Martinrea International Inc. Reports First-Quarter Results, Provides Long-Term Outlook, and Declares Dividend

Thursday, 06. May 2021 23:01

TORONTO, May 06, 2021 (GLOBE NEWSWIRE) -- 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, 2021 and that it has declared a quarterly cash dividend of $0.05 per share.

HIGHLIGHTS

  • Total sales of $997.2 million, up 14.3% year-over-year; production sales of $924.1 million
  • First quarter diluted net earnings per share of $0.48
  • First quarter Adjusted Net Earnings per Share(1) of $0.41
  • Balance sheet continues to be strong; Banking facility renewed
  • New business awards of approximately $130 million in annualized sales at mature volumes
  • First quarter results impacted by the global semiconductor shortage, which will continue in the second quarter; longer-term outlook remains positive
  • Quarterly cash dividend of $0.05 declared

OVERVIEW

Pat D’Eramo, President and Chief Executive Officer, stated: “First quarter results were impacted by some short-term headwinds, including the industry-wide shortage of semiconductors, a temporary lag in the pricing pass-through of higher aluminum costs, and an emerging third wave of COVID-19 which is presenting additional short-term challenges in some locations.  In addition, we are managing through a substantial amount of new business launches which of course is very good news for future sales and profitability.  While the semiconductor shortage will continue to impact results in the near-term, the longer-term outlook is very solid.  U.S. auto sales have been trending near record levels in recent months, and vehicle inventories are at their lowest levels in decades, particularly on truck, SUV and CUV models, where we have the majority of our platform exposure.  We believe this sets the stage for a prolonged period of strong production growth once supply chain pressures ease. Our future is bright, and our team continues to manage well under challenging circumstances.  I would like to thank the people of Martinrea for their continued dedication and commitment to our organization.”

He added: “I am also pleased to announce new business wins since we reported last quarter totaling $130 million in annualized sales at mature volumes, including approximately $90 million in our Lightweight Structures commercial group with various customers, including General Motors, Toyota and Tesla; $35 million in our Propulsion Systems commercial group with General Motors, Stellantis, and GAC; and our first contract with JLG in our Flexible Manufacturing Group. We are excited about our new EV battery joint venture with NanoXplore, named VoltaXplore, as we believe we have a differentiated technology that has the potential to provide a solution to produce EV batteries that will help governments and automotive OEMs meet ambitious targets for the production of electric vehicles.”

Fred Di Tosto, Chief Financial Officer, stated: “Sales for the first quarter, excluding tooling sales of $73.1 million, were $924.1 million, and our Adjusted Net Earnings per Share was $0.41, both within the range of our previously-disclosed guidance.  We continue to work through the many challenges the pandemic has put in front of us and the industry. While the temporary pricing lag in our aluminum business is largely behind us, the global semiconductor shortage is expected to continue to have an impact on production volumes in the second quarter before stabilizing later this year.  Taking these headwinds into account, we expect second-quarter production sales to be in the range of $850 million to $950 million, and Adjusted Net Earnings per Share to be in the range of $0.36 to $0.46.  On a full-year basis, we continue to expect 2021 Adjusted Net Earnings per Share to approach 2019 levels and Free Cash Flow to be approximately breakeven. These targets are dependent on a recovery in production volumes from an improving supply of semiconductors in the back half of the year.  On the financing front, we are pleased to note we extended our credit facilities with our lending syndicate to 2025, on very favourable terms.”

