Martinrea International Inc. · TSX:MRE
Martinrea International — Investor Presentation (May 2024)
60 slides from Martinrea International's investor presentation, May 2024
Slide 1: Investor Presentation May 2024
INVESTOR PRESENTATION MAY 2024
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This presentation contains forward-looking s tatements within the meaning of applicable s ecurities laws (“forward-looking s tatements ”), including, but not limited to, s tatements relating to the C ompany’s beliefs or views or expectations of, improvements in, expans ion
Slide 3: Industry Overview
INDUSTRY OVERVIEW www.martinrea.com | 3
Slide 4: US Light Vehicle Sales (SAAR)
US LIGHT VEHICLE SALES (SAAR) US auto sales remain resilient, despite inflation and interest rate headwinds 20 U.S. Light Vehicle Sales (SAAR) 15.4M UNITS Q1 2024 average, approximately Millions of Units 15 flat vs. Q4 2023 10 5 15.8M UNITS Dec-2005 Dec-2006 Dec-2007 Dec-2008 Dec-2009 Dec-2010 Dec-2
Slide 5: US Light Vehicle Inventory Days
US LIGHT VEHICLE INVENTORY DAYS US light vehicle inventories have been rising, though remain low by historical standards US Light Vehicle Inventory Days 140 120 US Inventory Days January 2020 March Outstanding (pre-pandemic) 2024 100 Passenger Cars 69 36 80 CUVs/SUVs 73 44 Light Trucks 98 80 60 All
Slide 6: 2023 Highlights
2023 HIGHLIGHTS www.martinrea.com | 6
Slide 7: 2023 Highlights
2023 HIGHLIGHTS Record Adjusted EBITDA of Record revenues of $5.34 19,000 employees – up 3.3% $616.7 million, and Record billion – a 12.2% increase from from 2022 (on a 12.2% Free Cash Flow of $195.4 2022 increase in revenue) million Continued growth in Adjusted EPS of $2.22 – up Deleveraging – Net
Slide 8: 2023 Highlights
2023 HIGHLIGHTS Maintained $0.05 quarterly Repurchased approximately Won multiple quality awards dividend to shareholders 2.3 million shares under our Normal Course Issuer Bid at a cost of approximately $29.1 million While continuing to invest in Continued to invest in leading- Established MiNDCAN t
Slide 9: Business Overview
BUSINESS OVERVIEW www.martinrea.com | 9
Slide 10: About Our Company
ABOUT OUR COMPANY • Leading Tier One automotive supplier in lightweight structures and propulsion systems • One of the fastest growing automotive parts suppliers since 2001 • Operating in 56 locations (including sales and engineering centers) in 10 countries: Canada, United States, Mexico, Brazil, G
Slide 11: Vision, Mission & Principles
VISION, MISSION & PRINCIPLES Vis ion 10 Guiding Principles Making lives better by being the best supplier we can be Our s ucces s will be bas ed on the execution of our in the products we make and the s ervices we provide. guiding principles , applied with integrity, in all that we do: Mis s ion We
Slide 12: Martinrea's Culture
MARTINREA’S CULTURE www.martinrea.com | 12
Slide 13: Global Presence
GLOBAL PRESENCE www.martinrea.com | 13
Slide 14: Company Journey
COMPANY JOURNEY www.martinrea.com | 14
Slide 15: Our Products and Capabilities
OUR PRODUCTS AND CAPABILITIES Assembly Body-in-White and Chassis Powertrain Fluids Industrial www.martinrea.com | 15
Slide 16: Competitive Landscape
COMPETITIVE LANDSCAPE FLUID MANAGEMENT STEEL METAL FORMING SYSTEMS ALUMINUM COMPONENTS PRIMARY OT HE R www.martinrea.com | 16
Slide 17: Martinrea 2.0
MARTINREA 2.0 >> > ACGhitRATE ar | WIHISION www.martinrea.cot
Slide 18: Martinrea 2.0 Framework
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 COMPANY • Implementing best practices BUSINESS UNIT Deployment Plans High
Slide 19: Martinrea Operating System
