Linamar Corporation · TSX:LNR
Linamar — Q1 2019 Earnings Presentation
45 slides from Linamar's earnings presentation, May 2, 2019
Slide 1: Conference Call Presentation
Conference Call Presentation Q1 2019 Conference Call Information Local: (647) 427-3383 Toll Free: (888) 424-9894 (North America) Conference ID 5899778 Linda Hasenfratz May 2, 2019
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 exp
Slide 3: 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 4: 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
Slide 5: Automotive Sales & Content Per Vehicle (CPV)
Automotive Sales & Content Per Vehicle (CPV) CPV Q1 2019 CPV Q1 2018 CPV % Change Vehicle Production Automotive Automotive Automotive Units % Change Sales Q1 2019 Sales Q1 2018 Sales % Change (CAD Millions) (CAD Millions) North America 167.37 165.43 1.2% (0.2%) 752.9 745.9 0.9% Europe 84.62 76.74 10
Slide 6: Commercial & Industrial Sales
Commercial & Industrial Sales (in millions CAD) Q1 2019 Q1 2018 % Change ▪ MacDon up with 3 months vs 2 last year, global market share growth combine headers Sales 559.2 493.2 13.4% QvQ¹ Change in Commerical & Industrial Sales Growth 18.8% 13.4% 34.4% 29.9% 64.8% 66.0% 45.2% 13.4% Q2 16 v Q2 17 Q3 1
Slide 7: Capital Expenditures
Capital Expenditures (in millions CAD) Q1 2019 Q1 2018 ▪ Normal range (annually) 6-8% ▪ 2019 expect low end of range, down from 2018 Capital Expenditures (Capex) 120.4 117.6 ▪ 2020 expect low end of range ▪ Using disciplined approach to spending given economic Capex as a % of Sales 6.1% 6.2% uncerta
Slide 8: Leverage
Leverage (in millions CAD) Q1 2019 Q4 2018 Q1 2018 ▪ Change to IFRS Rules resulted in $78.7 mill of leases to now be considered debt ▪ Adjusting for such net debt would have been down ~$10 mill thanks to Net Debt 2,084.8 2,016.5 2,160.8 $22 mill FCF & Leverage would be better ▪ NCWC down as a % of s
Slide 9: 2019 Expected to Drive Solid Free Cash Flow
2019 Expected to Drive Solid Free Cash Flow 500 Min Target ▪ 2019 expected to generate between 450 $500 and $700 million through ▪ Higher earnings over 2018; ▪ Lower Capex than 2018; 400 350 ▪ Focused NCWC Improvements; and 300 ▪ Long Term AR (“LTAR”) Improvements 250 ▪ NCWC Improvements focused on
Slide 10: Market Update
Market Update
Slide 11: 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
Slide 12: Auto Volumes Under Pressure First Half of 2019
Auto Volumes Under Pressure First Half of 2019 North America Light Vehicle Europe Light Vehicle Greater China Light Vehicle Production by Quarter Production by Quarter Production by Quarter 10.0 10.0 10.0 9.0 9.0 9.0 7.9 8.0 8.0 8.0 7.1 6.8 6.7 6.5 6.6 7.0 7.0 7.0 Volume (in Millions) 6.2 Volume (in
Slide 13: IHS Light Vehicle Production Forecast
IHS Light Vehicle Production Forecast Global light vehicle production recovering as of 2020 per IHS. Global Light Vehicle Production Forecast by Year Global Light Vehicle Production Forecast by Quarter 30 120 106.4 108.1 102.5 104.8 24.3 24.4 24.8 100.0 24.1 23.9 23.6 97.6 25 23.3 22.9 23.4 23.1 95.
