Linamar Corporation · TSX:LNR

Linamar — Q4 2022 Earnings Presentation

50 slides from Linamar's earnings presentation, Mar 8, 2023

  1. Slide 1: 2022 Q4 Conference Call Presentation

    For Audio Only Dial in: North America: (888) 396-8049 International: (416) 764-8646 Conference ID: 62240189 2022 Q4 Conference Call Presentation Linda Hasenfratz, Executive Chair & CEO March 8, 2023

  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: Sales, Normalized Earnings and CPV

    Sales, Normalized¹ Earnings and CPV 1 - The Company uses certain non-GAAP and other financial measures to provide useful information to both management, investors, and other stakeholders in assessing financial performance and financial condition of the Company. For more information refer to the sect

  4. Slide 4: Sales, Normalized Earnings, and Margins (in millions CAD)

    Sales, Normalized Earnings1, and Margins (in millions CAD) Q4 2022 Q4 2021 %Δ Q4 2022 The key impacts to the segments vs prior year are: Sales 2,060.0 1,534.4 34.3% The key factors impacting results in the Mobility quarter are:  Markets up 7.6% in NA , 7.8% in EU, and Industrial Sales 507.1 293.0 7

  5. Slide 5: Automotive Sales & Content Per Vehicle (CPV)

    Automotive Sales & Content Per Vehicle2 (CPV) CPV Q4 2022 CPV Q4 2021 CPV % Change Vehicle Production Automotive Automotive Automotive Units % Change Sales Q4 2022 Sales Q4 2021 Sales % Change (CAD Millions) (CAD Millions) North America 237.63 189.90 25.1% 7.6% 876.0 651.5 34.5% Europe 90.70 78.83 1

  6. Slide 6: Commercial & Industrial Sales (in millions CAD)

    Commercial & Industrial Sales2 (in millions CAD) Q4 2022 Q4 2021 % Change MacDon  Global market up in double digits  Global market share growth in all products Sales 584.0 366.1 59.5% Salford  Enhancing ag business growth Skyjack  Global markets up double digits QvQ¹ Change in Commerical & Indus

  7. Slide 7: Capital Expenditures (in millions CAD)

    Capital Expenditures (in millions CAD) Q4 2022 Q4 2021  Capex is up reflecting need to scale up to support global launches after a couple of years below normal levels; and Capital Expenditures (Capex) 154.3 74.1  Expect to be back to normal 6-8% of sales levels in 2023. Capex as a % of Sales 7.5%

  8. Slide 8: Cash Flow Continues to be a Key Priority

    Cash Flow Continues to be a Key Priority 1,300 30% 1,200 FCF1 positive on strong earnings despite heavier capex; 1,100 25% 1,000 900 20% 10th consecutive year of positive FCF 800 Liquidity1 remains excellent with $1.3 $ Millions 700 672.6 15% 600 billion of cash available at quarter end. 500 10%

  9. Slide 9: Leverage (in millions CAD)

    Leverage (in millions CAD) Q4 2022 Q3 2022 Q4 2021  Balance sheet is in excellent shape at 0.42x Net Debt to EBITDA despite very active NCIB; Net Debt1 447.9 452.7 (136.9)  700k shares purchased in the quarter under our NCIB Net Debt to EBITDA2 0.42x 0.46x (0.13)x taking us to 3.97 million in tota

  10. Slide 10: Challenges

    Challenges © Linamar Corporation 10

  11. Slide 11: Supply and Cost Challenges

    Supply and Cost Challenges Spiking Energy Supply Chain Spiking Commodity Labour Challenges Semi Conductor Major Increases in Costs Shortages Prices Chip Shortages Freight Costs Starting to See Slow Improving for Continued Improving Each Asia Back to Pre Some Improvements Most Challenges Quarter, Les

  12. Slide 12: Semiconductor Chip Shortage – Light Vehicle Production Impact

    Semiconductor Chip Shortage – Light Vehicle Production Impact Announced volume loss of 9.6M units in 2021, 3.0M units in 2022. 0.2M units 2023YTD. Announced Volume Loss by Quarter Announced Volume Loss by Region 4.0 3.48 1.0 0.0 3.5 0.8 0.0 3.0 2.60 2.5 2.06 0.0 0.51 Millions 0.47 0.6 Millions Milli

