investors presentation – q4 2015

INVESTORS PRESENTATION – Q4 2015
March 28, 2016
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, operating margins, SG&A,
earnings and adjusted net earnings, cash flow from operations, operating performance, targeted financial ratios, investment in
capital and programs; strategy, market opportunity and vision; views on the outlook of and growth of the automotive industry
(including production volumes); Martinrea’s ability to capitalize on opportunities in the automotive industry as well as other forwardlooking 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
MARTINREA OVERVIEW
• Leading Tier One automotive parts supplier – The second largest North American steel metal former
– Top three North American fluid management systems supplier
– A global market leader in aluminum parts through Martinrea Honsel
• One of the fastest growing automotive parts suppliers in the past 15 years ($0 to ~$3.9 billion in revenues)
– Footprint now in place
– Focus on operational excellence, lean manufacturing, margin improvement
• Operating 44 facilities in 8 countries: Canada, USA, Mexico, Germany, Spain, Slovakia, Brazil and China
– Each facility is a center of excellence, with an entrepreneurial “owner managed culture”
– 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
• Market Statistics (TSX : MRE)
– 52 Week high1 ‐ $14.44
– The 52 week stock price range1 ‐ $8.07 ‐ $14.44
– Market Cap1 ‐ $903 Million
– Enterprise Value1 ‐ $1,590 Million
– Dividend Yield1 1.1%
– EPS2 $1.38
– EBITDA2 $317.8 Million
1 – Based on stock price as of March 21, 2016
2 – On an adjusted basis for the 12 months ending December 31, 2015 as noted in the Company’s 2015 year‐end MD&A
3
MARTINREA’S EVOLUTION
NOV 2001
Acquires plant from Acquires majority
Royal Laser Acquires
Oxford Automotive
of Honsel
changes name to:
ThyssenKrupp Budd Fabco DEC 2005
JULY 2011
Martinrea International Inc.
North America
(Metallics)
(Aluminum)
JUN 2002
DEC 2006
(Metallics)
Acquires Pilot Industries
DEC 2002
(Fluid Management Systems)
Acquires
Rea International
APR 2002
(Fluid Management Systems)
Acquires
Depco International
MAY 2006
(Metallics)
Acquires
SKD Automotive
MAR 2009
(Metallics)
Footprint
In Place
Acquires balance
of Honsel
AUG 2014
4
MARTINREA VISION, MISSION and PRINCIPLES
MARTINREA VISION
MARTINREA PRINCIPLES
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.
Our success will be based on the execution of our guiding principles, applied with integrity, in all that we do:
MARTINREA 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.
1.
We make great, high quality products
2.
Every plant/division must be a centre of excellence
3.
Be disciplined. Discipline is key
4.
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.
5
MARTINREA’S GLOBAL PRESENCE
SLOVAKIA
1 Division
CANADA
13 Divisions
GERMANY
US
2 Divisions
CHINA
2 Divisions
14 Divisions
MEXICO
9 Divisions
SPAIN
2 Divisions
BRAZIL
1 Division
6
BUSINESS OVERVIEW
Steel Metal Forming and Assemblies
Market Position
Second largest North American steel metal former: plants in Canada, USA and Mexico
Key Drivers
Light weighting/safety parts
Key Products
Body stamping and assemblies, chassis components and modules, and leading edge operational processes
Key Capabilities
High‐pressure hydroforming, roll‐forming, stamping, hot forming/stamping, blanking dies, progressive dies, stage dies and transfer dies
7
BUSINESS OVERVIEW
Fluids Management Systems
Market Position
‐ Top three supplier in North America
‐ Expanding presence in Europe and China
Key Drivers
Efficient and safe fluid management systems for vehicles
