Linamar Corporation · TSX:LNR

Linamar — Q1 2020 Earnings Presentation

57 slides from Linamar's earnings presentation, May 13, 2020

  1. Slide 1: Q1 Conference Call Presentation

    Q1 Conference Call Presentation For Audio Only Dial in: Linda Hasenfratz North America: (877) 668-0168 International: (825) 312-2386 May 13, 2020 Conference ID 8792067

  2. 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

  3. Slide 3: COVID-19 Update

    COVID-19 Update 3

  4. Slide 4: Pandemic Crisis Management

    Pandemic Crisis Management Assemble Team Gather Data COVID-19 Task Force Make a Plan & Execute Communicate Employees Investors Customer Employees Financially Customers Community 4

  5. Slide 5: Current Focus on Recovery

    Current Focus on Recovery  Create a work environment where people feel and are as safe or safer coming to work than not coming to work  Shift from fear to hope  Take lessons learned from other countries ahead of us on this curve  Safe protocol  Economic impact  Focus on rebuilding confidence t

  6. Slide 6: Key Principles of Safe Work Protocol

    Key Principles of Safe Work Protocol CLEANING/ SCREENING PPE DISTANCING TRACING HYGIENE 6

  7. Slide 7: Current Plant Status

    Current Plant Status Today Linamar China Resumes Production Feb 10 0 Confirmed Positive Cases of COVID-19 in Returned Employees Since Restart in Any Region Linamar Europe Linamar NA Due to Resumes Resume Production Production May 4 May 18 Feb 10/20 Feb 17/20 Feb 24/20 Mar 2/20 Mar 9/20 Mar 16/20 Mar

  8. Slide 8: Consumer Demand: Light Vehicle

    Consumer Demand: Light Vehicle Signs of recovery in both US & China light vehicle markets China Light Vehicle Sales Europe Light Vehicle Sales US Light Vehicle Sales % Change YoY % Change YoY % Change YoY 6.8% 10% 2.6% 10% 10% 0.2% 0% 0% 0% -10% Jan Feb Mar Apr -10% Jan Feb Mar Apr -10% Jan Feb Mar

  9. Slide 9: Consumer Demand: Access & Agriculture

    Consumer Demand: Access & Agriculture 2020 Mobile Elevated Work Platform Industry Forecast NA Combine Retails % Change vs. Prior Year 900 30.0% 800 18% 20.0% 700 10.0% 600 0.0% 500 -10.0% -5% -12% 400 -20.0% -30.0% 300 -26% -40.0% -32% 200 -35% -36% -50.0% 100 -46% -60.0% -51% 0 NAM EMEA ROW Jan Feb

  10. Slide 10: Financial Action Plan

    Financial Action Plan Cash and Cost  Cash Conservation and cost control are top of mind to mitigate loss of sales  We have moved quickly to cut costs and capital spending  Capital spending down 25% in Q1, target down at least 1/3 vs 2019 for full year  Workforce adjustments  Spending cutbacks i

  11. Slide 11: Cost & Cash

    Cost & Cash $ 11,850,000 Cost Reductions Implemented by Global Cost Team CapEx Q1 Actual - 20 40 60 80 100 120 140 Q1 2019 Q1 2020 11

  12. Slide 12: Financial Action Plan

    Financial Action Plan Balance Sheet:  Our balance sheet is strong and we are carefully stress testing to understand our limits; we remain confident that our focus and responsiveness in this area will see us through this situation financially even in the event of a longer shutdown period  Financial

  13. Slide 13: Stress Scenario

    Stress Scenario  Our latest estimate of earnings conservatively trimmed about half of pre global COVID forecasted earnings  Our stress test trims another half of this estimate  In both our latest estimate and stress scenarios we continue to drive a profit in 2020, generate free cash flow and rema

  14. Slide 14: Community Support

    Community Support 14

  15. Slide 15: Thornhill Medical

    Thornhill Medical Model: MOVES SLC BOM: 1,700 Parts Volume: >1,200 over 90 days SOP: End of May Description:  Fully integrated ICU ventilator.  Combines complete vital sign monitoring with a high tech ventilator, in a standalone battery powered unit.  An ICU in a box. Scope:  Components, final a

  16. Slide 16: O-Two Medical

    O-Two Medical Model: eSeries e700 BOM: 150 Volume: >10,000 Description:  Electronically controlled, pneumatically powered ventilator developed for patient transport and resuscitation.  Designed to be a simple, easy to use, battery powered transport ventilator. Scope: 43 machined components, possib

