Linamar Corporation · TSX:LNR

Linamar — Q4 2019 Earnings Presentation

50 slides from Linamar's earnings presentation, Mar 11, 2020

  1. Slide 1: Conference Call Presentation

    Q4 2019 Conference Call Information Local: (647) 427-3383 Toll Free: (888) 424-9894 (North America) Conference ID 7182436 Linda Hasenfratz Conference Call Presentation March 11, 2020

  2. 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

  3. Slide 3: 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

  4. Slide 4: Sales, Normalized Earnings, and Margins (in millions CAD)

    Sales, Normalized Earnings, and Margins (in millions CAD) Q4 2019 Q4 2018 %Δ Q4 2019 Helped By:  Sales outperform soft global markets with  Strong launches in Transportation gaining Sales 1,616.1 1,732.0 (6.7%) 6.7% decline traction and working through transition  NA vehicle markets down 8.9% but

  5. Slide 5: Automotive Sales & Content Per Vehicle (CPV)

    Automotive Sales & Content Per Vehicle (CPV) CPV Q4 2019 CPV Q4 2018 CPV % Change Vehicle Production Automotive Automotive Automotive Units % Change Sales Q4 2019 Sales Q4 2018 Sales % Change (CAD Millions) (CAD Millions) North America 156.80 160.33 (2.2%) (9.6%) 617.4 699.2 (11.7%) Europe 77.01 73.

  6. Slide 6: Commercial & Industrial Sales (in millions CAD)

    Commercial & Industrial Sales (in millions CAD) Q4 2019 Q4 2018 % Change  Skyjack  Core NA & EU markets down in double digits Sales 398.6 441.0 (9.6%)  MacDon sales up on 2020 product launch in Q4 vs Q3 QvQ¹ Change in Commerical & Industrial Sales Growth 29.9% 64.8% 66.0% 45.2% 13.4% -7.6% -21.9%

  7. Slide 7: Capital Expenditures (in millions CAD)

    Capital Expenditures (in millions CAD) Q4 2019 Q4 2018  Capex down 17% from Q4 2018  Using disciplined approach to spending given Capital Expenditures (Capex) 120.1 144.5 economic uncertainties Capex as a % of Sales 7.4% 8.3% Capex Capex as a % of Sales 9.1% 8.5% 8.3% 7.4% 6.2% 6.1% 6.1% 5.5% 117.

  8. Slide 8: Leverage (in millions CAD)

    Leverage (in millions CAD) Q4 2019 Q3 2019 Q4 2018 Fantastic FCF of >$380 mill in quarter Net Debt 1,559.5 1,938.3 2,016.5 > $600 mill of debt repaid since peak in Q1 2018 Net Debt to EBITDA 1.50x 1.75x 1.68x Net Debt to EBITDA 1.79x 1.75x 1.69x 1.68x 1.78x 1.73x 1.75x 1.50x 1 1 1 1 Q1 2018 Q2 201

  9. Slide 9: 2020 Expected to Drive Solid Free Cash Flow

    2020 Expected to Drive Solid Free Cash Flow 700 650  2020 expected to again generate 600 between $500 and $700 million of 550 free cash flow Strong earnings; 500 450 400 Lower Capex than 2019 Millions 350 300  Leverage down to <1x EBITDA by 250 end of 2020 200 150 100 50 - 2015 2016 2017 2018 20

  10. Slide 10: Market Outlook

    Market Outlook © Linamar Corporation 10

  11. Slide 11: Market Snapshot

    Market Snapshot 2020 Light Vehicle Commercial Truck Agriculture Skyjack Industry Industry Industry Industry North America ▲1.3% ▼20.9% ▼5.0% ▼12.1% Industry Industry Industry Industry Europe ▼1.9% ▲0.9% ▼5.0% ▼4.9% Industry Industry Industry Industry Asia ▼3.1% ▼10.5% ▼15.0% ▲17.5% Source: IHS Marke

