Good day, and welcome to the Superior Industries' Fourth Quarter and Year-End 2019 Earnings Conference Call.I would now like to turn today's conference over to Troy Ford. Please go ahead, sir..

Thank you. Good morning, everyone and welcome to our fourth quarter and full-year 2019 earnings call. During our discussion today, we will be referring to our earnings presentation, which, along with the earnings release are available on the Investor Relations section of Superior's website.

This morning, I'm joined by Majdi Abulaban, our President and CEO; and Matti Masanovich, our Executive Vice President and CFO.Before I turn the call over to Majdi, I would like to remind everyone that any forward-looking statements contained in this presentation or commented on today are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Please refer to Slide 2 of this presentation for the full Safe Harbor statement and to the Company's SEC filings, including the Company's current annual report on Form 10-K for a more complete discussion of forward-looking statements and risk factors. We will also discuss non-GAAP measures today, including value-added sales and adjusted EBITDA.

These non-GAAP measures exclude the impact of certain items and therefore are not calculated in accordance with US GAAP. Reconciliations of these measures to the most directly comparable US GAAP measures can be found in the appendix of this presentation.With that, I will turn the call over to Majdi..

Thanks, Troy, and good morning, everyone and thank you for joining us today to review our fourth quarter and full-year results. Let me begin by taking you through the highlights for the fourth quarter and full-year. I will then provide you an update on this year's progress towards our strategic priorities.

And finally, I'll outline, our strategy moving forward into 2020.I’ll begin on Slide 3 of the earnings presentation to provide an overview of our full year results. In 2019, we continued to benefit from the secular trends for more fuel efficient wheels, and customer demand for larger premium finishes.

We also continue to position ourselves as a premium wheel solution provider, advancing our portfolio and enhancing our competitive position.

2019 was very challenging from a volume perspective, when our main customers production down 11% in the fourth quarter, and 6% in the full year.Now despite the production declines, we made significant progress on our strategic priorities.

Our global teams continue to execute on our premium strategy, delivering key product launches and wins as we shifted our portfolio towards larger, more complex wheels, the result a 6% increase in value added sales per wheel versus the prior year. Further in 2019 wheels 19 inches and greater accounted actually for more than 30% of our portfolio.

That's a 10% increase year over year. This positive shift in mix fundamentally supported growth over market of 2% on a value added sales, despite weaker volume. At the top of our priority is our commitment to improving profitability and generating cash flow to enable debt reduction.

As a result of these efforts, we delivered record cash flow from operations of 163 million, enabling us to reduce net debt by $84 million. A tremendous success as we move towards positioning Superior for the future. As we discussed last quarter, we are laser focused on optimizing our cost structure to match lower production volumes.

This includes realignment of our manufacturing footprint and overall reduction in structural costs and identifying additional initiatives that will further enhance our operational efficiency. We are pleased to say that these actions are bearing fruit. Despite lower unit volumes in sales, we delivered 169 million of EBITDA on 8% less volume.

Looking to 2020, while we expect a softening production environment, we remain committed to effectively executing our order book, enhancing profitability and driving cash flow through earnings, working capital and a disciplined approach to capital expenditures.Moving on to Slide 4.

As I mentioned, we are executing on our strategy as a premium wheel solution provider, winning in electrification and offering differentiated technologies to the marketplace. For example, we recently won and launched multiple wheels on electrical vehicle platforms.

During the fourth quarter, we launched a premium wheel on the Mercedes EQC by the way, which is known as the Q8, which also leverages our pad printing technology an exciting technology and capabilities that allows us to put action colors and price across the wheel.

This is actually a very unique design element for this vehicle.Next, we're excited about our recent win with a Detroit pre OEM on a newly announced on electric platform launching in the coming years, as well as a new win and partnership with a Silicon Valley OEM specializing in EVs. These platforms highlight our relevance in the EV space.

Right side of the chart highlights exciting applications and expansion of our technology portfolio. Now here you see some firsts for the industry some firsts for Superior.

The mid engine 2020 quarterback is just a great example and carries a complete spectrum of our products and process technologies, including our patented technology, as well as the flow polling process, both reduce weight and improve handling of the vehicle.

