Magna International Inc. · TSX:MG
Magna International — Q3 2019 Earnings Presentation
34 slides from Magna International's earnings presentation, Nov 8, 2019
Slide 1: Q3 2019 Results Conference Call
Q3 2019 RESULTS CONFERENCE CALL November 8, 2019 1
Slide 2: Forward Looking Statements
Forward Looking Statements Certain statements in this presentation constitute "forward-looking information" or "forward-looking statements" (collectively, "forward-looking statements") and are intended to provide information about management's current expectations and plans. Such forward-looking sta
Slide 3: Reminders
Reminders • All amounts are in U.S. Dollars (unless otherwise noted) • 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” • Prior period
Slide 4: Q3 2019 Highlights
Q3 2019 Highlights • Continued growth in excess of global vehicle production • Non-cash impairment charges related to Getrag’s equity accounted investments • New dual clutch transmission business with BMW 4
Slide 5: Sales Performance vs Market
Sales Performance vs Market Q3 2019 vs Q3 2018 1 Unweighted Weighted Reported Organic Performance Performance Body Exteriors & Structures (5%) (3%) - (1%) Power & Vision (9%) 4% 7% 6% Seating 4% 3% 6% 5% Complete Vehicles 9% 14% 17% 16% TOTAL SALES (3%) 2% 5% 4% Unweighted Production Growth (3%) Wei
Slide 6: GETRAG Update
GETRAG Update • Getrag joint-ventures have had challenges – Declining take-rates for manual transmissions – Lower volumes in China – particularly for certain key customers/programs – DCT insourcing in China – Lower DCT take-rates on certain programs in China • Business planning activity has led to l
Slide 7: GETRAG Update (cont.)
GETRAG Update (cont.) • Getrag’s wholly-owned operations in Europe have exceeded initial expectations – Expanding long-term customer base – Volumes in-excess of our acquisition plan 7
Slide 8: Magna Wins Transmission Technologies Contract
Magna Wins Transmission Technologies Contract • Magna to build dual-clutch transmissions including hybrid variants for strategic partner BMW Group • Technologies for front-wheel drive vehicle platforms – over 170 different vehicle applications • Largest transmission order in our history 8
Slide 9: Q3 2019 Financial Highlights
Q3 2019 Financial Highlights • Excluding GM strike, sales and Adjusted EBIT in-line with our expectations – Higher than expected launch and warranty costs largely offset by commercial settlements • Organic sales increased 2% vs 3% decline in global production • Returned $451 million to shareholders
Slide 10: Q3 2019 Consolidated Sales Performance
Q3 2019 Consolidated Sales Performance $ BILLIONS 9.6 - 3% 9.3 4.0 2.7 1.3 1.5 Q3 2018 Body Power Seating Complete Q3 2019 Exteriors & Vision Vehicles & Structures ($Millions) (196) (251) 47 125 (299) B/(W) 10
Slide 11: Q3 2019 Consolidated Sales Performance
Q3 2019 Consolidated Sales Performance $ BILLIONS Key Factors: - 3 % • Divestitures, net of acquisitions (-) • Foreign exchange translation (-) 9.6 • BMW 5-Series assembly volumes (-) 9.3 • Global light vehicle production (-) • Labour strike at GM (-) • End of production of certain programs (-) Q3 2
Slide 12: Q3 2019 Adjusted EBIT and Equity Income
Q3 2019 Adjusted EBIT and Equity Income ADJUSTED EBIT MARGIN % KEY FACTORS - 130BP • Power & Vision (-) • Seating (-) 7.3 • Corporate and Other (-) 6.0 • Body Exteriors & Structures (-) ADJUSTED EBIT EQUITY INCOME ($ Millions) ($ Millions) - 20 % 699 558 62 37 Q3 2018 Q3 2019 12
