Magna International Inc. · TSX:MG
Magna International — Q3 2020 Earnings Presentation
34 slides from Magna International's earnings presentation, Nov 6, 2020
Slide 1: Q3 2020 Results Call
Q3 2020 Results Call November 6, 2020 1
Slide 2: Forward Looking Statements
Forward Looking Statements Certain statements in this document 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 and pl
Slide 3: Reminders
Reminders • All amounts are in U.S. Dollars (unless otherwise noted) • Today’s discussion excludes the impact of other expense, net (Unusual Items) • “Organic”, in the context of sales movements, means “excluding the impact of foreign exchange, acquisitions and divestitures” • Magna will provide 202
Slide 4: Q3 2020 Highlights
Q3 2020 Highlights • Appointment of Swamy Kotagiri as CEO effective January 1, 2021 • Strong Q3 performance • Non-cash impairment charge • Agreement to acquire Honglizhixin (“Hongli”) • Start of production in China in our vehicle manufacturing JV • Cooperation with Fisker • Program award for camera
Slide 5: Strong Q3 2020 Performance
Strong Q3 2020 Performance SALES ADJUSTED EPS FREE CASH FLOW -2% $1.95 $1.3B Global Vehicle +38% vs $385M Production -4% Reflects Actions to Reduce Discretionary and Structural Costs 5
Slide 6: Getrag Update
Getrag Update Joint Ventures • Past few years we have highlighted challenges • Business planning activity has led to lower volume and free cash flow projections for Getrag Jiangling Transmission (GJT) joint-venture – Result: recorded $200 million impairment charge after taxes and minority interest 6
Slide 7: Getrag Update (cont'd)
Getrag Update (cont’d) Wholly Owned Operations • Business, predominantly DCT technology, continues to perform well • Package-neutral hybrid DCT (“HDT”) – important element of our powertrain electrification strategy – BMW program award – both DCTs and HDTs – HDT program award with additional global O
Slide 8: Honglizhixin ("Hongli") Seating
Honglizhixin (“Hongli”) Seating • Agreement signed to acquire 65% and control of Hongli, a leading seat supplier to Chinese automakers • Expands Magna’s capabilities in China • Strengthens competitiveness through additional manufacturing sites, full engineering and testing, increased vertical integr
Slide 9: Launching Arcfox α-T Electric Vehicle
Launching Arcfox α-T Electric Vehicle • First vehicle produced with the Arcfox brand by the Magna-BJEV joint venture • For Magna, first vehicle assembled outside of Europe • Volumes expected to grow over the next couple of years as production ramps up and more Arcfox-branded vehicles launch 9
Slide 10: Cooperation with Fisker
Cooperation with Fisker • Agreements signed with Fisker to provide the framework for platform sharing and manufacturing cooperation • Production of the Fisker Ocean electric SUV planned for Q4-2022 • Example of our strategy to leverage strong portfolio for future mobility needs • Utilizes our full v
Slide 11: Business Award for Camera Monitoring System
Business Award for Camera Monitoring System • Awarded business for new camera monitoring system across multiple vehicle models for a global automaker • ClearView technology will enter the market in 2022 • Unique combination of camera, exterior and interior mirror, electronic and software capabiliti
Slide 12: Magna CEO Transition
Magna CEO Transition • Don Walker announced his retirement effective end of 2020 after 33 years of impeccable service, growing Magna to be the third largest global automotive supplier, one of Fortune’s Worlds Most Admired Companies, and a perennial winner of customer, industry and technology awards
