Linamar Corporation · TSX:LNR

Linamar — RBC Automotive Investor Conference 2019

60 slides from Linamar's conference presentation, May 13, 2019

  1. Slide 1: Linamar Corporation: A Global Powerhouse in Diversified Advanced Manufacturing

    Linamar Corporation A Global Powerhouse in Diversified Advanced Manufacturing May 2019

  2. 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 managements assessment of the company’s future plans and operations may constitute forward- looking statements. This information is based on current ex

  3. Slide 3: Key Investment Themes

    Key Investment Themes Massive Market Focus on our Consistent Strong Free Cash Flow 2019 Earnings Growth Opportunity in All Shareholders Performance Expected in 2019 Leads Many Peers Businesses  History of growth  MacDon growth  Earnings up, capex  Consensus earnings  NCIB returning cash to desp

  4. Slide 4: Track Record of Growth Regardless of Auto Cycle

    Track Record of Growth Regardless of Auto Cycle 20 20.00 CAGR -3.3% CAGR 5.7% 15 15.00 US Vehicle Units (Millions) 10 2000-2018 10.00 EPS Normalized CAGR -- 16.1% US Vehicle Sales CAGR -- 0% CAGR 97.0% 5 5.00 CAGR 10.9% 0 - 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2

  5. Slide 5: Electrified Vehicles Key Growth Opportunity for Linamar

    Electrified Vehicles Key Growth Opportunity for Linamar $90 $80 $70 $60 Expected BEV Global CPV 3 years out same as ICE Global CPV 4 years ago $50 $40 $30 $20 $10 $0 2015 2016 2017 2018 2019 2020 2021 2022 2023 -$10 Electric Hybrid ICE Updated: Q1 2019, estimates based on current projections and EV

  6. Slide 6: Global Light Vehicle Production Growing

    Global Light Vehicle Production Growing Advanced Consensus Actual IHS Forecast 120 Projection 100 Pure Battery EV penetration reaches 13% of the market by 2030 Light Vehicles Produced (Millions) 80 60 40 20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2

  7. Slide 7: Global Total Addressable Market

    Global Total Addressable Market $350 $325 $300 $275 Addressable market more than doubles Addressable Market (Billions $CAD) $250 between 2018 and 2030 $225 $200 $175 $150 $125 $100 $75 $50 $25 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

  8. Slide 8: Significant Global Growth Opportunity

    Significant Global Growth Opportunity Global Market Combine Heads ($CAD) $3,000 $2,500 $2,000 $1,500 Millions $1,000 $500 Primary Market Today $0 2015 2016 2017 2018 est 2019 est North America South America Europe (Incl. Ukraine) Australia CIS Source: MacDon Internal, April 2019 © Linamar Corporatio

  9. Slide 9: Market Share Penetration Access - Key Growth Driver

    Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Source: Skyjack Internal, April 2019. Market share is rolling 12 month average. Q1 2018 Telehandler Market Share (NA Only) Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q

  10. Slide 10: Market Share Penetration Ag - Key Growth Driver

    Market Share Penetration Ag - Key Growth Driver Combine Drapers Market Share (Global) Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Source: MacDon Internal, April 2019. © Linamar Corporation 10

  11. Slide 11: 2019 Expected to Drive Solid Free Cash Flow

    2019 Expected to Drive Solid Free Cash Flow Min Target 500 450  2019 expected to generate between $500 and $700 million through 400  Higher earnings over 2018; 350  Lower Capex than 2018;  Focused NCWC Improvements; and 300  Long Term AR (“LTAR”) Improvements  NCWC Improvements focused on Mill

  12. Slide 12: Company Overview

    Company Overview

  13. Slide 13: Linamar - A Leading Global Advanced Manufacturing Company

    Linamar - A Leading Global Advanced Manufacturing Company  Carbon Efficient Transportation Leading Edge AI Enabled Technology  Electrified  Lightweight SOLUTIONS TO  Connected & Autonomous POWER THE FUTURE OF VEHICLES, MOTION,  New Mobility WORK, AND LIVES Infrastructure Deep Manufacturing Expe