This also represents the first laser etching launch, enabling the inscription of the iconic Corvette name across the side of the spoke.

For those of you who haven't seen it, it's really quite impressive.Another exciting first, we launched our first 23 inch wheel, this offering has enabled our customer, Audi in this case, to capture an emerging market segment they have not played in. One more first is the application that you see on this chart of our pro forming technology at Toyota.

This is the first time Toyota has ever used pro forming overall. Finally, I am pleased to announce that, we officially commercialized and launched our PVD process, a premium finish that provides a more environmentally sustainable and competitive alternative to chrome. Our PVD technology actually is on the road today. It's on the Ford F-150.

We are working closely with other customers to further expand this technology's reach and making very, very good progress and our customers are excited to see the capability and the validation and all the technical data related to this technology.

We were proud of the team for executing on this technology -- coming really proud of the team for bringing this to market.Moving on to Slide 5. I would like to provide an update on the near-term priorities that I mentioned mid last year, which focused on execution, enhancing our portfolio, talent and improving operational efficiency.

The underlying goals of these actions are to support EBITDA growth and improve cash flow. With that in mind, we made tremendous progress so far, not only commercializing new products like PVD, but also reducing expenses and optimizing our North American footprint, which by the way is now 100% at low cost.

Additionally, we are pleased with the reduction in annual turnover of our Mexican labor force by 17% year-on-year.

Now, from a margin standpoint, we expect many of these initiatives to narrow the margin gap between our North American operations and European operation.Further, launching our portfolio and in particular as we spoke the last earnings call with European OEMs in Mexico is core to our strategy, it's absolutely critical.

Especially given as you think of the shift in mix one-third of our portfolio is now 19 inches or greater. We're actually adding 1 million wheels in that category to our Mexican operations here in the next 12.

So, I would tell you we're very pleased that now our Mexican operations are now manufacturing and shipping premium wheels to European OEMs in North America, in Mexico and in the U.S. This has been a priority and we're excited that we are finally there and its core to our growth strategy as we discussed previously.Moving on now to slide 6.

You will see that these same items, cash flow generation, EBITDA growth, executing on a differentiated product portfolio as well as maintaining our customer relationships, remain foundational to our long-term value creation roadmap. This is where I see the company on the journey towards creating value for our shareholders.

Here now, we're focused on the current portfolio of launches, fixing our product lines such as PVD and aligning our cost to the current operating environment.As we move forward, the focus will be to continue enhancing our operations, driving commercial discipline, reducing manufacturing cost and winning across the balance portfolio.

All of these initiatives position us for the medium-term where we can deliver value to shareholders through revenue enhancements and EBITDA improvements.To summarize the quarter and the year, while we have made great progress to date, there is still much work to be done.

However, you will see when Matti takes you through the financial outlook for 2020 that we expect that the margin enhancing activities that we've already executed will start to show through our performance.

We remain excited about the potential of this business, our positioning as a differentiated technology leader and the progress to-date.With that, let me turn the call over to Matti to provide the details on our financial results for the full year and fourth quarter.

Matti?.

Thanks, Majdi. Turn to Slide seven, our full year 2019 value added sales results outperformed the broader markets due to our shift towards larger higher content wheels.

Value Added sales for the company's declined 2% on 8% lower volume, representing a 2% growth over market and value added sales and value added sales per wheel growth of 6% excluding FX.In North America value added sales was negatively impacted by lower volumes including the impact of the UAW strike, which was partially offset by a shift to larger premium wheels.

Conversely, in Europe value added sales grew 6% and value added sales per wheel grew 9% representing substantial growth over market or industry production volumes in the region were down 5%.

As Majdi noted in 2019 19 inch wheels and greater accounted for approximately 30% of our portfolio compared to approximately 20% in 2018.Slide eight, reflects the breakdown of unit shipments, net sales and value added sales by region for the fourth quarter and full year 2019, as compared to the prior year period.

As Majdi mentioned, our wheel share units decreased to 4.5 million units in the fourth quarter, compared to 5.2 million units in the prior year. For the full year 2019, wheel shipment units decreased to 19.2 million units compared to 21 million in the prior year.

