Superior Industries Outlook Revised To Negative On Weaker-Than-Expected Operating Performance, Ratings Affirmed


  • Wheel manufacturer Superior Industries International Inc. reported weaker-than-expected revenue and profitability for 2018 and we expect that its profitability will remain weak in 2019, causing its adjusted debt to EBITDA to remain above 5x.
  • Therefore, we are revising our outlook on the company to negative from stable and are affirming our 'B' issuer credit rating.
  • At the same time, we are affirming our 'B' issue-level rating on Superior's term loan and our 'B-' issue-level rating on its unsecured notes. Our '3' recovery rating on the term loan and '5' recovery rating on the unsecured notes remain unchanged.
  • The negative outlook reflects our expectation that higher operating costs in North America and weaker demand could cause Superior's leverage to remain well above 5.0x.
NEW YORK (S&P Global Ratings) March 14, 2019—S&P Global Ratings today took the 
above listed rating actions. The outlook revision reflects our expectation 
that Superior's financial ratios will likely remain weak for the current 
rating, particularly for a company exposed to the intense cyclicality of the 
auto original equipment market. Specifically, we believe there is an increased 
likelihood that the company's debt to EBITDA will remain above 5x on a 
sustained basis. While Superior's free operating cash flow (FOCF) will likely 
be positive (FOCF to debt of more than 3%) in 2019, we believe the amount of 
cash it has available for debt repayment will be limited after it makes 
dividend payments on both its common and convertible shares.


The negative outlook on Superior Industries International Inc. reflects our 
belief that the cushion in the company's financial metrics will remain weak 
relative to our debt-to-EBITDA downgrade threshold of 5.0x.


We would lower our ratings on Superior if we believe it is unlikely that the 
company's debt to EBITDA will fall below 5x or if its FOCF to debt falls below 
3% on a sustained basis. This could occur because of weaker demand for cars in 
the U.S. or Europe and decreased penetration of the company's wheels on its 
main platforms or if its launch-cost issues increase by more than current 
levels.


We could revise our outlook on Superior to stable over the next 12 months if 
the company increases its margins in North America or pays down enough debt to 
reduce its leverage sustainably below 5.0x. We would also expect the company 
to maintain a FOCF-to-debt ratio of at least 5%.

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