MARTINREA INTERNATIONAL INC. · PDF file©2016 Martinrea International Inc. Confidential...
Transcript of MARTINREA INTERNATIONAL INC. · PDF file©2016 Martinrea International Inc. Confidential...
©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
MARTINREA INTERNATIONAL INC.
Q1 2017 Company Presentation
MARTINREA OVERVIEW
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©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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 ~$4.0 billion in sales)– Footprint now in place– Focus now on operational excellence, lean manufacturing, margin improvement
MARTINREA OVERVIEW
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Operating 44 facilities in 8 countries: Canada, USA, Mexico, Brazil, Germany, Slovakia, Spain and China– Each facility a center of excellence, with an entrepreneurial “owner‐managed culture”– Approximately 15,000 trained and motivated employees– Over 9,000,000 square feet of manufacturing space with expansion potential and multiple expansions occurring
Market statistics (TSX: MRE)– Market Cap – approx. $950 Million– Enterprise Value – approx. $1.6 Billion– LTM Adj. EBITDA – $356 Million– LTM Adj. FD EPS – $1.57
MARTINREA’S EVOLUTION
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FootprintIn Place
AcquiresSKD Automotive
MAR 2009(Metallics)
NOV 2001
AcquiresRea International
APR 2002(Fluid Management Systems)
Royal Laser changes name to:
Martinrea International Inc.JUN 2002
Acquires Pilot Industries
DEC 2002(Fluid Management Systems)
AcquiresDepco International
MAY 2006(Metallics)
AcquiresThyssenKrupp Budd Fabco North America
DEC 2006(Metallics)
Acquires majorityof HonselJULY 2011(Aluminum)
Acquires plant from Oxford AutomotiveDEC 2005(Metallics)
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Acquires balanceof HonselAUG 2014
20172001
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MARTINREA VISION, MISSION AND PRINCIPLES
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MARTINREA’S GLOBAL PRESENCE
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MEXICO10 Plants
BRAZIL1 Plant
SPAIN2 Plants
US13 Plants
CANADA13 Plants
SLOVAKIA1 Plant
GERMANY2 Plants
CHINA2 Plants
MARTINREA’S PRODUCTS
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Steel Metal Forming
Aluminum Components
Fluid Management Systems
COMPETITIVE LANDSCAPE
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Steel Metal Forming (North America) Fluid Management Systems (North America, China, Slovakia)
Second largest North American metal former by sales
Primary Competitors
Other Competitors
Top three supplier in North America
Leader in growth since 2005
Primary Competitors
Other Competitors
Aluminum Components (Worldwide)
Leading supplier of light metal components
Primary Competitors
Other Competitors
Current Top 10 Platforms
Ford Escape/Focus
GM Equinox /Terrain
Ford Fusion/Edge
GM Pickups, SUVs
GM Malibu/Impala
Chrysler 300/Challenger/Charger
Jeep Commander/Grand Cherokee
Jeep Wrangler
Dodge Ram
BMW SUV
NORTH AMERICAN PLATFORM PORTFOLIO
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Martinrea 2.0 is the framework to become a great company…diverse people and groups working together to be One CompanyIt is principle centered to promote specific behaviours to create a strong culture
Our Martinrea 2.0 methodology is the four pillar strategy:
• A High Performance Culture supported by engaging and developing our people
• Operational Excellence requires Lean thinking and tools. Operational Excellence is learning by doing to attack waste, lower costs and continually improve profitability
• Financial Management is increasing our financial capability and responsibly managing all aspects of our business effectively (in a fiscally responsible way)
• Customer is King assures us profitable growth by being the best supplier. We create Customer enthusiasm through our Casper the Ghost approach and our benchmark performance
WHAT IS MARTINREA 2.0?
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WHERE WE AREWHERE WE ARE
WHERE WE ARE GOING
WHERE WE ARE GOING
HIGH PER
FORM
ANCE
CU
LTURE
OPE
RATIONAL
EXCE
LLEN
CE
FINANCIAL
MANAGEM
ENT
CUST
OMER
IS KIN
G!
