Magna International Inc. · TSX:MG
Magna International — Q4 2019 Earnings Presentation
30 slides from Magna International's earnings presentation, Feb 21, 2020
Slide 1: Q4 2019 Results Conference Call
Q4 2019 RESULTS CONFERENCE CALL 1 February 21, 2020
Slide 2: Forward Looking Statements
Forward Looking Statements 2 Certain statements in this presentation 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 expe
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” • Prior period
Slide 4: 2019 Highlights
2019 Highlights • We faced a number of challenges in 2019: – Lower global vehicle production – Labour strike at GM – $1.3 billion headwind from currency – Commodity costs, including lower scrap metal recoveries – Significantly higher engineering and other costs in our ADAS business 4
Slide 5: 2019 Highlights (cont.)
2019 Highlights (cont.) • There were a number of important positives as well: – Organic sales growth outpaced global production – Record free cash flow of $2.3 billion – Invested $2 billion in our business – Returned $1.7 billion to shareholders through dividends and buybacks – Continued to invest i
Slide 6: Financial Highlights
Q4 2019 Financial Highlights • Fourth quarter sales and Adjusted EBIT ahead of our expectations – GM strike impact largely in - line • Organic sales declined 3% vs flat global production, and - 5% on a weighted - basis • Returned $365 million to shareholders • Generated $1.1 billion in free cash flo
Slide 7: Consolidated Sales Performance
Q4 2019 Consolidated Sales Performance $ BILLIONS 7 ($Millions) (254) (262) (9) (226) (742) B/(W) 10.1 3.9 2.7 1.4 1.5 9.4 Q4 2018 Body Exteriors & Structures Power & Vision Seating Complete Vehicles Q4 2019 - 7 %
Slide 8: Consolidated Sales Performance
Q4 2019 Consolidated Sales Performance $ BILLIONS 8 Key Factors: • Light vehicle production in North America, including the labour strike at GM, and Europe ( - ) • Divestitures, net of acquisitions ( - ) • Foreign exchange translation ( - ) • Net customer price concessions ( - ) • Launch of new prog
Slide 9: Adjusted EBIT and Equity Income
Q4 2019 Adjusted EBIT and Equity Income 9 - 90 BP ADJUSTED EBIT MARGIN % 7.2 6.3 KEY FACTORS Q4 2018 Q4 2019 - 19 % ADJUSTED EBIT ($ Millions) 730 590 • Power & Vision ( - ) • Body Exteriors & Structures ( - ) • Seating ( - ) • Complete Vehicles (+) • Corporate and Other (+) EQUITY INCOME ($ Mil
Slide 10: Financial Highlights
Q4 2019 Financial Highlights 10 Q4 2018 Q4 2019 ADJUSTED DILUTED EPS - $0.22 $1.63 $1.41 Q4 2018 Q4 2019 ADJUSTED EFFECTIVE TAX RATE + 190 BP 21.4% 23.3% Q4 2018 Q4 2019 ADJUSTED NET INCOME ATTRIBUTABLE TO MAGNA - $109 Million $542M $433M
Slide 11: Segment Sales: Body Exteriors & Structures
Q4 2019 Segment Sales BODY EXTERIORS & STRUCTURES $ BILLIONS 11 • Light vehicle production in North America, including the labour strike at GM, and Europe ( - ) • End of production of certain programs ( - ) • Foreign currency translation ( - ) • Net customer price concessions ( - ) • New program lau
Slide 12: Segment Adjusted EBIT Margin: Body Exteriors & Structures
Q4 2019 Segment Adjusted EBIT Margin % BODY EXTERIORS & STRUCTURES 12 • The labour strike at GM ( - ) • Lower scrap metal recoveries ( - ) • Higher net warranty costs ( - ) • Lower foreign exchanges gains ( - ) • Higher launch costs ( - ) • Inefficiencies at plants in Q4’18 that have since closed (+
Slide 13: Segment Sales: Power & Vision
Q4 2019 Segment Sales POWER & VISION $ BILLIONS 13 • Divestiture of FP&C ( - ) • Light vehicle production in North America, including the labour strike at GM, and Europe ( - ) • Foreign currency translation ( - ) • Net customer price concessions ( - ) • New program launches (+) • DCT sales (+) Signi
Slide 14: Segment Adjusted EBIT Margin: Power & Vision
Q4 2019 Segment Adjusted EBIT Margin % POWER & VISION 14 • Higher engineering costs in our ADAS business ( - ) • The labour strike at GM ( - ) • Higher net warranty costs ( - ) • Divestiture of FP&C (+) • Net favourable commercial items (+) Q4 2018 Q4 2019 - 250 BP 8.5% 6.0%
Slide 15: Segment Sales: Seating
Q4 2019 Segment Sales SEATING $ BILLIONS 15 • Light vehicle production in North America, including the labour strike at GM, and Europe ( - ) • End of production of certain programs ( - ) • Foreign currency translation ( - ) • Net customer price concessions ( - ) • New program launches (+) • Acquisit
Slide 16: Segment Adjusted EBIT Margin: Seating