The decrease in shipments was driven by the decline and the global industry production volume, lower production at our key customers and reduced share due to the focus on larger, more complex wheels.For the fourth quarter, we reported a net loss of $99 million or a loss of $4.25 per diluted share, compared to net income of $8 million or earnings of $0.61 per diluted share in the prior year period.

Our net loss in the fourth quarter of 2019 was impacted by a non cash goodwill and intangible asset impairment charge of $102 million related to the excess of carrying value over the estimated fair value of our European business unit.

The business unit fair value was lower due to a reduction in forecasted industry production volumes and shipments in our long range plan completed in the fourth quarter of '19 as compared to our prior year long range plan, which adversely impacted our cash flow and adjusted EBITDA expectations, resulting in the non cash charge.While we still anticipate strong performance out of our European business unit going forward compared to today the goodwill impairment reflects an adjustment from the prior outlook to the current outlook.

For full year 2019, we reported a net loss of $97 million or a loss of $5.10 cents per diluted share, compared to income of $26 million or earnings of $0.29 per diluted share in the prior period.

In addition to the goodwill and tangible impairment, we had restructuring and net other expense of $19 million, primarily due to the rationalization of our production facility during 2019. The total impact on diluted earnings per share of these items is $4.65.

Please see the table in the appendix for the impact of acquisition restructuring and other items on diluted EPS and the reconciliation from net income to diluted EPS.The income tax benefit for the fourth quarter was $4 million on a pre tax loss of $103 million compared to an income tax provision of $5 million on pre tax income of $13 million in the prior period.

The tax benefit for the quarter was primarily due to the effect of US taxation on foreign earnings under the provision of tax reform and the generation of additional post tax credits.

Based on our investments in Poland.Income tax provisions for the full year 2019 was $3 million on pre tax loss of $93 million compared to an income tax provision of $6 million on a pretax income of $32 million for the full year '18.

Similar to the results in the fourth quarter, the tax provision declined from 2018 to 2019 due to the effects of US taxation of foreign earnings under the provisions of tax reform and the generation of additional post tax credits. Cash taxes for the company in 2019 were $9 million, as compared to the prior year of $7 million.

We continue to work on tax planning strategies to minimize taxes.On slide 9, let me walk you through our change in net sales and value-added sales year-over-year for the fourth quarter of 2019. Value-added sales decreased to $173 million, compared to $206 million in the prior year period.

The decrease was driven by lower production volumes including the UAW labor strike as well as the weakened euro offset partially by higher content wheels.On slide 10, adjusted EBITDA was $38 million for the fourth quarter of 2019, compared to $46 million in the prior year period.

The decrease in adjusted EBITDA was primarily driven by, as I mentioned earlier, lower production volumes including the UAW labor strike and the weakened euro, which was partially offset by favorable Mexican peso rates. Despite these headwinds, the company successfully managed to align costs with production levels.

For reference, SG&A expense for the fourth quarter of 2019 was $17 million or 5% of net sales, flat compared to the prior year period.Moving to slide 11, which provides more detail on our full year 2019 sales results.

Net sales were $1.4 billion for the year, compared to $1.5 billion in 2018 and value-added sales for the year was $755 million, compared to $797 million in 2018. The reduction in value-added sales was primarily driven by lower volumes and the impact of a weaker euro, which had a negative impact of $24 million.Turn to slide 12.

Adjusted EBITDA was $169 million for the full year of 2019, compared to $186 million in the prior period. The decrease in adjusted EBITDA was primarily driven by lower volumes, higher energy costs and plant inefficiencies, partially offset by improved product mix comprised of larger diameter wheels, more premium content and procurement savings.

In the full year 2019, adjusted EBITDA as a percentage of value-added sales decreased by one percentage point to 22.3%. SG&A expenses for full year 2019 were $64 million or 5% of net sales, compared to $78 million in the prior period.

The decrease is primarily due to reduction in acquisition and integration expenses and the alignment of reporting for SG&A in both of our regions.Our full year cash flow and capital structure are addressed on slide 13.

