Linamar Corporation · TSX:LNR
Linamar — Q4 2021 Earnings Presentation
55 slides from Linamar's earnings presentation, Mar 9, 2022
Slide 1: 2021 Q4 Conference Call Presentation
2021 Q4 Conference Call Presentation For Audio Only Dial in: Linda Hasenfratz North America: (877) 668-0168 International: (825) 312-2386 March 9, 2022 Conference ID: 7163205
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: © Linamar Corporation 3
© Linamar Corporation 3
Slide 4: 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 5: Sales, Normalized Earnings, and Margins (in millions CAD)
Sales, Normalized Earnings1, and Margins (in millions CAD) Q4 2021 The key impacts to the segments vs prior The key factors impacting results in year are: Q4 2021 Q4 2020 %Δ the quarter are: Mobility ▪ Significantly higher costs in material, ▪ EU light vehicle markets down 24% , NA Sales 1,534.4 1,7
Slide 6: Automotive Sales & Content Per Vehicle (CPV)
Automotive Sales & Content Per Vehicle2 (CPV) CPV Q4 2021 CPV Q4 2020 CPV % Change Vehicle Production Automotive Automotive Automotive Units % Change Sales Q4 2021 Sales Q4 2020 Sales % Change (CAD Millions) (CAD Millions) North America 189.90 171.57 10.7% (13.6%) 651.5 680.3 (4.2%) Europe 78.83 70.
Slide 7: Commercial & Industrial Sales (in millions CAD)
Commercial & Industrial Sales2 (in millions CAD) ▪ MacDon ▪ Supply chain constraints challenging ability to supply a strong Q4 2021 Q4 2020 % Change market up in double digits; and ▪ Expect to make up shortfall in subsequent quarters as supply Sales 366.1 391.7 (6.5%) chain issues ease. ▪ Skyjack ▪
Slide 8: Capital Expenditures (in millions CAD)
Capital Expenditures (in millions CAD) Q4 2021 Q4 2020 ▪ Capex down from 2020 but up from the first 3 quarters of the year as we start to anticipate more launches and volume Capital Expenditures (Capex) 74.1 75.8 growth; ▪ Capex will return to normal levels of 6-8% of sales in 2022. Capex as a % of
Slide 9: Cash Flow Continues to be a Key Priority
Cash Flow Continues to be a Key Priority ▪Free Cash Flow (FCF)1 in Q4 $145 1,300 1,185.0 30.00% million. 1,200 1,100 25.00% ▪ 15th consecutive quarter of positive FCF. 1,000 ▪FCF Yield has been consistently >10% since 2019. 900 20.00% 800 ▪Liquidity1 excellent with $1.9 billion of $ Millions 700 672
Slide 10: Leverage (in millions CAD)
Leverage (in millions CAD) Q4 2021 Q3 2021 Q4 2020 ▪ We have brought down nearly $2.3 Billion in net debt from our peak in early 2018 and are now in a solidly Net Debt1 (136.9) (5.7) 442.1 cash positive position. Net Debt to EBITDA2 (0.13)x (0.01)x 0.50x Net Debt to EBITDA 0.17x 1.57x 1.80x 1.11x 0.
