Business Overview and History
Cooper-Standard Holdings Inc. (CPS) is a leading global manufacturer of sealing and fluid handling systems for the automotive industry. The company's products are primarily designed for passenger vehicles and light trucks manufactured by original equipment manufacturers (OEMs) worldwide. Despite facing headwinds in the automotive sector, Cooper-Standard has demonstrated its ability to adapt and maintain operational excellence, positioning the company for continued success.
Cooper-Standard Holdings Inc. was established in 2004 as a Delaware corporation and began operating on December 23, 2004, when it acquired the automotive segment of Cooper Tire & Rubber Company. The company operates primarily through its principal operating subsidiary, Cooper-Standard Automotive Inc. (CSA U.S.).
Throughout its history, Cooper-Standard has faced various challenges, including uncertain economic conditions, commodity price volatility, and global supply chain disruptions. The company has worked to navigate these challenges through operational excellence initiatives, restructuring actions, and portfolio optimization.
In 2018, Cooper-Standard further expanded its Industrial and Specialty Group (ISG) business through the acquisition of Lauren Manufacturing and Lauren Plastics. From 2018 to 2021, the company signed multiple joint development agreements for its Fortrex chemistry platform. In 2021, Cooper-Standard reached a long-term commercial agreement to license its Fortrex technology to NIKE, Inc., demonstrating the versatility and value of its innovations beyond the automotive sector.
As part of its strategy to optimize its portfolio and focus on core products and markets, Cooper-Standard finalized the divestiture of its European technical rubber products business in 2023. Additionally, the company sold its entire controlling equity interest in a joint venture in the Asia Pacific region.
The company operates in 75 manufacturing locations and 49 design, engineering, administrative, and logistics facilities across 20 countries. Cooper-Standard believes it is the largest global producer of sealing systems, the second-largest global producer of fuel and brake delivery products, and the third-largest global producer of fluid transfer systems. The company's products are featured on more than 430 vehicle nameplates globally, with approximately 86% of its sales in 2024 coming directly from OEMs.
In 2024, Cooper-Standard realigned its reporting structure to focus on two global product line-based business segments: Sealing Systems and Fluid Handling Systems. This strategic move was designed to optimize asset and resource allocation, enhance operating efficiency, and accelerate growth. The company's commitment to operational excellence is reflected in its industry-leading safety performance, with a total incident rate of just 0.30 per 200,000 hours worked in 2024, surpassing its previous best and well below the world-class benchmark.
Financial Performance and Resilience
Despite facing industry-wide challenges, Cooper-Standard has demonstrated its financial resilience. In 2024, the company reported sales of $2.73 billion, a 3% decrease compared to 2023, primarily due to unfavorable volume and mix, divestitures, and foreign exchange. However, the company's adjusted EBITDA for the full year increased to $180.7 million, up from $167.1 million in 2023, driven by improved operational efficiencies and cost savings initiatives.
On a GAAP basis, Cooper-Standard reported a net loss of $78.7 million for the full year 2024, a significant improvement from the $202 million net loss in 2023. After adjusting for special items, the company's adjusted net loss was $56.7 million, or $3.23 per diluted share, compared to an adjusted net loss of $82 million, or $4.74 per diluted share, in the prior year.
The company's focus on cost control and operational efficiency is reflected in its capital expenditures, which decreased from $80.7 million, or 2.9% of sales, in 2023 to $50.5 million, or 1.8% of sales, in 2024. Cooper-Standard also generated positive free cash flow of $25.9 million for the full year 2024, a testament to its ability to navigate challenging market conditions.
In the fourth quarter of 2024, Cooper-Standard reported revenue of $660.8 million, a 1.9% decrease year-over-year due to unfavorable foreign exchange, customer price adjustments, and lower production volumes. However, the company saw a significant improvement in profitability, with adjusted EBITDA increasing 96.8% to $54.3 million. Net income for Q4 2024 was $40.2 million, with quarterly operating cash flow of $74.7 million and quarterly free cash flow of $63.2 million.
For the full year 2024, Cooper-Standard reported annual operating cash flow of $76.4 million. The company's performance varied across geographic markets, with approximately 59% of 2024 sales generated in North America, 22% in Europe, 15% in Asia Pacific, and 4% in South America.
Liquidity and Debt Management
As of December 31, 2024, Cooper-Standard had $170 million in cash and cash equivalents and an additional $169.2 million available under its $180 million ABL Facility, resulting in total liquidity of nearly $340 million. The company's net debt position stood at $930.2 million at the end of 2024.
Cooper-Standard has been proactive in managing its debt, with the recent expiration of the no-call provision on its first lien and third lien notes. The company is closely monitoring the credit markets and evaluating opportunities to potentially refinance its debt in order to improve its capital structure and lower its overall cost of capital.