Net cash from operating activities was $163 million, compared to $156 million in the prior period, despite $17 million of lower adjusted EBITDA and the initiation of the accounts receivable factoring program in the prior year, the improvement in operating cash flow was primarily due to net working capital management, including favorable inventory management and extended payment terms of suppliers, driven by our global supply chain team.Net cash used for investing activities was $55 million for a full year 2019, compared to $77 million in the prior year period.

Capital expenditures for the full year 2019 were $64 million versus $78 million in the prior period.

During 2019, we directed our capital expenditures towards the highest returning activities, including maintaining our equipment and facilities and investing in technologies and capabilities to support our customers' future platforms and a differentiated product portfolio.

As a reminder, in the third quarter, Superior suspended its quarterly common dividend, allowing the company to reallocate approximately $11 million annually.The $11 million of cash that is due to the common dividends without suspension will be used to invest in the business and reduce net debt.

Dividends paid for the full year totaled $23 million and purchases from minority holders of Superior Industries Europe total $7 million. At the end of the full year, we had approximately $6.5 million or 0.7% of the minority ownership outstanding.

Also during the year Superior repurchased $37 million face value of its 6% senior unsecured notes on the open market for $32 million, resulting in a pre tax net gain of approximately $4 million, which is included in other income and has been deducted to arrive at adjusted EBITDA.

The senior unsecured notes repurchased, repurchase is another debt payments resulted in the total reduction of $54 million of deference during the year.In summary, we ended the year with our net debt position $84 million lower than the prior year, and with $284 million of available liquidity.

The $284 million of availability includes cash and availability under our credit, revolving credit facilities. There are no near term maturities of our funded debt. By January 31, 2020, the available borrowing limit of our European credit facility was increased from €45 million to €60 million.

All other terms of the European credit facility remain unchanged. We also have incremental availability under accounts receivable factoring programs. As of the end of the full year, our net leverage was approximately 3.3 times down 0.2 turns from the prior year period.

Our cash flow and liquidity progression over the past two years is detailed further on Slide 14, where you can see that we have significantly increased our liquidity position overtime while generating substantially more free cash flow available to pay debt in 2019 as compared to 2018.Now on Slide 15, I'll move to our outlook for 2020.

For the full year 2020 given the current industry production outlook that we are seeing, we expect unit shipments to be in the range of 18.4 million to 19 million units. With regard to corona virus, we do not currently see a direct impact on our business.

If the impact on China continues there may be some supply opportunities within our facilities where we have capacity.

The impacts of the corona virus on the greater economies in North American and Europe are unknown at this time, and our guide does not incorporate any adverse impacts.Net sales are expected to be in the range of $1.33 billion to $1.39 billion, which as a reminder is impacted by aluminum prices.

Value added sales are anticipated has been the range of $750 million dollars to $790 million. We also expect a year over year increase in value added sales per wheel in 2020 as the guidance would imply. Adjusted EBITDA is expected to be in the range of $170 million to $190 million.

This range is supported by the already implemented initiatives Majdi discuss, including the rationalization of the vehicle production facility, the consolidation of the Polish and product line to Mexico, procurement savings, energy investments to reduce energy costs in Mexico, and an improvement in mix offsetting the lower volume outlook.

As well we have procurement savings initiatives in 2020, which will take effect for 2020. We should see a continued progression in EBITDA improvement as we move throughout the year.

Our outlook for cash flow and operations is anticipated to be in the range of $125 million to $145 million, which includes cash taxes and cash interest while capital expenditures are expected to be approximately $75 million.I want to open the call now for question and answer session focused on the results of the fourth quarter and the full year ended December 31, 2019.

While we have and we will continue to engage with investors on all matters relating to our 2020 Annual Meeting and our recommended slate of director nominees, we will not be addressing questions on these matters at this time.

Rest assured, in the coming weeks, we will be proactively engaging and meeting with our investors regarding these topics.With that, I'll turn the call back to the operator..

Thank you. [Operator Instructions]. We'll take our first question from Chris Van Horn with B. Riley FBR..

So, just starting on the guidance, especially on adjusted EBITDA.

