Linamar Corporation · TSX:LNR
Linamar — Q1 2021 Earnings Presentation
56 slides from Linamar's earnings presentation, May 6, 2021
Slide 1: Q1 Conference Call Presentation
Q1 Conference Call Presentation For Audio Only Dial in: Linda Hasenfratz North America: (877) 668-0168 International: (825) 312-2386 May 6, 2021 Conference ID: 5546587
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: Pandemic Crisis Management
Pandemic Crisis Management Assemble Team Gather Data COVID-19 Task Force Make a Plan & Execute Communicate Employees Investors Customer Employees Financially Customers Community © Linamar Corporation 4
Slide 5: Current Focus
Current Focus ▪ Safe Workplace ▪ Ensure we continue to maintain a safe work environment ▪ Vigilance around protocols is key ▪ Now is not the time to become complacent, protocols must be kept in place until we have herd immunity ▪ Testing ▪ Testing running on a regular basis for Linamar employees ▪ R
Slide 6: Testing - Why are we doing this?
Testing - Why are we doing this ? Normally aren’t seeing transmission in our plants. We think doing the testing is important to reduce transmission in our communities and our communities are where our people and their families live. Testing helps keep our people and their families safe. Testing to f
Slide 7: Vaccination clinic update
▪ Clinic launched early March ▪ 11,235 Shots Administered to Date ▪ Playbook posted on Linamar website to assist any company in launching their own clinic quickly
Slide 8: 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 9: Sales, Normalized Earnings, and Margins (in millions CAD)
Sales, Normalized Earnings, and Margins (in millions CAD) Q1 2021 Q1 2020 %Δ Q1 2021 The key impacts to the segments vs prior The key factors impacting results in year are: Sales 1,781.9 1,549.8 15.0% the quarter are: Mobility ▪ Continued strong performance in the ▪ Global light vehicle markets up 1
Slide 10: Automotive Sales & Content Per Vehicle (CPV)
Automotive Sales & Content Per Vehicle (CPV) CPV Q1 2021 CPV Q1 2020 CPV % Change Vehicle Production Automotive Automotive Automotive Units % Change Sales Q1 2021 Sales Q1 2020 Sales % Change (CAD Millions) (CAD Millions) North America 196.05 171.12 14.6% (3.9%) 734.2 666.5 10.2% Europe 82.81 84.87
Slide 11: Commercial & Industrial Sales (in millions CAD)
Commercial & Industrial Sales (in millions CAD) Q1 2021 Q1 2020 % Change ▪ MacDon ▪ Draper header market up 17% in NA in Q1 Sales 438.6 350.4 25.2% ▪ Solid market share gains in targeted core and expansion markets ▪ Skyjack ▪ Core NA market up 7.7% in Q1 and market share growth in all core products
Slide 12: Capital Expenditures (in millions CAD)
Capital Expenditures (in millions CAD) Q1 2021 Q1 2020 ▪ Capex down 34% from Q1 2020 as we continued to manage cash conservatively Capital Expenditures (Capex) 59.5 90.7 ▪ Flexible equipment allows us to continue to grow and tool up programs until market volumes pick up Capex as a % of Sales 3.3% 5.
