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Strong Markets and Market Share Performance Drive Earnings Growth at Linamar Despite Tough Cost Environment

Cision
  • Excellent new business wins ("NBW") take launch book to nearly $4.9 billion;

  • Sales up 28.2% for Industrial due to strong agricultural and access sales on stronger markets and market share growth;

  • Sales up 25.0% for Mobility on stronger markets and cost recoveries;

  • Two acquisitions completed in the quarter;

  • Strong content per vehicle1 growth in North America and Europe driven by a positive customer platform mix and launches; and

  • Liquidity1, measured as cash and cash equivalents and available credit as at June 30, 2022, was $1.4 billion.

GUELPH, ON, Aug. 10, 2022 /CNW/ - (TSX: LNR)


Three Months Ended


Six Months Ended

June 30


June 30

(in millions of dollars, except per share figures)

2022

2021


2022

2021

$

$


$

$

Sales

1,981.6

1,575.3


3,759.7

3,357.1

Operating Earnings (Loss)






Industrial

39.7

73.7


61.2

109.4

Mobility

104.1

80.0


216.7

265.5

Operating Earnings (Loss)

143.8

153.7


277.9

374.9

Net Earnings (Loss)

104.5

108.0


200.8

261.5

Net Earnings (Loss) per Share – Diluted

1.61

1.65


3.08

3.99

Earnings before interest, taxes and amortization ("EBITDA")1

256.5

261.2


495.2

594.0

Operating Earnings (Loss) – Normalized1






Industrial

49.4

66.3


62.8

112.2

Mobility

99.8

85.9


193.0

261.4

Operating Earnings (Loss) – Normalized

149.2

152.2


255.8

373.6

Net Earnings (Loss) – Normalized1

109.3

106.9


180.2

265.2

Net Earnings (Loss) per Share – Diluted – Normalized1

1.68

1.63


2.76

4.05

EBITDA – Normalized1

262.9

259.2


473.7

600.6

Operating Highlights

Sales for the second quarter of 2022 ("Q2 2022") were $1,981.6 million, up $406.3 million from $1,575.3 million in the second quarter of 2021 ("Q2 2021").

The Industrial segment ("Industrial") product sales increased 28.2%, or $111.1 million, to $504.6 million in Q2 2022 from Q2 2021. The sales increase was due to:

  • an increase in agricultural sales from market growth further improved by global market share growth in all core products;

  • additional access equipment sales primarily due to increased market volumes in North America for all products amplified by North American market share growth in booms and global market share growth in scissors;

  • increased pricing to help partially relieve increased supply chain costs; and

  • increased sales related to the acquisition of the Salford Group of Companies ("Salford").

Sales for the Mobility segment ("Mobility") increased by $295.2 million, or 25.0% in Q2 2022 compared with Q2 2021. The sales in Q2 2022 were impacted by:

  • a sales increase primarily attributed to an improvement in adverse conditions associated with supply related issues experienced by our customers compared to Q2 2021;

  • increased pricing related to cost recovery partially offsetting the associated raw material, utilities and freight increases;

  • increased sales related to the acquisition of the remaining 50% interest in the joint venture GF Linamar LLC ("GFL"); and

  • additional sales for launching programs and increased volumes for certain programs that the Company has significant business with; partially offset by

  • an unfavourable impact on sales from the changes in foreign exchange rates from Q2 2021.





1

Operating Earnings (Loss) – Normalized, Net Earnings (Loss) – Normalized, Net Earnings (Loss) per Share – Diluted – Normalized, EBITDA, EBITDA – Normalized,
Liquidity, and Free Cash Flow are non-GAAP financial measures. Content per Vehicle is a Supplementary Financial Measure. Please see "Non-GAAP and Other
Financial Measures" section of this press release.

The Company's normalized operating earnings for Q2 2022 was $149.2 million. This compares to normalized operating earnings of $152.2 million in Q2 2021, a decrease of $3.0 million.

Industrial segment normalized operating earnings in Q2 2022 decreased $16.9 million, or 25.5% from Q2 2021. The Industrial normalized operating earnings results were predominantly driven by:

  • the non-recurrence of a gain recognized in Q2 2021 for receivables collected that had been previously provided for;

  • an increase in material, labour, freight and utilities costs;

  • a reduction in the utilization of Government support programs related to the global COVID-19 pandemic; and

  • an unfavourable impact from the changes in foreign exchange rates from Q2 2021; partially offset by

  • an increase in agricultural sales; and

  • an increase in access equipment sales.

