Linamar Corporation · TSX:LNR
Linamar — Q4 2023 Earnings Presentation
45 slides from Linamar's earnings presentation, Mar 6, 2024
Slide 1: 2023 Q4 Conference Call Presentation
2023 Q4 Conference Call Presentation Linda Hasenfratz, Executive Chair & CEO March 6th, 2024 For Audio Only Dial in: North America: (888) 259-6580 International: (416) 764-8624 Conference ID: 11859424
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: Agenda: Quarter Highlights
Agenda Quarter Highlights Financial Strategy & Operations ▪ Record Results ▪ 1 acquisition closed ▪ Double Digit Top & another announced Bottom-Line Growth ▪ Both accretive with proprietary technology Markets & Market Share Innovation & New Business ▪ Growth in 2023 ▪ Excellent NBW in ▪ Flat/modest
Slide 4: Financial
Financial
Slide 5: Financial Highlights
Agenda Financial Highlights ANNUAL QUARTERLY ▪ Record sales at $9.73 Billion ▪ Double Digit Top & Bottom-Line Growth ▪ Double Digit Top & Bottom-Line Growth ▪ Sales up 19% ▪ Sales up 23% ▪ Normalized EPS1 up 23% ▪ Normalized EPS1 up 40% ▪ Margin expansion versus Q4 2022 ▪ Margin expansion to 5.6% ▪
Slide 6: Financial Highlights: Income Statement
Financial Highlights Income Statement Q4 2023 Q4 2022 %Δ 2023 2022 %Δ Q4 2023 The key factors impacting results in the quarter are: Sales 2,453.9 2,060.0 19.1% 9,733.5 7,917.9 22.9% 1) An unusually strong quarter for the industrial segment (best Q4 in history for MacDon); NE – Normalized1 122.2 99.5
Slide 7: Financial Highlights: Balance Sheet
Financial Highlights Balance Sheet 2023 2022 ▪ Balance sheet has remained consistently strong despite higher acquisition activity and resumption of normal capex spending Net Debt1 1,119.0 447.9 ▪ Leverage in excellent shape at 0.85x Net Debt to EBITDA, well under Net Debt to EBITDA2 0.85x 0.42x max
Slide 8: Strategy & Operations
Strategy & Operations © Linamar Corporation 8
Slide 9: Strategy & Operations Highlights
Agenda Strategy & Operations Highlights Structures Group Agriculture Group ▪ Completed acquisition of Mobex ▪ Announced acquisition of Bourgault ▪ Immediately accretive Industries acquisition ▪ Immediately accretive ▪ Strong proprietary technology acquisition in VRC & PRC casting for ▪ Industry-lead
Slide 10: Linamar's Powerful Synergistic Diversification Model
Linamar’s Powerful Synergistic Diversification Model Cash for Continued Brand Investment Management MOBILITY The Power of a Balanced & Diversified Business Model SEGMENT INDUSTRIAL Consistent Strong, Stable Sustainable Strong Profit SEGMENT Margins Free Cash Flow Balance Sheet Consistent Growth Supp
Slide 11: Synergistic Diversification Model Key Driver of Long-Term Performance
Synergistic Diversification Model Key Driver of Our Long-Term Consistent Strong Performance Percentage of years, out of the last 14 years, when Linamar has delivered upon each metric 1 - Free Cash Flow (FCF) and Net Earnings (NE) – Normalized are Non-GAAP Financial Measures. Please refer to “Non-GAA
Slide 12: Bourgault Acquisition
Bourgault Acquisition Immediately Accretive, Another Technology Leader for Ag Business Key Facts ▪ CAD $450 Million Sales ▪ OE within Industrial Segment normal range ▪ CAD $640 Million Acquisition Cost ▪ Valuation compares favourably to precedent agricultural transactions ▪ Immediately Accretive ▪ A
Slide 13: Complementary Short-line Products
Complementary Short-line Products Linamar has become a leader in premium short-line agriculture equipment and now with the acquisition of Bourgault provides a full suite of product offerings addressing all segments of the broad acre crop production cycle © Linamar Corporation 13
Slide 14: Agriculture Growth Strategic Criteria
Agriculture Growth Strategic Criteria SHORT-LINE OEM DIFFERENTIATED CUSTOMER CONNECTION ▪ Distribution synergies ▪ Innovative & Differentiated Offering ▪ Brand Recognition means end users ▪ OEM Complementary ▪ Strong Intellectual Property who pull demand through channels ▪ Additional Value ▪ Configu
Slide 15: Markets & Market Share
Markets & Market Share © Linamar Corporation 15
Slide 16: Market & Market Share Highlights
