Martinrea International Inc. · TSX:MRE
Martinrea International — Shareholder Meeting (June 2023)
38 slides from Martinrea International's shareholder meeting presentation, Jun 6, 2023
Slide 1: Martinrea 2023 Annual General Meeting of Shareholders
MARTINREA 2023 ANNUAL GENERAL MEETING OF SHAREHOLDERS June 6, 2023 – 10:00 a.m. ©2022 Martinrea International Inc.
Slide 2: Agenda
AGENDA FORMAL BUSINESS PRESENTATIONS • Chairman’s Opening Remarks and Call to Order – Chairman’s Address – Appointment of Secretary and Scrutineer – CEO’s Address – Quorum and Constitution of Meeting – CFO’s Address • Financial Statements – Shareholders’ Question Period • Election of Directors • App
Slide 3: 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 guidan
Slide 4: Rob Wildeboer, Executive Chairman
Rob Wildeboer Executive Chairman www.martinrea.com | 4
Slide 5: Martinrea Culture, Vision, Mission and Guiding Principles
MARTINREA CULTURE, VISION, MISSION AND GUIDING PRINCIPLES VISION 10 GUIDING PRINCIPLES Making lives better by being the best supplier we can Our success will be based on the execution of our guiding be in the products we make and the services we principles, applied with integrity, in all that we do:
Slide 6: Martinrea Vision – Making Lives Better
MARTINREA VISION – MAKING LIVES BETTER www.martinrea.com | 6
Slide 7: Industry-Leading Safety
INDUSTRY-LEADING SAFETY • Total Recordable Injury Frequency (TRIF) of 1.21 – an 86% improvement since 2014 www.martinrea.com | 7
Slide 8: Employee Survey Results
EMPLOYEE SURVEY RESULTS • I fully understand my job role and responsibilities – 95% agree • Our location works to improve health and safety – 89% agree • I feel a sense of personal accomplishment at the end of the workday – 82% agree • I respect my plant General Manager – 95% agree • Martinrea prior
Slide 9: Challenges Facing Martinrea and the Auto Parts Industry
CHALLENGES FACING MARTINREA AND THE AUTO PARTS INDUSTRY Macroeconomic Issues Supply Chain Issues Erratic Customer Labour Shortages • Cost inflation • Previously semiconductor Production Schedules • Especially in the U.S. • Interest rates chips, now broad-based across • Related to supply chain, • Gro
Slide 10: Reasons to Be Positive
REASONS TO BE POSITIVE • North American light vehicle production is expected to increase for the next several years • There is pent-up demand, given a long period of inventory shortages, which is now beginning to improve • Autos need replacing – U.S. average Source: IHS Markit vehicle age of 12 year
Slide 11: Reasons to Be Positive
REASONS TO BE POSITIVE May 2023 • U.S. light vehicle sales (SAAR) has U.S. Light Vehicle Sales (SAAR) SAAR = held in better than many expected 20 15.1M • Household balance sheets remain in Millions of Units 15 good shape • Unemployment is low 10 • Martinrea is positioned to benefit 5 from these macr
Slide 12: 2022 Share Price Performance
2022 SHARE PRICE PERFORMANCE 2022 Share Price Return 0% -2.1% -9.2% -10.2% -20% -15.2% -18.2% -25.7% -25.7% % Return -30.0% -31.7% -40% -33.1% -60% -58.0% -80% Source: S&P Capital IQ www.martinrea.com | 12
Slide 13: Year-to-Date Share Price Performance
YEAR-TO-DATE SHARE PRICE PERFORMANCE Year-To-Date Share Price Return (as of June 2, 2023) 30% 27.9% 18.5% 20% 15.5% 10.8% 10% 5.7% 1.7% 1.6% 1.2% % Return 0% -10% -6.6% -8.3% -8.9% -20% -24.1% -30% Source: S&P Capital IQ www.martinrea.com | 13