Slide 13: Cash Flow Continues to be a Key Priority
Cash Flow Continues to be a Key Priority 1,300 50.00% ▪FCF1 in Q1 $166 million 1,200 45.00% ▪Liquidity1 excellent with $1.6 billion of 1,100 1,000 40.00% cash available at quarter end 900 35.00% ▪Solid liquidity and balance sheet 800 30.00% positions us well for takeover and $ Millions acquisition o
Slide 14: Leverage (in millions CAD)
Leverage (in millions CAD) Q1 2021 Q4 2020 Q1 2020 ▪ We have paid down $1.85 Billion of debt from our peak in early 2018 Net Debt 308.9 442.1 1,539.3 Net Debt to EBITDA 0.31x 0.50x 1.57x Net Debt to EBITDA 1.73x 1.75x 1.50x 1.57x 1.80x 1.11x 0.50x 0.31x 2 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2
Slide 15: Market Outlook
Market Outlook © Linamar Corporation 15
Slide 16: Market Snapshot
Market Snapshot Commercial Combine Commercial 2021 Light Vehicle Truck Heads Access 2022 Light Vehicle Truck Access North North America ▲ 20.4% ▲28.4% ▲15.0% ▲20.3% America ▲ 7.5% ▲1.5% ▲58.9% Europe Europe ▲12.4% ▲11.6% ▲6.0% ▲22.4% ▲7.7% ▲6.9% ▲39.8% Asia ▲8.2% ▼32.3% n/a ▲7.7% Asia ▲7.0% ▼17.2% ▲
Slide 17: Light Vehicle Sales
Light Vehicle Sales Recovery in global light vehicle markets China Light Vehicle Sales Europe Light Vehicle Sales US Light Vehicle Sales % Change YOY % Change YOY % Change YOY 100% 388% 100% 100% 80% 80% 80% 60% 60% 73% 60% 63% 60% 40% 28% 40% 40% 11% 9% 14%10%10%11%12% 20% 1% 6% 20% 20% 7% 6% 1% 6%
Slide 18: US Light Vehicle Inventory – Days' Supply
US Light Vehicle Inventory – Days’ Supply Change vs Same Period Last Year US Days Supply of Inventory 180 Overall -85 160 VW -89 140 120 Renault/Nissan -96 100 Honda -120 80 Toyota -94 60 40 Stellantis -90 20 Ford -90 84 74 68 72 64 68 65 68 65 75 72 61 88 77 68 76 64 67 66 61 66 73 67 57 76 69 95 1
Slide 19: Global Light Vehicle Market: Q1 2021, Q2 2021 and 2021
Global Light Vehicle Market: Q1 2021, Q2 2021 and 2021 Q1 2021 production increased by 300,000. Q2 2021 forecast reduced by 1.1M. 2021 full-year forecast reduced by 1.1M. • Q1 2021 light vehicle production higher than • Q2 2021 forecast reduced by 1.1M largely • 2021 full-year outlook reduced by 1.1
Slide 20: Industrial Segment Impacts - Skyjack
Industrial Segment Impacts - Skyjack Access Equipment Market Commentary 2021 Access Industry Forecast & YTD Results % Change vs. Prior Year ▪ Recovery underway in core NA and EMEA AWP markets. Asia results, driven by China, outpacing expectations ▪ NA Access market up 8% Q1 YTD 50% ▪ EMEA Access mar
Slide 21: Agricultural Market
Agricultural Market Agriculture Market Commentary 2021 Combine Header Industry Forecast & YTD Estimates ▪ Ag. retailers continuing to see reduced inventory backlog % Change vs. Prior Year ▪ Commodity price rally, improved farm net income outlook boosting 40% retails ▪ Q1 YTD combine retails up in al
Slide 22: Growth Update and Outlook
Growth Update and Outlook © Linamar Corporation 22
Slide 23: Global Content Per Vehicle
Electrified Vehicles Key Growth Opportunity for Linamar $90 $80 $70 Expected global BEV CPV two years out nearly $60 the same as global ICE CPV three years ago Global Content Per Vehicle $50 $40 $30 $20 $10 $0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 -$10 Electric Hybrid ICE Updated: April
Slide 24: Diverse Electrification Strategy Maximizes Potential
Diverse Electrification Strategy Maximizes Potential Diverse Products Propulsion system solutions including eAxles, gearboxes, housings, gears, 1 differentials, shafts etc., delivered as components, assemblies or full systems Structural and body portfolio, including battery trays, shock towers,
Slide 25: Flexible Manufacturing Strategy
Flexible Manufacturing Strategy ▪ Capital assets currently employed in Linamar’s operations can be adapted to manufacture electrified components at little to no incremental CAPEX ▪ For instance, the same gear grinding equipment can produce gears for eAxles and ICE powertrains alike © Linamar Corpora
Slide 26: Flexible Manufacturing Strategy
Flexible Manufacturing Strategy ▪ This advantage is present across Linamar in many types of equipment that can make blocks for ICE and Housings for BEV for instance © Linamar Corporation 26