Agenda Market & Market Share Highlights Mobility Access Agriculture ▪ 9.5% global LV market ▪ High single digit global ▪ Flat to down markets in growth in 2023 market growth 2023 2023 & 2024 ▪ CPV up in NA & ▪ Increased global ▪ Excellent global market Europe to record market share for share growth
Slide 17: Market Snapshot
Mobility: Market Snapshot ▪ Q1 2024 Global LV Production expected to be essentially flat over Q1 2023 ▪ US Day’s Supply of Inventory is back to more normalized levels ▪ Strong launch book continues to support mobility segment double digit revenue growth for 2024 Access ▪ Industry experts are predict
Slide 18: Automotive Sales & Content Per Vehicle (CPV)
Automotive Sales & Content Per Vehicle2 (CPV) CPV Q4 2023 CPV Q4 2022 CPV % Change Vehicle Production Automotive Automotive Automotive Units % Change Sales Q4 2023 Sales Q4 2022 Sales % Change (CAD Millions) (CAD Millions) North America 275.28 237.63 15.8% 4.9% 1,064.7 876.0 21.5% Europe 99.25 90.70
Slide 19: Industrial Segment: Market Share Gains in Key Segments
Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Global Market Share Q3 2022 MacDon Combine Drapers: Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Industrial Segment: Market Share Gains in Key Segments Q
Slide 20: Innovation & New Business
Innovation & New Business © Linamar Corporation 20
Slide 21: Innovation & New Business Highlights
Agenda Innovation & New Business Highlights Mobility Access Agriculture ▪ Continued strong ▪ E-Drive ▪ MacDon, Salford new business program rollout and Bourgault all wins continues launching new ▪ Wins are a innovations balance of HEV, BEV, ICE, PA ▪ Strong Product Portfolio in Propulsion Agnostic P
Slide 22: Excellent Mobility New Business Wins
Agenda Excellent Mobility New Business Wins ▪ Q4 strongest quarter in year for NBW ▪ NBW a good blend of ▪ Propulsion Agnostic and Powertrain ▪ BEV, HEV and ICE ▪ >$15M in wins for propulsion-agnostic structural components ▪ Nearly $40M in wins for hybrid electric vehicle engine components and assem
Slide 23: Mobility Launches
Mobility Launches Launching nearly $3.7 Billion of new work today 4.00 3.50 3.00 2.50 CAD (Billions) 2.00 1.50 1.00 0.50 0.00 2022 2023 2024 2025 2026 Incremental Growth from Launches $700 Million Launched in 2023 $700 to $900 Million Launching in 2024 Updated: February 2024 © Linamar Corporation 23
Slide 24: Solid Blend of Products Suited to Changing Propulsion Types
Solid Blend of Products Well Suited to a Changing Landscape of Propulsion Types 2028 Light Vehicle Sales by Propulsion Type & System 42% 39% 19% Propulsion Agnostic BEV/HEV Powertrain ICE Powertrain Source: Linamar Internal, Feb. 15, 2024. 24
Slide 25: Flexibility is Key to Managing Major Transitions
Flexibility is Key to Managing Major Transitions ▪ Flexibility should directly correlate to level of uncertainty ▪ Create a Product Portfolio with equal potential for any type of vehicle propulsion ▪ Ensure content across a wide variety of platforms to optimize sales potential based on market demand
Slide 26: Structural and Chassis Strategy
Structural and Chassis Strategy: On Exhibit at EUROGUSS 2024, World’s Largest Die Casting Show ▪ Linamar Exhibited at the EUROGUSS 2024 trade fair in January in Nürnberg, Germany ▪ The first opportunity to showcase how the Structural and Chassis Portfolio comes together with an extensive offering of
Slide 27: Innovation: Start of production of E-Drive Midsize Scissors
Innovation: Start of production of E-Drive Midsize Scissors ▪ Five new E-Drive models introduced in Q4 of 2023 ▪ Utilizing highly efficient AC electric drive motors, a “3 in 1” integrated control system, CAN joystick & On-Board Diagnostics ▪ With continued roll out, now offer a total of ten E-Drive
Slide 28: Innovation: The new MacDon FC Series FlexCorn
Innovation: The new MacDon FC Series FlexCorn The FlexCorn expands our corn header product line This new product offers smooth, ground-following flex with smart, seamless combine integration © Linamar Corporation 28
Slide 29: Innovation: New Salford SS320 & SS420 Chassis Mounted Spreader
