Linamar Corporation · TSX:LNR
Linamar — Q3 2023 Earnings Presentation
46 slides from Linamar's earnings presentation, Nov 8, 2023
Slide 1: 2023 Q3 Conference Call Presentation
2023 Q3 Conference Call Presentation Linda Hasenfratz, Executive Chair & CEO November 8, 2023 For Audio Only Dial in: North America: (888) 396-8049 International: (416) 764-8646 Conference ID: 20767152
Slide 2: Forward Looking Information, Risk and Uncertainties
Forward Looking Information, Risk and Uncertainties Certain information regarding Linamar set forth in this presentation and oral summary, including management’s assessment of the Company’s future plans and operations may constitute forward-looking statements. This information is based on current ex
Slide 3: Sales, Normalized Earnings and CPV
Sales, Normalized¹ Earnings and CPV 1 - The Company uses certain non-GAAP and other financial measures to provide useful information to both management, investors, and other stakeholders in assessing financial performance and financial condition of the Company. For more information refer to the sect
Slide 4: Sales, Normalized Earnings, and Margins (in millions CAD)
Sales, Normalized Earnings1, and Margins (in millions CAD) %Δ Q3 2023 The key impacts to the segments vs prior Q3 2023 Q3 2022 year are: Sales 2,434.2 2,098.1 16.0% The key factors impacting results in the Mobility quarter are: ▪ Markets up 4% Industrial Sales 676.6 533.4 26.8% ▪ Strong performance
Slide 5: Net Earnings Attributable to Shareholders by Quarter
Net Earnings Attributable to Shareholders by Quarter 160 140 120 CAD $ (millions) 100 80 60 40 20 0 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Net Earnings - ATS 50.2 96.3 104.5 133.2 92.2 117.0 135.0 146.7 © Linamar Corporation 5
Slide 6: Automotive Sales & Content Per Vehicle (CPV)
Automotive Sales & Content Per Vehicle2 (CPV) CPV Q3 2023 CPV Q3 2022 CPV % Change Vehicle Production Automotive Automotive Automotive Units % Change Sales Q3 2023 Sales Q3 2022 Sales % Change (CAD Millions) (CAD Millions) North America 244.54 240.24 1.8% 8.9% 1,011.2 912.6 10.8% Europe 119.01 105.0
Slide 7: Commercial & Industrial Sales
Commercial & Industrial Sales2 (in millions CAD) Q3 2023 Q3 2022 % Change MacDon ▪ Combine draper market up globally on notable gains in Europe, Australia Sales 752.8 604.7 24.5% Salford ▪ Strong quarter well up from prior year is enhancing ag business growth Skyjack ▪ Solid global market share grow
Slide 8: Capital Expenditures (in millions CAD)
Capital Expenditures (in millions CAD) Q3 2023 Q3 2022 ▪ Capex has trended back to our normal 6-8% of sales levels in 2023 as expected Capital Expenditures (Capex) 199.9 83.4 ▪ 6-8% of sales investment in capex drives double digit sales growth Capex as a % of Sales 8.2% 4.0% Capex Capex as a % of Sa
Slide 9: Cash Flow Continues to be a Key Priority
Cash Flow Continues to be a Key Priority ▪FCF1,2 negative in the quarter due to higher draw on working capital and higher Capex in quarter; ▪Liquidity1 remains excellent with $1.4 billion of cash available at quarter end. YTD QTD 1 - Free Cash Flow and Liquidity are non-GAAP financial measures. Plea
Slide 10: Leverage (in millions CAD)
Leverage (in millions CAD) Q3 2023 Q2 2023 Q3 2022 ▪ Balance sheet has remained consistently strong despite heavier spending and acquisition activity Net Debt1 1,007.6 492.9 452.7 ▪ Leverage in excellent shape at 0.79x Net Debt to Net Debt to EBITDA2 0.79x 0.42x 0.46x EBITDA Net Debt to EBITDA 0.79x
Slide 11: Markets, Backlog and Sales Outlook
Markets, Backlog and Sales Outlook
Slide 12: Market Snapshot
Market Snapshot Commercial Commercial 2023 Light Vehicle Truck Agriculture Access 2024 Light Vehicle Truck Access North North America ▲6.3% ▲6.2% ▲5.0% ▲9.2% America ▲7.2% ▼12.6% ▲4.3% Europe Europe ▲11.9% ▲9.3% ▬ 0% ▲9.3% ▬ 1.5% ▼3.9% ▲5.1% Asia ▲6.9% ▲28.2% n/a ▲13.5% Asia ▬ 0.7% ▲5.8% ▲8.1% Rest
Slide 13: Industrial Segment - Access
Industrial Segment - Access Access Equipment Market Commentary Access Industry YTD Results & Forecast % Change vs. Prior Year ▪ Rental remains positive as companies look to counter fleet aging experienced during COVID. 20% ▪ Stable end market demand activity with equipment utilization 18% 17.3% well
Slide 14: Industrial Segment - Agriculture