MARTINREA OPERATING SYSTEM The way we think Pride kills continuous improvement Develop our people - Learn to unlearn – P ride for our people, not for our practice – Learning by doing - Attack waste – B e humble, there is always a better way – Use the tools – R espect our people www.martinrea.com | 1
Slide 20: Process Innovation
PROCESS INNOVATION www.martinrea.com | 20
Slide 21: The Way We Produce
THE WAY WE PRODUCE Past New Typical Material Flow High Frequency Delivery Inefficient Material Efficient Material Flow: Flow Requiring: • Eliminates waste • Higher headcount • Minimizes logistics: • More floor space • Requires 18% less • More WIP headcount • 20% Less floor space www.martinrea.com |
Slide 22: Martinrea Flexible Build Process
MARTINREA FLEXIBLE BUILD PROCESS Demand up 40% Less Capital 18% Less Labour 20% Less Space Demand down F lex Labour with Volume: No Lifes pan: 6 Years Flex labour with Volume: Yes Tooling change-over: 4 weeks Lifespan: 12+ Years S ervice part C apability: None Tooling change-over: 30 Minutes Volume
Slide 23: Product Innovation
PRODUCT INNOVATION www.martinrea.com | 23
Slide 24: 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 o More multi-material content to further lightweight o C reate reliable product engineering s ource to our cus tomers • C reate long-term
Slide 25: Martinrea's Portfolio
MARTINREA’S PORTFOLIO LIGH TW EIGH T STR U CTU R ES PR O PU LSIO N SYSTEM S FLEXIB LE M AN U FACTU R IN G www.martinrea.com | 25
Slide 26: Our Breakthrough Progress
OUR BREAKTHROUGH PROGRESS FRONT AND REAR SUB-FRAMES FRONT RAIL ASSEMBLY • Fully responsible for design, development and validation • Hydro-formed upper tail • Multi-material front subframe • Aluminum high-pressure die cast shock • Low-pressure die cast hollow aluminum rear tower • Structured for opt
Slide 27: Brake Lines with GrapheneGuard
BRAKE LINES WITH ® GRAPHENEGUARD Named 2022 Automotive News PACE Award winner • High-performance brake line coating with graphene • Industry leading abrasion protection • Provides up to 25% weight savings • Improved chemical resistance and high temperature performance www.martinrea.com | 27
Slide 28: Recent Awards
‘23 RECENT AWARDS Nissan Supplier Diversity Award ‘23 Zeekr Excellent Supply Quality Award ‘23 Jaguar Land Rover Quality Award ‘22 JLR Quality Award ‘22 Automotive News PACE Award ‘22 Toyota Excellent Quality Performance Award ‘22 Nissan Supplier Best Practice Award ‘22 Tenneco's Supplier Quality Ex
Slide 29: Growing Technology and Innovation
GROWING TECHNOLOGY AND INNOVATION IDEA RESEARCH Martinrea Technical Center DEVELOP TESTING ANALYSIS INTRO www.martinrea.com | 29
Slide 30: Addressable Content per Vehicle
ADDRESSABLE CONTENT PER VEHICLE Martinrea is well-positioned for electrification growth opportunities www.martinrea.com | 30
Slide 31: A Closer Look at EV Transition
A CLOSER LOOK AT EV TRANSITION www.martinrea.com | 31
Slide 32: Select EV Platforms
SELECT EV PLATFORMS SOP: 2020 SOP: 2021-2022 SOP: 2023-2025 Ford Mach-E Mercedes Audi PPE Aluminum front and Benz EVA2 Body and chassis rear subframes structures, Body and chassis e-motor housing structures Samsung Geely PMA 1 GM BEV 3 Aluminum battery Aluminum rear Body and chassis tray subframes s
Slide 33: Whatever the Future Holds, Martinrea Will Be a Leader
WHATEVER THE FUTURE HOLDS, MARTINREA WILL BE A LEADER ELECTRIFIED C ONNE C T E D S HAR E D AUTONOMOUS www.martinrea.com | 33
Slide 34: Martinrea Innovation Development (MiND)