Slide 14: Share Price Performance Since Last AGM
SHARE PRICE PERFORMANCE SINCE LAST AGM Share Price Return Since Last AGM (June 6, 2022 - June 2, 2023) 120% 100% 86.9% 80% 60% % Return 40% 19.0% 18.3% 20% 12.0% 9.3% 4.7% 0% -20% -2.1% -6.9% -8.0% -19.8% -20.1% -23.4% -40% -60% Source: S&P Capital IQ www.martinrea.com | 14
Slide 15: 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 16: Pat D'Eramo, President and CEO
Pat D’Eramo President and CEO www.martinrea.com | 16
Slide 17: 2022 in Review
2022 IN REVIEW Industry-leading safety metrics v TRIF - 86% improvement Won a number of over 2014 quality awards Record revenues of v from v – up $4.758 billion multiple customers 25.7% from 2021 Maintained quarterly v dividend 2022 Record Adjusted EBITDA – up 62.4%vfrom 2021 Balance sheet improved
Slide 18: 2022 in Review
2022 IN REVIEW • Our Sustainability program is becoming increasingly sophisticated, with some notable achievements made during 2022: (up from 'C' in 2021) • Increasingly, we are being recognized as an innovator in our field www.martinrea.com | 18
Slide 19: Status of Operations
STATUS OF OPERATIONS North Rest of World Europe 2022 Production Sales America 2022 Production Sales 2022 Production Sales • North American Adjusted Operating • European Adjusted Operating Income • Adjusted Operating Income declined year- Income improved significantly, as: improved substantially: ove
Slide 20: Lightweight/Electrified Vehicles Drive the Need for More Advanced Products
LIGHTWEIGHT/ELECTRIFIED VEHICLES DRIVE THE NEED FOR MORE ADVANCED PRODUCTS Martinrea’s Projected Book of Business: 2015 2020 2021 2023 2027 v Estimated mix based on IHS Markit production volume data ICE Platforms BEV/Hybrid Platforms www.martinrea.com | 20
Slide 21: 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 | 21
Slide 22: BEV Thermal Management
BEV THERMAL MANAGEMENT Thermal Management Line System 1 2 • 66% more Tube Product 1 2 • 600% more Quick Connectors Martinrea Thermal Management System Tube Products • Three types currently available • One type under development, available Q4 2023 • Meets all application needs • Meets low water perme
Slide 23: Select Pure Electric Vehicle Platforms in Martinrea Portfolio
SELECT PURE ELECTRIC VEHICLE PLATFORMS IN MARTINREA PORTFOLIO SOP: 2020 SOP: 2022 SOP: 2023 Ford Mach-E Daimler EVA2 Audi PPE Aluminum front Body and chassis Body and chassis and rear subframes structures structures, e-motor housing Samsung Geely PMA 1 GM BEV 3 Aluminum battery Aluminum rear Body an
Slide 24: Sales Outlook
Expect to see Better, but continued SALES OUTLOOK other supply improvement chain Good problems recovery chip shortage $4,800 - $5,000 5,000 Pandemic / Chip shortage Production Sales $314 $302 4,500 Tooling Sales 4,000 $405 $374 3,500 $269 $ Millions (CAD) $218 3,000 $4,456 $4,593 2,500 $3,394 $3,459
Slide 25: Our Equipment Is Flexible and Adaptable
OUR EQUIPMENT IS FLEXIBLE AND ADAPTABLE Transition does not require a material increase in capital or tooling as the majority of our equipment is flexible and adaptable www.martinrea.com | 25
Slide 26: Martinrea Innovation Development (MiND)
MARTINREA INNOVATION DEVELOPMENT (MiND) Purpose Investments NanoXplore – Hold a 22.7% interest Incubate, develop, and fund innovative AlumaPower – Company developing technologies that are strategic to aluminum air battery technology for a variety Martinrea’s portfolio of end markets Effenco – Acquir