  14. Slide 14: Linamar's Unique Value Creation Model

    Linamar’s Unique Value Creation Model Deeply Interconnected Businesses Driving Value Across Multiple Vectors Global Footprint Machining & Assembly Seissenschmidt Forging Light Metal Casting Independent Businesses Purchasing Value Connected © Linamar Corporation 14

  15. Slide 15: Core Brands and Diverse Markets

    Core Brands and Diverse Markets Diversified Manufactured Products that Power Vehicles, Motion, Work and Lives Infrastructure Food Transportation Linamar Machining & Assembly Power Water Age Linamar Light Metal Casting Linamar Montupet Light Metal Casting | GF Linamar Linamar Seissenschmidt Forging ©

  16. Slide 16: Market Concentration Balanced

    Market Concentration Balanced Sales Sales OE Sales OE Industrial Transportation Mobile Industrial Equipment | Fabricated Assemblies 24% 39% Engine | Transmission | Driveline | Body 76% 61% AUTOMOTIVE 69.6% ACCESS 15.8% OFF-HIGHWAY 2.5% AGRICULTURAL 8.2% COMMERCIAL VEHICLE 3.9% Q1 2019 - Industry fig

  17. Slide 17: Diverse Core Capabilities

    Diverse Core Capabilities Metal Forming Machining & Assembly Forging Light Metal Casting  Robotic Welding  Advanced Automation  Hatebur High Speed Hot  Gravity & Low Pressure  Laser cutting & Robotics Horizontal Forging Aluminum Die Casting  Metal Forming  CNC Expertise  Conventional Vertica

  18. Slide 18: Diverse Key Products

    Diverse Key Products Industrial Transportation Engine Transmission Body & Chassis Driveline © Linamar Corporation 18

  19. Slide 19: Key Market Strategies - Flexible & Opportunistic

    Key Market Strategies - Flexible & Opportunistic Transportation Infrastructure Food Power, Water, Age Overall  Increase CPV in BEV,  Globalize and expand  Build on MacDon  Invest lightly in the short  Expand Asian footprint HEV, FCV product lineup in all 3 acquisition as the term  Focus primar

  20. Slide 20: Strong Global Footprint

    Strong Global Footprint 24 CANADA 24 UNITED KINGDOM 1 GERMANY 7 HUNGARY 4 CHINA 4 Global Headcount 29,000 USA 6 MEXICO 5 49 Facilities with IATF 16949 13 Facilities with ISO 9001 SPAIN 1 FRANCE 4 BULGARIA 1 INDIA 3 51 Facilities with ISO 14001 41 Facilities with OHSAS 18001 Number of manufacturing f

  21. Slide 21: Innovation – Driving the Advanced Manufacturing Agenda

    Innovation – Driving the Advanced Manufacturing Agenda

  22. Slide 22: Broad Innovation Strategy

    Broad Innovation Strategy PRODUCT MANUFACTURING DEVELOPMENT PARTNERSHIPS WITH TECH STARTUPS PROCESS DIGITIZATION DEVELOPMENT THROUGH AI/ML MATERIAL TANGENTIAL DEVELOPMENT INNOVATION LIGHTER, STRONGER © Linamar Corporation 22

  23. Slide 23: AI/ML Driving Innovation & Efficiencies

    AI/ML Driving Innovation & Efficiencies VISION SYSTEMS ADVANCED ROBOTICS Evolving vision systems to more Development of advanced accurately gauge & inspect products collaborative robots to drive more for better product integrity efficient and safer automation ADDITIVE MANUFACTURING (3D PRINTING) DAT

  24. Slide 24: Digitization with AI/ML

    Digitization with AI/ML 60 Plants 2,201 LMMS Data 2,921 824 Traceability Collection Connections Robots Marking Stations 1,699 x10 2,845 RFID Stations 909 Connected Machines Vision Systems 1,825 8 Traceability Read Stations AGVs May 2019 © Linamar Corporation 24

  25. Slide 25: Quarter Highlights

    Quarter Highlights

  26. Slide 26: Q1 2019 - Performance Highlights

    Q1 2019 - Performance Highlights  Commercializing Innovation  New Business Wins in key strategic areas  Development program awarded for conformable hydrogen fuel tank for fuel cell vehicle  Key quarter for casting business wins  Key quarter for commercial vehicle business wins  CPV growth in N

