Martinrea International Inc. · TSX:MRE
Martinrea International — Investor Presentation (November 2022)
69 slides from Martinrea International's investor presentation, November 2022
Slide 1: Investor Presentation November 2022
INVESTOR PRESENTATION NOVEMBER 2022 ©2019 Martinrea International Inc.
Slide 2: Legal Disclaimer
LEGAL DISCLAIMER This presentation contains forward-looking statements within the meaning of applicable securities laws (“forward-looking statements”), including, but not limited to, statements relating to the Company’s beliefs or views or expectations of, improvements in, expansion of and/or guidan
Slide 3: Q3 2022 Update
Q3 2022 UPDATE | MARTINREA}
Slide 4: Q3 2022 Results Up Solidly vs. Last Quarter; Strong 2023 Expected
Q3 2022 RESULTS UP SOLIDLY VS. LAST QUARTER STRONG 2023 EXPECTED Q3 2022 results showed a solid Adjusted operating income margin improvement over Q2 2022, mainly was up 170bps quarter-over-quarter reflecting higher margins. Adjusted driven by an improved mix, lower EBITDA of $140 million was a quart
Slide 5: Status of Operations
STATUS OF OPERATIONS North Rest of World Europe YTD Production Sales America YTD Production Sales YTD Production Sales • Adjusted operating income improved • Adjusted operating income slightly lower • Adjusted operating income quarter-over-quarter on higher quarter-over-quarter improved quarter-over
Slide 6: Industry Overview
INDUSTRY OVERVIEW
Slide 7: US Light Vehicle Sales (SAAR)
US LIGHT VEHICLE SALES (SAAR) • US auto sales continue to be held back by a lack of supply of vehicles U.S. Light Vehicle Sales (SAAR) U.S. Light Vehicle sales 20 have been trending in the low-to-mid 13M unit range since June. Millions of Units 15 Low inventory as a result of chip and other supply s
Slide 8: US Light Vehicle Inventory Days
US LIGHT VEHICLE INVENTORY DAYS • US light vehicle inventories continue to trend near historic lows, though improved in September, especially light trucks US Inventory Days January 2020 September Outstanding (pre-pandemic) 2022 Passenger Cars 95 21 CUVs/SUVs 90 28 Light Trucks 100 55 All Vehicle Typ
Slide 9: Business Overview
BUSINESS OVERVIEW
Slide 10: Martinrea Overview
MARTINREA OVERVIEW Leading Tier One automotive supplier in lightweight structures and propulsion systems One of the fastest growing automotive parts suppliers since 2001 Operating in 57 locations (including sales and engineering centers) in 10 countries: Canada, United States, Mexico, Brazil, German
Slide 11: Martinrea Culture, Vision, Mission and Principles
MARTINREA CULTURE, VISION, MISSION AND PRINCIPLES VISION 10 GUIDING PRINCIPLES Making lives better by being the best supplier we can be in Our success will be based on the execution of our guiding the products we make and the services we provide. principles, applied with integrity, in all that we do
Slide 12: Martinrea Vision – Making Lives Better
MARTINREA VISION – MAKING LIVES BETTER www.martinrea.com | 12
Slide 13: Martinrea's Global Presence
MARTINREA’S GLOBAL PRESENCE www.martinrea.com | 13
Slide 14: Our Journey
OUR JOURNEY www.martinrea.com | 14
Slide 15: Martinrea Products and Capabilities
MARTINREA PRODUCTS AND CAPABILITIES Assembly Powertrain Body-in-White and Chassis Fluids Industrial www.martinrea.com | 15
Slide 16: Competitive Landscape
COMPETITIVE LANDSCAPE STEEL METAL FORMING FLUID MANAGEMENT SYSTEMS ALUMINUM COMPONENTS PRIMARY OTHER www.martinrea.com | 16
Slide 17: Accelerate Martinrea 2.0 – One Company
iF, ig ACCELERA MARTINREA .0 >> ONE COMPANY - _ oS - Za | MARTINREA J wW w
