Magna International Inc. · TSX:MG
Magna International — Q4 2018 Earnings Presentation
34 slides from Magna International's earnings presentation, Feb 22, 2019
Slide 1: Q4 2018 Results Conference Call
Q4 2018 Results CONFERENCE CALL February 22, 2019 1
Slide 2: Forward Looking Statements
Forward Looking Statements We disclose "forward-looking information" or "forward-looking statements" (collectively, "forward-looking statements") to provide information about management's current expectations and plans. Such forward-looking statements may not be appropriate for other purposes. Forwa
Slide 3: Reminders
Reminders • All amounts are in U.S. Dollars (unless otherwise noted) • Today’s discussion excludes the impact of other expense, net • Results for 2017 have been restated to reflect our adoption of a new revenue accounting standard related to tooling and pre-production engineering 3
Slide 4: Q4 2018 Highlights
Q4 2018 Highlights • Fourth quarter records for sales, Adjusted Diluted EPS • Returned $585 million to shareholders • Continued organic growth over market • Growth and innovation in liftgates • Seating’s acquisition of Viza • Upcoming launch of the Toyota GR Supra 4
Slide 5: Sales Performance vs Market
Sales Performance vs Market Q4 2018 vs Q4 2017 1 Unweighted Weighted Reported Organic Outperformance Outperformance Body Exteriors & Structures (4%) (1%) 3% 0% Power & Vision 1% 3% 7% 4% Seating 10% 15% 19% 16% Complete Vehicles 39% 43% 47% 44% TOTAL SALES 5% 7% 11% 8% Unweighted Production Growth (
Slide 6: Thermoplastic Liftgate Proves To Be Winning Solution
Thermoplastic Liftgate Proves To Be Winning Solution • One of the fastest growing products in our suite of lightweighting technologies • Our liftgate for 2019 Jeep Cherokee recognized with multiple industry innovation awards • Achieved a 28 percent mass reduction over steel version Magna innovations
Slide 7: Viza Seating Acquisition
Viza Seating Acquisition • Expands our global footprint and vertical integration in seat structures • Customers include VW, PSA, and Renault Nissan • Brings seat-structure technology and expertise along with a portfolio of products including patented floor-latch systems and foldable seats • Will hel
Slide 8: Magna to Build the Toyota GR Supra
Magna to Build the Toyota GR Supra • Magna adds new customer and additional sports car to complete vehicle assembly line-up • Production to begin in March • Further demonstrates our unique position in the industry Magna to build the all-new Toyota Supra sports car at its Graz, Austria facility (phot
Slide 9: Impairment Charge on Investment in Getrag-Ford Joint Venture
Impairment Charge on Investment in Getrag-Ford Joint Venture • 50/50 joint-venture in Europe with Ford • Impairment charge reflects declining demand for manual transmissions • Manual transmissions account for ~90% of JV’s volumes Continued Strong Demand for Dual Clutch Transmissions (DCT) Including
Slide 10: Q4 2018 Financial Highlights
Q4 2018 Financial Highlights • Details: – Q4 record Consolidated Sales – up 5% – Consolidated Adjusted EBIT – down 10% – Q4 Adjusted Net Income Attributable to Magna – down 5% – Q4 record Adjusted Diluted EPS – up 3% • Generated $871M in free cash flow • Returned $585M to shareholders • Quarterly di
Slide 11: Q4 2018 Consolidated Sales Performance
Q4 2018 Consolidated Sales Performance $ BILLIONS RECORD 9.7 + 5% 10.1 4.2 3.0 1.4 1.7 Q4 2017 Body Power Seating Complete Q4 2018 Exteriors & Vision Vehicles & Structures ($Millions) (156) 43 130 474 453 B/(W) 11