Key Products
Capable systems in fuel and brake lines, TOC lines and powertrain
Key Capabilities
Leading edge production systems, expertise in engine and transmission, fuel storage and delivery, power steering and brakes, exhaust and emission control, and HVAC
8
BUSINESS OVERVIEW
Aluminum Products (Martinrea Honsel)
Market Position
One of the top three leading suppliers of specialized aluminum light metal components
Key Drivers
‐ Trend of light weighting with Aluminum
‐ Emphasis on increased fuel economy and lower carbon footprint
‐ Growth in Aluminum engine block market and structural product market
Key Products
‐ Aluminum casting and machining
‐ Engine blocks
‐ Structural components
Key Capabilities
‐ Leading edge technologies in specialized products
‐ Ability to combine casting and machining as a “one stop shop”, vertical integration
‐ Geographic presence in all key areas
9
MARKET TRENDS – ALUMINUM (NORTH AMERICA)
Source: North American Light Vehicle Aluminum Content Study June 2014; Ducker Analysis
10
COMPETITIVE LANDSCAPE
Steel Metal Forming (North America)
Second largest North American metal former by revenue
Fluid Management Systems (North America, China, Slovakia)
Top three supplier in North America
Leader in growth since 2005
Aluminum Components (Worldwide)
Leading supplier of light metal components
Primary Competitors
Primary Competitors
Primary Competitors
Other Competitors
Other Competitors
Other Competitors
11
NORTH AMERICAN PLATFORM PORTFOLIO
Current Top 10 Platforms in North America
1
Ford Escape/Focus
2
GM Equinox / Terrain
3
Ford Fusion/Edge
4
GM Pickups, SUVs 5
Chrysler 300/Challenger/Charger
6
Ford F Series Super Duty
7
GM Malibu/Impala
8
Chrysler Cherokee/Commander
9
Chrysler 200
10
Chrysler Wrangler
12
HIGHLIGHTS OF RECENT NEW BUSINESS AWARDS
Annualized Revenue at Peak Volumes
SOP
Aluminum knuckles and control arms
$200,000,000
2015‐2018
Aluminum components – oil pan / carrier
$10,000,000
2016
Equinox, Terrain – steel metal forming
$175,000,000
2017
Pick‐up trucks – steel metal forming and fluid handling
$70,000,000
2018
Aluminum engine cradle For Cadillac (Omega)
$40,000,000
2016
4.0 cyl engine block
$10,000,000
2018
6.6L DMAX engine – fluid handling
$10,000,000
2016
Small car fuel filler
$10,000,000
2018
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
V4 aluminum diesel engine block
$35,000,000
2018
Customer
Products
13
MACROECONOMIC OUTLOOK – AUTOMOTIVE
•
Global vehicle production is anticipated to increase
•
North America, Europe, China markets are anticipated to grow
Positive factors in North America
• New auto affordability at or near record lows (app. 23 weeks)
• Consumer debt levels in U.S. have improved significantly
• U.S. housing market is healthy
• Oil and gas prices have dropped significantly
• Financing is available at low rates
• New auto inventory remain at modest levels
• Average vehicle age still exceeds 10 years
• Customer base remains healthy, employment levels in North America have increased
14
MACROECONOMIC OUTLOOK – AUTOMOTIVE
OVER THE NEXT 7 YEARS, GLOBAL VEHICLE PRODUCTION WILL LIKELY INCREASE BY ANOTHER 22 MILLION UNITS
Global Production Volume Bridge – 2014 to 2021 (millions)
110
1.10
1.00
1.08
2.36
108
2.42
105
3.15
103
4.44
100
98
8.84
95
109.7
108.7
Developed AP
2021F
93
90
88
85
83
86.4
80
2014
China
Source: Autofacts 2015 Q4 Data Release
BRI*
NA
EU
ASEAN
MEA
Other
*BRI – Brazil, Russia, India
15
MACROECONOMIC OUTLOOK – AUTOMOTIVE
NA ASSEMBLY IS FORECASTED TO GROW STEADILY FOR THE NEXT 6 YEARS, SURPASSING 20 MILLION UNITS FOR THE FIRST TIME BY 2020.
