Magna International Inc. · TSX:MG
Magna International — Q3 2021 Earnings Presentation
36 slides from Magna International's earnings presentation, Nov 5, 2021
Slide 1: Q3 2021 Earnings Presentation
Q3 2021 Earnings Presentation November 5, 2021
Slide 2: Forward Looking Statements
Forward Looking Statements Q3 - 2021 EARNINGS - 05NOV21 2 Certain statements in this presentation constitute "forward - looking information" or "forward - looking statements" (collectively, "forward - looking statements") . Any such forward - looking statements are intended to provide information ab
Slide 3: Forward Looking Statements (cont.)
Forward Looking Statements (cont.) Q3 - 2021 EARNINGS - 05NOV21 3 Forward - looking statements are based on information currently available to us and are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected f
Slide 4: Reminders
Q3 - 2021 EARNINGS - 05NOV21 4 Reminders All amounts are in U.S. Dollars Today's discussion excludes the impact of other expense (income), net ("Unusual Items") "Organic", in the context of sales movements, means "excluding the impact of foreign exchange, acquisitions and divestitures"
Slide 5: Key Messages
5 Key Messages Q3 - 2021 EARNINGS - 05NOV21 Solid Q3 performance in an increasingly challenged industry environment 1 Challenges expected to continue to a lesser degree in Q4 2 Strategic portfolio positions us for sales growth over market and strong free cash flow 3 Well - positioned to capture grow
Slide 6: Current Market Dynamics
Current Market Dynamics Q3 - 2021 EARNINGS - 05NOV21 6 Auto Demand Environment Remains Strong HEADWINDS TAILWINDS Low Dealer Inventory Levels OEMs Indications Point to Strong Future Production Continued Semiconductor Chip Supply Constraints Unpredictable OEM Production Schedules Causing Operational
Slide 7: Q3 2021 Performance Highlights
CONSOLIDATED SALES $7.9B Q3 2021 Performance Highlights Q3 - 2021 EARNINGS - 05NOV21 7 ADJUSTED EBIT MARGIN % 2.9% ADJUSTED DILUTED EPS $0.56 FREE CASH FLOW 1 ($25M) 1 Free Cash Flow (FCF) is Cash from Operating Activities plus proceeds from normal course dispositions of fixed and other asset s p lu
Slide 8: Customer and Industry Recognition
8 Q3 - 2021 EARNINGS - 05NOV21 Customer and Industry Recognition
Slide 9: FreeForm Provides Endless Design Possibilities
FreeForm Q3 - 2021 EARNINGS - 05NOV21 9 Provides Endless Design Possibilities • Currently launching technology on complete seat program for global OEM • Three other programs also awarded, including from new entrant OEM, that launch in 2022 • Significant additional customer interest Program Award
Slide 10: MEZZO Panel Changing the Face of Electric Vehicles
MEZZO Panel Q3 - 2021 EARNINGS - 05NOV21 10 Changing the Face of Electric Vehicles • First - to - market, large - format decorated front integration panel • Integrates ADAS sensors and lighting • Features hidden - until - lit functionality • Awarded program using this core technology • Enables des
Slide 11: Program Awards: Advanced Front Cameras and Dual-Clutch Transmissions
Q3 - 2021 EARNINGS - 05NOV21 11 Program Award Bolsters Magna's Leading Camera Position Supports Magna's Growth in Electrification Advanced Front Cameras • Awarded new business with European - based global OEM • Will utilize latest generation camera technology • Based on platform that already has a
Slide 12: Management Updates
12 Management Updates Q3 - 2021 EARNINGS - 05NOV21 Vince Galifi appointed as President Pat McCann promoted to EVP & CFO Anton Mayer promoted to EVP & CTO
Slide 13: Q3 2021 Financial Results
Q3 2021 Financial Results Q3 - 2021 EARNINGS - 05NOV21 13 Reflects Current Industry Environment Adjusted EBIT ($Millions) $778 $229 $0 $100 $200 $300 $400 $500 $600 $700 $800 Q3'20 Q3'21 Consolidated Sales ($Billions) $9.1 $7.9 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0