Q4 2019 Segment Adjusted EBIT Margin % SEATING 16 Q4 2018 Q4 2019 - 220 BP 7.7% 5.5% • Foreign exchange losses ( - ) • Launch costs and operational inefficiencies at a new facility ( - ) • Higher net warranty costs ( - ) • Higher commodity costs ( - ) • Higher launch costs ( - ) • The labour strike
Slide 17: Complete Vehicles
Q4 2019 Complete Vehicles 17 - 7 % ASSEMBLY VOLUMES (Thousands of units) 36.6 33.9 - 13 % SALES ($ Billions) 1.7 1.5 + 20 ADJUSTED EBIT ($ Millions) 24 44 ADJUSTED EBIT MARGIN % 1.4 3.0 Q4 2018 Q4 2019 + 160 BP
Slide 18: Cash Flow
Q4 2019 Cash Flow $ MILLIONS 18 Cash from Operations Net Income + Non - Cash Items $ 954 Changes in Non - Cash Operating Assets & Liabilities $ 742 $ 1,696 Investment Activities Fixed Assets $ (513) Investments, Other Assets & Intangibles $ (122) $ (635) Proceeds from Disposition and Other $ 16 Free
Slide 19: Return of Capital to Shareholders
Return of Capital to Shareholders 19 Common Shares Repurchased in Q4 4.7M $ to Repurchase Shares in Q4 $ 254M Dividends Paid $ 111M Total Q4 Return to Shareholders $ 365M
Slide 20: 2020 Update
2020 Update • Due to pull forward of ~$200 million of working capital into 2019, we now expect $1.4 - $1.6 billion of free cash flow in 2020, compared to $1.6 - $1.8 billion in our January outlook – Continue to anticipate free cash flow of ~$5.5 billion between 2020 and 2022 • We have not included a
Slide 21: Appendix
Q4 2019 APPENDIX 21 February 21, 2020
Slide 22: 2020 Outlook
2020 Outlook* 22 February 2020 January 2020 Vehicle Production: – North America 16.3M 16.3M – Europe 20.8M 20.8M Foreign Exchange Rates: – U.S. – Cdn 0.750 0.750 – U.S. – Euro 1.100 1.100 – U.S. – RMB 0.142 0.142 * Our 2020 outlook remains unchanged from the outlook provided on January 16, 2020. We
Slide 23: 2020 Outlook
2020 Outlook 1 $ BILLIONS UNLESS OTHERWISE NOTED 23 U.S. GAAP February 2020 January 2020 Sales: • Body Exteriors & Structures $16.0 - $16.8 $16.0 - $16.8 • Power & Vision $10.7 - $11.3 $10.7 - $11.3 • Seating Systems $5.7 - $6.1 $5.7 - $6.1 • Complete Vehicles $6.0 - $6.4 $6.0 - $6.4 Total Sales $38
Slide 24: 2020 Segment Adjusted EBIT Margin
2020 Segment Adjusted EBIT Margin % 24 2019 Prior 2020 Outlook Current 2020 Outlook BODY EXTERIORS & STRUCTURES 7.9% 7.7 - 8.1% 7.7 - 8.1% SEATING SYSTEMS 5.6% 5.5 - 6.0% 5.5 - 6.0% POWER & VISION 6.6% 7.9 - 8.3% 7.9 - 8.3% COMPLETE VEHICLES 2.1% 2.3 - 2.8% 2.3 - 2.8%
Slide 25: Sales Performance vs Market
Sales Performance vs Market Q4 2019 vs Q4 2018 Reported Organic 1 Unweighted Performance vs Global Production Weighted Performance vs Global Production Body Exteriors & Structures (6%) (5%) (5%) 0% Power & Vision (9%) 4% 4% 9% Seating (1%) (3%) (3%) 2% Complete Vehicles (13%) (11%) (11%) (6%) TOTAL
Slide 26: Geographic Sales Q4 2019 vs Q4 2018
Geographic Sales Q4 2019 vs Q4 2018 26 Q4 2018 Q4 2019 - 9 % NORTH AMERICA ($Billions) PRODUCTION - 7% - 6 % ASIA ($Millions) PRODUCTION +4% (China +8%) - 6 % EUROPE ($Billions) PRODUCTION - 3% - 1 % REST OF WORLD ($Millions) S.A. PRODUCTION - 2% 5.0 4.6 4.4 4.2 694 649 132 131
Slide 27: Segment Impact on Adjusted EBIT % of Sales
Segment Impact on Adjusted EBIT % of Sales Q4 2019 vs Q4 2018 $ MILLIONS 27 Sales Adjusted EBIT Adjusted EBIT as a Percentage of Sales Fourth Quarter of 2018 $ 10,137 $ 730 7.2% Increase (Decrease) related to: Body Exteriors & Structures $ (254) $ (67) (0.5%) Power & Vision $ (262) $ (91) (0.8%) Sea
Slide 28: Adjusted Debt to Adjusted EBITDA Calculation
Adjusted Debt to Adjusted EBITDA Calculation $ MILLIONS 28 Q4 2019 LTM EBITDA $ 3,890 Lease Adjustment $ 367 Other $ 27 Adjusted EBITDA $ 4,284 Debt per Balance Sheet $ 3,168 Lease Liability per Balance Sheet $ 1,826 Other $ 204 Adjusted Debt $ 5,198 Adjusted Debt / Adjusted EBITDA 1.21x
Slide 29: Reconciliation of Reported Results
Q4 2019 Reconciliation of Reported Results EXCLUDING OTHER EXPENSE (INCOME), NET $ MILLIONS – EXCEPT PER SHARE FIGURES 29 Reported Other Expense (Income) Excluding Other Income Income Before Income Taxes $ 579 $ (8) $ 571 % of Sales 6.2% 6.1% Income Taxes $ 134 $ 1 $ 133 % of Pretax 23.1% 23.3% Inco
Slide 30: Q4 2018 Reconciliation of Reported Results
Q4 2018 Reconciliation of Reported Results EXCLUDING OTHER EXPENSE (INCOME), NET $ MILLIONS – EXCEPT PER SHARE FIGURES 30 Reported Other Expense (Income) Excluding Other Expense Income Before Income Taxes $ 607 $ 97 $ 704 % of Sales 6.0% 6.9% Income Taxes $ 140 $ (11) $ 151 % of Pretax 23.1% 21.4% I