Q2 2022 normalized operating earnings for Mobility were higher by $13.9 million, or 16.2% compared to Q2 2021. The Mobility segment's earnings were impacted by the following:

  • a sales increase primarily attributed to an improvement in adverse conditions associated with supply related issues experienced by our customers compared to Q2 2021; and

  • additional sales for launching programs and increased volumes for certain programs that the Company has significant business with; partially offset by

  • reduction in earnings related to the acquisition of GFL;

  • a reduction in the utilization of Government support programs related to the global COVID-19 pandemic; and

  • increased costs related to raw material, utilities and freight partially offset by customer cost recovered in sales.

"Q2 was a strong quarter thanks to markets improving in all of our businesses, market share growing and some relief starting to flow on customer pricing related to higher costs," said Linamar Executive Chair and CEO Linda Hasenfratz, "We continue to strongly execute on electrified NBW's in our mobility business, 74% of wins YTD, and well over double the dollar value of all of 2021 in just 2 quarters. We are also executing on articulated strategies to grow our light metal structural casting business and expand our agricultural business into the nutrition space with our Mills River Foundry and Salford acquisitions. We have repurchased nearly 1.9 million shares under our NCIB, 1.3 million in Q2 alone and continue to execute on such. We remain focused on generating high single digit EPS growth this year."

Dividends

The Board of Directors today declared an eligible dividend in respect to the quarter ended June 30, 2022 of CDN$0.20 per share on the common shares of the company, payable on or after September 9, 2022 to shareholders of record on August 23, 2022.

Non-GAAP And Other Financial Measures

The Company uses certain non-GAAP and other financial measures to provide useful information to both management, investors and other stakeholders in assessing the financial performance and financial condition of the Company.

Certain expenses and income that must be recognized under GAAP are not necessarily reflective of the Company's underlying operational performance. For this reason, management uses certain non-GAAP and other financial measures when analyzing operational performance on a consistent basis.

These Non-GAAP and other financial measures do not have a standardized meaning prescribed by GAAP and therefore they are unlikely to be comparable to similarly titled measures presented by other publicly traded companies, and they should not be construed as an alternative to other financial measures determined in accordance with GAAP.

Normalized Non-GAAP Financial Measures and Ratios

All Non-GAAP financial measures denoted with 'Normalized' as presented by the Company are adjusted for foreign exchange gain (loss), foreign exchange gain (loss) on debt and derivatives, and other items.

Operating Earnings (Loss) – Normalized
Operating Earnings (Loss) – Normalized is a non-GAAP financial measure and the Company believes it is useful in assessing the Company's underlying operational performance and in making decisions regarding the ongoing operations of the business. Operating Earnings (Loss) – Normalized is calculated as Operating Earnings (Loss), the most directly comparable measure as presented in the Company's consolidated statement of earnings, adjusted for foreign exchange gain (loss), and any other items, if applicable, that are considered not to be indicative of underlying operational performance.

Net Earnings (Loss) – Normalized
Net Earnings (Loss) – Normalized is a non-GAAP financial measure and the Company believes it is useful in assessing the Company's underlying operational performance and in making decisions regarding the ongoing operations of the business. Net Earnings (Loss) – Normalized is calculated as Net Earnings (Loss), the most directly comparable measure as presented in the Company's consolidated statement of earnings, adjusted for foreign exchange gain (loss), foreign exchange gain (loss) on debt and derivatives, and any other items, if applicable, that are considered not to be indicative of underlying operational performance.

Net Earnings (Loss) per Share – Diluted – Normalized
Net Earnings (Loss) per Share – Diluted – Normalized is a non-GAAP financial ratio and the Company believes it is useful in assessing the Company's underlying operational performance and in making decisions regarding the ongoing operations of the business. Net Earnings (Loss) per Share – Diluted – Normalized is calculated as Net Earnings (Loss) – Normalized (as defined above) divided by the fully diluted number of shares outstanding as at the period end date.

EBITDA and EBITDA – Normalized
EBITDA is a non-GAAP financial measure and the Company believes it is useful in assessing the Company's underlying operational performance of cash flow and profitability, the effective use and allocation of resources, and to provide more meaningful comparisons of operating results. EBITDA is calculated as Net Earnings (Loss) before income taxes, the most directly comparable measure as presented in the Company's consolidated statement of earnings, adjusted for amortization of property, plant and equipment, amortization of other intangible assets, finance costs, and other interest.

EBITDA – Normalized is a non-GAAP financial measure and the Company believes EBITDA – Normalized is useful in assessing the Company's underlying operational performance of cash flow and profitability, the effective use and allocation of resources, and to provide more meaningful comparisons of operating results. EBITDA – Normalized is calculated as EBITDA (as defined above) adjusted for foreign exchange gain (loss), foreign exchange gain (loss) on debt and derivatives, non-cash asset impairments and any other items, if applicable, that are considered not to be indicative of underlying operational performance.