MARTINREA INNOVATION DEVELOPMENT (MiND) PURPOSE Incubate, develop and fund innovative technologies that are s trategic to Martinrea’s portfolio • Manufacturing s upport PARTNERS • P roduct development • S upply chain management • Other functional dis ciplines • NanoXplore – Hold a 22.7% interes t Mi
Slide 35: Acquired Assets of Effenco in 2022
Acquired assets of Montreal-based Effenco® Development Inc. in 2022 Effenco® designs, manufactures and markets ultracapacitor • The Effenco® Hybrid electric solution is focused on systems, which reduces: the heavy-duty vocational truck market • Effenco® is a Global Cleantech 100 company and a global
Slide 36: Sustainability
SUSTAINABILITY www.martinrea.com | 36
Slide 37: What Sustainability Means to Martinrea
WHAT SUSTAINABILITY MEANS TO MARTINREA P roviding s uperior long- term inves tment returns Delivering outs tanding to our s takeholders to quality products and ens ure the future of the s ervices that contribute to company the s afety, lightweighting, B eing pos itive and res pons ible propuls ion c
Slide 38: Our Sustainability Journey
OUR SUSTAINABILITY JOURNEY Protecting the Environment Environmental Energy Carbon Renewable Zero Landfill Management Efficiency Efficiency Energy Initiative Systems 23% 32% 36% 73% 92.5% Energy Carbon of electricity of Martinrea of Martinrea’s intens ity has intensity has consumed facilities globall
Slide 39: Our Sustainability Journey
OUR SUSTAINABILITY JOURNEY Download the 2023 Sustainability Report at www.martinrea.com www.martinrea.com | 39
Slide 40: Total Recordable Injury Frequency (TRIF)
OUR SUSTAINABILITY JOURNEY Safety Martinrea achieved a Total Recordable Injury Frequency of 1.10 in 2023, less than half the industry average Martinrea's Company-Wide Safety Performance 9.0 (# OF RECORDABLE INJURIES PER MONTH X 200,000 / TOTAL TOTAL RECORDABLE INJURY FREQUENCY (TRIF) 8.0 8.48 7.0 HO
Slide 41: Diversity, Equity and Inclusion
OUR SUSTAINABILITY JOURNEY Diversity, Equity and Inclusion • Women compris e 23% of Martinrea’s workforce and 18% of management and above pos itions • 33% of our B oard of Directors is female • E mployee R es ource G roups (E R G s ): Minds Matter is an E mployee Young P rofes s ionals (YoP ro) is W
Slide 42: Community Involvement
OUR SUSTAINABILITY JOURNEY Community Involvement • 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.martinrea.com | 42
Slide 43: Financials
FINANCIALS www.martinrea.com | 43
Slide 44: Sales
Tooling s ales were SALES elevated in 2023 and are expected to normalize in 2024. Assembly business changed to a 5,500 5,340 purchas ed component cons ignment Driven by 5,000-5,300 model res ulting in decreas e in 2017 C OV ID-19 pandemic 430 5,000 des pite s ame level of production and related s up
Slide 45: Top North American Vehicle Platforms
TOP NORTH AMERICAN VEHICLE PLATFORMS Stellantis Pentastar GM Pickups/SUVs Engine Block (3.6L) Ford Escape/Maverick Ford F-150 Jeep Grand Cherokee Mercedes EQS/EVA2 GM Equinox/Terrain Ford Edge Jeep Wagoneer/ Ford Transit Grand Wagoneer www.martinrea.com | 45
Slide 46: Recent New Business Awards
RECENT NEW BUSINESS AWARDS APPROX. ANNUALIZED SOP RANGE APPROX. ANNUALIZED SOP RANGE SALES AT PEAK VOLUME SALES AT PEAK VOLUME $555 M 2021 – 2026 $80 M 2021 $300 M 2021 – 2023 $55 M 2021 - 2024 $290 M 2021 – 2024 $50 M 2021 – 2023 $235 M 2021 – 2026 $40 M 2022 – 2025 $120 M 2022 – 2025 $30 M 2021 –
Slide 47: Adjusted Operating Income Margin %
ADJUSTED OPERATING INCOME MARGIN Decrease due to the impact 9% of the UAW-G M s trike and R ecovery of higher tooling s ales inflationary cos t 8% impact through 7.8% commercial 7.5% activity ADJUSTED OPERATING INCOME MARGIN % 7% Driven by C OV ID- 6.4% 19 pandemic and 6% related s upply 5.7%-6.2% s
