Magna International Inc. · TSX:MG
Magna International — FY2022 Earnings Presentation
48 slides from Magna International's earnings presentation, Feb 10, 2023
Slide 1: Q4 & Full Year 2022 + 2023 Outlook
Q4 & Full Year 2022 + 2023 Outlook February 10, 2023
Slide 2: Louis Tonelli, Vice President, Investor Relations
Louis Tonelli Vice President, Investor Relations Q4 & FULL YEAR 2022 + 2023 OUTLOOK 2
Slide 3: Forward Looking Statements
Forward Looking Statements Q4 & FULL YEAR 2022 + 2023 OUTLOOK 3 Certain statements in this website constitute "forward - looking information" or "forward - looking statements" (collectively, "forward - looking statements") . Any such forward - looking statements are intended to provide information a
Slide 4: Forward Looking Statements (cont.)
Forward Looking Statements (cont.) Q4 & FULL YEAR 2022 + 2023 OUTLOOK 4 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 expe
Slide 5: Reminders
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" Q4 & FULL YEAR 2022 + 2023 OUTLOOK 5
Slide 6: Agenda
6 Q4 & FULL YEAR 2022 + 2023 OUTLOOK Agenda 2022 Highlights and Q4 2022 Operating Results 2023 Outlook Financial Strategy
Slide 7: Swamy Kotagiri, Chief Executive Officer
Swamy Kotagiri Chief Executive Officer Q4 & FULL YEAR 2022 + 2023 OUTLOOK 7
Slide 8: 2022 Highlights
2022 Highlights Q4 & FULL YEAR 2022 + 2023 OUTLOOK 8
Slide 9: Q4 2022 Results and FY 2022 Results
Consolidated Sales $9.6B Q4 2022 Results Q4 & FULL YEAR 2022 + 2023 OUTLOOK 9 Adjusted EBIT Margin % 3.7% Adjusted Diluted EPS $0.91 Free Cash Flow 2 $340M 1 W eighted Growth over Market ( GoM ) compares organic sales growth (%) to vehicle production change (%) after applying Magna geographic sales
Slide 10: 2022 Accomplishments
2022 Accomplishments Q4 & FULL YEAR 2022 + 2023 OUTLOOK 10 • Managed through continued supply chain challenges while minimizing disruption to OEM production • Launched 66 Factory of the Future projects globally • Received 107 customer recognition awards Excellence Operational
Slide 11: 2022 Accomplishments (cont.)
2022 Accomplishments (cont.) Q4 & FULL YEAR 2022 + 2023 OUTLOOK 11 • Developed Operational Management Accelerator Program • 6th Straight Year Named to Forbes "World's Best Employers" • Named one of Fortune’s “World’s Most Admired Companies" Focus People
Slide 12: 2022 Accomplishments (cont.)
2022 Accomplishments (cont.) Q4 & FULL YEAR 2022 + 2023 OUTLOOK 12 Growth Sales 1 Weighted Growth over Market ( GoM ) compares organic sales growth (%) to vehicle production change (%) after applying Magna geographic sales weighting, excludi ng Complete Vehicles, to regional production 2 Excluding C
Slide 13: 2022 Accomplishments (cont.)
2022 Accomplishments (cont.) Q4 & FULL YEAR 2022 + 2023 OUTLOOK 13 • New business in core innovation areas: ̶ Battery enclosures ̶ E - Drives ̶ Driver Monitoring ̶ Smart Access Power Doors • Winners of PACE award and PACE Pilot Innovation to Watch • Increased R&D investment in mobility megatrends ar
Slide 14: Pat McCann, Executive Vice President & Chief Financial Officer
Pat McCann Executive Vice President & Chief Financial Officer Q4 & FULL YEAR 2022 + 2023 OUTLOOK 14
Slide 15: 2022 Financial Results
2022 Financial Results Q4 & FULL YEAR 2022 + 2023 OUTLOOK 15 Adjusted EBIT Margin (%) 5.7% 4.4% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 2021 2022 Consolidated Sales ($Billions) $36.2 $37.8 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 $40.0 2021 2022 Adjusted EPS ($)
Slide 16: Q4 2022 Financial Results
Q4'22 vs Q4'21 Prod'n Global 5% Magna Weighted 5% Q4 2022 Financial Results Q4 & FULL YEAR 2022 + 2023 OUTLOOK 16 Adjusted EBIT Margin (%) Consolidated Sales ($Billions) $9.1 $9.6 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 Q4'21 Q4'22 Adjusted EPS ($) $1.30 $0.91 0.0 0.1 0.