What gets you to that higher end of the range and what are kind of the primary puts and takes on that 170 to 190?.

Fundamentally Chris, the main driver of the guide on all the initiatives that we've been discussing over the last couple of earnings calls, where we needed to execute to reduce costs or consolidate footprints to improve the portfolio, a lot of these actions in place and other have begun to take hold and we'll see that in our performance in 2020 results.

So, it's fundamentally that's what's in the guide right now..

Okay.

When I think about your underlying production assumptions, are you using, basically IHS or LMC data or are you adjusting that for your program or platform mix?.

No. The debate is really IHS data which is you take North America and Europe, Europe slightly down, North America flat. So, its really flat to slightly downwards. Clearly, we use customer schedules for the next 12 weeks and IHS going forward. We haven't seen any changes in these schedules from our customers.

Now remember, we are mainly a European and North American based company. As you think and take it forward and think of coronavirus and such, ultimately how that shakes out and the impact on the OEMs and they're scheduled and hence the impact on us, that remains to be seen. We have not incorporated that in our guide..

Okay. Got it. And then, sorry, just to stay on the guidance here. The cash from operations, you had a really strong 2019. It sounds like you're guiding for that to not be as high in 2020.

Can you give any detail on reduction in there?.

Well, I mean, if you think about it, we got a lot out of working capital, Chris in 2019. So, it's like a onetime improvement when you take it out of working capital. We're focused on sustaining it. We do have improvement actions outlined to continue to drive working capital improvements, so for instance, DIO and inventory levels.

So, I think that's one area of improvement that we are going to be looking at and executing on in 2020. But right now the guide is kind of what I'll say is, pretty standard from what we can generate, what we feel we can generate from the EBITDA levels that we are articulating.

And I said it sustains the working capital positions that we had end of the year in 2019. As you know, we're a little bit cyclical as a company, we tend to invest in the first half and then unwind, we have an aftermarket business in Europe, which requires us to fund some inventory as we build up inventory positions in the first half.

So, we have the seasonality to our working capital, but at the end of the year, I think we feel very confident in the ranges we've provided..

Okay, great, thanks for that color.

And then maybe shifting over to your technology and EV specifically, just remind us your content per vehicle on an EV versus maybe a traditional IC depending, obviously a 23 inch wheels is much more content than a 19, but maybe just an apples to apples the comparison between EV and IC for your opportunity?.

I mean, it depends.

So, we make big wheels, so we lightweight, the bigger wheels, some for some of the customers and so not all of them get, flow forming and alulite as Majdi mentioned earlier, so but electric vehicles are really it's all about light weighting and so it's much light weighting as we can we can put our alulite technology which is kind of a back cutting technology where we can carve off more of the aluminum we try to make them more aerodynamic clearly and there is still the aesthetic though that EV still want larger wheels.

So, you'll still see the 19 inch and 20 inch wheels in the electric vehicle market space. So, that trend is kind of still alive and well because there's an aesthetic view as well. But clearly, it's all about light weighting and it's definitely a value add that we get so we were able to charge more when we lightweight wheels..

Okay last for me, congrats on your on your PVD launch. Is that an end of is that contract with the F-150. Does that go through its current life cycle and then are you actively bidding for the next iteration of the F-150.

And then what's your initial take from the customer on how well that or how they're responding to that product?.

Chris, Ford is actually very excited about this technology, we actually have been awarded the PVD applications from the next generation of F-150, which is going to start in the summer and as I mentioned, we have a little bit more capacity on that we expect to very quickly engage with other customers. We're making good progress on that front.

It's a great story that the team has delivered here..

We'll take our next question from Richard Phelan with Deutsche Bank..

Thank you. I had three questions. First is, it wasn't clear to the status of the Fayetteville restructuring. If you could just update us in terms of are all the workers gone, what's the plan with the real estate there as we head in 2020.

Second question was around the working capital if you could just update us with the account receivable factoring outstanding at year end. And lastly, I'd love to get any comments you have.

You mentioned in the guidance that there's no adverse impact from corona virus, but perversely, your business is one of the few in the auto space which is a potential beneficiary, if I can say that, because so much of your competition has manufacturing in China.