  27. Slide 27: Sales, Normalized Earnings, and Margins

    Sales, Normalized Earnings, and Margins (in millions CAD) Q1 2019 Q1 2018 %Δ Q1 2019 Helped By:  Sales up 4.3% despite most global  MacDon performance Sales 1,974.5 1,893.9 4.3% markets down  Strong launches in Transportation Industrial OE – Normalized¹ 77.9 62.7 24.2%  Global Vehicle markets do

  28. Slide 28: Outlook

    Outlook Consolidated Normal 2018 Expectations Expectations Ranges Actuals 2019 2020 Q2 Expectations Sales Growth Mid Single Digit Single Digit  Cash Normalized EBIT Growth Mid Single Digit Double Digit  Accelerating free cash flow in Q2 on continued Normalized Net Margin 7.0% to 9.0% 7.7% 7.25% to

  29. Slide 29: Market Snapshot 2019, 2020

    Market Snapshot 2019, 2020 Transportation Industrial Transportation Industrial 2019 Agriculture 2020 Automotive (LV) Commercial Truck Skyjack Automotive (LV) Commercial Truck Skyjack North America Flat Growth Flat Growth North America Flat Decline Decline Europe Flat Growth Decline Moderate Growth E

  30. Slide 30: Infrastructure

    Infrastructure

  31. Slide 31: Access & Material Handling Equipment – Product Mix

    Access & Material Handling Equipment – Product Mix $10,000 $11,349 $11,321 $12,000 $9,000 $11,001 $11,149 $11,177 $10,482 SEGMENT MARKET SIZE $Millions (USD) - LINES $8,000 TOTAL MARKET SIZE $Millions (USD) - BARS $10,000 $7,000 $8,639 $7,969 $7,948 $7,553 $8,000 $6,000 $7,120 $6,275 $5,000 $6,000 $

  32. Slide 32: Access & Material Handling Equipment – Geographic Mix

    Access & Material Handling Equipment – Geographic Mix $10,000 $12,000 $9,000 REGIONAL MARKET SIZE $Millions (USD) - LINES $8,000 GLOBAL MARKET SIZE $Millions (USD) - BARS $10,000 $7,000 $6,000 $8,000 $5,000 $6,000 $4,000 $3,000 $4,000 $2,000 $2,000 $1,000 $- $- 2012 2013 2014 2015 2016 2017 2018 201

  33. Slide 33: Access to Large Target Market with Limited Competition

    Access to Large Target Market with Limited Competition 2018 Global Market of $10.3 Billion Skyjack Manitou JLG Haulotte Genie Skyjack Internal Estimates – Final Q4-2018 Result © Linamar Corporation 33

  34. Slide 34: Innovation

    Innovation Remove operator from height Next Generation Alternative Power Mobile Apps Digital Products Smart machines Autonomy Secondary Guarding Continuously Variable Transmission © Linamar Corporation 34

  35. Slide 35: Food Agriculture

    Food Agriculture

  36. Slide 36: MacDon Industry Leading Business and Market Share

    MacDon Industry Leading Business and Market Share North American Strong Market Position in Key Product Categories Estimated Market Position Combine FlexDraper® Headers #1 Rigid Draper Headers #1 Self-Propelled Windrowers (mid-horsepower) #1 © Linamar Corporation 36

  37. Slide 37: Total US Combine Sales Historical Market

    Total US Combine Sales Historical Market Combine Sales Cash Receipts (millions) 12,000 250 10708 10774 10446 9747 9921 9830 10,000 9673 9190 200 8488 8635 8463 8007 8,000 7130 6402 6709 6730 150 6190 6,000 5472 5666 5385 5075 4855 4658 100 3982 4136 4,000 50 2,000 0 0 1994 1995 1996 1997 1998 1999 2

  38. Slide 38: Combine Retails

    Combine Retails 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 Jan-15 9,000 Feb-15 Mar-15 Apr-15 May-15 Source: MacDon Internal, April 2019 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 US Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

