00:53:04 EST Fri 13 Dec 2024
Enter Symbol
or Name
USA
CA



Martinrea International Inc
Symbol MRE
Shares Issued 76,740,240
Close 2024-05-02 C$ 11.35
Market Cap C$ 871,001,724
Recent Sedar Documents

Martinrea earns $43.65-million in Q1 2024

2024-05-02 17:41 ET - News Release

Mr. Pat D'Eramo reports

MARTINREA INTERNATIONAL INC. REPORTS STRONG FIRST QUARTER RESULTS AND DECLARES DIVIDEND

Martinrea International Inc. has released its financial results for the first quarter ended March 31, 2024, and has declared a quarterly cash dividend of five cents per share.

First quarter highlights

  • Total sales of $1,323.9-million, up 1.5 per cent year over year;
  • Diluted net earnings per share of 56 cents and adjusted net earnings per share of 62 cents;
  • Adjusted operating income margin of 6.0 per cent;
  • Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $162.8-million;
  • First quarter results improved significantly quarter over quarter;
  • Free cash flow (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 ratio, excluding the impact of IFRS 16, ended the quarter at 1.51 times;
  • 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 five cents per share declared.

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 of $162.8-million was near record levels, and adjusted operating income margin of 6.0 per cent 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 were 56 cents and 62 cents respectively. Free cash flow (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 in 2024, with the bulk of it being generated in the back half of the year, similar to 2023."

He continued: "Net debt (excluding IFRS-16 lease liabilities) increased by approximately $74-million quarter over quarter, to $856.5-million, reflecting our free cash flow 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 ratio (excluding the impact of IFRS 16) ended the quarter at 1.51 times, in line with our long-term target range of 1.5 times 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, and the company's annual information form for the year ended Dec. 31, 2023, can be found at SEDAR+.

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 (international financial reporting standards) 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 attached 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 attached table.

The attached tables provide a reconciliation of IFRS net income to non-IFRS adjusted net income, adjusted operating income and adjusted EBITDA.

The company's consolidated sales for the first quarter of 2024 increased by $20.0-million or 1.5 per cent to $1,323.9-million as compared with $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 per cent to $963.9-million from $974.0-million for the first quarter of 2023. The decrease was due to lower year-over-year OEM (original equipment manufacturer) 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 per cent 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 per cent 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 per cent 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 per cent 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.

The gross margin percentage for the first quarter of 2024 of 13.0 per cent increased as a percentage of sales by 0.2 per cent as compared with the gross margin percentage for the first quarter of 2023 of 12.8 per cent. 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;
  • 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;
  • 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 attached 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.

(1) Restructuring costs

Additions to the restructuring provision during the first quarter of 2024 totalled $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 ($600,000).

(2) Net gain on disposal of equity investments

On March 24, 2023, Martinrea sold its equity interest in VoltaXplore Inc. to NanoXplore Inc. 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 shown in the attached table.

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 per cent to 22.7 per cent.

Net income, before adjustments, for the first quarter of 2024 decreased by $4.5-million to $43.7-million or 56 cents per share, on a basic and diluted basis, from net income of $48.2-million or 60 cents 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 62 cents per share on a basic and diluted basis, from $43.6-million or 54 cents 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 with the first quarter of 2023, was positively impacted by the following:

  • Higher gross margin as previously explained;
  • A net foreign exchange gain of $4.9-million for the first quarter of 2024 compared with a gain of $100,000 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;
  • A higher effective tax rate (24.6 per cent for the first quarter of 2024 compared with 20.7 per cent for the first quarter of 2023).

Dividend

A cash dividend of five cents 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 International Inc.

Martinrea International 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 it can be in the products the company makes and the services it provides.

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 United States) and enter participant code 1012992 followed by the pound key. 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 12 months. The webcast and accompanying presentation can be accessed at the company's website.

There will also be a rebroadcast of the call available by dialling 905-694-9451 or toll-free 800-408-3053 (conference ID -- 3168089 followed by the pound key). The rebroadcast will be available until June 3, 2024, at 5 p.m.

If you have any teleconferencing questions, please call Ganesh Iyer at 416-749-0314.

We seek Safe Harbor.

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