Magna International Inc. · TSX:MG
Magna International — Q1 2020 Earnings Presentation
36 slides from Magna International's earnings presentation, May 8, 2020
Slide 1: Q1 2020 Results Call
Q1 2020 Results Call May 7, 2020 1
Slide 2: Forward Looking Statements
Forward Looking Statements 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 expectations an
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: Magna's Response to COVID-19
Magna’s Response to COVID-19 Health and Safety of Employees is Our #1 Priority • Developed protocols, assessment tools, and guidance documents – Disseminated health screening tools – Isolation and contact tracing guidelines – Decontamination procedures • Installed PPE and supplied personal protectiv
Slide 5: Magna's Response to COVID-19 (cont.)
Magna’s Response to COVID-19 (cont.) Health and Safety of Employees is Our #1 Priority • Minimizing the impact on our employees – Maintaining benefits coverage throughout layoffs – Maximizing days at full compensation by utilizing vacation days – Engaging emergency wage protection programs and provi
Slide 6: Magna's Response to COVID-19 (cont.)
Magna’s Response to COVID-19 (cont.) Experienced Senior Management Team • Highly coordinated response • Multiple workstreams formed across disciplines and geographies • Entrepreneurial culture drives an ownership mentality • Flexing our cost structure while continuing to support our customers • Exec
Slide 7: Magna's Response to COVID-19 (cont.)
Magna’s Response to COVID-19 (cont.) Supporting Fight Against COVID-19 • A number of our facilities producing masks, face shields, gowns, and ventilator components • Donating PPE to hospitals, meals to health care workers, and hygiene kits to shelters 7
Slide 8: Confident in Long-Term Position
Confident in Long-Term Position • Our value creation framework is intact – Entrepreneurial culture – Leading market positions – Global capabilities • Continue to invest for the future – New program launches – R&D • Industry trends largely unchanged – Magna well positioned as highlighted at Investor
Slide 9: PACE Award for Composite Liftgate
PACE Award for Composite Liftgate • Lightweight solution debuted on the 2020 Toyota Supra • Space frame reinforcement solution enables 10% mass reduction and is first application in the automotive industry • Expect significant growth in liftgates going forward 9
Slide 10: Restart of Production
Restart of Production • China – OEMs have restarted production – Vehicle sales continue to improve – We are now fully operational in our facilities – Lessons learned being shared globally • Europe – OEMs in the process of restarting • North America – Planning on restarts this month – Mexico could be
Slide 11: Restart of Production (cont.)
Restart of Production (cont.) • Close cooperation with customers, suppliers, local governments, and our employees • Smart Start Playbook provides a framework for restarting our facilities • Working closely with our supply chain 11
Slide 12: Restart of Production (cont.)
Restart of Production (cont.) • G-Class assembly line in Graz among the first in Europe to successfully restart complete vehicle production 12
Slide 13: Vehicle Production in Q1-2020 (Including Impact of COVID-19)
Vehicle Production in Q1-2020 (Including Impact of COVID-19) Region YOY Change in Production North America -13% Europe -19% China -44% Global -27% Estimated COVID-19 Impact on Magna’s 1Q20 Results: Total Sales ~$1.1 billion 1 EBIT ~$250 million 1 EBIT impact includes ~$30 million mainly associated w
