportion of our launches.
Dan Lee: Our continuous focus on delivering differentiated technology is a key driver in the 33% concept of real growth since 2019.
Turning to slide ten
Dan Lee: Looking ahead, we will main focus on our value creation roadmap, which we laid out several years ago.
We now have a differentiated foundation.
Dan Lee: The powerful combination of our 100% low-cost manufacturing footprint and our comprehensive portfolio of premier technology.
Both Arhan and Mehmet Dere, Gary Superior, Edited and Comparative Edges [inaudible]
with our Food Transferred Formations complete.
Dan Lee: We are focused on operational excellence and leveraging our differentiated portfolio to drive long-term possible growth.
Dan Lee: Moving on to slide 11, which highlights our outlook for the year.
Dan Lee: As the industry continues to face production headwinds and rising input costs, we expect global auto-productions to decline approximately 4% in 2025 compared to 2024.
Dan Lee: Our financial outlook, by the way, does not include assumptions on the net cost of tariffs.
Dan Lee: For the full year, we are guiding a adjusted EBITDA in the range of 160 million dollars to 180 million dollars reflecting the benefits of our European transformation and of the cost-taking actions.
This represents a 16% growth in artists.
Dan Lee: We also expect to generate approximately $110 million to $122 million of unloversed pre-cashable.
Dan Lee: Then, we'll provide more details on our outlook in a moment.
Dan Lee: I will now turn the call over to Dan to review our financial results in more details.
Thank you very much.
Dan Lee: Beginning on slide 13, fourth quarter and full year 20.4 financial summer. Net sales for the fourth quarter was 310 million compared to the 309 million in the prior year period.
Dan Lee: For the full year, net sales were 1.3 billion compared to 1.4 billion last year
Dan Lee: 4th quarter adjusted to 5th up was 359. The Associated Martin expressed as a percentage of value-edited sales was 21%.
Dan Lee: and for the whole year, adjusted EBITDA with 146 million with a margin of 21%. I will provide color on this in the upcoming pages.
Dan Lee: Netloth, the 109-04-4 and 78 million for the year.
Dan Lee: The board quarter, 2024, your overview of sales bridge is on slide 14. Value added sales worked out approximately 1 million, compared to the prior year quarter, primarily driven by lower unit sales, partly of the bifurcable inflation, recovery and mix.
Dan Lee: On slide 15, we have the full 2024 year-over-year sales bridge.
As you can see, we're here!
Dan Lee: Value-added sales were down 57 million, which was largely due to lower unit sales and long-been price recovery, partially offset by a favorable productment.
Dan Lee: In addition, the lower cost of aluminum led to a $61 million decrease in net sales, as aluminum
Dan Lee: On slide 16 is the fourth quarter, twenty-twenty-four year-over-year adjusted EBITDAB Ritz adjusted EBITDAB over the quarter increased to thirty-five million compared to twenty-three million in the prior year period.
Dan Lee: The adjusted EBITDA margin for the quarter was 21%, compared to 14% in the prior year of periods.
Dan Lee: This increase was mostly due to enhanced cost requirements from both reasons representing both operational and structural improvements. The impact of metal timing and product mix partially offset by lower unit fails.
Dan Lee: Slide 17 shows the full year 2024 year-over-year Adjustment Dept. Bridge.
Dan Lee: Adjusted E-Midda for the year was down $13 million to $146 million. Importantly, despite lower full-year sales, we delivered Adjusted E-Midda margin of 21% which was in line with the prior year.
Dan Lee: The year-over-year Adjust Eva Doug decline was primarily driven by lower unit sales, unfavorable and lower recovery of cost inflation from customers primarily in the first half of the year.
Dan Lee: This was partially out that by favorable product mix, the impact of metal timing, as well as enhanced creativity and lower cost structure as a result of our cost optimization
Dan Lee: An overview of the company's four-quarter and full-year 2024 Unlegged Creek cashflow is on slide 18.
Dan Lee: Cash provided by Operating 50s was 26 million or the quarter compared to 44 million in the prior year of period.
Dan Lee: The D-creasing cap provided by operating activities was driven by higher working capital, partially offset by improved operating performance in the work order.
