Linamar Corporation · TSX:LNR
Linamar — Q3 2022 Earnings Presentation
50 slides from Linamar's earnings presentation, Nov 9, 2022
Slide 1: 2022 Q3 Conference Call Presentation
For Audio Only Dial in: North America: (888) 886-7786 International: (416) 764-8658 Conference ID: 21070291 2022 Q3 Conference Call Presentation Linda Hasenfratz, Executive Chair & CEO November 9, 2022
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: 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
Slide 4: Sales, Normalized Earnings, and Margins
Sales, Normalized Earnings1, and Margins (in millions CAD) Q3 2022 Q3 2021 %Δ Q3 2022 The key impacts to the segments vs prior The key factors impacting results in the year are: Sales 2,098.1 1,645.0 27.5% quarter are: Mobility Industrial Sales 533.4 433.9 22.9% ▪ Growth in both segments, amplified
Slide 5: Automotive Sales & Content Per Vehicle (CPV)
Automotive Sales & Content Per Vehicle2 (CPV) CPV Q3 2022 CPV Q3 2021 CPV % Change Vehicle Production Automotive Automotive Automotive Units % Change Sales Q3 2022 Sales Q3 2021 Sales % Change (CAD Millions) (CAD Millions) North America 241.01 207.00 16.4% 24.1% 918.9 636.4 44.4% Europe 103.95 99.90
Slide 6: Commercial & Industrial Sales
Commercial & Industrial Sales2 (in millions CAD) Q3 2022 Q3 2021 % Change Skyjack ▪ Global markets up double digits. MacDon Sales 604.7 510.0 18.6% ▪ Markets up in mid single digits globally for both combine drapers and windrowers. Salford ▪ First full quarter of sales for this new ag sector acquisi
Slide 7: Capital Expenditures
Capital Expenditures (in millions CAD) Q3 2022 Q3 2021 ▪ Capex continues to run at a higher level than last year supporting global launches; and Capital Expenditures (Capex) 83.4 58.6 ▪ We will be just under of our normal spending range of 6-8% of sales in 2022 but back within it next year. Capex as
Slide 8: Cash Flow Continues to be a Key Priority
Cash Flow Continues to be a Key Priority ▪FCF1 positive on strong earnings; ▪Liquidity1 remains excellent with $1.3 billion of cash available at quarter end. 2 1 - Free Cash Flow and Liquidity are non-GAAP financial measures. Please refer to “Non-GAAP and Other Financial Measures” in the separately
Slide 9: Leverage
Leverage (in millions CAD) Q3 2022 Q2 2022 Q3 2021 ▪ Balance sheet is in excellent shape at 0.46x Net Debt to EBITDA despite very active NCIB; Net Debt1 452.7 337.4 (5.7) ▪ 1.8 million shares purchased in the quarter under our Net Debt to EBITDA2 0.46x 0.35x (0.01)x NCIB taking us to 3.5 million YTD
Slide 10: Challenges
Challenges © Linamar Corporation 10
Slide 11: Supply and Cost Challenges
Supply and Cost Challenges Spiking Energy Supply Chain Spiking Commodity Labour Challenges Semiconductor Major Increases in Costs Shortages Prices Chip Shortages Freight Costs Some Slow Improving for Continued Improving Each Trending Down Improvements in Improvements Most Challenges Quarter, Less on
Slide 12: Semiconductor Chip Shortage – Light Vehicle Production Impact
Semiconductor Chip Shortage – Light Vehicle Production Impact Announced volume loss of 2.6M units 2022 YTD. Supply disruption expected to continue into 2023. Announced Volume Loss by Quarter Announced Volume Loss by Region 4.0 5.31 3.48 6.0 3.5 3.0 2.60 3.17 2.5 4.0 3.05 2.06 Millions Millions 2.0 1
Slide 13: Commodity Prices Improving