Rob Wildeboer, Executive Chairman, stated: “At Martinrea, we spend a lot of time thinking about capital allocation.  Our overarching priority is quite simple – to generate long-term positive returns for our shareholders.  While maintaining a strong balance sheet, we seek to invest in growth opportunities that have the potential to generate strong returns, be they organic capital investments, research and development initiatives, or acquisitions that make strategic and financial sense.  We are driven by a strict hurdle rate mentality, which is evident by our return on invested capital profile, which is among the best in our space.  Ultimately, companies that generate strong returns on invested capital tend to generate strong free cash flow over time.  We are making investments in our business today that are expected to lead to sales growth in excess of market growth, and generate strong returns and Free Cash Flow.  We have a high degree of confidence and conviction in our future and, given our confidence, we are rolling out our 2023 outlook, which calls for total sales, including tooling sales, of $4.6 billion to $4.8 billion, an Adjusted Operating Income Margin exceeding 8%, and Free Cash Flow in excess of $200 million.  When we rolled out our Martinrea 2.0 strategy back in 2015, we said that we would double margins over a five-year period, and that is exactly what we did – to a level among the best in our industry.  Simply put, we did what we said we would do, and we are very confident we will do so again in delivering on our 2023 outlook.  We have a great future.”

__________________________
1 The Company prepares its financial statements in accordance with International Financial Reporting Standards (“IFRS”). 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” and “Net Debt”.  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, 2021 and in this press release.

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, 2021 (“MD&A”), the Company’s interim condensed consolidated financial statements for the first quarter ended March 31, 2021 (the “interim financial statements”) and the Company’s Annual Information Form for the year ended December 31, 2020 can be found at www.sedar.com.

OVERALL RESULTS

Results of operations may include certain unusual and other 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, 2021 and 2020.  Refer to the Company’s interim financial statements for the three months ended March 31, 2021 for a detailed account of the Company’s performance for the periods presented in the table below.

  Three months ended
March 31, 2021
 Three months ended
March 31, 2020
$ Change% Change
Sales$997,150 $872,706 124,444 14.3%
Gross Margin 120,857  120,237 620 0.5%
Operating Income 47,430  49,205 (1,775)(3.6%)
Net Income for the period 38,701  28,963 9,738 33.6%
Net Earnings per Share - Basic and Diluted$0.48 $0.36 0.12 33.3%
Non-IFRS Measures*      
Adjusted Operating Income$48,459 $50,752 (2,293)(4.5%)
% of Sales 4.9% 5.8%  
Adjusted EBITDA 109,815  107,724 2,091 1.9%
% of Sales 11.0% 12.3%  
Adjusted Net Income 32,631  30,123 2,508 8.3%
Adjusted Net Earnings per Share - Basic and Diluted$0.41 $0.38 0.03 7.9%
           

*Non-IFRS Measures

The Company prepares its interim financial statements in accordance with International Financial Reporting Standards (“IFRS”).  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” 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, 2021
 Three months ended
March 31, 2020
Net Income$38,701 $28,963
Unusual and Other Items (after-tax)* (6,070) 1,160
Adjusted Net Income$32,631 $30,123
*Unusual and Other Items are explained in the "Adjustments to Net Income" section of this Press Release.
 


  Three months ended
March 31, 2021
 Three months ended
March 31, 2020
Net Income$38,701 $28,963 
Income tax expense 12,954  11,210 
Other finance income (5,762) (1,130)
Share of loss of an associate 926  700 
Finance expense 8,411  9,462 
Unusual and Other Items (before-tax)* (6,771) 1,547 
Adjusted Operating Income$48,459 $50,752 
Depreciation of property, plant and equipment and right-of-use assets 58,058  53,854 
Amortization of intangible assets 3,298  3,118 
Adjusted EBITDA$109,815 $107,724 
*Unusual and Other Items are explained in the "Adjustments to Net Income" section of this Press Release.
 


SALES      
       
Three months ended March 31, 2021 to three months ended March 31, 2020 comparison
       
  Three months ended
March 31, 2021
 Three months ended
March 31, 2020
$ Change% Change
North America$704,130 $687,528 16,602 2.4%
Europe 254,069  159,897 94,172 58.9%
Rest of the World 46,513  27,859 18,654 67.0%
Eliminations (7,562) (2,578)(4,984)193.3%
Total Sales$997,150 $872,706 124,444 14.3%
           

The Company’s consolidated sales for the first quarter of 2021 increased by $124.4 million or 14.3% to $997.2 million as compared to $872.7 million for the first quarter of 2020. Sales increased year-over-year across all operating segments.

