Martinrea International Inc. · TSX:MRE
Martinrea International — Investor Presentation (November 2024)
60 slides from Martinrea International's investor presentation, November 2024
Slide 1: Investor Presentation November 2024
INVESTOR PRESENTATION NOVEMBER 2024
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS 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
Slide 3: Why Invest in Martinrea?
WHY INVEST IN MARTINREA? Our financial metrics Our approach to capital are among the best in Our stock is Our innovative allocation adds value our industry. undervalued based on approach to process, and is shareholder standard valuation products, and investing friendly. metrics. is leading edge. • A
Slide 4: Industry Overview
INDUSTRY OVERVIEW www.martinrea.com | 4
Slide 5: US Light Vehicle Sales (SAAR)
US LIGHT VEHICLE SALES (SAAR) U.S. auto sales have been resilient despite reduced vehicle affordability and interest rate headwinds U.S. Light Vehicle Sales (SAAR) 20 15.6M UNITS Q3 2024 average, Millions of Units 15 approximately flat vs. Q2 2024 10 5 16.0M UNITS Dec-2005 Dec-2006 Dec-2007 Dec-2008
Slide 6: Business Overview
BUSINESS OVERVIEW www.martinrea.com | 6
Slide 7: About Our Company
ABOUT OUR COMPANY • Leading Tier One automotive supplier in lightweight structures and propulsion systems • One of the fastest growing automotive parts suppliers since 2001 • Operating in 56 locations (including sales and engineering centers) in 10 countries: Canada, United States, Mexico, Brazil, G
Slide 8: Vision, Mission & Principles
VISION, MISSION & 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 the products we make and the services we provide. guiding principles, applied with integrity, in all that we do: Mission We make peo
Slide 9: Our Culture Is a Competitive Advantage
OUR CULTURE IS A COMPETITIVE ADVANTAGE www.martinrea.com | 9
Slide 10: Global Presence
GLOBAL PRESENCE Our footprint is global, though heavily weighted to North America (~75% of sales), which is a positive in the current geopolitical environment. www.martinrea.com | 10
Slide 11: Company Journey
COMPANY JOURNEY www.martinrea.com | 11
Slide 12: Our Products and Capabilities
OUR PRODUCTS AND CAPABILITIES Assembly Body-in-White and Chassis Powertrain Fluids Industrial www.martinrea.com | 12
Slide 13: Competitive Landscape
COMPETITIVE LANDSCAPE FLUID MANAGEMENT STEEL METAL FORMING SYSTEMS ALUMINUM COMPONENTS PRIMARY OTHER www.martinrea.com | 13
Slide 14: Our Financial Metrics Are Among the Best in Our Industry
OUR FINANCIAL METRICS ARE AMONG THE BEST IN OUR INDUSTRY LTM Adjusted Operating Income / Adjusted EBIT LTM Free Cash Flow (as a % of Sales) as of Q3 Margin as of Q3 2024 2024 8.0% 7.6% 6.0% 4.4% 6.0% 5.7% 5.5% 4.0% 3.6% 3.6% 5.2% 4.8% 4.5% 4.2% 2.5% 4.1% 4.0% 2.0% 1.2% 0.9% 0.5% 2.0% 2.0% 0.0% -0.9%
Slide 15: Martinrea 2.0
MARTINREA 2.0 >> > ~ MARTINREA | yi 1(@@a , ff 1 O a SOB Behe A EEE Be 0 SHAPING QuUR TY Fru Re www.martinrea.com
Slide 16: Martinrea 2.0 Framework
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 COMPANY • Implementing best practices BUSINESS UNIT Deployment High Financ
Slide 17: Martinrea Operating System
MARTINREA OPERATING SYSTEM Martinrea Operating System initiatives enabled us to double our Adjusted Operating Income Margin over a five-year period from 2014 to 2019 The way we think Pride kills continuous improvement Develop our people - Learn to unlearn – Pride for our people, not for our practice
Slide 18: Process Innovation
PROCESS INNOVATION www.martinrea.com | 18
Slide 19: The Way We Produce
THE WAY WE PRODUCE Past New Typical Material Flow High Frequency Delivery Inefficient Material Flow Efficient Material Flow: Requiring: • Eliminates waste • Higher headcount • Minimizes logistics: • More floor space • Requires 18% less headcount • More WIP • 20% Less floor space www.martinrea.com |
