Martinrea International Inc. · TSX:MRE
Martinrea International — Investor Presentation (May 2022)
66 slides from Martinrea International's investor presentation, May 2022
Slide 1: Investor Presentation May 2022
INVESTOR PRESENTATION MAY 2022 ©2019 Martinrea International Inc.
Slide 2: 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 the Company’s beliefs or views or expectations of, improvements in, expansion of and/or guida
Slide 3: Q1 2022 Operations Update
Q1 2022 OPERATIONS UPDATE
Slide 4: Q1 2022 Results Much Improved Over Second Half 2021; 2023 Outlook Intact
Q1 2022 RESULTS MUCH IMPROVED OVER SECOND HALF 2021; 2023 OUTLOOK INTACT Q1 2022 notably better than Q3 and The environment remains Q4 2021, as lower level of chip- challenging, with cost pressures related customer call-offs resulted in continuing during the quarter; these improved volume and mix co
Slide 5: Status of Operations
STATUS OF OPERATIONS North Europe Asia America • Volume and mix improved in Q1 2022 • European production volumes also saw a • China is being impacted by the same given a more stable production sequential improvement in Q1 2022. volume headwinds as in other environment. Further improvement Volumes a
Slide 6: Key Program Launches in 2021-2022
KEY PROGRAM LAUNCHES IN 2021-2022 Lightweight Structures Propulsion Systems Flexible Manufacturing Jeep Grand Cherokee Jeep Grand Cherokee Ford Maverick Jeep Grand Wagoneer Jeep Grand Wagoneer Float Arms / Tanks / Supports Ford Mustang Mach-E Ford – D35 6-Cylinder Fuel Tanks Lucid Air Engine Nissan
Slide 7: Industry Overview
INDUSTRY OVERVIEW
Slide 8: US Light Vehicle Sales (SAAR)
US LIGHT VEHICLE SALES (SAAR) • US auto sales have declined in recent months due to a lack of supply of vehicles US Light Vehicle sales 25 weakened through the first quarter of 2022, with a SAAR of 15.0M in Millions of Units 20 January, 14.1M in 15 February, and 13.3M in March. Low inventory as a re
Slide 9: US Light Vehicle Inventory Days
US LIGHT VEHICLE INVENTORY DAYS • US light vehicle inventories continue to trend near historic lows US Inventory Days January 2020 March Outstanding (pre-pandemic) 2022 Passenger Cars 95 28 CUVs/SUVs 90 26 Light Trucks 100 35 All Vehicle Types 76 28 Source: MarkLines Co. www.martinrea.com | 9
Slide 10: Business Overview
BUSINESS OVERVIEW
Slide 11: Martinrea Overview
MARTINREA OVERVIEW Leading Tier One automotive supplier in lightweight structures and propulsion systems One of the fastest growing automotive parts suppliers since 2001 Operating in 57 locations (including sales and engineering centers) in 10 countries: Canada, United States, Mexico, Brazil, German
Slide 12: Martinrea Culture, Vision, Mission and Principles
MARTINREA CULTURE, VISION, MISSION AND PRINCIPLES VISION 10 GUIDING PRINCIPLES Making lives better by being the best supplier we can be in Our success will be based on the execution of our guiding the products we make and the services we provide. principles, applied with integrity, in all that we do
Slide 13: Martinrea Vision – Making Lives Better
MARTINREA VISION – MAKING LIVES BETTER www.martinrea.com | 13
Slide 14: Martinrea's Global Presence
MARTINREA’S GLOBAL PRESENCE www.martinrea.com | 14
Slide 15: Our Journey
OUR JOURNEY www.martinrea.com | 15
Slide 16: Martinrea Products and Capabilities
MARTINREA PRODUCTS AND CAPABILITIES Assembly Powertrain Body-in-White and Chassis Fluids Industrial www.martinrea.com | 16
Slide 17: Competitive Landscape
COMPETITIVE LANDSCAPE STEEL METAL FORMING FLUID MANAGEMENT SYSTEMS ALUMINUM COMPONENTS PRIMARY OTHER www.martinrea.com | 17
Slide 18: Martinrea 2.0
SEE ~ MARTINREA —<&, 2.0P> sééiteme? d A, i ¥ I MARTINREA] SIN ON w \w /
Slide 19: Martinrea 2.0 Deployment Plans
Martinrea 2.0 is the framework to be a great company… diverse people and groups working together toward a single vision. • Fostering principles-based leadership • Promoting positive behaviours • Creating a strong lean culture • Implementing best practices COMPANY BUSINESS UNIT PLANT DEPLOYMENT PLANS
Slide 20: Martinrea's Manufacturing System