Sales for the first quarter of 2021 in the Company’s North America operating segment increased by $16.6 million or 2.4% to $704.1 million from $687.5 million for the first quarter of 2020. The operations acquired from Metalsa, results for which were consolidated with those of the Company effective March 2, 2020, accounted for $18.6 million of the year-over-year increase in sales (including a $0.6 million decrease in tooling sales). Excluding the acquired operations, first quarter sales in North America decreased year-over-year by $2.0 million or 0.3%. The decrease was due to lower year-over-year production sales from light vehicle programs impacted by the industry-wide shortage of semiconductor chips, and the impact of foreign exchange on the translation of U.S.-denominated production sales, which had a negative impact on overall sales for the first quarter of 2021 of $18.0 million as compared to the first quarter of 2020. These negative factors were partially offset by the higher year-over-year production volumes on General Motors’ pick-up truck and large SUV platform; the launch of new programs during or subsequent to the first quarter of 2020 including the new Ford Mach E Mustang and a six cylinder aluminum engine block for Ford; and an increase in tooling sales of $21.6 million, which are typically dependant on the timing of tooling construction and final acceptance by the customer. Overall first quarter OEM light vehicle production volumes in North America decreased by approximately 5% year-over-year, with the industry-wide shortage of semiconductor chips negatively impacting current year volumes, and the onset of the COVID-19 global pandemic negatively impacting prior year volumes.

Sales for the first quarter of 2021 in the Company’s Europe operating segment increased by $94.2 million or 58.9% to $254.1 million from $159.9 million for the first quarter of 2020. The operations acquired from Metalsa, results for which were consolidated with those of the Company effective March 2, 2020, accounted for $43.3 million of the year-over-year increase in sales (including a $0.4 million increase in tooling sales). Excluding the acquired operations, first quarter sales in Europe increased year-over-year by $50.9 million or 35.2%. The increase can be attributed to the launch of new programs during or subsequent to the first quarter of 2020, mainly with Volvo and Ford; higher production volumes on specific platforms, with Daimler and Jaguar Land Rover; a $10.4 million positive foreign exchange impact from the translation of Euro denominated production sales as compared to the first quarter of 2020; and a $4.2 million increase in tooling sales.

Sales for the first quarter of 2021 in the Company’s Rest of the World operating segment increased by $18.7 million or 67.0% to $46.5 million from $27.9 million in the first quarter of 2020. The operations acquired from Metalsa, results for which were consolidated with those of the Company effective March 2, 2020, accounted for $16.0 million of the year-over-year increase in sales. Excluding the acquired operations, first quarter sales in the Rest of the World increased year-over-year by $2.7 million or 12.3%. The increase was due to a post-COVID recovery of overall production volumes; partly offset by a $2.7 million decrease in tooling sales, a $2.0 million negative foreign exchange impact from the translation of foreign denominated production sales as compared to the first quarter of 2020, and a program with Ford in China that ended production during or subsequent to the first quarter of 2020.

Overall tooling sales increased by $22.9 million to $73.1 million for the first quarter of 2021 from $50.2 million for the first quarter of 2020.

GROSS MARGIN      
       
Three months ended March 31, 2021 to three months ended March 31, 2020 comparison
       
  Three months ended
March 31, 2021
 Three months ended
March 31, 2020
$ Change% Change
Gross margin$120,857 $120,237 6200.5%
% of Sales 12.1% 13.8%  
         

The gross margin percentage for the first quarter of 2021 of 12.1% decreased as a percentage of sales by 1.7% as compared to the gross margin percentage for the first quarter of 2020 of 13.8%.  The decrease in gross margin as a percentage of sales was generally due to:

  • operational inefficiencies at certain operating facilities including launch related costs and upfront costs incurred in preparation of upcoming new programs;
  • an increase in the cost of aluminum raw material in conjunction with a temporary lag in the offsetting contractual increase in selling prices to the Company’s customers;
  • a negative sales mix; and
  • an increase in tooling sales which typically earn low margins for the Company.

