DEUTSCHE BANK GLOBAL AUTO INDUSTRY CONFERENCE

Transcription

1 DEUTSCHE BANK GLOBAL AUTO INDUSTRY CONFERENCE January

2 MARTINREA OVERVIEW Leading Tier One automotive supplier in steel metal forming, fluid management systems and aluminum parts One of the fastest growing automotive parts suppliers in the past 15 years ($0 to ~$4.0 billion in sales in 2016) Operating 45 manufacturing facilities with over 10 million square feet of manufacturing space and 15,000 motivated employees in 8 countries: Canada, United States, Mexico, Brazil, Germany, Slovakia, Spain and China Market statistics (TSX: MRE (CAD)) Market Cap* approx. $1.0 Billion Enterprise Value* approx. $1.6 Billion Q3 LTM Adj. EBITDA $455 Million Q3 LTM Adj. FD EPS $2.22 *As of January 15, 2019

3 MARTINREA S GLOBAL PRESENCE

4 OUR JOURNEY

5 MARTINREA PRODUCTS /CAPABILITIES Powertrain Assembly Body-in-White and Chassis Industrial Fluids

6 COMPETITIVE LANDSCAPE STEEL METAL FORMING FLUID MANAGEMENT SYSTEMS ALUMINUM COMPONENTS OTHER PRIMARY

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8 VISION, MISSION & PRINCIPLES VISION Making lives better by being the best supplier we can be in the products we make and the services we provide. MISSION TO DELIVER We make people s lives better by: Delivering outstanding quality products and services to our customers; Providing meaningful opportunity, job satisfaction, and job security for our people; Being positive contributors to our communities; and, Providing superior long-term investment returns to our stake holders. 10 PRINCIPLES Our success will be based on the execution of our guiding principles, applied with integrity, in all that we do: We make great, high quality products Every location must be a centre of excellence Discipline is key We attract, train and work with excellent people, and we motivate our people to perform well We are a team Challenges make us better Think differently Work hard, play hard The Golden Rule - Treat everyone with dignity and respect Our leadership has to drive these messages consistently and simply 3

9 VISION, MISSION & PRINCIPLES VISION Making lives better by being the best supplier we can be in the products we make and the services we provide. MISSION TO DELIVER We make people s lives better by: Delivering outstanding quality products and services to our customers; Providing meaningful opportunity, job satisfaction, and job security for our people; Being positive contributors to our communities; and, Providing superior long-term investment returns to our stake holders. 10 PRINCIPLES Our success will be based on the execution of our guiding principles, applied with integrity, in all that we do: We make great, high quality products Every location must be a centre of excellence Discipline is key We attract, train and work with excellent people, and we motivate our people to perform well We are a team Challenges make us better Think differently Work hard, play hard The Golden Rule - Treat everyone with dignity and respect Our leadership has to drive these messages consistently and simply 4

10 MARTINREA 2.0 Martinrea 2.0 is the framework to be a great company diverse people and groups working together toward a single vision. Fostering principles-based leadership Promoting positive behaviors Creating a strong lean culture Implementing best practices COMPANY BUSINESS UNIT DEPLOYMENT PLANS PLANT

11 ATTRIBUTES OF THE MARTINREA 2.0 MANUFACTURING SYSTEM THE WAY WE THINK - Learn to unlearn attack waste PRIDE KILLS CONTINUOUS IMPROVEMENT - Pride for your people not for your practice - Be humble, there is always a better way ENGAGING OUR PEOPLE AT ALL LEVELS - Developing and respecting our people - Learning by doing - Use the tools

12 RESULTS TO DATE

13 SAFETY AND QUALITY PERFORMANCE SAFETY TOTAL RECORDABLE INJURY FREQUENCY Improved by 68% QUALITY Concerns Improved by 38% SAFETY AND QUALITY PERFORMANCE CONTINUE TO STRENGTHEN

14 FINANCIAL PERFORMANCE COMPANYWIDE ADJUSTED OPERATING INCOME MARGIN NET DEBT TO LTM ADJUSTED EBITDA RATIO 9.0% % 7.0% 6.0% 5.0% 4.0% 3.0% 4.1% 4.6% 5.0% 6.4% 7.8% x 2.37x 2.16x 1.89x 1.45x 1.35x 2.0% % 0.0% 2014A 2015A 2016A 2017A LTM Sept 2018A Q3 2014A 2014A 2015A 2016A 2017A LTM Sept 2018A OPERATING MARGINS AND BALANCE SHEET CONTINUE TO STRENGTHEN

15 MARTINREA 2.0 NEXT STEPS

16 NEW TARGET SETTING THROUGH 2020 ADJUSTED OPERATING INCOME MARGIN 10.0% Achieved predominantly through operational improvements Operational improvements Flexible process Evolution of Book of Business 9.0% 8.0% 7.0% >8.0% >9.0% 6.0% 5.0% 6.4% 4.0% 3.0% 4.1% 2.0% 1.0% 0.0% 2014A 2017A 2019F 2020F

17 PROCESS INNOVATION

18 THE WAY WE PRODUCE Past Typical Material Flow New High Frequency Delivery Material flow FG staging Assembly Supermarket Press Shop Shipping Inefficient Material Flow Requiring: Higher Headcount More Floor Space More WIP Efficient Material Flow Eliminates Waste Minimizes Logistics: Requires 18% Less Headcount (avg.) 20% Less Floor Space (avg.)

