Linamar Corporation · TSX:LNR
Linamar — Q4 2020 Earnings Presentation
51 slides from Linamar's earnings presentation, Mar 10, 2021
Slide 1: Q4 Conference Call Presentation
Q4 Conference Call Presentation For Audio Only Dial in: Linda Hasenfratz North America: (877) 668-0168 International: (825) 312-2386 March 10, 2021 Conference ID 8860535
Slide 2: Forward Looking Information, Risk and Uncertainties
Forward Looking Information, Risk and Uncertainties Certain information regarding Linamar set forth in this presentation and oral summary, including management’s assessment of the Company’s future plans and operations may constitute forward-looking statements. This information is based on current ex
Slide 3: COVID-19 Update
COVID-19 Update © Linamar Corporation 3
Slide 4: Pandemic Crisis Management
Pandemic Crisis Management Assemble Team Gather Data COVID-19 Task Force Make a Plan & Execute Communicate Employees Investors Customer Employees Financially Customers Community © Linamar Corporation 4
Slide 5: Linamar Health First Action Plan Achievements
Linamar Health First Action Plan Achievements ▪ Shareholders ▪ Implemented significant costs savings rapidly to offset negative impact of lost sales ▪ Generated 50% more free cash flow than any year in our history ▪ After a tough first half, turned the second half of 2020 into growth over prior year
Slide 6: Linamar Culture Key to Crisis Management
Linamar Culture Key to Crisis Management ▪ Strong Communicators ▪ Consistently kept employees, shareholders and customers informed ▪ Balanced ▪ We have always run our business as a balance of Customer, Employee and Financial satisfaction. ▪ Linamar Health First Action Plan focused on employees as we
Slide 7: Vaccinations Key to Recovery
Vaccinations Key to Recovery Ontario Canada 1,000,000 3,000,000 900,000 2,500,000 800,000 700,000 2,000,000 600,000 500,000 1,500,000 400,000 1,000,000 300,000 200,000 500,000 100,000 0 0 Doses Administered Positive Cases Doses Administered Positive Cases Source Data: Ontario and Canada COVID-19 web
Slide 8: Linamar's Current Focus
Linamar’s Current Focus ▪ Safe Workplace ▪ Ensure we continue to maintain a safe work environment ▪ Vigilance around protocols is key ▪ Now is not the time to become complacent, protocols must be kept in place until we have herd immunity ▪ Testing ▪ Testing running on a regular basis for Linamar emp
Slide 9: Project Safeguard
Project Safeguard ▪ Established vaccination site in Guelph to supplement local Public Health Unit capacity ▪ Linamar will provide capacity for 2,000 shots per day of targeted 10,000 per day for local public health unit ▪ Launch March 11th, ramp up through April based on vaccine availability ▪ Local
Slide 10: Sales, Normalized Earnings and CPV
Sales, Normalized¹ Earnings and CPV 1 –Management uses certain non-GAAP financial measures including normalized earnings which exclude foreign exchange impacts and the impact of unusual items when analyzing consolidated and segment underlying operational performance. For more information refer to th
Slide 11: Sales, Normalized Earnings, and Margins (in millions CAD)
Sales, Normalized Earnings, and Margins (in millions CAD) Q4 2020 The key impacts to the segments vs prior Q4 2020 Q4 2019 %Δ The key factors impacting results in the year are: Sales 1,704.8 1,616.1 5.5% quarter are: • Continued strong performance in the auto Transportation EBITDA – Normalized² 304.
Slide 12: Automotive Sales & Content Per Vehicle (CPV)
Automotive Sales & Content Per Vehicle (CPV) CPV Q4 2020 CPV Q4 2019 CPV % Change Vehicle Production Automotive Automotive Automotive Units % Change Sales Q4 2020 Sales Q4 2019 Sales % Change (CAD Millions) (CAD Millions) North America 171.57 156.80 9.4% 0.8% 680.3 617.4 10.2% Europe 70.65 77.01 (8.