Dan Lee: Capitalist expenditure in the fourth quarter with $7 million compared to the $12 million in the prior year period. We're flanting our successful efforts to reduce capital intensity on the business.
Dan Lee: There were no cash payments to not just finance activities for the fourth quarter compared to the $7 million in the prior year due to timing of dividend savings.
Dan Lee: on Lever Freecast Low in the quarter was 36 million compared to the 50 million in the prior year of period
Dan Lee: The decrease in unlettered recat will be primarily driven by higher working catholic, partially offset by improving operating profitability and lower capital expenditures.
Dan Lee: For the full year, CAST provided by offerings of these with 18 million compared to 64 million in the prior year.
Dan Lee: Higher working capital and lower operating profitability for the primary drivers for the
Dan Lee: Net Tax Use in Investing Activities in 2024 with down 189 compared to the full year 2023, driven largely by our successful efforts to reduce the capital intensity of the business.
Dan Lee: For the full year, cash payments for non-death financing are 70 total 5 million, a decrease of 12 million from 20.3
Duke Primarily is the timing of dividend change
Dan Lee: For the full year, Unlearn Free Cash Flow was 55 million, including 7 million of refinancing fees, compared to Unlearn Free Cash Flow of 80 million in the prior period.
Dan Lee: The variance was primarily driven by higher working capital, lower operating profitability and refinancing fees, partially offset by lower capital expenditures.
Dan Lee: In overview of the company's capital structure as of December 31, 2024, can be found on slide 19.
Dan Lee: Total cash on the balance sheet, as of your end, was 49 and we had zero draw on our 59 revolved credit facility.
Dan Lee: Total death, a year end with 520 million, down 118 million compared to the 731-2023.
Dan Lee: So if you're a debt maturity profile, as of December 31, 2024 is on slide 1.
Dan Lee: As previously announced, we've successfully completed our debt refinancing in 2024, attracting 529 in New Capital and extending our new term loan facility maturity to 2020-80.
Dan Lee: This fatigue has moved strengthens, our balance sheet has improved, our financial flexibility, positioning us for long-term growth.
The full year 2025 financial outlist is on page 21.
Dan Lee: For the full year 2025, we expect next sales to be in the range of 1.3 to 1.4 billion and value added sales in the range of 650 to 700 billion.
Dan Lee: The sale reflects the realization of the full impact of the transfer wheel from Germany to Poland and light vehicle production in our market general consistent with IHS Work
Dan Lee: We expect the adjusted EBITDA of 150 to 180 million. The improved EBITDA midpoint in 2025 is driven by realizing the benefits of the additional remaining wheels that transferred from Germany to Poland and the cost-production issues that were announced in Q4.
Dan Lee: 2025, Unlearned Recast Low, is expected to be in the range of 110 to 130 million. Highlighting the cast-generated power of our enterprise, driven by improved profitability, improved working castle, and lower cash costs related to disruption.
Dan Lee: This range considers the advances cut and we are currently having regarding liquidity with our lenders.
Dan Lee: Finally, we expect 35 million in capital spenders as we strategically invest in our business, specifically targeting additional automation to drive additional cost reduction.
We model a coin to 30% effective tax rate to coin 25.
Dan Lee: Note that the outlook that we are providing today does not represent the impact of the dynamic yield political environment regarding tariffs, which as described by Majdi could represent both headwinds and tailwinds as all the detailed unfolds.
Dan Lee: Incinclusion, I want to thank the Superior Team for the hard work in commission in 2024. We achieved several critical milestones this year, positioning the strongly core future growth
Dan Lee: Our focus remains on further strengthening our financial profile and leveraging our unmatched portfolio grants and local for local footprint to deliver sustained growth and enhance
Dan Lee: This concludes our prepared remarks. I want to thank everyone for joining us today. Majdi and I are happy to take place.
Speaker Change: At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad, and we would like to ask all participants to limit your question into one. We will pause for just a moment to compile the Q&A roster.
Speaker Change: Your first question comes from the line of Michael Ward of Freedom Capital, please go ahead.
Speaker Change: What implications does that have for capacity both in Europe and in North America?
Speaker Change: I thought you were pretty tight on capacity given the business you have in place. How much flexibility do you have with capacity?