And so I'm wondering if any color you can provide in terms of problems that your competitors may be facing, either starting up plants or otherwise?.

I'll take the first part then Majdi can add to the question. So, first part of the question was on Fayetteville. We have no production in Fayetteville after Q4, so December, workforce was rationalized, the production workforce was rationalized.

So, what we're doing now is cleaning up the facility, moving some equipment to various facilities around the globe, where we had equipment that we wanted to utilize, which should help offset some of the CapEx needs of the company on a go-forward basis. So, we have a, I don't want to give the exact number, but there's a very small workforce left.

Would you have an engineering center, which we will maintain in Fayetteville and we have no plans to change or modify the engineering center that's there while we have R&D type of capabilities and test capabilities. So, we'll continue with our engineering center in Fayetteville. As far as the building goes, we haven't made any announcements.

We have a lot of work to do to clean it up and the equipment. But, but I would say that, there's not a significant amount of proceeds coming that would change the cash flow, if that's what you're getting at. As far as AR factoring goes, we ended the year $10 million lower than the prior year for AR factoring.

So, we've got about $45 million in total AR factory and totally about $45 million of AR factory at the end of the year.

So, we have to lower the water level up from a factoring perspective.And then specifically on your China question, we have received calls over the course of the last two weeks from various OEMs, inquiring on our capacity and where we have open pockets of capacity. So, we believe that potentially it could be a tailwind.

If nothing else, it could be neutral to us, but there could be a tailwind coming. So, from a supply chain standpoint, I don't want to comment on where the competitors are at and if they're having difficulty, but we have had inquiries in the last two weeks.

Majdi, anything you want to add to this?.

Yeah. Just to frame the implication for our business on the coronavirus. So, first and foremost, from an exposure standpoint, we do not have operations in China. We don't ship product directly into China. So, that's first. Second, in terms of from a supply chain, we actually have very limited exposure there. We have some tools and some indirect material.

The team has done a great job of putting in place mitigation plans, and resourcing tools where it makes sense. We have a limited exposure in the context where our OEMs ship the vehicles into China, and that's a very, very low percentage of our exposure out of Europe.

Now having said that, what is going to happen with customers and production until, as you know, that remains to be seen and clearly the impact as it comes. We will have to respond. And finally, as Matti mentioned, in terms of opportunities, our customers know our footprint very well.

They're looking for us and support them as they pull together their risk mitigation plans for exposure to their supply chain from China and we're working to support them where we can..

Is it early to say, any impact at this point?.

That's correct..

Okay, great. Thank you very much..

We'll take our next question from Stephanie Vincent with JP Morgan..

Hi. Thank you very much for taking my questions. Thank you for addressing the coronavirus. Just to press a little bit more on the details on your supply chain, listening to BASF and the chemical guys they were talking about, just having a few weeks of inventory didn't know if you had some thoughts on that.

And then I know China is biggest risk, however Italy is it becoming a bigger risk and there's obviously some quarantine there. So I'd like to hear your views on your exposure to manufacturing in the Italian market. And then my second question is just to piggyback on Chris's on IHS.

So, you had another supplier on board yesterday expecting global production down between 5 to 7, which was pretty aggressive versus IHS's expectations. So, how much room do you feel like your guidance has versus the current IHS expectations.

Let's say they were going to move more towards the five level down five level versus where they are today which i believe is down twoish..

Maybe you repeat the question because….

So, Stephanie it was very hard to hear you. So, you were coming in and kind of every third or fourth word was skipped. If I understand the question, the first question was on supply chain and the exposure to corona virus in our supply chain.

Is that correct?.

Yes, so my questions were, can you hear me better now?.

We can hear you better now. Yes..

So my first question was on the corona virus. Thank you for the detail. I just wanted to ask a question on your Italian manufacturing exposure given some of the, I guess quarantining activities we have there.

And then also in your supply chain, I guess we could say chemical players say that they only have a few weeks left of inventory, didn't know your views on dual sourcing on the chemicals side.