Slide 12: Q4 2018 Consolidated Sales Performance
Q4 2018 Consolidated Sales Performance $ BILLIONS Key Factors: + 5% • Launch of new programs (+) 9.7 10.1 • Foreign exchange translation (-) • Change in production volumes on other programs (-) Q4 2017 Q4 2018 12
Slide 13: Adjusted EBIT and Equity Income
Q4 2018 Adjusted EBIT and Equity Income ADJUSTED EBIT MARGIN % KEY FACTORS - 120BP • Power & Vision (-) • Complete Vehicles (-) 8.4 • Corporate and other (-) 7.2 • Seating (-) • Body Exteriors & Structures (+) ADJUSTED EBIT EQUITY INCOME ($ Millions) ($ Millions) - 10 % - 36% 813 87 730 56 Q4 2017
Slide 14: Financial Highlights
Q4 2018 Financial Highlights ADJUSTED NET INCOME ADJUSTED EFFECTIVE TAX RATE ATTRIBUTABLE TO MAGNA DILUTED EPS 460BP - - $29Million + $0.05 26.0% $1.63 $571M $1.58 $542M 21.4% Q4 2017 Q4 2018 Q4 2017 Q4 2018 Q4 2017 Q4 2018 14
Slide 15: Segment Sales: Body Exteriors & Structures
Q4 2018 Segment Sales BODY EXTERIORS & STRUCTURES $ BILLIONS • Change in production volumes on other programs (-) - 4% • Foreign currency translation (-) 4.3 4.2 • Net customer price concessions (-) • New program launches (+) Significant New Launches: • Ram 1500 Pickup • GMC Sierra and Chevrolet Sil
Slide 16: Segment Adjusted EBIT Margin: Body Exteriors & Structures
Q4 2018 Segment Adjusted EBIT Margin % BODY EXTERIORS & STRUCTURES • Productivity and efficiency + 20 BP improvements (+) 8.2% 8.4% • Lower new facility costs (+) • Inefficiencies at a plant we are closing (-) • Higher launch costs (-) Q4 2017 Q4 2018 16
Slide 17: Segment Sales: Power & Vision
Q4 2018 Segment Sales POWER & VISION $ BILLIONS • New program launches (+) + 1% • Acquisitions, net of divestitures (+) • Foreign currency translation (-) 3.0 2.9 • Change in production volumes on other programs (-) • Net customer price concessions (-) Significant New Launches: • GMC Sierra and Chev
Slide 18: Segment Adjusted EBIT Margin: Power & Vision
Q4 2018 Segment Adjusted EBIT Margin % POWER & VISION • Spending associated with electrification - 240 BP and autonomy (-) 10.9% • Higher launch costs (-) 8.5% • Lower equity income (-) • Higher warranty costs (-) • Contribution on higher sales (+) Q4 2017 Q4 2018 18
Slide 19: Segment Sales: Seating
Q4 2018 Segment Sales SEATING $ BILLIONS • New program launches (+) + 10% • Change in production volumes on other programs (+) 1.435 1.305 • Foreign currency translation (-) • Net customer price concessions (-) Significant New Launches: • BMW X5 • Lynk & Co 01 and 02 • Skoda Kodiaq Q4 2017 Q4 2018 1
Slide 20: Segment Adjusted EBIT Margin: Seating
Q4 2018 Segment Adjusted EBIT Margin % SEATING • Higher new facility costs (-) - 40 BP • Favourable customer pricing 8.1% resolution (+) 7.7% • Lower launch costs (+) • Brazilian tax recovery (+) Q4 2017 Q4 2018 20
Slide 21: Complete Vehicles
Q4 2018 Complete Vehicles ASSEMBLY VOLUMES SALES (Thousands of units) ($ Billions) + 35% + 39% 1.7 36.6 27.2 1.2 ADJUSTED EBIT ADJUSTED EBIT MARGIN % ($ Millions) - 4 2.3 28 24 1.4 Q4 2017 Q4 2018 21
Slide 22: Cash Flow
Q4 2018 Cash Flow $ MILLIONS Cash from Operations Net Income + Non-Cash Items $ 1,001 Changes in Non-Cash Operating Assets & Liabilities $ 597 $ 1,598 Investment Activities Fixed Assets $ (647) Investments, Other Assets & Intangibles $ (150) Acquisition of Olsa $ (152) $ (949) Proceeds from Disposit
Slide 23: Return of Capital to Shareholders
