Martinrea International Inc. · TSX:MRE
Martinrea International — Investor Presentation (August 2021)
68 slides from Martinrea International's investor presentation, August 2021
Slide 1: Investor Presentation August 2021
INVESTOR PRESENTATION AUGUST 2021 ©2021 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: Q2 2021 Operations Update
Q2 2021 OPERATIONS UPDATE | MARTINREA]
Slide 4: Second quarter impacted by supply shortages; longer-term outlook remains positive
SECOND QUARTER IMPACTED BY SUPPLY SHORTAGES; LONGER‐TERM OUTLOOK REMAINS POSITIVE Production sales below our guidance range, impacted by the industry‐wide shortage of semiconductor chips Adjusted Operating Income Margin impacted by weaker cost absorption on lower volumes, sales mix, and a heavy laun
Slide 5: Status of Operations
STATUS OF OPERATIONS North Europe Asia America • Vehicle demand remains strong • Industry volumes are also being • China is operating at high in the post‐COVID shutdown impacted by the global demand levels, in line with pre‐ recovery. Vehicle inventories semiconductor shortage. Supply COVID levels,
Slide 6: Key Program Launches in 2021
KEY PROGRAM LAUNCHES IN 2021 Lightweight Structures Propulsion Systems Flexible Manufacturing Jeep Grand Cherokee Jeep Grand Cherokee Ford (New Vehicle) Jeep Grand Wagoneer Float Arms / Tanks / Jeep Grand Wagoneer Supports Ford Mustang Mach‐E Ford – D35 6‐Cylinder Fuel Tanks Nissan Pathfinder/ Rogue
Slide 7: Industry Overview
INDUSTRY OVERVIEW | MARTINREA]
Slide 8: US Light Vehicle Sales (SAAR)
US LIGHT VEHICLE SALES (SAAR) • US auto sales have declined in recent months due to a lack of supply of vehicles July 2021 US Light 25 Vehicle sales (SAAR) was 14.8 million units, continuing a decline Millions of Units 20 from the 17–19‐ 15 million‐unit range earlier in the year, 10 reflecting lack
Slide 9: US Light Vehicle Inventory Days
US LIGHT VEHICLE INVENTORY DAYS • US light vehicle inventories are at historic lows US Inventory Days January, 2020 June Outstanding (pre‐pandemic) 2021 Passenger Cars 95 36 CUVs/SUVs 90 31 Light Trucks 100 28 All Vehicle Types 76 33 Source: MarkLines Co. www.martinrea.com | 9
Slide 10: Business Overview
BUSINESS OVERVIEW Priactinnt a]
Slide 11: 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 12: 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 13: Martinrea Vision – Making Lives Better
MARTINREA VISION – MAKING LIVES BETTER www.martinrea.com | 13
Slide 14: Martinrea's Global Presence
MARTINREA’S GLOBAL PRESENCE www.martinrea.com | 14
Slide 15: Our Journey
OUR JOURNEY www.martinrea.com | 15
Slide 16: Martinrea Products and Capabilities
MARTINREA PRODUCTS AND CAPABILITIES Assembly Powertrain Body‐in‐White and Chassis Fluids Industrial www.martinrea.com | 16
Slide 17: Competitive Landscape
COMPETITIVE LANDSCAPE STEEL METAL FORMING FLUID MANAGEMENT SYSTEMS ALUMINUM COMPONENTS PRIMARY OTHER www.martinrea.com | 17
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Slide 19: Martinrea 2.0 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 20: 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 21: 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 22: Process Innovation
PROCESS INNOVATION | MARTINREAJ
Slide 23: The Way We Produce
THE WAY WE PRODUCE www.martinrea.com | 23
Slide 24: Martinrea Flexible Build Process
MARTINREA FLEXIBLE BUILD PROCESS Past 40% Less Capital Demand Up 18% Less Labour 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 25: Product Innovation
PRODUCT INNOVATION | MARTINREAJ
Slide 26: We Are a Lightweighting Company
WE ARE A LIGHTWEIGHTING COMPANY Continuously developing and evolving core products in Lightweight Structures and Propulsion Systems (high‐strength steel, aluminum, assemblies, etc.) to reduce vehicle weight and CO2 emissions, improving overall vehicle efficiency (MPG) www.martinrea.com | 26
Slide 27: Martinrea's Product Portfolio
MARTINREA'S PRODUCT PORTFOLIO www.martinrea.com | 27
Slide 28: Lightweight Structures