Slide 17: Q4 2022 Financial Results: Adjusted EBIT Margin
Q4 2022 Financial Results Q4 & FULL YEAR 2022 + 2023 OUTLOOK 17 Adjusted EBIT Margin % • Higher engineering spend for electrification & autonomy ( - ) • Increased net warranty costs ~35 bps ( - ) • Higher launch costs ( - ) • Provisions against accounts receivable + other balances ~35 bps ( - ) • Op
Slide 18: Q4 2022 Cash Flow and Investment Activities
Q4 2022 Cash Flow and Investment Activities Q4 & FULL YEAR 2022 + 2023 OUTLOOK 18 Free Cash Flow 1 ($Millions) OTHER USES OF CASH Net Repayment of Debt 22 Business Combinations 3 Repurchase of Common Shares 5 Dividends ($0.45/share) 126 Cash from Operations Before Changes in Operating Assets & Liabi
Slide 19: Annualized Dividend
Annualized Dividend 1 Q4 & FULL YEAR 2022 + 2023 OUTLOOK 19 Increased Q4 Dividend for 13 th Straight Year 1 Based on Q4 run rate 0.50 0.55 0.64 0.76 0.88 1.00 1.12 1.32 1.46 1.60 1.72 1.80 1.84 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00 Q4'10 Q4'11 Q4'12 Q
Slide 20: 2023 Outlook
2023 Outlook* *excludes pending acquisition of Veoneer Active Safety Q4 & FULL YEAR 2022 + 2023 OUTLOOK 20
Slide 21: Go-Forward Strategy
Q4 & FULL YEAR 2022 + 2023 OUTLOOK 21 Advancing Our Accelerate Deployment of Capital towards High - Growth Areas Drive Operational Excellence Unlock New Business Models and Markets Go - Forward Strategy
Slide 22: Overview of 2023 Outlook: Tailwinds and Headwinds
Q4 & FULL YEAR 2022 + 2023 OUTLOOK 22 Overview of 2023 Outlook Tailwinds Headwinds • Launching content on exciting new programs • Higher expected global light vehicle production • Increased business in megatrend areas ̶ Increased investments to fund future growth • Continued production volatility, p
Slide 23: Overview of 2023 Outlook – Financial Metrics
Sales Growth Overview of 2023 Outlook – Financial Metrics Q4 & FULL YEAR 2022 + 2023 OUTLOOK 23 Margin Expansion Investing for Growth Improving Free Cash Flow 2 1 Weighted Growth over Market ( GoM ) compares organic sales growth (%) to vehicle production change (%) after applying Magna geographic sa
Slide 24: Financial Outlook – Key Assumptions
Financial Outlook – Key Assumptions Q4 & FULL YEAR 2022 + 2023 OUTLOOK 24 Automotive Light Vehicle Production (millions of units) 2022 2023 2025 North America 14.3 14.9 16.5 Europe 15.6 16.2 17.5 China 26.9 26.2 29.0 U.S. Foreign Exchange Rates 2022 2023 2025 Cdn 0.769 0.750 0.750 Euro 1.053 1.070 1
Slide 25: Consolidated Outlook
Consolidated Outlook Q4 & FULL YEAR 2022 + 2023 OUTLOOK 25
Slide 26: Consolidated Sales
Consolidated Sales Q4 & FULL YEAR 2022 + 2023 OUTLOOK 26 2021 2022 2023F 2025F • Higher light vehicle production (+) • Content growth (+) ̶ New technologies ̶ New facilities ̶ Launches • Inflation recoveries (+) • Micromobility activities (+) • End of production on certain programs ( - ) • Program m
Slide 27: Unconsolidated Sales
