Magna International Inc. · TSX:MG
Magna International — Q3 2022 Earnings Presentation
32 slides from Magna International's earnings presentation, Nov 4, 2022
Slide 1: Q3 2022 Results
Q3 2022 Results November 4, 2022
Slide 2: Forward Looking Statements
Forward Looking Statements Q3 - 2022 RESULTS 2 Certain statements in this document constitute "forward - looking information" or "forward - looking statements" (collectively, "for ward - looking statements"). Any such forward - looking statements are intended to provide information about management'
Slide 3: Forward Looking Statements (cont.)
Forward Looking Statements (cont.) Q3 - 2022 RESULTS 3 Forward - looking statements are based on information currently available to us and are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future devel
Slide 4: Reminders
4 Reminders All amounts are in U.S. Dollars 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" Q3 - 2022 RESULTS
Slide 5: Key Messages – Q3 2022
Key Messages – Q3 2022 Q3 - 2022 RESULTS 5 Improved YoY and sequential results in Q3 1. Expect sequential improvement in earnings again in Q4 2. Reduced 2022 outlook for sales and margin 3. Further progress in our go - forward strategy 4.
Slide 6: Current Market Dynamics
Current Market Dynamics Q3 - 2022 RESULTS 6 Tailwinds Auto forecasters expecting increased global light vehicle production in 2023+ Dealer inventory levels remain well below historical levels Underlying auto demand remains resilient Headwinds Continued supply constraints Input costs remain elevated
Slide 7: Q3 2022 Performance Highlights
CONSOLIDATED SALES $9.3B Weighted GoM 1 3% +17% Q3 2022 Performance Highlights Q3 - 2022 RESULTS 7 ADJUSTED EBIT MARGIN % 4.8% +190 bps OTHER HIGHLIGHTS Paid out $125M in dividends ADJUSTED DILUTED EPS $1.07 +91% FREE CASH FLOW 2 - $210M Repurchased 3.1M shares for $180M 1 Weighted Growth over Marke
Slide 8: Updated 2022 Outlook – Key Factors
Updated 2022 Outlook – Key Factors Q3 - 2022 RESULTS 8 Expect Sequential Earnings Improvement Q4/22 vs Q3/22 • Operating efficiencies at certain facilities ~15 bps ̶ Most significant is BES facility in Europe » Action plans in place » We expect progress improving run - rate of losses going forward •
Slide 9: Magna Enters Micromobility Market
Magna Enters Micromobility Market Q3 - 2022 RESULTS 9 • Utilizing Magna’s capabilities and platform technologies • Invested in Yulu and in growing battery - swapping business • Ongoing activities with delivery robots
Slide 10: Launching 48Volt Hybrid Transmissions
Launching 48Volt Hybrid Transmissions Q3 - 2022 RESULTS 10 • Hybrid dual - clutch transmission debuted on the Jeep Renegade and Compass e - Hybrid, Fiat 500X and Tipo • Agreement includes additional hybrid models in the future for Europe • Scalable technology aids customers in the transition to vehi
Slide 11: Technology Recognitions from Automotive News
Technology Recognitions from Automotive News Q3 - 2022 RESULTS 11
Slide 12: Q3 2022 Financial Results
Q3 2022 Financial Results Q3 - 2022 RESULTS 12 Key Factors • Higher global light vehicle production and assembly volumes (+) • Launch of new programs (+) • Customer price increases to recover higher input costs (+) • Foreign currency translation: $774M or 10% ( - ) • Lower sales at facilities in Rus