LIGHTWEIGHT STRUCTURES Steel ASSEMBLED ALUMINUM SUBFRAME Mild Steel, HSS, AHSS, GEN 3 Steel, Hot Stamping Aluminum ALUMINUM EXTRUSION + HOLLOW CAST 33.2 lbs STEEL ALUMINUM – Stamped, Aluminum Casted 41.2 lbs SOLID and Extruded 34.0 lbs MULTI‐MATERIAL LAUNCH 2020 Multi‐Material ALUMINUM – HOLLOW 27.3
Slide 29: Propulsion Systems / Expansion of Portfolio
PROPULSION SYSTEMS/EXPANSION OF PORTFOLIO Growing the Portfolio www.martinrea.com | 29
Slide 30: Recent Awards
RECENT AWARDS • 2020 General Motors Supplier Quality Excellence Award • 2020 Jaguar Land Rover Performance Excellence Award • 2019 Ford Gold Supplier Performance Award • 2019 General Motors Excellence and Gold Award • 2019 General Motors Focused Recognition Award • 2019 General Motors Quality Suppli
Slide 31: Product Innovation
PRODUCT INNOVATION • Grow revenue and margins by providing engineered systems solutions and products with higher value‐added content to our customers by combining our various technologies • Create long‐term deep partnerships with our customers Existing Component Offerings New System Offerings www.ma
Slide 32: Growing Technology and Innovation
GROWING TECHNOLOGY AND INNOVATION IDEA RESEARCH DEVELOP TESTING ANALYSIS INTRO MARTINREA TECH CENTER www.martinrea.com | 32
Slide 33: Martinrea Book of Business Evolving with Market
MARTINREA BOOK OF BUSINESS EVOLVING WITH MARKET 2015A 2020A 2023E 2025E 8% 21% 25% 75% 79% 92% ICE Platforms BEV/Hybrid Platforms ICE Platforms BEV/Hybrid Platforms ICE Platforms BEV/Hybrid Platforms www.martinrea.com | 33
Slide 34: Addressable Content per Vehicle
ADDRESSABLE CONTENT PER VEHICLE Transition will not require a material increase in capital or tooling as the majority of our equipment is flexible and adaptable www.martinrea.com | 34
Slide 35: 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 | 35
Slide 36: Pure Electric Vehicle Platforms in Martinrea Portfolio
PURE ELECTRIC VEHICLE PLATFORMS IN MARTINREA PORTFOLIO 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 EV Hummer Body and chassis structures SOP: 2022 Audi PPE Body and chassis structures SOP:
Slide 37: Whatever the Future Holds, Martinrea Will Be a Leader
WHATEVER THE FUTURE HOLDS, MARTINREA WILL BE A LEADER www.martinrea.com | 37
Slide 38: New Product Introduction - Graphene and Nylon Coated Brake Lines
NEW PRODUCT INTRODUCTION ‐ GRAPHENE AND NYLON COATED BRAKE LINES We expect to be producing a new graphene‐enhanced brake line product for one of our largest customers in 2021 www.martinrea.com | 38
Slide 39: Spotlight on Graphene
Extremely SPOTLIGHT ON GRAPHENE strong (200x Lightweight stronger than steel) Unique A high‐performance material with Higher thermal electromagnetic and electrical properties game‐changing potential conductivities compared to Silver and Noise Copper reducing Extremely properties impermeable Almost c
Slide 40: Spotlight on Graphene
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 41: VoltaXplore – EV Battery Joint Venture
VOLTAXPLORE – EV BATTERY JOINT VENTURE www.martinrea.com | 41
Slide 42: VoltaXplore – EV Battery Joint Venture
VOLTAXPLORE – EV BATTERY JOINT VENTURE • 50/50 joint venture between Martinrea and NanoXplore to develop Li‐Ion battery cells for electric vehicles – VoltaXplore will initially build a 1 MWh demonstration facility in Montreal, Quebec • Martinrea and NanoXplore have each contributed $4 million in ini
Slide 43: VoltaXplore – Timeline
VOLTAXPLORE – TIMELINE 2021 Early 2022 Mid‐2022 Mid‐2024 Secure Commissioning Go/No Go SOP of Demonstration and SOP of Decision on 10 GWh facility facility Demonstration 10 GWh facility facility www.martinrea.com | 43
Slide 44: VoltaXplore – Advantages of Using Graphene
VOLTAXPLORE – ADVANTAGES OF USING GRAPHENE www.martinrea.com | 44
Slide 45: Environmental Social Governance
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Slide 46: 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 47: 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 48: 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 49: 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 | 49
