Linamar Corporation · TSX:LNR

Linamar — Q4 2018 Earnings Presentation

53 slides from Linamar's earnings presentation, Mar 11, 2019

  1. Slide 1: Conference Call Presentation

    Conference Call Presentation Q4 2018 Conference Call Information Local: (647) 427-3383 Toll Free: (888) 424-9894 (North America) Conference ID 6839576 Linda Hasenfratz March 11, 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 exp

  3. Slide 3: Sales, Earnings and CPV

    Sales, Earnings and CPV

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

    Sales, Earnings, and Margins (in millions CAD) Q4 2018 Q4 2017 %Δ 2018 2017 %Δ Q4 2018 Helped By: Sales 1,732.0 1,574.5 10.0% 7,620.6 6,546.5 16.4%  Sales up 10%  MacDon performance  OE up 8.2% but flat when normalized  Growth at Skyjack Operating Earnings (“OE”) 171.1 158.2 8.2% 819.9 707.9 15.

  5. Slide 5: Europe & China Volumes Under Pressure First Half of 2019

    Europe & China Volumes Under Pressure First Half of 2019 Europe Light Vehicle Production by Quarter Greater China Light Vehicle Production by Quarter 10.0 10.0 9.0 9.0 8.0 8.0 8.0 7.5 6.8 6.7 6.8 6.7 6.5 7.0 6.0 7.0 6.2 Volume (in Millions) 5.9 5.7 5.8 5.7 Volume (in Millions) 6.0 5.5 6.0 5.0 4.6 5.

  6. Slide 6: Sales, Earnings, and Margins (in millions CAD)

    Sales, Earnings, and Margins (in millions CAD) Q4 2018 Q4 2017 %Δ 2018 2017 %Δ Q4 2018 Helped By: Sales 1,732.0 1,574.5 10.0% 7,620.6 6,546.5 16.4%  Sales up 10%  MacDon performance  OE up 8.2% but flat when normalized  Growth at Skyjack Operating Earnings (“OE”) 171.1 158.2 8.2% 819.9 707.9 15.

  7. Slide 7: Outlook

    Outlook Normal Ranges 2018 Actuals Expectations Consolidated 2019 Sales Growth Mid Single Digit Normalized Operating Earnings High Single Digit Growth Normalized Net Margin 7.0% to 9.0% 7.7% Expansion to 7.75% to 8.25% Capex (% of Sales) 6.0% - 8.0% 7.1% Low End Range Down in $ and % from 2018 Indus

  8. Slide 8: Capital Expenditures (in millions CAD)

    Capital Expenditures (in millions CAD) Q4 2018 Q4 2017  Normal range (annually) 6-8%  2019 expect low end of range, < than 2018 in $ and Capital Expenditures (Capex) 144.5 100.9 %  Using disciplined approach to spending given economic Capex as a % of Sales 8.3% 6.4% uncertainties Capex Capex as a

  9. Slide 9: Leverage (in millions CAD)

    Leverage (in millions CAD) Q4 2018 Q3 2018 Q4 2017  Leverage continues to improve  Net Debt back under 1x EBITDA by late 2019 Net Debt 2,016.5 2,067.4 865.0 Net Debt to Proforma 1.68x 1.69x 0.83x EBITDA1 Net Debt to Proforma EBITDA¹ 0.97x 0.92x 0.92x 0.83x 1.79x 1.75x 1.69x 1.68x Q1 2017 Q2 2017 Q

  10. Slide 10: Automotive Sales & Content Per Vehicle (CPV)

    Automotive Sales & Content Per Vehicle (CPV) CPV Q4 2018 CPV Q4 2017 CPV % Change Vehicle Production Automotive Automotive Automotive Units % Change Sales Q4 2018 Sales Q4 2017 Sales % Change (CAD Millions) (CAD Millions) North America 160.33 157.58 1.7% 1.9% 699.2 675.2 3.6% Europe 73.06 69.93 4.5%