Slide 13: Commercial & Industrial Sales (in millions CAD)
Commercial & Industrial Sales (in millions CAD) Q4 2020 Q4 2019 % Change ▪ Skyjack ▪ Core NA market down 22% in Q4 partially offset by Sales 391.7 398.6 (1.7%) market share growth in all products ▪ New Medical Equipment sales improves year over year comparison ▪ MacDon ▪ Draper header market flat in
Slide 14: Capital Expenditures (in millions CAD)
Capital Expenditures (in millions CAD) Q4 2020 Q4 2019 ▪ Capex down 37% from Q4 2019 as we continued to conserve cash Capital Expenditures (Capex) 75.8 120.1 ▪ Full year capex was down 50% from 2019 Capex as a % of Sales 4.4% 7.4% Capex Capex as a % of Sales 9.1% 7.4% 6.1% 6.1% 5.9% 4.5% 4.4% 2.6% 2
Slide 15: Cash Flow Continues to be a Key Priority
Cash Flow Continues to be a Key Priority ▪FCF1 >50% higher than 2019, our previous record ▪Liquidity1 excellent with $1.6 billion of cash available at quarter end ▪Solid liquidity and balance sheet positions us well for takeover and acquisition opportunities as they arise ▪Results have prompted us t
Slide 16: Leverage (in millions CAD)
Leverage (in millions CAD) Q4 2020 Q3 2020 Q4 2019 ▪ Net debt now down >$1.6 billion from early 2019 post the MacDon acquisition Net Debt 442.1 876.7 1,559.5 Net Debt to EBITDA 0.50x 1.10x 1.50x Net Debt to EBITDA 1.78x 1.73x 1.75x 1.50x 1.57x 1.80x 1.10x 0.50x Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 202
Slide 17: Market Outlook
Market Outlook © Linamar Corporation 17
Slide 18: Market Snapshot
Market Snapshot 2021 Light Vehicle Commercial Truck Combine Heads Access North America ▲ 24.4% ▲28.4% ▲15.0% ▲20.3% Europe ▲14.3% ▲11.6% ▲6.0% ▲19.9% Asia ▲8.5% ▼32.3% n/a ▲7.4% Rest of World ▲24.6% n/a ▲8.5% n/a Above projections are external industry expert estimates for total market % unit change
Slide 19: Light Vehicle Sales
Light Vehicle Sales Recovery in global light vehicle markets China Light Vehicle Sales Europe Light Vehicle Sales US Light Vehicle Sales % Change YOY % Change YOY % Change YOY 50% 30% 30% 27% 30% 7% 6% 6% 14% 10% 10% 0% 1% 11% 9% 10% 10% 11% 12% 6% -4% 10% 5% 1% 3% -12% -15% -13% -10% -2% -2% -10% -
Slide 20: Global LV Auto Market: Q4-2020, Q1-2021 and 2021
Global LV Auto Market: Q4-2020, Q1-2021 and 2021 Q4 global light vehicle production increased by 1.3M vs. prior forecast. Q1-2021 forecast reduced by 800,000 due to global semiconductor shortage but full year expected up 1.5M Q4-2020 Global Vehicle Production Q1-2021 Global Vehicle Production 2021 G
Slide 21: Industrial Segment Impacts - Skyjack
Industrial Segment Impacts - Skyjack 2020 Mobile Aerial Work Platform (AWP) Industry Forecast & Access Equipment Market Commentary YTD Results % Change vs. Prior Year ▪ AWP market experienced steep declines in 2020 but a definite 40.0% 30% trend to improvement was seen in Q4 30.0% 21% 22% 17% ▪ Equi
Slide 22: Agricultural Market
Agricultural Market Agriculture Market Commentary NA Combine Retails • Ag. retailers seeing reduced inventory backlog 900 • Commodity price rally, improved farm net income outlook boosting retails • 2020 North America combine retails ended year flat vs. 2019 (+0.2%) 800 • Canada combine retails were
Slide 23: Growth Update and Outlook
Growth Update and Outlook © Linamar Corporation 23
Slide 24: Electrified Vehicles Key Growth Opportunity for Linamar
Electrified Vehicles Key Growth Opportunity for Linamar $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 2015 2016 2017 2018 2019 2020 2021 2022 2023 -$10 Electric Hybrid ICE Updated: February 21, 2021. Estimates based on current projections and EV applications in market. © Linamar Corporation 24