Speaker Change: As far as bumping it up, if you had opportunities to pick up some share [inaudible]
Good morning, my thanks for joining
Mike: Yeah, so listen, I think I think you may be referring to the periods when we were making the transfer of
of those wheels, when we invented our German operations.
Mike: and we try and strike the wheels to Poland, where we're at today, Mike.
Mike: We have access capacity in both regions, and we're highlighting that because it's really turning on to be a great asset. We've made certain investments that improve bottlenecks.
Mike: So right now we have about 20% excess capacity, both in Europe and in Mexico.
Mike: And, you know, maybe in a bit I'll tell you about some recent developments were because of all these geopolitical headwinds on tariffs were in advanced discussions with many customers.
Mike: In Europe and in North America as well, to absorb short-term business, if you recall last time we talked about a very quick win with the Japanese OEM back in November , then it's going in production actually as we speak.
Mike: And we have a recent word here a couple of weeks ago, what are they, what are they?
Mike: customer that is totally dependent on China imports where they want us to start production in a couple of months. So you ask the very important question, we do have capacity and we think it's going to turn out very well for us.
Speaker Change: Again, if you would like to ask a question, press star one on your telephone keypad. Your next question comes from the line of Gary Prestopino of Barrington Research, please go ahead.
Good morning, Dan, and Majdi. How are you guys doing?
Gary Percipino: I just want to tell you guys it's good good I just want to say given what you guys have been facing here and what you've done with the company you've you've just done
Gary Percipino: and hopefully this is going to start getting reflected in the value of the stock. I have several questions and I don't know if I'm going to be able to ask them without getting, have to get back in the queue, but first of all,
Speaker Change: You're talking about your guidance really on, based on slightly negative to flat units.
in North America and Europe , slightly negative units.
Speaker Change: And I believe there was a slide there you must have said may have said something that IHS is predicting a 4% decline in unit production. I assume that's in your markets.
Speaker Change: for 2025. So is some of that discrepancy, if I'm correct in that assumption, due to the fact of new business wins and then what you're anticipating in Europe from the tariffs on wheels from Morocco to Europe .
Yeah. Let me answer. Okay.
Speaker Change: Let me ask the market part of your question, so the view is the market combined in North America and Europe will be done about 4%, Gary. Europe is going to have a top year, so Europe is about 6%. I'm giving you IHS numbers.
Speaker Change: Actually, the first quarter is going to be very challenging, you know what it's going to be down.
Double Digits, Gary. Now, from our perspective, we're guiding slightly.
I had a market and you really nailed it, so...
Speaker Change: So we have a couple of things going on in Europe .
Speaker Change: We have good mix, and we also have a segment of our business, which is in the aftermarket. We called we talked about it last year that continues to deliver solid growth. And North America, we finished the year, North America, quite strong, significantly ahead of market.
Speaker Change: So, as we go on to 2025, we're going to stay safe with some of these programs, but we do have a couple of I follow the future of wind here.
Speaker Change: And the one that I mentioned when I was talking to Mike, is that we're going to be in production, so we expect in the guide with both regions.
Speaker Change: because of what I just described to perform a hair market. But what we don't have, Gary, in the guide, is what I talked about earlier, very early in my remarks, whereby because of our local footprints, because of our immediately available capacity.
Speaker Change: Yeah, I know you're very annoying. There's a thing, remember, in our comments that there's some volume related to the transfer of wheels from Germany to Poland. We only saw a portion of that at 20.
24. We expect to see the balance of that in 2025, which also is offsetting some of the
Speaker Change: You know, is that when when you sign up someone like that that maybe had been looks to say hypothetically using a Chinese manufacturer and they come to you and say okay we want you to start producing wheels. I mean how long?
Speaker Change: is that how long are you making them, or requiring them to sign a contract for, you know, this tariff they could do it?
Thank you very much.
Speaker Change: Gary, it's a good question and I need to define my use of the word short term win. What I'm referring to is, in automotive industry as you know, we work on a three-year cycle right? So we... Right. So what did something today we launched to do in our theaters?
Speaker Change: I'm referring to the short term that we have to go into SOP.
Speaker Change: very quickly, all hands on deck. Normally, you are not able to do that in three to four months, but because we have the existing capacity and frankly our team has done a few of these now, they know how to turn on a dime and start production.