MARTINREA’S MANUFACTURING SYSTEM • The way we think – Learn to unlearn – attack waste • Pride kills continuous improvement – Pride for your people not for your practice – Be humble, there is always a better way • Engaging our people at all levels – Developing and respecting our people – Learning by
Slide 21: Report Card
REPORT CARD • Martinrea 2.0 framework has proven to be effective • Results from 2014 to 2019 speak for themselves: – 72% improvement in safety – 34% improvement in quality – Doubling of Adjusted Operating Income Margin from ~4% to north of 8% (excluding the impact of the UAW GM strike and higher too
Slide 22: Process Innovation
PROCESS INNOVATION
Slide 23: The Way We Produce
THE WAY WE PRODUCE www.martinrea.com | 23
Slide 24: Martinrea Flexible Build Process
MARTINREA FLEXIBLE BUILD PROCESS Past 40% Less Capital Demand 18% Less Labour Up 20% Less Space Flexes With Volume Demand Down Flex Labour with Volume: No Flex labour with Volume: Yes Lifespan: 6 Years Lifespan: 12+ Years Tooling change-over: 4 weeks Tooling change-over: 30 Minutes Service part Capa
Slide 25: Product Innovation
PRODUCT INNOVATION
Slide 26: We Are a Lightweighting Company
WE ARE A LIGHTWEIGHTING COMPANY Continuously developing and evolving core products in Lightweight Structures and Propulsion Systems (high-strength steel, aluminum, assemblies, etc.) to reduce vehicle weight and CO2 emissions, improving overall vehicle efficiency (MPG) www.martinrea.com | 26
Slide 27: Martinrea's Product Portfolio
MARTINREA'S PRODUCT PORTFOLIO www.martinrea.com | 27
Slide 28: Lightweight Structures
LIGHTWEIGHT STRUCTURES Steel ASSEMBLED ALUMINUM SUBFRAME Mild Steel, HSS, AHSS, GEN 3 Steel, Hot Stamping Aluminum ALUMINUM EXTRUSION + HOLLOW CAST 33.2 lbs STEEL ALUMINUM – Stamped, Aluminum Casted 41.2 lbs SOLID and Extruded 34.0 lbs MULTI-MATERIAL LAUNCH 2020 Multi-Material ALUMINUM – HOLLOW 27.3
Slide 29: Propulsion Systems/Expansion of Portfolio
PROPULSION SYSTEMS/EXPANSION OF PORTFOLIO Growing the Portfolio www.martinrea.com | 29
Slide 30: Recent Awards
RECENT AWARDS • 2021 Nissan Supplier Diversity Over Achievement Award • 2020 Toyota Supplier Diversity Achievement Award • 2020 General Motors Supplier Quality Excellence Award • 2020 Jaguar Land Rover Performance Excellence Award • 2019 Ford Gold Supplier Performance Award • 2019 General Motors Exc
Slide 31: Product Innovation
PRODUCT INNOVATION • Grow revenue and margins by providing engineered systems solutions and products with higher value-added content to our customers by combining our various technologies • Create long-term deep partnerships with our customers Existing Component Offerings New System Offerings www.ma
Slide 32: Growing Technology and Innovation
GROWING TECHNOLOGY AND INNOVATION IDEA RESEARCH DEVELOP TESTING ANALYSIS INTRO MARTINREA TECH CENTER www.martinrea.com | 32
Slide 33: Martinrea Book of Business Evolving with Market
MARTINREA BOOK OF BUSINESS EVOLVING WITH MARKET 2020A 2026E 8% 40% 60% 92% ICE Platforms BEV/Hybrid Platforms ICE Platforms BEV/Hybrid Platforms www.martinrea.com | 33
Slide 34: Addressable Content Per Vehicle
ADDRESSABLE CONTENT PER VEHICLE Transition will not require a material increase in capital or tooling as the majority of our equipment is flexible and adaptable www.martinrea.com | 34
Slide 35: A Closer Look at EV Transition
A CLOSER LOOK AT EV TRANSITION Internal Combustion Hybrid Electric Vehicle (EV) Engine (ICE) 80% of products are agnostic to electrification 20% of products transitioning with market change www.martinrea.com | 35
Slide 36: Pure Electric Vehicle Platforms in Martinrea Portfolio
PURE ELECTRIC VEHICLE PLATFORMS IN MARTINREA PORTFOLIO Audi PPE Body and chassis structures SOP: 2023 Daimler EVA2 Body and chassis structures SOP: 2022 Ford Mach E Aluminum front and rear subframes SOP: 2020 Geely PMA 1 Aluminum rear subframes SOP: 2021 GM BEV 3 Body and chassis structures SOP: 202
Slide 37: Whatever the Future Holds, Martinrea Will Be a Leader
WHATEVER THE FUTURE HOLDS, MARTINREA WILL BE A LEADER www.martinrea.com | 37
Slide 38: New Product Introduction - Graphene and Nylon Coated Brake Lines
NEW PRODUCT INTRODUCTION - GRAPHENE AND NYLON COATED BRAKE LINES We expect to be producing a new graphene-enhanced brake line product for one of our largest customers in 2021 www.martinrea.com | 38