Industrial Segment - Agriculture North American Combine Retails 3,000 Agriculture Market Commentary 2,000 ▪ Inventory at Ag equipment retailers is normalizing but 1,000 still lower in historical terms ▪ Dealer sentiment remains positive, noting current hot 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct N
Slide 15: US Light Vehicle Inventory – Days' Supply
US Light Vehicle Inventory – Days’ Supply 180 160 140 120 100 80 60 40 20 76 69 95 119 61 59 55 52 50 59 55 48 61 54 39 33 25 27 24 25 24 26 24 25 26 24 27 25 25 28 27 29 32 35 37 36 39 37 36 35 33 36 34 39 40 0 Feb-20 Feb-21 Feb-22 Feb-23 Oct-20 Oct-21 Oct-22 Apr-20 Nov-20 Dec-20 Apr-21 Nov-21 Dec-
Slide 16: Global Light Vehicle Market: Q3 2023, Q4 2023, and 2023
Global Light Vehicle Market: Q3 2023, Q4 2023, and 2023 Q3 2023 production increased by 1.5M units versus prior forecast. Q4 2023 forecast increased by 0.1M units. 2023 full-year forecast increased by 1.8M. ▪ Q3 2023 production increased by 1.5M units on ▪ Q4 2023 forecast increased by 110,022 units
Slide 17: Strong EV & PA Wins Shifting Linamar Sales Mix
Strong EV & PA Wins Shifting Linamar Sales Mix Electrified Vehicle (EV) & Propulsion Agnostic Electrified Vehicle (EV) & Propulsion Agnostic (PA) Sales (PA) New Business Wins % of Total Light Vehicle Sales % of Total Mobility NBWs 57% 80% 74% 60% 56% 52% 70% 50% 46% 60% 53% 40% 35% 50% 28% 40% 30% 2
Slide 18: Mobility Launches
Mobility Launches 4.00 Launching nearly $3.7 Billion of new work today 3.50 3.00 2.50 CAD (Billions) 2.00 1.50 1.00 0.50 0.00 2022 2023 2024 2025 2026 2027 Incremental Growth from Launches $700 to $800 Million in 2023 $800 to $900 Million in 2024 Updated: October 2023 © Linamar Corporation 18
Slide 19: Outlook
Outlook © Linamar Corporation 19
Slide 20: Outlook
Outlook Consolidated Sales Growth Normal Ranges 2022 Actuals 21.1% Expectations 2023 Double Digit Growth Expectations 2024 Double Digit Growth Q4 2023 Expectations Normalized EPS Growth 1 -4.1% Significant Double Digit Growth Double Digit Growth ▪ Mobility Normalized Net Margin 1 7.0% - 9.0% 5.1% Ex
Slide 21: Operational Update
Operational Update © Linamar Corporation 21
Slide 22: Acquisition of Mobex Global's US Assets
Acquisition of Mobex Global’s US Assets Transaction Details Products ▪ Deal signed September 21st, and closed on October 31st ▪ $64M USD Final Transaction Price ▪ ~C$450 million sales Knuckles Control Arms Subframes ▪ Aligns to the ‘Linamar Structures’ Strategy, increases propulsion agnostic content
Slide 23: Linamar Structures Group
Linamar Structures Group A Fully EV/Propulsion Agnostic Powerhouse Projected to reach $1.5 Billion in Sales HPDC Battery Enclosure Business Mobex – Suspension & Mills River Former Dura-Shiloh 3 Plants Chassis Welland Giga Casting Plant Linamar 1 Plant LPDC & Machining ~$400 Million ~$600 Million ~$4
Slide 24: New Business
New Business © Linamar Corporation 24
Slide 25: New Business Win
New Business Win $40M in wins for electric vehicle differential assemblies Average Annual Revenue SOP Year Peak Volume Year Nearly $40 M / 2024 2026 year Production Location France China © Linamar Corporation 25
Slide 26: New Business Win
New Business Win >$15M in wins for propulsion agnostic structural components Average Annual Revenue SOP Year Peak Volume Year More Than $15 2024 2025 M / year Production Location United States Germany UK France © Linamar Corporation 26
Slide 27: New Business Win
New Business Win Nearly $40M in wins for hybrid electric vehicle engine components and assemblies Average Annual Revenue SOP Year Peak Volume Year Nearly $40M / 2024 2026 year Production Location Bulgaria China France © Linamar Corporation 27
Slide 28: New Business Win
New Business Win Structural NBW for electric SUV program to be produced at newly acquired U.S. Battery Enclosures entity Average Annual Volume SOP Year Peak Volume Year 240,000 / Year 2024 2026 Production Location United States © Linamar Corporation 28
Slide 29: Innovation
Innovation © Linamar Corporation 29
Slide 30: Innovation – Skyjack ELEVATE LIVE 2.0
Innovation – Skyjack ELEVATE LIVE 2.0 Launch of upgraded ELEVATE Live 2.0 telematics system includes: ▪ Detailed machine status ▪ Recent event highlights/warnings ▪ Additional controller ▪ Engine insights © Linamar Corporation 30