Slide 25: Global Addressable Market Grows More Than 3X in Years
Global Addressable Market Grows More Than 3X in 20 Years Addressable Market - Light Vehicle $350 $300 $250 Addressable Market (Billions CAD) $200 $150 $100 $50 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 20
Slide 26: Launches
Launches Launching nearly $3.8 billion of new work today $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $- 2019 2020 2021 2022 2023 2024 Other Driveline Engine Transmission Updated: February 2021 © Linamar Corporation 26
Slide 27: Outlook
Outlook Consolidated Normal Ranges 2019 Actuals 2020 Actuals Expectations 2021 Sales Growth (2.7%) (21.6%) Double Digit Growth Normalized Earnings Growth Strong Double Digit Growth Q1 Expectations EPS EBITDA (20%) (8%) (32%) (15%) ▪ Auto Normalized Net Margin 7.0% - 9.0% 6.3% 5.4% Expansion Towards
Slide 28: New Business
New Business © Linamar Corporation 28
Slide 29: New Business Win 110,000 / year Mexico
New Business Win Driveline differential assembly win for next generation BEV delivery vans and trucks Average Annual Volume SOP Year Peak Volume Year 110,000 / year 2023 2026 Production Location Mexico © Linamar Corporation 29
Slide 30: New Business Win 300,000 / year Mexico
New Business Win Major gear win for a new Asian-based customer in North America to be used in a new 8-speed automatic transmission Average Annual Volume SOP Year Peak Volume Year 300,000 / year 2023 2028 Production Location Mexico © Linamar Corporation 30
Slide 31: New Business Win 280,000 / year Germany
New Business Win Camshaft module win for new 3-cylinder engine program, 50% Hybrid application Average Annual Volume SOP Year Peak Volume Year 280,000 / year 2023 2023 Production Location Germany © Linamar Corporation 31
Slide 32: New Business Win 180,000 / year Canada
New Business Win Rear Differential Carrier for Major North American OEM Average Annual Volume SOP Year Peak Volume Year 180,000 / year 2024 2025 Production Location Canada © Linamar Corporation 32
Slide 33: New Business Win ~$150 M / year Global
New Business Win Nearly $150M in cylinder head wins for next generation engines, including significant win for a domestic Chinese OEM Average Annual Revenue SOP Year Peak Volume Year ~$150 M / year 2021 2025 Production Locations Global • Canada • United Kingdom • Germany • Hungary • China © Linamar
Slide 34: Innovation
Innovation © Linamar Corporation 34
Slide 35: Skyjack 40 and 60 ft Booms
Skyjack 40 and 60 ft Booms ▪ Skyjack’s new 40ft and 60ft booms have been redesigned to improve customer return by using SMARTORQUETM technology and data-driven design. ▪ Skyjack’s SMARTORQUETM utilizes improved gearing, high torque engines, and a simplified, high-efficiency hydraulic package, so tha
Slide 36: Skyjack SJ3013/14 Micro Scissor
Skyjack SJ3013/14 Micro Scissor ▪ Skyjack’s new SJ3013/14 micro represents a significant new presence in the low-level access arena. ▪ Ideal for easy accessibility into tight spaces, it has a quiet and swift all electric drive, and AGM (advanced glass material) batteries. The SJ3014 micro combines l
Slide 37: SKYVAC
SKYVACK simply reliable ema " . , Te Skywor-o OREM Pris aa ~
Slide 38: Digitization with AI/ML and Our Digitization Journey
Digitization with AI/ML and Our Digitization Journey February 2021 61 61 Plants Plants 3,975 3,439 Robots LMMS Data Collection Connections 2,481 1,926 1,155 Connected Machines RFID Stations Vision Systems 2,319 9 963 Traceability AGVs Marking Stations Traceability Read Stations © Linamar Corporation
