Martinrea International Inc. (TSX : MRE), a diversified and global
automotive supplier engaged in the design, development and
manufacturing of highly engineered, value-added Lightweight
Structures and Propulsion Systems, today announced the release of
its financial results for the first quarter ended March 31, 2024,
and declared a quarterly cash dividend of $0.05 per share.
FIRST-QUARTER HIGHLIGHTS
- Total sales of $1,323.9 million, up
1.5% year-over-year.
- Diluted net earnings per share of
$0.56 and Adjusted Net Earnings per Share(1) of $0.62.
- Adjusted Operating Income Margin(1)
of 6.0%.
- Adjusted EBITDA(1) of $162.8
million.
- First-quarter results improved
significantly quarter over quarter.
- Free Cash Flow(1) (excluding
principal payments of IFRS-16 lease liabilities) was ($1.4)
million, inclusive of a normal seasonal build in non-cash working
capital, a significant improvement over ($31.5) million generated
in the first quarter of 2023.
- Net debt-to-Adjusted EBITDA(1)
ratio, excluding the impact of IFRS 16, ended the quarter at
1.51x.
- New business awards of
approximately $30 million in annualized sales at mature volumes;
the Company was also awarded replacement business worth $150
million in annualized sales at mature volumes with various
customers.
- Quarterly cash dividend of $0.05
per share declared.
1 The Company prepares its financial statements in accordance
with IFRS Accounting Standards. However, the Company considers
certain non-IFRS financial measures as useful additional
information in measuring the financial performance and condition of
the Company. These measures, which the Company believes are widely
used by investors, securities analysts and other interested parties
in evaluating the Company’s performance, do not have a standardized
meaning prescribed by IFRS and therefore may not be comparable to
similarly titled measures presented by other publicly traded
companies, nor should they be construed as an alternative to
financial measures determined in accordance with IFRS. Non-IFRS
measures, included anywhere in this press release, include
“Adjusted Net Income”, “Adjusted Net Earnings per Share (on a basic
and diluted basis)”, “Adjusted Operating Income”, “Adjusted
EBITDA”, “Free Cash Flow”, “Free Cash-Flow (after IFRS 16 lease
payments)” and “Net Debt”. The relevant IFRS financial measure, as
applicable, and a reconciliation of certain non-IFRS financial
measures to measures determined in accordance with IFRS are
contained in the Company’s Management Discussion and Analysis for
the three months ended March 31, 2024 and in this press
release.
OVERVIEW
Pat D’Eramo, Chief Executive Officer, stated:
“Our first quarter financial results were solid, and a notable
improvement over the prior quarter as we bounced back from the
disruptions caused by the UAW strike and Tier 2 supplier issue we
faced in the fourth quarter. We continue to perform at a high level
operationally. Industry headwinds from supply shortages,
inflationary cost pressures, and tight labour market conditions
continue to improve, vehicle production volumes had a good start to
the year despite the slower-than-expected ramp-up in electric
vehicle platforms across the industry, and a number of our core
platforms experienced growth in production volumes quarter over
quarter. Commercial negotiations aimed at offsetting inflationary
cost pressures and volume shortfalls on certain programs continue,
and I am happy with the progress our team is making on this
front.”
He added: “I am pleased to announce that we have
been awarded new business representing $30 million in annualized
sales at mature volumes, consisting of $20 million in Lightweight
Structures and $10 million in Propulsion Systems. In addition, we
were awarded replacement business in both Lightweight Structures
and Propulsion Systems worth approximately $150 million in
annualized sales at mature volumes with a variety of
customers.”
Fred Di Tosto, President and Chief Financial
Officer, stated: “We are pleased with our operational and financial
performance in the first quarter. Adjusted EBITDA(1) of $162.8
million was near record levels, and Adjusted Operating Income
Margin(1) of 6.0% returned to a level consistent with where we were
prior to the disruptions from the UAW strike and Tier 2 supplier
issue that impacted the fourth quarter. Sales for the first
quarter, excluding tooling sales of $66.4 million, were $1,257.5
million, and diluted net earnings per share and Adjusted Net
Earnings per Share(1) were $0.56 and $0.62 respectively. Free Cash
Flow(1) (excluding principal payments of IFRS-16 lease liabilities)
of ($1.4) million improved significantly year over year. We expect
another solid year of Free Cash Flow(1) in 2024, with the bulk of
it being generated in the back half of the year, similar to
2023.”
He continued: “Net Debt(1) (excluding IFRS-16
lease liabilities) increased by approximately $74 million quarter
over quarter, to $856.5 million, reflecting our Free Cash Flow(1)
profile for the quarter, as well as funding an investment in
Equispheres Inc., cash restructuring costs, our regular dividend
payment, and significant share buyback activity during the quarter.
Our Net Debt to Adjusted EBITDA(1) ratio (excluding the impact of
IFRS 16) ended the quarter at 1.51x, inline with our long-term
target range of 1.5x or better.”
Rob Wildeboer, Executive Chairman, stated: “As
Pat and Fred outlined, we continue to perform well operationally,
our balance sheet is in great shape, and we are executing on our
capital allocation priorities. We repurchased 1,353,500 shares for
cancellation under our normal course issuer bid (NCIB) during the
quarter at a cost of $15.9 million. We have renewed our NCIB for
another year, and our intention is to continue to buy back stock at
these price levels. We also funded an investment in Equispheres
Inc. for $8.0 million. Equispheres is a leading-edge company
developing innovative technologies for the production of advanced
materials, including high-performance aluminum powder for additive
manufacturing applications. Our relationship with Equispheres is
expected to enable us to introduce increasingly complex and
sophisticated products to our customers, thereby advancing our
Project BreakThrough strategy. On behalf of the executive
management team, we would like to thank our people for their hard
work in delivering a solid quarterly performance, as well as our
shareholders and other stakeholders for their continued
support.”