Slide 13: Strong Q3 2020 Financial Performance
Strong Q3 2020 Financial Performance $9.1B Consolidated Sales -2% $778M Consolidated Adjusted EBIT +39% 8.5% Adjusted EBIT Margin +250 bps $1.95 Adjusted Diluted EPS +38% $1.3B Free Cash Flow vs $385m $115M Returned to shareholders through dividends Increased 2020 Outlook 13
Slide 14: Q3 2020 Consolidated Sales
Q3 2020 Consolidated Sales Key Factors: - 2% • Assembly volumes (-) • European light vehicle production (-) $9.3B • End of production of certain programs (-) $9.1B • Launch of new programs (+) • Labour strike at GM in Q3 2019 (+) • Foreign currency translation (+) Q3 2019 Q3 2020 14
Slide 15: Consolidated Sales Performance vs Market
Consolidated Sales Performance vs Market Q3 2020 YTD 2020 1 ORGANIC 1 ORGANIC SALES YoY WEIGHTED SALES YoY WEIGHTED -3% -25% 2 2 GoM GoM -1% +4% 1 Excluding acquisitions net of divestitures and FX movements 2 Weighted Growth over Market (GoM) compares organic sales to vehicle production after applyi
Slide 16: Q3 2020 Adjusted EBIT Margin %
Q3 2020 Adjusted EBIT Margin % ADJUSTED EBIT MARGIN % Key Factors: +250bps • Cost savings and efficiencies realized (+) 8.5% • COVID-19 related government employee support programs (+) $778M • Labour strike at GM in Q3 2019 (+) 6.0% • Launch costs (+) $558M • Productivity and efficiency improvements
Slide 17: Higher Adjusted EBIT Margin in all Segments
Higher Adjusted EBIT Margin in all Segments BODY EXTERIOR SYSTEMS POWER & VISION SALES ADJUSTED EBIT SALES ADJUSTED EBIT 10.1% $3.98B $3.86B 7.7% $390M 8.3% $306M $2.70B $2.72B 6.2% $227M $167M SEATING COMPLETE VEHICLES SALES ADJUSTED EBIT SALES ADJUSTED EBIT $1.52B $1.40B $1.27B $1.28B 5.2% 5.0% 4.
Slide 18: Q3 2020 Financial Highlights
Q3 2020 Financial Highlights ADJUSTED EFFECTIVE ADJUSTED NET INCOME ADJUSTED TAX RATE ATTRIBUTABLE TO MAGNA DILUTED EPS + 34% + 38% 22.6% $585M $1.95 19.6% $438M $1.41 Q3 2019 Q3 2020 Q3 2019 Q3 2020 Q3 2019 Q3 2020 18
Slide 19: Impact of Non-Cash Impairment of Investment in GJT
Impact of Non-Cash Impairment of Investment in GJT $ MILLIONS Q3 2020 Income from Operations Before Income Taxes $ (337) Income Taxes $ 62 Net Loss $ (275) Loss Attributable to Non-Controlling Interests $ 75 Net Loss Attributable to Magna $ (200) Diluted Earnings Per Share $ (0.67) 19
Slide 20: Q3 2020 Cash Flow
Q3 2020 Cash Flow $ MILLIONS Cash from Operations Net Income + Non-Cash Items $ 1,094 Changes in Non-Cash Operating Assets & Liabilities $ 518 $ 1,612 Investment Activities Fixed Assets $ (213) Investments, Other Assets & Intangibles $ (68) $ (281) Proceeds from Disposition and Other $ 14 Free Cash
Slide 21: Strong Liquidity Position
Strong Liquidity Position $ MILLIONS UNLESS OTHERWISE NOTED Available Operating & Term Lines of Credit $ 3,728 Cash & Cash Equivalents $ 1,618 Total Available Liquidity (9/30/20) $ 5,346 21
Slide 22: Adjusted Debt to Adjusted EBITDA
Adjusted Debt to Adjusted EBITDA $ MILLIONS LTM EBITDA $ 2,530 Lease Adjustment $ 316 Other $ (10) Adjusted EBITDA $ 2,836 Debt per Balance Sheet $ 3,930 Lease Liability per Balance Sheet $ 1,808 Other $ 237 Adjusted Debt $ 5,975 Adjusted Debt / Adjusted EBITDA (Q3 2020) 2.11x Adjusted Debt / Adjust
Slide 23: Updated 2020 Outlook
1 Updated 2020 Outlook $ BILLIONS UNLESS OTHERWISE NOTED U.S. GAAP November 2020 August 2020 Sales: • Body Exteriors & Structures $13.0 - $13.4 • Power & Vision $9.2 - $9.5 • Seating Systems $4.3 - $4.5 • Complete Vehicles $5.4 - $5.6 Total Sales $31.5 - $32.5 $30.0 - $32.0 Adjusted EBIT Margin % 4.
