Linamar Corporation · TSX:LNR
Linamar — Q3 2021 Earnings Presentation
57 slides from Linamar's earnings presentation, Nov 9, 2021
Slide 1: Q3 Conference Call Presentation
Q3 Conference Call Presentation For Audio Only Dial in: Linda Hasenfratz North America: (877) 668-0168 International: (825) 312-2386 November 9, 2021 Conference ID: 3374269
Slide 2: Forward Looking Information, Risk and Uncertainties
Forward Looking Information, Risk and Uncertainties Certain information regarding Linamar set forth in this presentation and oral summary, including management’s assessment of the Company’s future plans and operations may constitute forward-looking statements. This information is based on current ex
Slide 3: COVID-19 Update
COVID-19 Update © Linamar Corporation 3
Slide 4: Current Focus
Current Focus WFH Analysis Overall Workforce Q3 2021 1% ▪ Safe Workplace 0% ▪ Ensure we continue to maintain a safe work environment ▪ Start easing protocols in line with regional bylaws ▪ Vaccinations 98% ▪ Continue to encourage employees to get fully At Work At Home Hybrid vaccinated WFH Analysis
Slide 5: Sales, Normalized Earnings and CPV
Sales, Normalized¹ Earnings and CPV 1 –Management uses certain non-GAAP financial measures including normalized earnings which exclude foreign exchange impacts and the impact of unusual items when analyzing consolidated and segment underlying operational performance. For more information refer to th
Slide 6: Sales, Normalized Earnings, and Margins (in millions CAD)
Sales, Normalized Earnings, and Margins (in millions CAD) Q3 2021 The key impacts to the segments vs prior Q3 2021 Q3 2020 %Δ The key factors impacting results in year are: the quarter are: Mobility Sales 1,645.0 1,637.4 0.5% ▪ Strong market demand in all ▪ Global light vehicle markets down 20% offs
Slide 7: Automotive Sales & Content Per Vehicle (CPV)
Automotive Sales & Content Per Vehicle (CPV) CPV Q3 2021 CPV Q3 2020 CPV % Change Vehicle Production Automotive Automotive Automotive Units % Change Sales Q3 2021 Sales Q3 2020 Sales % Change (CAD Millions) (CAD Millions) North America 201.78 181.50 11.2% (23.7%) 636.3 750.3 (15.2%) Europe 96.83 76.
Slide 8: Commercial & Industrial Sales (in millions CAD)
Commercial & Industrial Sales (in millions CAD) Q3 2021 Q3 2020 % Change ▪ MacDon ▪ Draper header market up 20% in NA2 in Q3; Sales 510.0 358.9 42.1% ▪ Solid market share gains in both draper headers and windrowers globally driving strong sales growth. ▪ Skyjack ▪ Global markets up more than 50% ove
Slide 9: Capital Expenditures (in millions CAD)
Capital Expenditures (in millions CAD) Q3 2021 Q3 2020 ▪ Capex down from 2020 as we continue to conservatively manage cash in a volatile environment; Capital Expenditures (Capex) 58.6 73.9 ▪ Flexible equipment allows us to continue to grow and tool up programs until market volumes pick up; Capex as
Slide 10: Cash Flow Continues to be a Key Priority
Cash Flow Continues to be a Key Priority 1,300 45% ▪FCF1 in Q3 $224 million. 1,200 1,100 40% ▪ 14th consecutive quarter of positive FCF. 1,000 35% ▪FCF Yield has been consistently >20% since 2019. 900 30% 800 762.7 ▪Liquidity1 excellent with $1.8 billion of $ Millions 700 25% 600 500 527.8 20% cash
Slide 11: Leverage (in millions CAD)
Leverage (in millions CAD) Q3 2021 Q2 2021 Q3 2020 ▪ We have brought down nearly $2.2 Billion in net debt from our peak in early 2018 and are now in a cash Net Debt (5.7) 198.7 876.7 positive position. Net Debt to EBITDA (0.01)x 0.17x 1.11x ▪ Our strong cash position has prompted us to return cash t
Slide 12: Challenges
Challenges © Linamar Corporation 12
Slide 13: Disruptions
Disruptions Semi Conductor Chip Major Increases in Shortages Shipping Costs Spiking Commodity Prices Labour Challenges © Linamar Corporation 13
Slide 14: Semiconductor Chip Shortage – Light Vehicle Production Impact
Semiconductor Chip Shortage – Light Vehicle Production Impact Total forecasted 2021 volume loss of 11.5M units. Announced volume loss of 9.2M units YTD. Supply disruption expected to continue in 2022. Estimated Volume Loss by Quarter Estimated Volume Loss by Region 5.0 5.0 4.53 4.00 4.0 3.46 4.0 3.3