OUR STRATEGY FOCUS
Continuously Improve
Cost‐Down Every Day
Deliver on Time with Quality
Develop Your People
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OPERATIONAL
EXCELLENCE
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SO WHAT IS LEAN?Wikipedia:A systematic method for the elimination of waste within a manufacturing system. Lean also takes into account waste created through overburden and waste created through unevenness in work loads. Working from the perspective of the client who consumes a product or service, "value" is any action or process that a customer would be willing to pay for.
Finding and Eliminating WasteSIMPLY
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RESPECTING our people
USING lean tools
DEVELOPING our people
ATTRIBUTES OF THE MARTINREA MANUFACTURING SYSTEM
Learn by DOING
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A thinking way using lean tools–the WHY
To continuously improve
To develop our people
MARTINREA MANUFACTURING SYSTEM (MMS)
Problem Solving Skill / Human Development (All Levels)
Standardized Work & Clear Standards
The Process: How Results are Achieved Determines Sustainability
Visualization
Flexible Manpower Lines / Quick Changes
Kaizen of Standardized Work
P & L
Just in TimeGo & See
on the Floor with Own Eyes
Built in Quality with Ownership
Foun
datio
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Make what the customer needs at the right time in the right amountMinimize inventoryFully utilize man and machine (separate the work)…regardless of volumeBuild quality into the processReduce lead time, assure flexibility in schedulingPush process waste away from T/M who add value building product Push waste upstream
**Overproduction is the root of all operational evil.**
MMS BLUEPRINT
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SAFETY PERFORMANCE ‐ COMPANYWIDE
Total recordable injury frequency has improved
Total Recordable Injury Frequency
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QUALITY PERFORMANCE
As Martinrea, we want to be Casper the Ghost• 100% On‐time delivery• 100% Compliance –on‐time submission & operate as we say we do
• 100% on‐time, flawless launches and APQP Gate completion
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Severity Score
PR/R's
QUALITY PERFORMANCEQuality performance has improved
2014: Alfield, Rollstar, Ridgetown, Slovakia, Silao
2015: Alfield, Rollstar, Ridgetown, Silao
2015 Quality Premium Award: Silao
2015 Quality Excellence Award: Meschede HPDC
2015/2016 Supplier of the Year: Queretaro
2016 Top Supplier
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Who
How
What
OPERATIONAL STRATEGY
Lean Activity/People
Flexible Processes
Products(Light Weighting)
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FLEXIBLE PROCESSES
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FLEXIBLE ASSEMBLY‐METALLICSToday ‐ Rear Cradle Line Future ‐ Rear Cradle Line
Lifespan: 6 years Tooling change‐over: 4 weeks Service part capability: None Volume Flex Capability: Low
Lifespan: 12+ years Tooling Change‐over: 30 minutes Service Parts: Capable Volume flexibility: High
40% Less capital 20% Less labor
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PRODUCTSOUR KEY STRATEGY
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A LIGHT WEIGHTING COMPANYA Definition:Continuously developing and evolving core metallic products (high strength steel, aluminum, assemblies, etc.) to reduce vehicle weight and CO2 contribution, improving overall vehicle efficiency (MPG).
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2000 2005 2010 2015 2020 2025
LIGHT WEIGHTING TREND DRIVEN BY CO2/MPG REGULATIONS
Targets in MPG/Grams of CO2
2025 55/110
2021 61/95
2020 55/105
2020 50/116
10% reduction in weight provides a 6‐7% improvement in fuel economy
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MARKET TRENDS – ALUMINUM (NORTH AMERICA)
Source: North American Light Vehicle Aluminum Content Study June 2014; Ducker Analysis
+ 39%
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MARTINREA’S POSITION
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B‐PILLAR DESIGN EVOLUTION
Tailor Rolled Hot‐Stamp14.3 lbs
Multi‐Piece Steel17.6 lbs
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MATERIAL OPTIONS – CROSSMEMBERS AND CONTROL ARMS
Aluminum – Hollow27.3 lbs
Aluminum ‐ Solid34.0 lbs
Steel41.2 lbs
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Steel11.2 lbs
Aluminum9.9 lbs
HollowAluminum6.2 lbs
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MATERIAL OPTIONS – ENGINE BLOCKS
Cast Iron225 lbs
Cast Aluminum w/ Steel Liners64 lbs
Cast Aluminum w/ SprayBore46 lbs
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PLASMA SPRAY STEEL COATING FOR ENGINE BLOCKS
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MARTINREA HONSEL ALUTHINFER® = BORE SPRAY COATING:is a technology to replace iron liners in engine blocks by a thin (100 micron)steel layerEffects: weight reduction of block, better wear performance, less friction, less oil and fuel consumption, better heat dissipation from engine
Thermal Spray Process AluThinFer® no Liners!