Slide 11: Challenges
Challenges © Linamar Corporation 11
Slide 12: Disruptions – The War in Ukraine
Disruptions – The War in Ukraine ▪ A humanitarian crisis of significant proportions ▪ Our global teams are supporting refugees ▪ Accommodations ▪ Jobs ▪ Money ▪ Supply chain issues to OEM customers, ourselves, re suppliers in Ukraine ▪ Resourcing occurring where possible ▪ Supply chain mapping at OE
Slide 13: Resourcing Ukrainian Produced Goods Case Study
Resourcing Ukrainian Produced Goods Case Study LPT, Germany ▪ PTU Assembly used bearings produced in Ukraine ▪ In 10 days the team found an alternative supplier ▪ Fast tracking engineering approval with customer ▪ Customer line will not shut down © Linamar Corporation 13
Slide 14: Disruptions
Disruptions Semi Conductor Chip Major Increases in Shortages Shipping Costs Spiking Commodity Prices Labour Challenges © Linamar Corporation 14
Slide 15: Semiconductor Chip Shortage – Light Vehicle Production Impact
Semiconductor Chip Shortage – Light Vehicle Production Impact Total 2021 volume loss of 9.6M units. Announced volume loss of 0.85M units 2022 YTD. Supply disruption expected to continue into 2023. Announced Volume Loss by Quarter Announced Volume Loss by Region 4.0 3.48 6.0 4.65 3.5 3.0 2.60 2.5 2.0
Slide 16: Commodity Prices a Challenge
Commodity Prices a Challenge Largely Pass Through for Mobility, Less Flexibility in Industrial Steel Plate (CDN) - per metric ton Aluminum (USD) - per lb $1,200.00 $1.60 $1,000.00 $1.40 $800.00 $1.20 $1.00 $600.00 $0.80 $400.00 Stabilizing & Starting to Decline $0.60 Continuing to Climb $200.00 $0.4
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 Europe Asia & SA $22,500 $27,500 $20,500 $18,500 $22,500 Germany 20' $16,500 India 20' Germany 40' India 40' $14,500 Brazil 20' $17,500 Brazil 20' Switzerland 20'
Slide 18: Natural Gas Prices up 10 Fold in Europe
Natural Gas Prices up 10 Fold in Europe (EUR) EUROS © Linamar Corporation 18
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
Slide 20: Key Issues on People Side – Availability of People and Turnover
2 Key Issues on People Side – Availability of People and Turnover AVAILABILITY TURNOVER © Linamar Corporation 20
Slide 21: Market Outlook
Market Outlook © Linamar Corporation 21
Slide 22: Market Snapshot
Market Snapshot Industry Forecasts for Market Growth Commercial 2022 Light Vehicle Truck Combine Heads Access North America ▲ 16.6% ▲18.6% ▲10.0% ▲27.0% Europe ▲18.1% ▲5.8% ▲5.0% ▲16.9% Asia ▲3.5% ▼-19.0% n/a ▲12.2% Rest of ▲8.7% n/a ▲5.0% n/a World Above projections are external industry expert est
Slide 23: 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 -30 140 GM -15 120 Ford -22 100 80 Stellantis -18 60 Toyota -26 40 Honda -60 20 85747276687269706471716184746872646865686575726188776876646766
Slide 24: Global Light Vehicle Market: Q4 2021, Q1 2022 and 2022
Global Light Vehicle Market: Q4 2021, Q1 2022 and 2022 Q4 2021 production increased by 2.2M units. Q1 2022 forecast increased by 0.4M units. 2022 full-year forecast increased by 1.4M. Q4 Actual Q1 2022 Forecast FY 2022 Forecast ▪ Q4 2021 increased by 2.2M ▪ Q1 2022 forecast increased by 0.4M ▪ 2022
Slide 25: Industrial Segment Impacts - Skyjack
Industrial Segment Impacts - Skyjack Access Equipment Market Commentary 2021 Access Industry Results % 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 2021. 140%
Slide 26: Agricultural Market
Agricultural Market Agriculture Market Commentary North American Combine Retails ▪ Supply chain disruptions including shipping container shortages and higher commodity prices 1,600 are continuing to negatively impact production, shipments and costs in 2021. ▪ Agriculture Retailers are seeing very le
Slide 27: Growth Update and Outlook
Growth Update and Outlook © Linamar Corporation 27
Slide 28: Content Per Vehicle (CPV)
Electrified Vehicles Key Growth Opportunity for Linamar $90 $80 $70 $60 Content Per Vehicle (CPV) $50 $40 $30 $20 $10 $0 2015 2016 2017 2018 2019 2020 2021 2022 2023 Electric Hybrid ICE Updated: February 17, 2022. Estimates based on current projections and EV applications in market.