Slide 14: Q1 2020 Consolidated Sales Performance
Q1 2020 Consolidated Sales Performance $ BILLIONS - 18% Key Factors: • Production and assembly volumes, including COVID-19 (-) 10.6 • Divestitures, net of acquisitions (-) • Foreign exchange translation (-) 8.7 • End of certain programs (-) • Net customer price concessions (-) • Launch of new progra
Slide 15: Adjusted EBIT and Equity Income
Q1 2020 Adjusted EBIT and Equity Income ADJUSTED EBIT MARGIN % KEY FACTORS • COVID-19 ~200BP (-) - 210BP • Lower tooling contribution (-) • Operational underperformance at a BES facility (-) • Divestiture of FP&C (-) 6.8 • Lower incentive compensation and profit sharing (+) 4.7 • Favourable engineer
Slide 16: Financial Highlights
Q1 2020 Financial Highlights ADJUSTED EFFECTIVE ADJUSTED NET INCOME ADJUSTED TAX RATE ATTRIBUTABLE TO MAGNA DILUTED EPS - $270Million - $0.77 34.7% $1.63 $531M 23.7% $0.86 $261M 1 1 Q1 2019 Q1 2020 Q1 2019 Q1 2020 Q1 2019 Q1 2020 1 950 basis points of the increase in our adjusted effective tax rate
Slide 17: Cash Flow
Q1 2020 Cash Flow $ MILLIONS Cash from Operations Net Income + Non-Cash Items $ 615 Changes in Non-Cash Operating Assets & Liabilities $ 24 $ 639 Investment Activities Fixed Assets $ (203) Investments, Other Assets & Intangibles $ (93) $ (296) Proceeds from Disposition and Other $ 23 Free Cash Flow
Slide 18: Return of Capital to Shareholders
Return of Capital to Shareholders Common Shares Repurchased in Q1 1 4.8M $ to Repurchase Shares in Q1 1 $ 192M Dividends Paid $ 121M Total Q1 Return to Shareholders $ 313M 1 Shares repurchased for cancellation 18
Slide 19: Liquidity Position
Liquidity Position $ MILLIONS UNLESS OTHERWISE NOTED Available Operating & Term Lines of Credit $3,072 Cash & Cash Equivalents $1,146 Total Available Liquidity (3/31/20) $4,218 Increase in Short Term Revolver (4/13/20)1 $700 Pro-forma Total Available Liquidity ~$4.9 Billion Also Recently Filed $2B S
Slide 20: Adjusted Debt to Adjusted EBITDA Calculation
Adjusted Debt to Adjusted EBITDA Calculation $ MILLIONS Q1 2020 LTM EBITDA $ 3,588 Lease Adjustment $ 316 Other $ (10) Adjusted EBITDA $ 3,894 Debt per Balance Sheet $ 3,114 Lease Liability per Balance Sheet $ 1,804 Other $ 237 Adjusted Debt $ 5,155 Adjusted Debt / Adjusted EBITDA 1.32x 20
Slide 21: Capital Allocation Update
Capital Allocation Update • Continue to invest in our business – Support organic growth – R&D – M&A • Board approved Q1 2020 dividend of $0.40 per share • Given ongoing uncertainty we stopped share repurchases 21
Slide 22: 2020 Considerations
2020 Considerations • Withdrew our Outlook given business uncertainty • Decremental margin in the low 20% range for balance of the year is reasonable – Various puts and takes can impact decrementals, including Q2 top-up payments • Working capital expected to be a use of cash as sales increase sequen
Slide 23: Q&A
Q1 2020 RESULTS Q&A 23
Slide 24: Appendix
Q1 2020 RESULTS APPENDIX 24
Slide 25: Estimated COVID-19 Q1-2020 Impact by Segment
1 Estimated COVID-19 Q1-2020 Impact by Segment $ MILLIONS Estimated Estimated Sales Margin Segment Impact Impact Body Exteriors and Structures $ 425 ~200-250BP Power & Vision $ 300 ~200-250BP Seating $ 150 ~200-250BP Complete Vehicles $ 225 ~25-50BP Magna $ 1,100 ~200BP 1 It is difficult to determin
Slide 26: Sales Performance vs Market
