Cooper-Standard Holdings Inc (CPS) Q3 2024 Earnings Call Highlights: Navigating Challenges with ...

GuruFocus.com11-02 15:02

Revenue: $685.4 million for Q3 2024, a decrease of 6.9% compared to Q3 2023. Adjusted EBITDA: $46.1 million for Q3 2024, down from $79.1 million in Q3 2023. Net Loss: $11.1 million for Q3 2024, ...

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GuruFocus has detected 4 Warning Signs with CPS.\n\nRelease Date: November 01, 2024\nFor the complete transcript of the earnings call, please refer to the full earnings call transcript.\n Positive Points \n\nCooper-Standard Holdings Inc (NYSE:CPS) achieved outstanding operational performance with 98% of customer scorecards being green for new program launches.\nThe company reported its best-ever safety performance with a total incident rate of 0.20, well below the world-class benchmark.\nCost optimization efforts resulted in $15 million in savings through lean initiatives and an additional $10 million from restructuring initiatives.\nCPS was awarded $44 million in net new business during the third quarter, reflecting strong customer trust in their innovations.\nThe company improved its sustainability score, placing in the 88th percentile and receiving a silver medal from EcoVadis for the eighth year.\n\n Negative Points \n\nThird quarter sales decreased by 6.9% compared to the same period last year, primarily due to lower production volumes and unfavorable foreign exchange.\nAdjusted EBITDA for the quarter was $46.1 million, down from $79.1 million in the third quarter of 2023.\nThe company reported a net loss of $11.1 million in the third quarter of 2024, compared to net income of $11.4 million in the same period last year.\nUnfavorable foreign exchange and general inflation negatively impacted financial results.\nDespite cost savings, the company continues to face headwinds from lower production volumes and persistent inflation.\n\n Q & A Highlights \nQ: When you look at your guidance and if you back out the fourth quarter, the upper end of that range gets you to that double-digit margin that you've talked about. What needs to go right for you to get there? A: Jeffrey Edwards, CEO: For 2025, we've said we'll be there as we exit the year. We're ahead of where we thought we would be due to additional cost reductions and flawless execution in our manufacturing plants. Volume would be beneficial, but we're doing well without it. We're confident in our guidance and see good momentum heading into 2025.\nQ: As it relates to currency, you've had significant hits from FX as a headwind. Is there anything you can do to mitigate that? A: Jonathan Banas, CFO: The FX headwinds are primarily related to cost-only currencies where we manufacture but don't sell in the same currency. We have a hedging program, but it doesn't cover 100%. We also engage with customers for recovery on goods manufactured in those currencies. We expect the FX impact to lessen in Q4.\nQ: Are you able to refinance or make changes to your debt in the current declining rate environment? A: Jonathan Banas, CFO: The non-call provisions on our notes expire in Q1 2025, giving us more flexibility. We hope to lower our interest costs and improve operating flexibility, but it depends on market conditions, industry state, and our financial performance.\nQ: Can you expand on what you're seeing in your business in Europe, and were you EBITDA positive in both North America and Europe in the third quarter? A: Jeffrey Edwards, CEO: Yes, we were positive in both markets. Despite headwinds, we maintain profitability through cost focus and aligning our fixed cost footprint with market conditions. We're also doing well with Chinese domestic manufacturers and seeing growth in South America.\nQ: Regarding the new products and the Pace Pilot Awards, do these innovations allow you to stay ahead of the competition or take market share? A: Jeffrey Edwards, CEO: Our EcoFlow technology improves fluid management and reduces system costs, increasing our content and profit per vehicle. Our sealing product enhances vehicle aerodynamics and aesthetics, appealing to high-end customers. Both innovations are gaining significant customer interest.\nQ: The CapEx guidance came down over the year. Are you doing something differently, and what is the CapEx run rate going forward? A: Jeffrey Edwards, CEO: We're designing products that require less capital and reusing existing capital. This year, we're guiding around $50 million in CapEx and expect to maintain or slightly reduce that level next year, despite winning new business.\nQ: Excluding the commercial settlements of $30 million, how should we view the company's performance year-over-year? A: Jonathan Banas, CFO: It's appropriate to adjust 2023 sales and EBITDA by $30 million for a more accurate comparison, as that was retroactive pricing impacting the first two quarters of 2023.\nQ: Regarding the implied fourth-quarter guidance, what's driving the margin expansion? A: Jonathan Banas, CFO: We expect benefits from purchasing initiatives, manufacturing efficiencies, and restructuring savings. These will be offset by wage inflation and mix softening. We also have normalized incentive compensation compared to last year's charge.\nFor the complete transcript of the earnings call, please refer to the full earnings call transcript.This article first appeared on \nGuruFocus.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2480412817"}