Slide 14: Q3 2021 vs Q2 2021 (Sequential) Financial Results: Sales
14 Q3 2021 vs Q2 2021 (Sequential) Financial Results Q3 - 2021 EARNINGS - 05NOV21 Key Factors • Lower global light vehicle production, substantially due to semiconductor chip shortage ( - ) • Negative program mix ( - ) • Foreign currency translation: $90M ( - ) • Sale of three loss - making Exterior
Slide 15: Q3 2021 vs Q2 2021 (Sequential) Financial Results: Adjusted EBIT
15 Q3 2021 vs Q2 2021 (Sequential) Financial Results Q3 - 2021 EARNINGS - 05NOV21 Key Factors • Lower earnings on $1.1B decline in sales ( - ) • Production inefficiencies driven by unpredictable OEM production schedules ( - ) • Increased production costs, including freight and commodities ( - ) • $4
Slide 16: Q3 2021 Cash Flow and Investment Activities
16 Q3 2021 Cash Flow and Investment Activities Q3 - 2021 EARNINGS - 05NOV21 Free Cash Flow 1 ($Millions) $1,345 $178 - $25 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 -$250 -$50 $150 $350 $550 $750 $950 $1,150 $1,350 Q3'20 Q2'21 Q3'21 OTHER USES OF CASH Acquisition of 49% interest in LG - Magna JV $454M Public
Slide 17: Continued Financial Flexibility
Continued Financial Flexibility Q3 - 2021 EARNINGS - 05NOV21 17 ($Billions, unless otherwise noted) Estimated Future LTD Principal Repayments (12/31/20) ($Millions) $129 $365 $722 $760 $647 $1,479 2021 2022 2023 2024 2025 Thereafter LEVERAGE RATIO (LTM, 9/30/21) Adjusted Debt $5.9 Adjusted EBITDA $4
Slide 18: 2021 Outlook Assumptions
2021 Outlook Assumptions Q3 - 2021 EARNINGS - 05NOV21 18 2020 AUGUST NOVEMBER Light Vehicle Production (millions of units) • North America 13.0 14.4 13.4 • Europe 16.5 18.1 16.5 • China 23.5 24.7 23.0 Foreign Exchange Rates • 1 CDN dollar equals USD 0.746 0.801 0.800 • 1 EURO equals USD 1.141 1.193
Slide 19: 2021 Outlook
2021 Outlook Q3 - 2021 EARNINGS - 05NOV21 19 2020 AUGUST NOVEMBER Sales: • Body Exteriors & Structures $15.3 – $15.9 $14.1 – $14.5 • Power & Vision $11.8 – $12.2 $11.2 – $11.5 • Seating Systems $5.1 – $5.4 $4.6 – $4.8 • Complete Vehicles $6.3 – $6.6 $6.0 – $6.2 Total Sales $32.6 $38.0 – $39.5 $35.4
Slide 20: 2021 Segment Adjusted EBIT Margin
2021 Segment Adjusted EBIT Margin Q3 - 2021 EARNINGS - 05NOV21 20 2020 August 2021 Outlook November 2021 Outlook BODY EXTERIORS & STRUCTURES 6.0% 8.0 - 8.5% 5.4 - 5.7% SEATING SYSTEMS 2.4% 4.5 - 5.0% 2.0 - 2.3% POWER & VISION 5.1% 7.3 - 7.8% 6.1 - 6.4% COMPLETE VEHICLES 5.1% 4.5 - 5.0% 4.1 - 4
Slide 21: Free Cash Flow Expectations
21 Free Cash Flow 1 Expectations Q3 - 2021 EARNINGS - 05NOV21 2021 ($Billions) $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 $1.80 $2.00 $1.6 - $1.8 ~$1 August 2021 Outlook November 2021 Outlook 1 Free Cash Flow (FCF) is Cash from Operating Activities plus proceeds from normal course dis
Slide 22: In Summary
22 IN SUMMARY Solid Q3 Performance in an Increasingly Challenged Industry Environment Q3 - 2021 EARNINGS - 05NOV21 Managing through volatile production environment and inflationary pressures Continuing to win business with our technology portfolio Positioned to support anticipated strong recovery of
Slide 23: Appendix
Q3 - 2021 EARNINGS - 05NOV21 23 Appendix
Slide 24: Q3 2021 Reconciliation of Reported Results
Q3 2021 Reconciliation of Reported Results Q3 - 2021 EARNINGS - 05NOV21 24 REPORTED OTHER EXPENSE, NET EXCL. OTHER EXPENSE, NET Income Before Income Taxes $ 27 $ 180 $ 207 % of Sales 0.3% 2.6% Income Tax Expense $ 10 $ 21 $ 31 % of Pretax 37.0% 15.0% Income Attributable to Non - Controlling Interest
Slide 25: Q3 2020 Reconciliation of Reported Results
