Sypris Reports Double-Digit Revenue and Margin Growth Forecast for 2019

Estimated reading time: 6 minutes

Sypris Solutions, Inc. reported financial results for its fourth quarter and full year ended December 31, 2018. Net revenue for the full year 2018 increased 6.9% over 2017 and gross margin improved 460 basis points. These improvements continue to reflect the successful implementation of strategic initiatives to better align the Company's revenue and cost structure and diversify the Company’s book of business, both in terms of customers and markets.

Highlights:

• The Company’s fourth quarter revenue increased 11.5% over the prior-year quarter and 13.5% sequentially, with both segments contributing to the improvements.
• Full-year revenue increased 9.0% for Sypris Technologies and 2.7% for Sypris Electronics, underscoring favorable market conditions and strong customer relationships.
• Gross margin for Sypris Technologies increased to 14.3% of revenue for the quarter, up from 11.3% in the prior-year period and up from 8.9% sequentially, reflecting mix and productivity improvements.
• Gross margin for Sypris Technologies increased to 12.6% in 2018, up from 1.4% in 2017, primarily attributable to the full-year impact of cost structure reductions, revenue growth and operational improvements.
• Company gross margin for the full year more than doubled in 2018, reaching 8.6% compared with 4.0% for the prior-year.
• During the fourth quarter, the Company entered into a series of supply agreements with Sistemas Automotrices de Mexico, S.A. de C.V. (“Sisamex”), to supply Sisamex with a variety of driveline components for use in the commercial vehicle, agricultural and all-terrain markets.
• The Company’s outlook for 2019 includes revenue of $100-$110 million, representing 19% year-over-year growth at the midpoint, and gross margin of 14%-16%, with both business segments forecasted to register solid profitability for the year.

“We were pleased with the year-over-year revenue growth and margin expansion at Sypris Technologies,” commented Jeffrey T. Gill, president and chief executive officer. “Shipment volumes remained strong in the quarter to support demand coming from the automotive and commercial vehicle markets, which experienced a 17% increase in shipments on a year-over-year basis.

“We also experienced strengthening demand for our energy-related products, which resulted in a 22% increase sequentially in revenue. A number of production, supply and other constraints that we experienced in the previous quarter were mitigated in the current period.

“During the fourth quarter, the Company entered into a series of agreements to continue to supply axle shafts to Sisamex, in addition to the introduction of new driveline products for use in the commercial vehicle, agricultural and all-terrain markets. Sisamex is a long-term strategic partner, and expanding the range of products we supply further strengthens this relationship. We expect to begin production on the new products during 2019,” he continued.

“While shipments at Sypris Electronics were generally on plan for the quarter, its results were adversely affected by operational challenges as we neared completion on an engineering manufacturing development program that included numerous design and material changes, and the ramp-up on a new program on which we incurred an unexpected level of inefficiencies. Aside from operational challenges during the fourth quarter, we recognized charges totaling approximately $0.9 million for a physical inventory adjustment, which we performed at year-end concurrent with our implementation of a new ERP system, and an increase to our reserve for excess and obsolete inventory on certain specific programs.”

Concluding, Gill said, “We continue to see strong demand in each of our primary markets to support our revenue outlook for 2019. Our customer base and the markets we serve remain resilient and are considerably more diversified than at any point in our recent history. We are confident that the combination of our forecasted revenue growth and lower fixed manufacturing overhead costs, driven by effective cost-reduction actions, will contribute to our expected return to profitability in 2019.”

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