Slide 27: Global Addressable Market Grows More Than 3X
Global Addressable Market Grows More Than 3X in 20 Years $350 Addressable Market - Light Vehicle $300 $250 Addressable Market (Billions CAD) $200 $150 $100 $50 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 20
Slide 28: Launches
Launches 4,500.00 Launching nearly $3.7 billion of new work today 4,000.00 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 Driveline Engine Transmission $500 to $600 Million in 2021 $600 to $700 Million in 2022 Updated: April 2021 © Linamar Corporat
Slide 29: Outlook
Outlook Consolidated Sales Growth Normal Ranges 2020 Actuals (21.6%) Expectations 2021 Double Digit Growth Expectations 2022 Continued Growth Normalized Earnings Growth EPS (32%) Strong Double Digit Growth Continued Growth EBITDA (15%) Q2 Expectations Normalized Net Margin 7.0% - 9.0% 5.4% Expansion
Slide 30: New Business
New Business © Linamar Corporation 30
Slide 31: New Business Win: 73,000 / year, United States
New Business Win Structural components for next generation battery electric vehicles Average Annual Volume SOP Year Peak Volume Year 73,000 / year 2023 2025 Production Location Unites States © Linamar Corporation 31
Slide 32: New Business Win: 109,000 / year, Mexico
New Business Win 10-speed transmission differential assembly win for major Japanese OEM Average Annual Volume SOP Year Peak Volume Year 109,000 / year 2022 2024 Production Location Mexico © Linamar Corporation 32
Slide 33: New Business Win: ~$110M / year, Global
New Business Win Nearly $110M in light vehicle cylinder head and block wins Average Annual Volume SOP Year Peak Volume Year ~$110 M / year 2021 2022 Production Locations Global • Canada • Mexico • France • Germany © Linamar Corporation 33
Slide 34: New Business Win: ~$23M / year, China
New Business Win $23M in wins for off-highway cylinder blocks Average Annual Volume SOP Year Peak Volume Year ~$23 M / year 2021 2023 Production Location China © Linamar Corporation 34
Slide 35: Innovation
Innovation © Linamar Corporation 35
Slide 36: MacDon Product Innovation
MacDon Product Innovation: Expanding Product Offerings for the Europe Market TM100 ▪ Cost effective solution for entry into niche windrowing markets where acres do not justify customer investment in a dedicated Self-Propelled Windrower. Draper header can attach to farmer’s existing tractor. Sunflowe
Slide 37: Innovation Hub
Innovation Hub ThermoLift – Thermal Compression Climate Control (TC3) A single all-in-one unit that can replace a furnace, hot water heater and air conditioner. Commercial & Residential applications Medical & Specialized applications Unit under test, McLaren Livonia, MI Key Advantage to Other Techno
Slide 38: Continuing Mobility Innovation for eAxles Products
Continuing Mobility Innovation for eAxles Products eLSD Disconnect Provides improved performance and driver safety by Offers improved EV range potential by disconnecting enhancing stability control secondary eAxles when not in use Park Lock Many EVs require park lock systems integrated into the elec
Slide 39: Digitization with AI/ML and Our Digitization Journey
Digitization with AI/ML and Our Digitization Journey April 2021 61 61 Plants Plants 4,341 3,455 Robots Connected Digital Asset Counts by Category LMMS Data Collection Connections Total Connected Digital Assets 2,522 1,955 1,144 Connected Machines RFID Stations Vision Systems 2,346 8 951 Traceability
Slide 40: Strategic Initiatives
Strategic Initiatives © Linamar Corporation 40
Slide 41: Strategic Alliance with Ballard Power Systems
Strategic Alliance with Ballard Power Systems A Partnership to Develop Fuel Cell Solutions for Light-Duty Vehicles ▪ Framework Agreement to initially co-develop a fuel cell powertrain solution demonstration platform ▪ In a secondary phase, the parties will move towards a formal Joint Venture focused
Slide 42: 'Plug & Play' Platform Conversion from BEV to FCEV
