Magna International Inc. · TSX:MG
Magna International — Q2 2019 Earnings Presentation
31 slides from Magna International's earnings presentation, Aug 8, 2019
Slide 1: Q2 2019 Results Conference Call
Q2 2019 RESULTS CONFERENCE CALL August 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: Q2 2019 Highlights
Q2 2019 Highlights • Q2 financials and outlook • Framework agreement for electric vehicle manufacturing JV • Customer quality awards 4
Slide 5: Q2 2019 Financial Highlights
Q2 2019 Financial Highlights • Solid second quarter Sales and Adjusted Diluted EPS despite: – Challenging global production environment – Higher costs in our ADAS business – Lower equity income – Dilutive impact of divestitures net of acquisitions – FX headwinds • Overall results slightly ahead of i
Slide 6: Framework Agreement for Electric Vehicle Manufacturing JV
Framework Agreement for Electric Vehicle Manufacturing JV • Joint venture in China between Magna and BAIC Group • Combines Magna’s vehicle assembly expertise with BAIC’s local manufacturing, marketing, and distribution • Expect to launch in late 2020 with potential to assemble EVs for other customer
Slide 7: Quality Recognition Awards
Quality Recognition Awards • FCA: Interior Supplier of the Year awarded to Seating • Ford: Silver Quality World Excellence for hydroformed components in China • GM: Driveline Systems Supplier of the Year 7
Slide 8: Q2 2019 Consolidated Sales Performance
Q2 2019 Consolidated Sales Performance $ BILLIONS 10.3 - 1% 10.1 4.2 2.8 1.5 1.8 Q2 2018 Body Power Seating Complete Q2 2019 Exteriors & Vision Vehicles & Structures ($Millions) (308) (389) 28 522 (154) B/(W) 8
Slide 9: Q2 2019 Consolidated Sales Performance
Q2 2019 Consolidated Sales Performance $ BILLIONS Key Factors: - 1 % • Global light vehicle production (-) Organic Growth • Foreign exchange translation (-) 10.3 +5% 10.1 • Divestitures, net of acquisitions (-) • Lower assembly volumes on the BMW 5-Series (-) • End of production of certain programs,
Slide 10: Q2 2019 Adjusted EBIT and Equity Income
Q2 2019 Adjusted EBIT and Equity Income ADJUSTED EBIT MARGIN % KEY FACTORS - 110BP • Power & Vision (-) • Seating (-) 7.8 • Body Exteriors & Structures (-) 6.7 • Corporate and Other (+) ADJUSTED EBIT EQUITY INCOME ($ Millions) ($ Millions) - 16 % - 33% 803 677 72 48 Q2 2018 Q2 2019 10
Slide 11: Q2 2019 Financial Highlights
Q2 2019 Financial Highlights ADJUSTED EFFECTIVE ADJUSTED NET INCOME ADJUSTED TAX RATE ATTRIBUTABLE TO MAGNA DILUTED EPS + 40BP - $81Million - $0.08 23.1% 23.5% $590M $1.67 $1.59 $509M Q2 2018 Q2 2019 Q2 2018 Q2 2019 Q2 2018 Q2 2019 11
Slide 12: Q2 2019 Segment Sales: Body Exteriors & Structures
Q2 2019 Segment Sales BODY EXTERIORS & STRUCTURES $ BILLIONS • Global light vehicle production (-) - 7% • Foreign currency translation (-) • End of production of certain programs, 4.6 including the Chevrolet Cruze (-) 4.2 • Net customer price concessions (-) • New program launches (+) Significant Ne
Slide 13: Q2 2019 Segment Adjusted EBIT Margin: Body Exteriors
Q2 2019 Segment Adjusted EBIT Margin % BODY EXTERIORS & STRUCTURES • Reduced earnings due to lower sales (-) • Lower net gains on sale of assets (-) - 50BP • Higher depreciation and amortization (-) 8.5% • Foreign exchange losses (-) 8.0% • Inefficiencies at plants we are closing (-) • Higher warran
Slide 14: Q2 2019 Segment Sales: Power & Vision
Q2 2019 Segment Sales POWER & VISION $ BILLIONS • Divestitures, net of acquisitions (-) - 12% • Global light vehicle production (-) • Foreign currency translation (-) 3.2 • Net customer price concessions (-) 2.8 • New program launches (+) Significant New Launches: • BMW X5 • Chevrolet Blazer • BMW X
Slide 15: Q2 2019 Segment Adjusted EBIT Margin: Power & Vision
Q2 2019 Segment Adjusted EBIT Margin % POWER & VISION • Higher engineering and other costs in our ADAS business (-) - 220BP • Higher depreciation and amortization (-) • Lower equity income (-) 9.4% • Acquisitions (-) 7.2% • Higher spending on electrification, autonomy and R&D (-) • Divestiture of FP
Slide 16: Q2 2019 Segment Sales: Seating
Q2 2019 Segment Sales SEATING $ BILLIONS • New program launches (+) • Acquisition of Viza (+) + 2% • Global light vehicle production (-) 1.5 • End of production of certain programs, 1.4 including the Chevrolet Cruze (-) • Foreign currency translation (-) • Net customer price concessions (-) Signific
Slide 17: Q2 2019 Segment Adjusted EBIT Margin: Seating
