Superior Industries publishes Q2 2017 results, updates outlook
Second quarter results for aluminium wheel manufacturer Superior Industries International, Inc. show both record unit shipments and a net loss. These results for the quarter to 25 June 2017 also include one month of results from Uniwheels AG, in which Superior acquired a major shareholding on 30 May 2017. Upon tomorrow’s settlement of the delisting tender offer, Superior will own approximately 93.2 per cent of Uniwheels’ common stock shares.
“The second quarter marked an exciting transformational shift for Superior as we closed our tender offer for Uniwheels,” commented Don Stebbins, president and chief executive officer of Superior Industries International. “We have also started the process to delist and subsequently acquire the remaining outstanding shares of Uniwheels. This transaction establishes Superior as one of the largest global automotive wheel suppliers, significantly expanding our geographic reach, diversifying our customer base, expanding our technological capabilities and bringing together the two companies’ talented employees. Since closing, I have been extremely pleased with our teams in North America and Europe who are working diligently to integrate our operations and evaluate strategies to further serve the needs of our customers.”
Wheel unit shipments in the second quarter of the year amounted to 3.8 million pieces, a company record for any individual quarter, compared to shipments of 3.1 million units in the second quarter of last year. The increase was driven by the addition of 0.8 million units from the month of Uniwheels operations included in the results. Net sales for the second quarter of 2017 were up 31.7 per cent year-on-year to US$240.6 million, with Uniwheels adding $53.7 million to net sales during the quarter.
Gross profit for the second quarter of 2017 was $20.1 million, or 8.4 per cent of net sales, compared to $29.5 million, or 16.2 per cent of net sales, a year earlier. In addition to lower unit shipments and manufacturing inefficiencies in North America, gross profit for the quarter was negatively impacted by the effects of purchase accounting and amortisation of intangibles by $8.3 million related to the acquisition of Uniwheels. Excluding the aforementioned acquisition-related impact on gross profit and a $12.9 million acquisition-related selling, general, and administrative expense, and net of the impact of foreign currency transactions, income from operations in the second quarter of 2017 would have been $12.7 million higher than reported.
“With respect to second quarter financial performance, we saw slightly softer volumes and experienced some operational inefficiencies in North America,” said Stebbins. “Conversely, we benefited from strength in Europe bolstered by the ramp up of our newest facility in Poland. As we look ahead, despite some macro headwinds in North America, we believe we are in an excellent position to drive long-term, sustainable growth and profitability as we capitalise on the tremendous potential for our transformed organisation.”
Adjusted EBITDA was $29.5 million for the quarter, or 12.2 per cent of net sales. This compares to $27.9 million, or 15.3 per cent of net sales, for the second quarter of 2016 on higher unit volume and better manufacturing performance. The company reported a net loss of $7.3 million, or ($0.41) per diluted share, for the second quarter of 2017. This result includes a $19.6 million, or $0.78 per diluted share, impact related to purchase accounting adjustments, non-recurring interest and acquisition support costs, and foreign exchange transactions. In comparison, in the second quarter of 2016 the company achieved net income of $13.2 million, or $0.52 per diluted share.
Superior is revising its previously issued outlook for 2017 to include the consolidated results of Uniwheels from June through December 2017 as well as to reflect current expectations for Superior’s North American operations. Uniwheels’ financials are assumed to be translated at an exchange rate of 1.12 EUR/USD for the second half of 2017.
Superior now expects net sales to be in the range of $1,095 million to $1,115 million, driven by unit shipments of 16.9 million to 17.2 million. This compares to Superior’s previously issued outlook of 12.0 million to 12.25 million units and resulting sales of $730 million to $750 million.
Value-added sales are now expected to be in the range of $595 million to $615 million. This compares to Superior’s previously issued outlook of $400 million to $410 million. Value-added sales are defined as net sales less pass-through charges, primarily for the value of aluminium.
Adjusted EBITDA is now expected to be in the range of $135 million to $145 million compared to the prior outlook of $97 million to $105 million.
Capital expenditures are expected to be approximately $85 million. This compares to the prior outlook of $50 million.
“We are excited about the opportunities and potential that lie ahead following the addition of Uniwheels’ customers, employees and operations,” Stebbins continued. “The combined company operates two of the newest manufacturing facilities in the world including our facility in Poland that opened mid-last year, which continues its ramp to full production. The process of integrating the two companies is underway and we look forward to continuing to report on the progress. In addition to the leadership team added through the acquisition, we have also made key changes to the Superior team to support the execution of our vision for the combined organisation.
“Looking at full year 2017, our revised outlook reflects the addition of Uniwheels, lighter production in North America, and an operational focus in our plants in North America. We remain acutely focused on adapting to current industry production levels while leveraging the resources of the combined platform to drive improvement and execute on our strategic priorities.”