Linamar Corporation · TSX:LNR

Linamar — Q1 2022 Earnings Presentation

58 slides from Linamar's earnings presentation, May 11, 2022

  1. Slide 1: 2022 Q1 Conference Call Presentation

    2022 Q1 Conference Call Presentation For Audio Only Dial in: Linda Hasenfratz North America: (877) 668-0168 International: (825) 312-2386 May 11, 2022 Conference ID: 2056809

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

  3. Slide 3: Sales, Normalized Earnings and CPV

    Sales, Normalized¹ Earnings and CPV 1 - The Company uses certain non-GAAP and other financial measures to provide useful information to both management, investors, and other stakeholders in assessing financial performance and financial condition of the Company. For more information refer to the sect

  4. Slide 4: Sales, Normalized Earnings, and Margins (in millions CAD)

    Sales, Normalized Earnings1, and Margins (in millions CAD) Q1 2022 Q1 2021 %Δ Q1 2022 The key impacts to the segments vs prior The key factors impacting results in the year are: Sales 1,778.1 1,781.9 (0.2%) quarter are: Mobility Industrial Sales 368.2 348.3 5.7%  Massively higher costs in material,

  5. Slide 5: Automotive Sales & Content Per Vehicle (CPV)

    Automotive Sales & Content Per Vehicle2 (CPV) CPV Q1 2022 CPV Q1 2021 CPV % Change Vehicle Production Automotive Automotive Automotive Units % Change Sales Q1 2022 Sales Q1 2021 Sales % Change (CAD Millions) (CAD Millions) North America 206.00 193.56 6.4% (1.1%) 761.6 723.4 5.3% Europe 100.82 81.88

  6. Slide 6: Commercial & Industrial Sales (in millions CAD)

    Commercial & Industrial Sales2 (in millions CAD)  Skyjack  Global markets up in double digits; and Q1 2022 Q1 2021 % Change  Growth enhanced by market share growth in scissors, booms and telehandlers in NA. Sales 440.7 438.6 0.5%  MacDon  Supply chain constraints challenging ability to supply s

  7. Slide 7: Capital Expenditures (in millions CAD)

    Capital Expenditures (in millions CAD) Q1 2022 Q1 2021  Capex continuing to climb back to higher levels to support launching business; and Capital Expenditures (Capex) 88.0 59.5  We will be back in our normal spending range of 6-8% of sales in 2022 and 2023. Capex as a % of Sales 4.9% 3.3% Capex C

  8. Slide 8: Cash Flow Continued Positive

    Cash Flow Continued Positive 1,300 40% FCF1 in Q1 $3.7 million despite the 1,170 36% seasonal working capital uptick of Q1 1,040 32%  16th consecutive quarter of positive FCF Liquidity1 excellent with $1.9 billion of 910 28% 780 24% cash available at quarter end; and $ Millions Solid liquidity a

  9. Slide 9: Leverage (in millions CAD)

    Leverage (in millions CAD) Q1 2022 Q4 2021 Q1 2021  We continue to sit in a cash positive position  Balance sheet is in excellent shape; and Net Debt1 (110.3) (136.9) 308.9  Planning active engagement in NCIB as soon as out of Net Debt to EBITDA2 (0.12)x (0.13)x 0.31x blackout. Net Debt to EBITDA

  10. Slide 10: Challenges

    Challenges © Linamar Corporation 10

  11. Slide 11: Disruptions – A Significant Challenge

    Disruptions – A Significant Challenge Semi Conductor Chip Major Increases in Shortages Shipping Costs Spiking Commodity Prices Labour Challenges & Other Supply Chain Shortages © Linamar Corporation 11

  12. Slide 12: Semiconductor Chip Shortage – Light Vehicle Production Impact

    Semiconductor Chip Shortage – Light Vehicle Production Impact Announced volume loss of 1.6M units YTD. Supply disruption expected to continue into 2023. Announced Volume Loss by Quarter Announced Volume Loss by Region 4.0 3.48 6.0 4.94 3.5 3.0 2.60 2.5 2.06 4.0 2.87 2.76 Millions Millions 2.0 1.44 1

  13. Slide 13: Ukraine War Production Impact

    Ukraine War Production Impact Russian invasion of Ukraine having negative impact on Light vehicle production in Europe as Western OEMs cease production in Russia, wiring harness supply from Ukraine to OEMs in Europe is disrupted Volume Lost by Country Volume Lost by Strategic Group 140000 160000 131

  14. Slide 14: Ukraine Support

    Ukraine Support Over $400,000 Donated to Support Ukrainians Fighting for their Freedom Employee Donations $159,829.00 Linamar Employee Match $159,829.00 LEU In Kind Donations $82,152.00 Total Raised $401,804.00 © Linamar Corporation 14