RESULTS OF OPERATIONS
All amounts in this press release are in
Canadian dollars, unless otherwise stated; and all tabular amounts
are in thousands of Canadian dollars, except earnings per share and
number of shares.
Additional information about the Company,
including the Company’s Management Discussion and Analysis of
Operating Results and Financial Position for the three months ended
March 31, 2024 (“MD&A”), the Company’s interim condensed
consolidated financial statements for the three months ended March
31, 2024 (the “interim financial statements”) and the Company’s
Annual Information Form for the year ended December 31, 2023 can be
found at www.sedarplus.ca.
OVERALL RESULTS
Results of operations may include certain items
which have been separately disclosed, where appropriate, in order
to provide a clear assessment of the underlying Company results. In
addition to IFRS measures, management uses non-IFRS measures in the
Company’s disclosures that it believes provide the most appropriate
basis on which to evaluate the Company’s results.
The following table sets out certain highlights
of the Company’s performance for the three months ended March 31,
2024 and 2023. Refer to the Company’s interim financial statements
for the three months ended March 31, 2024 for a detailed account of
the Company’s performance for the periods presented in the table
below.
|
Three months ended March 31, 2024 |
|
Three months ended March 31, 2023 |
|
$ Change |
|
% Change |
Sales |
$ |
1,323,913 |
|
|
$ |
1,303,889 |
|
|
20,024 |
|
|
1.5 |
% |
Gross Margin |
|
172,537 |
|
|
|
167,386 |
|
|
5,151 |
|
|
3.1 |
% |
Operating Income |
|
72,932 |
|
|
|
75,177 |
|
|
(2,245 |
) |
|
(3.0 |
%) |
Net
Income for the period |
|
43,650 |
|
|
|
48,171 |
|
|
(4,521 |
) |
|
(9.4 |
%) |
Net Earnings per Share - Basic and Diluted |
$ |
0.56 |
|
|
$ |
0.60 |
|
|
(0.04 |
) |
|
(6.7 |
%) |
Non-IFRS Measures* |
|
|
|
|
|
|
|
Adjusted Operating Income |
$ |
79,187 |
|
|
$ |
75,177 |
|
|
4,010 |
|
|
5.3 |
% |
% of Sales |
|
6.0 |
% |
|
|
5.8 |
% |
|
|
|
|
Adjusted EBITDA |
|
162,830 |
|
|
|
152,504 |
|
|
10,326 |
|
|
6.8 |
% |
% of Sales |
|
12.3 |
% |
|
|
11.7 |
% |
|
|
|
|
Adjusted Net Income |
|
48,097 |
|
|
|
43,597 |
|
|
4,500 |
|
|
10.3 |
% |
Adjusted Net Earnings per Share - Basic and Diluted |
$ |
0.62 |
|
|
$ |
0.54 |
|
|
0.08 |
|
|
14.8 |
% |
*Non-IFRS Measures
The Company prepares its interim financial
statements in accordance with IFRS Accounting Standards. However,
the Company considers certain non-IFRS financial measures as useful
additional information in measuring the financial performance and
condition of the Company. These measures, which the Company
believes are widely used by investors, securities analysts and
other interested parties in evaluating the Company’s performance,
do not have a standardized meaning prescribed by IFRS and therefore
may not be comparable to similarly titled measures presented by
other publicly traded companies, nor should they be construed as an
alternative to financial measures determined in accordance with
IFRS. Non-IFRS measures include “Adjusted Net Income”, “Adjusted
Net Earnings per Share (on a basic and diluted basis)”, “Adjusted
Operating Income”, "Adjusted EBITDA”, “Free Cash Flow”, "Free Cash
Flow (after IFRS 16 lease payments)", and “Net Debt”.