Key financial ratios as of December 31, 2024, include: - Debt/Equity ratio: -9.13 - Current ratio: 1.40 - Quick ratio: 1.15
The company believes it can reduce its net leverage ratio to around 2x or lower over the 2025-2027 timeframe, even at the base case of current estimates for global production volumes.
Innovation and Growth Opportunities
Cooper-Standard's strong focus on innovation has enabled the company to deliver value-added solutions to its customers. The company's i3 Innovation Process (Imagine, Initiate, and Innovate) has resulted in the development of several award-winning technologies, such as the Fortrex chemistry platform, FlexiCore Thermoplastic Body Seal, and the Plastic Coolant Hub.
These innovations have been recognized by industry organizations, including the Environment & Energy Leader Award, the General Motors Overdrive Award for Sustainability, and the Society of Plastics Engineers Automotive Innovation Award. The company's innovations are designed to help customers meet their goals for weight reduction, ease of assembly, system efficiency, and environmental sustainability.
Cooper-Standard is also well-positioned to capitalize on the industry's shift towards hybrid and electric vehicles. The company's products are well-suited to these evolving powertrain technologies, with the potential for increased content per vehicle compared to traditional internal combustion engine platforms.
Segment Performance
Sealing Systems Segment: The Sealing Systems segment is Cooper-Standard's largest product line, accounting for over 50% of the company's total sales in 2024. This segment designs and manufactures products that protect vehicle interiors from weather, dust, and noise intrusion, enhancing the driving experience. Cooper-Standard believes it is the largest global producer of sealing systems.
Key products in the Sealing Systems segment include the Fortrex materials platform, FlexiCore Thermoplastic Body Seal, dynamic seals, FlushSeal sealing systems, static seals, variable extrusion, encapsulated glass, Tex-A-Fib Textured Surface with Cloth Appearance, stainless steel trim, and obstacle detection sensor systems.
In 2024, the Sealing Systems segment generated $1.42 billion in sales, down 1.4% from the prior year due to lower customer volumes and recoveries, partially offset by favorable foreign exchange. Segment adjusted EBITDA was $126.5 million, up 10.8% year-over-year, driven by cost savings initiatives and lower material costs, which more than offset unfavorable volume, mix, and inflation.
Fluid Handling Systems Segment: The Fluid Handling Systems segment accounted for 45% of Cooper-Standard's 2024 sales, producing products that sense, deliver, connect, and control fluid systems for fuel, brake, and thermal management applications. Key product lines include Fuel and Brake Delivery Systems and Fluid Transfer Systems.
In 2024, the Fluid Handling Systems segment generated $1.24 billion in sales, down 2.0% from the prior year due to lower customer volumes, partially offset by favorable foreign exchange. Segment adjusted EBITDA was $77.7 million, up 3.9% year-over-year, as manufacturing and material cost savings more than offset the impact of lower volumes and inflation.
Corporate, Eliminations and Other: This category includes all other business activities not specifically attributed to the Sealing Systems or Fluid Handling Systems segments. In 2024, sales in this category were $74.0 million, down 30.4% from the prior year, primarily due to divestitures. Adjusted EBITDA for this category was a loss of $23.5 million, compared to a loss of $22.0 million in 2023.
Outlook and Guidance
For 2025, Cooper-Standard expects flat or slightly lower sales, driven by weak production volume forecasts. The company anticipates further cost savings through improved operating efficiencies and lean initiatives, including actions to lower raw material costs. Cooper-Standard expects to benefit from a full year of savings related to the restructuring implemented in Q2 2024.
The company is confident that the combination of increased operating efficiency and the ramp-up of higher margin business will enable it to achieve its strategic target of double-digit EBITDA margins as it exits 2025. Cooper-Standard expects its free cash flow in 2025 to again be positive, based on its current outlook and expectations for improving operational efficiencies and savings initiatives.
Risks and Challenges
Like other automotive suppliers, Cooper-Standard faces risks associated with volatile commodity prices, supply chain disruptions, and fluctuations in global vehicle production volumes. The company's international operations also expose it to currency exchange rate fluctuations and geopolitical risks.
Additionally, the highly competitive nature of the automotive supplier industry, with ongoing pricing pressures from OEMs, presents a continuous challenge for Cooper-Standard. The company's ability to maintain its operational efficiency and cost discipline will be crucial in navigating these industry-wide headwinds.
The global automotive industry is susceptible to uncertain economic conditions that could adversely impact new vehicle demand and production. The global light vehicle production CAGR is expected to be negative 0.5% from 2024 to 2025, presenting additional challenges for the company.
Conclusion
Cooper-Standard's resilient performance in the face of industry challenges underscores the company's operational excellence and commitment to innovation. By realigning its organizational structure, driving cost savings, and developing cutting-edge products, Cooper-Standard has positioned itself for continued success. While the automotive industry navigates ongoing volatility, Cooper-Standard's focus on financial discipline, liquidity management, and strategic growth initiatives positions the company as a well-equipped supplier capable of weathering market fluctuations and capitalizing on emerging industry trends.