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PROCESS DEVELOPMENTS FOR HIGH PRESSURE DIE CASTING
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MICRO SPRAY TECHNOLOGY – FOR HPDC CASTING:is a technology for die surface lubrication which uses a minimum amount of lubricant and internal cooling Effects: improvement of casting surface, extension of die life up to approx. 120‐150k shots (from 100k), improved mechanical properties
Conventional spraying after33,788 shots
Micro spraying after103,826 shots
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HYBRID DESIGN DEVELOPMENT
Steel
Cast Engine Mounts
• Rear Cast AluminumProvides improved tolerances
• Front SteelProvides necessary crash performance
• Cast Engine Mounts AluminumProvides tighter packaging
• SteelProvides greater stiffness and necessary crash performance
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WHATEVER THE FUTURE HOLDS, MARTINREA WILL BE A LEADER
HYBRIDPLUG‐IN HYBRID
FUEL CELL
DRIVERLESS
ELECTRIC
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MACROECONOMIC OUTLOOK
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MACROECONOMIC OUTLOOK ‐ AUTOMOTIVEGlobal vehicle production is anticipated to increase over time
North America, Europe, China markets are anticipated to grow over time
Positive factors in North America– New auto affordability at or near record lows– Consumer debt levels in U.S. have improved– U.S. housing market is healthy– Oil and gas prices remain low– Financing is available at low rates– Average vehicle age 12 years– Customer base remains healthy, employment/participation levels in North America have increased– Annual population growth adding new drivers– New vehicles have more features, may be more economical to drive– Volumes are at a healthy level
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MACROECONOMIC OUTLOOK ‐ AUTOMOTIVE
Global Production Volume Bridge – 2015 to 2022 (millions)
BETWEEN 2015 AND 2022, GLOBAL VEHICLE PRODUCTION WILL LIKELY INCREASE BY ANOTHER 22 MILLION UNITS
Source: PWC Autofacts
88.2
110.5
9.10
4.60
2.501.90
2.601.30
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2015 China BRI NA EU ASEAN MEA Other Developed AP 2022F
0.8
0.5
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TAKEAWAYS FROM THE 2017 DETROIT AUTO SHOW
Overall positive tone, one of confidence for the industry
Outlook of global auto production is one of growth
U.S. may be at a plateau but the view is a good one
Electrification is coming in various forms but it will take time; North America expected to emphasis hybrids
Driverless car is coming but in stages, creating an exciting time for our industry
Current OEMs will play prominent role and be leaders in whatever the future holds
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FINANCIALS
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SALES
Sales growth since 2009 has been staggering
Excluding FX impacts, growth is expected to normalize
Module assembly business moving to a VAA pricing model
Focus is on new programs exceeding specific investment return hurdles
1,091
1,570
2,076
2,706 3,019
3,354 3,705 3,715 3,648
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1,138
1,689
2,193
2,901
3,222
3,599
3,867 3,968 3,930
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1,500
2,000
2,500
3,000
3,500
4,000
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2009 2010 2011 2012 2013 2014 2015 2016 LTM Mar2017A
In M
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Can
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Production Sales Tooling Sales
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HIGHLIGHTS OF RECENT NEW BUSINESS AWARDS
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Customer Products Annualized Sales at Peak Volumes SOP
Aluminum knuckles and control arms $200,000,000 2015‐2018
Steel Metal Forming ‐ Equinox, Terrain $175,000,000 2017
Pick‐up trucks and SUVs – steel metal forming and fluid handling $175,000,000 2018‐2020
Transmission engine fluids systems $20,000,000 2018
Fluids systems ‐ Small Car $25,000,000 2018‐2019
Steel Metal Forming – Mid Size SUVs $25,000,000 2019
VAA module assembly – SRX $10,000,000 2019
2.0L aluminum engine block $100,000,000 2018
3.5L V6 engine block $50,000,000 2020
Aluminum powertrain $10,000,000 2018
Fluids systems (RAM/Wrangler) $10,000,000 2018
Steel Metal Forming – Compact Sedan $30,000,000 2018
V8 AMG aluminum engine block $25,000,000 2017
Aluminum transmission (X5) $15,000,000 2018
Steel Metal Forming $10,000,000 2018
4 cyl aluminum diesel engine block $35,000,000 2018