Sales Performance vs Market Q1 2020 vs Q1 2019 Unweighted Weighted Performance vs Performance vs 1 Reported Organic Global Production Global Production Body Exteriors & Structures (15%) (14%) 13% 2% Power & Vision (18%) (5%) 22% 11% Seating (12%) (13%) 14% 3% Complete Vehicles (31%) (29%) (2%) (13%)
Slide 27: Q1 2020 Segment Sales: Body Exteriors & Structures
Q1 2020 Segment Sales BODY EXTERIORS & STRUCTURES $ BILLIONS • Global light vehicle production including the impact of the COVID-19 - 15% pandemic (-) • End of production of certain programs (-) 4.3 • Foreign currency translation (-) 3.7 • Net customer price concessions (-) • New program launches (+
Slide 28: Segment Adjusted EBIT Margin: Body Exteriors & Structures
Q1 2020 Segment Adjusted EBIT Margin % BODY EXTERIORS & STRUCTURES • COVID-19 pandemic (-) - 300BP • Lower tooling contribution (-) • Operational underperformance at 8.4% a facility (-) • Lower scrap steel and aluminum recoveries partially offset by lower 5.4% commodity costs(-) • Higher foreign exc
Slide 29: Q1 2020 Segment Sales: Power & Vision
Q1 2020 Segment Sales POWER & VISION $ BILLIONS • Global light vehicle production including the impact of the COVID-19 - 18% pandemic (-) • Divestiture of FP&C (-) 3.1 • Foreign currency translation (-) 2.5 • Net customer price concessions (-) • New program launches (+) Significant New Launches: • M
Slide 30: Segment Adjusted EBIT Margin: Power & Vision
Q1 2020 Segment Adjusted EBIT Margin % POWER & VISION • COVID-19 pandemic (-) - 160BP • Divestiture of FP&C (-) • Higher foreign exchange gains (+) • Lower labour and benefit costs (+) • Lower commodity costs (+) 7.0% • Higher net favourable commercial 5.4% items (+) Q1 2019 Q1 2020 30
Slide 31: Q1 2020 Segment Sales: Seating
Q1 2020 Segment Sales SEATING $ BILLIONS • Global light vehicle production including the impact of the COVID-19 - 12% pandemic (-) 1.4 • End of production of certain programs (-) 1.3 • Foreign currency translation (-) • Net customer price concessions (-) • Acquisition of Viza (+) • New program launc
Slide 32: Segment Adjusted EBIT Margin: Seating
Q1 2020 Segment Adjusted EBIT Margin % SEATING • COVID-19 pandemic (-) - 340BP • Higher launch costs (-) • Operational underperformance at a facility (-) 6.6% • Gain on sale of assets during Q1’19 (-) • Lower equity income (-) • Foreign exchange gains (+) 3.2% Q1 2019 Q1 2020 32
Slide 33: Q1 2020 Complete Vehicles
Q1 2020 Complete Vehicles ASSEMBLY VOLUMES SALES (Thousands of units) ($ Billions) - 33% - 31% 45.9 1.9 30.9 1.3 ADJUSTED EBIT ADJUSTED EBIT MARGIN % ($ Millions) + 22 + 230BP 50 3.8 28 1.5 Q1 2019 Q1 2020 33
Slide 34: Segment Impact on Adjusted EBIT % of Sales
Segment Impact on Adjusted EBIT % of Sales Q1 2020 vs Q1 2019 $ MILLIONS Adjusted EBIT as a Adjusted Percentage Sales EBIT of Sales First Quarter of 2019 $ 10,591 $ 720 6.8% Increase (Decrease) Related to: Body Exteriors & Structures $ (632) $ (164) (1.4%) Power & Vision $ (560) $ (81) (0.5%) Seatin
Slide 35: Q1 2019 Reconciliation of Reported Results
Q1 2019 Reconciliation of Reported Results EXCLUDING OTHER EXPENSE (INCOME), NET $ MILLIONS – EXCEPT PER SHARE FIGURES Other Excluding Expense Other Reported (Income) (Income) Income Before Income Taxes $ 1,368 $ (679) $ 689 % of Sales 12.9% 6.5% Income Taxes $ 267 $ 104 $ 163 % of Pretax 19.5% 23.7
Slide 36: Magna
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