Magna International Inc. · TSX:MG
Magna International — Investor Presentation (June 2020)
45 slides from Magna International's investor presentation, June 2020
Slide 1: Investor Presentation
Investor Presentation JUNE 2020 1
Slide 2: Forward Looking Statements
Forward Looking Statements Certain statements in this presentation constitute "forward-looking information" or "forward-looking statements" (collectively, "forward-looking statements"). Any such forward-looking statements are intended to provide information about management's current expectations an
Slide 3: Investment Profile
Investment Profile • World’s 3rd largest automotive supplier by sales • Strong capabilities in lightweighting, powertrain/electrification, ADAS, seating and mechatronics • Complete vehicle operations are unique and positioned for smart mobility • Track record of returning capital to shareholders • T
Slide 4: Agenda
Agenda • Magna’s Response to COVID-19 • Q1 2020 Update • Financial Strategy • Positioning for the Future 4
Slide 5: Magna's Response to COVID-19
MAGNA’S RESPONSE TO COVID-19 5
Slide 6: Health and Safety of Employees is Our #1 Priority
Health and Safety of Employees is Our #1 Priority • Developed protocols, assessment tools, and guidance documents – Disseminated health screening tools – Isolation and contact tracing guidelines – Decontamination procedures • Installed PPE and supplied personal protective gear to employees • Working
Slide 7: Health and Safety of Employees is Our #1 Priority (cont.)
Health and Safety of Employees is Our #1 Priority (cont.) • Minimizing the impact on our employees – Maintaining benefits coverage throughout layoffs – Maximizing days at full compensation by utilizing vacation days – Engaging emergency wage protection programs and providing top-up payments – Provid
Slide 8: Experienced Senior Management Team
Experienced Senior Management Team • Highly coordinated response • Multiple workstreams formed across disciplines and geographies • Entrepreneurial culture drives an ownership mentality • Flexing our cost structure while continuing to support our customers • Executive management able to focus on lon
Slide 9: Restart of Production
Restart of Production • China – OEMs have restarted production – Vehicle sales continue to improve – We are now fully operational in our facilities – Lessons learned being shared globally • Europe – OEMs in the process of restarting • North America – Planning on restarts this month – Mexico could be
Slide 10: Restart of Production (cont.)
Restart of Production (cont.) • Close cooperation with customers, suppliers, local governments, and our employees • Smart Start Playbook provides a framework for restarting our facilities • Working closely with our supply chain 10
Slide 11: Restart of Production (cont.)
Restart of Production (cont.) • Mercedes Benz G-Class assembly line in Graz, Austria among the first in Europe to successfully restart complete vehicle production 11
Slide 12: Confident in Long-Term Position
Confident in Long-Term Position • Our value creation framework is intact – Entrepreneurial culture – Leading market positions – Global capabilities • Continue to invest for the future – New program launches – R&D • Industry trends largely unchanged – Magna well positioned as highlighted at Investor
Slide 13: Q1 2020 Update
Q1 2020 UPDATE 13
Slide 14: Q1-2020 Vehicle Production (incl. impact of COVID-19)
Q1-2020 Vehicle Production (incl. impact of COVID-19) Region YOY Change in Production North America -13% Europe -19% China -44% Global -27% Estimated COVID-19 Impact on Magna’s Q1 2020 Results: Total Sales ~$1.1 billion 1 EBIT ~$250 million 1 EBIT impact includes ~$30 million mainly associated with
Slide 15: Significant Volume Declines impact Q1 2020 Sales
