Linamar Corporation · TSX:LNR

Linamar — Q2 2020 Earnings Presentation

53 slides from Linamar's earnings presentation, Aug 6, 2020

  1. Slide 1: Q2 Conference Call Presentation

    Q2 Conference Call Presentation For Audio Only Dial in: Linda Hasenfratz North America: (877) 668-0168 International: (825) 312-2386 August 6, 2020 Conference ID 4440626

  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: COVID-19 Update

    COVID-19 Update © Linamar Corporation 3

  4. 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

  5. Slide 5: Current Focus - Restart, Rejuvenate and Recover

    Current Focus - Restart, Rejuvenate and Recover  Create a work environment where people feel and are as safe or safer coming to work than not coming to work  >90% of our employees are back to full time work  We have had sporadic cases popping up since Return to Work but are managing to contain su

  6. Slide 6: Employees are Feeling Safe and Confident in Protocols

    Employees are Feeling Safe and Confident in Protocols © Linamar Corporation 6

  7. Slide 7: Financial Action Plan

    Financial Action Plan Cash and Cost  Cash Conservation and cost control are top of mind to mitigate loss of sales  We have moved quickly to cut costs and capital spending  Capital spending down 81% in Q2, target down at least 1/3 vs 2019 for full year  Cost savings of >$30 mill realized in Q2 al

  8. Slide 8: Global Cost Team Results

    Global Cost Team Results © Linamar Corporation 8

  9. Slide 9: Financial Action Plan

    Financial Action Plan Balance Sheet:  Our balance sheet is strong and we are carefully stress testing to understand our limits; we remain confident that our focus and responsiveness in this area will see us through this situation financially even in the event of a longer shutdown period  Financial

  10. Slide 10: Stress Scenario

    Stress Scenario  Our latest estimate of earnings trimmed about half of pre global COVID forecasted earnings  Our stress tests again trim half or more of the latest estimate (LE) OE out  In both our latest estimate and stress scenarios we continue to drive a profit in 2020, generate free cash flow

  11. Slide 11: Community Support

    Community Support © Linamar Corporation 11

  12. Slide 12: Manufacturing Flexibility Supports our Communities

    Manufacturing Flexibility Supports our Communities Rapid Shift to Ventilator Production Saving Lives Thornhill Medical MOVES  In March, Linamar was awarded 5 production contracts on fully assembled SLC Full Integrated ICU Ventilator ventilators, ventilator subassemblies or individual ventilator com

  13. Slide 13: Manufacturing Flexibility Supports our Communities

    Manufacturing Flexibility Supports our Communities Rapid Shift to Ventilator Production Saving Lives Thornhill Medical CleanSlate GM Ventec VOCSN O-Two Medical MOVES SLC UV Based Zoll Ventilator Integrated eSeries Full Integrated ICU disinfectant unit Multifunction e700Ventilator Ventilator Ventilat

  14. Slide 14: 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

  15. Slide 15: Sales, Normalized Earnings, and Margins

    Sales, Normalized Earnings, and Margins (in millions CAD) Q2 2020 Q2 2019 %Δ Q2 2020  Removing COVID-19 impact (including  COVID-19 shutdowns single biggest government support) vs 2019 Sales 923.6 2,086.1 (55.7%) impact to Q2 in both segments  Transportation segment OE margins  $1.13 billion est

  16. Slide 16: Automotive Sales & Content Per Vehicle (CPV)

    Automotive Sales & Content Per Vehicle (CPV) CPV Q2 2020 CPV Q2 2019 CPV % Change Vehicle Production Automotive Automotive Automotive Units % Change Sales Q2 2020 Sales Q2 2019 Sales % Change (CAD Millions) (CAD Millions) North America 192.74 166.09 16.0% (68.5%) 267.1 732.3 (63.5%) Europe 86.53 81.