  17. Slide 17: GM Ventec

    GM Ventec Model: VOCSN Number of Parts: 170 - 230 Description:  Integrated multifunction ventilator that combines several devices into one (ventilator, O2 concentrator, cough assist, etc.) Plants & Components Scope: 1. Comtech: Manifold Cover 8. PowerCor: Bracket, Blower Mounting Front & Back 9. Qu

  18. Slide 18: Zoll | Dovetail Bracket

    Zoll | Dovetail Bracket  Volume: 10,000 pcs  Plant: Roctel 18

  19. Slide 19: Clean Slate

    Clean Slate Volume: Ramping to 40 per day, total 3,000 ordered so far SOP: End May Description:  UV based disinfection unit to rapidly clean mobile phones, tablets and other electronic equipment 19

  20. Slide 20: Community Support

    Guelph Team donates Community Support masks, sources additional for Guelph hospitals McLaren donated PPE to first responders & hospitals in Michigan LLM, LSF, LME Donated PPE to health care workers Sending PPE to China in the Europe Linamar helped deliver basic necessities to MacDon printed 3D ear v

  21. Slide 21: Sales, Normalized Earnings and CPV

    Sales, Normalized¹ Earnings and CPV 1 –Management uses certain non-GAAP financial measures including normalized earnings which exclude foreign exchange impacts and the impact of unusual items when analyzing consolidated and segment underlying operational performance. For more information refer to th

  22. Slide 22: Sales, Normalized Earnings, and Margins (in millions CAD)

    Sales, Normalized Earnings, and Margins (in millions CAD) Q1 2020 Q1 2019 %Δ Q1 2020  Adjusting out COVID-19 Impact vs 2019:  COVID-19 shutdowns single biggest  Sales down $150 million Sales 1,549.8 1,974.5 (21.5%) impact to Q1 in both segments  OE down $11.6 million  $275 million impact to sal

  23. Slide 23: Automotive Sales & Content Per Vehicle (CPV)

    Automotive Sales & Content Per Vehicle (CPV) CPV Q1 2020 CPV Q1 2019 CPV % Change Vehicle Production Automotive Automotive Automotive Units % Change Sales Q1 2020 Sales Q1 2019 Sales % Change (CAD Millions) (CAD Millions) North America 171.06 174.14 (1.8%) (11.2%) 666.4 763.7 (12.7%) Europe 88.68 84

  24. Slide 24: Commercial & Industrial Sales (in millions CAD)

    Commercial & Industrial Sales (in millions CAD) Q1 2020 Q1 2019 % Change  Skyjack  Global markets down in double digits Sales 350.4 559.2 (37.3%)  MacDon  Draper header market down double digits in NA, Canada hardest hit, as well as CIS  Partially offset by great market share growth in EU QvQ¹

  25. Slide 25: Capital Expenditures (in millions CAD)

    Capital Expenditures (in millions CAD) Q1 2020 Q1 2019  Capex down 25% from Q1 2019  Target full year to be down at least 1/3 from 2019 Capital Expenditures (Capex) 90.7 120.4  Using disciplined approach to spending given economic situation Capex as a % of Sales 5.9% 6.1% Capex Capex as a % of Sa

  26. Slide 26: Leverage (in millions CAD)

    Leverage (in millions CAD) Q1 2020 Q4 2019 Q1 2019  Another strong quarter of FCF2 of $147 million in quarter for further reductions to debt Net Debt 1,539.3 1,559.5 2,084.8  Leverage strong at 1.57x Net Debt to EBITDA 1.57x 1.50x 1.78x  Liquidity excellent with $1.2 billion of cash Net Debt to E

  27. Slide 27: Cash Flow Continues to be a Key Priority

    Cash Flow Continues to be a Key Priority 800 50.0% 750 45.0%  We have generated FCF yearly 700 650 for 5 years running and expect to 40.0% 600 do so in 2020 as well 550 35.0% 500 30.0%  FCF Yield is strong and has been 450 for the last 2 years $ Millions 400 25.0% 350 20.0%  Solid liquidity and b

  28. Slide 28: Market Outlook

    Market Outlook © Linamar Corporation 28

  29. Slide 29: Market Snapshot 2020

    Market Snapshot 2020 Light Vehicle Commercial Truck Agriculture Access Industry Industry Industry Industry North America ▼ 25.4% ▼19.9% ▼13.7% ▼46.3% Industry Industry Industry Industry Europe ▼24.8% ▼3.4% ▼5.0% ▼51.2% Industry Industry Industry Industry Asia ▼18.9% ▼12.8% - ▼26.3% Source: IHS Marke

