Horizon Global Corporation, a manufacturer of branded towing and trailering equipment last week reported fourth-quarter and full-year financial results for 2021.
“Our Q4 and full-year 2021 financial performance is consistent with the preliminary results communicated in mid-February,” stated Terry Gohl, Horizon Global’s President and Chief Executive Officer. “Our net sales during Q4 2021 were significantly impacted by macroeconomic headwinds, including supply chain, logistics, and material constraints, which resulted in approximately $31.0 million of delayed sales as we exited the quarter. In addition, increased steel and freight costs, up approximately 145% and 209%, respectively, in the Americas, and operational inefficiencies relating to last-minute OEM production changes drove lower gross profit and Adjusted EBITDA levels.”
Gohl continued, “While our pricing actions to recover material economics are largely complete, implementation of pricing generally lags one to two quarters and, as a result, will be recognized in 2022. The previously mentioned macroeconomic headwinds, coupled with a strategic build of high-volume SKUs ahead of the 2022 selling season, drove a substantial increase in inventories at year-end. Inventories are expected to return to more normalized levels as we reduce purchases in 2022 and, importantly, deliver against both our Americas year-end open order book of $57.1 million and expected demand during the 2022 selling season.”
2021 Fourth Quarter Segment Results
Horizon Americas – Net sales increased $5.6 million, or 5.8%, to $102.4 million when compared to the fourth quarter of 2020. The net sales increase was primarily driven by a $6.0 million combined increase in the retail and industrial sales channels. Gross profit decreased $6.7 million, driven by unfavorable cost performance, primarily attributable to unfavorable material, supply chain, and other manufacturing input costs, partially offset by related customer price increases, associated with global macroeconomic factors. Adjusted EBITDA decreased to $3.5 million for the quarter, as compared to $10.9 million for the fourth quarter of 2020, driven primarily by the unfavorable gross profit.
Horizon Europe-Africa – Net sales decreased $17.2 million, or 21.7%, to $61.9 million when compared to the fourth quarter of 2020. The net sales decrease was primarily driven by a $12.5 million decrease in the automotive OEM sales channel, as well as a $5.5 million combined decrease in the automotive OES and aftermarket sales channels. Gross profit decreased $10.2 million, due to lower net sales, coupled with unfavorable material, supply chain, and other manufacturing input costs associated with global macroeconomic factors, which were not able to be fully recovered via commercial pricing recoveries. Adjusted EBITDA declined to $(7.0) million for the quarter, as compared to $2.5 million for the fourth quarter of 2020, driven by the unfavorable gross profit.
Balance Sheet and Liquidity – Cash and Availability was $39.2 million, a reduction of $44.2 million compared to December 31, 2020. Working Capital was $108.8 million, an increase of $53.2 million compared to December 31, 2020, primarily driven by increased inventory levels. The increased inventory was attributable to global macroeconomic factors, including increased commodity and logistics costs, and supply chain and material constraints. Gross debt increased $34.8 million to $300.9 million compared to December 31, 2020, primarily reflecting additional borrowings on the Company’s ABL, due to additional working capital needs.
Summary
Gohl commented, “Horizon Global’s 2021 performance did not meet our expectations. This performance was driven by an extremely challenging back half of the year as supply chain, logistics and material constraints throttled our net sales levels and drove significantly higher input costs. These constraints will not disappear overnight, but we view them as relatively short-term and believe we are positioned to deliver strong financial results as 2022 progresses. Our inventory position will allow us to address our open order book and continued heightened demand. Expected lower steel costs and the implementation of a multi-port strategy should result in lower input costs during 2022. Further, commercial pricing recovery recognized throughout 2022 should further bolster gross profit levels.”
Gohl closed, “I’d like to take this opportunity to thank the global team for their continued dedication throughout unprecedented circumstances. The foundation of our business is solid and we remain focused on creating long-term value for shareholders.”
About Horizon Global
Headquartered in Plymouth, MI, Horizon Global is the #1 designer, manufacturer, and distributor of a wide variety of high-quality, custom-engineered towing, trailering, cargo management, and other related accessory products in North America and Europe. The Company serves OEMs, retailers, dealer networks, and the end consumer as the category leader in the automotive, leisure, and agricultural market segments. Horizon provides its customers with outstanding products and services that reflect the Company’s commitment to market leadership, innovation, and operational excellence. The Company’s mission is to utilize forward-thinking technology to develop and deliver premium products for our customers, engage with our employees and realize value creation for our shareholders.
Horizon Global is home to some of the world’s most recognized brands in the towing and trailering industry, including: Draw-Tite, Reese, Westfalia, BULLDOG, Fulton, and Tekonsha. Horizon Global has approximately 3,800 employees.
For more information, please visit www.horizonglobal.com.