  17. Slide 17: Commercial & Industrial Sales

    Commercial & Industrial Sales (in millions CAD) Q2 2020 Q2 2019 % Change  Skyjack  Global markets down nearly 50% in Q2 driving Sales 316.7 689.2 (54.0%) significant sales declines  MacDon  Draper header market down double digits in Canada QvQ¹ Change in Commerical & Industrial Sales Growth in t

  18. Slide 18: Capital Expenditures

    Capital Expenditures (in millions CAD) Q2 2020 Q2 2019  Capex down 81% from Q2 2019 as part of our cash conservation program Capital Expenditures (Capex) 24.0 126.4  Full year down at least 1/3 from 2019  Using disciplined approach to spending given economic Capex as a % of Sales 2.6% 6.1% situat

  19. Slide 19: Leverage

    Leverage (in millions CAD) Q2 2020 Q1 2020 Q2 2019  Another strong quarter of FCF2 of $170 million in quarter for further reductions to debt  Net debt down nearly $600 mill from a year ago despite market Net Debt 1,342.1 1,539.3 1,931.7 pressures  Leverage up somewhat to 1.80x re soft EBITDA Net

  20. Slide 20: Cash Flow Continues to be a Key Priority

    Cash Flow Continues to be a Key Priority 800 40.0% 750  We have generated FCF yearly for 5 700 35.0% years running and expect to do so in 650 2020 as well 600 30.0% 550  FCF Yield is strong and has been for the 500 25.0% last 2 years 450 $ Millions 400 20.0%  Solid liquidity and balance sheet 350

  21. Slide 21: Market Outlook

    Market Outlook © Linamar Corporation 21

  22. Slide 22: Market Snapshot 2020

    Market Snapshot 2020 Light Vehicle Commercial Truck Agriculture Access North America ▼ 22.6% ▼37.7% ▼10% ▼51.6% Europe ▼25.0% ▼22.1% ▼7.5% ▼45.5% Asia ▼19.3% ▼22.6% - ▲0.4% Above projections are external industry expert estimates for total market % Unit Changes as a whole vs. prior Year in each of t

  23. Slide 23: Market Snapshot 2021

    Market Snapshot 2021 Light Vehicle Commercial Truck Access North America ▲15.6% ▲16.8% ▲20.4% Europe ▲14.8% ▲17.5% ▲11.5% Asia ▲11.7% ▼5.9% ▲7.4% Above projections are external industry expert estimates for total market % Unit Changes as a whole vs. prior Year in each of the respective market segmen

  24. Slide 24: Regional LV Auto Production Update

    Regional LV Auto Production Update COVID-19 Related Impact vs. Prior Forecast and Expected Recovery Regional LV Production Impact Outlook Comments 30.0  Global: At the time of latest publication on July 16th, global light Light Vehicles (Millions) 25.0 vehicle 2020 production forecast stood at 69.5

  25. Slide 25: IHS Light Vehicle Production Forecast

    IHS Light Vehicle Production Forecast Global light vehicle production trough in 2020. Lowest quarterly production to occur in Q2-2020. Global Light Vehicle Production Forecast by Year Global Light Vehicle Production Forecast by Quarter 120 25 22.9 22.8 22.1 21.0 20.7 95.1 94.2 95.1 97.2 100 90.8 93.

  26. Slide 26: Light Vehicle Sales

    Light Vehicle Sales Signs of recovery in global light vehicle markets China Light Vehicle Sales Europe Light Vehicle Sales US Light Vehicle Sales % Change YoY % Change YoY % Change YoY 30% 30% 30% 15% 11% 9% 10% 1% 10% 7% 10% 0% -10% Jan Feb Mar Apr May June July -10% Jan Feb Mar Apr May June July -

  27. Slide 27: Global LV Auto Market: Q2 & 2020FY

    Global LV Auto Market: Q2 & 2020FY Q2 global light vehicle production forecast down 40,000 vs. prior forecast. Q3 forecast down 80,000 units. Q2-2020 Global Vehicle Production Forecast By Region Q3-2020 Global Vehicle Production Forecast By Region Change in Forecast July-2020 vs. Apr-2020 Change in