Slide 13: Q3 2019 Financial Highlights
Q3 2019 Financial Highlights ADJUSTED EFFECTIVE ADJUSTED NET INCOME ADJUSTED TAX RATE ATTRIBUTABLE TO MAGNA DILUTED EPS - 40BP - $97Million - $0.15 $535M $1.56 20.0% 19.6% $1.41 $438M Q3 2018 Q3 2019 Q3 2018 Q3 2019 Q3 2018 Q3 2019 13
Slide 14: Q3 2019 Segment Sales: Body Exteriors & Structures
Q3 2019 Segment Sales BODY EXTERIORS & STRUCTURES $ BILLIONS • Global light vehicle production (-) - 5% • Labour strike at GM (-) • End of production of certain programs, including the Chevrolet Cruze (-) 4.2 4.0 • Foreign currency translation (-) • Net customer price concessions (-) • New program l
Slide 15: Segment Adjusted EBIT Margin %: Body Exteriors & Structures
Q3 2019 Segment Adjusted EBIT Margin % BODY EXTERIORS & STRUCTURES • Favourable customer pricing resolution Q3’18 (-) - 10BP • Labour strike at GM (-) • Lower scrap steel recoveries and higher 7.8% 7.7% commodity costs (-) • Higher warranty costs (-) • Higher launch costs (-) • Earnings on higher sa
Slide 16: Q3 2019 Segment Sales: Power & Vision
Q3 2019 Segment Sales POWER & VISION $ BILLIONS • Divestitures, net of acquisitions (-) - 9% • Foreign currency translation (-) • Global light vehicle production (-) • Labour strike at GM (-) 2.9 • Net customer price concessions (-) 2.7 • New program launches (+) Significant New Launches: • BMW X5 •
Slide 17: Segment Adjusted EBIT Margin %: Power & Vision
Q3 2019 Segment Adjusted EBIT Margin % POWER & VISION • Higher engineering costs in our ADAS business (-) - 260BP • Lower equity income (-) • Higher spending on electrification, 8.8% autonomy and R&D (-) • Labour strike at GM (-) 6.2% • Higher launch costs (-) • Acquisitions (-) • Divestiture of FP&
Slide 18: Q3 2019 Segment Sales: Seating
Q3 2019 Segment Sales SEATING $ BILLIONS • New program launches (+) • Acquisition of Viza (+) + 4% • Global light vehicle production (-) • End of production of certain programs, 1.2 1.3 including the Chevrolet Cruze (-) • Labour strike at GM (-) • Foreign currency translation (-) • Net customer pric
Slide 19: Segment Adjusted EBIT Margin %: Seating
Q3 2019 Segment Adjusted EBIT Margin % SEATING • Earnings on lower sales (-) - 130 BP • Launch costs and operational inefficiencies at a new facility (-) • Higher commodity costs (-) 5.7% • Labour strike at GM (-) 4.4% • Acquisitions (-) • Favourable commercial settlements (+) Q3 2018 Q3 2019 19
Slide 20: Q3 2019 Complete Vehicles
Q3 2019 Complete Vehicles ASSEMBLY VOLUMES SALES (Thousands of units) ($ Billions) + 6% + 9% 35.6 1.4 1.5 33.5 ADJUSTED EBIT ADJUSTED EBIT MARGIN % ($ Millions) + 5 + 20BP 29 1.9 24 1.7 Q3 2018 Q3 2019 20
Slide 21: Impact of Getrag Impairments on Magna Results
Impact of Getrag Impairments on Magna Results $ MILLIONS Getrag Getrag Dong Feng Jiangling Ford Getrag Investments In: Total Transmissions Transmissions Transmissions (GJT) (GFT) (DGT) Other Expense 511 150 39 700 Adjusted EBIT (511) (150) (39) (700) Income Taxes (31) (2) (3) (36) Net Loss (480) (14
Slide 22: Economic Ownership – Transmission JV's
Economic Ownership – Transmission JV’s ACCOUNTING TREATMENT MAGNA 50% GFT GFT: No control – equity account for 50% interest 50% (Europe) FORD MOTOR CO. GAP: Control – consolidate entity (i.e. investment in GJT) 75% and record minority interest (i.e. Ford’s interest in GFT) GAP 25% 66.7% GJT: No cont