  12. Slide 12: IHS Light Vehicle Production Forecast

    IHS Light Vehicle Production Forecast North America Light Vehicle Asia-Pacific Light Vehicle Europe Light Vehicle Production by Quarter Production by Quarter Production by Quarter 5 14 7 12.9 4.4 4.4 4.2 4.3 12.5 12.412.6 4.5 4.2 4.3 4.2 11.7 12.2 11.7 5.9 6.0 4.0 4.0 4.0 12 11.111.4 6 5.7 5.6 5.5 3

  13. Slide 13: IHS Light Vehicle Production Forecast

    IHS Light Vehicle Production Forecast Global light vehicle production trough in 2020. Lowest quarterly production occurred in Q1-2020. Global Light Vehicle Production Forecast by Year Global Light Vehicle Production Forecast by Quarter 120 25 22.9 23.0 22.2 22.6 22.2 104.3 21.6 98.0 99.9 102.0 21.1

  14. Slide 14: Historical NA Auto Cycles

    Historical NA Auto Cycles 120.0% 10 9 100.0% 8 7 80.0% 6 Years 60.0% 5 % Change 4 40.0% 3 2 20.0% 1 0.0% - Growth Decline Growth Decline Growth Decline Growth Decline Growth Decline Growth Decline Growth '17-'19 20-'27 '61-'65 '66-'70 '71-'73 '74-'75 '76-'78 '79-'82 '83-'85 '86-'91 '92-'00 '01-'09 '

  15. Slide 15: Growth Update and Outlook

    Growth Update and Outlook © Linamar Corporation 15

  16. Slide 16: Electrified Vehicles Key Growth Opportunity for Linamar

    Electrified Vehicles Key Growth Opportunity for Linamar $90 $80 $70 $60 Expected BEV Global CPV 3 years out same as ICE Global CPV 5 years ago $50 $40 $30 $20 $10 $0 2015 2016 2017 2018 2019 2020 2021 2022 2023 -$10 Electric Hybrid ICE Updated: Q4 2019, estimates based on current projections and EV

  17. Slide 17: Global Addressable Market Grows 2.5X

    Global Addressable Market Grows 2.5X in 10 Years Addressable Market - Light Vehicle $350 $300 $250 Addressable market more than Addressable Market (Billions CAD) doubles between 2019 and 2030 $200 $150 $100 $50 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2

  18. Slide 18: Launches

    Launches Launching more than $4.2 billion of new work today 4,500.00 4,000.00 Other Driveline Engine Transmission 3,500.00 3,000.00 2,500.00 2,000.00 1,500.00 1,000.00 500.00 - 2018 2019 2020 2021 2022 2023 Sales from Launch add: $700 Million to $900 Million in 2020 18

  19. Slide 19: Outlook

    Outlook Q1 Expectations Consolidated Normal Ranges 2018 Actuals 2019 Actuals Expectations 2020  Auto Sales Growth 16.4% (2.7%) Flat to Modest Declines  COVID-19 outbreak is the single largest Normalized Earnings Growth impact to Q1 EPS 6% (20.0%) Low to Mid Single Digit Growth  $20-$30 mill estim

  20. Slide 20: New Business

    New Business © Linamar Corporation 20

  21. Slide 21: New Business Wins: Driveline Components

    New Business Wins: Driveline Components Package Volume 220,000 PTUs & RDUs / year Major driveline program win in Mexico SOP Year 2022 Peak Volume Year 2024 Production Location © Linamar Corporation 21

  22. Slide 22: New Business Wins: Engine Components

    New Business Wins: Engine Components Package Volume 750,000 sets / year Balance shaft win for new 4 cylinder SOP Year engine program 2023 Peak Volume Year 2026 Production Location © Linamar Corporation 22

  23. Slide 23: New Business Wins: eAxle

    New Business Wins: eAxle Package Volume 2000 / year Tier 1 eAxle win, including gearbox, motor and converter, for high SOP Year performance vehicles 2023 Peak Volume Year 2023 Production Location © Linamar Corporation 23

