Magna International Inc. · TSX:MG
Magna International — Q2 2021 Earnings Presentation
35 slides from Magna International's earnings presentation, Aug 6, 2021
Slide 1: Q2 2021 Earnings Presentation
August 6, 2021 Q2 2021 Earnings Presentation
Slide 2: Forward Looking Statements
Forward Looking Statements Q2 2021 Earnings - 06AUG21 2 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 abou
Slide 3: Forward Looking Statements (cont.)
Forward Looking Statements (cont.) 3 Q2 2021 Earnings - 06AUG21 Forward - looking statements are based on information currently available to us and are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected fut
Slide 4: Reminders
Q2 2021 Earnings - 06AUG21 4 Reminders All amounts are in U.S. Dollars Today's discussion excludes the impact of other expense (income), net ("Unusual Items") "Organic", in the context of sales movements, means "excluding the impact of foreign exchange, acquisitions and divestitures"
Slide 5: Key Messages
5 Key Messages Q2 2021 Earnings - 06AUG21 Solid Q2 performance in a challenging industry environment 1 Continued focus on cost management, reflecting operational excellence and implemented restructuring actions 2 Strategic portfolio positions us for sales growth over market and strong free cash flow
Slide 6: Magna's ICON Digital Radar
Magna's ICON Digital Radar Q2 2021 Earnings - 06AUG21 6 Industry First Application Launches in 2022 Program Award • Dramatically improves RADAR performance • Detects pedestrians up to 150 metres away • Eliminates interference experienced by current RADAR systems • Developed in partnership with t
Slide 7: Magna and LG Close Joint Venture Transaction
Magna and LG Close Joint Venture Transaction Q2 2021 Earnings - 06AUG21 7 Increased Opportunities for Growth in e - Powertrains • Enhances e - motor and inverter building blocks • Strengthens position in e - drive systems through vertical integration • Allows us to participate in growing addressable
Slide 8: Surface Element Lighting Technology
Surface Element Lighting Technology Q2 2021 Earnings - 06AUG21 8 First to Market on All - Electric 2021 Volkswagen ID.4 • Compact packaging, homogeneous appearance and customizable, affordable LED lighting • OLED - like uniformity at a fraction of the cost is a game - changer • Minimum thickness of
Slide 9: Recognition from General Motors
Recognition from General Motors Q2 2021 Earnings - 06AUG21 9 Six 2020 Supplier of the Year Awards • Only supplier to receive six awards in a single year from the automaker – won six awards for second straight year • Awards honor top suppliers that consistently exceed expectations • Magna recognized
Slide 10: Current Market Dynamics
Current Market Dynamics Q2 2021 Earnings - 06AUG21 10 Continued Robust Auto Demand Environment HEADWINDS TAILWINDS Low Dealer Inventory Levels, Particularly in North America OEMs Indications Point to Strong Future Production Semiconductor Chip Supply Constraints High Commodity Costs Increased Labour
Slide 11: Q2 2021 Performance Highlights
CONSOLIDATED SALES $9.0B Q2 2021 Performance Highlights Q2 2021 Earnings - 06AUG21 11 ADJUSTED EBIT MARGIN % 6.2% OTHER ACCOMPLISHMENTS ADJUSTED DILUTED EPS $1.40 FREE CASH FLOW 1 $178M $592M YTD Returned $226M to shareholders through dividends + share buybacks 1 Free Cash Flow (FCF) is Cash from Op
Slide 12: Q2 2021 Financial Results
Q2 2021 Financial Results Q2 2021 Earnings - 06AUG21 12 Reflects COVID - 19 shutdowns Q2'20, semiconductor chip shortage Q2'21 Adjusted EBIT ($Millions) - $600 $557 -$750 -$550 -$350 -$150 $50 $250 $450 $650 Q2'20 Q2'21 Consolidated Sales ($Billions) $4.3 $9.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 $0.0 $1