  30. Slide 30: Market Snapshot 2021

    Market Snapshot 2021 Light Vehicle Commercial Truck Access Industry Industry Industry North America ▲22.7% ▲4.3% ▲1.5% Industry Industry Industry Europe ▲15.2% ▲6.8% ▼8.4% Industry Industry Industry Asia ▲11.7% ▼10.2% ▲5.3% Source: IHS Market Estimates for LV, CV Production. Industrial and Agricultu

  31. Slide 31: Global Light Vehicle Production

    Global Light Vehicle Production COVID-19 has caused major reduction in global light vehicle production forecast, greater in magnitude than 2008/9 financial crisis. But production is expected return to growth in 2021 with an increase of 15% YoY. 110 100 90 80 Millions 70 Peak to trough 60 (2019 to 20

  32. Slide 32: IHS Light Vehicle Production Forecast

    IHS Light Vehicle Production Forecast Global light vehicle production trough in 2020. Lowest quarterly production to occur in Q2-2020. Global Light Vehicle Production Forecast by Year Global Light Vehicle Production Forecast by Quarter 120 25 22.9 22.8 22.1 97.6 21.0 20.8 100 95.1 94.2 93.4 95.3 88.

  33. Slide 33: Global LV Auto Market: Q1 & Q2, 2020

    Global LV Auto Market: Q1 & Q2, 2020 Q1 Production down 4.1M, Q2 Production Forecast down 10.5M Units vs. Prior Quarter Forecast Q1-2020 Global Vehicle Production Forecast By Region Q2-2020 Global Vehicle Production Forecast By Region Change in Forecast Apr-2020 v2 vs. Dec-2019 Change in Forecast Ap

  34. Slide 34: Global LV Auto Market: 2020, 2021

    Global LV Auto Market: 2020, 2021 2020 Annual Forecast down 19.3M Units vs. Prior Quarter Forecast, 2021 Forecast Down 11.2M Units. 2020 Global Vehicle Production Forecast By Region 2021 Global Vehicle Production Forecast By Region 95.0 Change in Forecast Apr-2020 v2 vs. Dec-2019 95.0 Change in Fore

  35. Slide 35: Historical NA Auto Cycles

    Historical NA Auto Cycles Conclusions NA Historical Auto Production Cycle 120.0% 10  ‘Normal' cycle is 1% to 5% drops 9 ie low single digit each year for 100.0% 8 on average 4 years, then growth 80.0% 7 6 resumes Years 60.0% 5 % Change 4 40.0% 3 2 20.0% 1 0.0% - Growt Decli Growt Decli Growt Decli

  36. Slide 36: Growth Update and Outlook

    Growth Update and Outlook © Linamar Corporation 36

  37. Slide 37: Electrified Vehicles Key Growth Opportunity for Linamar

    Electrified Vehicles Key Growth Opportunity for Linamar $90 $80 $70 $60 Hybrid CPV already at level ICE was only 5 years ago and BEV catching up quickly $50 $40 $30 $20 $10 $0 2015 2016 2017 2018 2019 2020 2021 2022 2023 -$10 Electric Hybrid ICE Updated: May 7, 2020. Estimates based on current proje

  38. Slide 38: Global Addressable Market Grows Nearly 3X

    Global Addressable Market Grows Nearly 3X in 10 Years Addressable Market - Light Vehicle $350 $300 $250 Addressable Market (Billions CAD) $200 $150 $100 $50 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

  39. Slide 39: Launches

    Launches Launching more than $4.1 billion of new work today 4,500.00 4,000.00 3,500.00 3,000.00 2,500.00 2,000.00 1,500.00 1,000.00 500.00 - 2019 2020 2021 2022 2023 2024 Other Driveline Engine Transmission 39

  40. Slide 40: Outlook

    Outlook Q2 Expectations Normal  Auto Consolidated 2019 Expectations Expectations Ranges Actuals 2020 2021  COVID-19 outbreak is the single largest Sales Growth (2.7%) Significant Double Digit Declines in Growth in Sales and Earnings Driving impact to Q2 both Sales and Earnings due to From Market 

  41. Slide 41: New Business

    New Business © Linamar Corporation 41

  42. Slide 42: New Business Wins: E-Axle Components

    New Business Wins: E-Axle Components Package Value Nearly $25 million / year Package of several E-Axle components SOP Year for US based new entrant BEV OEM 2021 Peak Volume Year 2026 Production Location © Linamar Corporation 42

  43. Slide 43: New Business Wins: Assembled Battery Tray

    New Business Wins: Assembled Battery Tray Package Volume • Assembled BEV Battery Tray for 70,000 / year European based OEM. • A new product type for Linamar SOP Year • Intricate passageways for cooling 2022 makes design perfectly suited for Peak Volume Year Linamar’s light metal casting 2026 experti