  15. Slide 15: Commodity Prices a Challenge

    Commodity Prices a Challenge Some Flattening of Steel Plate, AL and Oil Keep Rising Steel Plate (CDN) - per metric ton Aluminum (USD) - per lb $1.80 $1,200.00 $1.60 $1,000.00 $1.40 $800.00 $1.20 $600.00 $1.00 $0.80 $400.00 $0.60 $200.00 $0.40 $- $0.20 $- Crude Oil, WTI (USD) - per barrel Scrap Steel

  16. Slide 16: MacDon Supply Disruption

    MacDon Supply Disruption Assembly Line Shortages: Partially Completed Header All released Projects, All Lines, by SKU including partials Production 120 100 90 100 80 70 80 60 60 50 40 40 30 20 20 10 0 0 Mar-22 Mar-22 Mar-22 Mar-22 Feb-22 Feb-22 Feb-22 Feb-22 Jan-22 Jan-22 Jan-22 Jan-22 May-22 Apr-22

  17. Slide 17: Ocean Freight Continues at an Elevated Level

    Ocean Freight Continues at an Elevated Level Europe Leveling Off, Asia Possibly Trending Down… Ocean Lane Increases Ocean Lane Increases $16,500 Europe Asia $27,500 $14,500 $22,500 $12,500 $10,500 $17,500 $8,500 $12,500 $6,500 $7,500 $4,500 $2,500 $2,500 Germany 20' Germany 40' Switzerland 20' India

  18. Slide 18: Natural Gas Prices

    Natural Gas Prices US$/mmbtu US$/mmbtu Natural gas, Europe 50 Liquefied natural gas, Japan 8 Natural gas, U.S. (RHS) 40 30 4 20 10 0 0 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Updated May 2022 Source: World Bank. © Linamar Corporation 18

  19. Slide 19: Energy Cost and Availability An Issue

    Energy Cost and Availability An Issue And One We Will Live with for Some Time…  Declines in investment in fossil fuel energy globally, down 40% in recent years  Unpopular, investors don’t want it, banks won’t fund it, governments won’t approve it  Insufficient offsetting investment in alternative

  20. Slide 20: Energy Crisis

    Energy Crisis Updated May 2022 https://thundersaidenergy.com/downloads/global-energy-supply-demand-balance/ © Linamar Corporation 20

  21. Slide 21: Top Issue on People Side Is Availability of People

    Top Issue on People Side Is Availability of People AVAILABILITY  Workforce Availability has Shrunk Significantly  Acceleration of Baby Boomer Retirement  Insufficient Immigration  COVID Impact © Linamar Corporation 21

  22. Slide 22: Market Outlook

    Market Outlook © Linamar Corporation 22

  23. Slide 23: Market Snapshot

    Market Snapshot Commercial Combine Commercial 2022 Light Vehicle Truck Heads Access 2023 Light Vehicle Truck Access North North America ▲13.0% ▲18.6% ▲10.0% ▲12.0% America ▲ 11.8% ▼-7.4% ▲9.8% Europe Europe ▲3.8% ▲5.8% ▲5.0% ▲13.7% ▲11.0% ▲8.5% ▲9.3% Asia ▲1.3% ▼-19.0% n/a ▲9.9% Asia ▲7.2% ▼-5.8% ▲1

  24. Slide 24: 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 180 Year 160 Overall -8 140 GM 7 120 Ford 2 100 80 Stellantis 1 60 Toyota -2 40 Honda -28 20 8574727668726970647171618474687264686568657572618877687664676661667367

  25. Slide 25: Global Light Vehicle Market: Q1 2022, Q2 2022, and 2022

    Global Light Vehicle Market: Q1 2022, Q2 2022, and 2022 Q1 2022 production decreased by 0.4M units. Q2 2022 forecast decreased by 1.8M units. 2022 full-year forecast decreased by 3.5M.  Q1 2022 forecast decreased by 0.4M  Q2 2022 forecast decreased by 1.8M  2022 full-year outlook decreased by 3.5

  26. Slide 26: Industrial Segment Impacts - Skyjack

    Industrial Segment Impacts - Skyjack Access Industry YTD Results & Forecast Access Equipment Market Commentary % Change vs. Prior Year  Supply chain disruptions including shipping container shortages and higher commodity prices are continuing to negatively impact production, shipments and costs in

  27. Slide 27: Agricultural Market

    Agricultural Market Agriculture Market Commentary North American Combine Retails  Supply chain disruptions including shipping container shortages and higher commodity 1,600 prices are continuing to negatively impact production, shipments and costs in 2022.  Agriculture retailers are seeing very le