  39. Slide 39: North America Tractor Market

    Tractor Retails US 180,000 190,000 200,000 210,000 220,000 230,000 240,000 Dec-15 250,000 Jan-16 Feb-16 Source: MacDon Internal, April 2019 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 North America Tractor Market Mar-17 Apr-17 US May-17 Jun-17 Jul-17 Aug-17 Se

  40. Slide 40: Agriculture Strategic Road Map

    Agriculture Strategic Road Map GLOBAL PARTS DISTRIBUTION STRATEGY REGIONAL GROWTH INTIATIVES LASER FOCUS ON OPERATIONS ADVANCED & DISRUPTIVE TECHNOLOGIES PRODUCT LINE DIVERSIFICATION © Linamar Corporation 40

  41. Slide 41: Technology and Innovation Leader

    Technology and Innovation Leader  Technology supported by over 100 unique patents with an additional 30+ unique patents pending globally, and a permanent technology-focused staff of 110 FlexDrapers® & Rigid Drapers Self-Propelled Windrowers Hay Products  Higher cutting speeds  Industry leading ro

  42. Slide 42: Transportation

    Transportation

  43. Slide 43: Global Powertrain and Structural Market Highly Opportunistic

    Global Powertrain and Structural Market Highly Opportunistic TOTAL GLOBAL POWERTRAIN / DRIVELINE MARKET Global Market 2018 2021 2030 Light Vehicle $373 B $384 B $429 B Commercial Truck & Off Highway Vehicle $129 B $124 B $130 B Total: $502 B $508 B $ 559 B Structural EV & Battery Housings Assumption

  44. Slide 44: Global Launch Review – Geographic Mix

    Global Launch Review – Geographic Mix Launching more than $4.3 billion of new work today North America Europe Asia Pacific - 500 1,000 1,500 2,000 2,500 3,000 2018 2019 2020 Mature ($ Millions) Updated: Q1 2019 © Linamar Corporation 46

  45. Slide 45: Global Launch Review – Product Mix

    Global Launch Review – Product Mix Launching more than $4.3 billion of new work today Transmission Engine Driveline Other - 500 1,000 1,500 2,000 2,500 2018 2019 2020 Mature ($ Millions) Updated: Q1 2019 © Linamar Corporation 47

  46. Slide 46: Launches

    Launches Launching more than $4.3 billion of new work today 4,500.00 4,000.00 3,500.00 3,000.00 2,500.00 2,000.00 1,500.00 1,000.00 500.00 - 2018 2019 2020 2021 2022 2023 Other Driveline Engine Transmission Sales from Launch add: $800 to $900 Million in 2019 >$1.2 Billion in 2020 Updated April 2019

  47. Slide 47: Preparing for the Future of Propulsion

    Preparing for the Future of Propulsion 3 - Internal Combustion Hybrid Vehicle 1 - Electric Vehicle Engine (ICE) (HEV) (BEV) & Fuel Cell EV (FCEV)  Focus on Light Weighting, Fuel Efficiency,  Continue to increase Content Per Vehicle on  Strong organizational focus on integrated Emissions Reduction

  48. Slide 48: Technology Leadership Key to Growth

    Technology Leadership Key to Growth Innovation in Design, Development, Lightweighting Solutions Green & Connected Vehicles and Manufacturing  Using unique manufacturing processes,  Innovative design & engineering solutions to  Utilizing Linamar product and engineering materials, and designs to pr

  49. Slide 49: Financial Review

    Financial Review

  50. Slide 50: Yearly Sales Growth

    Yearly Sales Growth 9,000 8,000 7,000 6,000 $ Millions 5,000 4,000 3,000 2,000 1,000 4,171.6 5,162.4 6,005.6 6,546.5 7,620.6 1,893.9 1,974.5 0 2014 2015 2016 2017 2018 Q1 2018 Q1 2019 Annual Results Current Quarter © Linamar Corporation 52

  51. Slide 51: Normalized Operating Earnings

    Normalized Operating Earnings1 900 18.0% 800 16.0% 700 14.0% 600 11.4% 11.3% 11.1% 11.1% 12.0% 10.7% 10.6% 10.0% $ Millions 500 10.0% 400 8.0% 300 6.0% 200 4.0% 100 2.0% 445.8 586.4 677.5 728.9 807.6 209.5 197.7 0 0.0% 2014 2015 2016 2017 2018 Q1 2018 Q1 2019 Annual Results Current Quarter Normalize