Innovation: New Salford SS320 & SS420 Chassis Mounted Spreader New 56N cover crop seeder designed specifically for narrow, folding tillage tools © Linamar Corporation 29
Slide 30: Innovation: New Bourgault XP DUO Meter System
Innovation: New Bourgault XP DUO Meter System © Linamar Corporation 30
Slide 31: Outlook
Outlook © Linamar Corporation 31
Slide 32: Outlook
Outlook Consolidated Normal Ranges 2023 Actuals Expectations 2024 Sales Growth 22.9% Double Digit Growth Q1 24 Expectations 1 Normalized EPS Growth 40.3% Double Digit Growth ▪ Mobility 1 Normalized Net Margin 7.0% - 9.0% 5.6% Expansion ▪ Expect double digit sales growth to prior year, mid to high si
Slide 33: Financial Review
Financial Review Dale Schneider, CFO Linamar Corporation 33
Slide 34: Financial Highlights
Financial Highlights Income Statement Q4 2023 Q4 2022 %Δ 2023 2022 %Δ Q4 2023 The key factors impacting results in the quarter are: Sales 2,453.9 2,060.0 19.1% 9,733.5 7,917.9 22.9% 1) An unusually strong quarter for the industrial segment (best Q4 in history for MacDon); NE – Normalized1 122.2 99.5
Slide 35: Foreign Exchange Gain/Loss (in millions CAD)
Foreign Exchange Gain/Loss (in millions CAD) Q4 2023 Q4 2022 +/- ▪ Total FX Loss was $24.8 which resulted from a $22.3 FX Loss – FX Gain/(Loss) – Operating1 (22.3) (17.1) (5.2) Operating and a $2.5 FX Loss – Financing. FX Gain/(Loss) – Financing (2.5) (0.3) (2.2) ▪ FX Loss – Operating was comprised
Slide 36: Industrial Sales, Earnings, and Margins
Industrial Sales, Earnings, and Margins (in millions CAD) Industrial Sales increased by 19.8% or $100.3 to $607.4. Q4 2023 Q4 2022 ▪ The Sales were helped by: Finance ▪ a substantial increase in agriculture sales driven by global market share growth on Sales 607.4 507.1 drapers which is our primary
Slide 37: Mobility Sales, Earnings, and Margins
Mobility Sales, Earnings, and Margins (in millions CAD) Mobility sales increased by 18.9% or $293.6 to $1,846.5. Q4 2023 Q4 2022 ▪ The Sales were helped by: ▪ the additional sales from our Linamar Structures acquisitions in 2023; Sales 1,846.5 1,552.9 ▪ the increasing volumes on launching programs a
Slide 38: Operating Expenses (in millions CAD)
Operating Expenses (in millions CAD) Q4 2023 Q4 2022 +/- % ▪ Gross Margin was $320.2 in the quarter and was impacted by the same factors that impacted each business segment. (See the previous two slides) Sales 2,453.9 2,060.0 393.9 19.1% Cost of Goods Sold 2,133.7 1,811.2 322.5 17.8% ▪ Amortization
Slide 39: Finance Expenses & Income Tax
Finance Expenses & Income Tax (in millions CAD) ▪ Finance expenses increased by $13.3. Q4 2023 Q4 2022 +/- ▪ Finance expenses were hurt by: ▪ the new private placement notes issued in June 2023 to fund the Linamar Structures acquisitions in 2023; and Finance Expense 24.7 11.4 13.3 ▪ additional inter
Slide 40: Leverage (in millions CAD)
Leverage (in millions CAD) Q4 2023 Q4 2022 ▪ Cash position at the end of the quarter was $653.3 million. ▪ Linamar generated $276.4 in Cash from Operating Activities. Cash Position 653.3 860.5 ▪ Net Debt to EBITDA at 0.85x mainly due to Linamar Structures acquisitions in 2023. Available Cash on Cred
Slide 41: Conclusion
Conclusion ▪ Double-Digit Sales growth in both Industrial and Mobility ▪ Improving markets and increasing market share in both segments; and ▪ Overall, sales up 19.1% for Q4 and 23% for the year. ▪ Double-Digit Normalized Net Earnings and Earnings per Share growth ▪ Mobility margin growth over Q3 20
Slide 42: Question and Answer
Question and Answer © Linamar Corporation 42
Slide 43: Outlook
Outlook Consolidated Normal Ranges 2023 Actuals Expectations 2024 Sales Growth 22.9% Double Digit Growth Q1 24 Expectations 1 Normalized EPS Growth 40.3% Double Digit Growth ▪ Mobility 1 Normalized Net Margin 7.0% - 9.0% 5.6% Expansion ▪ Expect double digit sales growth to prior year, mid to high si
Slide 44: Key Messages
Key Messages Double-Digit Top and Bottom-Line Growth, Margin Expansion for Quarter and Year Improved ROE and ROCE Excellent Strategic Agricultural Acquisition Announced Enhancing Powerful Diversification Strategy © Linamar Corporation 44
Slide 45: Thank You
Thank You www.linamar.com © Linamar Corporation 45