  28. Slide 28: Growth Update and Outlook

    Growth Update and Outlook © Linamar Corporation 28

  29. Slide 29: Strong EV Wins Shifting Linamar Sales Mix Dramatically in Future

    Strong EV Wins Shifting Linamar Sales Mix Dramatically in Future Non-ICE Powertrain % of Light Vehicle Electrified Wins Total Sales 45% $600 $500 40% $400 35% Millions $300 30% 2022 April YTD $200 electrified NBWS already 25% above all prior $100 years 20% $0 2021 2022 2023 2024 2025 2026 2019 2020

  30. Slide 30: Launches

    Launches Launching nearly $4.4 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 - 2021 2022 2023 2024 2025 2026 Incremental Growth from Launches $500 to $600 Million in 2022 $700 to $800 Million in 2023 Updated: April 2022 © Linamar Corporation 30

  31. Slide 31: Q2 22 Expectations

    Outlook Consolidated Normal Ranges 2021 Actuals Expectations 2022 Expectations 2023 Q2 22 Expectations Sales Growth 12.4% Double Digit Growth Double Digit Growth  Mobility 1 Normalized EPS Growth 35.8% Double Digit Growth Double Digit Growth  Customer vehicle build losses will continue to weigh on

  32. Slide 32: Strategy Updates: Recent Developments

    Strategy Updates: Recent Developments © Linamar Corporation 32

  33. Slide 33: Acquired Casting Assets Strengthen Growth Platform for Structural Content

    Acquired Casting Assets Strengthen Growth Platform for Structural Content  Linamar Acquires Partner’s Interest in GF Linamar April 1, 2022  Renamed Linamar Light Metals Mills River  Strengthens growth platform in Structural content, a key part of Future of Mobility strategy and 1 of the 4 key pil

  34. Slide 34: Acquisition of Salford Group to Expand Agricultural Portfolio

    Acquisition of Salford Group to Expand Agricultural Portfolio  April 27th, 2022, Linamar announced an agreement to acquire 100% ownership of the Salford Group of companies for $260M CAD.  Salford is a global leader in crop nutrition application and tillage products.  This acquisition expands Lina

  35. Slide 35: China Market Entry

    China Market Entry  Investment agreement with Binhai New Area announced in March 2022.  Skyjack’s Electric DC Scissor lift models utilizing space and resources in Linamar’s existing Tianjin facility © Linamar Corporation 35

  36. Slide 36: New Business

    New Business © Linamar Corporation 36

  37. Slide 37: New Business Win 500,000 / year

    New Business Win Major driveline component win for hybrid electric vehicles. SOP Year Peak Volume 2024 500,000 / year Production Location North America © Linamar Corporation 37

  38. Slide 38: New Business Win $137M / year

    New Business Win $137M in wins for battery electric vehicles Average Annual Revenue SOP Year Peak Volume Year $137M / year 2022 2023 Production Location . Canada United States Mexico China France Germany © Linamar Corporation 38

  39. Slide 39: New Business Win $77M / year

    New Business Win $77M in powertrain wins for hybrid electric vehicles Average Annual Revenue SOP Year Peak Volume Year $77M / year 2023 2025 Production Location France China Germany © Linamar Corporation 39

  40. Slide 40: New Business Win $100M / year

    New Business Win $100M in camshaft wins for fuel efficient engine programs SOP Year Average Annual Revenue 2023 $100M / year Production Location Mexico Germany © Linamar Corporation 40

  41. Slide 41: Innovation

    Innovation © Linamar Corporation 41

  42. Slide 42: Innovation: Rolling Chassis Demonstrator

    Innovation: Rolling Chassis Demonstrator  A significant showcase of Linamar’s Electrified Mobility Capabilities on display this week at the ACT Expo in California  Linamar’s eLIN Product Solutions Group exhibiting systems solutions in;  Full Scale Hydrogen Fuel Cell Powered Class 2 Truck Chassis

  43. Slide 43: Innovation: FD2 Combine Integration

    Innovation: FD2 Combine Integration Mechanical Hydraulics Electronics + Interface Technologies = Improved Harvest Package Performance  As combines become increasingly technologically advanced, MacDon’s advances in integration systems seamlessly work with those technologies. Integration Innovations

  44. Slide 44: Innovation – Skyjack Telematics

    Innovation – Skyjack Telematics  ELEVATE Battery Management System targets the largest cost of ownership on electric scissors  Provides the operator with charging advice, and the rental company the ability to manage the cost of battery replacement using accurate and immediate data © Linamar Corpor