And then finally, just on your expectations for IHS, you had a supplier yesterday, coming out with a negative 5 to 7 global production view, I know that you have your North American and European exposure, but if we didn't need that global production, more towards the down five versus IHS, so how much on-cushion do you have in your asset demand?.

So, the supply chains, we've assessed our supply chain, and we don't believe we've got significant risk. We do have some exposure, specifically tooling, some tooling and some indirect spend in China. We've been at it we've been able to get the tools out of China prior to the kind of crisis really breaking.

And we were and we've got alternate sources at equal costs. So we don't necessarily see a big, big issue for us in our supply chain. That's number one.

For the Italian manufacturing standpoint, as you are aware, I think our big three customers are the big three German customers and they don't have a huge footprint within the Italian now the sales side of it could get impacted, but we don't believe the production size going to be dramatically impacted now as it spreads throughout, if it continues to spread and are the cells that continue to spread, we don't have a view on the impact.

I would say that I don't have a view on what would happen if the corona virus were to expand.

And then from a room against guidance standpoint, and look I think we would have to come back and assess what a 5% global production but I believe that supplier has China exposure and so that's where the what was driving the guidance the guide down, but we have very little China exposure.

There is some exposure to some of our customers that export product from Europe to China. But that's pretty much as you know Jaguar, Land Rover is a big one that does that. We have nominal exposure to Jaguar and Land Rover and we wouldn't expect to be normally impacted from export sales to China..

[Operator Instructions] We'll take our next question from Glenn Chin with Buckingham Research..

Just going back to the guidance, Matti, I think in your comments you mentioned that you expect continued improvement in EBITDA as you progress through the year.

Is that a function of the volume backdrop that you guys envision or is it a function of the initiatives that you have with respect to efficiency and operational, et cetera?.

It's the latter part. So, I'll just say that from a launch perspective, we're a little heavier in the first half than we are in the second half from a launch perspective, launches are about flat year-on-year, so overall launches. So, we're a little heavier in launch activity in the first half. That's one consideration.

Number two is we are going procurement savings as we drive more procurement savings we have a central procurement team actively engaged in our global spending and trying to global source the buy and so we're going to see continued improvement and all of the initiatives will take hold, as we move throughout the year.

Now, many of the initiatives as Majdi mentioned were implemented for instance for vehicle production rationalization. It was done in Q4. So, that one's done. But as you move forward, we'll continue to see energy savings kind of ramp up as we go through 2020. So, it's going to be, we should see improvement as we go forward from EBITDA perspective..

Okay. Very good. Thanks. And then just some questions on VAS.

Can you guys share what the impact from the UAW strike was in VAS terms?.

We can't give you the VAS terms, so we had approximately 300,000 units related to the UAW strike..

Yeah. Okay. And then, sort of sticking to VAS. So, your proportion of 19 inch wheels acting down slightly sequentially.

Is there any seasonality to that or is that a function of the GM strike?.

Well, it's definitely going to be GM strike and I'd just say overall mix, but certainly the GM strike impacted it..

Okay.

And then may I ask still on VAS, year-over-year VAS declined more than unit sales, why is that, if mix was a tailwind?.

Give me a second here..

Right. The share or the proportion of 19 inch wheels in larger was greater year-over-year, and then I'm assuming a complexity et cetera was also a tailwind, but VAS was down more than unit sales..

Yeah, I think as you go quarter-to-quarter, VAS is not always going to be on the North side going up quarter in and quarter out. Fairly Q4 heavily impacted with the UAW strike and then as we kind of look forward, we should be seeing going forward continue to see penetration, 19 inch wheel space and premium content.

So, we're going to continue to see expansion in VAS sales.

So, specifically on a per unit basis, but Troy wanted to add something?.

Yeah. Glenn, as you know, mix can have an impact so we like to use the 19 inch and greater as a barometer, but a smaller diameter wheel with a premium finish can have a higher VAS, value-added sales per wheel selling price, that does come in to the mix although we close the 19 inch and greater..

Yeah. Okay. Very good That's it for me gentlemen. Thank you..

And we have no more questions in the queue at this time..

Thank you everyone..

Thank you..

This concludes today's call. Thank you for your participation. You may now disconnect..