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ADJUSTED OPERATING INCOME MARGINAdjusted operating income margin for Q1 2017 was 5.6% compared to 5.0% for 2016, 4.6% for 2015 and 4.1% for 2014
Positive trend is expected to continue in 2017
Operating income margins are expected to improve to >6% by the end of 2017
6% is not the ceiling – margins expected to continue to increase after 2017
4.1%4.6%
5.0%
5.6%>6%
0%
2%
4%
6%
8%
Adju
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Ope
ratin
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com
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argi
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Note: Operating income margins presented have been adjusted for unusual and other items highlighted in our MD&A
Q1 YTD 2017 ‐ 5.6%, up year‐over‐year
from 4.9%PROGRESS ON TRACK
2016A YTD Mar 2017A
2014A 2015A 2017F
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$52 $67 $73
$82 $83 $119
$130 $136 0.61
0.79 0.880.97 0.98
1.38
1.501.57
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$0.20
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$1.40
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Dol
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Net Earnings* Diluted Net Earnings Per Share*
Full Year Financials
*Note: Adjusted for Unusual and Other Items highlighted in our MD&A
ADJUSTED NET EARNINGS PER SHARE
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©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
BALANCE SHEET
The Company is a significant cash flow generator with operating cash flow increasing every year since 2010
Investments in the business continue to be made
Capex in 2017 expected to be ~ $240M
Net Debt to Adjusted EBITDA ratio trending down – targeted to be 1.5X by the end of 2017
$89 $142 $146
$237 $259 $308
$348 $355
050
100150200250300350400
2010 2011 2012 2013 2014 2015 2016 LTM Mar2017
In M
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$91 $149
$201 $189 $204 $215 $249 $240
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1.39x1.75x 1.62x
2.54x 2.37x 2.16x 1.89x 1.78
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Net Debt to Adjusted EBITDA
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©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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, (adjusted) operating income margins, SG&A, earningsand 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 andgrowth of electric and autonomous vehicles and the role of OEMs in the future); Martinrea’s ability to capitalize on opportunities in theautomotive 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 onestimates and assumptions made by Martinrea in light of its experience and its perception of historical trends, current conditions and expectedfuture developments, as well as other factors that Martinrea believes are appropriate in the circumstances. These forward-looking statementsare subject to risks, uncertainties and assumptions that may cause actual results, performance or achievements to differ materially from thoseexpected or implied by the forward-looking statements. Factors that may cause such differences include, but are not limited to, North Americanand global economic and political conditions; the highly cyclical nature of the automotive industry and the industry’s dependence on consumerspending and general economic conditions; Martinrea’s dependence on a limited number of significant customers; Martinrea’s reliance oncritical 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 mostrecent Management Discussion and Analysis and Annual Information Form filed with applicable securities commissions, as well as other riskfactors identified therein, available at www.sedar.com, and the documents incorporated by reference into such documents. These factorsshould be considered carefully, and readers should not place undue reliance on Martinrea’s forward-looking statements. If any of such risksactually occur, they could materially adversely affect our business, financial condition or results of operations. In that case, the trading price ofour common shares could decline, perhaps materially. We provide forward-looking statements solely for the purpose of providing informationabout management's current expectations and plans relating to the future. You are cautioned that such information may not be appropriate forother purposes. Except as required by law, we do not undertake or accept any obligation or undertaking to release publicly any updates orrevisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions, assumptions orcircumstances on which any such statement is based.
LEGAL DISCLAIMER
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