Magna International Inc. · TSX:MG
Magna International — Q2 2020 Earnings Presentation
28 slides from Magna International's earnings presentation, Aug 7, 2020
Slide 1: Q2 2020 Results Call
1 Q2 2020 Results Call August 7, 2020
Slide 2: Forward Looking Statements
Forward Looking Statements 2 Certain statements in this document constitute "forward - looking information" or "forward - looking statements" (collectively, "forward - looking statements") . Any such forward - looking statements are intended to provide information about management's current expectat
Slide 3: Reminders
Reminders • All amounts are in U.S. Dollars (unless otherwise noted) • Today’s discussion excludes the impact of other expense (income), net (Unusual Items) • “Organic”, in the context of sales movements, means “excluding the impact of foreign exchange, acquisitions and divestitures” 3
Slide 4: Restart of Operations
Restart of Operations • Health and safety of employees remains our top priority • Reintegrating employees back into plants and offices • Following established protocols, assessment tools & guidance documents 4
Slide 5: Challenging Production Environment in Key Markets
Challenging Production Environment in Key Markets… • NA & EU markets experienced significant YOY reductions • Volume declines worse than the Great Financial Crisis 5 Challenging Q2 Trend shows sequential improvement • Industry environment recovering off of the lows • Expecting significant improvemen
Slide 6: However, Some Encouraging Elements Emerged
… However, Some Encouraging Elements Emerged • On sales impacted by COVID - 19 • Reduction in discretionary spending 6 Q2/20 Decremental Margin of ~22% Conserving Additional Cash • Reduced capital spending Improved Decremental Margin Expected Beyond Q2 • Driven by: – Cost reduction across the compan
Slide 7: GM Supplier of the Year Awards
GM Supplier of the Year Awards 7 Most Ever for a Supplier in a Single Year 6 Supplier of the Year Awards Mirrors Truck Frames Driveline Systems Fascias Seat Systems FREEFORM Innovation
Slide 8: Update on Restart of Production
Update on Restart of Production • China and North America – Capacity getting close to levels anticipated at beginning of the year for this timeframe • Europe – Capacity levels a little bit behind China and North America – Softer demand environment • Program delays and cancellations – Not expected to
Slide 9: Advancing Our Protocols
Advancing Our Protocols • Smart Start Playbook provided an excellent framework for managing a “new normal” • Production ramped up without significant disruption to production efficiency • Team of varying backgrounds developed recommendations: – How our global operations could be adjusted to stay pre
Slide 10: Continue to Monitor Ongoing and Potential New Trends
Continue to Monitor Ongoing and Potential New Trends 10 Magna Well Positioned to Remain a Leader in Mobility
Slide 11: Executive Leadership Announcement
Executive Leadership Announcement • Sherif Marakby has joined Magna as Executive Vice President of Research and Development – Will manage all aspects of innovation and new product development strategy – 30 years of experience in automotive and technology industries – Extensive experience in electrif
Slide 12: Vehicle Production in Q2 2020
Vehicle Production in Q2 - 2020 Region YOY Change in Production North America - 70% Europe - 59% China + 3% Global - 42% Estimated COVID - 19 Impact on Magna’s Q2 - 2020 Results: Total Sales ~$5.5 billion EBIT ~$1.2 billion Decremental Margin ~22% 12
Slide 13: Q2 2020 Consolidated Sales
Q2 2020 Consolidated Sales 13 Key Factors: • Impact of COVID - 19 pandemic ~$5.5B ( - ) • End of production of certain programs ( - ) • Foreign exchange translation ( - ) • Net customer price concessions ( - ) Q2 2019 Q2 2020 $10.1B $4.3B
Slide 14: Sales Performance vs Market
Sales Performance vs Market 14 Q2 2020 vs Q2 2019 Reported Organic 1 Unweighted Performance vs Global Production Weighted Performance vs Global Production Body Exteriors & Structures (62%) (61%) (20%) (2%) Power & Vision (54%) (53%) (12%) 6% Seating (64%) (63%) (22%) (4%) Complete Vehicles (48%) (47