Slide 18: Company Business Unit Deployment Plans
Martinrea 2.0 is the framework to be a great company… diverse people and groups working together toward a single vision. • Fostering principles-based leadership • Promoting positive behaviours • Creating a strong lean culture • Implementing best practices COMPANY BUSINESS UNIT PLANT DEPLOYMENT PLANS
Slide 19: Martinrea's Manufacturing System
MARTINREA’S MANUFACTURING SYSTEM • The way we think – Learn to unlearn – attack waste • Pride kills continuous improvement – Pride for your people not for your practice – Be humble, there is always a better way • Engaging our people at all levels – Developing and respecting our people – Learning by
Slide 20: Report Card
REPORT CARD • Martinrea 2.0 framework has proven to be effective • Results from 2014 to 2019 speak for themselves: – 72% improvement in safety – 34% improvement in quality – Doubling of Adjusted Operating Income Margin from ~4% to north of 8% (excluding the impact of the UAW GM strike and higher too
Slide 21: Process Innovation
PROCESS INNOVATION
Slide 22: The Way We Produce
THE WAY WE PRODUCE www.martinrea.com | 22
Slide 23: Martinrea Flexible Build Process
MARTINREA FLEXIBLE BUILD PROCESS Past 40% Less Capital Demand 18% Less Labour Up 20% Less Space Flexes With Volume Demand Down Flex Labour with Volume: No Flex labour with Volume: Yes Lifespan: 6 Years Lifespan: 12+ Years Tooling change-over: 4 weeks Tooling change-over: 30 Minutes Service part Capa
Slide 24: Product Innovation
PRODUCT INNOVATION
Slide 25: Project Breakthrough
Launched in 2019, Project Breakthrough target was to: • Grow revenue and margins by providing engineered products with higher value-added content to our customers – More multi-material content to further lightweight – Create reliable product engineering source to our customers • Create long-term dee
Slide 26: Martinrea's Commercial Groups
MARTINREA’S COMMERCIAL GROUPS Flexible Manufacturing Group www.martinrea.com | 26 ©2019 Martinrea International Inc. ©2020
Slide 27: A Closer Look at Breakthrough Progress
A CLOSER LOOK AT BREAKTHROUGH PROGRESS
Slide 28: Geely PMA-1 EV Rear Sub-Frame
GEELY PMA-1 EV REAR SUB-FRAME • Fully design responsible • Hollow low-pressure die cast aluminum • MIG welding, low pressure die cast to extrusions • Complete machining and final assembly www.martinrea.com | 28 ©2019 Martinrea International Inc. ©2020
Slide 29: Lucid Air Body-in-White Aluminum Die Cast Components
LUCID AIR BODY-IN-WHITE ALUMINUM DIE CAST COMPONENTS • Front Shock Tower • Front Torque Box • Rear Torque Box – Vacuum high-pressure die cast – High dimensional requirements www.martinrea.com | 29 ©2019 Martinrea International Inc. ©2020
Slide 30: Stellantis Jeep Grand Cherokee Front Rail Assembly
STELLANTIS JEEP GRAND CHEROKEE FRONT RAIL ASSEMBLY • Hydro-formed upper tail • Aluminum high-pressure die cast shock tower • 3rd Gen advanced high-strength steel • Self-pierce riveting (SPR) and structural adhesive joining • Thin-gage electro-galvanized steel MIG weld www.martinrea.com | 30 ©2019 Ma
Slide 31: Ford Mach-E Front and Rear Sub-Frames
FORD MACH-E FRONT AND REAR SUB-FRAMES • Fully responsible for design, development and validation • Multi-material front subframe – Low-pressure die cast hollow aluminum rear – Structured for optimal stiffness, mass and dimensional control – Welded steel front structure for management of front impact
Slide 32: Lucid Air Front and Rear Sub-Frames
