Weak Third Quarter for Superior Industries

Analysts have suggested Superior is taking a “last man standing approach” while the company reports relatively weak third quarter results. For the three months ended 30 September 2004, Superior Industries’ revenue increased 6.4 per cent to $199,328,000 from $187,365,000 (£102,235,965). Unit wheel shipments declined 4.7 per cent in the same period. The year-to-date figure, however is more positive showing a 3.2 per cent increase in shipments. The company reports that net income totalled $5,475,000, or $0.20 per diluted share, roughly half as much as at the same time last year. In the first nine months net income was $32,726,000 (£17,871,655).

The third quarter results also included an operating loss from Superior’s aluminium suspension components business of $2,548,000 (£1,391,752) compared to $2,153,000 for the same period last year. At the same time Superior reported a drop on profits from its share of its joint venture aluminium wheel manufacturing operation in Hungary. This year the company’s third quarter profits were $1.7 million compared to $1.9 million a year ago.

“Superior’s third quarter results reflected production cuts announced by certain OEM customers following weak summer sales of cars and light trucks. However, global competitive pricing pressure is the most significant factor that has constricted Superior’s earnings to levels below our historical norms,” said president and chief operating officer Steven Borick.

Financial analysts suggest that Superior fighting back: “Having secured the industry’s largest contracts, and as the low-cost producer, is pricing to maintain the business.” In this way the UBS analysts suggest that Superior is taking a last man standing a strategy. “It has the war chest to fund new plants in low cost areas and invest in more automation, but this clearly looks to be a long-term slog. An improvement in the operational issues, if and when, could relieve some pressure on the stock,” UBS analysts commented.

“In the short run, we are focused on managing our pricing mix. We have adjusted prices on some of our products, particularly our high volume core programs, to protect market share. In other cases, we have turned down business that does not offer a fair economic return. We are also investing in automation, training, and new manufacturing facilities that will reduce our wheel making costs in the longer term. We have recently broken ground on a third plant in Mexico,” said Mr Borick.