Horizon Global, a manufacturer of branded towing and trailering equipment, today expressed disappointment over the results of its financial report for the first quarter of 2022.
“We are extremely disappointed with our results for the first quarter,” stated Terry Gohl, Horizon Global’s president and chief executive officer, in a press release. “We were faced with a number of challenges, some were outside our control, and others we should have controlled better.”
For Horizon Americas, net sales decreased by $7.9 million (7.2%) to $101.9 million versus the same period last year. This decrease was driven by an $8.3 million combined reduction in the aftermarket and automotive OEM sales channels. Gross profit decreased $16.4 million, driven by lower net sales, combined with unfavorable manufacturing input costs, primarily increased material costs, and only partially offset by customer pricing recoveries
Horizon Europe-Africa also saw some decreases. Net sales dropped $10.4 million (11.7%), to $78.9 million than the first quarter of 2021. This decrease was primarily due to an $8.6 million reduction in the automotive OEM sales channel driven by lower volumes from rapid customer disruptions, the company said.
Under the same segment, net sales were negatively impacted by $5.7 million of unfavorable currency translation in the first quarter of 2022. Gross profit decreased by $4.0 million, driven by lower net sales, coupled with unfavorable manufacturing input costs, primarily increased material costs, and operational inefficiencies due to sudden customer disruptions.
Still, Gohl’s outlook remains positive, assuring that the company is taking immediate steps to address the challenges moving forward.
“[A]s we enter the selling season, we expect to recognize the benefits of robust inventory levels resulting from our strategic build in the fourth quarter of 2021 and the first quarter of 2022. We are also throttling our purchase levels, which, together with natural inventory attrition during the selling season, should significantly taper down our inventory levels and optimize our working capital position over the next few quarters,” he said.
Horizon is now experiencing a shift back to seasonal order patterns for its higher-margin non-OE business after almost two years of demand for its products. This shift impacted net sales levels during the first quarter of 2022, Gohl said.
Global supply chain bottlenecks continued to impact the company during the first quarter of 2022, as per Horizon Global’s president and CEO. Moreover, the Russia-Ukraine war aggravated OEM production disruption in Europe, resulting in peak disruption at 17 customer assembly plants Horizon supplies across Europe in March 2022.
“While there is no set timetable for a return to ‘normal’, the global market outlook for OEM production remains strong for the remainder of 2022,” Gohl declared.
For Horizon’s balance sheet and liquidity, Cash and Availability was $47.4 million, an increase of $8.2 million compared to December 31, 2021. The company also reported a Working Capital of $111.2 million, an increase of $2.4 million compared to December 31, 2021 while gross debt increased $42.8 million to $343.6 million compared to December 31, 2021, primarily reflecting $35.0 million of additional borrowings under the company’s term loan facility during the first quarter of this year.
In summary, Gohl said that the company has “taken a proactive approach to mitigate the impact of uncontrollable outside factors” with material costs at the top of the list.
Horizon Global has also fully implemented pricing recovery actions with non-OE customers and has either implemented or remains in active discussions with OE customers. As a new quarter is underway, the company anticipates reaping the benefits of its pricing actions this year.
“This recovery, together with expected favorability in volumes and softening in steel and average freight cost inflation, should positively impact our performance in 2022,” Gohl said.
In his closing remark, Gohl said: “We are not pleased with our performance in the first quarter and we are determined to do a better job in addressing the very dynamic and ever-changing markets that we serve around the globe. I want to thank our employees and key stakeholders for their support as we take immediate action to improve our performance going forward.”
Horizon Global will host a conference call regarding first quarter 2022 earnings on Thursday, May 5, 2022 at 8:30 a.m. Eastern Time. The conference call will be hosted by Horizon Global’s president and CEO Terry Gohl and Chief Financial Officer Dennis Richardville.
Participants on the call are asked to register five to ten minutes prior to the scheduled start time by dialing (844) 825-9786 and from outside the U.S. at (412) 902-4185. Please use the conference identification number 10165103.