Slide 14: 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
Slide 15: Growth Update & Outlook
Growth Update & Outlook
Slide 16: Global Total Addressable Market
Global Total Addressable Market Updated: April, 2019 © Linamar Corporation 16
Slide 17: 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
Slide 18: 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
Slide 19: New Business
New Business
Slide 20: New Business Wins: Commercial Truck Cylinder Block
New Business Wins: Commercial Truck Cylinder Block Package Volume 40,000 / year Major fully machined cylinder block win SOP Year for on-highway trucks 2022 Peak Volume Year 2023 Production Location © Linamar Corporation 20
Slide 21: New Business Wins: Commercial Truck Engine Components
New Business Wins: Commercial Truck Engine Components Package Volume 35,000 / year Several new business wins for a heavy SOP Year truck engine program in India 2020 Peak Volume Year 2024 Production Location © Linamar Corporation 21
Slide 22: New Business Wins: Cylinder Heads
New Business Wins: Cylinder Heads Package Volume 535,000 / year SOP Year Major cylinder head casting expansion 2020 Peak Volume Year 2022 Production Location © Linamar Corporation 22
Slide 23: New Business Wins: Development Project for Conformable H2 Storage Tank
New Business Wins: Development Project for Conformable H2 Storage Tank Package Volume Development project Conformable H2 storage tank for a fuel SOP Year cell vehicle under development at a key N/A customer Peak Volume Year N/A Production Location © Linamar Corporation 23
Slide 24: Innovation Update
Innovation Update
Slide 25: GF Linamar | Innovative Light Weight Structural Components
GF Linamar | Innovative Light Weight Structural Components Picture of the largest die cast machine in NA Cross Car Beam in Magnesium • Critical component of instrument panel • Jointly designed with customer • Unique process developed to significantly enhance efficiency and cost • Cast on a 4,400 ton
Slide 26: 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 26
Slide 27: Operations Update
Operations Update
Slide 28: LTH – Hungary | E-Axle Gear Box
LTH – Hungary | E-Axle Gear Box © Linamar Corporation 28
Slide 29: OROS – Hungary | Corn Heads & Skyjack
OROS – Hungary | Corn Heads & Skyjack © Linamar Corporation 29
Slide 30: LPW, Wuxi, China | E-Axle
LPW, Wuxi, China | E-Axle © Linamar Corporation 30
Slide 31: Trade Update
Trade Update
Slide 32: China & Metal Tariffs Not Material Impact to Linamar
China & Metal Tariffs Not Material Impact to Linamar ▪ Discussions continue regarding ratifying USMCA ▪ Critical for Tariffs to be eliminate ahead of ratification to minimize negative impact to automakers and ability to invest in new technologies ▪ China Tariffs ▪ Impacting mainly our industrial bus
Slide 33: Financial Review
Financial Review Chris Merchant
Slide 34: Sales, Normalized Earnings, and Margins
Sales, Normalized Earnings, and Margins (in millions CAD) Q1 2019 Q1 2018 %Δ ▪ Tough market environment with Europe vehicle markets down 5.3% and Asia Pacific Sales 1,974.5 1,893.9 4.3% markets down 6.6% Industrial OE – Normalized¹ 77.9 62.7 24.2% ▪ Sales up 4.3% Transportation OE – Normalized¹ 119.
Slide 35: Foreign Exchange Gain/Loss
Foreign Exchange Gain/Loss (in millions CAD) Q1 2019 Q1 2018 +/- ▪ Net FX Loss of $5.1 FX Gain/(Loss) – Operating1 (6.0) 5.4 (11.4) ▪ FX Loss – Operating was $6.0 FX Gain/(Loss) – Financing 0.9 (1.2) 2.1 ▪ Industrial FX Loss was $4.8 Total FX Gain/(Loss) (5.1) 4.2 (9.3) ▪ Transportation FX Loss was
Slide 36: Industrial Sales, Earnings, and Margins
Industrial Sales, Earnings, and Margins (in millions CAD) Q1 2019 Q1 2018 ▪ Industrial sales increased by 17.0% or $67.6 million to reach $465.1 ▪ The sales increase for the quarter was due to: ▪ additional sales as a result of the acquisition of MacDon; Sales 465.1 397.5 ▪ favourable changes in FX
Slide 37: Transportation Sales, Earnings, and Margins
Transportation Sales, Earnings, and Margins (in millions CAD) Q1 2019 Q1 2018 ▪ Transportation sales increased by $13.0 million to reach $1.51 billion. ▪ The sales was mainly driven by: ▪ higher sales from our launching programs; Sales 1,509.4 1,496.4 ▪ a favourable impact from the changes in FX rat
Slide 38: Operating Expenses
Operating Expenses (in millions CAD) Q1 2019 Q1 2018 +/- % ▪ Gross Margin decreased 3.9% Sales 1,974.5 1,893.9 80.6 4.3% ▪ Amortization remained flat at 4.8% of sales Cost of Goods Sold 1,670.6 1,577.8 92.8 5.9% ▪ Amortization increased $6.0 mainly due to the impact of the new IFRS 16 standard and G
Slide 39: Finance Expenses & Income Tax
Finance Expenses & Income Tax (in millions CAD) Q1 2019 Q1 2018 +/- ▪ Finance expenses increased $2.9 million due to: ▪ higher interest rates due to the Bank of Canada rate hikes since Q1 2018; ▪ the inclusion of three months of interest expense related the MacDon acquisition debt; partially offset
Slide 40: Leverage
Leverage (in millions CAD) Q1 2019 Q1 2018 ▪ The new IFRS 16 Leases was adopted as of Jan 1, 2019. ▪ The impact is $78.7 million of leases are now recorded on the balance sheet increasing both Fixed Assets and Debt. Cash Position 485.5 455.3 ▪ To compare 2018 debt to 2019, you will need to adjust 20
Slide 41: Conclusion
Conclusion ▪ Sales up 4.3% despite tough markets in Europe and Asia ▪ Normalized OE is down 5.6% ▪ Normalized NE is down 9.1% ▪ Normalized EPS was $2.11 for the quarter ▪ Double Digit Normalized OE Margins © Linamar Corporation 41
Slide 42: Question and Answer
Question and Answer © Linamar Corporation 42
Slide 43: 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
Slide 44: Key Messages
Key Messages 1. First we are very happy to see both sales and market share up in most of our businesses this quarter despite challenging markets, echoing Linamar's consistent above market performance throughout historical economic cycles. 2. Second, we are expecting to see strong free cash flow this
Slide 45: Thank You
Thank You @linamarcorp @linamarcorp Linamar Corporation www.linamar.com Linamar Corporation