Slide 15: Semiconductor Chip Shortage by Far Biggest Issue
Semiconductor Chip Shortage by Far Biggest Issue But Not the Only One… Heightened disruption continues into fourth quarter with little visibility; risk of public health measures and energy shortages disrupting other supply chains is also increasing Thousands Source: IHS Markit, October 2021 © Linama
Slide 16: Commodity Prices a Challenge
Commodity Prices a Challenge Pass Through for Mobility, Less Flexibility in Industrial Steel Plate (CDN) - per metric ton Aluminum (USD) - per lb $1,200.00 $1.40 $1,000.00 $1.20 $1.00 $800.00 $0.80 $600.00 $0.60 $400.00 $0.40 $200.00 $0.20 $- $- Feb-20 Feb-21 Dec-19 Jun-20 Dec-20 Jun-21 Aug-20 Aug-2
Slide 17: Ocean Freight Continues to be A Key Concern
Ocean Freight Continues to be A Key Concern… Ocean Lane Increases $27,500 $22,500 India 40' $17,500 Germany 40' USD S.Korea 40' China 20' $12,500 China 40' MacDon Japan 20' MacDon Germany 40' $7,500 $2,500 © Linamar Corporation 17
Slide 18: Natural Gas Prices up Nearly Fold in Europe
Natural Gas Prices up Nearly 5 Fold in Europe European Unions Natural Gas Import Price 35 30 31.05 25 USD/MMBtu 20 15 10 5 0 Jan '21 Feb '21 Mar '21 Apr '21 May '21 Jun '21 Jul '21 Aug '21 Sep '21 Oct '21 Europe Natural Gas Prices Source: Data from World Bank. © Linamar Corporation 18
Slide 19: Energy Cost and Availability An Issue
Energy Cost and Availability An Issue And One We Will Live with for Some Time… ▪ Natural gas and power prices in Europe and Asia at record highs, US prices have doubled ▪ Demand is rebounding ▪ Producers have been slow to increase output ▪ Carbon offsets are pricey – everyone shifting from coal to g
Slide 20: Key Issues on People Side – Turnover and Availability of People
2 Key Issues on People Side – Turnover and Availability of People TURNOVER AVAILABILITY © Linamar Corporation 20
Slide 21: Market Outlook
Market Outlook © Linamar Corporation 21
Slide 22: Market Snapshot
Market Snapshot Commercial Combine Commercial 2021 Light Vehicle Truck Heads Access 2022 Light Vehicle Truck Access North North America ▼-0.2% ▲32.9% ▲20.0% ▲30.9% America ▲17.2% ▲8.7% ▲25.0% Europe Europe ▼-3.3% ▲24.6% ▲10.0% ▲37.4% ▲16.1% ▲2.3% ▲18.1% Asia ▲0.7% ▼-17.1% n/a ▲147.1% Asia ▲6.3% ▼-26
Slide 23: US Light Vehicle Inventory – Days' Supply
US Light Vehicle Inventory – Days’ Supply Will Take Years To Replenish Inventory Levels Regardless of Demand… Change vs Same Period Last Year 180 Overall -33 160 140 GM -22 120 Ford -34 100 Stellantis -27 80 60 Toyota -28 40 Honda -60 20 84 74 68 72 64 68 65 68 65 75 72 61 88 77 68 76 64 67 66 61 66
Slide 24: Global Light Vehicle Market: Q3 2021, Q4 2021 and 2021
Global Light Vehicle Market: Q3 2021, Q4 2021 and 2021 Q3 2021 production decreased by 3.4M units. Q4 2021 forecast reduced by 3.8M units. 2021 full-year forecast reduced by 7.2M. ▪ Q3 2021 light vehicle production lower than ▪ Q4 2021 forecast reduced by 3.8M due to ▪ 2021 full-year outlook reduced
Slide 25: Industrial Segment Impacts - Skyjack
Industrial Segment Impacts - Skyjack Access Equipment Market Commentary 2021 Access Industry YTD Results & Forecast ▪ Supply chain disruptions including shipping container shortages and higher commodity % Change vs. Prior Year prices are continuing to negatively impact production, shipments and cost
Slide 26: Agricultural Market
Agricultural Market Agriculture Market Commentary North American Combine Retails ▪ Supply chain disruptions including shipping container shortages and higher commodity prices are continuing to negatively impact production, shipments and costs in 2021. ▪ Agriculture Retailers are seeing very lean inv
Slide 27: Growth Update and Outlook
Growth Update and Outlook © Linamar Corporation 27
Slide 28: Electrified Vehicles Key Growth Opportunity for Linamar
Electrified Vehicles Key Growth Opportunity for Linamar $90 $80 $70 $60 Content Per Vehicle (CPV) $50 $40 $30 $20 $10 $0 2015 2016 2017 2018 2019 2020 2021 2022 2023 Electric Hybrid ICE Updated: October 25, 2021. Estimates based on current projections and EV applications in market.