19 MARTINREA FLEXIBLE ASSEMBLY - METALLICS IMPLEMENT FLEXIBLE BUILD PROCESSES (WELD EXAMPLE) Past 40% Less Capital 18% Less Labor 20% Less Space Flexes With Volume Demand Up Demand Down Flex Labor with Volume: No Lifespan: 6 Years Tooling change-over: 4 weeks Service part Capability: None Volume Flex Capability: Low Flex labor with Volume: Yes Lifespan: 12+ Years Tooling change-over: 30 Minutes Service part Capability: Capable 16

20 PROCESS INNOVATION FOR HIGH PRESSURE DIE CASTING: MICRO-SPRAY TECHNOLOGY ORIGINAL PROCESS NEW PROCESS CONVENTIONAL SPRAYING AFTER 33,788 SHOTS MICRO SPRAYING AFTER 103,826 SHOTS Longer tool life Better mechanical properties Improved surface

21 PRODUCTS, INNOVATION AND BEYOND 2020

22 WE ARE A LIGHTWEIGHTING COMPANY Continuously developing and evolving core products (high-strength steel, aluminum, assemblies, etc.) to reduce vehicle weight and CO 2 emissions, improving overall vehicle efficiency (MPG).

23 GLOBAL REGULATIONS DRIVE THE DEMAND FOR LIGHTWEIGHTING Ducker Worldwide

24 MARTINREA'S POSITION Current Book Aluminum percentage is growing 26%

25 LIGHTWEIGHT STRUCTURES Full Steel Construction Full Aluminum Construction Multi-Material Mild Steel, HSS, AHSS, GEN III Steel, Hot Stamping Stamped, Aluminum Casted and Extruded Mild Steel, HSS, VHSS, GEN III Steel, Aluminum

26 LIGHTWEIGHT STRUCTURES ASSEMBLED ALUMINUM SUBFRAME ALUMINUM EXTRUSION + HOLLOW CAST 33.2 lbs STEEL 41.2 lbs ALUMINUM SOLID 34.0 lbs MULTI-MATERIAL LAUNCH 2020 ALUMINUM HOLLOW 27.3 lbs

27 PROPULSION SYSTEMS/EXPANSION OF PORTFOLIO

28 PROPULSION SYSTEMS Plasma Spray Steel Coating for Engine Blocks Cast in liner Spray Coating* Weight reduction of block Better wear performance Less friction Less oil and fuel consumption Better heat dissipation from engine *Up to 500g per Engine Cylinder Weight Reduction Vs. Cast In Liner

29 GROWING TECHNOLOGY AND INNOVATION IDEA RESEARCH DEVELOP TESTING ANALYSIS INTRO NEW MARTINREA TECH CENTER

30 WHATEVER THE FUTURE HOLDS, MARTINREA WILL BE A LEADER ELECTRIFIED CONNECTED SHARED AUTONOMOUS

31 MARTINREA BOOK OF BUSINESS EVOLVING WITH MARKET CURRENT PROJECTED IN FIVE YEARS 5% 23% 95% 77% ICE Platforms BEV/Hybrid Platforms ICE Platforms BEV/Hybrid Platforms

32 FINANCIALS

33 SALES Assembly business changed to a purchased component consignment model resulting in decrease in 2017 despite same level of production > 4,000 Sales growth has been staggering (CAGR ~ 20% from 2009 to 2016) Sales are anticipated to start to increase again in 2019 and grow to over $4 billion in 2020 based on budgets. In millions (CAD) 4,000 3,500 3,000 2,500 2,000 1,500 1,138 1, ,570 2, ,076 2, ,706 3, ,019 3, ,354 3,867 3,968 3, , , ,479 1,000 1, A 2010A 2011A 2012A 2013A 2014A 2015A 2016A LTM 2017A Sep 2017A 2020F Production Sales Tooling Sales

34 HIGHLIGHTS OF RECENT BUSINESS AWARDS Annualized Sales at Peak Volume SOP Range $300 M $270 M $160 M $120 M $90 M 2020 $85M 2021 $50 M $35 M $35 M 2018 $25 M 2019 $20 M 2020 $12 M 2021 $10 M 2021 The company continues to win new business with both new and existing customers in all product areas.