  13. Slide 13: Commodity Prices Improving

    Commodity Prices Improving $1,200.00 Steel Plate (CDN) - per metric ton $1.80 Aluminum (USD) - per lb $1.60 $1,000.00 $1.40 $800.00 $1.20 $1.00 $600.00 $0.80 $400.00 $0.60 $0.40 $200.00 $0.20 $- $- $140.00 Crude Oil, WTI (USD) - per barrel $800.00 Scrap Steel No. 1 Busheling N. America - per long to

  14. Slide 14: MacDon Supply Disruption Situation Still a Challenge

    0 20 40 60 80 100 120 140 07-Jan 14-Jan 21-Jan Updated February 2023 28-Jan 04-Feb 11-Feb 18-Feb 25-Feb 04-Mar 11-Mar 18-Mar 25-Mar Gradual Improvement 01-Apr 08-Apr 15-Apr 22-Apr 29-Apr 06-May 13-May 20-May 27-May 03-Jun 10-Jun Headers Green Tagged 17-Jun 24-Jun Week Ended 01-Jul 08-Jul 15-Jul 22-J

  15. Slide 15: Skyjack Improved from a Year Ago … but Issues Continue

    Skyjack Improved from a Year Ago … but Issues Continue Line Down - Weekly Total 50 47 45 41 40 39 40 37 35 32 32 29 30 26 25 22 22 20 20 17 17 17 15 16 16 16 15 14 14 14 13 13 14 15 11 12 12 12 11 13 12 9 10 9 9 10 10 9 10 7 7 8 6 6 6 7 6 5 5 2 2 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 2

  16. Slide 16: Ocean Freight: Asia Back to Pre Covid Levels, Europe Finally Trending Down

    Ocean Freight: … Asia Back to Pre Covid Levels, Europe Finally Trending Down Ocean Lane Costs Europe Ocean Lane Costs Asia & SA $27,500 $18,500 $16,500 $22,500 $14,500 $12,500 $17,500 $10,500 $12,500 $8,500 $6,500 $7,500 $4,500 $2,500 $2,500 March April September October December Sep'22 Oct'22 Dec'2

  17. Slide 17: Gas & Electricity Prices Normalizing in Europe but Still Triple Historical Levels

    Gas & Electricity Prices Normalizing in Europe but Still Triple Historical Levels Updated Jan 2023 Source: The New York Times, Ember Climate Org https://ember-climate.org/data/data-tools/europe-power-prices/. © Linamar Corporation 17

  18. Slide 18: Top Issue on People Side: The Availability of People

    Top Issue on People Side: The Availability of People AVAILABILITY  Workforce Availability has Shrunk Significantly  Increase in number of jobs to fill  Insufficient immigration  Acceleration of baby boomer retirements  COVID impact © Linamar Corporation 18

  19. Slide 19: Market Outlook

    Market Outlook © Linamar Corporation 19

  20. Slide 20: Market Snapshot

    Market Snapshot Commercial 2022A Light Vehicle Commercial Agriculture Access 2023E Light Vehicle Truck Agriculture Access Truck North North America ▲5.4% ▼-1.5% ▲5-10% ▲9.6% America ▲9.7% ▲7.2% ▲10% ▲26.4% Europe Europe ▲4.8% ▼-1.7% 0% ▲9.3% ▼-0.5% ▼-0.5% 0% ▲35.4% Asia ▲1.9% ▲22.5% n/a ▲13.4% Asia

  21. Slide 21: US Light Vehicle Inventory – Days' Supply

    US Light Vehicle Inventory – Days’ Supply Inventory levels gradually increasing but still well below industry norm of 60 days’ supply Change vs Same Period Last Year 180 160 Overall 13 140 GM 20 120 Ford 15 100 80 Stellantis 28 60 Toyota 4 40 Honda 10 20 84 74 68 72 64 68 65 68 65 75 72 61 88 77 68

  22. Slide 22: Global Light Vehicle Market: Q4 2022 and Q1 2023

    Global Light Vehicle Market: Q4 2022 and Q1 2023 Q4 2022 production increased by 0.2M units. Q1 2023 forecast decreased by 0.8M units.  Q4 2022 production increased by 237,000 on faster than expected recovery  Q1 2023 forecast decreased by 804,000 mainly due to deteriorating from COVID lockdowns i