Slide 24: 2020 Outlook YoY Implications for Q4 2020
2020 Outlook YoY Implications for Q4 2020 Implied Q4 2020 Q4 2019 Change LIGHT VEHICLE PRODUCTION: North America 3.8M 3.9M 4% Europe 5.0M 5.3M 6% Global 21.1M 23.6M 10% KEY FINANCIALS: Total Sales $9.4B - $10.4B $9.4B Level to 11% EBIT ~$675M - ~$850M $590M Net Income Attributable to Magna $5
Slide 25: Q3 2020 Results Appendix
Q3 2020 RESULTS APPENDIX 25
Slide 26: Sales Performance vs Market (by segment)
Sales Performance vs Market (by segment) Q3 2020 vs Q3 2019 Performance Performance vs Unweighted vs Weighted 1 Reported Organic Global Production Global Production Body Exteriors & Structures (3%) (4%) 0% (2%) Power & Vision 1% (1%) 3% 1% Seating 1% 2% 6% 4% Complete Vehicles (8%) (12%) (8%) (10%)
Slide 27: Sales Performance vs Market (by segment)
Sales Performance vs Market (by segment) YTD 2020 vs YTD 2019 Performance Performance vs Unweighted vs Weighted 1 Reported Organic Global Production Global Production Body Exteriors & Structures (27%) (26%) (1%) 3% Power & Vision (24%) (19%) 6% 10% Seating (26%) (26%) (1%) 3% Complete Vehicles (30%)
Slide 28: Economic Ownership – Transmission JV's
Economic Ownership – Transmission JV’s ACCOUNTING TREATMENT MAGNA 50% GFT GFT: No control – equity account for 50% interest 50% (Europe) FORD MOTOR CO. GAP: Control – consolidate entity (i.e. investment in GJT) 75% and record minority interest (i.e. Ford’s interest in GFT) GAP 25% 66.7% GJT: No cont
Slide 29: 2020 Segment Adjusted EBIT Margin %
2020 Segment Adjusted EBIT Margin % BODY EXTERIORS & STRUCTURES POWER & VISION 7.9% 6.6% 4.6-5.1% 3.8-4.3% 3.0% 2.1% SEATING SYSTEMS COMPLETE VEHICLES 5.6% 4.5% 4.4-4.9% 1.4-1.9% 2.1% 0.7% 2019 YTD 2020 Current 2020 Outlook 29
Slide 30: Segment Impact on Adjusted EBIT % of Sales
Segment Impact on Adjusted EBIT % of Sales $ MILLIONS Q3 2020 vs Q3 2019 Adjusted EBIT as a Adjusted Percentage Sales EBIT of Sales 3rd Quarter of 2019 $ 9,319 $ 588 6.0% Increase (Decrease) Related to: Body Exteriors & Structures $ (126) $ 84 1.0% Power & Vision $ 26 $ 60 0.6% Seating Systems $ 14
Slide 31: Q3 2020 Reconciliation of Reported Results
Q3 2020 Reconciliation of Reported Results EXCLUDING OTHER EXPENSE (INCOME), NET $ MILLIONS – EXCEPT PER SHARE FIGURES Other Excl. Other Reported Expense, Net Expense, Net Income Before Income Taxes $ 436 $ 316 $ 752 % of Sales 4.8% 8.2% Income Tax Expense $ 109 $ 61 $ 170 % of Pretax 25.0% 22.6% Lo
Slide 32: Q3 2019 Reconciliation of Reported Results
Q3 2019 Reconciliation of Reported Results EXCLUDING OTHER EXPENSE (INCOME), NET $ MILLIONS – EXCEPT PER SHARE FIGURES Other Excl. Other Reported Expense, Net Expense, Net (Loss) Income Before Income Taxes $ (319) $ 859 $ 540 % of Sales (3.4%) 5.8% Income Tax Expense $ 45 $ 61 $ 106 % of Pretax (14.
Slide 33: Geographic Sales
Geographic Sales Q3 2020 vs Q3 2019 NORTH AMERICA EUROPE $4.7B $4.7B $4.1B $3.8B PRODUCTION 0% PRODUCTION -5% ASIA REST OF WORLD $592M $538M $146M $100M PRODUCTION -3% S.A. PRODUCTION -21% (China +10%) Q3 2019 Q3 2020 33
Slide 34: AX MAGNA i innovrion
e . . AX MAGNA i innovrion