  28. Slide 28: Global LV Auto Market: 2020, 2021

    Global LV Auto Market: 2020, 2021 2020 annual forecast down 520,000 units vs. prior quarter forecast. 2021 forecast down 1.32M units. 2020 Global Vehicle Production Forecast By Region 2021 Global Vehicle Production Forecast By Region Change in Forecast Jul-2020 vs. Apr-2019 85.0 Change in Forecast J

  29. Slide 29: Historical NA Auto Cycles

    Historical NA Auto Cycles NA Historical Auto Production Cycle 120.0% 10 Conclusions 9  ‘Normal' cycle is 1% to 5% 100.0% 8 drops ie low single digit each 80.0% 7 6 year for on average 4 years, Years % Change 60.0% 5 then growth resumes 4 40.0% 3 2 20.0% 1 0.0% - Growth Decline Growth Decline Growth

  30. Slide 30: Industrial Segment Impacts - Skyjack

    Industrial Segment Impacts - Skyjack Access Equipment Market Commentary 2020 Mobile Aerial Work Platform (AWP) Industry Forecast & YTD Results  With rental customers delaying CapEx spend and construction % Change vs. Prior Year activities slowed, the AWP market has experienced steep declines in 10.

  31. Slide 31: Agricultural Market

    Agricultural Market Agriculture Market Commentary NA Combine Retails 900  North American Combine retails increased by 2.5% in Q2 vs. 800 Q2 2019, but are down 9% June YTD 700  Canada down 31% June YTD (down 26% Q2) , US down 2% YTD 600  MacDon’s sales were not materially impacted by COVID-19 500

  32. Slide 32: Growth Update and Outlook

    Growth Update and Outlook © Linamar Corporation 32

  33. Slide 33: Electrified Vehicles Key Growth Opportunity for Linamar

    Electrified Vehicles Key Growth Opportunity for Linamar $110 $90 Expected BEV Global CPV 3 years out $70 same as ICE Global CPV today $50 $30 $10 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 -$10 Electric Hybrid ICE Updated: July 31, 2020. Estimates based on current projections and EV applicati

  34. Slide 34: 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 2001 2019 2020 2038 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2021 2022 2023 2024 2025 20

  35. Slide 35: Launches

    Launches Launching more than $4.3 billion of new work today 4,500.00 4,000.00 3,500.00 3,000.00 2,500.00 2,000.00 1,500.00 1,000.00 500.00 - 2019 2020 2021 2022 2023 2024 Other Driveline Engine Transmission Updated: July, 2020 © Linamar Corporation 35

  36. Slide 36: Outlook

    Consolidated Normal Ranges 2019 Actuals Expectations 2020 Expectations 2021 Sales Growth (2.7%) Outlook Significant Double Digit Declines in both Sales and Earnings Strong growth in sales and earnings driving from market rallies Q3 Expectations Normalized Earnings Growth EPS (20%)  Auto EBITDA (8%)

  37. Slide 37: New Business

    New Business © Linamar Corporation 37

  38. Slide 38: New Business Win

    New Business Win Package of BEV Gearbox Components Average Annual Volume 50,000 / year SOP Year 2021 Peak Volume Year 2026 Production Location © Linamar Corporation 38

  39. Slide 39: New Business Win

    New Business Win Sliding Camshaft Assembly for Next Generation Fuel Efficient Engines Average Annual Volume 130,000 / year SOP Year 2021 Peak Volume Year 2023 Production Location © Linamar Corporation 39

  40. Slide 40: New Business Win

    New Business Win Balance Shaft Module For Next Generation Hybrid-Electric Vehicles Average Annual Volume 183,000 / year SOP Year 2023 Peak Volume Year 2026 Production Location © Linamar Corporation 40

