Superior Industries International, one of the world’s leading light vehicle aluminum wheel suppliers for OEMs and the European aftermarket, has reported financial results for the first quarter ended March 31, 2021.
“Our team delivered impressive results in a rapidly shifting environment as we continued to execute our value creation roadmap and drive profitable growth,” said Majdi Abulaban, president and CEO of Superior. “We have established a strong foundation with a robust portfolio of differentiated technologies that are advancing Value-Added Sales and growth over market. Further, we generated strong earnings improvement and margin expansion in the face of a volatile production environment and supply chain challenges, including semiconductor shortages, that impacted the automotive industry. This is a testament to the enhanced cost and cash discipline we fostered throughout the business.”
Abulaban continued, “We remain focused on capitalizing on trends towards electrification, CO2reduction and vehicle differentiation through our light weighting and premium finishing capabilities, as these technologies will strengthen our position as a growth over market company. I am confident in our ability to continue to generate significant shareholder value throughout 2021 and beyond.”
First Quarter Results
Net sales for the first quarter of 2021 were $358.2 million, compared to net sales of $301.1 million in the prior year period. Value-Added Sales, a non-GAAP financial measure, were $207.3 million for the first quarter of 2021 compared to $170.1 million in the prior year period. Value-Added Sales Adjusted for Foreign Exchange, a non-GAAP financial measure, increased 17%, or 19% above market, which was driven by the ongoing portfolio shift to larger diameter wheels with more premium content.
Gross profit for the first quarter of 2021 was $43 million, compared to $23.1 million in the prior year period. The increase in gross profit for the quarter was primarily due to higher sales, year-over-year increased plant utilization due to plant shutdowns in the prior year period, and stronger product mix.
Selling, general, and administrative (SG&A) expenses for the first quarter of 2021 were $17.3 million, compared to $12.5 million in the prior year period, which was affected by compensation accruals due to the impact of COVID in 2020.
Operating income for the first quarter of 2021 was $25.7 million, compared to a loss from operations of $183 million in the prior year period. The increase is due to higher gross profit, partially offset by higher SG&A, as well as the non-recurring Goodwill and Indefinite-Lived Intangibles non-cash impairment charge of $193.6 million in 2020.
The income tax provision for the first quarter of 2021 was $0.8 million on pre-tax income of $13.9 million. The tax provision for the quarter differs from the statutory rate primarily due to valuation allowances, the release of an uncertain tax position and the mix of earnings among tax jurisdictions.
For the first quarter of 2021, the company reported net income of $13.1 million, or earnings per diluted share of $0.18. This compares to a net loss of $190.1 million, or loss per diluted share of $7.84, in the first quarter of 2020.
Adjusted EBITDA, a non-GAAP financial measure, was $54.9 million for the first quarter of 2021, or 26.5% of Value-Added Sales, which compares to $39.5 million, or 23.2% of Value-Added Sales in the prior year period. The increase in Adjusted EBITDA was driven by increased volume, stronger product mix, and improved manufacturing performance, partially offset by challenges resulting from the winter storm in February 2021 in the southern United States and in northern Mexico. Additionally, the first quarter of 2020 was partly affected by the onset of plant shutdowns resulting from COVID.
The company reported net cash provided by operating activities of $18.2 million in the first quarter of 2021, compared to cash provided by operating activities of $31.3 million during the first quarter of 2020. Operating cash flow in the first quarter of 2021 was affected by higher net working capital due to higher sales and production volumes compared to the prior year period. Free Cash Flow, a non-GAAP financial measure, was $3.0 million for the first quarter, compared to $9.8 million in the prior year period.
Financial Position
As of March 31, 2021, Superior had funded debt of $630.3 million and net debt, a non-GAAP financial measure, of $476.5 million, compared to funded debt of $824.1 million and net debt of $541.9 million as of the end of the prior year period. The improvement in Net Debt of $14.2 million compared to year-end 2020 was supported by cash flow generation as described above, and a decrease related to Superior’s Euro-denominated debt as the Euro weakened relative to the US Dollar.
2021 Outlook
The company reconfirmed its Full Year 2021 guidance. Based on IHS’ latest forecast and management’s estimates for 2021, Superior assumes industry production in North America and Europe to increase year-over-year in 2021 by 20% and 10%, respectively. Based on this outlook for industry production and Superior’s portfolio, the company’s full year 2021 outlook is as follows:
“We had a strong start to the year, in part due to richer product mix as OEMs generally shifted production schedules to more premium vehicles in response to the shortage of semiconductors. As we look to the remainder of 2021 and the uncertainties associated with possible OEM supply chain disruption, especially the availability of semiconductors, we believe it prudent to maintain our full year 2021 outlook pending resolution of these uncertainties. We do, however, remain confident in our ability to continue to generate profitable growth as we execute our long-term strategic priorities,” said Tim Trenary, executive vice president and CFO of Superior.