LUCID AIR FRONT AND REAR SUB-FRAMES • Front Sub-frame – Aluminum front sub-frame features leading- edge multi-process architecture – Joined using structural adhesive – Hollow low-pressure die cast and extrusion components • Rear Sub-frame – Aluminum one-piece hollow low-pressure die cast www.martinr
Slide 33: Daimler EVA II Platform – Roof, Rear Panel, Underbody
DAIMLER EVA II PLATFORM – ROOF, REAR PANEL, UNDERBODY • Higher value system solutions – Utilizing new advanced joining technologies in mixed material solutions – High-strength steel, hot-formed steel, Ultra High-Strength Steel – Stamped, extruded and cast aluminum components www.martinrea.com | 33
Slide 34: Brake Lines with GrapheneGuard
BRAKE LINES WITH GRAPHENEGUARDTM • High-performance brake line coating with graphene – Industry leading abrasion protection – Provides up to 25% weight savings – Improved chemical resistance and high temperature performance • Approved at Ford, GM, and Stellantis • In production at Ford and GM – Ford
Slide 35: Recent Awards
RECENT AWARDS • 2021 Nissan Supplier Diversity Over Achievement Award • 2020 Toyota Supplier Diversity Achievement Award • 2020 General Motors Supplier Quality Excellence Award • 2020 Jaguar Land Rover Performance Excellence Award • 2019 Ford Gold Supplier Performance Award • 2019 General Motors Exc
Slide 36: Growing Technology and Innovation
GROWING TECHNOLOGY AND INNOVATION IDEA RESEARCH DEVELOP TESTING ANALYSIS INTRO MARTINREA TECH CENTER www.martinrea.com | 36
Slide 37: Lightweight/Electrified Vehicles Drive the Need for More Advanced Products
LIGHTWEIGHT/ELECTRIFIED VEHICLES DRIVE THE NEED FOR MORE ADVANCED PRODUCTS 2020A 2026E 8% 40% 60% 92% ICE Platforms BEV/Hybrid Platforms ICE Platforms BEV/Hybrid Platforms www.martinrea.com | 37
Slide 38: Addressable Content per Vehicle
ADDRESSABLE CONTENT PER VEHICLE www.martinrea.com | 38
Slide 39: A Closer Look at EV Transition
A CLOSER LOOK AT EV TRANSITION Internal Combustion Hybrid Electric Vehicle (EV) Engine (ICE) 80% of products are agnostic to electrification 20% of products transitioning with market change www.martinrea.com | 39
Slide 40: Select Pure Electric Vehicle Platforms in Martinrea Portfolio
SELECT PURE ELECTRIC VEHICLE PLATFORMS IN MARTINREA PORTFOLIO Audi PPE Body and chassis structures, e-motor housing SOP: 2023 Daimler EVA2 Body and chassis structures SOP: 2022 Ford Mach-E Aluminum front and rear subframes SOP: 2020 Geely PMA 1 Aluminum rear subframes SOP: 2021 GM BEV 3 Body and cha
Slide 41: Whatever the Future Holds, Martinrea Will Be a Leader
WHATEVER THE FUTURE HOLDS, MARTINREA WILL BE A LEADER www.martinrea.com | 41
Slide 42: New Product Introduction – Brake Lines with GrapheneGuard
NEW PRODUCT INTRODUCTION – BRAKE LINES WITH GRAPHENEGUARDTM We are currently producing our GrapheneGuardTM brake line product on four programs with two of our largest customers www.martinrea.com | 42
Slide 43: Spotlight on Graphene
Extremely SPOTLIGHT ON GRAPHENE strong (200x Lightweight stronger than steel) Unique A high-performance material with Higher thermal electromagnetic properties game-changing potential and electrical conductivities compared to Silver and Noise Copper reducing Extremely properties impermeable Almost c
Slide 44: Spotlight on Graphene – Potential Applications
SPOTLIGHT ON GRAPHENE • Some Potential Applications – Automotive – Transportation – Renewable Energy – Industrial – Agricultural – Batteries (including Li ion for EV applications) – Recycled Plastics – Paints • We are excited about the technology that graphene provides and its opportunities through
Slide 45: EV Battery Joint Venture