  44. Slide 44: Financial Review

    Financial Review Dale Schneider © Linamar Corporation 44

  45. Slide 45: Sales, Normalized Earnings, and Margins (in millions CAD)

    Sales, Normalized Earnings, and Margins (in millions CAD) Q1 2020 Q1 2019 %Δ Q1 2020 Hurt By: • Sales were $1.55 billion, down $424.7, • Q1 was significantly impacted by COVID-19 Sales 1,549.8 1,974.5 (21.5%) from $1.97 billion in Q1 2019 in terms of Sales and Earnings. EBITDA – Normalized² 213.9 29

  46. Slide 46: Foreign Exchange Gain/Loss (in millions CAD)

    Foreign Exchange Gain/Loss (in millions CAD) Q1 2020 Q1 2019 +/-  Net FX Gain of $14.1 FX Gain/(Loss) – Operating1 14.4 (6.0) 20.4  FX Gain – Operating was $14.4 FX Gain/(Loss) – Financing (0.3) 0.9 (1.2)  Industrial FX Gain was $11.5 Total FX Gain/(Loss) 14.1 (5.1) 19.2  Transportation FX Gain

  47. Slide 47: Industrial Sales, Earnings, and Margins

    Industrial Sales, Earnings, and Margins (in millions CAD)  Industrial sales decreased by 35.7% or $166.1 to reach $299 Q1 2020 Q1 2019  The sales were hurt by:  sales declines associated with the global COVID-19 Sales 299.0 465.1 pandemic;  reduced access equipment volumes from certain key Opera

  48. Slide 48: Transportation Sales, Earnings, and Margins

    Transportation Sales, Earnings, and Margins (in millions CAD)  Transportation sales decreased by $258.6 to $1.3 billion. Q1 2020 Q1 2019  The sales were hurt by:  the impact of COVID-19 due to customer shutdowns; and Sales 1,250.8 1,509.4  an unfavourable FX impact due to the changes in rates si

  49. Slide 49: Operating Expenses (in millions CAD)

    Operating Expenses (in millions CAD) Q1 2020 Q1 2019 +/- %  Gross Margin decreased 34% mainly due to:  The lower sales volumes in both segments; partially offset by Sales 1,549.8 1,974.5 (424.7) (21.5%)  The focus on cost reductions in the quarter. Cost of Goods Sold 1,349.3 1,670.6 (321.3) (19.2

  50. Slide 50: Finance Expenses & Income Tax (in millions CAD)

    Finance Expenses & Income Tax (in millions CAD)  Finance expenses decreased $4.8 Q1 2020 Q1 2019 +/-  Finance expenses were helped by:  the impact of lower debt levels; and Finance Expense 7.4 12.2 (4.8)  lower interest rates  The effective interest rate declined to 2.5% Effective Interest Rate

  51. Slide 51: Leverage (in millions CAD)

    Leverage (in millions CAD) Q1 2020 Q1 2019  Cash position at the end of the quarter was $413.2  Generated $232.6 in Cash from Operating Activities Cash Position 413.2 485.5  Generated more than $147 in quarter of Free Cash Flow²  Normalized Net Debt to EBITDA3 was 1.48 to continue the deleveragi

  52. Slide 52: Conclusion

    Conclusion  COVID has a significant impact on Sales and Earnings  Excellent Cash Generation in the Quarter  Free Cash Flow1 generation of over $147 million  Available Liquidity increased to $1.2 billion 1 - For more information on the Free Cash Flow measure refer to the section entitled “Non-GAA

  53. Slide 53: Question and Answer

    Question and Answer 53

  54. Slide 54: Annual General Meeting

    Annual General Meeting  Due to COVID-19 restrictions on public gatherings, the 2019 AGM will be held virtually.  Wednesday May 27th, 2020 10:00am Eastern Time  For information updates and virtual meeting details go to: linamar.com/coronavirus/shareholders 54

  55. Slide 55: Outlook

    Outlook Q2 Expectations Normal  Auto Consolidated 2019 Expectations Expectations Ranges Actuals 2020 2021  COVID-19 outbreak is the single largest Sales Growth (2.7%) Significant Double Digit Declines in Growth in Sales and Earnings Driving impact to Q2 both Sales and Earnings due to From Market 

  56. Slide 56: Key Messages

    Key Messages $147 Million Cash $1.2 Billion Liquidity Cutting Capex, Conserving Cash, Cutting Costs, Growing Supporting our Communities 56

  57. Slide 57: Thank You

    Thank You www.linamar.com @linamarcorp Linamar Corporation

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