The following tables provide a reconciliation of
IFRS “Net Income” to Non-IFRS “Adjusted Net Income”, “Adjusted
Operating Income” and “Adjusted EBITDA”:
|
Three months ended March 31, 2024 |
|
Three months ended March 31, 2023 |
Net Income |
$ |
43,650 |
|
$ |
48,171 |
|
Adjustments, after tax* |
|
4,447 |
|
|
(4,574 |
) |
Adjusted Net Income |
$ |
48,097 |
|
$ |
43,597 |
|
*Adjustments are explained in the “Adjustments
to Net Income” section of this Press Release
|
Three months ended March 31, 2024 |
|
Three months ended March 31, 2023 |
Net Income |
$ |
43,650 |
|
|
$ |
48,171 |
|
Income tax expense |
|
13,918 |
|
|
|
12,079 |
|
Other finance income |
|
(5,443 |
) |
|
|
(224 |
) |
Share of loss of equity
investments |
|
634 |
|
|
|
1,378 |
|
Finance expense |
|
20,173 |
|
|
|
19,046 |
|
Adjustments, before tax* |
|
6,255 |
|
|
|
(5,273 |
) |
Adjusted Operating Income |
$ |
79,187 |
|
|
$ |
75,177 |
|
Depreciation of property, plant and equipment and right-of-use
assets |
|
81,037 |
|
|
|
74,672 |
|
Amortization of development
costs |
|
2,494 |
|
|
|
2,613 |
|
Loss on
disposal of property, plant and equipment |
|
112 |
|
|
|
42 |
|
Adjusted EBITDA |
$ |
162,830 |
|
|
$ |
152,504 |
|
*Adjustments are explained in the “Adjustments
to Net Income” section of this Press Release
SALES
Three months ended March 31, 2024 to
three months ended March 31, 2023 comparison
|
Three months ended March 31, 2024 |
|
Three months ended March 31, 2023 |
|
$ Change |
|
% Change |
North America |
$ |
963,943 |
|
|
$ |
973,992 |
|
|
(10,049 |
) |
|
(1.0 |
%) |
Europe |
|
334,010 |
|
|
|
303,470 |
|
|
30,540 |
|
|
10.1 |
% |
Rest of the World |
|
31,762 |
|
|
|
33,882 |
|
|
(2,120 |
) |
|
(6.3 |
%) |
Eliminations |
|
(5,802 |
) |
|
|
(7,455 |
) |
|
1,653 |
|
|
22.2 |
% |
Total Sales |
$ |
1,323,913 |
|
|
$ |
1,303,889 |
|
|
20,024 |
|
|
1.5 |
% |
The Company’s consolidated sales for the first
quarter of 2024 increased by $20.0 million or 1.5% to $1,323.9
million as compared to $1,303.9 million for the first quarter of
2023. The total increase in sales was driven by a year-over-year
increase in the Europe operating segment, partially offset by
year-over-year decreases in North America and the Rest of the
World.
Sales for the first quarter of 2024 in the
Company’s North America operating segment decreased by $10.0
million or 1.0% to $963.9 million from $974.0 million for the first
quarter of 2023. The decrease was due to lower year-over-year OEM
production volumes on certain light vehicle platforms, including
the Ford Mustang Mach E, General Motors' Equinox/Terrain, and
Mercedes' new electric vehicle platform (EVA2); programs that ended
production during or subsequent to the first quarter of 2023,
specifically the Dodge Charger/Challenger and Chevrolet Bolt; and a
decrease in tooling sales of $33.0 million, which are typically
dependent of the timing of tooling construction and final
acceptance by the customer. These negative factors were partially
offset by the launch and ramp up of new programs during or
subsequent to the first quarter of 2023, including General Motors'
new electric vehicle platform (BEV3), a Toyota/Lexus SUV, and a
transmission for the ZF Group; and higher year-over-year OEM
production volumes on certain other light vehicle platforms,
including the Ford Escape and General Motors' large pick-up truck
and SUV platform. Overall first quarter industry-wide OEM light
vehicle production volumes in North America increased by
approximately 1% year-over-year.
Sales for the first quarter of 2024 in the
Company’s Europe operating segment increased by $30.5 million or
10.1% to $334.0 million from $303.5 million for the first quarter
of 2023. The increase was due to an increase in tooling sales of
$30.8 million, which are typically dependent of the timing of
tooling construction and final acceptance by the customer; higher
year-over-year OEM production volumes on certain platforms,
including aluminum engine blocks for Jaguar Land Rover, Mercedes
and Ford; and the impact of foreign exchange on the translation of
Euro denominated production sales, which had a positive impact on
overall sales for the first quarter of 2024 of $5.0 million. These
positive factors were partially offset by lower year-over-year
production volumes of certain other light vehicle platforms,
including the Mercedes' new electric vehicle platform (EVA2) and
Lucid Air. Overall industry-wide first quarter OEM light vehicle
production volumes in Europe decreased by approximately 3%
year-over-year.
Sales for the first quarter of 2024 in the
Company’s Rest of the World operating segment decreased by $2.1
million or 6.3% to $31.8 million from $33.9 million for the first
quarter of 2023. The decrease was largely driven by programs that
came with the operations acquired from Metalsa in China that ended
production during or subsequent to the first quarter of 2023;
partially offset by the launch and ramp up of new programs during
or subsequent to the first quarter of 2023, specifically the BMW
5-series in China, and an increase in tooling sales of $4.2
million.
Overall tooling sales increased by $2.1 million
(including outside segment sales eliminations) to $66.4 million for
the first quarter of 2024 from $64.3 million for the first quarter
of 2023.
GROSS MARGIN
Three months ended March 31, 2024 to
three months ended March 31, 2023 comparison
|
Three months ended March 31, 2024 |
|
Three months ended March 31, 2023 |
|
$ Change |
|
% Change |
Gross margin |
$ |
172,537 |
|
|
$ |
167,386 |
|
|
5,151 |
|
3.1 |
% |
% of
Sales |
|
13.0 |
% |
|
|
12.8 |
% |
|
|
|
|
The gross margin percentage for the first
quarter of 2024 of 13.0% increased as a percentage of sales by 0.2%
as compared to the gross margin percentage for the first quarter of
2023 of 12.8%. The increase in gross margin as a percentage of
sales was generally due to:
- productivity and efficiency
improvements at certain operating facilities and other
improvements; and
- contribution
from overall higher production sales volume.
These factors were partially offset by:
- a negative sales mix, including
additional depreciation expense from recent new program
investments;
- an unfavourable impact from a
year-over-year change in foreign exchange rates in Mexico; and
- operational
inefficiencies at certain operating facilities.