Slide 20: Martinrea Flexible Build Process
MARTINREA FLEXIBLE BUILD PROCESS Demand up 40% Less Capital 18% Less Labour 20% Less Space 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 Capability: None Service par
Slide 21: Product Innovation
PRODUCT INNOVATION www.martinrea.com | 21
Slide 22: Project Breakthrough
Launched in 2019, Project Breakthrough target was to: • Grow revenue and margins by providing engineered products with higher value-added content to our customers o More multi-material content to further lightweight o Create reliable product engineering source to our customers • Create long-term dee
Slide 23: Martinrea's Portfolio
MARTINREA’S PORTFOLIO LIGHTWEIGHT STRUCTURES PROPULSION SYSTEMS FLEXIBLE MANUFACTURING www.martinrea.com | 23
Slide 24: Our Breakthrough Progress
OUR BREAKTHROUGH PROGRESS FRONT AND REAR SUB-FRAMES FRONT RAIL ASSEMBLY • Fully responsible for design, development and validation • Hydro-formed upper tail • Multi-material front subframe • Aluminum high-pressure die cast shock • Low-pressure die cast hollow aluminum rear tower • Structured for opt
Slide 25: Brake Lines with GrapheneGuard
BRAKE LINES WITH GRAPHENEGUARD® Named 2022 Automotive News PACE Award winner • High-performance brake line coating with graphene • Industry leading abrasion protection • Provides up to 25% weight savings • Improved chemical resistance and high temperature performance www.martinrea.com | 25
Slide 26: Recent Awards
‘24 Nissan Supplier Diversity Award RECENT AWARDS ‘23 Ford Supplier Quality Award Diversity Award ‘23 Toyota Quality Certificate ‘23 Nissan Supplier Diversity Award ‘23 Zeekr Excellent Supply Quality Award ‘23 Jaguar Land Rover Quality Award ‘22 JLR Quality Award ‘22 Automotive News PACE Award ‘22 T
Slide 27: Innovation Is Core to Our Culture
INNOVATION IS CORE TO OUR CULTURE IDEA RESEARCH Martinrea Technical Center DEVELOP TESTING ANALYSIS INTRO www.martinrea.com | 27
Slide 28: Whatever the Future Holds, Martinrea Will Be a Leader
WHATEVER THE FUTURE HOLDS, MARTINREA WILL BE A LEADER ELECTRIFIED CONNECTED SHARED AUTONOMOUS www.martinrea.com | 28
Slide 29: A Closer Look at EV Transition
A CLOSER LOOK AT EV TRANSITION www.martinrea.com | 29
Slide 30: Addressable Content per Vehicle
ADDRESSABLE CONTENT PER VEHICLE Martinrea is well-positioned for any mix of vehicles and propulsion types www.martinrea.com | 30
Slide 31: Martinrea Innovation Development (MiND)
MARTINREA INNOVATION DEVELOPMENT (MiND) •Incubate, develop and fund innovative PURPOSE technologies that are strategic to Martinrea’s portfolio • Manufacturing support PARTNERS • Product development • Supply chain management • Other functional disciplines MiND • NanoXplore – 22.5% equity interest IN
Slide 32: Effenco Hybrid Electric System
Effenco® designs, manufactures and markets ultracapacitor systems, • The Effenco® Hybrid electric system is focused on which reduces: the heavy-duty vocational truck market. • Effenco® is a Global Cleantech 100 company and a global technology leader in the innovative use of Greenhouse Gas Emissions
Slide 33: Effenco Hybrid, Hybrid S and E-ZEV
Developed Hybrid-S version of the Effenco system utilizing Superbatteries, offering a step change in emission reductions Effenco’s answer to the industry is an evolution of its current product to create a Zero Emission Vehicle perfectly tailored for the heavy-duty vocational market Hybrid Hybrid S E
Slide 34: MiNDCAN Software
• MiNDCAN provides specialized software that meets the unique needs of complex organizations. • The flagship product is Profit+, an enterprise-wide collaborative platform for cost optimization. • Other modules cover program management, sustainability reporting, and customer relationship management.
