Cooper Standard(US:CPS)2022-08-06 02:35Financial Data and Key Metrics Changes - Second quarter 2022 sales were $605.9 million, an increase of 13.6% compared to the same period in 2021, significantly outpacing global light vehicle production growth [21] - Gross profit for the second quarter was $15.4 million or 2.5% of sales, compared to a gross loss of $900,000 in Q2 2021 [22] - Adjusted EBITDA was negative $10.4 million, an improvement from negative $14.7 million in Q2 2021, driven by favorable volume and mix, cost recoveries, and manufacturing efficiencies [22] - Net loss for the quarter was $33.2 million, compared to a net loss of $63.6 million in Q2 2021, including a gain of $33.4 million from a sale-leaseback transaction [23] Business Line Data and Key Metrics Changes - The company achieved $21 million in savings through lean initiatives and improved efficiencies despite market challenges [10] - Material cost recoveries exceeded the high end of historical ranges, with index-based agreements covering a significant majority of revenue [14][15] Market Data and Key Metrics Changes - Favorable volume and mix, net of customer price adjustments, increased sales by $102 million compared to Q2 2021, while foreign exchange impacts reduced sales by $22 million [25] - The company expects to see increasing offsets to material inflation headwinds as commercial recovery agreements are implemented [27] Company Strategy and Development Direction - The company is focused on optimizing its cost structure, having achieved over $100 million in annualized savings over the past three years [35] - Plans to enhance its position in the EV market with new products for fluid handling and innovations in the Fortrex chemistry platform [19][17] - The company is evaluating its real estate portfolio for potential asset sales or sale-leaseback opportunities to fund strategic initiatives [66] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future opportunities despite uncertainties in the global economy, citing improved cost structure and customer commitments to address inflation challenges [38] - The company reaffirmed its full-year adjusted EBITDA guidance in the range of $50 million to $60 million, leveraging better-than-expected operating efficiencies [37] Other Important Information - The company ended June 2022 with a solid cash balance of $250 million and total liquidity of $407 million, indicating a strong liquidity position [31] - The company is in the process of refinancing a portion of its debt with the assistance of Goldman Sachs [33] Q&A Session Summary Question: Update on non-automotive efforts, specifically with Fortrex - Management confirmed progress with the first product launch slated for Q1 2023 and highlighted the attractiveness of next-generation Fortrex for both automotive and footwear markets [45][46] Question: Inflationary cost measures and their transitory nature - Management indicated that while some inflationary pressures are sticky, they have successfully negotiated to cover 65% to 75% of raw material inflation through index-based agreements [48][49] Question: EBITDA guidance and FX impact - Management acknowledged that the Euro's performance has impacted revenues but noted that cost reductions in local currencies would mitigate the overall effect [58] Question: Working capital and inventory management - Management expects working capital reductions, particularly in inventory, to benefit cash flows in the second half of the year, given the current high inventory levels [62][80] Question: Sale-leaseback opportunities - Management described the potential for sizable proceeds from repositioning real estate and conducting sale-leasebacks, similar to a recent transaction that generated nearly $50 million [66] Question: Profitability in European operations - Management expressed confidence in achieving profitability in Europe by 2023, with expectations for high-single-digit EBITDA margins by 2024 [70]