Slide 39: Financial Review
Financial Review Dale Schneider © Linamar Corporation 39
Slide 40: Sales, Normalized Earnings, and Margins (in millions CAD)
Sales, Normalized Earnings, and Margins (in millions CAD) Q4 2020 Q4 2019 %Δ Q4 2020 Unusual Items The key factors impacting results in the ▪ Restructuring costs primarily in Europe Sales 1,704.8 1,616.1 5.5% quarter are: ▪ European operations were reorganized • Continued strong performance in the a
Slide 41: Foreign Exchange Gain/Loss (in millions CAD)
Foreign Exchange Gain/Loss (in millions CAD) Q4 2020 Q4 2019 +/- ▪ Total FX Loss was $12.4 which was related to the revaluation FX Gain/(Loss) – Operating1 (12.4) (19.6) 7.2 of operating balances. FX Gain/(Loss) – Financing 0.0 0.0 0.0 ▪ FX Loss – Operating was a $7.3 loss in Industrial and $5.1 Tot
Slide 42: Industrial Sales, Earnings, and Margins (in millions CAD)
Industrial Sales, Earnings, and Margins (in millions CAD) ▪ Industrial sales decreased by 6.0% or $20.3 to $315.6 Q4 2020 Q4 2019 ▪ The sales were hurt by: Finance ▪ Access Equipment sales declines associated with the global Sales 315.6 335.9 COVID-19 pandemic. updating ▪ The sales were helped by: O
Slide 43: Transportation Sales, Earnings, and Margins (in millions CAD)
Transportation Sales, Earnings, and Margins (in millions CAD) ▪ Transportation sales increased by $109.0 to $1,389.2 Q4 2020 Q4 2019 ▪ The sales were helped by: ▪ increasing volumes on launching programs; Sales 1,389.2 1,280.2 ▪ increasing volumes on certain programs related to some of our more sign
Slide 44: Operating Expenses (in millions CAD)
Operating Expenses (in millions CAD) Q4 2020 Q4 2019 +/- % ▪ Gross Margin was $273.5 in the quarter and was impacted by: ▪ the margin improvement from the various increases in volumes within the Sales 1,704.8 1,616.1 88.7 5.5% Transportation segment; Cost of Goods Sold 1,431.3 1,418.6 12.7 0.9% ▪ th
Slide 45: Finance Expenses & Income Tax (in millions CAD)
Finance Expenses & Income Tax (in millions CAD) ▪ Finance expenses decreased $11.8. Q4 2020 Q4 2019 +/- ▪ Finance expenses were helped by: ▪ lower interest expense as a result of reducing average daily debt balances Finance Expense (0.2) (12.0) 11.8 by $830 since Q4 2019; and ▪ lower effective inter
Slide 46: Leverage (in millions CAD)
Leverage (in millions CAD) Q4 2020 Q4 2019 ▪ Cash position at the end of the quarter was $861.1. ▪ Linamar generated $489.6 in Cash from Operating Activities. Cash Position 861.1 338.2 ▪ Linamar generated $422.3 of Free Cash Flow1 in the quarter. ▪ Net Debt to EBITDA was decreased significantly to 0
Slide 47: Conclusion
Conclusion ▪ Strong Sales and Earnings performance ▪ Operations have continued to recover ▪ Excellent cash generation in the quarter ▪ Free Cash Flow1 generation of $422.3 million ▪ Free Cash Flow1 generation of $1.2 billion in 2020 which is a record year ▪ Available Liquidity1 increased to $1.6 bil
Slide 48: Question and Answer
Question and Answer
Slide 49: Outlook
Outlook Consolidated Normal Ranges 2019 Actuals 2020 Actuals Expectations 2021 Sales Growth (2.7%) (21.6%) Double Digit Growth Normalized Earnings Growth Strong Double Digit Growth Q1 Expectations EPS EBITDA (20%) (8%) (32%) (15%) ▪ Auto Normalized Net Margin 7.0% - 9.0% 6.3% 5.4% Expansion Towards
Slide 50: Key Messages
Key Messages $422 Million Cash Generation to Top Year of $1.2 Billion Solid Growth in Transportation Segment Markets Improving and Market Share Growing © Linamar Corporation 50
Slide 51: Thank You
Thank You www.linamar.com @linamarcorp Linamar Corporation