Slide 13: Q2 2021 vs Q1 2021 (Sequential) Financial Results
13 Q2 2021 vs Q1 2021 (Sequential) Financial Results Q2 2021 Earnings - 06AUG21 Key Factors • Lower global light vehicle production, substantially due to semiconductor chip shortage ( - ) • Foreign currency translation: $31M (+) Q2'21 vs Q1'21 Production Global - 10% North America - 13% Europe - 11%
Slide 14: Q2 2021 vs Q1 2021 (Sequential) Financial Results
14 Q2 2021 vs Q1 2021 (Sequential) Financial Results Q2 2021 Earnings - 06AUG21 Key Factors • Lower earnings on $1.1B decline in sales ( - ) • Commodity costs ( - ) • New facility and launch costs ( - ) • Incremental labour costs in Mexico ( - ) • Higher net application costs in ADAS ( - ) • Favoura
Slide 15: Q2 2021 Cash Flow and Investment Activities
15 Q2 2021 Cash Flow and Investment Activities Q2 2021 Earnings - 06AUG21 Free Cash Flow 1 ($Millions) - $1,462 $414 $178 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 -$1,600 -$1,100 -$600 -$100 $400 Q2'20 Q1'21 Q2'21 USES OF CASH Public and Private Equity Investments $17M Share Repurchases (1.0M Shares) $99M Di
Slide 16: Continued Financial Flexibility
Continued Financial Flexibility Q2 2021 Earnings - 06AUG21 16 Improved Adjusted Debt to Adjusted EBITDA Q2'21 HIGHLIGHTS • Continued operational excellence and higher earnings driving strong cash generation ($B) Estimated Future LTD Principal Repayments (12/31/20) ($M) $129 $365 $722 $760 $647 $1,47
Slide 17: 2021 Outlook Assumptions
2021 Outlook Assumptions Q2 2021 Earnings - 06AUG21 17 2020 MAY AUGUST Light Vehicle Production (millions of units) • North America 13.0 15.6 14.4 • Europe 16.5 18.5 18.1 • China 23.5 24.7 24.7 Foreign Exchange Rates • 1 CDN dollar equals USD 0.746 0.797 0.801 • 1 EURO equals USD 1.141 1.201 1.193 •
Slide 18: 2021 Outlook
2021 Outlook Q2 2021 Earnings - 06AUG21 18 $ Billions, Unless Otherwise Noted 2020 MAY AUGUST Sales: • Body Exteriors & Structures $16.5 – $17.1 $15.3 – $15.9 • Power & Vision $12.0 – $12.4 $11.8 – $12.2 • Seating Systems $5.6 – $5.9 $5.1 – $5.4 • Complete Vehicles $6.7 – $7.0 $6.3 – $6.6 Total Sale
Slide 19: Free Cash Flow Expectations
19 Free Cash Flow 1 Expectations Q2 2021 Earnings - 06AUG21 2021 ($Billions) $0.0 $0.2 $0.4 $0.6 $0.8 $1.0 $1.2 $1.4 $1.6 $1.8 $2.0 $1.6 - $1.8 $1.6 - $1.8 May 2021 Outlook August 2021 Outlook 1 Free Cash Flow (FCF) is Cash from Operating Activities plus proceeds from normal course dispositions
Slide 20: 2021 Segment Adjusted EBIT Margin
2021 Segment Adjusted EBIT Margin Q2 2021 Earnings - 06AUG21 20 2020 May 2021 Outlook August 2021 Outlook BODY EXTERIORS & STRUCTURES 6.0% 8.5 - 9.0% 8.0 - 8.5% SEATING SYSTEMS 2.4% 5.4 - 5.9% 4.5 - 5.0% POWER & VISION 5.1% 7.7 - 8.2% 7.3 - 7.8% COMPLETE VEHICLES 5.1% 4.1 - 4.6% 4.5 - 5.0%
Slide 21: In Summary
21 IN SUMMARY Solid Q2 Performance in a Challenging Environment Q2 2021 Earnings - 06AUG21 Strong cost management considering volatile production schedules Free cash flow 1 generation of $178M, $592M YTD Maintained 2021 free cash flow 1 expectations despite lowered 2021 Outlook 1 Free Cash Flow (FCF
Slide 22: Appendix
Q2 2021 Earnings - 06AUG21 22 Appendix
Slide 23: Q2 2021 Reconciliation of Reported Results
Q2 2021 Reconciliation of Reported Results Q2 2021 Earnings - 06AUG21 23 REPORTED OTHER EXPENSE, NET EXCL. OTHER EXPENSE, NET Income Before Income Taxes $ 540 $ 6 $ 546 % of Sales 6.0% 6.0% Income Tax Expense $ 104 $ 4 $ 108 % of Pretax 19.3% 19.8% Income Attributable to Non - Controlling Interests
Slide 24: Q2 2020 Reconciliation of Reported Results