EV Battery Joint Venture www.martinrea.com | 45
Slide 46: VoltaXplore – Timeline
VOLTAXPLORE - TIMELINE 2021 Early 2022 Late 2022/Early 2023 Mid-2024 Secure Commissioning Go/No Go Demonstration and SOP of SOP of 2 GWh facility Decision on 2 GWh facility facility Demonstration facility www.martinrea.com | 46
Slide 47: Advantages of Graphene-Enhanced Li-Ion Batteries
ADVANTAGES OF GRAPHENE-ENHANCED LI-ION BATTERIES hence www.martinrea.com | 47
Slide 48: Martinrea Innovation Development (MiND)
MARTINREA INNOVATION DEVELOPMENT (MiND) PURPOSE LEADERSHIP CURRENT MARTINREA EQUITY INVESTMENTS: Incubate, develop, and fund Bruce Johnson, • NanoXplore – Hold a 21.2% interest innovative technologies that Executive Vice • VoltaXplore – 50/50 JV with NanoXplore to are strategic to Martinrea’s Presid
Slide 49: Environmental, Social, Governance
ENVIRONMENTAL SOCIAL GOVERNANCE i] MARTINREA J]
Slide 50: What Sustainability Means to Martinrea
WHAT SUSTAINABILITY MEANS TO MARTINREA We build a sustainable business through making people’s lives better by: • Providing meaningful opportunity, job satisfaction and job security for our people • Delivering outstanding quality products and services that contribute to the safety, lightweighting, a
Slide 51: Environmental
ENVIRONMENTAL • Lightweighting strategy helps to improve fuel efficiency (or in the case of electric vehicles, driving range per charge) and lower CO2 emissions • LEAN manufacturing practices minimize waste (e.g., energy efficiency, reduction of water consumption and waste generation) • Environmenta
Slide 52: Social
SOCIAL • Treating people the way they want to be treated, with dignity and respect (Golden Rule) • Employee Bill of Rights in place • Workplace health and safety is a key priority • Belief in open, honest two-way communication supported by visible, responsible action • Open Door Policy Safety - Tota
Slide 53: Social (Continued)
SOCIAL (CONTINUED) Diversity, Equity and Inclusion • Gender diversity – women at senior executive and Board level • Culturally diverse workforce • Supplier Diversity Program • Promoting women in automotive careers, leadership, STEM and trades www.martinrea.com | 53
Slide 54: Social (Continued)
SOCIAL (CONTINUED) Community Involvement • “Making People’s Lives Better” – global charitable giving program • Sponsorship of University co-op programs and STEM programs such as First Robotics • Partnership with Givesome to support global outreach through volunteer time, service, and donations www.m
Slide 55: Social (Continued)
SOCIAL (CONTINUED) Supplier Quality Guidelines and Assessments • Product Safety and Quality Assurance • Social Responsibility • Environmental Sustainability • Code of Conduct and Ethics • Diversity, Equity and Inclusion www.martinrea.com | 55
Slide 56: Governance
GOVERNANCE • Independent Board (6 of 8 members); 100% of committee members are independent • “Pay for Performance” – significant portion of total compensation is variable, based on performance (i.e., bonus based on pre-tax income, equity-based compensation) • Business ethics a top priority • Whistle
Slide 57: Financials
FINANCIALS
Slide 58: Sales
SALES Assembly business changed to a purchased component consignment model resulting in decrease in 2017 despite same level of 4,800-5,000 5,000 production Driven by 253 COVID-19 162 4,516 pandemic 211 4,500 384 245 3,968 4,000 3,867 3,864 3,784 In Millions (CAD) 162 203253 3,690 3,663 4053,479 3,59
Slide 59: Top North American Vehicle Platforms