Slide 29: Electrification Product Solutions
Electrification Product Solutions Develop new electrification product solutions leveraging existing resources Leverage Electrification Support All Support Existing Existing Customers Strategies eLIN Groups & Resources Globally Develop electrification strategies Plants Win New Business Win new busine
Slide 30: Strategy: Maximize Electrification Opportunities
Strategy Maximize Electrification Opportunities Diverse Products 1 ▪ Propulsion System ▪ Structural and Chassis ▪ Power Generation ▪ Power Storage ▪ Other Non Propulsion Products Diverse Vehicle Types ▪ Pass car, CUV/SUV, Light truck ▪ Commercial vehicles ▪ Trucks Class 1-8 5 ▪ Off road vehicles Sca
Slide 31: Global Addressable Market Grows More Than 3X
Global Addressable Market Grows More Than 3X in 20 Years Addressable Market - Light Vehicle $350 $300 $250 Addressable Market (Billions CAD) $200 $150 $100 $50 $0 2002 2003 2021 2039 2000 2001 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2022 2023 2024 2025 20
Slide 32: Launches
Launches 4,000.00 Launching more than $3.7 billion of new work today 3,500.00 3,000.00 2,500.00 2,000.00 1,500.00 1,000.00 500.00 - 2020 2021 2022 2023 2024 2025 Other Body & Chassis Driveline Engine Transmission $350 to $450 Million in 2021 $600 to $700 Million in 2022 Updated: October 2021 © Linam
Slide 33: Outlook
Outlook Consolidated Sales Growth Normal Ranges 2020 Actuals (21.6%) Expectations 2021 Double Digit Growth Expectations 2022 Double Digit Growth Normalized EPS Growth (32%) Double Digit Growth Double Digit Growth Q4 Expectations Normalized Net Margin 7.0% - 9.0% 5.4% Expansion Nearing Normal Range S
Slide 34: New Business
New Business © Linamar Corporation 34
Slide 35: New Business Win $142M / year
New Business Win $142M in wins for commercial truck engine and transmission components Average Annual Revenue SOP Year Peak Volume Year $142M / year 2021 2025 . Production Location United States Canada France Germany Hungary China India © Linamar Corporation 35
Slide 36: New Business Win 220,000 / year
New Business Win New balance shaft program for next generation fuel efficient engines Average Annual Volume SOP Year Peak Volume Year 220,000 / year 2024 2027 Production Location Mexico © Linamar Corporation 36
Slide 37: New Business Win $19M / year
New Business Win $19M in new business wins for Chinese based OEMs. Average Annual Revenue SOP Year Peak Volume Year $19M / year 2022 2024 Production Location China & Mexico © Linamar Corporation 37
Slide 38: New Business Win $42M / year
New Business Win $42M in camshaft wins for next generation fuel efficient engines Average Annual Revenue SOP Year Peak Volume Year $42M / year 2022 2026 Production Location Canada & India © Linamar Corporation 38
Slide 39: Innovation
Innovation © Linamar Corporation 39
Slide 40: Capturing Innovation
Capturing Innovation Patented eBrick™ Modular Battery Design Competitive Advantage ▪ 3-Dimensional Structure ▪ Flexible, modular system ▪ No-weld contact ▪ Lower cost ▪ Optimized airflow cooling ▪ More efficient ▪ Simple eBrick-to-eBrick connection ▪ Simple and affordable mounting to enclosure ▪ min
Slide 41: Innovation in Product Accessories: The X-Step
▪ Innovation in Product Accessories: The X-Step ▪ Safe Access to extra height in confined spaces ▪ A better solution to access extra height safely in and around confined spaces ▪ Optional attachment to maximize fleet utilization ▪ Modular system sold as an option or field kit for new and previous ge
Slide 42: M1170NT
M1170NT Narrow Transport Windrower. The all-new M1170NT5 allows the windrower to shift into a narrow transport mode ideal for narrow European roads, further boosting productivity.
Slide 43: More Capacity. More Speed. More Flex.
More Capacity. More Speed. More Flex. The all-new FD2 gives you more of everything you need for harvesting performance from the company that brought you the Original FlexDraper®.