Overall market related inflationary pressures on
labour, material and energy costs, along with offsetting commercial
settlements, were generally stable for the quarter on a
year-over-year basis.
ADJUSTMENTS TO NET INCOME
Adjusted Net Income excludes certain items as
set out in the following table and described in the notes thereto.
Management uses Adjusted Net Income as a measurement of operating
performance of the Company and believes that, in conjunction with
IFRS measures, it provides useful information about the financial
performance and condition of the Company.
TABLE A
Three months ended March 31, 2024 to
three months ended March 31, 2023 comparison
|
Three months ended March 31, 2024 |
|
Three months ended March 31, 2023 |
|
$ Change |
NET INCOME |
$ |
43,650 |
|
|
$ |
48,171 |
|
|
$ |
(4,521 |
) |
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
Restructuring costs (1) |
|
6,255 |
|
|
|
- |
|
|
|
6,255 |
|
Net gain on disposal of equity
investments (2) |
|
- |
|
|
|
(5,273 |
) |
|
|
5,273 |
|
ADJUSTMENTS, BEFORE TAX |
$ |
6,255 |
|
|
$ |
(5,273 |
) |
|
$ |
11,528 |
|
|
|
|
|
|
|
Tax impact of adjustments |
|
(1,808 |
) |
|
|
699 |
|
|
|
(2,507 |
) |
ADJUSTMENTS, AFTER TAX |
$ |
4,447 |
|
|
$ |
(4,574 |
) |
|
$ |
9,021 |
|
|
|
|
|
|
|
ADJUSTED NET INCOME |
$ |
48,097 |
|
|
$ |
43,597 |
|
|
$ |
4,500 |
|
|
|
|
|
|
|
Number of Shares Outstanding –
Basic (‘000) |
|
77,900 |
|
|
|
80,387 |
|
|
|
Adjusted Basic Net Earnings
Per Share |
$ |
0.62 |
|
|
$ |
0.54 |
|
|
|
Number of Shares Outstanding –
Diluted (‘000) |
|
77,960 |
|
|
|
80,445 |
|
|
|
Adjusted Diluted Net Earnings Per Share |
$ |
0.62 |
|
|
$ |
0.54 |
|
|
|
(1) Restructuring
costs
Additions to the restructuring provision during
the first quarter of 2024 totaled $6.3 million, and represent
employee-related severance resulting from the rightsizing of
certain operations in Mexico ($2.8 million), Germany ($1.7
million), Canada ($1.2 million), and the United States ($0.6
million).
(2) Net
gain on disposal of equity investments
On March 24, 2023, Martinrea sold its equity
interest in VoltaXplore Inc. ("VoltaXplore) to NanoXplore Inc.
("NanoXplore") for 3,420,406 common shares of NanoXplore at $2.92
per share representing an aggregate consideration of $10.0 million.
The sale transaction resulted in a gain on disposal of equity
investments during the first quarter of 2023 as follows:
Gross gain (Total consideration of $10.0 million less book value of
investment) |
$ |
6,821 |
|
Less:
gain attributable to indirect retained interest |
|
(1,548 |
) |
Net gain on disposal of equity investments |
$ |
5,273 |
|
Subsequent to this transaction, the Company no
longer holds a direct equity interest in VoltaXplore while its
equity ownership interest in NanoXplore increased from 21.1% to
22.7%.
NET INCOME
Three months ended March 31, 2024 to
three months ended March 31, 2023 comparison
|
Three months ended March 31, 2024 |
|
Three months ended March 31, 2023 |
|
$ Change |
|
% Change |
Net Income |
$ |
43,650 |
|
$ |
48,171 |
|
(4,521 |
) |
|
(9.4 |
%) |
Adjusted Net Income |
|
48,097 |
|
|
43,597 |
|
4,500 |
|
|
10.3 |
% |
Net Earnings per Share |
|
|
|
|
|
|
|
Basic and Diluted |
$ |
0.56 |
|
$ |
0.60 |
|
|
|
|
Adjusted Net Earnings per
Share |
|
|
|
|
|
|
|
Basic and Diluted |
$ |
0.62 |
|
$ |
0.54 |
|
|
|
|
Net Income, before adjustments, for the first
quarter of 2024 decreased by $4.5 million to $43.7 million or $0.56
per share, on a basic and diluted basis, from Net Income of $48.2
million or $0.60 per share, on a basic and diluted basis, for the
first quarter of 2023. Excluding the adjustments explained in Table
A under “Adjustments to Net Income”, Adjusted Net Income for the
first quarter of 2024 increased by $4.5 million to $48.1 million or
$0.62 per share on a basic and diluted basis, from $43.6 million or
$0.54 per share, on a basic and diluted basis, for the first
quarter of 2023.
Adjusted Net Income for the first quarter of
2024, as compared to the first quarter of 2023, was positively
impacted by the following:
- higher gross margin as previously
explained; and
- a net foreign
exchange gain of $4.9 million for the first quarter of 2024
compared to a gain of $0.1 million for the first quarter of
2023.
These factors were partially offset by the
following:
- a $1.7 million year-over-year
increase in research and development costs driven generally by
increased new product and process development activity;
- a $1.1 million year-over-year
increase in finance expense as a result of increased borrowing
rates on the Company's revolving bank debt; and
- a higher effective tax rate (24.6%
for the first quarter of 2024 compared to 20.7% for the first
quarter of 2023).