Slide 29: Non-ICE Powertrain Sales at 41% of Total Light Vehicle Sales by 2026
Non-ICE Powertrain Sales at 41% of Total Light Vehicle Sales by 2026 Light Vehicle Sales by Propulsion Type & System (Yearly) % of Total Light Vehicle Sales 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 2019 2020 2021 2022 2023 2024 2025 2026 Non-ICE Powertrain (Q4 2021) Source: Linamar Internal, March 1, 2
Slide 30: Electrification Product Solutions
Electrification Product Solutions Develop new electrification product solutions leveraging existing resources Leverage Electrification Support All Support Existing Existing Customers Strategies eLIN Groups & Resources Globally Develop electrification strategies Plants Win New Business Win new busine
Slide 31: Global Addressable Market Grows More Than 3X
Global Addressable Market Grows More Than 3X in 20 Years Addressable Market - Light Vehicle $350 $300 $250 Addressable Market (Billions CAD) $200 $150 $100 $50 $0 2002 2003 2021 2039 2000 2001 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2022 2023 2024 2025 20
Slide 32: Launches
Launches 4,000.00 Launching nearly $4.1 billion of new work today 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 Body & Chassis Driveline Engine Transmission $600 to $700 Million Incremental Growth from Launches in 2022 Updated: February 2022 © Lin
Slide 33: Outlook
Outlook Consolidated Sales Growth Normal Ranges 2020 Actuals (21.6%) 2021 Actuals 12.4% Expectations 2022 Double Digit Growth Q1 22 Expectations 1 Normalized EPS Growth (32.1%) 35.8% Double Digit Growth ▪ Mobility 1 Normalized Net Margin 7.0% - 9.0% 5.4% 6.6% Steady Performance ▪ Continued chip and
Slide 34: New Business
New Business © Linamar Corporation 34
Slide 35: New Business Win
New Business Win Major driveline system win for a European OEM. SOP Year Peak Volume 2026 970,500 Production Location Germany © Linamar Corporation 35
Slide 36: New Business Win $39M / year
New Business Win $39M in wins for battery electric vehicles Average Annual Revenue SOP Year Peak Volume Year $39M / year 2021 2026 Production Location . United States, Mexico, India, France, Germany & Hungary © Linamar Corporation 36
Slide 37: New Business Win
New Business Win Significant gear win for next generation HEV transmission program SOP Year Peak Volume 2024 600,000 Production Location France © Linamar Corporation 37
Slide 38: New Business Win $130M / year
New Business Win Nearly $130M in wins for commercial vehicle programs Average Annual Revenue SOP Year Peak Volume Year $130M / year 2022 2024 Production Location United States, Mexico, Germany & Hungary © Linamar Corporation 38
Slide 39: New Business Win $83M / year
New Business Win $83 million in wins for balance shaft programs, including one win for an Asian-based OEM (new customer for Linamar) Average Annual Revenue SOP Year Peak Volume Year $83M / year 2023 2025 Production Location Mexico © Linamar Corporation 39
Slide 40: Innovation
Innovation © Linamar Corporation 40
Slide 41: Innovation in Process Development for Light Metal Castings
Innovation in Process Development for Light Metal Castings ▪ Lightweight aluminum casting capabilities are evolving to increase the Structural and Chassis portfolio Structural & Chassis Products EV Motor Housings & Electric Drive Units (EDUs) Cases © Linamar Corporation 41
Slide 42: Digitization with AI/ML and Our Digitization Journey
Digitization with AI/ML and Our Digitization Journey February 2022 6061 Plants Plants 5,009 3,422 Robots LMMS Data Collection Connections 2,700 Connected 1,975 1,170 Machines RFID Stations Vision Systems 2,456 6 966 Traceability AGVs Marking Stations Traceability Read Stations