Return of Capital to Shareholders Common Shares Repurchased in Q4 9.9M $ to Repurchase Shares in Q4 $ 479M Dividends Paid $ 106M Total Q4 Return to Shareholders $ 585M 1 Common Shares Repurchased to date in Q1 2.0M 1 $ to Repurchase Shares in Q1 $ 100M 1 As of February 15, 2019 23
Slide 24: Free Cash Flow Outlook
Free Cash Flow Outlook $ BILLIONS PREVIOUS CURRENT 1.9-2.1 1.8-1.9 1.7-1.9 1.6 ~$200 Million Working Capital Shift 2018 2019 2018 Actual 2019 24
Slide 25: Summary
Summary • Posted Q4 records for sales and diluted EPS • Operating segments largely performed in-line with our expectations • 2019 Outlook is unchanged from January other than the shift in working capital from 2018 to 2019 • Expect to generate strong sales, earnings and free cash flow in 2019 25
Slide 26: Appendix
Q4 2018 APPENDIX Conference Call February 22, 2019 26
Slide 27: Q4 2018 Reconciliation of Reported Results
Q4 2018 Reconciliation of Reported Results EXCLUDING OTHER EXPENSE (INCOME), NET $ MILLIONS – EXCEPT PER SHARE FIGURES Other Excl. Other Reported Exp./Inc. Exp./Inc. Income Before Income Taxes $ 607 $ 97 $ 704 % of Sales 6.0% 6.9% Income Taxes $ 140 $ (11) $ 151 % of Pretax 23.1% 21.4% Income Attrib
Slide 28: Q4 2017 Reconciliation of Reported Results
Q4 2017 Reconciliation of Reported Results EXCLUDING OTHER EXPENSE (INCOME), NET $ MILLIONS – EXCEPT PER SHARE FIGURES Other Excl. Other Reported Exp./Inc. Exp./Inc. Income Before Income Taxes $ 765 $ 28 $ 793 % of Sales 7.9% 8.2% Income Taxes $ 190 $ (16) $ 206 % of Pretax 24.8% 26.0% Income Attrib
Slide 29: 2019 Outlook
2019 Outlook February January Vehicle Production: – North America 17.0M 17.0M – Europe 22.3M 22.3M 1 – China – Magna’s Top 30 Programs 4.7M 4.7M Foreign Exchange Rates: – U.S. – Cdn 0.760 0.760 – U.S. – Euro 1.130 1.130 – U.S. – RMB 0.145 0.145 1 Represents ~70% of Magna’s 2018 consolidated sales in
Slide 30: 2019 Outlook
1 2019 Outlook $ BILLIONS UNLESS OTHERWISE NOTED U.S. GAAP February January Sales: • Body Exteriors & Structures $16.8 - $17.6 $16.8 - $17.6 • Power & Vision $11.2 - $11.8 $11.2 - $11.8 • Seating Systems $5.8 - $6.2 $5.8 - $6.2 • Complete Vehicles $6.9 - $7.3 $6.9 - $7.3 Total Sales $40.2 - $42.4 $4
Slide 31: 2019 Segment Adjusted EBIT Margin %
2019 Segment Adjusted EBIT Margin % BODY EXTERIORS & STRUCTURES POWER & VISION 10.2% 9.5% 8.2-8.6% 8.5-9.0% 8.1% 8.0% SEATING SYSTEMS COMPLETE VEHICLES 8.3% 7.7% 6.8-7.3% 1.9% 1.5-2.0% 1.1% 2017 2018 Current 2019 Outlook 31
Slide 32: Segment Impact on Adjusted EBIT % of Sales
Segment Impact on Adjusted EBIT % of Sales Q4 2018 vs Q4 2017 $ MILLIONS Adjusted EBIT as a Adjusted Percentage Sales EBIT of Sales Fourth Quarter of 2017 $ 9,684 $ 813 8.4% Increase (Decrease) related to: Body Exteriors & Structures $ (156) $ (3) 0.1% Power & Vision $ 43 $ (69) (0.7%) Seating Syste
Slide 33: Geographic Sales
Geographic Sales Q4 2018 vs Q4 2017 NORTH AMERICA EUROPE ($Billions) ($Billions) + 1% + 11% 4.96 5.01 4.43 3.98 PRODUCTION +1% PRODUCTION -1% ASIA REST OF WORLD ($Millions) ($Millions) - 5% - 18% 728 694 160 132 PRODUCTION -6% (China -14%) S.A. PRODUCTION -8% Q4 2017 Q4 2018 33
Slide 34: Adjusted Debt to Adjusted EBITDA Calculation
Adjusted Debt to Adjusted EBITDA Calculation $ MILLIONS Q4 2018 Unadjusted LTM EBITDA $ 4,385 Other Income (Expense) LTM $ (43) Other $ 421 Adjusted EBITDA $ 4,763 Debt per Balance Sheet $ 4,383 Operating Lease Adjustment $ 1,732 Other $ 245 Adjusted Debt $ 6,360 Adjusted Debt / Adjusted EBITDA 1.34