DIVIDEND
A cash dividend of $0.05 per share has been
declared by the Board of Directors payable to shareholders of
record on June 30, 2024, on or about July 15, 2024.
ABOUT MARTINREA
Martinrea International Inc. is a leader in the
development and production of quality metal parts, assemblies and
modules, fluid management systems, and complex aluminum products
focused primarily on the automotive sector. Martinrea currently
operates in 56 locations in Canada, the United States, Mexico,
Brazil, Germany, Slovakia, Spain, China, South Africa, and Japan.
Martinrea’s vision is making lives better by being the best
supplier we can be in the products we make and the services we
provide. For more information on Martinrea, please visit
www.martinrea.com. Follow Martinrea on X and Facebook.
CONFERENCE CALL DETAILS
A conference call to discuss the financial
results will be held on Thursday, May 2, 2024 at 5:30 p.m. Eastern
Time. To participate, please dial 416-641-6104 (Toronto area) or
800-952-5114 (toll free Canada and US) and enter participant code
1012992#. Please call 10 minutes prior to the start of the
conference call.
The conference call will also be webcast live in
listen-only mode and archived for twelve months. The webcast and
accompanying presentation can be accessed at:
https://www.martinrea.com/investor-relations/events-presentations/.
There will also be a rebroadcast of the call
available by dialing 905-694-9451 or toll free 800-408-3053
(Conference ID – 3168089#). The rebroadcast will be available until
June 3, 2024 at 5:00 p.m.
If you have any teleconferencing questions,
please call Ganesh Iyer at 416-749-0314.
FORWARD-LOOKING INFORMATION
Special Note Regarding Forward-Looking
Statements
This Press Release and the documents
incorporated by reference therein contains forward-looking
statements within the meaning of applicable Canadian securities
laws including those related to the Company’s expectations as to,
or its views or beliefs in or on, the impact of, or duration of, or
factors affecting, or expected response to or growth of,
improvements in, expansion of and/or guidance or outlook (including
for 2024) as to future results, revenue, sales, margin, gross
margin, earnings, and earnings per share, adjusted earnings per
share, free cash flow, volumes, adjusted net earnings per share,
operating income margins, operating margins, adjusted operating
income margins, leverage ratios, net debt to adjusted EBITDA(1),
debt repayment, Adjusted EBITDA(1), capex levels, working capital
levels, cash tax levels, progress on commercial negotiations, the
growth of the Company and pursuit of, and belief in, its
strategies, the strength, recovery and growth of the automotive
industry and continuing challenges, contemplated purchases under
the NCIB, expectation of the benefit of the Equispheres investment,
as well as other forward-looking statements. The words “continue”,
“expect”, “anticipate”, “estimate”, “may”, “will”, “should”,
“views”, “intend”, “believe”, “plan” and similar expressions are
intended to identify forward-looking statements. Forward-looking
statements are based on estimates and assumptions made by the
Company in light of its experience and its perception of historical
trends, current conditions and expected future developments, as
well as other factors that the Company believes are appropriate in
the circumstances, such as expected sales and industry production
estimates, current foreign exchange rates, timing of product
launches and operational improvement during the period, and current
Board approved budgets. Many factors could cause the Company’s
actual results, performance or achievements to differ materially
from those expressed or implied by the forward-looking statements,
including, without limitation, the following factors, some of which
are discussed in detail in the Company’s AIF and MD&A for the
year ended December 31, 2023, and other public filings which can be
found at www.sedarplus.ca:
- North American and Global Economic
and Political Conditions (including war) and Consumer
Confidence
- Automotive Industry Risks
- Pandemics and Epidemics, Force
Majeure Events, Natural Disasters, Terrorist Activities, Political
and Civil Unrest or War, and Other Outbreaks
- Russia and Ukraine War and
Hamas-Israel War
- Semiconductor Chip Shortages and
Price Increases
- Inflationary Pressures
- Regional Energy Shortages
- Dependence Upon Key Customers
- Customer Consolidation and
Cooperation
- Emergence of Potentially Disruptive
EV OEMs
- Outsourcing and Insourcing
Trends
- Financial Viability of Suppliers
and Key Suppliers and Supply Disruptions
- Competition
- Customer Pricing Pressures,
Contractual Arrangements, Cost and Risk Absorption and Purchase
Orders
- Material and Commodity Prices and
Volatility
- Scrap Steel/Aluminum Price
Volatility
- Quote/Pricing Assumptions
- Launch and Operational Costs and
Cost Structure
- Fluctuations in Operating
Results
- Product Warranty,
Repair/Replacement Costs, Recall, Product Liability and Liability
Risk
- Product Development and
Technological Change
- A Shift Away from Technologies in
Which the Company is Investing
- Dependence Upon Key Personnel
- Limited Financial
Resources/Uncertainty of Future Financing/Banking
- Cybersecurity Threats
- Acquisitions
- Joint Ventures
- Private or Public Equity
Investments in Technology Companies
- Potential Tax Exposures
- Potential Rationalization Costs,
Turnaround Costs and Impairment Charges
- Labour Relations Matters
- Trade Restrictions or Disputes
- Changes in Laws and Governmental
Regulations
- Environmental Regulation and
Climate Change
- Litigation and Regulatory
Compliance and Investigations
- Risks of Conducting Business in
Foreign Countries, Including China, Brazil and Other Growing
Markets
- Currency Risk
- Internal Controls Over Financial
Reporting and Disclosure Controls and Procedures
- Loss of Use of Key Manufacturing
Facilities
- Intellectual Property
- Availability of Consumer Credit or
Cost of Borrowing
- Evolving Business Risk Profile
- Competition with Low Cost
Countries
- The Company’s Ability to Shift its
Manufacturing Footprint to Take Advantage of Opportunities in
Growing Markets
- Change in the Company’s Mix of
Earnings Between Jurisdictions with Lower Tax Rates and Those with
Higher Tax Rates
- Pension Plans and Other
Post-Employment Benefits
- Potential Volatility of Share
Prices
- Dividends
- Lease Obligations
These factors should be considered carefully,
and readers should not place undue reliance on the Company’s
forward-looking statements. The Company has no intention and
undertakes no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as required by law.