Speaker Change: and six months. To your question, all these contracts, you can disregard the word use of short-term, all these contracts are long-term contracts. They're normally five years each one of them. Okay. Okay, great.
All right. I'll just get back in the queue.
Thank you.
Speaker Change: Your next question comes from the line of Michael Ward of Freedom Capital, please go ahead.
Speaker Change: Thanks, everyone. Dan, I want to focus a little bit on the
Michael Ward: moving items on the cash flow side. The timing of the preferred divot engine mentioned, working capital.
Speaker Change: is an item that I think that comes back in 1Q. And then as it relates to the perforge, is there the stop that date in September ? Can that be extended? And can you give us any color on what's happening with the potential agreement on that side?
Speaker Change: So, with number one, the dividends, we are picking the dividends, as you know, already.
That's what the timing is related to that.
Speaker Change: In terms of September , it's in our note in note 11 in the K.
Speaker Change: But what we're planning on doing clearly is one, it's an optional redemption, that's number one, and number two, that redemption is contingent on the accompanying ability to pay the proceeds.
What can you repeat that?
Speaker Change: I think quite follow that. It's an optional redemption, but that redemption is at the discretion of the board to approve the payment, and to approve the payment, we have to be able to fund the payment.
Okay, does that make sense?
Speaker Change: I think so. It's in the K. Okay, you have to have the ability to pay it. Okay. And that's in the K and note 11 is what you're referring to. Yeah.
Okay.
Perfect.
Speaker Change: Are you going to shut me off or do I have another question?
Can you define that? How is that?
Thank you.
What I was referring to is our in-culture...
Speaker Change: on our North America production, which had you know, all the wheels we produced in North America are done in our four-show-hour plans. On 8% of the production, the incoherence are such that our customers pick up the wheels from our plans, and they are the importer of records.
That's what I mean by that. Oh, I see. Okay.
Okay. How old are you?
which is less than 20% of my production.
Actually, far less than that.
and Dan Wadima.
Speaker Change: Yeah, I think it's an unusual that the customer would pick the wheels up from your plant.
I think it depends on the water.
Speaker Change: I think it depends on the camaraderie, Gary. I think it is less common. I would say it is less common, yes.
Thank you.
Very good. Thank you very much.
Speaker Change: My sorry, sorry, the direction is note 10, note 10, not look good. Okay, and that'll be out later today.
Yep.
Awesome. Thank you.
Speaker Change: Again, if you would like to ask a question, press turn one on your telephone keypad. Your next question comes from the line of Gary Prestopino of Barrington Research, please go ahead.
Thanks, guys. Hey, Dan, could you maybe just go over?
Some of the covenants
Speaker Change: Numbers in terms of leverage ratios that you have with the new capital structure.
Speaker Change: Sure, the Covenant ratio is 3.75 Q4 and in Q1 and then the ratio drops to 3.5 at the end of Q2.
and then it caused blood.
Speaker Change: Right, and then that's on adjusted EBITDA plus .com, so you're adding back .com in there.
Yep.
Speaker Change: Okay, and there's nothing in there that deals with the preferred and any way shape or form, so it's the depth and the length from the preferred, correct?
RET.
Okay. All right.
Thank you.
Thank you. Bye-bye.
Speaker Change: That's end of our Hyundai session. We appreciate your participation. I will now turn the call back over to Majdi Abulaban for closing remarks. Please go ahead.
Speaker Change: Thank you. Thank you, Arjun. Before we conclude today's call, I want to emphasize that we're absolutely excited about more rare.
Speaker Change: We are a business that is fundamentally competitively advanced in many ways, and now geopolitical localization tailwind are in our direction.
Speaker Change: All the restructuring and all the heavy lifting is behind us. We expect our team's hard work to pay dividends as we highlight it in our guide. I do want to thank the entire superior team for putting our company in this position.
Thank you for joining our call today.
Speaker Change: Ladies and gentlemen, that concludes today's call. Thank you all for joining, you may now disconnect.
Speaker Change: and Michael B. McCullough. We are the American People. We are one nation under God, indivisible, with liberty and justice for all. Amen. We are one nation under God, indivisible, with liberty and justice for all. Amen. We are one nation under God.
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