Slide 23: Q3 2019 Cash Flow
Q3 2019 Cash Flow $ MILLIONS Cash from Operations Net Income + Non-Cash Items $ 846 Changes in Non-Cash Operating Assets & Liabilities $ (96) $ 750 Investment Activities Fixed Assets $ (349) Investments, Other Assets & Intangibles $ (83) $ (432) Proceeds from Disposition and Other $ 67 Free Cash Flo
Slide 24: Return of Capital to Shareholders
Return of Capital to Shareholders Common Shares Repurchased in Q3 6.8M $ to Repurchase Shares in Q3 $ 342M Dividends Paid $ 109M Total Q3 Return to Shareholders $ 451M 1 Common Shares Repurchased to date in Q4 1.9M 1 $ to Repurchase Shares in Q4 $ 100M 1 As of November 7, 2019 24
Slide 25: 2019 Outlook
2019 Outlook November August Vehicle Production: – North America 16.3M 16.6M – Europe 21.4M 21.4M 1 – China – Magna’s Top 30 Vehicles 2.6M 2.6M Foreign Exchange Rates: – U.S. – Cdn 0.754 0.745 – U.S. – Euro 1.120 1.125 – U.S. – RMB 0.145 0.146 1 Represents ~2/3 of Magna’s 2018 consolidated sales in
Slide 26: 2019 Outlook
2019 Outlook 1 $ BILLIONS UNLESS OTHERWISE NOTED U.S. GAAP November August Sales: • Body Exteriors & Structures $16.2 - $16.6 $16.3 - $17.1 • Power & Vision $11.1 - $11.4 $11.0 - $11.6 • Seating Systems $5.4 - $5.6 $5.4 - $5.8 • Complete Vehicles $6.6 - $6.8 $6.8 - $7.2 Total Sales $38.7 - $39.8 $38
Slide 27: 2019 Segment Adjusted EBIT Margin %
2019 Segment Adjusted EBIT Margin % BODY EXTERIORS & STRUCTURES POWER & VISION 9.5% 8.2-8.6% 8.1% 7.6-7.9% 6.6-7.1% 6.5-6.8% SEATING SYSTEMS COMPLETE VEHICLES 7.7% 5.7-6.2% 5.5-5.8% 1.7-2.2% 1.9-2.2% 1.1% 2018 Prior 2019 Outlook Current 2019 Outlook 27
Slide 28: Appendix
Q3 2019 APPENDIX November 8, 2019 28
Slide 29: Geographic Sales
Geographic Sales Q3 2019 vs Q3 2018 NORTH AMERICA EUROPE ($Billions) ($Billions) - 5% + 2% 4.9 4.7 4.0 4.1 PRODUCTION -3% PRODUCTION +1% ASIA REST OF WORLD ($Millions) ($Millions) - 19% + 7% 662 137 146 538 PRODUCTION -5% (China -11%) S.A. PRODUCTION -6% Q3 2018 Q3 2019 29
Slide 30: Segment Impact on Adjusted EBIT % of Sales
Segment Impact on Adjusted EBIT % of Sales Q3 2019 vs Q3 2018 $ MILLIONS Adjusted EBIT as a Adjusted Percentage Sales EBIT of Sales Third Quarter of 2018 $ 9,618 $ 699 7.3% Increase (Decrease) related to: Body Exteriors & Structures $ (196) $ (20) (0.1%) Power & Vision $ (251) $ (92) (0.8%) Seating
Slide 31: Adjusted Debt to Adjusted EBITDA Calculation
Adjusted Debt to Adjusted EBITDA Calculation $ MILLIONS Q3 2019 LTM EBITDA $ 3,993 Lease Adjustment $ 361 Other $ 17 Adjusted EBITDA $ 4,371 Debt per Balance Sheet $ 3,561 Lease Liability per Balance Sheet $ 1,745 Other $ 218 Adjusted Debt $ 5,524 Adjusted Debt / Adjusted EBITDA 1.26x 31
Slide 32: Q3 2019 Reconciliation of Reported Results
Q3 2019 Reconciliation of Reported Results EXCLUDING OTHER EXPENSE (INCOME), NET $ MILLIONS – EXCEPT PER SHARE FIGURES Other Excl. Other Reported Expense Expense (Loss) Income Before Income Taxes $ (319) $ 859 $ 540 % of Sales (3.4%) 5.8% Income Taxes $ 45 $ 61 $ 106 % of Pretax (14.1%) 19.6% Income
Slide 33: Q3 2018 Reconciliation of Reported Results
Q3 2018 Reconciliation of Reported Results EXCLUDING OTHER EXPENSE (INCOME), NET $ MILLIONS – EXCEPT PER SHARE FIGURES Other Excl. Other Reported Income Income Income Before Income Taxes $ 674 $ 2 $ 676 % of Sales 7.0% 7.0% Income Taxes $ 114 $ 21 $ 135 % of Pretax 16.9% 20.0% Income Attributable to
Slide 34: Magna
A\MAGNA DRIVING EXCELLENCE. INSPIRING INNOVATION. 34