Slide 27: Effenco (Latest Investment)
EFFENCO® (LATEST INVESTMENT) • Acquired assets of Montreal-based Effenco® Development Inc. in 2022 • Effenco® designs, manufactures and markets ultracapacitor systems, which reduces: • The Effenco® Hybrid electric solution is focused on the heavy-duty vocational truck market • Effenco® is a Global C
Slide 28: VoltaXplore Transaction
VOLTAXPLORE TRANSACTION • On March 24, Martinrea sold its 50% equity interest in VoltaXplore to NanoXplore – Aggregate equity consideration of $10 million, paid in NanoXplore shares – Gain on investment of $5.3 million – NanoXplore now owns 100% of the equity and intellectual property of VoltaXplore
Slide 29: Fred Di Tosto, Chief Financial Officer
Fred Di Tosto Chief Financial Officer www.martinrea.com | 29
Slide 30: Overview of 2022 Results
OVERVIEW OF 2022 RESULTS 2022 results were up sharply over a challenging 2021 on higher sales and margins. Most importantly, we generated solid positive Free Cash Flow during the year. In Canadian Dollars 6.0% 5.6% F2022 F2021 5.0% 4.0% Production Sales $4,456M $3,410M 4.0% Tooling Sales $302M $374M
Slide 31: Q1 2023 Results – Sequential Comparison to Q4 2022
Q1 2023 RESULTS – SEQUENTIAL COMPARISON TO Q4 2022 Q1 2023 results improved quarter-over-quarter compared to Q4 2022. Adjusted EBITDA set another quarterly record for the Company. In Canadian Dollars Q1 2023 Q4 2022 Production sales up 5.6% on higher production Production Sales $1,239.5M $1,173.6M v
Slide 32: Balance Sheet
BALANCE SHEET NET DEBT - Excluding IFRS-16 ($ Millions) $1,200.0 $1,000.0 $800.0 Q1 2023 net debt increased by $47 million compared to Q4 2022. $600.0 $908.7 $955.9 $857.7 $400.0 $662.6 $682.4 Net-debt-to-Adjusted EBITDA ended the $200.0 quarter at 1.90x, a comfortable level, $0.0 and well below our
Slide 33: 2023 Outlook
2023 OUTLOOK 2023F 2022A 2021A TOTAL SALES $4.8-$5.0B $4.76B $3.78B ADJUSTED OPERATING INCOME 6%-7% 4.8% 1.8% MARGIN FREE CASH FLOW $150M-$200M $50.2M ($121.6M) www.martinrea.com | 33
Slide 34: Cash Flow
CASH FLOW OPERATING CASH FLOW - BEFORE CHANGES IN WORKING CAPITAL ($ MILLIONS) Decrease driven by COVID- 19 pandemic and chip/other supply shortages $600 $500 $508 $524 $400 $300 $406 $461 FREE CASH FLOW ($ MILLIONS) $348 $358 $308 $321 $200 $259 $100 $250 $0 $200 2014A 2015A 2016A 2017A 2018A 2019A
Slide 35: Our Margins Are Among the Best in Our Peer Group
OUR MARGINS ARE AMONG THE BEST IN OUR PEER GROUP… LTM Adjusted Operating Income / Adjusted EBIT Margin as of Q1 2023 8.0% 5.7% 5.5% 5.3% 5.3% 6.0% 4.1% 3.9% 3.4% 3.4% 4.0% 2.0% 0.0% -2.0% -4.0% -2.6% www.martinrea.com | 35
Slide 36: Our Margins Are Among the Best in Our Peer Group
OUR MARGINS ARE AMONG THE BEST IN OUR PEER GROUP… Q1 2023 Adjusted Operating Income / Adjusted EBIT Margin 8.0% 5.8% 5.6% 5.5% 6.0% 4.6% 4.1% 4.0% 3.9% 3.4% 4.0% 2.0% 0.0% -2.0% -4.0% -2.3% www.martinrea.com | 36
Slide 37: And So Is Our Return on Invested Capital
AND SO IS OUR RETURN ON INVESTED CAPITAL LTM ROIC (Pre-Tax) as of Q1 2023 15.0% 12.7% 12.5% 11.4% 10.5% 10.2% 10.0% 8.1% 7.3% 5.4% 5.0% 0.0% -5.0% -6.0% -10.0% * Pre-tax return on invested capital (ROIC) = EBIT / total invested capital www.martinrea.com | 37
Slide 38: Questions?
QUESTIONS? www.martinrea.com | 38
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