Slide 43: Financial Review
Financial Review © Linamar Corporation 43
Slide 44: Sales, Normalized Earnings, and Margins (in millions CAD)
Sales, Normalized Earnings1, and Margins (in millions CAD) Q4 2021 The key impacts to the segments vs prior The key factors impacting results in year are: Q4 2021 Q4 2020 %Δ the quarter are: Mobility ▪ Significantly higher costs in material, ▪ EU light vehicle markets down 24% , NA Sales 1,534.4 1,7
Slide 45: Foreign Exchange Gain/Loss (in millions CAD)
Foreign Exchange Gain/Loss (in millions CAD) Q4 2021 Q4 2020 +/- ▪ Total FX Gain was $5.7 which resulted from a $5.6 FX Gain – FX Gain/(Loss) – Operating1 5.6 (12.4) 18.0 Operating and a $0.1 FX Gain – Financing. FX Gain/(Loss) – Financing 0.1 0.0 0.1 ▪ FX Gain – Operating was comprised of a $4.4 lo
Slide 46: Industrial Sales, Earnings, and Margins (in millions CAD)
Industrial Sales, Earnings, and Margins (in millions CAD) ▪ Industrial sales decreased by 7.2% or $22.6 to $293.0. Q4 2021 Q4 2020 ▪ The sales were hurt by: Finance ▪ lower agricultural sales due to supply issues impacting our ability to Sales 293.0 315.6 produce and deliver product; and updating ▪
Slide 47: Mobility Sales, Earnings, and Margins (in millions CAD)
Mobility Sales, Earnings, and Margins (in millions CAD) ▪ Mobility sales were $1,241.4 for the quarter. Q4 2021 Q4 2020 ▪ The sales were hurt by: ▪ the market impact of the semiconductor chip supply issues which are impacting our customers; and Sales 1,241.4 1,389.2 ▪ a negative FX impact related to
Slide 48: Operating Expenses (in millions CAD)
Operating Expenses (in millions CAD) Q4 2021 Q4 2020 +/- % ▪ Gross Margin was $160.9 in the quarter and was impacted by the same factors that impacted each business segment. (See the previous two slides) Sales 1,534.4 1,704.8 (170.4) (10.0%) Cost of Goods Sold 1,373.5 1,431.3 (57.8) (4.0%) ▪ Amortiz
Slide 49: Finance Expenses & Income Tax (in millions CAD)
Finance Expenses & Income Tax (in millions CAD) ▪ Finance expenses increased by $0.3. Q4 2021 Q4 2020 +/- ▪ Finances expenses were hurt by the lower interest earned due to the lower long-term receivables. Finance Expense 0.5 0.2 0.3 ▪ Finance expenses were helped by the significant reduction in debt
Slide 50: Leverage (in millions CAD)
Leverage (in millions CAD) Q4 2021 Q4 2020 ▪ Cash position at the end of the quarter was $928.4. ▪ Linamar generated $217.6 in Cash from Operating Activities. Cash Position 928.4 861.1 ▪ Linamar generated $144.7 of Free Cash Flow1 in the quarter. Available Cash on Credit Facilities 957.5 773.4 ▪ Net
Slide 51: Conclusion
Conclusion ▪ Sales declines in Mobility driven by ongoing semiconductor supply shortages. ▪ Sales declines in Industrial driven by ongoing supply shortages limiting the ability to produce and deliver product. ▪ Significant challenges in the quarter from supply issues increase the cost of raw materia
Slide 52: Question and Answer
Question and Answer
Slide 53: Outlook
Outlook Consolidated Sales Growth Normal Ranges 2020 Actuals (21.6%) 2021 Actuals 12.4% Expectations 2022 Double Digit Growth Q1 22 Expectations 1 Normalized EPS Growth (32.1%) 35.8% Double Digit Growth ▪ Mobility 1 Normalized Net Margin 7.0% - 9.0% 5.4% 6.6% Steady Performance ▪ Continued chip and
Slide 54: Key Messages
Key Messages Record Year in NBW, EV $ wins 50% Up From 2020 15 Consecutive Quarters of Free Cash Flow Double Digit Top and Bottom-Line Growth as Promised Despite Challenges © Linamar Corporation 54
Slide 55: Thank You
Thank You www.linamar.com @linamarcorp Linamar Corporation