Q3 2020 Reconciliation of Reported Results Q3 - 2021 EARNINGS - 05NOV21 25 REPORTED OTHER EXPENSE, NET EXCL. OTHER EXPENSE, NET Income Before Income Taxes $ 436 $ 316 $ 752 % of Sales 4.8% 8.2% Income Tax Expense $ 109 $ 61 $ 170 % of Pretax 25.0% 22.6% Loss Attributable to Non - Controlling Interes
Slide 26: Sales Performance vs Market (Q3 2021 vs Q3 2020)
Sales Performance vs Market 26 REPORTED ORGANIC 1 PERFORMANCE VS WEIGHTED GLOBAL PRODUCTION (Weighted GoM) Body Exteriors & Structures (17%) (16%) 2% Power & Vision (8%) (17%) 1% Seating Systems (12%) (21%) (3%) Complete Vehicles (10%) (11%) 7% TOTAL SALES (13%) (17%) 1% Unweighted Production Growth
Slide 27: Sales Performance vs Market (2021 YTD vs 2020)
Sales Performance vs Market 27 REPORTED ORGANIC 1 PERFORMANCE VS WEIGHTED GLOBAL PRODUCTION (Weighted GoM) Body Exteriors & Structures 19% 16% 2% Power & Vision 30% 17% 3% Seating Systems 17% 6% (8%) Complete Vehicles 26% 18% 4% TOTAL SALES 23% 15% 1% Unweighted Production Growth 16% Weighted Produc
Slide 28: Geographic Sales
Geographic Sales 28 Q3 2020 Q3 2021 NORTH AMERICA $4.7B $3.9B PRODUCTION (19%) EUROPE $3.8B $3.1B PRODUCTION (20%) ASIA $592M $927M PRODUCTION (8%) (China (12%)) REST OF WORLD $100M $96M S.A. PRODUCTION (11%) Q3 2021 vs Q3 2020 Q3 - 2021 EARNINGS - 05NOV21
Slide 29: 2023 Financial Outlook
2023 Financial Outlook 1 Q3 - 2021 EARNINGS - 05NOV21 29 1 We have not updated 2023 Outlook ranges from our February 19 th , 2021 press release. 2 Adjusted EBIT Margin is the ratio of Adjusted EBIT to Total Sales Assumptions Light Vehicle Production (millions of units) • North America 16.3 • Europe
Slide 30: Capital Allocation Principles
Capital Allocation Principles Q3 - 2021 EARNINGS - 05NOV21 30 Disciplined, Profitable Approach to Growth Remains a Foundational Principle Q3 2021 Maintain Strong Balance Sheet • Preserve liquidity and high investment grade credit ratings - Adj. debt / Adj. EBITDA ratio between 1.0 - 1.5x LTM 09/30/2
Slide 31: Leverage Ratio
($Millions) Leverage Ratio Q3 - 2021 EARNINGS - 05NOV21 31 LTM EBITDA $ 4,136 Lease Adjustment $ 320 Other $ (163) Adjusted EBITDA $ 4,293 Debt per Balance Sheet $ 4,009 Lease Liability per Balance Sheet $ 1,707 Other $ 218 Adjusted Debt $ 5,934 Adjusted Debt / Adjusted EBITDA (Q3 2021) 1.38x
Slide 32: Body Exteriors & Structures Segment Financial Performance
BODY EXTERIORS & STRUCTURES Segment Financial Performance Q3 - 2021 EARNINGS - 05NOV21 32 • Reduced earnings on lower sales ( - ) • Negative impact of production disruptions ( - ) • Higher production costs, including freight ( - ) • Benefit of COVID - 19 related government employee support programs
Slide 33: Power & Vision Segment Financial Performance
• Lower global light vehicle production, including impact of semiconductor chip shortage ( - ) • Net customer price concessions ( - ) • Business combinations during 2021: $189M (+) • Foreign currency translation: $44M (+) • Launch of new programs (+) POWER & VISION Segment Financial Performance Q3 -
Slide 34: Seating Systems Segment Financial Performance
• Lower global light vehicle production, including impact of semiconductor chip shortage ( - ) • Net customer price concessions ( - ) • Launch of new programs (+) • Acquisition of Hongli in China: $102M (+) • Foreign currency translation: $8M (+) SEATING SYSTEMS Segment Financial Performance Q3 - 20
Slide 35: Complete Vehicles Segment Financial Performance
• Lower vehicle assembly volumes, including impact of semiconductor chip shortage ( - 4K units) • Higher euro: $13M (+) COMPLETE VEHICLES Segment Financial Performance Q3 - 2021 EARNINGS - 05NOV21 35 • $45M provision on engineering service contracts with the automotive unit of Evergrande ( - ) • Low
Slide 36: END
Q3 - 2021 EARNINGS - 05NOV21 36 END