  45. Slide 45: Digitization with AI/ML and Our Digitization Journey

    Digitization with AI/ML and Our Digitization Journey April 2022 61 Category Counts by Quarter 6000 20000 Traceability 18000 Connected Digital Asset Count by Category Marking 16000 Total Connected Digital Assets 5000 Stations 14000 4000 12000 3000 10000 8000 2000 6000 4000 1000 2000 2,456 0 0 Q1/18 Q

  46. Slide 46: Financial Review

    Financial Review © Linamar Corporation 46

  47. Slide 47: Sales, Normalized Earnings, and Margins (in millions CAD)

    Sales, Normalized Earnings1, and Margins (in millions CAD) Q1 2022 Q1 2021 %Δ Q1 2022 The key impacts to the segments vs prior The key factors impacting results in the year are: Sales 1,778.1 1,781.9 (0.2%) quarter are: Mobility Industrial Sales 368.2 348.3 5.7%  Massively higher costs in material,

  48. Slide 48: Foreign Exchange Gain/Loss (in millions CAD)

    Foreign Exchange Gain/Loss (in millions CAD) Q1 2022 Q1 2021 +/-  Total FX Gain was $5.9 which resulted from a $5.5 FX Gain – FX Gain/(Loss) – Operating1 5.5 (0.1) 5.6 Operating and a $0.4 FX Gain – Financing. FX Gain/(Loss) – Financing 0.4 (6.3) 6.7  FX Gain – Operating was comprised of a $8.1 ga

  49. Slide 49: Industrial Sales, Earnings, and Margins (in millions CAD)

    Industrial Sales, Earnings, and Margins (in millions CAD)  Industrial sales increased by 5.7% or $19.9 to $368.2. Q1 2022 Q1 2021  The sales were helped by: Finance  access equipment market share gains in North America for all three product Sales 368.2 348.3 families; and updating  higher sale p

  50. Slide 50: Mobility Sales, Earnings, and Margins (in millions CAD)

    Mobility Sales, Earnings, and Margins (in millions CAD)  Mobility sales were $1,409.9 for the quarter. Q1 2022 Q1 2021  The sales were hurt by:  the market impact of the supply related issues which are impacting our customers; and Sales 1,409.9 1,433.6  a negative FX impact related to the change

  51. Slide 51: Operating Expenses (in millions CAD)

    Operating Expenses (in millions CAD) Q1 2022 Q1 2021 +/- %  Gross Margin was $198.2 in the quarter and was impacted by the same factors that impacted each business segment. (See the previous two slides) Sales 1,778.1 1,781.9 (3.8) (0.2%) Cost of Goods Sold 1,579.9 1,469.2 110.7 7.5%  Amortization

  52. Slide 52: Finance Expenses & Income Tax (in millions CAD)

    Finance Expenses & Income Tax (in millions CAD)  Finance expenses decreased by $7.1. Q1 2022 Q1 2021 +/-  Finance expenses were helped by  The one-time FX impact in Jan 21 from replacing the 2021 expiring private notes Finance Expense 0.5 7.6 (7.1) with the new 2031 Euro notes.  the significant

  53. Slide 53: Leverage (in millions CAD)

    Leverage (in millions CAD) Q1 2022 Q1 2021  Cash position at the end of the quarter was $903.9.  Linamar generated $62.5 in Cash from Operating Activities. Cash Position 903.9 671.9  Net Debt to EBITDA was decreased significantly to negative 0.12x. Available Cash on Credit Facilities 957.6 957.5

  54. Slide 54: Conclusion

    Conclusion  Sales declines in Mobility and MacDon driven by ongoing supply shortages.  Significant challenges in the quarter from supply issues increase the cost of raw material, labour, freight and utilities costs.  Available Liquidity1 remains strong at $1.9 billion.  Continued to be Net Debt2

  55. Slide 55: Question and Answer

    Question and Answer

  56. Slide 56: Q2 22 Expectations

    Outlook Consolidated Normal Ranges 2021 Actuals Expectations 2022 Expectations 2023 Q2 22 Expectations Sales Growth 12.4% Double Digit Growth Double Digit Growth  Mobility 1 Normalized EPS Growth 35.8% Double Digit Growth Double Digit Growth  Customer vehicle build losses will continue to weigh on

  57. Slide 57: Key Messages

    Key Messages Excellent NBW, 75% EV 16 Consecutive Quarters of Free Cash Flow 2 Strategic Acquisitions Announced 1. Free Cash Flow is a non-GAAP financial measure. Please refer to “Non-GAAP © Linamar Corporation 57 and Other Financial Measures” in the separately released Q1 2022 MD&A.

  58. Slide 58: Thank You

    Thank You www.linamar.com @linamarcorp Linamar Corporation

Linamar — Q1 2022 Earnings Presentation on 6ix