‘Plug & Play’ Platform Conversion from BEV to FCEV Battery Electric Vehicle: Fuel Cell Electric Vehicle: The Main Systems: Adds: ▪ Full eAxle Propulsion System ▪ Linamar FlexFormTM storage tank ▪ Battery Tray & Pack Storage ▪ Fuel Cell Stack, Hydrogen Supply System & Balance of Plant ▪ Integrated Su
Slide 43: FCEV An Answer to End to End Sustainable Green Mobility Solutions
FCEV An Answer to End to End Sustainable Green Mobility Solutions CLEAN Truly 0 Emissions from fuel source to tailpipe FAST Quick Refueling in line with ICE experience EFFICIENT H2 high density of energy makes it very efficient VIABLE Unlike BEV doesn’t rely on regionally concentrated sources of “co
Slide 44: Financial Review
Financial Review Dale Schneider © Linamar Corporation 44
Slide 45: Sales, Normalized Earnings, and Margins (in millions CAD)
Sales, Normalized Earnings, and Margins (in millions CAD) Q1 2021 Q1 2020 %Δ Q1 2021 The key impacts to the segments vs prior year The key factors impacting results in are: Sales 1,781.9 1,549.8 15.0% the quarter are: Mobility ▪ Continued strong performance in the ▪ Global light vehicle markets up 1
Slide 46: Foreign Exchange Gain/Loss (in millions CAD)
Foreign Exchange Gain/Loss (in millions CAD) Q1 2021 Q1 2020 +/- ▪ Total FX Loss was $6.4 which was nearly fully related to the FX Gain/(Loss) – Operating1 (0.1) 14.4 (14.5) revaluation of financing balances. FX Gain/(Loss) – Financing (6.3) (0.3) (6.0) ▪ FX Loss – Operating was a $0.1 loss with a $
Slide 47: Industrial Sales, Earnings, and Margins (in millions CAD)
Industrial Sales, Earnings, and Margins (in millions CAD) ▪ Industrial sales increased by 16.5% or $49.3 to $348.3. Q1 2021 Q1 2020 ▪ The sales were helped by: Finance ▪ strong demand and market share gains at MacDon for Sales 348.3 299.0 agricultural equipment; and updating ▪ strong North American
Slide 48: Mobility Sales, Earnings, and Margins (in millions CAD)
Mobility Sales, Earnings, and Margins (in millions CAD) ▪ Mobility sales increased by $182.8 to $1,433.6. Q1 2021 Q1 2020 ▪ The sales were helped by: ▪ increasing volumes on certain programs related to some of Sales 1,433.6 1,250.8 our more significant customers; ▪ increasing volumes on launching pr
Slide 49: Operating Expenses (in millions CAD)
Operating Expenses (in millions CAD) Q1 2021 Q1 2020 +/- % ▪ Gross Margin was $312.7 in the quarter and was impacted by: ▪ the margin improvement from the various increases in volumes within both the Sales 1,781.9 1,549.8 232.1 15.0% Mobility and Industrial segments; Cost of Goods Sold 1,469.2 1,349
Slide 50: Finance Expenses & Income Tax (in millions CAD)
Finance Expenses & Income Tax (in millions CAD) ▪ Finance expenses increased by $0.2. Q1 2021 Q1 2020 +/- ▪ Finance expenses were hurt by: ▪ a one-time FX impact due to the USD Debt repayment and the funding of the new Euro PPN; and Finance Expense 7.6 7.4 0.2 ▪ lower interest earned due the lower l
Slide 51: Leverage (in millions CAD)
Leverage (in millions CAD) Q1 2021 Q1 2020 ▪ Cash position at the end of the quarter was $671.9. ▪ Linamar generated $223.9 in Cash from Operating Activities. Cash Position 671.9 413.2 ▪ Linamar generated $166.2 of Free Cash Flow1 in the quarter. ▪ Net Debt to EBITDA was decreased significantly to 0
Slide 52: Conclusion
Conclusion ▪ Normalized Net Earnings up 2.3 times ▪ Strong Sales and Earnings performance in both Segments ▪ Operations have continued to recover ▪ Excellent Free Cash Flow1 generation of $166.2 million in the quarter ▪ Available Liquidity1 remains strong at $1.6 billion 1 - For more information on
Slide 53: Question and Answer
Question and Answer
Slide 54: Outlook
Outlook Consolidated Normal Ranges 2020 Actuals Expectations 2021 Expectations 2022 Sales Growth (21.6%) Double Digit Growth Continued Growth Normalized Earnings Growth Q2 Expectations EPS EBITDA (32%) (15%) Strong Double Digit Growth Continued Growth ▪ Auto Normalized Net Margin 7.0% - 9.0% 5.4% Ex
Slide 55: Key Messages
Key Messages Outstanding Earnings Performance >2x Prior Year Exciting New In Roads Towards Green Mobility All Markets Significantly Up and Market Share Growing in Each Business © Linamar Corporation 55
Slide 56: Thank You
Thank You www.linamar.com @linamarcorp Linamar Corporation