  41. Slide 41: Financial Review

    Financial Review Dale Schneider © Linamar Corporation 41

  42. Slide 42: Sales, Normalized Earnings, and Margins

    Sales, Normalized Earnings, and Margins (in millions CAD) Q2 2020 Q2 2019 %Δ Q2 2020 Unusual Items  COVID-19 shutdowns single biggest  Prepayment of the 2021 Notes Sales 923.6 2,086.1 (55.7%) impact to Q2 in both segments  High level of uncertainty around OEM EBITDA – Normalized² 92.1 326.2 (71.8

  43. Slide 43: Foreign Exchange Gain/Loss

    Foreign Exchange Gain/Loss (in millions CAD) Q2 2020 Q2 2019 +/-  Net FX Loss of $11.0 FX Gain/(Loss) – Operating1 (5.9) (8.3) 2.4  FX Loss – Operating was $5.9 FX Gain/(Loss) – Financing (5.1) (0.5) (4.6)  Industrial FX Loss was $12.0 Total FX Gain/(Loss) (11.0) (8.8) (2.2)  Transportation FX G

  44. Slide 44: Industrial Sales, Earnings, and Margins

    Industrial Sales, Earnings, and Margins (in millions CAD)  Industrial sales decreased by 56.7% or $339.9 to $259.2 Q2 2020 Q2 2019  The sales were hurt by:  sales declines associated with the global COVID-19 Sales 259.2 599.1 pandemic; and  the expected agricultural sales declines due to the ong

  45. Slide 45: Transportation Sales, Earnings, and Margins

    Transportation Sales, Earnings, and Margins (in millions CAD)  Transportation sales decreased by $822.6 to $664.4. Q2 2020 Q2 2019  The sales were hurt by:  the impact of COVID-19 due to customer shutdowns. Sales 664.4 1,487.0  The sales were helped by: Operating Earnings (49.8) 115.5  a favour

  46. Slide 46: Operating Expenses

    Operating Expenses (in millions CAD) Q2 2020 Q2 2019 +/- %  Gross Margin was $41.0 in the quarter and was impacted by:  the lower sales volumes in both segments; partially offset by Sales 923.6 2,086.1 (1,162.5) (55.7%)  the focus on cost reductions in the quarter; and Cost of Goods Sold 882.6 1,

  47. Slide 47: Finance Expenses & Income Tax

    Finance Expenses & Income Tax (in millions CAD)  Finance expenses increased $4.0 Q2 2020 Q2 2019 +/-  Finance expenses were helped by:  the impact of lower interest rates; and Finance Expense 17.7 13.7 4.0  lower debt levels  Finance expenses were hurt by the prepayment of the 2021 Notes.  The

  48. Slide 48: Leverage

    Leverage (in millions CAD) Q2 2020 Q2 2019  Cash position at the end of the quarter was $375.6  Generated $193.5 in Cash from Operating Activities Cash Position 375.6 437.6  Generated more than $170 of Free Cash Flow² in the quarter  Net Debt to EBITDA was increased slightly to 1.80x Available C

  49. Slide 49: Conclusion

    Conclusion  COVID has a significant impact on Sales and Earnings  Operations have restarted and volumes continue to strengthen  Excellent Cash Generation in the Quarter  Free Cash Flow1 generation of over $170 million  Available Liquidity at $1.1 billion 1 - For more information on the Free Cas

  50. Slide 50: Question and Answer

    Question and Answer

  51. Slide 51: Outlook

    Consolidated Normal Ranges 2019 Actuals Expectations 2020 Expectations 2021 Sales Growth (2.7%) Outlook Significant Double Digit Declines in both Sales and Earnings Strong growth in sales and earnings driving from market rallies Q3 Expectations Normalized Earnings Growth EPS (20%)  Auto EBITDA (8%)

  52. Slide 52: Key Messages

    Key Messages $170 Million Cash Generation > $30 Million Costs Cut $1.1 Billion Liquidity & Debt Reduction Outstanding Operational Execution in Tough Conditions © Linamar Corporation 52

  53. Slide 53: Thank You

    Thank You www.linamar.com @linamarcorp Linamar Corporation

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