Magna International Inc. · TSX:MG
Magna International — Q3 2018 Earnings Presentation
32 slides from Magna International's earnings presentation, Nov 8, 2018
Slide 1: Q3 2018 Results Conference Call
November 8, 2018 CONFERENCE CALL Q3 2018 Results 1
Slide 2: Forward Looking Statements
Forward Looking Statements 2 We disclose "forward - looking information" or "forward - looking statements" (collectively, "forward - looking statements") to provide information about management's current expectations and plans . Such forward - looking statements may not be appropriate for other purp
Slide 3: Reminders
Reminders • All amounts are in U.S. Dollars (unless otherwise noted) • Today’s discussion excludes the impact of other expense, net • Results for 2017 have been restated to reflect our adoption of a new revenue accounting standard related to tooling and pre - production engineering 3
Slide 4: Highlights
Q3 2018 Highlights • Third quarter records for sales, Adjusted Diluted EPS • Returned $629 million to shareholders in the quarter • Continued outgrowth of vehicle production • Sale of Fluid Pressure & Controls business • J.D. Power award for Seat Quality and Satisfaction • Launch of the all - new BM
Slide 5: Sales Performance vs Market
Sales Performance vs Market Q3 2018 vs Q3 2017 Reported Organic 1 Unweighted Outperformance Weighted Outperformance Body Exteriors & Structures 4% 6% 8% 4% Power & Vision 4% 6% 8% 4% Seating 0% 5% 7% 3% Complete Vehicles 48% 50% 52% 48% TOTAL SALES 9% 11% 13% 9% Unweighted Production Growth (2%) Wei
Slide 6: Global Fluid Pressure & Controls Business Divestiture
Global Fluid Pressure & Controls Business Divestiture • Powertrain unit signed agreement to sell global FP&C business to Hanon Systems • Sale price was approximately $1.23 billion • FP&C specialized in mechanical and electrical pumps, electronic cooling fans, and other components • Disposition sharp
Slide 7: Magna Wins J.D. Power Award for Seat Quality and Satisfaction
Magna Wins J.D. Power Award for Seat Quality and Satisfaction • Magna awarded for second year in a row • Magna - made seats in the Ford Edge ranked highest in the midsize/large SUV segment • Seating continues to grow in all regions due to our strong program management & engineering, and reputation f
Slide 8: Magna to Produce the New Z4 for the BMW Group
Magna to Produce the New Z4 for the BMW Group • Magna’s Complete Vehicle operations the sole - source of production for the new BMW Z4 • Will be the fifth vehicle model assembled at our contract manufacturing facility in Graz, Austria • Production will start at the end of 2018 • Our unique expertise
Slide 9: Financial Highlights
Q3 2018 Financial Highlights • Details: – Q3 record Consolidated Sales – up 9% – Consolidated Adjusted EBIT – down 1% – Q3 record Adjusted Net Income Attributable to Magna – up 4% – Q3 record Adjusted Diluted EPS – up 12% • Generated $637M in free cash flow • Returned $629M to shareholders • Reduced
Slide 10: Consolidated Sales Performance
Q3 2018 Consolidated Sales Performance $ BILLIONS ($Millions) 176 117 2 453 754 B/(W) 8.9 4.2 2.9 1.2 1.4 9.6 Q3 2017 Body Exteriors & Structures Power & Vision Seating Complete Vehicles Q3 2018 + 9 % RECORD 10
Slide 11: Consolidated Sales Performance