Q2 2019 Segment Adjusted EBIT Margin % SEATING • Launch costs and operational - 250 BP inefficiencies at a new facility (-) 8.2% • Lower equity income (-) • Higher commodity costs (-) 5.7% • Foreign exchange losses (-) • Higher labour and benefit costs (-) Q2 2018 Q2 2019 17
Slide 18: Q2 2019 Complete Vehicles
Q2 2019 Complete Vehicles ASSEMBLY VOLUMES SALES (Thousands of units) ($ Billions) + 28% + 41% 1.8 43.0 33.5 1.3 ADJUSTED EBIT ADJUSTED EBIT MARGIN % ($ Millions) + 42 + 230BP 43 2.4 1 0.1 Q2 2018 Q2 2019 18
Slide 19: Q2 2019 Cash Flow
Q2 2019 Cash Flow $ MILLIONS Cash from Operations Net Income + Non-Cash Items $ 920 Changes in Non-Cash Operating Assets & Liabilities $ - $ 920 Investment Activities Fixed Assets $ (328) Investments, Other Assets & Intangibles $ (107) Acquisition of Viza $ (152) $ (587) Proceeds from Disposition an
Slide 20: Return of Capital to Shareholders
Return of Capital to Shareholders Common Shares Repurchased in Q2 8.6M $ to Repurchase Shares in Q2 $ 409M Dividends Paid $ 110M Total Q2 Return to Shareholders $ 519M 1 Common Shares Repurchased to date in Q3 1.9M 1 $ to Repurchase Shares in Q3 $ 92M 1 As of August 2, 2019 20
Slide 21: 2019 Outlook
2019 Outlook August May Vehicle Production: – North America 16.6M 16.7M – Europe 21.4M 21.5M 1 – China – Magna’s Top 30 Vehicles 2.6M 2.8M Foreign Exchange Rates: – U.S. – Cdn 0.745 0.743 – U.S. – Euro 1.125 1.124 – U.S. – RMB 0.146 0.148 1 Represents ~2/3 of Magna’s 2018 consolidated sales in China
Slide 22: 2019 Outlook
2019 Outlook 1 $ BILLIONS UNLESS OTHERWISE NOTED U.S. GAAP August May Sales: • Body Exteriors & Structures $16.3 - $17.1 $16.3 - $17.1 • Power & Vision $11.0 - $11.6 $11.0 - $11.6 • Seating Systems $5.4 - $5.8 $5.5 - $5.9 • Complete Vehicles $6.8 - $7.2 $6.9 - $7.3 Total Sales $38.9 - $41.1 $39.1 -
Slide 23: 2019 Segment Adjusted EBIT Margin %
2019 Segment Adjusted EBIT Margin % BODY EXTERIORS & STRUCTURES POWER & VISION 9.5% 8.2-8.6% 8.2-8.6% 8.1% 6.6-7.1% 6.6-7.1% SEATING SYSTEMS COMPLETE VEHICLES 7.7% 6.2-6.7% 5.7-6.2% 1.5-2.0% 1.7-2.2% 1.1% 2018 Prior 2019 Outlook Current 2019 Outlook 23
Slide 24: Summary
Summary • Operating results remained strong • Organic sales outpaced global vehicle production in each segment • Free cash flow was $511 million, bringing our year to date total to $858 million • Returned $519 million to shareholders • Our 2019 outlook is largely unchanged with modest sales and marg
Slide 25: Appendix
Q2 2019 APPENDIX August 8, 2019 25
Slide 26: Sales Performance vs Market
Sales Performance vs Market Q2 2019 vs Q2 2018 1 Unweighted Weighted Reported Organic Outperformance Outperformance Body Exteriors & Structures (7%) (4%) 2% (1%) Power & Vision (12%) 1% 7% 4% Seating 2% 3% 9% 6% Complete Vehicles 41% 49% 55% 52% TOTAL SALES (1%) 5% 11% 8% Unweighted Production Growt
Slide 27: Geographic Sales
Geographic Sales Q2 2019 vs Q2 2018 NORTH AMERICA EUROPE ($Billions) ($Billions) - 4% + 4% 5.2 5.0 4.3 4.5 PRODUCTION -2% PRODUCTION -5% ASIA REST OF WORLD ($Millions) ($Millions) - 22% + 12% 697 155 547 139 PRODUCTION -8% (China -19%) S.A. PRODUCTION -1% Q2 2018 Q2 2019 27
Slide 28: Segment Impact on Adjusted EBIT % of Sales
Segment Impact on Adjusted EBIT % of Sales Q2 2019 vs Q2 2018 $ MILLIONS Adjusted EBIT as a Adjusted Percentage Sales EBIT of Sales Second Quarter of 2018 $ 10,280 $ 803 7.8% Increase (Decrease) related to: Body Exteriors & Structures $ (308) $ (47) (0.2%) Power & Vision $ (389) $ (98) (0.7%) Seatin
Slide 29: Adjusted Debt to Adjusted EBITDA Calculation
Adjusted Debt to Adjusted EBITDA Calculation $ MILLIONS Q2 2019 LTM EBITDA $ 4,124 LTM Other Income per Financial Statements & Restructuring (Expense) $ 512 Other $ (134) Adjusted EBITDA $ 4,502 Debt per Balance Sheet $ 3,382 Lease Liability per Balance Sheet $ 1,758 Other $ 218 Adjusted Debt $ 5,35
Slide 30: Q2 2019 Reconciliation of Reported Results
Q2 2019 Reconciliation of Reported Results EXCLUDING OTHER EXPENSE (INCOME), NET $ MILLIONS – EXCEPT PER SHARE FIGURES Other Excl. Other Reported Expense Expense Income Before Income Taxes $ 595 $ 68 $ 663 % of Sales 5.9% 6.5% Income Taxes $ 145 $ 11 $ 156 % of Pretax 24.4% 23.5% Income Attributable
Slide 31: Q2 2018 Reconciliation of Reported Results
Q2 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 $ 819 $ (39) $ 780 % of Sales 8.0% 7.6% Income Taxes $ 183 $ (3) $ 180 % of Pretax 22.3% 23.1% Income Attributabl