Slide 13: Q3 2022 Financial Results
Q3 2022 Financial Results Q3 - 2022 RESULTS 13 Adjusted effective tax rate of 25.5% vs 15.0% in Q3'21: • Lower R&D credits ( - ) • Change in the mix of earnings ( - ) • Favourable changes in reserves for uncertain tax positions (+) Adjusted Net Income Attributable to Magna of $308M, up $138M Adjuste
Slide 14: Q3 2022 Cash Flow and Investment Activities
Q3 2022 Cash Flow and Investment Activities Q3 - 2022 RESULTS 14 Free Cash Flow 1 ($Millions) - $25 - $210 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 -$250 -$200 -$150 -$100 -$50 $0 Q3'21 Q3'22 OTHER USES OF CASH Net Repayment of Debt $10 Private Equity Investments $25 Repurchase of Common Shares $180 Dividend
Slide 15: Continued Financial Flexibility
Continued Financial Flexibility Q3 - 2022 RESULTS 15 ($Billions) Estimated LTD Principal Repayments (12/31/21) ($Millions) $455 $692 $771 $651 $3 $1,437 2022 2023 2024 2025 2026 Thereafter LEVERAGE RATIO (LTM, 09/30/22) Adjusted Debt $5.138 Adjusted EBITDA $3.695 Adjusted Debt / Adjusted EBITDA 1.39
Slide 16: Financial Outlook – Key Assumptions
Financial Outlook – Key Assumptions Q3 - 2022 RESULTS 16 2021 JULY 2022 NOVEMBER 2022 Light Vehicle Production (millions of units) • North America 13.1 14.7 14.5 • Europe 16.0 16.4 16.0 • China 24.6 24.4 25.5 Foreign Exchange Rates • 1 CDN dollar equals USD 0.798 0.783 0.767 • 1 EURO equals USD 1.18
Slide 17: 2022 Outlook
2022 Outlook Q3 - 2022 RESULTS 17 2021 JULY 2022 NOVEMBER 2022 Sales: • Body Exteriors & Structures 14.5 16.0 – 16.6 16.0 – 16.4 • Power & Vision 11.3 11.7 – 12.1 11.6 – 11.9 • Seating Systems 4.9 5.3 – 5.6 5.2 – 5.4 • Complete Vehicles 6.1 5.1 – 5.4 5.0 – 5.2 Total Sales 36.2 37.6 – 39.2 37.4 – 38.
Slide 18: Free Cash Flow Expectations
Free Cash Flow 1 Expectations Q3 - 2022 RESULTS 18 • Reduced earnings outlook ( - ) • Higher expected year end working capital ( - ) • Lower capital spending outlook (+) 2022 ($Billions) 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 $0.7 - $0.9 $0.4 - $0.6 July 2022 Outlook November 2022 Outlook 1
Slide 19: In Summary
In Summary Q3 - 2022 RESULTS 19 • Further sequential earnings improvement expected in Q4 • Continued focus on improvements in our underperforming operations, managing costs and customer recoveries • Ongoing progress in our go - forward strategy Improved Results in Q3, Both YoY and Sequentially
Slide 20: Appendix – Q3 2022 Results
Appendix – Q3 2022 Results Q3 - 2022 RESULTS 20
Slide 21: Q3 2022 Reconciliation of Reported Results
Q3 2022 Reconciliation of Reported Results 21 REPORTED OTHER EXPENSE, NET EXCL. OTHER EXPENSE, NET Income Before Income Taxes $ 400 $ 23 $ 423 % of Sales 4.3% 4.6% Income Tax Expense $ 104 $ 4 $ 108 % of Pretax 26.0% 25.5% Income Attributable to Non - Controlling Interests $ (7) $ - $ (7) Net Income
Slide 22: Q3 2021 Reconciliation of Reported Results
Q3 2021 Reconciliation of Reported Results 22 REPORTED OTHER EXPENSE, NET EXCL. OTHER EXPENSE, NET Income Before Income Taxes $ 27 $ 180 $ 207 % of Sales 0.3% 2.6% Income Tax Expense $ 10 $ 21 $ 31 % of Pretax 37.0% 15.0% Income Attributable to Non - Controlling Interests $ (6) $ - $ (6) Net Income