The common shares of Martinrea trade on The
Toronto Stock Exchange under the symbol “MRE”.
For further information, please contact:
Fred Di TostoPresident and Chief Financial
OfficerMartinrea International Inc.3210 Langstaff RoadVaughan,
Ontario L4K 5B2Tel: 416-749-0314Fax:
289-982-3001
Martinrea International Inc.Interim Condensed
Consolidated Balance Sheets(in thousands of Canadian dollars)
(unaudited)
|
Note |
March 31, 2024 |
December 31, 2023 |
ASSETS |
|
|
|
Cash and cash equivalents |
|
$ |
173,694 |
$ |
186,804 |
Trade and other
receivables |
2 |
|
826,880 |
|
695,819 |
Inventories |
3 |
|
558,119 |
|
568,274 |
Prepaid expenses and
deposits |
|
|
32,310 |
|
33,904 |
Income
taxes recoverable |
|
|
20,080 |
|
11,089 |
TOTAL CURRENT ASSETS |
|
|
1,611,083 |
|
1,495,890 |
Property, plant and equipment |
4 |
|
1,947,889 |
|
1,943,771 |
Right-of-use assets |
5 |
|
231,103 |
|
238,552 |
Deferred tax assets |
|
|
199,925 |
|
192,301 |
Intangible assets |
|
|
42,119 |
|
42,743 |
Investments |
6 |
|
67,654 |
|
60,170 |
Pension
assets |
|
|
15,943 |
|
16,303 |
TOTAL NON-CURRENT ASSETS |
|
|
2,504,633 |
|
2,493,840 |
TOTAL ASSETS |
|
$ |
4,115,716 |
$ |
3,989,730 |
|
|
|
|
LIABILITIES |
|
|
|
Trade and other payables |
|
$ |
1,211,451 |
$ |
1,176,579 |
Provisions |
7 |
|
13,749 |
|
29,892 |
Income taxes payable |
|
|
22,096 |
|
25,017 |
Current portion of long-term
debt |
8 |
|
11,178 |
|
12,778 |
Current
portion of lease liabilities |
9 |
|
49,385 |
|
48,507 |
TOTAL CURRENT LIABILITIES |
|
|
1,307,859 |
|
1,292,773 |
Long-term debt |
8 |
|
1,019,016 |
|
956,458 |
Lease liabilities |
9 |
|
203,100 |
|
210,469 |
Pension and other
post-retirement benefits |
|
|
38,774 |
|
37,261 |
Deferred tax liabilities |
|
|
27,492 |
|
27,588 |
TOTAL NON-CURRENT LIABILITIES |
|
|
1,288,382 |
|
1,231,776 |
TOTAL LIABILITIES |
|
|
2,596,241 |
|
2,524,549 |
|
|
|
|
EQUITY |
|
|
|
Capital stock |
11 |
|
634,079 |
|
645,256 |
Contributed surplus |
|
|
45,945 |
|
45,903 |
Accumulated other
comprehensive income |
|
|
127,132 |
|
95,753 |
Retained earnings |
|
|
712,319 |
|
678,269 |
TOTAL EQUITY |
|
|
1,519,475 |
|
1,465,181 |
TOTAL LIABILITIES AND EQUITY |
|
$ |
4,115,716 |
$ |
3,989,730 |
Contingencies (note
16)Subsequent event
(note 11)
See accompanying notes to the interim condensed consolidated
financial statements.
On behalf of the Board:
“Robert
Wildeboer” |
Director |
“Terry Lyons” |
Director |
Martinrea International Inc.Interim Condensed
Consolidated Statements of Operations(in thousands of Canadian
dollars, except per share amounts) (unaudited)
|
Note |
|
Three months endedMarch 31,
2024 |
|
|
Three months endedMarch 31,
2023 |
|
|
|
|
|
SALES |
|
$ |
1,323,913 |
|
$ |
1,303,889 |
|
|
|
|
|
Cost of sales (excluding depreciation of property, plant and
equipment and right-of-use assets) |
|
|
(1,074,409 |
) |
|
(1,066,197 |
) |
Depreciation of property, plant and equipment and right-of-use
assets (production) |
|
|
(76,967 |
) |
|
(70,306 |
) |
Total cost of sales |
|
|
(1,151,376 |
) |
|
(1,136,503 |
) |
GROSS MARGIN |
|
|
172,537 |
|
|
167,386 |
|
|
|
|
|
Research and development costs |
|
|
(10,977 |
) |
|
(9,278 |
) |
Selling, general and administrative |
|
|
(78,191 |
) |
|
(78,523 |
) |
Depreciation of property, plant and equipment and right-of-use
assets (non-production) |
|
|
(4,070 |
) |
|
(4,366 |
) |
Loss on disposal of property, plant and equipment |
|
|
(112 |
) |
|
(42 |
) |
Restructuring costs |
7 |
|
(6,255 |
) |
|
- |
|
OPERATING INCOME |
|
|
72,932 |
|
|
75,177 |
|
|
|
|
|
Share of loss of equity investments |
6 |
|
(634 |
) |
|
(1,378 |
) |
Net gain on disposal of equity investments |
|
|
- |
|
|
5,273 |
|
Finance expense |
13 |
|
(20,173 |
) |
|
(19,046 |
) |
Other finance income |
13 |
|
5,443 |
|
|
224 |
|
INCOME BEFORE INCOME TAXES |
|
|
57,568 |
|
|
60,250 |
|
|
|
|
|
Income tax expense |
10 |
|
(13,918 |
) |
|
(12,079 |
) |
NET INCOME FOR THE
PERIOD |
|
$ |
43,650 |
|
$ |
48,171 |
|
|
|
|
|
Basic earnings per share |
12 |
$ |
0.56 |
|
$ |
0.60 |
|
Diluted earnings per share |
12 |
$ |
0.56 |
|
$ |
0.60 |
|
See accompanying notes to the interim condensed consolidated
financial statements.
