Martinrea International Inc. · TSX:MRE
Martinrea International — Q2 2017 Earnings Presentation
49 slides from Martinrea International's earnings presentation, 2017
Slide 1: Martinrea International Inc. Q2 2017 Company Presentation
MARTINREA INTERNATIONAL INC. ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. Q2 2017 Company Presentation
Slide 2: Martinrea Overview
MARTINREA OVERVIEW Leading Tier One automotive parts supplier – The second largest North American steel metal former – Top three North American fluid management systems supplier – A global market leader in aluminum parts through Martinrea Honsel One of the fastest growing automotive parts suppliers
Slide 3: Martinrea Overview
MARTINREA OVERVIEW Operating 44 manufacturing facilities in 8 countries: Canada, United States, Mexico, Brazil, Germany, Slovakia, Spain and China – Each facility a center of excellence, with an entrepreneurial “owner-managed culture” – Approximately 15,000 trained and motivated employees – Over 9,0
Slide 4: Martinrea's Evolution
MARTINREA’S EVOLUTION Acquires plant from Oxford Acquires majority Royal Laser Automotive of Honsel changes name to: Acquires NOV 2001 DEC 2005 ThyssenKrupp Budd Fabco North America JULY 2011 Martinrea International Inc. (Metallics) (Aluminum) JUN 2002 DEC 2006 (Metallics) 2001 2017 Footprint Acquir
Slide 5: Martinrea Vision, Mission and Principles
MARTINREA VISION, MISSION AND PRINCIPLES ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. 5
Slide 6: Martinrea's Global Presence
MARTINREA’S GLOBAL PRESENCE SLOVAKIA 1 Plant CANADA 13 Plants GERMANY 2 Plants US 13 Plants CHINA 2 Plants MEXICO 10 Plants SPAIN 2 Plants BRAZIL 1 Plant ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. 6
Slide 7: Martinrea's Products
MARTINREA’S PRODUCTS Aluminum Components Steel Metal Forming Fluid Management Systems ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. 7
Slide 8: Competitive Landscape
COMPETITIVE LANDSCAPE Fluid Management Systems Steel Metal Forming (North America) (North America, China, Slovakia) Aluminum Components (Worldwide) Second largest North American Top three supplier in North Leading supplier of light metal former by sales America metal components Leader in growth
Slide 9: North American Platform Portfolio
NORTH AMERICAN PLATFORM PORTFOLIO Current Top 10 Platforms YTD 1 Ford Escape 2 GM Equinox /Terrain 3 Ford Fusion/Edge 4 GM Pickups, SUVs 5 GM Malibu/Impala 6 Chrysler 300/Challenger/Charger 7 Dodge Ram 8 Jeep Grand Cherokee/Commander 9 Jeep Wrangler 10 BMW SUV ©2016 Martinrea International Inc. Conf
Slide 10: What Is Martinrea 2.0?
WHAT IS MARTINREA 2.0? Martinrea 2.0 is the framework to become a great company . . . diverse people and groups working together toward a single vision. Principles-based leadership promoting positive behaviors to create a strong culture, and implementing best-practices through our 4 Pillar Business
Slide 11: Our Strategy Focus
OUR STRATEGY FOCUS Cost-Down Every Day Develop Your People WHERE WHERE WE ARE WE ARE GOING HIGH PERFORMANCE CUSTOMER IS KING! MANAGEMENT OPERATIONAL EXCELLENCE FINANCIAL CULTURE Deliver on Continuously Time with Improve Quality ©2016 Martinrea International Inc. Confidential and proprietary. Do not
Slide 12: Operational Excellence
OPERATIONAL EXCELLENCE ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. 12
Slide 13: So What Is Lean?