All these other items contained in these non-GAAP financial measures are summarized as follows:


Three Months Ended


Six Months Ended



June 30



June 30


2022

2021


2022

2021

(in millions of dollars)

$

$


$

$

Gain on sale of unused land

-

-


(22.1)

-

Other items impacting Operating Earnings (loss) – Normalized and Net
Earnings (Loss) - Normalized

-

-


(22.1)

-







Gain on sale of unused land

-

-


(22.1)

-

Other items

-

-


(22.1)

-

Asset impairment provision, net of reversals

0.1

(0.5)


0.1

1.6

Other items and asset impairments impacting EBITDA – Normalized

0.1

(0.5)


(22.0)

1.6

Normalizing items for asset impairment provisions adjusted EBITDA and impacted the Mobility segment by $0.1 million for Q2 2022 and $0.1 million for YTD 2022 ($0.5 million gain for Q2 2021 and $1.6 million loss for YTD 2021).

During Q1 2022, a normalizing item related to a "gain on sale of unused land" adjusted the Mobility segment by $22.1 million.

All normalized non-GAAP financial measures areas reconciled as follows:


Three Months Ended


Six Months Ended

June 30


June 30

(in millions of dollars)

2022


2021


+/-


+/-


2022


2021


+/-


+/-

$


$


$


%


$


$


$


%

Operating Earnings (Loss) – Normalized
















Operating Earnings (Loss)

143.8


153.7


(9.9)


(6.4 %)


277.9


374.9


(97.0)


(25.9 %)

Foreign exchange (gain) loss

5.4


(1.5)


6.9




-


(1.3)


1.3



Other items

-


-


-




(22.1)


-


(22.1)



Operating Earnings (Loss) – Normalized

149.2


152.2


(3.0)


(2.0 %)


255.8


373.6


(117.8)


(31.5 %)

















Net Earnings (Loss) – Normalized
















Net Earnings (Loss)

104.5


108.0


(3.5)


(3.2 %)


200.8


261.5


(60.7)


(23.2 %)

Foreign exchange (gain) loss

5.4


(1.5)


6.9




-


(1.3)


1.3



Foreign exchange (gain) loss on debt and derivatives

0.9


-


0.9




0.5


6.3


(5.8)



Other items

-


-


-




(22.1)


-


(22.1)



Tax impact

(1.5)


0.4


(1.9)




1.0


(1.3)


2.3



Net Earnings (Loss) – Normalized

109.3


106.9


2.4


2.2 %


180.2


265.2


(85.0)


(32.1 %)

















Net Earnings (Loss) per Share – Diluted – Normalized
















Net Earnings (Loss) per Share – Diluted

1.61


1.65


(0.04)


(2.4 %)


3.08


3.99


(0.91)


(22.8 %)

Foreign exchange (gain) loss

0.08


(0.02)


0.10




-


(0.02)


0.02



Foreign exchange (gain) loss on debt and derivatives

0.01


-


0.01




0.01


0.10


(0.09)



Other items

-


-


-




(0.34)


-


(0.34)



Tax impact

(0.02)


-


(0.02)




0.01


(0.02)


0.03



Net Earnings (Loss) per Share – Diluted – Normalized

1.68


1.63


0.05


3.1 %


2.76


4.05


(1.29)


(31.9 %)

















EBITDA and EBITDA – Normalized
















Net Earnings (Loss) before income taxes

138.9


145.7


(6.8)


(4.7 %)


266.5


353.1


(86.6)


(24.5 %)

Amortization of property, plant and equipment

97.2


97.9


(0.7)




189.5


205.1


(15.6)



Amortization of other intangible assets

13.6


12.2


1.4




27.5


24.1


3.4



Finance costs

5.0


4.7


0.3




8.9


10.1


(1.2)



Other interest

1.8


0.7


1.1




2.8


1.6


1.2



EBITDA

256.5


261.2


(4.7)


(1.8 %)


495.2


594.0


(98.8)


(16.6 %)

Foreign exchange (gain) loss

5.4


(1.5)


6.9




-


(1.3)


1.3



Foreign exchange (gain) loss on debt and derivatives

0.9


-


0.9




0.5


6.3


(5.8)



Asset impairment provision, net of reversals

0.1


(0.5)


0.6




0.1


1.6


(1.5)



Other items

-


-


-




(22.1)


-


(22.1)



EBITDA – Normalized

262.9


259.2


3.7


1.4 %


473.7


600.6


(126.9)


(21.1 %)

All normalized non-GAAP financial measures areas impacting segments reconciled as follows: