investors presentation – q2 2015

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investors presentation – q2 2015
INVESTORS PRESENTATION – Q2 2015
LEGAL DISCLAMER
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, operating margins, SG&A,
earnings and adjusted net earnings, cash flows from operations, operating performance, investment in capital and programs;
strategy, market opportunity and vision; Martinrea’s views on the outlook of the automotive industry; Martinrea’s ability to capitalize
on opportunities 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 www.sedar.com, 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.
2
COMPANY OVERVIEW
• Martinrea is a leading Tier One supplier of automotive parts, assemblies and modules – Revenues have grown from $1.1 billion in 2009 to $3.6 billion in 2014 representing a CAGR of 26%
– Large book of new business awards
• The second largest North American metalformer in terms of revenue
• A top three supplier of fluid management systems by revenue in North America
• A global market leader in aluminum parts through Martinrea Honsel
• Growth strategy is focused on prudent and profitable growth
– Through a combination of greenfield organic growth initiatives coupled with complementary business acquisitions
• Content on some of the largest and leading platforms in the automotive industry with both the North American domestic and foreign OEMs
– Strong relationships with these OEMs have led to repeat business opportunities and trusted supplier status
• Operates under a decentralized business model with an “owner‐manager culture”
– Each business unit is centered on areas of expertise and responsible for its own bottom line
– The Central Management Group is responsible for overall strategic direction and financial decisions
• Operates 44 facilities in Canada, US, Mexico, Brazil, Germany, Slovakia, Spain and China
– Currently employs over 14,000 trained and motivated employees
– Over 9,000,000 square feet of manufacturing space with expansion potential and multiple expansions occurring
• Strong, independent, experienced board of directors
– Deep knowledge of automotive, finance, governance
• Martinrea trades on the Toronto Stock Exchange under the symbol “MRE”
– The 52 week stock price range is $8.95 ‐ $14.44
3
MARTINREA’S EVOLUTION
NOV 2001
Acquires plant from Acquires majority
Royal Laser Oxford Automotive
of Honsel
Acquires
changes name to:
DEC 2005
JULY 2011
ThyssenKrupp Budd Fabco
Martinrea International Inc.
North America
JUN 2002
DEC 2006
Acquires
Rea International
APR 2002
Acquires Pilot Industries
DEC 2002
Acquires
Depco International
MAY 2006
Acquires
SKD Automotive
MAR 2009
Acquires balance
of Honsel
AUG 2014
4
OUR VISION
Our vision for the future is to be the best,
preferred and most valued automotive parts
supplier in the world in the products and services
we provide our customers.
5
OUR MISSION
Our Mission is to deliver:
‐
‐
‐
‐
Outstanding quality products and services to our customers
Meaningful opportunity, job satisfaction and job security to our people through competitiveness and prudent growth
Superior long term investment returns to our stakeholders
Positive contributions to our communities as good corporate citizens
6
TOP 10 PRINCIPLES
PRINCIPLES: Our success will be based on the execution of our guiding principles, applied with integrity, in all that we do:
1.
2.
3.
4.
We make great, high quality products
Every plant/division must be a centre of excellence
Be disciplined. Discipline is Key
We attract, train and work with excellent people, and we get our people to perform well
5. We are a team
6. Challenges make us better
7. Think Different
8. Work hard, play hard
9. The Golden Rule – Show Dignity and Respect
10. Our leadership team has to drive these messages consistently and simply. Leadership means having the will to ensure we get the right things done the right way.
7
MARTINREA’S GLOBAL PRESCENCE
SLOVAKIA
1 Division
CANADA
13 Divisions
GERMANY
US
3 Divisions
CHINA
2 Divisions
13 Divisions
MEXICO
9 Divisions
SPAIN
2 Divisions
BRAZIL
1 Division
8
BUSINESS OVERVIEW
A leading Tier One supplier in the development and production of quality metal parts, assemblies and
modules, fluid management systems and complex aluminum products
Steel Metal Forming and Assemblies
Fluid Handling Systems
Capabilities include:
• High‐pressure hydroforming
• Roll‐forming
• Stamping
• Hot stamping
• Blanking dies, progressive dies, stage dies, transfer dies
Designs & engineers complete systems in:
• Engine & transmission
• Fuel storage & delivery
• Power steering & brakes
• Exhaust and emission control
• HVAC
Aluminum Die Casting (Martinrea Honsel)
Aluminum casting and machining capability in:
• Engine blocks
• Transmission housings
• Structural components
• Body‐in‐white frames
9
COMPETITIVE LANDSCAPE
Steel Metal Forming (North America)

Second largest
North American
metal former by
revenue
Fluid Handling (North America, China, Slovakia)

Top three supplier
in North America

Leader in growth
since 2005
Light Metal Components (Worldwide)

Leading
supplier of light
metal
components
Primary Competitors
Primary Competitors
Primary Competitors
Other Competitors
Other Competitors
Other Competitors
Viewed as primary
consolidators in the industry
Viewed as primary
consolidators in the industry
Viewed as primary
consolidators in the industry
10
NORTH AMERICAN PLATFORM PORTFOLIO
Current Top 10 Platforms in North America
1
GM Equinox / Terrain
2
Ford Escape/Focus
3
Ford Fusion/Edge
4
Chrysler Cherokee/Commander
5
GM Pickups, SUVs 6
Chrysler 300/Challenger/Charger
7
Ford F Series Super Duty
8
GM Malibu/Impala
9
Chrysler 200
10
Chrysler Minivan
11
ACQUISITION OF 45% INTEREST IN MARTINREA HONSEL
•
On August 6, 2014, Martinrea acquired the 45% equity interest in the Martinrea Honsel Group held by Anchorage Capital LLC for total proceeds of €160 million representing an EV/LTM EBITDA multiple of approximately 5.8x
•
Strategic reasons for acquiring full ownership of Martinrea Honsel included:
Strategic and Operational
 Trend to lighter weight aluminum based solutions, provides significant growth opportunities and complements Martinrea’s steel capabilities in certain products like engine cradles
 Allows Martinrea to invest necessary capital into Martinrea Honsel to take advantage of opportunities and position it favourably for long‐term growth without being hindered by Anchorage’s constraints as a financial sponsor
 Removes capital allocation distortions caused by having one business not wholly owned
 Martinrea Honsel maintains operations in jurisdictions that are seen as being key areas of growth, including Spain, Mexico and Brazil; growth prospects in China are significant
Financial
 The acquisition of the minority interest is accretive on a net income basis
 Opportune time to transact at a relatively attractive price compared to what Martinrea would be required to pay based on the put option or once the growth begins to materialize
 Strong financing markets and access to capital to finance the purchase
 Permits Martinrea to tap into Martinrea Honsel’s borrowing capacity/EBITDA
12
MARKET TRENDS ‐ ALUMINUM
A previous short term trend analysis predicted 144 kilograms of aluminum content by 2015. The current trend analysis and market evidence supports a forecast of 150 kg per vehicle in 2015, and the theoretical CO2 based analysis supports 180 kg by 2020
Source: EAA Aluminum Penetration in Cars – Final Report March 13, 2012; Ducker Analysis
13
MARKET TRENDS – ALUMINUM ENGINE BLOCKS
100%
90%
80%
% of Total Engines in Aluminum
70%
60%
North America
50%
Europe
Brazil
40%
China
30%
20%
10%
0%
2014
2015
2016
2017
2018
2019
Year
Source: IHS Automotive
14
MARTINREA HONSEL PRODUCT FOCUS
Engine Blocks
15
MARTINREA HONSEL PRODUCT FOCUS
Structural Components
16
HIGHLIGHT OF RECENT NEW BUSINESS AWARDS
Annualized Revenue at Peak Volumes
SOP
Aluminum knuckles and control arms
$200,000,000
2015‐2018
Equinox, Terrain – steel metal forming
$175,000,000
2017
Aluminum engine cradle For Cadillac (Omega)
$40,000,000
2015‐2016
Malibu –steel metal forming, assembly and fluid handling
$40,000,000
2015
6.6L DMAX engine – fluid handling
$10,000,000
2016
Fusion, Edge, MKS – steel metal forming and fluid handling
$100,000,000
2014‐2016
2.0L aluminum engine block
$100,000,000
2018
Minivan line – steel metal forming
$25,000,000
2016
Pentastar V6 aluminum engine block ‐ incremental machining volume
$15,000,000
2016
V8 AMG aluminum engine block
$25,000,000
2016
Aluminum cross member for C‐Class
$25,000,000
2016
Aluminum transmission casing
$20,000,000
2015
V4 aluminum diesel engine block
$35,000,000
2018
I4 aluminum engine block
$20,000,000
2015
Customer
Products
17
MACROECONOMIC OUTLOOK – AUTOMOTIVE
Consumer confidence remains steady; North America looks good; Europe recovery is slow; Asia is a large market
Positive factors in North America
• New auto affordability at or near record lows (app. 23 weeks)
• Consumer debt levels in U.S. are improving
• U.S. housing market strengthening
• Oil and gas prices have dropped
• Financing is available at low rates
• New auto inventory remain at modest levels
• Average vehicle age still exceeds 10 years