Slide 44: Digitization with AI/ML and Our Digitization Journey
Digitization with AI/ML and Our Digitization Journey October 2021 6061 Plants Plants 4,592 3,448 Robots LMMS Data Collection Connections 2,572 Connected 2,033 1,162 Machines RFID Stations Vision Systems 2,431 6 958 Traceability AGVs Marking Stations Traceability Read Stations
Slide 45: Financial Review
Financial Review Dale Schneider © Linamar Corporation 45
Slide 46: Sales, Normalized Earnings, and Margins (in millions CAD)
Sales, Normalized Earnings, and Margins (in millions CAD) Q3 2021 The key impacts to the segments vs prior Q3 2021 Q3 2020 %Δ The key factors impacting results in year are: the quarter are: Mobility Sales 1,645.0 1,637.4 0.5% • Strong market demand in all ▪ Global light vehicle markets down 20% offs
Slide 47: Foreign Exchange Gain/Loss (in millions CAD)
Foreign Exchange Gain/Loss (in millions CAD) Q3 2021 Q3 2020 +/- ▪ Total FX Gain was $5.5 which was fully related to the FX Gain/(Loss) – Operating1 5.5 (7.5) 13.0 revaluation of operating balances. FX Gain/(Loss) – Financing - 0.9 (0.9) ▪ FX Gain – Operating was comprised of a $2.9 loss in Industri
Slide 48: Industrial Sales, Earnings, and Margins (in millions CAD)
Industrial Sales, Earnings, and Margins (in millions CAD) ▪ Industrial sales increased by 45.4% or $135.5 to $433.9. Q3 2021 Q3 2020 ▪ The sales were helped by: Finance ▪ strong demand and certain product and regional market share Sales 433.9 298.4 gains at Skyjack; and updating ▪ strong volumes at
Slide 49: Mobility Sales, Earnings, and Margins (in millions CAD)
Mobility Sales, Earnings, and Margins (in millions CAD) ▪ Mobility sales were $1,211.1 for the quarter. Q3 2021 Q3 2020 ▪ The sales were hurt by: ▪ the market impact of the semi conductor chip supply issues which are impacting our customers; and Sales 1,211.1 1,339.0 ▪ a negative FX impact related t
Slide 50: Operating Expenses (in millions CAD)
Operating Expenses (in millions CAD) Q3 2021 Q3 2020 +/- % ▪ Gross Margin was $235.5 in the quarter and was impacted by: ▪ the ongoing semi-conductor issues which is impacting sales and margin; Sales 1,645.0 1,637.4 7.6 0.5% ▪ the reduction in global COVID-19 government support; Cost of Goods Sold 1
Slide 51: Finance Expenses & Income Tax (in millions CAD)
Finance Expenses & Income Tax (in millions CAD) ▪ Finance expenses increased by $0.4. Q3 2021 Q3 2020 +/- ▪ Finances expenses were hurt by the lower interest earned due to the lower long-term receivables. Finance Expense 1.9 1.5 0.4 ▪ Finance expenses were helped by the significant reduction in debt
Slide 52: Leverage (in millions CAD)
Leverage (in millions CAD) Q3 2021 Q3 2020 ▪ Cash position at the end of the quarter was $806.0 ▪ Linamar generated $281.2 in Cash from Operating Activities. Cash Position 806.0 570.1 ▪ Linamar generated $223.9 of Free Cash Flow1 in the quarter. Available Cash on Credit Facilities 957.5 757.0 ▪ Net
Slide 53: Conclusion
Conclusion ▪ Sales declines in Mobility driven by ongoing semi-conductor supply shortages ▪ Sales increases in Industrial from strong demand and market share gains ▪ Significant challenges in the quarter from supply chain issues increase the cost of labour, energy, raw material and logistics ▪ Excel
Slide 54: Question and Answer
Question and Answer
Slide 55: Outlook
Outlook Consolidated Sales Growth Normal Ranges 2020 Actuals (21.6%) Expectations 2021 Double Digit Growth Expectations 2022 Double Digit Growth Normalized EPS Growth (32%) Double Digit Growth Double Digit Growth Q4 Expectations Normalized Net Margin 7.0% - 9.0% 5.4% Expansion Nearing Normal Range S
Slide 56: Key Messages
Key Messages Double Digit Growth on Track for 2021, 2022 Despite Challenges Returning Cash to Shareholders Market Share Growth Across the Board © Linamar Corporation 56
Slide 57: Thank You
Thank You www.linamar.com @linamarcorp Linamar Corporation