Cooper-Standard remains focused on financial goals

NORTHVILLE, Mich.—Cooper-Standard Automotive Inc. has seen its share of curve balls. And yes, the company has had some rough quarters along the way. But Chairman and CEO Jeff Edwards is confident about one thing: Its plan to build a solid financial foundation is working.

Just give it time.

Cooper-Standard, Edwards said, is stronger today than it was even one year ago because the company is doing everything right. It's cost-cutting, innovating and working with partners to reduce costs while maintaining product quality and improving safety.

And that, he told investors during the company's recent third-quarter investment call, means something. Especially in an automotive industry battling inflationary pressures and lower-than-expected production volumes.

So for now the company continues its work on its financial health. Because every step along the way, the moves Cooper-Standard made were met with more challenges.

"From 2019 to 2023 our global team achieved over $500 million in sustainable cost savings through improvements in manufacturing efficiency, supply chain optimization, fixed cost reductions and many other lean initiatives," Edwards said. "And yet, the current challenging dynamics of our industry require us to do even more. And, obviously, we are.

"So far in 2024, we have realized an additional $64 million of cost savings through the successful implementation of several aggressive (actions), putting us on track to achieve nearly $100 million of overall cost savings for the full year.

"So while we are pleased with the savings we are achieving, it is clear that we simply cannot cost-cut our way to long-term prosperity, and that is why innovation is also a strategic imperative for us."

That innovation is already bearing fruit, he said, pointing to the $44 million in new business awards that the company saw during the third quarter as proof. And this trend, he said, should continue, especially as the company prepares to roll out more innovative, new products.

"We are pleased that in an increasingly complex and dynamic automotive industry, our customers continue to turn to us to design and develop new technologies for some of their most important new vehicle programs, including ICE, hybrid and battery-electric vehicles," Edwards said.

For the third quarter, Cooper-Standard posted a net loss of $11.1 million. Adjusted EBITDA came in at $46.1 million. This compares to the $11.4 million in net income and $79.1 million in adjusted EBITDA for the Q3 2023.

Sales for the quarter totaled $685.4 million, compared with $736 million for the third quarter of 2023.

The company attributed the year-over-year income change to the timing of commercial settlements that occurred in the third quarter of 2023, including $30 million of settlements that were related to the first and second quarters that year. These did not recur at the same levels in 2024.

Moreover, this year's net loss included restructuring charges of $1.5 million and pension settlement credit of $2.2 million.

Regarding the year-over-year adjusted EBITDA change, Cooper-Standard said the difference can be attributed to the timing of commercial settlements the year prior, unfavorable foreign exchange, continuing inflation and lower overall production volumes.

But Edwards was quick to note that there were things working in Cooper-Standard's favor, particularly when it comes to the restructuring initiative it implemented during the quarter.

"In terms of cost optimization, we had another outstanding quarter," Edwards said noting that the lean initiative savings for the period came in at $15 million. "In addition, the aggressive restructuring initiative we announced in the second quarter has been implemented successfully and is driving the planned savings. In the third quarter alone, we realized an additional $10 million in savings from this most recent initiative. And so that is on pace to achieve the expected $40 (million)-$45 million in fully annualized savings.

"These savings are helping us offset the headwinds of lower production volumes and unfavorable foreign exchange that have persisted during the first nine months of the year."

For the quarter, Cooper-Standard saw year-over-year sales dips across both the Sealing Systems and fluid handling segments. Sealing Systems posted sales of around $353.3 million, which is roughly $17.5 million lower year over year. Fluid Handling sales fell by about $28 million year over year to come in around $313.7 million.

Third quarter adjusted EBITDA for the Sealing Systems segment was about $29.9 million, down roughly $9.71 million compared to 2023. Meanwhile, the Fluid Handling segment saw EBITDA slip about $18.2 million year over year to around $23.1 million in Q3 2024.

Even with these slips in earnings, Edwards in confident that both segments' performance will continue to improve.

"We remain confident in our ability to adapt and manage our business in a slow-growth environment," Edwards said. "Our cost reduction initiatives are working, and our customers continue to support us with pricing and new business awards. Despite the current headwinds we believe that both of our product segments remain on track to achieve double-digit return on invested capital as we exit 2025.

"We also remain confident that, as more of our new programs and products are launched over the next couple of years, we will continue to see further expansion of our profitability both through increasing volume and improved variable contribution margins."

For the nine-month period, Cooper-Standard recorded a $119 million net loss, an improvement over the $146.8 million loss for the same period last year.

Sales dropped year-to-date in 2024 to $2.07 billion from $2.14 billion for the first three quarters last year.

Adjusted EBITDA for the first nine months was $126.4 million, down from the $139.5 million for the same period last year.

"We continue to face headwinds and challenges from lower-than-expected volumes, persistent inflation and unfavorable exchange rates in certain key countries," Edwards said. "But at the end of the day, we do expect that our continuing cost-cutting initiatives will allow us to drive improvement in adjusted EBITDA margin as we conclude this challenging year.

"In view of these market conditions, we are pleased that our continuing execution has kept our full-year outlook for profit and cash flow largely in line with our original expectations."

Cooper-Standard now expects sales to come in between $2.7 billion and $2.75 billion. This is down slightly from the $2.8 billion to $2.9 billion projected at the start of 2024.

Adjusted EBITDA for the year should be around $180 million to $195 million.