Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cooper-Standard Holdings Inc (CPS, Financial) achieved a 97% green rating on customer scorecards for product quality and 96% for new program launches.
- The company reported a significant improvement in safety performance, with a total incident rate of 0.29, well below the world-class benchmark of 0.47.
- Cost optimization efforts resulted in $16 million in savings through lean initiatives, contributing to a 100 basis point improvement in gross profit margin compared to the previous year.
- CPS was awarded $61 million in net new business during the second quarter, reflecting strong demand for its innovative products and technologies.
- The company continues to be recognized for its sustainability efforts, being included in USA Today's list of America's climate leaders.
Negative Points
- Second quarter sales decreased by 2.1% compared to the same period last year, primarily due to the divestiture of the Technical Rubber business and unfavorable foreign exchange.
- CPS reported a net loss of $76.2 million in the second quarter, significantly higher than the $27.8 million loss in the same quarter of 2023.
- The company faced ongoing inflation headwinds, particularly in energy and labor costs, which partially offset positive financial drivers.
- Unfavorable foreign exchange impacted both sales and operating costs, with a $15 million negative effect on adjusted EBITDA.
- Despite improvements, the macroeconomic environment, including lower light vehicle production estimates and inflationary pressures, continues to pose challenges to achieving financial targets.
Q & A Highlights
Q: On the restructuring actions, have they been completed?
A: We are in the final stages. Most actions have been completed, and we expect to see a pickup of $20 million to $25 million in savings in the third and fourth quarters. We have a high level of confidence in this. - Jeffrey Edwards, CEO
Q: Is the margin performance, excluding FX, trending towards double-digit rates?
A: Yes, we are marching towards double-digit EBITDA and return on invested capital, and we expect to achieve this next year. - Jeffrey Edwards, CEO
Q: Can you clarify your cash flow expectations for the year?
A: We expect to be slightly negative on free cash flow due to electing cash interest payments on our notes, which is in the best long-term interest for our capital structure. - Jonathan P. Banas, CFO
Q: What are the drivers for achieving a 10% EBITDA margin by 2025?
A: The drivers include $40 million to $45 million in annualized cost savings, new product launches, improved margins from innovative products, and a significant contribution from our fluid business. - Jeffrey Edwards, CEO
Q: How would you describe your organic growth rate with recent new business wins?
A: We continue to outpace the market, and with the introduction of hybrid vehicles, which increase our content per vehicle by about 80%, we expect significant growth. - Jeffrey Edwards, CEO
Q: Can you explain the low CapEx spend and how long it can remain at this level?
A: We are designing products that require less capital, operating at low volumes, and focusing on cost reductions with a payback of less than a year. We aim to keep CapEx closer to 3% of sales going forward. - Jeffrey Edwards, CEO
Q: Are there any updates on Fortrex deployments and future wins?
A: Fortrex continues to drive demand for our Sealing business, and we are seeing positive results, including new product launches like Nike's third shoe. - Jeffrey Edwards, CEO
Q: Is a global refinancing still on the table for 2025?
A: Yes, it depends on market conditions and interest rates. We have the opportunity to refinance starting in Q1 2025, and we are focused on making our capital structure more manageable. - Jonathan P. Banas, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