  23. Slide 23: Industrial Segment - Access

    Industrial Segment - Access Access Equipment Market Commentary Access Industry YTD Results & Forecast % Change vs. Prior Year  Supply chain shortages and higher commodity prices are continuing to limit production and shipments as well as negatively impact costs. 40%  Rental demand is strong as com

  24. Slide 24: Industrial Segment - Agriculture

    Industrial Segment - Agriculture North American Combine Retails Agriculture Market Commentary 3,000 • Supply chain issues continue to persist, and although moderating to some 2,000 degree, they continue to impact customer deliveries 1,000 • Inventory remains lean within Ag equipment retailers which

  25. Slide 25: Growth Update and Outlook

    Growth Update and Outlook © Linamar Corporation 25

  26. Slide 26: Strong EV Wins Shifting Linamar Sales Mix Dramatically in Future

    Strong EV Wins Shifting Linamar Sales Mix Dramatically in Future Non-ICE Vehicle Powertrain Sales Electrified New Business Wins % of Total Light Vehicle Sales $1,200 60% $1,000 50% 40% $800 Millions 30% $600 20% $400 10% $200 0% $0 2021 2022 2023 2024 2025 2026 2027 2019 2020 2021 2022 Source: Linam

  27. Slide 27: Mobility Launches

    Mobility Launches 4,000.00 Launching more than $4.1 billion of new work today 3,500.00 3,000.00 2,500.00 2,000.00 1,500.00 1,000.00 500.00 - 2021 2022 2023 2024 2025 2026 Incremental Growth from Launches $700 to $800 Million in 2023 Updated: March 2023 © Linamar Corporation 27

  28. Slide 28: Outlook

    Outlook Consolidated Normal Ranges 2021 Actuals 2022 Actuals Expectations 2023 Q1 2023 Expectations Sales Growth 12.4% 21.1% Double Digit Growth  Mobility 1 Normalized EPS Growth 35.8% -4.1% Double Digit Growth  Sales modestly up from Q4 2022 but well up from 1 Normalized Net Margin 7.0% - 9.0% 6.

  29. Slide 29: New Business

    New Business © Linamar Corporation 29

  30. Slide 30: New Business Win 600,000 / year

    New Business Win Significant win for new dedicated hybrid vehicle transmission Average Volume SOP Year 600,000 / year 2024 Production Location India © Linamar Corporation 30

  31. Slide 31: New Business Win 37,000 / year

    New Business Win Significant industrial component win for industrial electrolysers used to produce renewable hydrogen Average Volume SOP Year 37,000 / year 2024 Production Location Germany © Linamar Corporation 31

  32. Slide 32: New Business Win $190M / year

    New Business Win $190M in program uplifts and extensions for automotive eAxles Average Annual Revenue SOP Year $190M / year 2026 Production Location Hungary © Linamar Corporation 32

  33. Slide 33: Innovation

    Innovation © Linamar Corporation 33

  34. Slide 34: Innovation: eLIN eAxle Product Family Announced

    Innovation: eLIN eAxle Product Family Announced Light Duty Light Duty Beam Utility Duty Beam Medium Duty Beam Independent eAxle eAxle eAxle eAxle Vehicle Class Vehicle Class Vehicle Class Vehicle Class 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7 8  Linamar’s eLIN Product Solutions

  35. Slide 35: Skyjack Innovation – Perimeter Lighting

    Skyjack Innovation – Perimeter Lighting  Skyjack’s perimeter safety lights for DC scissors project a clearly visible coloured light pattern into the floor which acts as a warning to workers of an active scissor lift in the vicinity  In noisy environments when ambient noise or hearing protection in

  36. Slide 36: Innovation: Agriculture Product Awards at both MacDon and Salford

    Innovation: Agriculture Product Awards at both MacDon and Salford Salford HALO VRT MacDon TM100 Tractor Mount © Linamar Corporation 36

  37. Slide 37: Our Digitization Journey – February 2023

    Our Digitization Journey – February 2023 65 Plants 5,196 3,519 1,035 Traceability Robots Marking Stations LMMS Data Collection Connections 2,124 2,961 RFID Stations 1,230 2,733 Connected Machines Vision Systems 6 Traceability Read Stations AGVs February- 2023 37