Slide 50: 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 51: 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 | 51
Slide 52: 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 53: Financials
FINANCIALS | MARTINREA]
Slide 54: Sales
Assembly business changed to a purchased component consignment model resulting in SALES decrease in 2017 despite same level of production Driven by COVID‐19 pandemic 4,600 ‐ 4,800 3,968 4,000 3,867 162 253 3,864 162 253 3,690 3,663 211 3,599 405 245 211 269 3,500 245 3,375 3,222 218 In Millions (CAD
Slide 55: 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 | 55
Slide 56: 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 $270 M 2021 – 2022 $55 M 2021 ‐ 2024 $245 M 2021 – 2023 $30 M 2022‐2023 $220 M 2021 – 2024 $20 M 2021 $190 M 2021‐2023 $15 M 2021 $110M 2022 – 2024 $15 M 2021
Slide 57: Adjusted Operating Income Margin
ADJUSTED OPERATING INCOME MARGIN Decrease due to the impact of the UAW‐ 9% GM strike and higher tooling sales 8% >8% 7.8% 7.5% 7% ADJUSTED OPERATING INCOME MARGIN % 6.4% 6% Driven by COVID‐19 5% pandemic 5.0% 4.6% 4% 4.1% 3.7% 3% 2% 2014A 2015A 2016A 2017A 2018A 2019A 2020A 2023F Operating margins a
Slide 58: Drivers of Margin Expansion
DRIVERS OF MARGIN EXPANSION OPERATIONAL EXCELLENCE EVOLUTION OF BOOK OF BUSINESS Lean transformation Lower margin work rolling off and being replaced with higher margin work Lean, efficient, always improving Scale up by sharing (read across) Strict adherence to Martinrea 2.0 investment hurdle rates
Slide 59: Adjusted Net Earnings per Share
Decrease due to ADJUSTED NET EARNINGS PER SHARE the impact of the UAW‐GM strike FULL YEAR FINANCIALS $250.00 $2.50 EPS supported by share repurchases in 2018 and 2019 2.27 $2.22 $200.00 $1.91 $2.00 193 IN MILLIONS OF CANADIAN DOLLARS 188 $1.50 $150.00 166 $1.50 $1.38 Driven by COVID‐19 130 pandemic
Slide 60: Cash Flow
CASH FLOW Decrease driven by OPERATING CASH FLOW (Before changes in working capital) COVID‐19 pandemic IN MILLIONS OF CANADIAN DOLLARS 500 400 $508 $461 300 $406 $348 $358 200 $308 $237 $259 100 $89 $142 $146 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 CAPEX Capex driving growth IN MILL
Slide 61: 2021 Year-to-Date Financial Highlights (as of June 30)
2021 YEAR‐TO‐DATE FINANCIAL HIGHLIGHTS (AS OF JUNE 30) YTD TOTAL SALES YTD ADJ. FD EPS YTD ADJ. OPERATING $2,000 $1,882 $2.00 INCOME MARGIN $1.50 6.0% 4.7% $1,500 $0.74 $ Millions $1,333 $1.00 4.0% $0.50 2.0% $1,000 $0.00 ($0.50) 0.0% ($1.00) ($0.54) ‐2.0% ‐1.3% $500 2020 2021 2020 2021 2020 2021 Ye
Slide 62: Our Balance Sheet Is Strong
OUR BALANCE SHEET IS STRONG NET DEBT ‐ Excluding IFRS‐16 ($ Millions) Net Debt increased in the second quarter compared to Q1 2021 Our Net Debt to Adjusted EBITDA NET DEBT TO LTM ADJUSTED EBITDA ratio ended the quarter at ~1.8x, modestly above our target range of ~1.5x, but within our comfort zone w
Slide 63: 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 excess liquidity offering • Maintain flex
Slide 64: Investing for Growth
INVESTING FOR GROWTH • Growth investments are driven by a strict ROIC/IRR hurdle rate framework • The majority of our capital spending is program‐related • We only deploy capital after we win the business (we generally do not deploy capital on spec) • Our acquisition strategy is disciplined and has
Slide 65: 2019 Pre-Tax ROIC (Most Recent Pre-COVID Year)
2019 PRE‐TAX ROIC (MOST RECENT PRE‐COVID YEAR) 18% 17.1% 16% 14.8% 14% 12% 11.3% 10.9% 9.9% 10% 8% 6% 3.5% 4% 2% 0% Magna Martinrea Linamar Gestamp Nemak Cooper Standard * Pre‐tax return on invested capital (ROIC) = EBIT / total invested capital www.martinrea.com | 65
Slide 66: 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 67: 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 68: 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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