Slide 39: Spotlight on Graphene
Extremely SPOTLIGHT ON GRAPHENE strong (200x Lightweight stronger than steel) Unique A high-performance material with Higher thermal electromagnetic properties game-changing potential and electrical conductivities compared to Silver and Noise Copper reducing Extremely properties impermeable Almost c
Slide 40: Spotlight on Graphene: Potential Applications
SPOTLIGHT ON GRAPHENE • Some Potential Applications – Automotive – Transportation – Renewable Energy – Industrial – Agricultural – Batteries (including Li ion for EV applications) – Recycled Plastics – Paints • We are excited about the technology that graphene provides and its opportunities through
Slide 41: EV Battery Joint Venture
EV Battery Joint Venture www.martinrea.com | 41
Slide 42: VoltaXplore - Timeline
VOLTAXPLORE - TIMELINE 2021 Early 2022 Mid-2022 Mid-2024 Secure Commissioning Go/No Go Demonstration and SOP of Decision on 10 GWh SOP of first phase of facility Demonstration facility (to be built in two 10 GWh facility facility phases) www.martinrea.com | 42
Slide 43: Advantages of Graphene-Enhanced Li-Ion Batteries
ADVANTAGES OF GRAPHENE-ENHANCED LI-ION BATTERIES www.martinrea.com | 43
Slide 44: Martinrea Innovation Development (MiND)
MARTINREA INNOVATION DEVELOPMENT (MiND) PURPOSE LEADERSHIP CURRENT MARTINREA EQUITY INVESTMENTS: Incubate, develop, and fund Bruce Johnson, • NanoXplore – Hold a 21.2% interest in innovative technologies that Executive Vice NanoXplore (GRA-TO), the world’s largest can be directly applied to Presiden
Slide 45: Environmental, Social, Governance
ENVIRONMENTAL SOCIAL GOVERNANCE i] MARTINREA J]
Slide 46: What Sustainability Means to Martinrea
WHAT SUSTAINABILITY MEANS TO MARTINREA We build a sustainable business through making people’s lives better by: • Providing meaningful opportunity, job satisfaction and job security for our people • Delivering outstanding quality products and services that contribute to the safety, lightweighting, a
Slide 47: Environmental
ENVIRONMENTAL • Lightweighting strategy helps to improve fuel efficiency (or in the case of electric vehicles, driving range per charge) and lower CO2 emissions • LEAN manufacturing practices minimize waste (e.g., energy efficiency, reduction of water consumption and waste generation) • Environmenta
Slide 48: Social
SOCIAL • Treating people the way they want to be treated, with dignity and respect (Golden Rule) • Employee Bill of Rights in place • Workplace health and safety is a key priority • Belief in open, honest two-way communication supported by visible, responsible action • Open Door Policy Safety - Tota
Slide 49: Social (Continued)
SOCIAL (CONTINUED) Diversity, Equity and Inclusion • Gender diversity – women at senior executive and Board level • Culturally diverse workforce • Supplier Diversity Program • Promoting women in automotive careers, leadership, STEM and trades www.martinrea.com | 49
Slide 50: Social (Continued)
SOCIAL (CONTINUED) Community Involvement • “Making People’s Lives Better” – global charitable giving program • Sponsorship of University co-op programs and STEM programs such as First Robotics • Partnership with Givesome to support global outreach through volunteer time, service, and donations www.m
Slide 51: Social (Continued)
SOCIAL (CONTINUED) Supplier Quality Guidelines and Assessments • Product Safety and Quality Assurance • Social Responsibility • Environmental Sustainability • Code of Conduct and Ethics • Diversity, Equity and Inclusion www.martinrea.com | 51
Slide 52: Governance
GOVERNANCE • Independent Board (6 of 8 members); 100% of committee members are independent • “Pay for Performance” – significant portion of total compensation is variable, based on performance (i.e., bonus based on pre-tax income, equity-based compensation) • Business ethics a top priority • Whistle
Slide 53: Financials
FINANCIALS
Slide 54: Sales
Assembly business changed to a purchased component consignment model resulting in SALES decrease in 2017 despite same level of production Driven by COVID-19 pandemic 4,600-4,800 3,968 4,000 3,867 3,864 253 162 3,784 162 253 3,690 3,663 211 3,599 405 211 245 374 3,500 245 269 3,375 3,222 218 In Milli