SO WHAT IS LEAN? Wikipedia: A systematic method for the elimination of waste within a manufacturing system. Lean also takes into account waste created through overburden and waste created through unevenness in work loads. Working from the perspective of the client who consumes a product or service,
Slide 14: Attributes of the Martinrea Manufacturing System
ATTRIBUTES OF THE MARTINREA MANUFACTURING SYSTEM RESPECTING our people USING lean tools DEVELOPING our people Learn by DOING ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. 14
Slide 15: Martinrea Manufacturing System (MMS)
MARTINREA MANUFACTURING SYSTEM (MMS) A thinking way using P&L lean tools–the WHY Kaizen of Standardized Work To continuously improve Flexible Manpower Lines / Quick Changes To develop our people Go & See Just in Time on the Floor with Built in Quality Own Eyes with Ownership Visualization The Proces
Slide 16: MMS Blueprint
MMS BLUEPRINT Make what the customer needs at the right time in the right amount Minimize inventory Fully utilize man and machine (separate the work)…regardless of volume Build quality into the process Reduce lead time, assure flexibility in scheduling Push process waste away from T/M who add value
Slide 17: Safety Performance - Companywide
SAFETY PERFORMANCE - COMPANYWIDE Total Recordable Injury Frequency Total recordable injury frequency has improved ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. 17
Slide 18: Quality Performance
QUALITY PERFORMANCE As Martinrea, we want to be Casper the Ghost • 100% On-time delivery • 100% Compliance – on-time submission & operate as we say we do • 100% on-time, flawless launches and APQP Gate completion ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or c
Slide 19: Quality Performance
QUALITY PERFORMANCE PR/R's Quality performance has improved 2014: Alfield, Rollstar, Ridgetown, Slovakia, Silao 2015: Alfield, Rollstar, Ridgetown, Silao 2016: Alfield, Rollstar, Ridgetown, London, Columbia, ICON, Silao 2015/2016 Quality Premium Award: Silao 2015/2016 Quality Excellence Award: Mesch
Slide 20: Quality Performance
QUALITY PERFORMANCE ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. 20
Slide 21: Operational Strategy
OPERATIONAL STRATEGY Who Lean Activity/People How Flexible Processes What Products(Light Weighting) ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. 21
Slide 22: Flexible Processes
FLEXIBLE PROCESSES ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. 22
Slide 23: Flexible Assembly-Metallics
FLEXIBLE ASSEMBLY-METALLICS • Implement Flexible Build Processes (weld example) NOW THEN ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. 23
Slide 24: Products: Our Key Strategy
PRODUCTS OUR KEY STRATEGY ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. 24
Slide 25: A Light Weighting Company
A LIGHT WEIGHTING COMPANY A Definition: Continuously developing and evolving core metallic products (high strength steel, aluminum, assemblies, etc.) to reduce vehicle weight and CO2 contribution, improving overall vehicle efficiency (MPG). ©2016 Martinrea International Inc. Confidential and proprie
Slide 26: Light Weighting Trend Driven by CO2/MPG Regulations
LIGHT WEIGHTING TREND DRIVEN BY CO2/MPG REGULATIONS 65 10% reduction in weight provides a 6-7% improvement in Targets in MPG/Grams of CO2 60 fuel economy 55 2025 55/110 50 45 2021 61/95 40 35 2020 55/105 30 25 2020 50/116 20 2000 2005 2010 2015 2020 2025 ©2016 Martinrea International Inc. Confidenti
Slide 27: Market Trends – Aluminum (North America)
MARKET TRENDS – ALUMINUM (NORTH AMERICA) + 39% Source: North American Light Vehicle Aluminum Content Study June 2014; Ducker Analysis ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. 27
Slide 28: Martinrea's Position
MARTINREA’S POSITION ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. 28
Slide 29: Material Options – Engine Blocks
MATERIAL OPTIONS – ENGINE BLOCKS Cast Iron Cast Aluminum w/ Steel Liners Cast Aluminum w/ SprayBore 225 lbs 64 lbs 46 lbs ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. 29
Slide 30: Material Options – Crossmembers and Control Arms
MATERIAL OPTIONS – CROSSMEMBERS AND CONTROL ARMS Steel Aluminum - Solid Aluminum – Hollow 41.2 lbs 34.0 lbs 27.3 lbs Steel Aluminum Hollow 11.2 lbs 9.9 lbs Aluminum 6.2 lbs ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. 30
Slide 31: B-Pillar Design Evolution
B-PILLAR DESIGN EVOLUTION Multi-Piece Steel Tailor Rolled Hot-Stamp 17.6 lbs 14.3 lbs ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. 31
Slide 32: Lightweight Products
LIGHTWEIGHT PRODUCTS General Motors reduced the weight of the 2018 Equinox by 10% or 400 lbs by using lighter body parts and frames. Martinrea’s metallic content on the 2018 Equinox ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. 32
Slide 33: Growing Technology and Innovation