Q3 2018 Consolidated Sales Performance $ BILLIONS Key Factors: • Launch of new programs (+) • Change in production volumes ( - ) • Foreign exchange translation ( - ) Q3 2017 Q3 2018 + 9 % 8.9 9.6 11
Slide 12: Adjusted EBIT and Equity Income
Q3 2018 Adjusted EBIT and Equity Income - 70 BP ADJUSTED EBIT MARGIN % 8.0 7.3 KEY FACTORS + 38 % EQUITY INCOME ($ Millions) 45 62 Q3 2017 Q3 2018 12 - 1 % ADJUSTED EBIT ($ Millions) 705 699 • Complete Vehicles ( - ) • Seating ( - ) • Power & Vision ( - ) • Corporate and other (+)
Slide 13: Financial Highlights
Q3 2018 Financial Highlights Q3 2017 Q3 2018 ADJUSTED DILUTED EPS + $0.17 $1.39 $1.56 13 Q3 2017 Q3 2018 EFFECTIVE TAX RATE - 360 BP 23.6% 20.0% Q3 2017 Q3 2018 ADJUSTED NET INCOME ATTRIBUTABLE TO MAGNA + $21 Million $514M $535M
Slide 14: Segment Sales: Body Exteriors & Structures
Q3 2018 Segment Sales BODY EXTERIORS & STRUCTURES $ BILLIONS • New program launches (+) • Change in production volumes on other programs ( - ) • Foreign currency translation ( - ) • Net customer price concessions ( - ) Significant New Launches: • Ram 1500 Pickup • BMW X3 • Chevrolet Traverse and Bui
Slide 15: Segment Adjusted EBIT Margin: Body Exteriors & Structures
Q3 2018 Segment Adjusted EBIT Margin % BODY EXTERIORS & STRUCTURES • Favourable customer pricing resolutions (+) • Productivity and efficiency improvements (+) • Higher launch costs ( - ) • Inefficiencies at a plant we are closing ( - ) • Restructuring costs at a certain facility ( - ) Q3 2017 Q3 20
Slide 16: Segment Sales: Power & Vision
Q3 2018 Segment Sales POWER & VISION $ BILLIONS • New program launches (+) • Change in production volumes on other programs ( - ) • Foreign currency translation ( - ) • Impact of divestitures ( - ) • Net customer price concessions ( - ) Significant New Launches: • Ram 1500 Pickup • Audi A6 • Chevrol
Slide 17: Segment Adjusted EBIT Margin: Power & Vision
Q3 2018 Segment Adjusted EBIT Margin % POWER & VISION • Spending associated with electrification and autonomy ( - ) • Higher foreign exchange losses ( - ) • Warranty costs ( - ) • Higher equity income (+) • Lower launch costs (+) Q3 2017 Q3 2018 - 60 BP 9.4% 8.8% 17
Slide 18: Segment Sales: Seating
Q3 2018 Segment Sales SEATING $ BILLIONS • New program launches (+) • Foreign currency translation ( - ) • Change in production volumes on other programs ( - ) • Impact of divestiture ( - ) • Net customer price concessions ( - ) Significant New Launches: • Ford Expedition and Lincoln Navigator • Lyn
Slide 19: Segment Adjusted EBIT Margin: Seating
Q3 2018 Segment Adjusted EBIT Margin % SEATING 19 Q3 2017 Q3 2018 - 210 BP 7.8% 5.7% • New facility costs ( - ) • Favourable customer pricing resolutions in Q3 2017 ( - ) • Higher foreign exchange losses ( - )
Slide 20: Complete Vehicles
Q3 2018 Complete Vehicles 20 + 59 % ASSEMBLY VOLUMES (Thousands of units) 21.1 33.5 + 48 % SALES ($ Millions) 938 1,391 + 7 ADJUSTED EBIT ($ Millions) 17 24 ADJUSTED EBIT MARGIN % 1.8 1.7 Q3 2017 Q3 2018
Slide 21: Cash Flow
Q3 2018 Cash Flow $ MILLIONS Cash from Operations Net Income + Non - Cash Items $ 899 Changes in Non - Cash Operating Assets & Liabilities $ 177 $ 1,076 Investment Activities Fixed Assets $ 381 Investments, Other Assets & Intangibles $ 114 $ 495 Proceeds from Disposition and Other $ 56 Free Cash Flo