Light Vehicle Assembly Outlook 2006 through 2021: North America (millions)
22
2.6
20
18
3.0
16
88%
82%
2.3
2.3
15.4
15.1
4.9
12.6
10
11.9
16.2
17.1
17.5
18.1
18.4
19.0
19.6
20.1
20.3
13.1
64%
Assembly Volume
Excess Capacity
2021F
2020F
2019F
2018F
2017F
2016F
2015F
2014
2013
2012
2011
58%
2010
2009
2008
2007
76%
70%
8.6
8
2006
100%
94%
2.4
1.0
3.5
15.3
1.9
2.5
1.6
2.4
14
12
2.2
2.0
2.7
2.5
Utilisation (R‐Axis)
Source: Autofacts 2015 Q4 Data Release
16
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
17
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 ~$3.9 bn in 2015
• In building the footprint rapidly, focus was on expanding capacity and building a base
• Focus now is on margin improvement ‐ operating margins are expected to continue to increase due to increased capacity utilization, stable launch activity 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
• Continue to invest in future product programs to maintain a strong revenue backlog
• LTM Capex/Total Sales is 5.6%, above average, building base for future
• Net debt to total capital of 47% • Net debt/LTM EBITDA ratio of 2.17x • Reasonable capital structure and coverage ratios
• Capital structure expected to strengthen
• Targeted Net debt/LTM EBITDA ratio of 1.5:1 by the end of 2017
18
REVENUE
4,000
3,500
In Millions Of Dollars
3,000
2,500
2,000
$3,867
$3,599
$3,222
1,500
$2,901
$2,193
1,000
$1,689
500
$1,138
0
2009
2010
2011
2012
2013
2014
2015
Revenue growth from 2009 to 2015 has been significant (CAGR 23%). Growth is expected to continue but at a more normalized pace.
19
ADJUSTED OPERATING INCOME MARGIN
Adjusted Operating Income Margin %
8%
Greater than 6% by
end of 2017
6%
4.6%
4.1%
4%
2%
0%
2014
2015
2017F
Operating income margins are expected to improve by 50% from 2014 to 2017 on increased capacity utilization, stable launch activity and productivity/efficiency improvements. In 2015, adjusted operating income margin increased to 4.6%.
Note: Operating income margins presented have been adjusted for unusual and other items noted in the Company’s MD&A
20
ADJUSTED NET EARNINGS PER SHARE IS RISING
Quarterly Financials
Full Year Financials
$1 .60
13 5
40
$0.45
1.38
$1 .40
11 5
95
0.97
0.98
$1 .00
0.88
0.79
75
$0 .80
0.61
$119
55
In Millions Of Dollars
In Millions Of Dollars
$1 .20
0.36
0.34
30
0.30
0.28
25
$0.25
0.23
20
0.21
$0 .60
$0.20
$33
$82
$30
35
$67
$0 .40
$83
$0 .20
-0.05
10
$0 .00
5
-$0 .2 0
0
$18
$29
$26
$24
$73
$52
$0.35
$0.30
0.27
15
15
$0.40
0.39
35
$0.15
$23
$19
$0.10
$0.05
-$4
-5
20 09
20 10
20 11
Net Earnings*
20 12
20 13
20 14
20 15
$0.00
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015
Diluted Net Earnings Per Share*
Net Earnings*
Diluted Net Earnings Per Share*
Martinrea had record net earnings in 2015. Q1 2016 FD EPS expected to be between $0.35 and $0.39.
*Note: Adjusted for Unusual and Other Items noted in the Company’s MD&A
21
CASH FLOW IS IMPROVING & CAPEX STEADY
Operating Cash Flow
CAPEX
350
250
300
200
200
$308
150
$259
$237
In Millions of Dollars
In Millions of Dollars
250
150
$204
$201
100
$180
100
$180
$149
$142
50
$146
50
$91
$89
$51
0
$24
2009
0
2010
2011
2012
2013
2014
2015
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
2014
2015
Martinrea has made significant investment in future growth.
22
INVESTORS PRESENTATION – Q4 2015
March 28, 2016