Slide 15: Q2 2020 Adjusted EBIT
Q2 2020 Adjusted EBIT 15 Q2 2019 Q2 2020 $677M ($600)M - $1.3B ADJUSTED EBIT Key Factors: • COVID - 19 ~$1.2B ( - ) • Lower tooling contribution ( - ) • Higher engineering costs in our ADAS business including retroactive social tax costs ( - ) • Net provisions for customer claims ( - ) • Net warrant
Slide 16: Q2 2020 Financial Highlights
Q2 2020 Financial Highlights 16 1 Lower adjusted effective tax rate is primarily related to an increase in losses not benefitted in Europe. 2 Assuming a tax rate of ~24.5% when we last provided an outlook in February, we estimate our adjusted diluted EPS was impacted by approximately $0.15. Q2 2019
Slide 17: Q2 2020 Cash Flow
Q2 2020 Cash Flow 17 $ MILLIONS Cash from Operations Net Loss + Non - Cash Items $ (298) Changes in Non - Cash Operating Assets & Liabilities $ (934) $ (1,232) Investment Activities Fixed Assets $ (169) Investments, Other Assets & Intangibles $ (72) $ (241) Proceeds from Disposition and Other $ 11 F
Slide 18: Liquidity Position
Liquidity Position 18 $ MILLIONS UNLESS OTHERWISE NOTED In June, 2020 Completed Offering of $750M of 10 - year Senior Unsecured Notes Bearing Interest at 2.45% Available Operating & Term Lines of Credit $ 3,490 Cash & Cash Equivalents $ 648 Total Available Liquidity (6/30/20) $ 4,138
Slide 19: Adjusted Debt to Adjusted EBITDA
Adjusted Debt to Adjusted EBITDA 19 $ MILLIONS Q2 2020 LTM EBITDA $ 2,311 Lease Adjustment $ 316 Other $ (10) Adjusted EBITDA $ 2,617 Debt per Balance Sheet $ 4,109 Lease Liability per Balance Sheet $ 1,798 Other $ 237 Adjusted Debt $ 6,144 Adjusted Debt / Adjusted EBITDA 2.35x
Slide 20: 2020 Outlook
2020 Outlook 1 20 $ BILLIONS UNLESS OTHERWISE NOTED U.S. GAAP August 2020 Total Sales $30.0 - $32.0 EBIT Margin % 2.9% - 3.3% Interest Expense ~$90M Tax Rate ~30% Capital Spending ~$1.4 1 In this outlook we have assumed no material unannounced acquisitions or divestitures or other significant transa
Slide 21: 2020 Outlook: YOY Implications for 2nd Half
2020 Outlook YOY Implications for 2 nd Half 21 Implied H2 2020 H2 2019 Change LIGHT VEHICLE PRODUCTION: North America 7.4M 7.8M 5% Europe 8.9M 10.0M 10% Global 39.6M 44.7M 11% KEY FINANCIALS: Total Sales 17.05B – 19.05B 18.7B 9% – 2% EBIT ~1.05B – ~1.25B 1.15B Free Cash Flow 1.3B – 1.5B 1.
Slide 22: Q2 2020 Results Appendix
Q2 2020 RESULTS APPENDIX 22
Slide 23: Estimated COVID Q2 2020 Impact by Segment
Estimated COVID - 19 Q2 - 2020 Impact by Segment 1 23 $ MILLIONS Segment Approximate Sales Impact Decremental Margin Body Exteriors and Structures $ 2,650 >20% Power & Vision $ 1,450 >20% Seating $ 1,000 ~20% Complete Vehicles $ 400 <10% Magna $ 5,500 ~22% 1 It is difficult to determine with a high
Slide 24: Segment Impact on Adjusted EBIT % of Sales
Segment Impact on Adjusted EBIT % of Sales 24 Q2 2020 vs Q2 2019 $ MILLIONS Sales Adjusted EBIT Adjusted EBIT as a Percentage of Sales 2nd Quarter of 2019 $ 10,126 $ 677 6.7% Increase (Decrease) Related to: Body Exteriors & Structures $ (2,620) $ (656) (11.2)% Power & Vision $ (1,510) $ (427) (7.6)%
Slide 25: Q2 2020 Reconciliation of Reported Results
Q2 2020 Reconciliation of Reported Results 25 EXCLUDING OTHER EXPENSE (INCOME), NET $ MILLIONS – EXCEPT PER SHARE FIGURES Reported Other Expense (Income) Excluding Other (Income) Loss Before Income Taxes $ (789) $ 168 $ (621) % of Sales (18.4)% (14.5)% Income Tax Benefit $ (137) $ 32 $ (105) % of Pr
Slide 26: Q2 2019 Reconciliation of Reported Results
Q2 2019 Reconciliation of Reported Results 26 EXCLUDING OTHER EXPENSE (INCOME), NET $ MILLIONS – EXCEPT PER SHARE FIGURES Reported Other Expense (Income) Excluding Other (Income) Income Before Income Taxes $ 595 $ 68 $ 663 % of Sales 5.9% 6.5% Income Tax Expense $ 145 $ 11 $ 156 % of Pretax 24.4% 23
Slide 27: Geographic Sales Q2 2020 vs Q2 2019
Geographic Sales 27 Q2 2020 vs Q2 2019 Q2 2019 Q2 2020 NORTH AMERICA ($Billions) 5.0 1.6 PRODUCTION - 70% EUROPE ($Billions) 4.5 2.2 PRODUCTION - 59% ASIA ($Millions) 547 475 PRODUCTION - 20% (China +3) REST OF WORLD ($Millions) 155 25 S.A. PRODUCTION - 78%
Slide 28: AA MAGNA oinsovsrion’
e AA MAGNA oinsovsrion’