$- $100.00 $120.00 $140.00 $20.00 $40.00 $60.00 $80.00 $- $500.00 $1,000.00 $1,500.00 Oct-20 Oct-20 Nov-20 Nov-20 Dec-20 Dec-20 Jan-21 Jan-21 Feb-21 Feb-21 Mar-21 Mar-21 Commodity Pricing Update Oct 2022 Apr-21 Apr-21 May-21 May-21 Jun-21 Jun-21 Jul-21 Jul-21 Aug-21 Aug-21 Sep-21 Sep-21 Oct-21 Oct-2
Slide 14: MacDon Supply Disruption Situation Improving
100 120 40 60 20 80 0 03/18/2022 04/01/2022 Updated October 2022 04/15/2022 04/29/2022 05/13/2022 05/27/2022 06/10/2022 06/24/2022 07/08/2022 07/22/2022 08/05/2022 08/19/2022 Assembly Line Shortages: 09/02/2022 09/16/2022 All released Projects, All Lines, by SKU including partials 09/30/2022 10/14/2
Slide 15: Skyjack Improving As Well
Skyjack Improving As Well Line Down - Weekly Total 35 30 30 29 29 25 25 25 25 23 22 22 20 20 20 17 17 16 16 16 15 15 14 14 14 13 13 13 13 12 12 12 12 11 11 10 10 10 10 9 9 9 9 8 7 7 6 6 6 5 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39
Slide 16: Ocean Freight: Europe Leveled Off, Asia Normalizing
Ocean Freight: Europe Leveled Off, Asia Normalizing… Ocean Lanes Ocean Lanes Asia Europe $27,500 $18,500 $16,500 $22,500 $14,500 $17,500 $12,500 $10,500 $12,500 $8,500 $6,500 $7,500 $4,500 $2,500 $2,500 India 40' S.Korea 20' SJK from China 20' Germany 20' Germany 40' Switzerland 20' SJK from China 4
Slide 17: Seeing Some Softening of Gas Prices in Europe
Seeing Some Softening of Gas Prices in Europe… Though Still Quite High Historically and Well Above Other Countries Updated Oct 2022 Source: World Bank, The New York Times. © Linamar Corporation 17
Slide 18: Top Issue on People Side: The Availability of People
Top Issue on People Side: The Availability of People AVAILABILITY ▪ Workforce Availability has Shrunk Significantly ▪ Acceleration of Baby Boomer Retirement; ▪ Insufficient Immigration; ▪ COVID Impact. © Linamar Corporation 18
Slide 19: Market Outlook
Market Outlook © Linamar Corporation 19
Slide 20: Market Snapshot
Market Snapshot Commercial Commercial 2022 Light Vehicle Truck Agriculture Access 2023 Light Vehicle Truck Access North North America ▲10.9% ▲9.7% ▲5-10% ▲20.3% America ▲ 6.4% ▲1.3% ▲9.7% Europe Europe ▼-1.6% ▼-5.9% 0% ▲35.0% ▲6.5% ▲5.3% ▲9.3% Asia ▲6.8% ▼-34.6% n/a ▲10.5% Asia ▲2.9% ▲11.5% ▲12.9% R
Slide 21: 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 180 160 Overall 8 140 GM 19 120 Ford 18 100 80 Stellantis 19 60 Toyota 4 40 Honda 5 20 85747276687269706471716184746872646865686575726188776876646766616673675
Slide 22: Global Light Vehicle Market: Q3 2022, Q4 2022, and 2022
Global Light Vehicle Market: Q3 2022, Q4 2022, and 2022 Q3 2022 production increased by 1.1M units. Q4 2022 forecast decreased by 400,000 units. 2022 full-year forecast increased by 1M. ▪ Q3 2022 production increased by 1.1M on faster ▪ Q4 2022 decreased by 400,000, mostly due to ▪ 2022 full-year ou
Slide 23: Industrial Segment - Access
Industrial Segment - Access Access Equipment Market Commentary 2022 Access Industry YTD Results & Forecast % Change vs. Prior Year ▪ Supply chain shortages and higher commodity prices are continuing to limit production and shipments as well as negatively impact costs in 2022 45% ▪ Energy surcharges
Slide 24: Industrial Segment - Agriculture
Industrial Segment - Agriculture North American Combine Retails Agriculture Market Commentary 1,500 • Supply chain issues continue to persist, and although moderating to some 1,000 degree, they continue to act as a ceiling to market upside 500 • Commodity pricing and higher input costs pressures con
