Cooper-Standard: Q1 performance signaling successful year ahead

NORTHVILLE, Mich.—Cooper-Standard Automotive Inc. came into 2023 with optimism.

Optimism that it could continue to grow sales while renegotiating customer contracts, right its financial ship and best optimize its manufacturing efficiencies. One quarter into the year and none of that has changed.

"We fully expect to achieve significantly improved financial results in each of the remaining quarters of the year," Chairman and CEO Jeffrey Edwards said during a call with investors May 4. "Our initial plan and full-year guidance anticipated that the first quarter would be the toughest, given the expected timing of our commercial settlements. That is consistent with our plan. …

"Overall, our outlook for 2023 remains very positive."

First-quarter sales increased by 11.3 percent year-over-year, coming in at $682.5 million, due mainly to favorable volume and mix, though recoveries of raw materials cost inflation also played a role. These were partially offset, the Cooper-Standard CEO said, by foreign exchange.

Net new business awards on electric vehicle platforms totaled $18 million.

Adjusted EBITDA improved to $12.5 million for the three months, up from the $100,000 posted in Q1 2022. Improved volume and mix, and favorable price adjustments as well as lean manufacturing and purchasing initiatives contributed to the year-over-year improvement.

"Although year-over-year cost reductions are getting harder to achieve—and as it's often said in our industry, that you can't cost-cut your way to prosperity—even so, we are continuing our efforts to be as lean as possible," Edwards said during the investors call.

"Our manufacturing and purchasing teams were able to deliver $8 million in savings through lean initiatives and improving efficiencies in the quarter," he added. "These savings, combined with year-over-year improvements, volume and mix, and enhanced commercial agreements on pricing and cost recoveries enabled us to increase our gross margin for the quarter by 94 percent over the same period a year ago.

"So we have made modest progress with more anticipated to come later this year and next."

The net loss for the first quarter was $130.4 million.

This included $81.9 million in losses related to refinancing and extinguishing of debt as well as $2.4 million in restructuring charges and other special items. Adjusted net loss was $46.2 million for the quarter.

Looking ahead, the automotive supplier anticipates that the cost and inflationary pressures that have weighed heavily on all businesses across the rubber and automotive spaces won't ease. But there is optimism that new vehicle production levels will hold steady, particularly in North America and Europe.

"We continue to see a lot of change in industry production forecasts and customer production schedules, so that certainly makes planning a bit difficult," Edwards said. "But our current outlook for production volume remains positive and anticipates current, modest year-over-year growth, overall, driven by increases in Europe and North America."

Cooper-Standard, during the first three months of 2023, saw year-over-year improved sales in all regions except Asia-Pacific, where sales were down about $8.96 million from the year-ago period, coming in at $94.7 million.

North America continues to anchor the Northville-based company, posting sales of $365.1 million for the quarter. This marked a $43.2 million improvement over Q1 2022.

Europe, likewise, saw a strong sales uptick—about $30.4 million in all—from last year's first quarter. Sales for the first three months of 2023 came in at $161.8 million.

In South America, sales grew by about $7.3 million year-over-year to $28.8 million.

One of the keys to growing its sales is the continued work to renegotiate customer contracts that allow for flexibility of pricing related to fluctuating raw materials costs. The company, Edwards said, has made tremendous strides in this area, which has helped to offset the headwinds of inflationary costs and allow the company to maintain sustainable pricing.

In Europe, specifically, the result of those most recent negotiations will have a significant impact.

"We were set to burn close to $100 million in cash in Europe over the next two years if we didn't address sustainable pricing in Europe. And, as I sit here today, I am very confident that (financial loss) is not going to happen. The negotiations are going well, our customers are proving that we are a valued supplier in Europe and I look forward to those results hitting our bottom line in the second quarter."