  11. Slide 11: Commercial & Industrial Sales (in millions CAD)

    Commercial & Industrial Sales (in millions CAD) Q4 2018 Q4 2017 %  MacDon acquisition performing strongly  Skyjack market share growth Sales 441.0 303.7 45.2% QvQ¹ Change in Commerical & Industrial Sales Growth 27.4% 18.8% 13.4% 34.4% 29.9% 64.8% 66.0% 45.2% Q1 16 v Q1 17 Q2 16 v Q2 17 Q3 16 v Q3

  12. Slide 12: Market Outlook

    Market Outlook

  13. Slide 13: Market Snapshot 2019

    Market Snapshot 2019 Transportation Industrial 2019 Agriculture Automotive (LV) Commercial Truck Skyjack North America Flat Flat Moderate Growth Growth Europe Flat Growth Flat Moderate Growth Asia Flat Decline Flat Decline Ranking Score Growth Expectation Decline 0.00 <-2% The above market expectati

  14. Slide 14: Growth Update & Outlook

    Growth Update & Outlook

  15. Slide 15: Global Total Addressable Market

    Global Total Addressable Market Pure Battery EV penetration reaches 20% of the market by 2030 Updated: March 2019 © Linamar Corporation 15

  16. Slide 16: Launches

    Launches Launching nearly $4.4 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 - 2017 2018 2019 2020 2021 2022 Other Driveline Engine Transmission Sales from Launch add: $900 Mill to $1.1 Billion in 2019 Updated March 2019 © Linamar Corporatio

  17. Slide 17: Outlook

    Outlook Normal Ranges 2018 Actuals Expectations Consolidated 2019 Sales Growth Mid Single Digit Normalized Operating Earnings High Single Digit Growth Normalized Net Margin 7.0% to 9.0% 7.7% Expansion to 7.75% to 8.25% Capex (% of Sales) 6.0% - 8.0% 7.1% Low End Range Down in $ and % from 2018 Indus

  18. Slide 18: Q4 2018 - Outlook Strong for the Future

    Q4 2018 - Outlook Strong for the Future Sales by Region 12,000 10,000 Target 8,000 $ Millions 6,000 4,000 2,000 - 2013 2018 2022 Actual Actual Estimate North America Europe Asia Target - Business to be Booked © Linamar Corporation 18

  19. Slide 19: New Business

    New Business

  20. Slide 20: New Business Wins: Balance Shaft Assembly

    New Business Wins: Balance Shaft Assembly Package Revenue $45 million / year More than $45 million in wins for engine SOP Year balance shaft assemblies 2022 Peak Volume Year 2023 Production Location © Linamar Corporation 20

  21. Slide 21: New Business Wins: Engine & Transmission Components in France

    New Business Wins: Engine & Transmission Components in France Package Revenue $25 million / year More than $25 million in engine and SOP Year transmission component wins for our 2020 French plants Peak Volume Year 2023 Production Location © Linamar Corporation 21

  22. Slide 22: New Business Wins: Components for Commercial Vehicle Transmissions

    New Business Wins: Components for Commercial Vehicle Transmissions Package Revenue $20 million / year Package of commercial vehicle SOP Year transmission components representing 2020 more than $20 million in annual sales Peak Volume Year 2022 Production Location © Linamar Corporation 22

  23. Slide 23: New Business Wins: Cylinder Heads

    New Business Wins: Cylinder Heads Package Revenue $60 million / year Two cylinder head casting wins for our SOP Year light metal casting group representing 2019 nearly $60 million in annual sales Peak Volume Year 2020 Production Location © Linamar Corporation 23

  24. Slide 24: New Business Wins: Camshafts

    New Business Wins: Camshafts Package Volume 180,000 / year Important camshaft win for a key SOP Year Japanese OEM 2021 Peak Volume Year 2025 Production Location © Linamar Corporation 24

  25. Slide 25: New Business Wins: Structural Components

    New Business Wins: Structural Components Package Volume 700,000 / year Important structural component win for SOP Year this growing area of our business 2020 Peak Volume Year 2021 Production Location © Linamar Corporation 25