Significant Volume Declines impact Q1 2020 Sales Sales ($Billions) -18% • COVID-19 (approx. -$1,100M) • Other production and assembly 10.6 volumes (-) 8.7 • Divestitures, net of acquisitions (-$325M) • FX translation (-$152M) • End of production of certain programs (-) • Net customers price concessi
Slide 16: Q1 2020 Adjusted EBIT % and Tax Rate
Q1 2020 Adjusted EBIT % and Tax Rate Adjusted EBIT Margin % Key Factors • COVID-19 ~200BP (-) -210BP • Lower tooling contribution (-) 6.8 • Operational underperformance at a BES facility (-) 4.7 • Divestiture of FP&C (-) • Lower incentive compensation and profit sharing (+) • Favourable engineering
Slide 17: Sales Decline Impacts Q1 2020 Earnings
Sales Decline Impacts Q1 2020 Earnings Adjusted Diluted EPS ($) • Lower Adjusted EBIT due to significant decline in sales (-) 1.63 • Divestiture of FP&C (-) • Higher income tax rate (-) • Lower share count (+) 0.86 Q1 2019 Q1 2020 17
Slide 18: Q1 2020 Segment Results (incl. COVID-19 Impact)
Q1 2020 Segment Results (incl. COVID-19 Impact) ($Millions, unless otherwise noted) BODY EXT. & STRUCTURES Q1 2019 Q1 2020 POWER & VISION Q1 2019 Q1 2020 Sales 4,308 3,676 Sales 3,083 2,523 Adjusted EBIT 363 199 Adjusted EBIT 216 135 Adjusted EBIT % 8.4% 5.4% Adjusted EBIT % 7.0% 5.4% COVID-19 - Sal
Slide 19: Financial Strategy
FINANCIAL STRATEGY 19
Slide 20: Capital Allocation Principles Unchanged
Capital Allocation Principles Unchanged • Preserve liquidity and high investment grade 1 Maintain Strong Balance Sheet credit ratings • Maintain flexibility to invest for growth • Organic opportunities (disciplined capital spending) 2 Invest for Growth • Innovation • Acquisitions that fit product st
Slide 21: Strong Liquidity Position
Strong Liquidity Position ($Millions, unless otherwise noted) Available Operating & Term Lines of Credit1 $3,072 Cash & Cash Equivalents $1,146 Total Available Liquidity (3/31/20) $4,218 Increase in Short Term Revolver (4/13/20)2 $700 Pro-forma Total Available Liquidity (3/31/20) ~$4.9 Billion Also
Slide 22: Conservative Adjusted Debt to Adjusted EBITDA
Conservative Adjusted Debt to Adjusted EBITDA ($Millions, unless otherwise noted) Q1 2020 LTM EBITDA $ 3,588 Lease Adjustment $ 316 Other $ (10) Adjusted EBITDA $ 3,894 Debt per Balance Sheet $ 3,114 Lease Liability per Balance Sheet $ 1,804 Other $ 237 Adjusted Debt $ 5,155 Adjusted Debt / Adjusted
Slide 23: No Significant Debt Repayments Until 2022
No Significant Debt Repayments Until 2022 1 Estimated Future LTD Principal Repayments ($Millions) 1,321 751 619 338 106 33 2020 2021 2022 2023 2024 Thereafter 1 Excludes operating leases 23
Slide 24: Proven Track Record of Returning Capital to Shareholders
Proven Track Record of Returning Capital to Shareholders 2017-2019 Share Dividends Repurchases Returned $ 1.3B $ 4.4B $ 5.7B 85 million shares Since 2017 Returned ~$313M in Q1 2020 24
Slide 25: 2020 Considerations
2020 Considerations • Withdrew our Outlook given business uncertainty • Decremental margin in the low 20% range for balance of the year is reasonable – Various puts and takes can impact decrementals, including Q2 top-up payments • Working capital expected to be a use of cash as sales increase sequen
Slide 26: Positioning for the Future
POSITIONING FOR THE FUTURE 26
Slide 27: Electrification, Lightweighting, Autonomy, Smart Mobility
(ADS Electrification Lightweighting Autonomy Smart Mobility 27
Slide 28: Select Technologies Supporting Trends
Select Technologies Supporting Trends Smart Access Reconfigurable Battery Frames Seating 28
Slide 29: Powertrain Electrification is Growing…
Powertrain Electrification is Growing… 4% 2% 3% 5-8% 10-15% 7-9% 26-29% 11-17% 2019 40% 2025 38-46% 2030 51% 27-29% 17-19% 28-29% 11-19% Internal Combustion Engine (ICE) Micro Hybrid: ICE with 12V start/stop functionality & regeneration capability Mild Hybrid: ICE with 48V start/stop functionality,