Unconsolidated Sales 1 Q4 & FULL YEAR 2022 + 2023 OUTLOOK 27 2021 2022 2023F 2025F • Significant growth primarily driven by: ̶ Electrification components and systems (LG JV) ̶ Integrated e - Drives (HASCO JV) ̶ Seating systems 1 Sales at 100% for our unconsolidated entities 2.4 Unweighted Global LV
Slide 28: Consolidated Adjusted EBIT Margin
Consolidated Adjusted EBIT Margin % 1 Q4 & FULL YEAR 2022 + 2023 OUTLOOK 28 2021 2022 2023F 2025F 2022 - 2023 • Contribution on higher sales (+) • Operational improvement initiatives (+) • Lower warranty costs (+) • Lower commercial resolutions ( - ) • Higher net input costs (~$150M) ( - ) • Lower l
Slide 29: Segment Outlook
Segment Outlook Q4 & FULL YEAR 2022 + 2023 OUTLOOK 29
Slide 30: Segment Sales & Adjusted EBIT Margin
Segment Sales & Adjusted EBIT Margin % 1 Q4 & FULL YEAR 2022 + 2023 OUTLOOK 30 1 Excluding other expense (income), net 2 Organic Sales represents sales excluding acquisitions net of divestitures and FX movements Body Exteriors & Structures 2021 2022 2023F 2025F 5.7 5.3 5.5 - 6.5 7.5 - 8.6 Power & Vi
Slide 31: Financial Strategy
Financial Strategy Q4 & FULL YEAR 2022 + 2023 OUTLOOK 31
Slide 32: Capital Allocation Principles
Q4 & FULL YEAR 2022 + 2023 OUTLOOK 32 Capital Allocation Principles Maintain Strong Balance Sheet • Preserve liquidity and high investment grade credit ratings ̶ Adj. debt to Adj. EBITDA ratio between 1.0 - 1.5x • Maintain flexibility to invest for growth Invest For Growth • Organic and inorganic op
Slide 33: Leverage Ratio
Leverage Ratio Q4 2022 Q4 & FULL YEAR 2022 + 2023 OUTLOOK 33 Planning to increase debt in 2023 ($Millions) LTM EBITDA 3,081 Credit Rating Agency Adjustments 259 Adjusted EBITDA 3,340 Debt per Balance Sheet 5,073 Credit Rating Agency Adjustments 198 Adjusted Debt 5,271 Adjusted Debt / Adjusted EBITDA
Slide 34: Capital Spending
Capital Spending Q4 & FULL YEAR 2022 + 2023 OUTLOOK 34 Increased Spending Reflects Investments for Growth 1 2023 to 2025 are based on the level of business reflected in our sales outlook ($Billions) 1.8 1.9 1.7 1.4 1.1 1.4 1.7 5.3 5.1 4.0 3.7 3.5 3.8 4.4 2016 2017 2018 2019 2020 2021 2022 2023F 2024
Slide 35: Free Cash Flow Generation
Free Cash Flow 1 Generation Q4 & FULL YEAR 2022 + 2023 OUTLOOK 35 Impacted by Near - Term Growth Investments 1 Free Cash Flow (FCF) is Cash from Operating Activities plus proceeds from normal course dispositions of fixed and other asset s m inus capital spending minus investment in other assets 1.1
Slide 36: In Summary
In Summary Continued organic sales growth over market Increased investments to support growth in megatrend areas Margin expansion over outlook period, including through operational improvement initiatives Free cash flow improves as sales and margins expand + growth spending subsides Q4 & FULL YEAR 2
Slide 37: Q4 & FULL YEAR 2022 + 2023 OUTLOOK 37
Q4 & FULL YEAR 2022 + 2023 OUTLOOK 37
Slide 38: Appendix – Q4 2022 Results
Appendix – Q4 2022 Results Q4 & FULL YEAR 2022 + 2023 OUTLOOK 38