Martinrea International Inc.Interim Condensed
Consolidated Statements of Comprehensive Income(in thousands of
Canadian dollars) (unaudited)
|
|
Three months endedMarch 31,
2024 |
|
|
Three months endedMarch 31,
2023 |
|
|
|
|
NET
INCOME FOR THE PERIOD |
$ |
43,650 |
|
$ |
48,171 |
|
Other
comprehensive income (loss), net
of tax: |
|
|
Items that may be reclassified to net
income |
|
|
Foreign currency translation differences for foreign
operations |
|
31,391 |
|
|
2,621 |
|
Items that will not be reclassified to net
income |
|
|
Share of other comprehensive loss of equity investments (note
6) |
|
(12 |
) |
|
(11 |
) |
Remeasurement of defined benefit plans |
|
(1,028 |
) |
|
375 |
|
Other comprehensive
income, net of tax |
|
30,351 |
|
|
2,985 |
|
TOTAL COMPREHENSIVE INCOME
FOR THE PERIOD |
$ |
74,001 |
|
$ |
51,156 |
|
See accompanying notes to the interim condensed consolidated
financial statements.
Martinrea International Inc.Interim Condensed
Consolidated Statements of Changes in Equity(in thousands of
Canadian dollars) (unaudited)
|
|
Capital stock |
|
|
Contributedsurplus |
|
|
Accumulated other comprehensive
income |
|
|
Retained earnings |
|
|
Total equity |
|
BALANCE AT DECEMBER 31,
2022 |
$ |
663,646 |
|
$ |
45,558 |
|
$ |
124,065 |
|
$ |
543,636 |
|
$ |
1,376,905 |
|
Net income for the period |
|
- |
|
|
- |
|
|
- |
|
|
48,171 |
|
|
48,171 |
|
Compensation expense related to stock options |
|
- |
|
|
110 |
|
|
- |
|
|
- |
|
|
110 |
|
Dividends ($0.05 per share) |
|
- |
|
|
- |
|
|
- |
|
|
(4,019 |
) |
|
(4,019 |
) |
Other comprehensive income (loss) net of tax |
|
|
|
|
|
Remeasurement of defined benefit plans |
|
- |
|
|
- |
|
|
- |
|
|
375 |
|
|
375 |
|
Foreign currency translation differences |
|
- |
|
|
- |
|
|
2,621 |
|
|
- |
|
|
2,621 |
|
Share of other comprehensive loss of equity investments |
|
- |
|
|
- |
|
|
(11 |
) |
|
- |
|
|
(11 |
) |
BALANCE AT MARCH 31,
2023 |
|
663,646 |
|
|
45,668 |
|
|
126,675 |
|
|
588,163 |
|
|
1,424,152 |
|
Net income for the period |
|
- |
|
|
- |
|
|
- |
|
|
105,494 |
|
|
105,494 |
|
Compensation expense related to stock options |
|
- |
|
|
332 |
|
|
- |
|
|
- |
|
|
332 |
|
Dividends ($0.15 per share) |
|
- |
|
|
- |
|
|
- |
|
|
(11,827 |
) |
|
(11,827 |
) |
Exercise of employee stock options |
|
358 |
|
|
(97 |
) |
|
- |
|
|
- |
|
|
261 |
|
Repurchase of common shares (note 11) |
|
(18,748 |
) |
|
- |
|
|
- |
|
|
(10,321 |
) |
|
(29,069 |
) |
Other comprehensive income (loss) net of tax |
|
|
|
|
|
Remeasurement of defined benefit plans |
|
- |
|
|
- |
|
|
- |
|
|
6,760 |
|
|
6,760 |
|
Foreign currency translation differences |
|
- |
|
|
- |
|
|
(30,915 |
) |
|
- |
|
|
(30,915 |
) |
Share of other comprehensive loss of equity investments |
|
- |
|
|
- |
|
|
(7 |
) |
|
- |
|
|
(7 |
) |
BALANCE AT DECEMBER 31,
2023 |
|
645,256 |
|
|
45,903 |
|
|
95,753 |
|
|
678,269 |
|
|
1,465,181 |
|
Net income for the period |
|
- |
|
|
- |
|
|
- |
|
|
43,650 |
|
|
43,650 |
|
Compensation expense related to stock options |
|
- |
|
|
42 |
|
|
- |
|
|
- |
|
|
42 |
|
Dividends ($0.05 per share) |
|
- |
|
|
- |
|
|
- |
|
|
(3,839 |
) |
|
(3,839 |
) |
Repurchase of common shares (note 11) |
|
(11,177 |
) |
|
- |
|
|
- |
|
|
(4,733 |
) |
|
(15,910 |
) |
Other comprehensive income (loss) net of tax |
|
|
|
|
|
Remeasurement of defined benefit plans |
|
- |
|
|
- |
|
|
- |
|
|
(1,028 |
) |
|
(1,028 |
) |
Foreign currency translation differences |
|
- |
|
|
- |
|
|
31,391 |
|
|
- |
|
|
31,391 |
|
Share of other comprehensive loss of equity investments |
|
- |
|
|
- |
|
|
(12 |
) |
|
- |
|
|
(12 |
) |
BALANCE AT MARCH 31,
2024 |
$ |
634,079 |
|
$ |
45,945 |
|
$ |
127,132 |
|
$ |
712,319 |
|
$ |
1,519,475 |
|
See accompanying notes to the interim condensed consolidated
financial statements.
