Superior Industries (SUP) Misses Q2 EPS by 54c

Superior Industries (NYSE: SUP) reported Q2 EPS of ($2.00), $0.54 worse than the analyst estimate of ($1.46). Revenue for the quarter came in at $144.8 million versus the consensus estimate of $131.62 million.

Second Quarter 2020 Financial Highlights:

• Safe and efficient restart of production activities across the manufacturing footprint
• Unit shipments of 2.1M; net sales of $145M
• Value-Added Sales(1) of $84M, growth over market of 11%(2), per wheel growth of 4%(2)
• Net loss of $43M, includes $7 million of restructuring and net other expense(3)
• Adjusted EBITDA(1) loss of $4M
• Executed approximately $40M of permanent and temporary cost actions for 2020
• Aggressively managed cash – costs, working capital, and capital expenditures
• Net debt of $596M; available liquidity of $245M(4); ongoing compliance with covenants

Business Update

Second quarter 2020 automotive production was severely impacted by the broad-based shutdown across the automotive industry in North America and Europe due to COVID-19. By June 1, 2020, Superior had resumed production at all its facilities following the temporary suspension of operations between late March and early April 2020. To ensure the health and safety of its employees, the Company is executing its Safe Work Playbook across its footprint, which includes expanded cleaning, social distancing measures, distribution of personal protective equipment, and daily temperature checks, among other activities.

While Superior is experiencing stronger demand compared to April and May from its customers in North America, specifically on pickup/SUV platforms, as well as in Europe, the Company continues to pursue cost reduction initiatives to align to the lower production environment. To date, Superior has executed temporary and permanent cost savings including furloughs, compensation and benefit reductions, deferral of merit increases, reduced travel, personnel restructurings, and use of government subsidies where available. These cost initiatives are expected to benefit 2020 results by approximately $40 million. Further, Superior may utilize in the future selective, temporary facility closures to efficiently balance capacity with production costs and inventory levels. In addition to these cost reductions, the Company is taking other measures to improve cash flow through targeted working capital initiatives and by reducing capital expenditures.

Despite the Company’s cost saving actions, COVID-19 factors had a negative financial impact on the results for the second quarter of 2020 by reducing:

• Net sales by approximately $200 million;
• Value-Added Sales, a non-GAAP financial measure, by approximately $110 million; and
• Adjusted EBITDA, a non-GAAP financial measure, by approximately $55 million.

Most of the negative impact on revenue occurred in April and May. In June, Superior’s Value-Added Sales rebounded from April and May, declining 14% compared to June of 2019, and free cash flow, defined as the sum of operating, investing, and financing activities before net debt repayments, was positive.

2020 Outlook

On March 23, 2020, the Company withdrew its 2020 outlook given the unprecedented economic uncertainty resulting from COVID-19. The Company continues to monitor the impact of COVID-19 and will revisit providing additional full-year 2020 outlook once conditions stabilize.

In the interim, based on the latest IHS industry production forecast, which indicates a decline in industry production in Superior’s key regions of approximately 24%, 23% in North America and 25% in Western and Central Europe, Superior anticipates free cash flow, defined as the sum of operating, investing, and financing activities before net debt repayment, to be neutral for full year 2020. Production schedules in North America remain strong due to inventory rebuild at Superior’s key customers while the ramp up in the European market has been slower. While the volume outlook continues to evolve rapidly, Superior anticipates its third quarter 2020 Value-Added Sales to decline in the low-teens percentage range compared to the prior year period.

For earnings history and earnings-related data on Superior Industries (SUP) click here.

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