GROWING TECHNOLOGY AND INNOVATION Idea Research Develop Testing Analysis Intro New Tech Center Opening in 2017 ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. 33
Slide 34: Capless Fuel Filler
CAPLESS FUEL FILLER Today’s Design Our New Design Smallest in industry First capless unit to market • Half the weight of current model Welded two piece design Eliminates deep drawn funnel cost Requires deep draw funnel savings and added value. Best refueling performance Retains best re
Slide 35: Plasma Spray Steel Coating for Engine Blocks
PLASMA SPRAY STEEL COATING FOR ENGINE BLOCKS MARTINREA HONSEL ALUTHINFER® = BORE SPRAY COATING: is a technology to replace iron liners in engine blocks by a thin (100 micron) steel layer Effects: weight reduction of block, better wear performance, less friction, less oil and fuel consumption, better
Slide 36: Process Developments for High Pressure Die Casting
PROCESS DEVELOPMENTS FOR HIGH PRESSURE DIE CASTING MICRO SPRAY TECHNOLOGY – FOR HPDC CASTING: is a technology for die surface lubrication which uses a minimum amount of lubricant and internal cooling Effects: improvement of casting surface, extension of die life up to approx. 120-150k shots (from 10
Slide 37: Hybrid Design Development
HYBRID DESIGN DEVELOPMENT • Rear Cast Aluminum Provides improved tolerances • Front Steel Provides necessary crash performance • Cast Engine Mounts Aluminum Steel Provides tighter packaging • Steel Provides greater stiffness and necessary crash performance Cast Engine Mounts ©2016 Martinrea Internat
Slide 38: Whatever the Future Holds, Martinrea Will Be a Leader
WHATEVER THE FUTURE HOLDS, MARTINREA WILL BE A LEADER HYBRID PLUG-IN HYBRID ELECTRIC FUEL CELL ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. DRIVERLESS 38
Slide 39: Macroeconomic Outlook
MACROECONOMIC OUTLOOK ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. 39
Slide 40: Macroeconomic Outlook - Automotive
MACROECONOMIC OUTLOOK - AUTOMOTIVE ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. 40
Slide 41: U.S. Automotive Sales
U.S. AUTOMOTIVE SALES Fundamentals are still strong: • Financing is available at low rates • Oil and gas prices remain low • Employment/participation levels are strong • Average vehicle age ~ 12 years • U.S. housing is healthy • Annual population growth adding new drivers • Consumer debt levels in t
Slide 42: Financials
FINANCIALS ©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. 42
Slide 43: Sales
SALES 3,968 4,000 3,878 3,867 162 253 Sales growth from 2009 to 2016 has been 249 3,599 staggering (CAGR ~ 20%) 3,500 245 3,222 Excluding FX impacts, growth is expected to In Millions Of Canadian Dollars 203 normalize over the next three years 3,000 2,901 195 Module assembly business moving to a VAA
Slide 44: Highlights of Recent New Business Awards
HIGHLIGHTS OF RECENT NEW BUSINESS AWARDS Annualized Sales at Peak Customer Products SOP Volumes Aluminum knuckles and control arms $200,000,000 2015-2018 Steel Metal Forming - Equinox, Terrain and Bolt EV $190,000,000 2017-2018 Pick-up trucks and SUVs – steel metal forming and fluid handling $175,00
Slide 45: Adjusted Operating Income Margin
ADJUSTED OPERATING INCOME MARGIN >8.0% 8% Q1 17A – 5.6% Q2 17A – 6.9% • Adjusted operating income margin for 2016 7% was 5.0%, compared to 4.6% for 2015 and 4.1% > 6.0% for 2014 6% Adjusted Operating Income Margin % 5.5% 5.0% • Operating income margin is expected to 5% 4.6% improve to >6% for 2017 4
Slide 46: Drivers of Margin Expansion
DRIVERS OF MARGIN EXPANSION EVOLUTION OF BOOK OF OPERATIONAL EXCELLENCE BUSINESS • Lean transformation • Lower margin work rolling off and being replaced with higher margin • Lean, efficient, always improving work • Scale up by sharing (read across) • Strict adherence to Martinrea 2.0 • Purchasing i
Slide 47: Adjusted Net Earnings Per Share
ADJUSTED NET EARNINGS PER SHARE Full Year Financials 16 0 $1 .8 0 1.70 14 0 $1 .6 0 1.50 1.38 $1 .4 0 12 0 In Millions Of Canadian Dollars $1 .2 0 10 0 0.97 0.98 $1 .0 0 0.88 80 0.79 $146 $0 .8 0 0.61 60 $130 $0 .6 0 $119 40 $82 $83 $73 $0 .4 0 $67 $52 20 $0 .2 0 0 $0 .0 0 20 10 20 11 20 12 20 13 20
Slide 48: Balance Sheet
BALANCE SHEET Operating Cash Flow In Millions of Canadian Dollars 400 350 $376 300 $348 $308 250 200 $237 $259 The Company is a significant cash flow 150 100 $142 $146 generator with operating cash flow increasing 50 0 $89 every year since 2010 2010 2011 2012 2013 2014 2015 2016 LTM Jun 2017 Investm
Slide 49: Legal Disclaimer
LEGAL DISCLAIMER This presentation contains forward-looking statements within the meaning of applicable securities laws (“forward-looking statements”), including, but not limited to, statements relating to future expectations of our revenues, (adjusted) operating income margins, SG&A, earnings and a
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