Martinrea International Inc.Interim Condensed
Consolidated Statements of Cash Flows(in thousands of Canadian
dollars) (unaudited)
|
|
Three months endedMarch 31,
2024 |
|
|
Three months endedMarch 31,
2023 |
|
CASH PROVIDED BY (USED IN): |
|
|
OPERATING
ACTIVITIES: |
|
|
Net income for the period |
$ |
43,650 |
|
$ |
48,171 |
|
Adjustments for: |
|
|
Depreciation of property, plant and equipment and right-of-use
assets |
|
81,037 |
|
|
74,672 |
|
Amortization of development costs |
|
2,494 |
|
|
2,613 |
|
Unrealized gain on foreign exchange forward contracts |
|
(796 |
) |
|
(4,784 |
) |
Finance expense |
|
20,173 |
|
|
19,046 |
|
Income tax expense |
|
13,918 |
|
|
12,079 |
|
Loss on disposal of property, plant and equipment |
|
112 |
|
|
42 |
|
Deferred and restricted share units expense (benefit) |
|
(184 |
) |
|
5,436 |
|
Stock options expense |
|
42 |
|
|
110 |
|
Share of loss of equity investments |
|
634 |
|
|
1,378 |
|
Net gain on disposal of equity investments |
|
- |
|
|
(5,273 |
) |
Pension and other post-retirement benefits expense |
|
564 |
|
|
694 |
|
Contributions made to pension and other post-retirement
benefits |
|
(568 |
) |
|
(623 |
) |
|
|
161,076 |
|
|
153,561 |
|
Changes in non-cash working
capital items: |
|
|
Trade and other receivables |
|
(118,212 |
) |
|
(131,868 |
) |
Inventories |
|
18,607 |
|
|
(21,975 |
) |
Prepaid expenses and deposits |
|
1,983 |
|
|
3,259 |
|
Trade, other payables and provisions |
|
21,396 |
|
|
107,426 |
|
|
|
84,850 |
|
|
110,403 |
|
Interest paid |
|
(20,678 |
) |
|
(23,299 |
) |
Income taxes paid |
|
(25,118 |
) |
|
(32,577 |
) |
NET CASH PROVIDED BY
OPERATING ACTIVITIES |
$ |
39,054 |
|
$ |
54,527 |
|
|
|
|
FINANCING
ACTIVITIES: |
|
|
Increase in long-term debt (net of deferred financing fees) |
|
49,464 |
|
|
47,094 |
|
Equipment loan repayments |
|
(2,710 |
) |
|
(4,240 |
) |
Principal payments of lease liabilities |
|
(12,324 |
) |
|
(10,954 |
) |
Dividends paid |
|
(3,907 |
) |
|
(4,019 |
) |
Repurchase of common shares |
|
(15,910 |
) |
|
- |
|
NET CASH PROVIDED BY
FINANCING ACTIVITIES |
$ |
14,613 |
|
$ |
27,881 |
|
|
|
|
INVESTING
ACTIVITIES: |
|
|
Purchase of property, plant and equipment (excluding capitalized
interest)* |
|
(58,273 |
) |
|
(83,416 |
) |
Capitalized development costs |
|
(1,045 |
) |
|
(1,765 |
) |
Increase in investments (note 6) |
|
(8,130 |
) |
|
- |
|
Proceeds on disposal of property, plant and equipment |
|
978 |
|
|
131 |
|
NET CASH USED IN
INVESTING ACTIVITIES |
$ |
(66,470 |
) |
$ |
(85,050 |
) |
|
|
|
Effect
of foreign exchange rate changes on cash and cash equivalents |
|
(307 |
) |
|
(2,428 |
) |
|
|
|
DECREASE
IN CASH AND CASH EQUIVALENTS |
|
(13,110 |
) |
|
(5,070 |
) |
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD |
|
186,804 |
|
|
161,655 |
|
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ |
173,694 |
|
$ |
156,585 |
|
*As at March 31, 2024, $53,063
(December 31, 2023 - $75,800) of purchases of property, plant
and equipment remain unpaid and are recorded in trade and other
payables.
See accompanying notes to the interim condensed
consolidated financial statements.
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