Slide 31: New Product – MacDon M2 Series Windrower
New Product – MacDon M2 Series Windrower The M2 Series Windrowers advance our reputation for innovation, performance, and speed by adding more power and simple touchscreen control © Linamar Corporation 31
Slide 32: New Product – Salford
New Product – Salford New 56N cover crop seeder designed specifically for narrow, folding tillage tools © Linamar Corporation 32
Slide 33: Digitization with AI/ML – October 2023
Digitization with AI/ML – October 2023 70 Plants 5,321 3,692 1,107 Traceability Robots Marking Stations LMMS Data Collection Connections 2,611 3,339 RFID Stations 1,210 Connected Machines 2,877 6 Vision Systems Traceability Read Stations AGVs Oct- 2023 33
Slide 34: Financial Review
Financial Review Dale Schneider, CFO Linamar Corporation 34
Slide 35: Sales, Normalized Earnings, and Margins (in millions CAD)
Sales, Normalized Earnings1, and Margins (in millions CAD) %Δ Q3 2023 The key impacts to the segments vs prior Q3 2023 Q3 2022 year are: Sales 2,434.2 2,098.1 16.0% The key factors impacting results in the Mobility quarter are: ▪ Markets up 4% Industrial Sales 676.6 533.4 26.8% ▪ Strong performance
Slide 36: Foreign Exchange Gain/Loss (in millions CAD)
Foreign Exchange Gain/Loss (in millions CAD) Q3 2023 Q3 2022 +/- ▪ Total FX Gain was $14.0 which resulted from a $13.9 FX Gain FX Gain/(Loss) – Operating1 13.9 17.0 (3.1) – Operating and a $0.1 FX Gain – Financing. FX Gain/(Loss) – Financing 0.1 (0.7) 0.8 ▪ FX Gain – Operating was comprised of an $8
Slide 37: Industrial Sales, Earnings, and Margins (in millions CAD)
Industrial Sales, Earnings, and Margins (in millions CAD) Industrial Sales increased by 26.8% or $143.2 to $676.6. Q3 2023 Q3 2022 ▪ The Sales were helped by: Finance ▪ additional access equipment sales primarily due to increased global market share Sales 676.6 533.4 growth for certain targeted prod
Slide 38: Mobility Sales, Earnings, and Margins (in millions CAD)
Mobility Sales, Earnings, and Margins (in millions CAD) Mobility Sales increased by 12.3% or $192.9 to $1,757.6. Q3 2023 Q3 2022 ▪ The Sales were helped by: ▪ a favourable impact on sales from the changes in FX rates from Q3 2022; ▪ increased sales related to launching programs; Sales 1,757.6 1,564.
Slide 39: Operating Expenses (in millions CAD)
Operating Expenses (in millions CAD) Q3 2023 Q3 2022 +/- % ▪ Gross Margin was $340.3 in the quarter and was impacted by the same factors that impacted each business segment. (See the previous two slides) Sales 2,434.2 2,098.1 336.1 16.0% Cost of Goods Sold 2,093.9 1,820.2 273.7 15.0% ▪ Amortization
Slide 40: Finance Expenses & Income Tax (in millions CAD)
Finance Expenses & Income Tax (in millions CAD) ▪ Finance expenses increased by $8.9. Q3 2023 Q3 2022 +/- ▪ Finance expenses were hurt by: ▪ an increase in interest costs due to change in the Bank of Canada overnight rate and Finance Expense 17.8 8.9 8.9 United States Federal Funds rate; ▪ increased
Slide 41: Leverage (in millions CAD)
Leverage (in millions CAD) Q3 2023 Q3 2022 ▪ Cash position at the end of the quarter was $694.6 million. ▪ Linamar generated $74.6 in Cash from Operating Activities. Cash Position 694.6 856.0 ▪ Net Debt to EBITDA at 0.79x mainly due to acquisitions in 2022 and 2023, and share buybacks in 2022. Avail
Slide 42: Conclusion
Conclusion ▪ Double-Digit Sales growth in both Industrial and Mobility ▪ Continued improvements in supply chain issues helping to drive sale growth; ▪ 2 months of the Battery Enclosure Business; and ▪ Further economic hardship recoveries achieved in 2023. ▪ Double-Digit Normalized Net Earnings and E
Slide 43: Question and Answer
Question and Answer © Linamar Corporation 43
Slide 44: Outlook
Outlook Consolidated Sales Growth Normal Ranges 2022 Actuals 21.1% Expectations 2023 Double Digit Growth Expectations 2024 Double Digit Growth Q4 2023 Expectations Normalized EPS Growth 1 -4.1% Significant Double Digit Growth Double Digit Growth ▪ Mobility Normalized Net Margin 1 7.0% - 9.0% 5.1% Ex
Slide 45: Key Messages
Key Messages Double-Digit Top and Bottom Line Growth Strong Market Share Growth In Each Business Second Mobility Acquisition Completed Accelerating EV / PA Business Shift © Linamar Corporation 45
Slide 46: Thank You
Thank You www.linamar.com © Linamar Corporation 46