• Auto sales and production volumes are still increasing
• Customer base remains healthy
18
TOMORROW’S OPPORTUNITIES
18,000,000
US Car and Light Truck Sales
We are here
17,000,000
16,000,000
Annual Sales
15,000,000
14,000,000
13,000,000
12,000,000
11,000,000
Recession
10,000,000
9,000,000
Year
• The future looks good and volumes should be strong for the next few years
• Industry has gone through tough times but has rebounded
- Annual population growth 1.0%; over the next two decades additional 25 million drivers per decade
- Vehicle population aging, scrapping over 14 million per year
- New vehicles have more features; may be more economical to drive
19
FINANCIAL HIGHLIGHTS
Top‐line Growth
Improving Operating Margins
Significant Investment in Future Growth
Reasonable Capital Structure
• Revenue has recovered from trough in 2009
• Revenue has grown from ~$1.1 bn in 2009 to ~$3.6 bn in 2014
• Revenue for first half of 2015 of ~$1,902 mm
• Operating margins are expected to continue to increase due to increased capacity utilization and productivity / efficiency improvements
• Expect stability in SG&A
• Made significant investment in future growth and has been at the high end of comparable peer group
• Continues to invest in future product programs to maintain a strong revenue backlog
• LTM Capex/Total Sales is 5.4%, above average, building base for future
• Net debt to total capital of 49% • Net debt/LTM EBITDA ratio of 2.31x • Reasonable capital structure and coverage ratios
• Capital structure expected to strengthen
20
REVENUE
4,000
3,500
In Millions Of Dollars
3,000
2,500
2,000
$3,599
$3,705
$3,222
1,500
$2,901
$2,193
1,000
$1,689
500
$1,138
0
2009
2010
2011
2012
2013
2014
LTM
Revenue growth from 2009 to 2014 was significant (CAGR 26%). Growth is expected to continue but at a more normalized pace.
21
ADJUSTED OPERATING INCOME MARGIN
8%
Adjusted Operating Income Margin %
>6%
6%
4.9%
4.6%
4.1%
4.1%
4%
2%
0%
2011
2012
2013
2014
2017F
Operating income margins are expected to improve by 50% from 2014 to 2017 on increased capacity utilization and productivity / efficiency improvements.
Note: Operating income margins presented have been adjusted for unusual and other items noted in the Company’s MD&A
22
ADJUSTED NET EARNINGS PER SHARE
Full Year Financials
Quarterly Financials
$1 .40
11 5
$0 .45
40
1.24
$1 .20
0.98
$1 .00
0.88
75
0.79
$0 .80
0.61
$0 .60
55
$105
$82
35
$67
$0 .35
30
$0 .30
0.28
25
0.27
$0 .25
0.23
0.21
20
$33
0.17
$0 .20
$30
15
$73
$0 .40
0.36
$0 .40
$83
$0 .15
$24
$0 .20
$52
15
In Millions Of Dollars
In Millions Of Dollars
0.97
0.39
35
95
10
-0.05
$23
$19
$18
$0 .10
$14
$0 .00
5
$0 .05
-$4
-$0 .2 0
-5
20 09
20 10
20 11
20 12
20 13
20 14
LTM
$0 .00
0
Q4 2 013
Net Earnings*
Q1 2 014
Q2 2 014
Q3 2 014
Q4 2 014
Q1 2 015
Q2 2 015
Diluted Net Earnings Per Share*
Net Earnings*
Diluted Net Earnings Per Share*
Management expects record net earnings in 2015. Q3 2015 FD EPS expected to be between $0.27 and $0.31.
*Note: Adjusted for Unusual and Other Items noted in the Company’s MD&A
23
CASH FLOW / CAPEX
Operating Cash Flow
CAPEX
300
250
250
200
200
150
150
$282
$259
$237
$201
100
100
$204
$201
2014
LTM
$180
$149
$142
$146
50
50
$91
$89
$51
$24
0
0
2009
2010
2011
2012
2013
2014
LTM
The Company is a significant cash flow generator. Cash flow from operations is expected to increase as margins improve and the business continues to expand.
2009
2010
2011
2012
2013
Martinrea has made significant investment in future growth.
24
STEEL METAL FORMING
25
MARTINREA HEAVY STAMPINGS
Ford Escape – C520
26
MARTINREA HEAVY STAMPINGS
Ford Escape – C520
27
MARTINREA HOT STAMPINGS ‐ DETROIT
28
HIGH PRESSURE ALUMINUM DIE CASTING
29
LOW PRESSURE ALUMINUM DIE CASTING
30
MARTINREA HONSEL SPAIN – NEW ALUMINUM FACILITY
Automatic Assembly Line for Jaguar LandRover Knuckles/Control Arms
31
MARTINREA HONSEL MEXICO ‐ FUTURE EXPANSION
High Pressure Die Casting
32
MARTINREA HONSEL MEXICO ‐ NEW ALUMINUM FACILITY
Low Pressure Die Casting
33
MARTINREA HONSEL – MACHINING CAPABILITIES
Jaguar Engine Block Machining Line
34
MARTINREA RIVERSIDE, MISSOURI – NEW METALLICS FACILITY
35

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