Hayes Lemmerz Increases Adjusted EBITDA Guidance for 2008

On September 4 Hayes Lemmerz International announced it is increasing its fiscal 2008 Adjusted EBITDA guidance as it reported substantially improved Adjusted EBITDA, core operating earnings and liquidity for the second fiscal quarter ended July 31, 2008.

“We are increasing the Company’s Adjusted EBITDA guidance for fiscal 2008 to $225 million to $240 million, up $20 million from prior guidance of $205 million to $220 million,” said Curtis J. Clawson, president, CEO and chairman of the Board. “Capital expenditures have been reduced for the year and are now expected to be between $90 million to $100 million, down $5 million from prior guidance of $95 million to $105 million. We are also affirming the Company’s sales guidance of $2.1 billion to $2.3 billion for fiscal 2008.”

Compared to the year earlier quarter, Adjusted EBITDA for the second quarter improved 40 per cent, to $63.9 million from $45.8 million and the Adjusted EBITDA margin rose to 11.3 per cent from 8.4 per cent. Adjusted EBITDA for the first half of the fiscal year was $118.5 million, up $22.6 million or 24 per cent from the prior fiscal year. Compared to the year earlier quarter, core operating earnings for the second quarter improved 87 per cent to $33.8 million from $18.1 million. Core operating earnings for the first half of the fiscal year were $59.0 million, an improvement of $19.8 million, or 51 per cent from the prior fiscal year.

“This was a very good quarter for Hayes Lemmerz and, although there is the potential for higher steel prices and further reductions in customer production volumes, the outlook for the full fiscal year has improved,” said Clawson. “Despite challenging industry conditions, our Adjusted EBITDA and core operating earnings improved significantly. Our good results reflect a strong overall performance including the benefits of our recent investments in leading-cost, high-growth areas, such as Brazil, the Czech Republic, Turkey, India and Thailand.”

Sales in the second fiscal quarter were $563.5 million, up 4 per cent from $544.1 in the year earlier quarter, due primarily to favourable currency exchange rates. For the first half of the fiscal year, Hayes Lemmerz reported sales of $1.14 billion, up 9.1 per cent from $1.04 billion in the first half of the prior fiscal year. The company’s net loss in the quarter decreased to $47.0 million, an improvement of $40.1 million compared with a net loss of $87.1 million in the year earlier quarter. The Company reported a net loss for the first half of $59.8 million, down $42.6 million from a net loss of $102.4 million in the first half of the prior fiscal year.

The company also announced the sale of its aluminium wheel facility in Hoboken, Belgium during the quarter, in addition to other previously announced restructuring plans. “The divestiture of our aluminium wheel facility in Hoboken, Belgium in June, the expected closure of our Gainesville, Georgia, aluminium wheel facility and the planned divestiture of our powertrain facility in Nuevo Laredo, Mexico, will have a positive impact on our long-term financial performance. We have now essentially completed the process of divesting facilities and product lines that have negatively impacted our earnings,” said COO Fred Bentley.

“Five years ago, we were saddled with a number of unprofitable facilities, heavily dependent upon the health of the US auto market, and equally dependent upon the success of a small number of customers. Today, we are the only company with a cost-effective manufacturing presence in both steel and aluminium wheels in almost every global market,” he said. “Our strategic focus on improving product, customer and geographic diversification is providing ever-increasing benefits.”

Bentley noted that Hayes Lemmerz’ geographic distribution of sales has changed significantly: from 45 per cent of total sales in the domestic U.S. market in 2004 to an estimated 13 per cent in fiscal 2008 (excluding the three facilities being closed or divested), from 4 per cent to 16 per cent in South America, from 15 per cent to 24 per cent in Eastern Europe, and from 29 per cent to 34 per cent in Western Europe. Overall, sales in leading-cost countries have almost doubled since 2004, reducing the company’s reliance on the domestic US market. “Our largest single customer today is based in the US, but 79 per cent of our business with that customer is in other regions,” Bentley added.

“We have also greatly diversified our customer base since 2004. We are continuing to win new business with European and US customers, and we are increasingly winning with Asian OEMs,” said the COO. “The company expects to meet or exceed last year’s record of $430 million of new business, with wins spread across its customer base.”

“Although sales are essentially even with 5 years ago, the Company’s employee count is down 33 per cent during that period, and employment in high-cost regions is down more than 60 per cent,” Bentley added. He also noted that Hayes Lemmerz’ product mix is well balanced, with aluminium light vehicle wheels, steel light vehicle wheels, and commercial truck wheels each accounting for approximately one-third of the company’s sales.