  26. Slide 26: Innovation Update

    Innovation Update

  27. Slide 27: Business Intelligence

    Typical Data Path : Artificial Intelligence / Machine Learning Business UNSTRUCTURED STRUCTURE Intelligence Transformation Data D Data LMMS : Linamar Manufacturing Monitoring System © Linamar Corporation 27

  28. Slide 28: LMMS Structured Data - The Strategic Advantage

    LMMS Structured Data - The Strategic Advantage UNSTRUCTURED STRUCTURED Data Data by Design STRUCTURED Intelligence Global, Standardized Data Data Platform On-going cost efficiency Etc... LMMS : Linamar Manufacturing Monitoring System © Linamar Corporation 28

  29. Slide 29: LMMS – Manufacturing Intelligence

    LMMS – Manufacturing Intelligence Linamar’s Manufacturing Monitoring System[LMMS] is leading the way to Manufacturing Intelligence. LMMS Platform LMMS is Modular LMMS provides a global, Production 2019 PRODUCTIVITY Monitoring: Real-time standardized platform for & Historical insights manufacturing d

  30. Slide 30: LMMS 2018 Review

     Connected 2845 machines to LMMS PRODUCTIVITY in 50 factories over 11 countries LMMS  Upgrade most factory–floor networks improving redundancy  Launched 3 full-traceability lines (additional ~150 machines) 2018 Review as development / POC for QUALITY Module  LMMS has already collected millions o

  31. Slide 31: LMMS 2019 Outlook

     LMMS roll out additional PRODUCTIVITY lines globally LMMS  There are ~300 production lines “eligible” for LMMS Productivity  LMMS working on CODE DEVELOPMENT for new features and LMMS modules. (Reports / Tools)  LMMS developing QUALITY Module logic and code 2019 Outlook  Developing LMMS Bench

  32. Slide 32: 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 Vision Systems 1,825 Connected Machines 8 Traceability Read Stations AGVs March 2019 © Linamar Corporation 32

  33. Slide 33: Operations Update

    Operations Update

  34. Slide 34: LTH – Hungary | E-Axle Gear Box

    LTH – Hungary | E-Axle Gear Box © Linamar Corporation 34

  35. Slide 35: OROS – Hungary | Corn Heads & Skyjack

    OROS – Hungary | Corn Heads & Skyjack © Linamar Corporation 35

  36. Slide 36: Wuxi 2 | E-Axle

    Wuxi 2 | E-Axle © Linamar Corporation 36

  37. Slide 37: Trade Update

    Trade Update

  38. Slide 38: China & Metal Tariffs Not Material Impact to Linamar

    China & Metal Tariffs Not Material Impact to Linamar  China Tariffs  Impacting mainly our industrial business in cost increases from material suppliers in US buying from China  Not at material levels  Metal Tariffs  Metal tariffs remain in place despite USMCA  Impact building in many American

  39. Slide 39: Financial Review

    Financial Review Dale Schneider

  40. Slide 40: Sales, Earnings, and Margins (in millions CAD)

    Sales, Earnings, and Margins (in millions CAD) Q4 2018 Q4 2017 % Sales 1,732.0 1,574.5 10.0%  Sales up 10% Operating Earnings (“OE”) 171.1 158.2 8.2%  OE up 8.2% Operating Margin 9.9% 10.0% OE – Normalized¹ 158.9 160.8 (1.2%)  NE down 7.8%, or 5.4% on a normalized basis OE – Normalized Margin 9.2

  41. Slide 41: Foreign Exchange Gain/Loss (in millions CAD)

    Foreign Exchange Gain/Loss (in millions CAD) Q4 2018 Q4 2017 +/-  $18.4 FX gain from the revaluation of operating balances FX Gain/(Loss) – Operating1 18.4 (2.6) 21.0  Industrial FX gain of $17.7  Transportation FX gain of $0.7 FX Gain/(Loss) – Financing (0.9) (0.1) (0.8) Total FX Gain/(Loss) 17.