Slide 22: Return of Capital to Shareholders
Return of Capital to Shareholders Common Shares Repurchased in Q3 9.2M $ to Repurchase Shares in Q3 $ 520M Dividends Paid $ 109M Total Q3 Return to Shareholders $ 629M Common Shares Repurchased to date in Q4 1 3.0M $ to Repurchase Shares in Q4 1 $ ~150M 22 1 As of November 2, 2018
Slide 23: 2018 Outlook: Vehicle Production and FX
2018 Outlook November August Vehicle Production: – North America 17.0M 17.2M – Europe 22.5M 22.6M Foreign Exchange Rates: – U.S. – Cdn 0.772 0.771 – U.S. – Euro 1.184 1.185 23
Slide 24: 2018 Outlook
2018 Outlook 1 $ BILLIONS UNLESS OTHERWISE NOTED U.S. GAAP November August Sales: • Body Exteriors & Structures $17.3 - $17.7 $17.1 - $17.9 • Power & Vision $12.3 - $12.6 $12.2 - $12.8 • Seating Systems $5.4 - $5.6 $5.5 - $5.9 • Complete Vehicles $5.9 - $6.1 $6.1 - $6.5 Total Sales $40.3 - $41.4 $40
Slide 25: 2018 Segment Adjusted EBIT Margin Outlook
2018 Segment Adjusted EBIT Margin % OUTLOOK vs PRIOR FORECAST 2017 Prior 2018 Current 2018 25 BODY EXTERIORS & STRUCTURES 8.1% 8.1 - 8.5% 7.8 - 8.0% SEATING SYSTEMS 8.3% 7.5 - 8.0% 7.5 - 7.8% POWER & VISION 10.2% 9.5 - 10.0% 9.3 - 9.6% COMPLETE VEHICLES 1.9% 1.0 - 1.5% 1.0 - 1.3%
Slide 26: Summary
Summary 26 • Number of puts and takes in Q3 • Power & Vision, Seating Systems, and Complete Vehicles performed substantially in line with our expectations after taking into account weaker than expected volumes • Expect to outgrow the market and generate strong free cash flow
Slide 27: Appendix
November 8, 2018 APPENDIX Q3 2018 Conference Call 27
Slide 28: Reconciliation of Reported Results
Q3 2018 Reconciliation of Reported Results EXCLUDING OTHER EXPENSE (INCOME), NET $ MILLIONS – EXCEPT PER SHARE FIGURES Reported Other Exp./Inc. Excl. Other Exp./Inc. Income Before Income Taxes $ 674 $ 2 $ 676 % of Sales 7.0% 7.0% Income Taxes $ 114 $ (21) $ 135 % of Pretax 16.9% 20.0% Income Attribu
Slide 29: Q3 2017 Reconciliation of Reported Results
Q3 2017 Reconciliation of Reported Results EXCLUDING OTHER EXPENSE (INCOME), NET $ MILLIONS – EXCEPT PER SHARE FIGURES Reported Restructuring Excl. Other Exp./Inc. Income Before Income Taxes $ 683 $ 2 $ 685 % of Sales 7.7% 7.7% Income Taxes $ 162 $ - $ 162 % of Pretax 23.7% 23.6% Income Attributable
Slide 30: Segment Impact on Adjusted EBIT
Segment Impact on Adjusted EBIT % of Sales Q3 2018 vs Q3 2017 $ MILLIONS Sales Adjusted EBIT Adjusted EBIT as a Percentage of Sales Third Quarter of 2017 $ 8,864 $ 705 8.0% Increase (Decrease) related to: Body Exteriors & Structures $ 176 $ 16 0.0% Power & Vision $ 117 $ (9) (0.2%) Seating Systems $
Slide 31: Geographic Sales
Geographic Sales Q3 2018 vs Q3 2017 31 Q3 2017 Q3 2018 + 6 % NORTH AMERICA ($Billions) 4.7 4.9 PRODUCTION +4% 0 % ASIA ($Millions) 660 662 PRODUCTION - 4% (China - 9%) + 14 % EUROPE ($Billions) 3.5 4.0 PRODUCTION 0% - 16 % REST OF WORLD ($Millions) 162 137 PRODUCTION +3%
Slide 32: Adjusted Debt to Adjusted EBITDA Calculation
Adjusted Debt to Adjusted EBITDA Calculation $ MILLIONS Q3 2018 Unadjusted LTM EBITDA $ 4,466 Other Income (Expense) LTM $ 6 Other $ 391 Adjusted EBITDA $ 4,863 Debt per Balance Sheet $ 4,634 Operating Lease Adjustment $ 1,729 Other $ 267 Adjusted Debt $ 6,630 Adjusted Debt / Adjusted EBITDA 1.36x 3