  24. Slide 24: New Business Wins: Driveline Components

    New Business Wins: Driveline Components Package Volume 300,000 / year Electric drive unit housings for battery SOP Year electric vehicles. New product type for Linamar Light Metal Casting 2022 Peak Volume Year 2024 Production Location © Linamar Corporation 24

  25. Slide 25: Takeover Work Building From Distressed Supply Base

    Takeover Work Building From Distressed Supply Base Takeover wins to date >$240 million in annual sales Additional opportunities under pursuit 25

  26. Slide 26: Innovation

    Innovation © Linamar Corporation 26

  27. Slide 27: Innovation In Focus: New Guelph iHub Innovation Centre

    Innovation In Focus : New Guelph, Canada ‘iHub’ Innovation Centre Nearly Complete  Linamar’s dedicated Innovation Hub (iHub) building construction has entered its final phase  Move in date planned for early Q2  Facility will enable accelerated Research and Development focused on; Engineering Rend

  28. Slide 28: Innovation In Focus: Light Metals Casting eAxle Housing

    Innovation In Focus: Light Metals Casting Development of a Electric Drive unit (EDU) eAxle Housing  Newly developed eAxle housing for an upcoming Electric Vehicle application  Linamar Light Metals Casting Group demonstrates the deep technical expertise required to design a manufacturing process th

  29. Slide 29: Innovation In Focus: MacDon's R2 Hay Mower-Conditioners

    Innovation In Focus : MacDon’s R2 is the Latest Offering in Hay Mower-Conditioners  MacDon’s latest R2 Series Rotary Disc Header for Hay crops launched for the 2020 production year run  New R2 Series Rotary Disc header mates with the MacDon M1240 Self- Propelled Windrower (SPW) with EvenflowTM tec

  30. Slide 30: Innovation In Focus: Skyjack's Evolving Telematics Solutions

    Innovation In Focus : Skyjack’s Evolving Telematics Solutions State of Health  Battery life  Last charge date  Battery care information Serialized Machine Information Elevate Telematics Solution  Introduced in February 2018  Quickstart guides  Optional equipment with a high take-rate on new ma

  31. Slide 31: Digitization with AI/ML

    Digitization with AI/ML 61 Plants 3,162 3,206 922 Traceability Robots Marking Stations LMMS Data Collection Connections 2,094 2,489 RFID Stations 1,081 Connected Machines Vision Systems 2,105 9 Traceability Read Stations AGVs March 2020 31

  32. Slide 32: Operations

    Operations © Linamar Corporation 32

  33. Slide 33: LTH & Oros Expansion Grand Opening

    LTH & Oros Expansion Grand Opening 33 33

  34. Slide 34: Strategy

    Strategy © Linamar Corporation 34

  35. Slide 35: Synaptive Medical Manufacturing Agreement

    Synaptive Medical Manufacturing Agreement Modus VTM is a advanced robotic and digital microscope surgical system. Fully-automated, hands-free, robotically- controlled digital microscope with advanced visualization. Replaces current technology of static microscope with limited field of view requiring

  36. Slide 36: Synaptive Medical Manufacturing Agreement

    Synaptive Medical Manufacturing Agreement EvryTM is a revolutionary head-only MRI system. Innovative, midfield MRI designed to be installed directly at the point of care – ER, ICU, Operating Room with high performance imagery. Offers a lighter weight, less costly installation, and lower ongoing oper

  37. Slide 37: Financial Review

    Financial Review Dale Schneider © Linamar Corporation 37

  38. Slide 38: Sales, Normalized Earnings, and Margins (in millions CAD)

    Sales, Normalized Earnings, and Margins (in millions CAD) Q4 2019 Q4 2018 %Δ Q4 2019 Helped By:  Sales outperform soft global markets with  Strong launches in Transportation gaining Sales 1,616.1 1,732.0 (6.7%) 6.7% decline traction and working through transition  NA vehicle markets down 8.9% but