Slide 25: Growth Update and Outlook
Growth Update and Outlook © Linamar Corporation 25
Slide 26: Strong EV Wins Shifting Linamar Sales Mix Dramatically in Future
Strong EV Wins Shifting Linamar Sales Mix Dramatically in Future Non-”ICE Powertrain” Sales Electrified New Business Wins % of Total Light Vehicle Sales $1,200 60% 50% $1,000 40% $800 Millions 30% $600 20% $400 10% $200 0% $0 2021 2022 2023 2024 2025 2026 2019 2020 2021 2022 Source: Linamar Internal
Slide 27: Launches
Launches Launching more than $5 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 - 2021 2022 2023 2024 2025 2026 Incremental Growth from Launches $500 to $600 Million in 2022 $800 to $900 Million in 2023 Updated: October 2022 © Linamar Corporat
Slide 28: Outlook
Outlook Consolidated Normal Ranges 2021 Actuals Expectations 2022 Expectations 2023 Q4 2022 Expectations Sales Growth 12.4% Double Digit Growth Double Digit Growth ▪ Mobility 1 Normalized EPS Growth 35.8% Flat Double Digit Growth ▪ Sales at best flat to Q3 2022 but meaningfully up from 1 Normalized
Slide 29: New Business
New Business © Linamar Corporation 29
Slide 30: New Business Win $55M / year
New Business Win $55M in wins for HEV/ICE transmission programs Average Annual Revenue SOP Year $55M / year 2023 Production Location Canada Hungary Germany © Linamar Corporation 30
Slide 31: New Business Win $127M / year
New Business Win $127M in new business wins for BEVs Average Annual Revenue SOP Year $127M / year 2024 Production Location China, Canada, Mexico © Linamar Corporation 31
Slide 32: New Business Win ~250k / year Late 2024
New Business Win Structural Component Win for BEV Vehicle Average Annual Volume SOP Year ~250k / year Late 2024 Production Location To Be Determined North America © Linamar Corporation 32
Slide 33: Innovation
Innovation © Linamar Corporation 33
Slide 34: eLIN Innovation: Flexform Tank Development
eLIN Innovation: Excellent Progress on Flexform Tank Development ▪ Flexform Hydrogen Storage Tank currently in R&D phase continues to make excellent progress in both product and process development ▪ Offers customers packaging advantages for FCEV (Fuel Cell Electric Vehicles) applications ▪ Adds to
Slide 35: Skyjack Innovation: SKY360 Video Tech Support
Skyjack Innovation: SKY360 Video Tech Support ▪ A service tool that allows technicians to interact through a live video feed to customers in the field, reducing costs of tech support experts ▪ Integrates with service manual information ▪ The tool allows highlighting of components for identification
Slide 36: MacDon Innovation: Trimble GPS Guidance Systems
MacDon Innovation: Trimble GPS Guidance Systems ▪ MacDon has collaborated with Trimble to release two new guidance systems for MY2023 M1 Series Windrower ▪ 1 value system & 1 high performance system ▪ The guidance system automatically steers the windrower ▪ These new guidance systems further improve
Slide 37: Digitization with AI/ML – November 2022
Digitization with AI/ML – November 2022 65 Plants 5,268 3,467 1,036 Traceability Robots Marking Stations LMMS Data Collection Connections 2,051 2,975 RFID Stations 1,202 Connected Machines 2,704 6 Vision Systems Traceability Read Stations AGVs November- 2022 37
Slide 38: Financial Review
