Superior Industries International, one of the largest manufacturers of aluminum wheels for light vehicles in North America, has reported financial results for the first quarter ended March 26, 2017.

“As anticipated, our first quarter results reflect lower unit volume due to the timing of program changes as well as higher production costs compared to the first quarter of 2016,” said Don Stebbins, president and CEO. “During the first quarter, we also announced our intent to acquire 100 percent of UNIWHEELS AG. This accretive transaction will position Superior as one of the world’s largest automotive OEM aluminum wheel suppliers, while diversifying our customer base and extending our geographic reach. With the enhanced global manufacturing capacity of the combined businesses, we believe this transaction will strengthen our ability to serve our customers and provides a stronger platform for growth.

First Quarter Results

Net sales for the first quarter of 2017 were $174.2 million, compared to net sales of $186.1 million in the first quarter of 2016. Value-added sales, a non-GAAP financial measure defined as net sales less pass-through charges, primarily for the value of aluminum, were $95.5 million for the first quarter of 2017, a 6.7 percent decrease compared to the first quarter of 2016, driven by lower unit volume.

Gross profit for the first quarter of 2017 was $19.2 million, or 11 percent of net sales, compared to $27.7 million, or 14.9 percent of net sales in the prior year period. Gross profit as a percentage of value-added sales was 20.1 percent compared to 27.1 percent of value-added sales in the prior year period. The decrease in gross profit was due mainly to lower unit shipments and increased manufacturing expenses, which were partially offset by improved product mix, in particular for 19-inch diameter and larger products which were up 8 percent from the prior year period.

Income from operations for the first quarter of 2017 was $3.9 million, or 2.3 percent of net sales, compared to operating income of $18.7 million, or 10.1 percent of net sales in the prior year period. Income from operations as a percentage of value-added sales was 4.1 percent for the first quarter of 2017 compared to 18.3 percent of value-added sales in the prior year period. The decrease was driven primarily by the aforementioned acquisition expenses and lower gross margin. Excluding acquisition-related costs, income from operations as a percentage of net sales and value-added sales would have been higher than reported by 400 basis points and 729 basis points, respectively.

For the first quarter of 2017, the company reported net income of $3.1 million, or 12 cents per diluted share including a $4.8 million, or 19 cents per diluted share, impact related to acquisition support costs. This compares to $14.5 million of net income, or $0.56 per diluted share, in the first quarter of 2016.

Adjusted EBITDA, a non-GAAP financial measure, was $19.1 million, or 11.0% of net sales, for the first quarter of 2017. This compares to $28.1 million, or 15.1% of net sales, for the first quarter of 2016. Adjusted EBITDA as a percentage of value-added sales was 20 percent compared to 27.5 percent of value-added sales in the prior year period. The decline includes the aforementioned lower unit volume and higher costs for the quarter.

2017 Outlook

Based on the current outlook for the year, Superior reaffirms its previous 2017 outlook provided on March 2. This outlook is based on Superior stand-alone and excludes any future impact from the acquisition of UNIWHEELS.

Superior expects net sales to be in the range of $730 million to $750 million driven by unit shipments of 12.0 million to 12.25 million. Value-added sales are expected to be in the range of $400 million to $410 million. Value-added sales are defined as net sales less pass-through charges, primarily for the value of aluminum. Adjusted EBITDA is expected to be in the range of $97 million to $105 million

The company expects North American light vehicle production to decrease 1.4 percent to 17.6 million units in 2017 and the company’s resulting market share to remain stable compared to 2017.

Stebbins concluded, “Our outlook for 2017 remains relatively unchanged and reflects reasonably strong overall North American light vehicle production, albeit slightly softer than 2016. Looking forward, we are excited about the opportunities that will come from the combination of Superior and UNIWHEELS and believe it will yield positive results for all stakeholders including customers, employees, and shareholders.”