Martinrea International Inc. · TSX:MRE
Martinrea International — Shareholder Meeting (June 2022)
45 slides from Martinrea International's shareholder meeting presentation, Jun 7, 2022
Slide 1: Martinrea 2022 Annual General Meeting of Shareholders
MARTINREA 2022 ANNUAL GENERAL MEETING OF SHAREHOLDERS June 7, 2022 – 10:00 a.m. ©2022 Martinrea International Inc.
Slide 2: Agenda
AGENDA FORMAL BUSINESS PRESENTATIONS • Chairman’s Opening Remarks and Call to Order – Chairman’s Address – Appointment of Secretary and Scrutineer – CEO’s Address – Quorum and Constitution of Meeting – CFO’s Address • Financial Statements – Shareholders’ Question Period • Election of Directors • App
Slide 3: Legal Disclaimer
LEGAL DISCLAIMER This presentation contains forward-looking statements within the meaning of applicable securities laws (“forward-looking statements”), including, but not limited to, statements relating to future expectations relating to: the impact of the global semiconductor shortage; outlook to 2
Slide 4: Rob Wildeboer, Executive Chairman
Rob Wildeboer Executive Chairman www.martinrea.com | 4
Slide 5: Risk Factors
RISK FACTORS • North American and Global Economic and Political Conditions and Consumer Confidence; • Environmental Regulation and Climate Change; • The highly cyclical nature of the automotive industry and the industry’s dependence on consumer spending and • Litigation and Regulatory Compliance and
Slide 6: Top Challenges Facing Martinrea and the Auto Parts Industry
TOP 10 CHALLENGES FACING MARTINREA AND THE AUTO PARTS INDUSTRY Macroeconomic Issues International Supply Chains Erratic Customer • Cost inflation • Semiconductor chips Production Schedules • Interest rates • Other commodities – • Related to supply • Growth rates slowing plastics/resins/energy chain,
Slide 7: Top Challenges Facing Martinrea and the Auto Parts Industry
TOP 10 CHALLENGES FACING MARTINREA AND THE AUTO PARTS INDUSTRY Lingering Challenges from Climate Change / Electrification International Trade Policy the COVID-19 Pandemic • EV transition – timing and headwinds • USMCA; tariffs • Shutdowns in China We need three things: • We like no border • Stress i
Slide 8: Reasons to Be Positive
REASONS TO BE POSITIVE • Worldwide auto sales are going UP from here, not down; our industry is growing • The North American economy is in good shape • People can afford to buy or lease vehicles Source: IHS Markit www.martinrea.com | 8
Slide 9: Reasons to Be Positive
REASONS TO BE POSITIVE • There’s an inventory shortage 25 U.S. Light Vehicle Sales (SAAR) • Autos need replacing; they’re getting older Millions of Units 20 • Interest rates are likely not going high enough 15 to dampen demand too much 10 • The North American region in particular is 5 poised to exce
Slide 10: Five-Year Share Price Performance Remains in Top Quartile of Peer Group
FIVE-YEAR SHARE PRICE PERFORMANCE REMAINS IN TOP QUARTILE OF PEER GROUP Five-Year Share Price Return (as of December 31, 2021) 100% 86.5% 80% 60% 38.2% 33.9% 40% 29.9% 26.9% 20.2% 14.3% 20% % Return 0% -20% -4.4% -40% -60% -51.7% -80% -67.2% -78.3% -100% www.martinrea.com | 10
Slide 11: 2022 Share Price Impacted by Equity Market Downturn
2022 SHARE PRICE IMPACTED BY EQUITY MARKET DOWNTURN, THOUGH MARTINREA IS OUTPERFORMING ITS PEERS YEAR-TO-DATE Year-To-Date Share Price Return (as of June 3, 2022) 20% 0% -6.3% -20% -12.8% -17.7% -18.7% -20.0% -21.0% % Return -23.6% -24.4% -24.8% -26.5% -40% -28.5% -60% -80% -73.7% -100% Our share pr
Slide 12: Martinrea Culture, Vision, Mission and Principles
MARTINREA CULTURE, VISION, MISSION AND 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 guiding the products we make and the services we provide. principles, applied with integrity, in all that we do
Slide 13: Martinrea Vision – Making Lives Better
MARTINREA VISION – MAKING LIVES BETTER www.martinrea.com | 13
Slide 14: Pat D'Eramo, President and CEO
Pat D’Eramo President and CEO www.martinrea.com | 14
Slide 15: 2021 in Review
2021 IN REVIEW We faced many challenges (supply shortages, cost inflation, sales mix, and heavy launch activity), and we had some notable achievements: • Celebrated our 20th anniversary as an auto parts manufacturer • Launched more new and large programs than in any other point in our history • Main