  52. Slide 52: Normalized Net Earnings

    Normalized Net Earnings1 600 18.0% 500 15.0% 400 12.0% $ Millions 8.3% 8.4% 8.4% 300 7.6% 7.7% 9.0% 8.1% 200 7.1% 6.0% 100 3.0% 319.1 426.8 504.0 551.5 583.8 153.4 139.4 0 0.0% 2014 2015 2016 2017 2018 Q1 2018 Q1 2019 Annual Results Current Quarter Normalized NE as a % of Sales Net Margin Expectatio

  53. Slide 53: Operational Capital Expenditures

    Operational Capital Expenditures 600 18.0% 500 15.0% 400 12.0% $ Millions 300 9.0% 200 6.0% 6.6% 7.1% 6.2% 6.1% 6.3% 6.3% 5.7% 100 3.0% 263.5 341.6 343.3 410.1 537.3 117.6 120.4 0 0.0% 2014 2015 2016 2017 2018 Q1 2018 Q1 2019 Annual Results Current Quarter Capex as a % of Sales Capex as % of Sales –

  54. Slide 54: Net Debt to Proforma EBITDA

    Net Debt to Proforma EBITDA¹ 3.0x 2.5x 2.0x 1.5x 1.0x 0.5x 0.35x 0.24x 0.96x 0.83x 1.68x 1.79x 1.78x 0.0x 2014 2015 2016 2017 2018 Q1 2018 Q1 2019 Net Debt x Proforma EBITDA Current Quarter Target ¹ Proforma EBITDA includes last 12 month rolling EBITDA on acquisitions. © Linamar Corporation 56

  55. Slide 55: Return on Capital Employed

    Return on Capital Employed 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 23.6% 24.4% 19.4% 17.9% 14.2% 13.2% 13.4% 0.0% 2014 2015 2016 2017 2018 Q1 2018 Q1 2019 Annual Results Current Quarter Target © Linamar Corporation 57

  56. Slide 56: Q1 2019 - Outlook Strong for the Future

    Q1 2019 - Outlook Strong for the Future Sales by Region 12,000 Target 10,000 8,000 $ Millions 6,000 4,000 2,000 - 2013 2018 2023 Actual Actual Estimate North America Europe Asia Target - Business to be Booked Updated: Q1 2019 © Linamar Corporation 58

  57. Slide 57: Linamar 2019 Consensus Growth Expectation Coupled with Low Valuation

    Linamar 2019 Consensus Growth Expectation Coupled with Low Valuation Major Buy Opportunity Net Earnings Adjusted¹ Margin % 2X PE Multiple < 5% Growth in 2019 With Low PE AA Multiple 5% to 7.4% 4X >7.5% 6X Linamar Martinrea '18 Actuals to Consensus '19 Earnings Growth Nemak Meritor Dana -25% -20% -15

  58. Slide 58: Strong, Consistent Track Record

    Strong, Consistent Track Record Sales Growth Normalized OE¹ Growth³ 20.0% 20.0% 18.0% 18.0% 16.0% 16.0% 14.0% 14.0% 12.0% 12.0% 10.0% 10.0% 8.0% 8.0% 6.0% 4.0% 6.0% 2.0% 33.0% 28.4% 12.6% 11.6% 16.0% 23.8% 16.3% 9.0% 16.4% 4.0% 0.0% 2.0% 789.8% 20.0% 39.5% 39.1% 45.3% 31.6% 15.5% 7.6% 10.8% 2010 201

  59. Slide 59: Key Investment Themes

    Key Investment Themes Massive Market Focus on our Consistent Strong Free Cash Flow 2019 Earnings Growth Opportunity in All Shareholders Performance Expected in 2019 Leads Many Peers Businesses  History of growth  MacDon growth  Earnings up, capex  Consensus earnings  NCIB returning cash to desp

  60. Slide 60: Thank You

    Thank You @linamarcorp @linamarcorp Linamar Corporation www.linamar.com Linamar Corporation

Linamar — RBC Automotive Investor Conference 2019 on 6ix