Slide 55: Top North American Vehicle Platforms
TOP NORTH AMERICAN VEHICLE PLATFORMS 1. GM Pickups/SUVs 6. Ford Edge 2. Ford Escape 7. Ford F-150 3. GM Equinox/Terrain 8. Ford Transit 4. RAM Pickups 9. Dodge Challenger/Charger 5. Jeep Grand Cherokee 10. Chevy Blazer www.martinrea.com | 55
Slide 56: Highlights of Recent New Business Awards
HIGHLIGHTS OF RECENT NEW BUSINESS AWARDS APPROX. ANNUALIZED SOP RANGE APPROX. ANNUALIZED SOP RANGE SALES AT PEAK VOLUME SALES AT PEAK VOLUME $305 M 2021 – 2024 $55 M 2021 - 2024 $270 M 2021 – 2022 $30 M 2022-2023 $250 M 2021 – 2023 $30 M 2021-2022 $195 M 2021-2023 $15 M 2021 $110M 2022 – 2024 $15 M
Slide 57: Adjusted Operating Income Margin
ADJUSTED OPERATING INCOME MARGIN* Decrease due to the impact of the UAW- GM strike and higher tooling sales 9% 8% 7.8% >8% 7.5% 7% Driven by ADJUSTED OPERATING INCOME MARGIN % 6% 6.4% COVID-19 pandemic Driven by 5% chip and 5.0% 4.6% other 4% supply 4.1% shortages 3.7% 3% 2% 1.8% 1% 0% 2014A 2015A 2
Slide 58: Adjusted Net Earnings Per Share
ADJUSTED NET EARNINGS PER SHARE* Decrease due to the impact of the UAW-GM strike FULL YEAR FINANCIALS $250.00 $2.50 EPS supported by share repurchases in 2018 and 2019 2.27 $2.22 $200.00 $1.91 $2.00 Driven by 193 COVID-19 IN MILLIONS OF CANADIAN DOLLARS 188 pandemic $1.50 166 $150.00 $1.38 Driven by
Slide 59: Cash Flow
CASH FLOW Decrease driven by COVID-19 pandemic and chip/other supply OPERATING CASH FLOW - BEFORE CHANGES IN WORKING CAPITAL ($ MILLIONS) shortages $600 $500 $400 $508 $461 $300 $406 $348 $358 $308 $321 $200 $259 $237 $100 $142 $146 $0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 CAPEX ADD
Slide 60: Q1 2022 Results – Sequential Comparison to Q4 2021
Q1 2022 RESULTS – SEQUENTIAL COMPARISON TO Q4 2021 First quarter results much improved sequentially; production environment more stable with a lower level of chip- related OEM production shutdowns and customer “call-offs” In Canadian Dollars Q1 2022 Q4 2021 Production sales up 29.7% on higher Produc
Slide 61: Q1 2022 Results – Year-Over-Year Comparison
Q1 2022 RESULTS – YEAR-OVER-YEAR COMPARISON First quarter results are approaching year-ago levels, when we began to feel the impact of lower volumes due to semiconductor and other supply shortages, mix, cost inflation, certain operational inefficiencies, and heavy launch activity In Canadian Dollars
Slide 62: Balance Sheet
BALANCE SHEET NET DEBT - Excluding IFRS-16 ($ Millions) Net Debt increased during the first quarter; an increase in production and $1,000.0 tooling-related working capital $800.0 contributed to the increase. Net Debt to $600.0 Adjusted EBITDA ended the quarter at $857.7 $922.1 $400.0 $640.0 $688.1 $
Slide 63: Capital Allocation Framework
CAPITAL ALLOCATION FRAMEWORK Invest to Maintain and Maintain Strong Return Capital Grow Our Business Balance Sheet to Shareholders • Organic opportunities • Targeted Net Debt/Adjusted • Repurchase shares with • Invest in R&D and product EBITDA ratio of ~1.5x over excess liquidity offering time (at t
Slide 64: Biographies
BIOGRAPHIES Pat D’Eramo joined Martinrea International Inc. as President and Chief Executive Officer in November 2014 and was elected to the Board of Directors in June 2015. D’Eramo has a long and successful career in the automotive business, with extensive metalforming and parts manufacturing exper
Slide 65: Biographies
BIOGRAPHIES Rob Wildeboer is the Executive Chairman and co-founder of Martinrea International Inc. He brings a deep and intricate knowledge of the Company’s culture, key personnel, strategy, history and development, and relationships with key constituencies such as capital providers and governments,
Slide 66: Biographies
BIOGRAPHIES Fred Di Tosto joined Martinrea International Inc. as Vice President of Finance in June of 2010 and then became the Company’s Chief Financial Officer in March of 2011. Di Tosto’s scope of authority includes executive guidance and direction in the following areas: Corporate and Operational
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