Slide 16: Status of Operations
STATUS OF OPERATIONS North America Europe Rest of World Production Sales Production Sales Production Sales • Volume and mix improved in Q1 2022 • European production volumes improved • China impacted by volume sequentially in Q1 2022 headwinds, disruption from strict • Further improvement expected a
Slide 17: Path to 2023 Outlook
PATH TO 2023 OUTLOOK Launch related cost expected to normalize Expected to into second half of 2022 smooth as supply chain improves Commercial Other >8% negotiations Heavy Launch Cycle Operations and customer production inefficiency Material/Labour/Energy Cost Inflation Volume/ Mix Adjusted Operatin
Slide 18: Select Program Launches in 2021-2022
SELECT PROGRAM LAUNCHES IN 2021-2022 Lightweight Structures Propulsion Systems Flexible Manufacturing Jeep Grand Cherokee / Jeep Grand Cherokee / Ford Maverick Grand Wagoneer Grand Wagoneer Honda HR-V Lucid Air Exterior Trim Ford – D35 6-Cylinder Ford Mustang Mach-E Engine Float Arms / Tanks / Nissa
Slide 19: 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 – More content multi-material (unlike) to further lightweight – Create reliable product engineering source to our customers • Create long
Slide 20: Martinrea's Commercial Groups
MARTINREA’S COMMERCIAL GROUPS Flexible Manufacturing Group www.martinrea.com | 20 ©2019 Martinrea International Inc. ©2020
Slide 21: A Closer Look at Breakthrough Progress
A CLOSER LOOK AT BREAKTHROUGH PROGRESS
Slide 22: Geely PMA-1 EV Rear Sub-Frame
GEELY PMA-1 EV REAR SUB-FRAME • Fully design responsible • Hollow low-pressure die cast aluminum • MIG welding, low pressure die cast to extrusions • Complete machining and final assembly www.martinrea.com | 22 ©2019 Martinrea International Inc. ©2020
Slide 23: Lucid Air Body-in-White Aluminum Die Cast Components
LUCID AIR BODY-IN-WHITE ALUMINUM DIE CAST COMPONENTS • Front Shock Tower • Front Torque Box • Rear Torque Box – Vacuum high-pressure die cast – High dimensional requirements www.martinrea.com | 23 ©2019 Martinrea International Inc. ©2020
Slide 24: Stellantis Jeep Grand Cherokee Front Rail Assembly
STELLANTIS JEEP GRAND CHEROKEE FRONT RAIL ASSEMBLY • Hydro-formed upper tail • Aluminum high-pressure die cast shock tower • Gen 3 advanced high-strength steel • Self-pierce riveting (SPR) and structural adhesive joining • Thin-gage electro-galvanized steel MIG weld www.martinrea.com | 24 ©2019 Mart
Slide 25: Ford Mach-E Front and Rear Sub-Frames
FORD MACH-E FRONT AND REAR SUB-FRAMES • Fully responsible for design, development and validation • Multi-material front subframe – Low-pressure die cast hollow aluminum rear – Structured for optimal stiffness, mass and dimensional control – Welded steel front structure for management of front impact
Slide 26: Lucid Air Front and Rear Sub-Frames
LUCID AIR FRONT AND REAR SUB-FRAMES • Front Sub-frame – Aluminum front sub-frame features leading- edge multi-process architecture – Joined using structural adhesive – Hollow low-pressure die cast and extrusion components • Rear Sub-frame – Aluminum one-piece hollow low-pressure die cast www.martinr
Slide 27: Daimler EVA II Platform – Roof, Rear Panel, Underbody
DAIMLER EVA II PLATFORM – ROOF, REAR PANEL, UNDERBODY • Higher value system solutions – Utilizing new advanced joining technologies in mixed material solutions – High-strength steel, hot-formed steel, Ultra High-Strength Steel – Stamped, extruded and cast aluminum components www.martinrea.com | 27
Slide 28: Brake Lines with GrapheneGuard
BRAKE LINES WITH GRAPHENEGUARDTM • High-performance brake line coating with graphene – Industry leading abrasion protection – Provides up to 25% weight savings – Improved chemical resistance and high temperature performance • Approved at Ford, GM, and Stellantis • In production at Ford and GM – Ford
Slide 29: Lightweight/Electrified Vehicles Drive Need for More Advanced Products
LIGHTWEIGHT/ELECTRIFIED VEHICLES DRIVE THE NEED FOR MORE ADVANCED PRODUCTS 2020A 2026E 8% 40% 60% 92% ICE Platforms BEV/Hybrid Platforms ICE Platforms BEV/Hybrid Platforms www.martinrea.com | 29