Slide 35: Equispheres Investment
Private company developing Equispheres’ powder enables Equispheres’ high-performance technologies for the production printing speeds up to nine times powders have the potential to of advanced materials, including faster than industry standards. enhance design flexibility, high-performance aluminum i
Slide 36: Sustainability
SUSTAINABILITY www.martinrea.com | 36
Slide 37: What Sustainability Means to Martinrea
WHAT SUSTAINABILITY MEANS TO MARTINREA Providing superior long- term investment returns to our stakeholders to Delivering outstanding ensure the future of the quality products and services company that contribute to the safety, Being positive contributors lightweighting, and responsible to our commu
Slide 38: Our Sustainability Journey: Protecting the Environment
OUR SUSTAINABILITY JOURNEY Protecting the Environment Environmental Energy Carbon Renewable Zero Landfill Management Efficiency Efficiency Energy Initiative Systems 23% 32% 36% 73% 92.5% Energy intensity Carbon intensity of electricity of Martinrea facilities of Martinrea’s has reduced by has reduce
Slide 39: Our Sustainability Journey
OUR SUSTAINABILITY JOURNEY Download the 2023 Sustainability Report at www.martinrea.com www.martinrea.com | 39
Slide 40: Total Recordable Injury Frequency (TRIF)
OUR SUSTAINABILITY JOURNEY Safety Martinrea achieved a Total Recordable Injury Frequency of 1.10 in 2023, less than half the industry average Martinrea's Company-Wide Safety Performance 9.0 (# OF RECORDABLE INJURIES PER MONTH X 200,000 / TOTAL TOTAL RECORDABLE INJURY FREQUENCY (TRIF) 8.0 8.48 7.0 HO
Slide 41: Diversity, Equity and Inclusion
OUR SUSTAINABILITY JOURNEY Diversity, Equity and Inclusion • Women comprise 23% of Martinrea’s workforce and 18% of management and above positions • 33% of our Board of Directors is female • Employee Resource Groups (ERGs): MindsMatter is an Employee Young Professionals (YoPro) is Women at Martinrea
Slide 42: Community Involvement
OUR SUSTAINABILITY JOURNEY Community Involvement • 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.martinrea.com | 42
Slide 43: Financials
FINANCIALS www.martinrea.com | 43
Slide 44: Sales
Tooling sales were elevated SALES in 2023 and are expected to normalize in 2024. 5,500 Assembly business changed to a 5,340 purchased component consignment Driven by 5,000-5,300 model resulting in decrease in 2017 COVID-19 pandemic 430 5,000 despite same level of production and related supply 4,758
Slide 45: Top North American Platforms
TOP NORTH AMERICAN PLATFORMS Stellantis Pentastar GM Pickups/SUVs Engine Block (3.6L) Ford Escape/Maverick Ford F-150 Jeep Grand Cherokee Mercedes EQS/EVA2 GM Equinox/Terrain Ford Edge Jeep Wagoneer/ Ford Transit Grand Wagoneer www.martinrea.com | 45
Slide 46: Recent New Business Awards
RECENT NEW BUSINESS AWARDS APPROX. ANNUALIZED SOP RANGE APPROX. ANNUALIZED SOP RANGE SALES AT PEAK VOLUME SALES AT PEAK VOLUME $560 M 2021 – 2026 $80 M 2021 $350 M 2021 – 2025 $55 M 2021 - 2024 $290 M 2021 – 2024 $50 M 2021 – 2023 $250 M 2021 – 2027 $45 M 2022 – 2025 $125 M 2022 – 2027 $40 M 2021 –
Slide 47: Adjusted Operating Income Margin
ADJUSTED OPERATING INCOME MARGIN Decrease due to the impact of 9% the UAW-GM strike and higher tooling sales Recovery of 8% inflationary cost 7.8% impact through 7.5% ADJUSTED OPERATING INCOME MARGIN % 7% commercial activity Driven by COVID-19 6.4% pandemic and 6% related supply 5.7%-6.2% shortages