  42. Slide 42: Industrial Sales, Earnings, and Margins (in millions CAD)

    Industrial Sales, Earnings, and Margins (in millions CAD) Q4 2018 Q4 2017  Sales increased $145 or 70% mainly due to:  additional sales from the acquisition of MacDon; Sales 353.4 208.2  strong volume increases in scissors as result of market share gains; and Operating Earnings 63.1 28.8  favour

  43. Slide 43: Industrial Sales, Earnings, and Margins (in millions CAD)

    Industrial Sales, Earnings, and Margins (in millions CAD) Q4 2018 Q4 2017  Normalized OE increased $17.3 or 61.6% mainly due to: Sales 353.4 208.2  the acquisition of MacDon;  the strong access volumes; and Operating Earnings 63.1 28.8  the favourable changes in FX rates. Foreign Exchange1 (Gain

  44. Slide 44: Transportation Sales, Earnings, and Margins (in millions CAD)

    Transportation Sales, Earnings, and Margins (in millions CAD) Q4 2018 Q4 2017  Sales increased by $12.3 or 0.9% mainly due to:  higher sales from launching programs; Sales 1,378.6 1,366.3  a favourable change in FX rates since last year. Operating Earnings 108.0 129.4  Sales growth was hurt by:

  45. Slide 45: Transportation Sales, Earnings, and Margins (in millions CAD)

    Transportation Sales, Earnings, and Margins (in millions CAD) Q4 2018 Q4 2017  Normalized OE decreased by $19 mainly due to:  Market declines in Europe and Asia on Sales 1,378.6 1,366.3 programs with mature margins; and  heavy launch activity globally. Operating Earnings 108.0 129.4  Normalized

  46. Slide 46: Operating Expenses (in millions CAD)

    Operating Expenses (in millions CAD)  Gross Margin grew by $9 Q4 2018 Q4 2017 +/- % Sales 1,732.0 1,574.5 157.5 10.0% Cost of Goods Sold 1,471.2 1,322.8 148.4 11.2%  Amortization as % of sales remains relatively Gross Margin 260.8 251.7 9.1 3.6% flat Gross Margin as a % of Sales 15.1% 16.0% Cost o

  47. Slide 47: Finance Expenses & Income Tax (in millions CAD)

    Finance Expenses & Income Tax (in millions CAD)  Finance expenses increased by $10 primarily Q4 2018 Q4 2017 +/- due to: Finance Expense (12.9) (2.7) (10.2)  the acquisition debt to purchase MacDon;  the related impact on borrowing spreads; Effective Interest Rate 2.8% 2.4% 0.4% and Effective Tax

  48. Slide 48: Leverage (in millions CAD)

    Leverage (in millions CAD) Q4 2018 Q4 2017  Net Debt to Proforma EBITDA decreased to 1.68x Cash Position 472.0 439.1 from 1.79x since the MacDon acquisition. Available Cash on Credit Facilities 721.8 643.8  The expectation is to delever under 1.0x by the end of 2019. Net Debt to Proforma EBITDA1 1

  49. Slide 49: Conclusion

    Conclusion  Annual Double Digit Sales and OE growth;  Sales up 16%  Operating earnings up 16%  Finance Expenses increased due to the MacDon acquisition and will delever by the end of 2019  Solid Financial Performance despite the European and Asian market declines. © Linamar Corporation 49

  50. Slide 50: Question and Answer

    Question and Answer © Linamar Corporation 50

  51. Slide 51: Outlook

    Outlook Normal Ranges 2018 Actuals Expectations Consolidated 2019 Sales Growth Mid Single Digit Normalized Operating Earnings High Single Digit Growth Normalized Net Margin 7.0% to 9.0% 7.7% Expansion to 7.75% to 8.25% Capex (% of Sales) 6.0% - 8.0% 7.1% Low End Range Down in $ and % from 2018 Indus

  52. Slide 52: Key Messages

    Key Messages 1. We are thrilled with another record year of sales and earnings at Linamar and particularly with achieving our 9th consecutive year of double digit earnings growth. 2. We are optimistic in our outlook to see margin expansion this year and high single digit earnings growth, despite sof

  53. Slide 53: Thank You

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

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