Slide 30: Addressable Content per Vehicle
ADDRESSABLE CONTENT PER VEHICLE www.martinrea.com | 30
Slide 31: Addressable Content per Vehicle
ADDRESSABLE CONTENT PER VEHICLE Transition will not require a material increase in capital or tooling as the majority of our equipment is flexible and adaptable www.martinrea.com | 31
Slide 32: A Closer Look at EV Transition
A CLOSER LOOK AT EV TRANSITION Internal Combustion Hybrid Electric Vehicle (EV) Engine (ICE) 80% of products are agnostic to electrification 20% of products transitioning with market change www.martinrea.com | 32
Slide 33: Select Pure Electric Vehicle Platforms in Martinrea Portfolio
SELECT PURE ELECTRIC VEHICLE PLATFORMS IN MARTINREA PORTFOLIO Audi PPE Body and chassis structures, e-motor housing SOP: 2023 Daimler EVA2 Body and chassis structures SOP: 2022 Ford Mach-E Aluminum front and rear subframes SOP: 2020 Geely PMA 1 Aluminum rear subframes SOP: 2021 GM BEV 3 Body and cha
Slide 34: EV Battery Joint Venture
EV Battery Joint Venture www.martinrea.com | 34
Slide 35: Advantages of Graphene-Enhanced Li-Ion Batteries
ADVANTAGES OF GRAPHENE-ENHANCED LI-ION BATTERIES hence www.martinrea.com | 35
Slide 36: VoltaXplore – Battery Day
VOLTAXPLORE – BATTERY DAY • Battery Day held on April 5 in Montreal • Facility up and running, producing batteries • Technology validated, confirming advantages of graphene-enhanced Li-Ion batteries – Greater capacity – Longer life – Faster charging speeds – Enhanced safety • 2GWh facility condition
Slide 37: Martinrea Innovation Development (MiND)
MARTINREA INNOVATION DEVELOPMENT (MiND) PURPOSE LEADERSHIP CURRENT MARTINREA EQUITY INVESTMENTS: Incubate, develop, and fund Bruce Johnson, • NanoXplore – Hold a 21.2% interest innovative technologies that Executive Vice • VoltaXplore – 50/50 JV with NanoXplore to are strategic to Martinrea’s Presid
Slide 38: Fred Di Tosto, Chief Financial Officer
Fred Di Tosto Chief Financial Officer www.martinrea.com | 38
Slide 39: Overview of 2021 Results
OVERVIEW OF 2021 RESULTS 2021 results impacted by semiconductor and other supply shortages, cost inflation, sales mix, and higher- than-normal launch activity In Canadian Dollars F2021 F2020 Production Sales $3,410M $3,157M Tooling Sales $374M $218M Total Sales $3,784M $3,375M Adjusted Operating Inc
Slide 40: Q1 2022 Results – Sequential Comparison to Q4 2021
Q1 2022 RESULTS – SEQUENTIAL COMPARISON TO Q4 2021 First quarter results much improved sequentially; production environment more stable with a lower level of chip- related OEM production shutdowns and customer “call-offs” In Canadian Dollars Q1 2022 Q4 2021 Production sales up 29.7% on higher Produc
Slide 41: Balance Sheet
BALANCE SHEET Net Debt increased during the first NET DEBT - Excluding IFRS-16 ($ Millions) quarter; an increase in production and tooling-related working capital $1,000.0 contributed to the increase. $800.0 $600.0 During the fourth quarter of 2021, and in $857.7 $922.1 $400.0 $640.0 $688.1 $662.2 $
Slide 42: 2023 Outlook
2023 OUTLOOK 2023F 2021A TOTAL SALES $4.6-$4.8B $3.78B ADJUSTED OPERATING INCOME MARGIN >8% 1.8% FREE CASH FLOW >$200M ($121.6M) KEY ASSUMPTIONS • Based on IHS production volume projections • Capex expected to normalize over the forecast period and approximate depreciation as a % of sales • Outlook
Slide 43: Cash Flow
CASH FLOW OPERATING CASH FLOW - BEFORE CHANGES IN WORKING CAPITAL ($ MILLIONS) Decrease driven by COVID- 19 pandemic and chip/other supply shortages $600 $500 $400 $508 FREE CASH FLOW ($ MILLIONS) $461 $300 $406 $348 $358 $308 $321 $200 $100 $259 $250 $0 $200 2014 2015 2016 2017 2018 2019 2020 2021
Slide 44: Capital Allocation Framework
CAPITAL ALLOCATION FRAMEWORK Invest to Maintain and Maintain Strong Return Capital Grow Our Business Balance Sheet to Shareholders • Organic opportunities • Targeted Net Debt/Adjusted • Repurchase shares with • Invest in R&D and product EBITDA ratio of ~1.5x over excess liquidity offering time (at t
Slide 45: Questions?
QUESTIONS? www.martinrea.com | 45
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