Slide 48: Adjusted Net Earnings per Share
ADJUSTED NET EARNINGS PER SHARE 250 EPS supported by share $2.50 Decrease due to the impact repurchases in 2018, $2.27 of the UAW-GM strike $2.22 $2.22 2019, and 2023 Driven by chip 200 $1.91 and other supply $2.00 shortages 193 $1.76 IN MILLIONS OF CANADIAN DOLLARS 188 Driven by 176 $1.50 166 COVID
Slide 49: Cash Flow
CASH FLOW OPERATING CASH FLOW - BEFORE CHANGES IN WORKING CAPITAL ($ MILLIONS) Decrease driven by COVID- $800 19 pandemic and related supply shortages $600 $400 $508 $524 $608 FREE CASH FLOW ($ MILLIONS) $461 $406 $250 $348 $358 $321 $200 $308 $259 $200 $0 $195 2014 2015 2016 2017 2018 2019 2020 202
Slide 50: 2024 Outlook
2024 OUTLOOK 2024F 2023A FREE CASH FLOW* $100-$150M (before IFRS 16 lease payments) $195.4M (high end of the range or better expected) Approximately $340M $295.3M CAPEX (expect to finish the year below this level) TOTAL SALES $5.0-$5.3B $5.34B (low end of the range or slightly lower expected) ADJUST
Slide 51: Q3 2024 Update
Q3 2024 UPDATE www.martinrea.com | 51
Slide 52: Q3 2024 Highlights
Q3 2024 HIGHLIGHTS $65.9M ADJUSTED OPERATING $1,237.5M $154.1 INCOME (5.3% MARGIN) TOTAL SALES ADJUSTED EBITDA (12.5% MARGIN) $57.0M FREE CASH FLOW $1,167.3M PRODUCTION SALES www.martinrea.com | 52
Slide 53: Status of Operations
STATUS OF OPERATIONS Operationally, we continue to execute well. Commercial activity to offset EV We have experienced OEM volume shortfalls and lingering production shutdowns on inflationary costs continues. select programs, often with little to no advance warning. Vehicle production volumes impacte
Slide 54: Year-to-Date Financial Highlights
YEAR-TO-DATE FINANCIAL HIGHLIGHTS 2024 results were consistent year to date, though with much better Free Cash Flow YTD TOTAL SALES YTD ADJ. OPERATING INCOME YTD FREE CASH FLOW $5,000 MARGIN (Excluding IFRS-16 Lease $4,043.9 $3,863.2 Payments) $4,000 8.0% 5.9% $150 6.0% $ Millions $3,000 6.0% $107.4
Slide 55: Balance Sheet
BALANCE SHEET NET DEBT - Excluding IFRS-16 ($ Millions) Q3 2024 net debt (excluding the impact of $1,000.0 IFRS-16) decreased by approximately $32 million compared to Q2 2024. $900.0 $800.0 $955.9 In Q3 2024, we spent approximately $9.5 $937.4 $700.0 $857.7 $908.7 $889.2 $856.5 $852.1 $820.1 million
Slide 56: Capital Allocation Framework
CAPITAL ALLOCATION FRAMEWORK Invest to Maintain and Maintain Strong Return Capital to Grow Our Business Balance Sheet Shareholders • Organic opportunities • Targeted Net Debt/Adjusted • Repurchase shares with • Invest in R&D and new products EBITDA ratio of ~1.5x or better excess liquidity (at the •
Slide 57: 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 58: 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 59: 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 (CFO) in March of 2011. As of January 2024, Di Tosto took on the role of President. Effective July 1st, 2024, Di Tosto transitioned from Pr
Slide 60: Biographies
BIOGRAPHIES Peter Cirulis was appointed on July 1, 2024, as Chief Financial Officer of Martinrea, reporting to Pat D’Eramo, Chief Executive Officer and to the Company’s Board of Directors. In this position, Peter brings nearly 30 years of international automotive experience in finance, strategy, ope
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