Slide 23: Sales Performance vs Market (Q3)
Sales Performance vs Market 23 REPORTED ORGANIC 1 PERFORMANCE VS WEIGHTED GLOBAL PRODUCTION (Weighted GoM) Body Exteriors & Structures 25% 31% 7% Power & Vision 16% 26% 2% Seating Systems 15% 25% 1% Complete Vehicles (3%) 13% (11%) TOTAL SALES 17% 27% 3% Unweighted Production Growth 24% Weighted Pro
Slide 24: Sales Performance vs Market (YTD)
Sales Performance vs Market 24 REPORTED ORGANIC 1 PERFORMANCE VS WEIGHTED GLOBAL PRODUCTION (Weighted GoM) Body Exteriors & Structures 11% 16% 10% Power & Vision 4% 9% 3% Seating Systems 9% 17% 11% Complete Vehicles (15%) (5%) (11%) TOTAL SALES 4% 11% 5% Unweighted Production Growth 6% Weighted Prod
Slide 25: Geographic Sales
Geographic Sales Q3 - 2022 RESULTS 25 Q3 2021 Q3 2022 ASIA ASIA PRODUCTION 23% China Production 27% Q3 2022 vs Q3 2021 $3.9B $4.7B $0.0B $0.5B $1.0B $1.5B $2.0B $2.5B $3.0B $3.5B $4.0B $4.5B $5.0B $3.1B $3.3B $0.0B $0.5B $1.0B $1.5B $2.0B $2.5B $3.0B $3.5B $927M $1.2B $0M $200M $400M $600M $800M
Slide 26: 2022 Segment Adjusted EBIT Margin
2022 Segment Adjusted EBIT Margin Q3 - 2022 RESULTS 26 2021 July 2022 Outlook November 2022 Outlook BODY EXTERIORS & STRUCTURES 5.7% 6.0 - 6.5% 5.8 - 6.1% SEATING SYSTEMS 3.1% 3.0 - 3.5% 2.1 - 2.4% POWER & VISION 6.5% 4.5 - 5.0% 4.3 - 4.6% COMPLETE VEHICLES 4.7% 3.8 - 4.3% 4.0 - 4.3%
Slide 27: Capital Allocation Principles
Capital Allocation Principles Q3 - 2022 RESULTS 27 Disciplined, Profitable Approach to Growth Remains a Foundational Principle Q3 2022 Maintain Strong Balance Sheet • Preserve liquidity and high investment grade credit ratings - Adj. debt / Adj. EBITDA ratio between 1.0 - 1.5x LTM 9/30/22 1.39x • Ma
Slide 28: Segment Financial Performance – Body Exteriors & Structures
Segment Financial Performance Q3 - 2022 RESULTS 28 Adjusted EBIT Margin % • Earnings on higher sales (+) • Commercial settlements (+) • Higher tooling contribution (+) • Divestitures, net of acquisitions (+) • Higher net input costs ( - ) • Operating inefficiencies at a facility in Europe ( - ) • Re
Slide 29: Segment Financial Performance – Power & Vision
• Higher global light vehicle production (+) • Launch of new programs (+) • Customer price increases to recover higher production costs (+) • Foreign currency translation: $239M ( - ) • Net customer price concessions ( - ) Segment Financial Performance Q3 - 2022 RESULTS 29 POWER & VISION $2.5 $2.9 Q
Slide 30: Segment Financial Performance – Seating
• Higher global light vehicle production (+) • Launch of new programs (+) • Customer price increases to recover higher production input costs (+) • Foreign currency translation: $103M ( - ) • Lower sales at facilities in Russia ( - ) • Divestitures: $9M ( - ) • Net customer price concessions ( - ) S
Slide 31: Segment Financial Performance – Complete Vehicles
• Weaker euro: $207M ( - ) • Higher vehicle assembly volumes: 1.6K units (+) Segment Financial Performance Q3 - 2022 RESULTS 31 Adjusted EBIT Margin % • Provision on engineering services contract with Evergrande in Q3'21 (+) • Higher earnings on higher assembly volumes, net of contractual fixed cost
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