  39. Slide 39: Normalized Earnings (in millions CAD)

    Normalized Earnings (in millions CAD) Q4 2019  Earnings were normalized for three unusual items in Q4, in addition to the FX OE 79.3 impact of revaluing the balance sheet Restructuring Costs 4.4  The unusual items in the quarter related to: Supplier Quality Issue 3.1 Inventory Adjustment 6.2  Res

  40. Slide 40: Foreign Exchange Gain/Loss (in millions CAD)

    Foreign Exchange Gain/Loss (in millions CAD) Q4 2019 Q4 2018 +/-  Net FX Loss of $19.6 FX Gain/(Loss) – Operating1 (19.6) 18.4 (38.0)  FX Loss – Operating was $19.6 FX Gain/(Loss) – Financing 0.0 (0.9) 0.9  Industrial FX Loss was $5.5 Total FX Gain/(Loss) (19.6) 17.5 (37.1)  Transportation FX Lo

  41. Slide 41: Industrial Sales, Earnings, and Margins (in millions CAD)

    Industrial Sales, Earnings, and Margins (in millions CAD)  Industrial sales decreased by 5% or $17.5 to reach $335.9 Q4 2019 Q4 2018  The sales were hurt by:  lower access equipment sales in Europe and North America Sales 335.9 353.4 as certain key customers continued to adjust their capital spen

  42. Slide 42: Transportation Sales, Earnings, and Margins (in millions CAD)

    Transportation Sales, Earnings, and Margins (in millions CAD)  Transportation sales decreased by $98.4 to reach $1.28 billion. Q4 2019 Q4 2018  The sales were helped by:  the additional sales from launching programs. Sales 1,280.2 1,378.6  The sales were hurt by:  the impact of the strike at GM

  43. Slide 43: Operating Expenses (in millions CAD)

    Operating Expenses (in millions CAD) Q4 2019 Q4 2018 +/- %  Gross Margin decreased 24.3% mainly due to:  the impact of the GM Strike Sales 1,616.1 1,732.0 (115.9) (6.7%)  a reduction of earnings related to the lower volumes and market Cost of Goods Sold 1,418.6 1,471.2 (52.6) (3.6%) declines; Gro

  44. Slide 44: Finance Expenses & Income Tax (in millions CAD)

    Finance Expenses & Income Tax (in millions CAD)  Finance expenses decreased $0.9 Q4 2019 Q4 2018 +/-  Finance expenses were helped by:  the impact of lower debt levels; and Finance Expense (12.0) (12.9) 0.9  lower interest rates  Finance expenses were hurt by:  less interest earned from lower

  45. Slide 45: Leverage (in millions CAD)

    Leverage (in millions CAD) Q4 2019 Q4 2018  Cash position at the end of the quarter was $338.2.  Generated $502.7 in Cash from Operating Activities. Cash Position 338.2 472.0  Generated more than $380 in quarter and $670 in year of Free Cash Flow²,3 which is well beyond the minimum target of $500

  46. Slide 46: Conclusion

    Conclusion  Outperformed our markets  Net Debt to EBITDA at 1.5x; target to be under 1.0x for 2020  Great Free Cash Flow1,2 generation of over $670 million for the year compared to our minimum target of $500 million.  Strong Normalized EBITDA margins at 14%  Outstanding level of New Business wi

  47. Slide 47: Question and Answer

    Question and Answer 47

  48. Slide 48: Outlook

    Outlook Q1 Expectations Consolidated Normal Ranges 2018 Actuals 2019 Actuals Expectations 2020  Auto Sales Growth 16.4% (2.7%) Flat to Modest Declines  COVID-19 outbreak is the single largest Normalized Earnings Growth impact to Q1 EPS 6% (20.0%) Low to Mid Single Digit Growth  $20-$30 mill estim

  49. Slide 49: Key Messages

    Key Messages $670 million Cash Market Share Growth Cost Improvements Active Buyback 49

  50. Slide 50: Thank You

    Thank You www.linamar.com @linamarcorp Linamar Corporation

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