Q2 2020 Reconciliation of Reported Results Q2 2021 Earnings - 06AUG21 24 EXCLUDING OTHER EXPENSE (INCOME), NET $MILLIONS – EXCEPT FOR SHARE FIGURES REPORTED OTHER EXPENSE EXCL. OTHER EXPENSE Loss Before Income Taxes $ (789) $ 168 $ (621) % of Sales (18.4)% 14.5% Income Tax Benefit $ (137) $ 32 $ (10
Slide 25: Sales Performance vs Market
Sales Performance vs Market 25 REPORTED ORGANIC 1 PERFORMANCE VS WEIGHTED GLOBAL PRODUCTION (Weighted GoM) Body Exteriors & Structures 125% 114% (19)% Power & Vision 122% 95% (38)% Seating 123% 97% (36)% Complete Vehicles 60% 46% (87)% TOTAL SALES 110% 93% (40)% Unweighted Production Growth 58% Weig
Slide 26: Sales Performance vs Market
Sales Performance vs Market 26 REPORTED ORGANIC 1 PERFORMANCE VS WEIGHTED GLOBAL PRODUCTION (Weighted GoM) Body Exteriors & Structures 45% 39% 1% Power & Vision 58% 41% 3% Seating 38% 25% (13)% Complete Vehicles 48% 36% (2)% TOTAL SALES 48% 37% (1)% Unweighted Production Growth 36% Weighted Producti
Slide 27: Geographic Sales
Geographic Sales 27 Q2 2020 Q2 2021 NORTH AMERICA $1.6B $4.1B PRODUCTION +165% EUROPE $2.2B $4.1B PRODUCTION +110% ASIA $475M $912M PRODUCTION +25% (China +3%) REST OF WORLD $25M $100M S.A. PRODUCTION +355% Q2 2021 vs Q2 2020 Q2 2021 Earnings - 06AUG21
Slide 28: 2023 Financial Outlook
2023 Financial Outlook 1 Q2 2021 Earnings - 06AUG21 28 1 We have not updated 2023 Outlook ranges from our February 19 th , 2021 press release. 2 Adjusted EBIT Margin is the ratio of Adjusted EBIT to Total Sales Assumptions Light Vehicle Production (millions of units) • North America 16.3 • Europe 20
Slide 29: Capital Allocation Principles
Capital Allocation Principles Q2 2021 Earnings - 06AUG21 29 Disciplined, Profitable Approach to Growth Remains a Foundational Principle Q2'21 Maintain Strong Balance Sheet • Preserve liquidity and high investment grade credit ratings - Adj. debt / Adj. EBITDA ratio between 1.0 - 1.5x LTM 06/30/21 1.
Slide 30: Leverage Ratio Further Improved in Q2 2021
$Millions Leverage Ratio Q2 2021 Earnings - 06AUG21 30 Further Improved in Q2 2021 LTM EBITDA $ 4,634 Lease Adjustment $ 320 Other $ (217) Adjusted EBITDA $ 4,737 Debt per Balance Sheet $ 4,058 Lease Liability per Balance Sheet $ 1,841 Other $ 218 Adjusted Debt $ 6,117 Adjusted Debt / Adjusted EBITD
Slide 31: Body Exteriors & Structures Segment Financial Performance
BODY EXTERIORS & STRUCTURES Segment Financial Performance Q2 2021 Earnings - 06AUG21 31 • Earnings on higher sales (+) • Cost savings and operating efficiencies, including as a result of implemented restructuring actions (+) • Higher tooling contribution (+) • Net provisions for customer claims in 2
Slide 32: Power & Vision Segment Financial Performance
• Higher global light vehicle production (+) • Launch of new programs (+) • Consolidation of Getrag entities: $175M (+) • Foreign currency translation: $170M (+) • Net customer price concessions ( - ) POWER & VISION Segment Financial Performance Q2 2021 Earnings - 06AUG21 32 • Earnings on higher sal
Slide 33: Seating Segment Financial Performance
• Higher global light vehicle production (+) • Launch of new programs (+) • Acquisition of Hongli in China: $92M (+) • Foreign currency translation: $41M (+) • Unfavourable production mix ( - ) • Net customer price concessions ( - ) SEATING Segment Financial Performance Q2 2021 Earnings - 06AUG21 33
Slide 34: Complete Vehicles Segment Financial Performance
• Higher vehicle assembly volumes (+13K units) • Higher euro: $126M (+) COMPLETE VEHICLES Segment Financial Performance Q2 2021 Earnings - 06AUG21 34 • Earnings on higher assembly volumes, net of contractual fixed cost recoveries on certain programs (+) • Higher margins on engineering programs (+) •
Slide 35: END
Q2 2021 Earnings - 06AUG21 35 END