Financial Review Dale Schneider, CFO © Linamar Corporation 38
Slide 39: Sales, Normalized Earnings, and Margins
Sales, Normalized Earnings1, and Margins (in millions CAD) Q3 2022 Q3 2021 %Δ Q3 2022 The key impacts to the segments vs prior The key factors impacting results in the year are: Sales 2,098.1 1,645.0 27.5% quarter are: Mobility Industrial Sales 533.4 433.9 22.9% ▪ Growth in both segments, amplified
Slide 40: Foreign Exchange Gain/Loss
Foreign Exchange Gain/Loss (in millions CAD) Q3 2022 Q3 2021 +/- ▪ Total FX Gain was $16.3 which resulted from a $17.0 FX Gain FX Gain/(Loss) – Operating1 17.0 5.5 11.5 – Operating and a $0.7 FX Loss – Financing. FX Gain/(Loss) – Financing (0.7) - (0.7) ▪ FX Gain – Operating was comprised of a $10.4
Slide 41: Industrial Sales, Earnings, and Margins
Industrial Sales, Earnings, and Margins (in millions CAD) Industrial sales increased by 22.9% or $99.5 to $533.4. Q3 2022 Q3 2021 ▪ The sales were helped by: Finance ▪ increased sales related to the acquisition of Salford; Sales 533.4 433.9 ▪ increased pricing to help partially relieve increased sup
Slide 42: Mobility Sales, Earnings, and Margins
Mobility Sales, Earnings, and Margins (in millions CAD) Mobility sales increased by 29.2% or $353.6 to $1,564.7. Q3 2022 Q3 2021 ▪ The sales were helped by: ▪ a sales increase primarily due to improvements in supply related issues experienced by our customers compared to Q3 2021; Sales 1,564.7 1,211
Slide 43: Operating Expenses
Operating Expenses (in millions CAD) Q3 2022 Q3 2021 +/- % ▪ Gross Margin was $277.9 in the quarter and was impacted by the same factors that impacted each business segment. (See the previous two slides) Sales 2,098.1 1,645.0 453.1 27.5% Cost of Goods Sold 1,820.2 1,409.5 410.7 29.1% ▪ Amortization
Slide 44: Finance Expenses & Income Tax
Finance Expenses & Income Tax (in millions CAD) ▪ Finance expenses increased by $7.0. Q3 2022 Q3 2021 +/- ▪ Finance expenses were hurt by: ▪ increase in interest costs due to change in the Bank of Canada overnight rate and Finance Expense 8.9 1.9 7.0 United States Federal Funds rate; ▪ increased bor
Slide 45: Leverage
Leverage (in millions CAD) Q3 2022 Q3 2021 ▪ Cash position at the end of the quarter was $856.0. ▪ Linamar generated $118.3 in Cash from Operating Activities. Cash Position 856.0 806.0 ▪ Net Debt to EBITDA was increased to 0.46x due acquisitions and share buybacks. Available Cash on Credit Facilitie
Slide 46: Conclusion
Conclusion ▪ Sales growth in both Mobility and Industrial. ▪ Global market share growth in Mobility and MacDon. ▪ Economic hardship recoveries achieved in Mobility. ▪ Available Liquidity1 remains strong at $1.3 billion. ▪ Very active in the share buyback program (NCIBs). 1 - Liquidity is a non-GAAP
Slide 47: Question and Answer
Question and Answer
Slide 48: Outlook
Outlook Consolidated Normal Ranges 2021 Actuals Expectations 2022 Expectations 2023 Q4 2022 Expectations Sales Growth 12.4% Double Digit Growth Double Digit Growth ▪ Mobility 1 Normalized EPS Growth 35.8% Flat Double Digit Growth ▪ Sales at best flat to Q3 2022 but meaningfully up from 1 Normalized
Slide 49: Key Messages
Key Messages Double Digit Top and Bottom Line Growth Huge Electrified Wins -- >$1 Billion YTD Outstanding Market Share Growth © Linamar Corporation 49
Slide 50: Thank You
Thank You www.linamar.com @linamarcorp Linamar Corporation