Slide 48: Adjusted Net Earnings Per Share
ADJUSTED NET EARNINGS PER SHARE 250 EPS supported by share Decrease due to the impact $2.50 repurchases in 2018, 2019, $2.27 of the UAW-GM strike $2.22 $2.22 and 2023 Driven by chip 200 $1.91 and other supply $2.00 shortages 193 $1.76 IN MILLIONS OF CANADIAN DOLLARS 188 Driven by 176 $1.50 166 COVID
Slide 49: Cash Flow
CASH FLOW OPERATING CASH FLOW - BEFORE CHANGES IN WORKING CAPITAL ($ MILLIONS) Decrease driven by COVID- $800 19 pandemic and related supply shortages $600 $524 $608 FREE CASH FLOW ($ MILLIONS) $400 $508 $461 $406 $250 $348 $358 $321 $200 $308 $259 $200 $0 $195 2014 2015 2016 2017 2018 2019 2020 202
Slide 50: 2024 Outlook
2024 OUTLOOK 2024F 2023A TOTAL SALES $5.0-$5.3B $5.34B ADJUSTED OPERATING INCOME MARGIN 5.7%-6.2% 5.6% Approximately $340M CAPEX Approximating depreciation and amortization expense for $295.3M the year FREE CASH FLOW* $100M-$150M $195.4M (before IFRS 16 lease payments) * Note: Including IFRS 16 leas
Slide 51: Q1 2024 Update
Q1 2024 UPDATE www.martinrea.com | 51
Slide 52: Q1 2024 Highlights
Q1 2024 HIGHLIGHTS $162.8M ADJUSTED EBITDA $1,323.9M $0.62 (12.3% MARGIN) TOTAL SALES ADJUSTED EPS $79.2M ADJUSTED OPERATING INCOME (6.0% MARGIN) $1,257.5M PRODUCTION SALES www.martinrea.com | 52
Slide 53: Status of Operations
STATUS OF OPERATIONS Operationally, we continue to perform very well. Industry headwinds (e.g., supply The slow ramp-up in electric vehicle shortages, inflationary cost programs is resulting in underutilized pressures, tight labour market assets across the industry. conditions) continue to improve.
Slide 54: Sequential Comparison to Q4 2023
SEQUENTIAL COMPARISON TO Q4 2023 Q1 2024 was a good start to the year as we bounced back from disruptions related to the UAW strike and Tier 2 supplier issue that impacted the fourth quarter. In Canadian Dollars Q1 2024 Q4 2023 Production sales were up approximately 8%, as industry production volume
Slide 55: Year-over-Year Comparison
YEAR-OVER-YEAR COMPARISON Adjusted Operating Income and Adjusted EBITDA increased year-over-year on a 1.5% increase in production sales. Free Cash Flow was a lot less negative compared to Q1 2023. In Canadian Dollars Q1 2024 Q1 2023 Production Sales $1,257.5M $1,239.5M Tooling Sales $66.4M $64.3M To
Slide 56: Balance Sheet
BALANCE SHEET NET DEBT - Excluding IFRS-16 ($ Millions) $1,200.0 Q1 2024 net debt (excluding the impact of $1,000.0 IFRS-16) increased by approximately $74 million compared to Q4 2023, reflecting $800.0 $600.0 $400.0 $857.7 $908.7 $955.9 $937.4 $889.2 $782.4 $856.5 foreign exchange translation and:
Slide 57: Capital Allocation Framework
CAPITAL ALLOCATION FRAMEWORK Invest to Maintain and Maintain Strong Return Capital to Grow Our Business Balance Sheet Shareholders • Organic opportunities • Targeted Net Debt/Adjusted • Repurchase shares with excess • Invest in R&D and product offering EBITDA ratio of ~1.5x or better liquidity (at t
Slide 58: Biographies
BIOGRAPHIES Pat D’Eramo 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 manufac
Slide 59: 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 60: Biographies
BIOGRAPHIES Fred Di Tosto joined Martinrea International Inc. as Vice President of Finance in June of 2010 and then became the C ompany’s C hief F inancial Officer (C F O) in March of 2011. As of J anuary 2024, Di Tos to took on the role of P res ident. As P res ident, Di Tos to in addition to his c
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