Slide 39: Q4 2022 Reconciliation of Reported Results
Q4 2022 Reconciliation of Reported Results Q4 & FULL YEAR 2022 + 2023 OUTLOOK 39 ($Millions, except for share figures) Reported Other Expense, Net Excl. Other Expense, Net Income Before Income Taxes $ 146 $ 193 $ 339 % of Sales 1.5% 3.5% Income Tax Expense $ 35 $ 27 $ 62 % of Pretax 24.0% 18.3% Inco
Slide 40: Q4 2021 Reconciliation of Reported Results
Q4 2021 Reconciliation of Reported Results Q4 & FULL YEAR 2022 + 2023 OUTLOOK 40 ($Millions, except for share figures) Reported Other Income, Net Excl. Other Income, Net Income Before Income Taxes $ 576 $ (90) $ 486 % of Sales 6.3% 5.3% Income Tax Expense $ 98 $ (17) $ 81 % of Pretax 17.0% 16.7% Inc
Slide 41: Sales Performance vs Market (Q4 2022 vs Q4 2021)
Sales Performance vs Market Q4 & FULL YEAR 2022 + 2023 OUTLOOK 41 Reported Organic 1 Performance vs Weighted Global Production (Weighted GoM) Body Exteriors & Structures 11% 17% 12% Power & Vision 8% 16% 11% Seating Systems 4% 11% 6% Complete Vehicles (12)% (1)% (6)% TOTAL SALES 5% 13% 8% Unweighted
Slide 42: Sales Performance vs Market (2022 YTD vs 2021 YTD)
Sales Performance vs Market Q4 & FULL YEAR 2022 + 2023 OUTLOOK 42 Reported Organic 1 Performance vs Weighted Global Production (Weighted GoM) Body Exteriors & Structures 11% 16% 11% Power & Vision 5% 11% 6% Seating Systems 8% 15% 10% Complete Vehicles (15)% (4)% (9)% TOTAL SALES 4% 12% 7% Unweighted
Slide 43: Segment Impact on Adjusted EBIT
Segment Impact on Adjusted EBIT % of Sales Q4 & FULL YEAR 2022 + 2023 OUTLOOK 43 ($Millions) Sales Adjusted EBIT Adjusted EBIT as a Percentage of Sales 4 th Quarter of 2021 $ 9,110 $ 508 5.6% Increase (Decrease) Related to: Body Exteriors & Structures $ 384 $ 30 0.1% Power & Vision $ 212 $ (62) (0.8
Slide 44: Geographic Sales
Geographic Sales Q4 & FULL YEAR 2022 + 2023 OUTLOOK 44 Q4 2021 Q4 2022 Asia ASIA PRODUCTION 6% China Production 3% $4.2B $4.7B $0.0B $0.5B $1.0B $1.5B $2.0B $2.5B $3.0B $3.5B $4.0B $4.5B $5.0B $3.7B $3.7B $0.0B $0.5B $1.0B $1.5B $2.0B $2.5B $3.0B $3.5B $4.0B $1.2B $1.2B $0.0B $0.2B $0.4B $0.6B $
Slide 45: Segment Sales and Adjusted EBIT Margin
Segment Sales and Adjusted EBIT Margin Q4 & FULL YEAR 2022 + 2023 OUTLOOK 45 $3.62B $4.00B Body Exteriors & Structures Sales $168M $198M Adjusted EBIT 4.6% 4.9% $1.30B $1.35B Seating Sales $49M $13M Adjusted EBIT 3.8% 1.0% $1.51B $1.33B Complete Vehicles Sales $98M $57M Adjusted EBIT 6.5% 4.3% $2.80
Slide 46: Appendix - Outlook
Appendix - Outlook Q4 & FULL YEAR 2022 + 2023 OUTLOOK 46
Slide 47: Financial Outlook
Financial Outlook Q4 & FULL YEAR 2022 + 2023 OUTLOOK 47 2023 2025 Sales: • Body Exteriors & Structures 16.7 – 17.3 20.0 – 21.0 • Power & Vision 13.0 – 13.4 14.8 – 15.4 • Seating Systems 5.5 – 5.8 6.2 – 6.6 • Complete Vehicles 4.9 – 5.2 4.0 – 4.5 Total Sales 39.6 – 41.2 44.7 – 47.2 Adjusted EBIT Marg
Slide 48: Q4 & FULL YEAR 2022 + 2023 OUTLOOK 48
Q4 & FULL YEAR 2022 + 2023 OUTLOOK 48