TOP NORTH AMERICAN VEHICLE PLATFORMS 1. GM Pickups/SUVs 6. Ford Edge 2. Ford Escape 7. Ford F-150 3. GM Equinox/Terrain 8. Ford Transit 4. RAM Pickups 9. Dodge Challenger/Charger 5. Jeep Grand Cherokee 10. Chevy Blazer www.martinrea.com | 59
Slide 60: Highlights of Recent New Business Awards
HIGHLIGHTS OF RECENT NEW BUSINESS AWARDS APPROX. ANNUALIZED SOP RANGE APPROX. ANNUALIZED SOP RANGE SALES AT PEAK VOLUME SALES AT PEAK VOLUME $330 M 2021 – 2024 $55 M 2021 - 2024 $300 M 2021 – 2023 $30 M 2022-2023 $275 M 2021 – 2024 $30 M 2021-2022 $195 M 2021 – 2023 $18 M 2021 – 2022 $110M 2022 – 20
Slide 61: Adjusted Operating Income Margin %
ADJUSTED OPERATING INCOME MARGIN* Decrease due to the impact of the UAW- GM strike and higher tooling sales 9% 8% 7.8% 7.5% 7% Driven by chip and 6%-7% Driven by other ADJUSTED OPERATING INCOME MARGIN % 6% 6.4% COVID-19 supply pandemic shortages 5% 5.0% 4.6% 4% 4.1% 3.7% 3% 3.5% 2% 1.8% 1% 0% 2014A
Slide 62: Adjusted Net Earnings per Share
ADJUSTED NET EARNINGS PER SHARE* Decrease due FULL YEAR FINANCIALS to the impact $250.00 of the UAW- $2.50 EPS supported by share repurchases in 2018 and 2019 2.27 GM strike $2.22 $200.00 $1.91 $2.00 193 Driven by IN MILLIONS OF CANADIAN DOLLARS 188 COVID-19 $1.50 pandemic Driven by 166 chip and $15
Slide 63: Cash Flow
CASH FLOW Decrease driven by COVID-19 pandemic OPERATING CASH FLOW - BEFORE CHANGES IN WORKING CAPITAL ($ MILLIONS) and chip/other supply shortages $600 $500 $508 $400 $461 $406 $428 $300 $348 $358 $308 $321 $200 $259 $100 $0 2014 2015 2016 2017 2018 2019 2020 2021 LTM CAPEX ADDITIONS ($ MILLIONS) C
Slide 64: 2022 Year-to-Date Financial Highlights
2022 YEAR-TO-DATE FINANCIAL HIGHLIGHTS (AS OF SEPTEMBER 30) YTD TOTAL SALES YTD ADJ. OPERATING YTD ADJ. OPERATING $4,000 INCOME INCOME MARGIN $3,463.0 $3,500 $200 4.6% $159.6 5.0% $3,000 $2,730.5 $150 4.0% $ Millions $2,500 $ Millions 3.0% 2.6% $2,000 $100 $71.3 $1,500 2.0% $50 1.0% $1,000 $500 $0 0
Slide 65: Balance Sheet
BALANCE SHEET NET DEBT - Excluding IFRS-16 ($ Millions) Q3 2022 net debt was essentially flat compared to Q2 2022. $1,000.0 $800.0 $922.1 $931.1 $928.2 During the fourth quarter of 2021, and in $859.6 $857.7 $600.0 $714.7 $776.4 $682.4 $728.0 $793.4 light of the semiconductor shortage, we $662.6 $67
Slide 66: Capital Allocation Framework
CAPITAL ALLOCATION FRAMEWORK Invest to Maintain and Maintain Strong Return Capital Grow Our Business Balance Sheet to Shareholders • Organic opportunities • Targeted Net Debt/Adjusted • Repurchase shares with • Invest in R&D and product EBITDA ratio of ~1.5x over excess liquidity offering time (at t
Slide 67: Biographies
BIOGRAPHIES Pat D’Eramo joined Martinrea International Inc. as President and Chief Executive Officer in November 2014 and was elected to the Board of Directors in June 2015. D’Eramo has a long and successful career in the automotive business, with extensive metalforming and parts manufacturing exper
Slide 68: Biographies
BIOGRAPHIES Rob Wildeboer is the Executive Chairman and co-founder of Martinrea International Inc. He brings a deep and intricate knowledge of the Company’s culture, key personnel, strategy, history and development, and relationships with key constituencies such as capital providers and governments,
Slide 69: Biographies
BIOGRAPHIES Fred Di Tosto joined Martinrea International Inc. as Vice President of Finance in June of 2010 and then became the Company’s Chief Financial Officer in March of 2011. Di Tosto’s scope of authority includes executive guidance and direction in the following areas: Corporate and Operational
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