  38. Slide 38: Financial Review

    Financial Review Dale Schneider, CFO © Linamar Corporation 38

  39. Slide 39: Sales, Normalized Earnings, and Margins (in millions CAD)

    Sales, Normalized Earnings1, and Margins (in millions CAD) Q4 2022 Q4 2021 %Δ Q4 2022 The key impacts to the segments vs prior year are: Sales 2,060.0 1,534.4 34.3% The key factors impacting results in the Mobility quarter are:  Markets up 7.6% in NA , 7.8% in EU, and Industrial Sales 507.1 293.0 7

  40. Slide 40: Foreign Exchange Gain/Loss (in millions CAD)

    Foreign Exchange Gain/Loss (in millions CAD) Q4 2022 Q4 2021 +/-  Total FX Loss was $17.4 which resulted from a $17.1 FX Loss FX Gain/(Loss) – Operating1 (17.1) 5.6 (22.7) – Operating and a $0.3 FX Loss – Financing. FX Gain/(Loss) – Financing (0.3) 0.1 (0.4)  FX Loss – Operating was comprised of a

  41. Slide 41: Industrial Sales, Earnings, and Margins (in millions CAD)

    Industrial Sales, Earnings, and Margins (in millions CAD) Industrial sales increased by 73.1% or $214.1 to $507.1. Q4 2022 Q4 2021  The sales were helped by: Finance  higher in agricultural sales driven by growth in global markets; Sales 507.1 293.0  increased sales related to the acquisition of

  42. Slide 42: Mobility Sales, Earnings, and Margins (in millions CAD)

    Mobility Sales, Earnings, and Margins (in millions CAD) Mobility sales increased by 25.1% or $311.5 to $1,552.9. Q4 2022 Q4 2021  The sales were helped by:  additional sales for launching programs and increased volumes for certain programs Sales 1,552.9 1,241.4 that the Company has significant bus

  43. Slide 43: Operating Expenses (in millions CAD)

    Operating Expenses (in millions CAD) Q4 2022 Q4 2021 +/- %  Gross Margin was $248.8 in the quarter and was impacted by the same factors that impacted each business segment. (See the previous two slides) Sales 2,060.0 1,534.4 525.6 34.3% Cost of Goods Sold 1,811.2 1,373.5 437.7 31.9%  Amortization

  44. Slide 44: Finance Expenses & Income Tax (in millions CAD)

    Finance Expenses & Income Tax (in millions CAD)  Finance expenses increased by $10.9. Q4 2022 Q4 2021 +/-  Finance expenses were hurt by:  increase in interest costs due to change in the Bank of Canada overnight rate and Finance Expense 11.4 0.5 10.9 United States Federal Funds rate;  increased

  45. Slide 45: Leverage (in millions CAD)

    Leverage (in millions CAD) Q4 2022 Q4 2021  Cash position at the end of the quarter was $860.5.  Linamar generated $221.0 in Cash from Operating Activities. Cash Position 860.5 928.4  Net Debt to EBITDA at 0.42x due to acquisitions and share buybacks. Available Cash on Credit Facilities 462.5 957

  46. Slide 46: Conclusion

    Conclusion  Sales growth in both Mobility and Industrial.  Improvements in supply shortages adding additional Mobility sales and earnings.  Economic hardship recoveries achieved in both segments.  Available Liquidity1 remains strong at $1.3 billion. 1 - Liquidity is a non-GAAP financial measure.

  47. Slide 47: Question and Answer

    Question and Answer © Linamar Corporation 47

  48. Slide 48: Outlook

    Outlook Consolidated Normal Ranges 2021 Actuals 2022 Actuals Expectations 2023 Q1 2023 Expectations Sales Growth 12.4% 21.1% Double Digit Growth  Mobility 1 Normalized EPS Growth 35.8% -4.1% Double Digit Growth  Sales modestly up from Q4 2022 but well up from 1 Normalized Net Margin 7.0% - 9.0% 6.

  49. Slide 49: Key Messages

    Key Messages Exceptional Top and Bottom Line Growth Transformative Level of Electrified Wins 2022 -- Record Sales, Record NBW, Record Market Share, 10th Year of Positive FCF © Linamar Corporation 49

  50. Slide 50: Thank You

    Thank You www.linamar.com @linamarcorp Linamar Corporation

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