Slide 30: Positioned for Powertrain Electrification
Positioned for Powertrain Electrification ICE & HYBRID ELECTRIC STOP-START Significant Booked eMobility Contracts 30
Slide 31: Positioned to Help Reduce Vehicle Weight
Positioned to Help Reduce Vehicle Weight • Broadest offering of lightweight design and manufacturing solutions • Ability to support OEMs with comprehensive engineering for product and process design • Strong know-how in joining multi-materials • Global footprint allows us to win, support and launch
Slide 32: Autonomy Will Continue to Proliferate
Autonomy Will Continue to Proliferate 1% 2% 5% 5% 13% 12% 32% 17% 28% 30% 2019 2025 2030 28% 57% 34% 36% Level 0 Level 1 Level 2 Level 3 Level 4 Level 5 Source: Magna Internal ADAS market forecast December 2019 33
Slide 33: Magna's ADAS Hardware Building Blocks
Magna’s ADAS Hardware Building Blocks Single Front Ultrasonic and Multi Camera Sensors Camera Domain Radar LiDAR Controller 34
Slide 34: Positioned for Smart Mobility
Positioned for Smart Mobility Consumer Focused Vehicles Flexible Mobility Vehicles Architecture Providing Services Body & Structure Powertrain Seating ADAS/Electronics/ Mechatronics Complete Vehicle Design, Engineering and Assembly 35
Slide 35: In Summary
In Summary • Taking step to address current environment • Strong liquidity position • Preparing for restart of production • Continuing to invest for the future • Well positioned for future mobility 36
Slide 36: Appendix
APPENDIX 37
Slide 37: Supporting Fight Against COVID-19
Supporting Fight Against COVID-19 • A number of our facilities producing masks, face shields, gowns, and ventilator components • Donating PPE to hospitals, meals to health care workers, and hygiene kits to shelters 38
Slide 38: New Launches Ramping Up (North America)
N O R T H A M E R I C A New Launches Ramping Up Ford Escape Mercedes-Benz GLE Coupe Ford Maverick Cadillac Escalade Ford Mustang Mach E Jeep Grand Cherokee 3-Row Body Power & Vision Seating 39
Slide 39: New Launches Ramping Up (Europe)
E U R O P E New Launches Ramping Up Volkswagen Caddy BMW 2-Series Porsche Taycan Cross Turismo Nissan Qashqai Mercedes-Benz GLA Volkswagen ID.4 Body Power & Vision Seating 40
Slide 40: New Launches Ramping Up (Asia)
A S I A New Launches Ramping Up Mercedes-Benz GLB Ford Explorer BMW X2 Cadillac CT4 Geely 05 Chevy Blazer Body Power & Vision Seating 41
Slide 41: PACE Award for Composite Liftgate
PACE Award for Composite Liftgate • Lightweight solution debuted on the 2020 Toyota Supra • Space frame reinforcement solution enables 10% mass reduction and is first application in the automotive industry • Expect significant growth in liftgates going forward 42
Slide 42: Q1 2020 Sales Performance vs Market
Q1 2020 Sales Performance vs Market Q1 2020 vs Q1 2019 Unweighted Weighted Performance vs Performance vs 1 Reported Organic Global Production Global Production Body Exteriors & Structures (15%) (14%) 13% 2% Power & Vision (18%) (5%) 22% 11% Seating (12%) (13%) 14% 3% Complete Vehicles (31%) (29%) (2
Slide 43: Disciplined Capital Spending Profile
Disciplined Capital Spending Profile Capital Spending ($Billions) 1.9 1.8 1.7 1.4 % of ~5.25 5.12 Sales 4.04 3.65 2016 2017 2018 2019 44
Slide 44: Strong Free Cash Flow Generation
Strong Free Cash Flow Generation Free Cash Flow 1 ($Billions) 2.3 1.6 1.2 1.1 2016 2017 2018 2019 1 Free Cash Flow is Cash from Operating Activities plus proceeds from normal course dispositions of fixed and other assets minus capital spending minus investment in other assets 45
Slide 45: Long History of Increasing Dividend
Long History of Increasing Dividend Annualized Dividend 1 ($ per share) 1.60 1.46 14% 1.32 CAGR 1.12 1.00 0.88 0.76 0.64 0.55 0.50 Q410 Q411 Q412 Q413 Q414 Q415 Q416 Q417 Q418 Q419 1 Based on Q4 run rate 46
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