35 NA PLATFORM PORTFOLIO SEPT YTD Ford Escape GM Equinox /Terrain Ford Edge/Fusion GM Pickups, SUVs GM Malibu Ford Trucks Ram Chrysler 300/Challenger/Charger Jeep Wrangler Jeep Grand Cherokee Current North American Platform Portfolio Projected North American Platform Portfolio in Next Few Years SUVs, Trucks and CUVs Passenger Cars SUVs, Trucks and CUVs Passenger Cars

36 ADJUSTED OPERATING INCOME MARGIN 10% On an LTM basis, operating income margin has increased to 7.8% at the end of Q Margins expected to continue to increase to >8% by 2019 and > 9% by 2020 Road map in place to get to targets ADJUSTED OPERATING INCOME MARGIN % 9% 8% 7% 6% 5% 4% 3% 4.1% 4.6% 5.0% YTD Q3 17A 6.2% 6.4% 7.8% >8.0% 2% 2014A 2015A 2016A 2017A LTM Sep 2019F 2018A Note: Operating income margins presented have been adjusted for unusual and other items highlighted in our MD&A >9.0% 2020F

37 OPERATING INCOME MARGIN GROWTH % 4.43% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.50% 1.00% 0.80% 0.50% 0.33% 0.15% 0.41% 0.00% -0.50% Competitor 1 Competitor 2 Competitor 3 Competitor 4 Competitor % Competitor A 2019F* *2019F based on analyst consensus

38 DRIVERS OF MARGIN EXPANSION OPERATIONAL EXCELLENCE Lean transformation Lean, efficient, always improving Scale up by sharing (read across) Purchasing initiatives Innovative, flexible manufacturing Cost saving road maps Strong program management EVOLUTION OF BOOK OF BUSINESS Lower margin work rolling off and being replaced with higher margin work Strict adherence to Martinrea 2.0 investment hurdle rates Operations competing for capital Capital to be allocated to projects with the greatest margins and returns

39 ADJUSTED NET EARNINGS PER SHARE $ FULL YEAR FINANCIALS $2.22 $2.50 IN MILLIONS OF CANADIAN DOLLARS $ $ $ $50.00 $0.00 $0.79 $ $0.97 $0.98 $ $1.50 $ $ A 2011A 2012A 2013A 2014A 2015A 2016A 2017A LTM Sept NET EARNINGS* DILUTED NET EARNINGS PER SHARE* 2018A $2.00 $1.50 $1.00 $0.50 $0.00 *Note: Adjusted for Unusual and Other Items. If any, as highlighted and described in our MD&A

40 CASH FLOW (Before changes in working capital) Capex expected to level off while operating cash expected to continue to increase as margins continue to expand

41 RETURNING CAPITAL TO SHAREHOLDERS 2017 Dividends Paid $10 M 2018 Dividends Paid $ to Repurchase Shares (Sept. to Dec.) approximately 2.25 million shares (2.5% of shares outstanding) $14 M $26 M $40 M

42 MACROECONOMIC OUTLOOK

43 MACROECONOMIC OUTLOOK - AUTOMOTIVE GLOBAL PRODUCTION VOLUME BRIDGE 2017 TO 2024F (MILLIONS) BETWEEN 2017 AND 2024 GLOBAL VEHICLE PRODUCTION will likely increase by over 20 MILLION UNITS 94.0 Source: PWC Autofacts 2018 Q3 Forecast Release

44 U.S. AUTOMOTIVE SALES December mm SAAR FUNDAMENTALS ARE STILL STRONG: Financing is available at low rates Employment/participation levels are strong U.S. housing is healthy Consumer debt levels in the U.S. have improved Oil and gas prices remain low Average vehicle age ~ 12 years Annual population growth adding new drivers; Millennials now buying vehicles New vehicles have more features, may be more economical to drive

45 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 of our revenues, sales, (adjusted) operating income margins, balance sheet strength, earnings, adjusted net earnings, adjusted net earnings per share, cash flow from operations, operating performance, targeted financial ratios, capex levels, investment in capital and programs, growth in and investment in products and technology; strategy, market opportunity and vision; views on the outlook of and growth of the automotive industry; Martinrea s ability to capitalize on opportunities and be a leader in the automotive industry as well as other forward-looking statements. The words continue, expect, anticipate, estimate, may, will, intend, believe, plan and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on estimates and assumptions made by Martinrea in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that Martinrea believes are appropriate in the circumstances. These forward-looking statements are subject to risks, uncertainties and assumptions that may cause actual results, performance or achievements to differ materially from those expected or implied by the forward-looking statements. Factors that may cause such differences include, but are not limited to, North American and global economic and political conditions; the highly cyclical nature of the automotive industry and the industry s dependence on consumer spending and general economic conditions; Martinrea s dependence on a limited number of significant customers; Martinrea s reliance on critical suppliers for components and the risk that suppliers will not be able to supply components on a timely basis or in sufficient quantities; competition; the factors discussed under the headings Industry Highlights and Trends and Risks and Uncertainties in Martinrea s most recent Management Discussion and Analysis and Annual Information Form filed with applicable securities commissions, as well as other risk factors identified therein, available at and the documents incorporated by reference into such documents. These factors should be considered carefully, and readers should not place undue reliance on Martinrea s forward-looking statements. If any of such risks actually occur, they could materially adversely affect our business, financial condition or results of operations. In that case, the trading price of our common shares could decline, perhaps materially. We provide forward-looking statements solely for the purpose of providing information about management's current expectations and plans relating to the future. You are cautioned that such information may not be appropriate for other purposes. Except as required by law, we do not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions, assumptions or circumstances on which any such statement is based.