These factors were partially offset by:

  • the receipt of certain COVID-related subsidies, namely wage subsidies related to active employees; and
  • productivity and efficiency improvements at certain operating facilities.

ADJUSTMENTS TO NET INCOME

Adjusted Net Income excludes certain unusual and other 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, 2021 to three months ended March 31, 2020 comparison
        
 Three months ended  Three months ended   
 March 31, 2021  March 31, 2020 (a)-(b) 
 (a)  (b) Change 
        
NET INCOME (A)$38,701  $28,963  $9,738 
        
Add Back - Unusual and Other Items:       
        
Restructuring costs (1)1,029  -  1,029 
Gain on dilution of investment in associate (2)(7,800) -  (7,800)
Transaction costs associated with operations acquired from Metalsa (recorded as SG&A) (3)-  1,547  (1,547)
        
        
TOTAL UNUSUAL AND OTHER ITEMS BEFORE TAX($6,771) $1,547  ($8,318)
        
Tax impact of above items701  (387) 1,088 
        
        
TOTAL UNUSUAL AND OTHER ITEMS - AFTER TAX (B)($6,070) $1,160  ($7,230)
        
        
ADJUSTED NET INCOME (A + B)$32,631  $30,123  $2,508 
        
        
Number of Shares Outstanding – Basic (‘000)80,296  80,121    
Adjusted Basic Net Earnings Per Share$0.41  $0.38    
Number of Shares Outstanding – Diluted (‘000)80,533  80,281    
Adjusted Diluted Net Earnings Per Share$0.41  $0.38    
        
        

1) Restructuring costs

Additions to the restructuring provision during the first quarter of 2021 totaled $1.0 million and represent employee-related severance resulting from the rightsizing of an operating facility in Germany.

2) Gain on dilution of investment in associate

As at December 31, 2020, the Company held 34,045,954 common shares of NanoXplore Inc. (“NanoXplore”) representing a 23.3% equity interest in NanoXplore (on a non-diluted basis). On February 12, 2021, NanoXplore completed a public offering of 11,500,000 common shares for gross proceeds of $46.0 million. In a separate transaction on February 12, 2021, the Company purchased 1,000,000 common shares from NanoXplore’s President and Chief Executive Officer for consideration of $4.0 million. Subsequent to these transactions, the Company’s net ownership interest decreased to 22.2% from 23.3%. This dilution resulted in a deemed disposition of a portion of the Company’s ownership interest in NanoXplore, resulting in a gain on dilution of $7.8 million for the three months ended March 31, 2021.

3) Transaction costs associated with the operations acquired from Metalsa (recorded as SG&A)

On March 2, 2020, the Company completed the acquisition of the structural components for passenger car operations of Metalsa S.A, de C.V. Included in SG&A expense are transaction costs related to the acquisition totaling $1.5 million for the three months ended March 31, 2020.

NET INCOME
 
Three months ended March 31, 2021 to three months ended March 31, 2020 comparison
        
  Three months ended
March 31, 2021
 Three months ended
March 31, 2020
$ Change% Change
Net Income$38,701$28,9639,73833.6%
Adjusted Net Income$32,631$30,1232,5088.3%
Net Earnings per Share      
 Basic and Diluted$0.48$0.36  
Adjusted Net Earnings per Share      
 Basic and Diluted$0.41$0.38  
        

Net income, before adjustments, for the first quarter of 2021 increased by $9.7 million to $38.7 million from $29.0 million for the first quarter of 2020. Excluding the unusual and other items explained in Table A under “Adjustments to Net Income”, Adjusted Net Income for the first quarter of 2021 increased by $2.5 million to $32.6 million or $0.41 per share, on a basic and diluted basis, from $30.1 million or $0.38 per share, on a basic and diluted basis, for the first quarter of 2020. 

Adjusted Net Income for the first quarter of 2021, as compared to the first quarter of 2020, was positively impacted by the following:

  • a net foreign exchange gain of $5.3 million for the first quarter of 2021 compared to a gain of $1.0 million for the first quarter of 2020;
  • a year-over-year decrease in research and development costs; and
  • a year-over-year decrease in finance expense on the Company’s long-term debt as a result of lower borrowing rates;

These factors were partially offset by a year-over-year increase in SG&A expense as previously discussed. Gross margin was essentially flat year-over-year, on higher sales, as previously explained.

ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
       
Three months ended March 31, 2021 to three months ended March 31, 2020 comparison
       
  Three months ended
March 31, 2021
 Three months ended
March 31, 2020
$ Change% Change
Additions to PP&E$81,592$63,96417,62827.6%
        

Additions to PP&E increased by $17.6 million to $81.6 million or 8.2% of sales in the first quarter of 2021 from $64.0 million or 7.3% of sales in the first quarter of 2020. General timing of expenditures makes quarterly additions to PP&E quite volatile in nature. Certain new program additions, previously delayed during the COVID-related shutdowns in the second quarter of 2020, moved in to the back half of 2020 and 2021 to date, as preparations for upcoming new program launches resumed. Capital additions also include incremental investments required in equipment related to several customer-driven engineering changes on upcoming new program launches. The Company continues to make investments in the business including in various sales and margin growth projects and in new and replacement business in all its various product offerings, while continuing to apply a measured and prudent approach to capital investment.

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, 2021, on or about July 15, 2021.

ABOUT MARTINREA INTERNATIONAL INC.

Martinrea is a diversified and global automotive supplier engaged in the design, development and manufacturing of highly engineered, value-added Lightweight Structures and Propulsion Systems. Martinrea operates in 57 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 Twitter and Facebook.

CONFERENCE CALL DETAILS

A conference call to discuss the financial results will be held on Thursday, May 6, 2021 at 6:00 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 4636275#. 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 online 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 – 4851137#).  The rebroadcast will be available until June 5, 2021.

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 statements related to the Company’s beliefs or views or expectations of, improvements in, expansion of and/or guidance or outlook as to future revenue, sales, production sales, margin, gross margin, earnings, earnings per share, adjusted earnings per share, adjusted net earnings per share, operating income margins, operating margins, adjusted operating income margins, cash flow, free cash flow, including outlook for 2021, 2022 and 2023; the expected impact of or duration of the COVID-19 pandemic; on the Company’s financial position, its business and operations, on its employees, on the automotive industry, or on the business of any OEM or suppliers; the Company’s current and future strategy, priorities and response related to COVID-19, and the status of implementation; the expected economic impact resulting from COVID-19; the potential effects or issues relating to a prolonged pandemic or lockdown(s), including its global impact, demand for vehicles; the growth of the Company and pursuit of, and belief in, its strategies; the impact of or the expected duration of the semiconductor shortage; the Company’s views of longer term outlook or results of future increases or growth in production; the Company’s views about VoltaXplore and EV batteries; the ramping up and launching of new business; continued investments and expected benefit of those investments in its business and technologies; the opportunity to increase sales; its ability to finance future capital expenditures, and ability to fund anticipated working capital needs, debt obligations and other commitments; the Company’s views on its liquidity and operating cash flow and ability to deal with present or future economic conditions; the potential for fluctuation of operating results, the Company’s expectations of future macroeconomic conditions and the payment of dividends 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. Certain forward-looking financial assumptions are presented as non-IFRS information and we do not provide reconciliation to IFRS for such assumptions. 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 Annual Information Form for the year ended December 31, 2020 and other public filings which can be found at www.sedar.com:

  • North American and Global Economic and Political Conditions and Consumer Confidence;
  • The highly cyclical nature of the automotive industry and the industry’s dependence on consumer spending and general economic conditions;
  • Pandemics and Epidemics (including the ongoing COVID-19 Pandemic), Force Majeure Events, Natural Disasters, Terrorist Activities, Political Unrest, and Other Outbreaks
  • The Company’s dependence on key customers
  • Financial Viability of Suppliers;
  • Competition;
  • The increasing pressure on the Company to absorb costs related to product design and development, engineering, program management, prototypes, validation and tooling;
  • Increased pricing of raw materials and commodities;
  • Outsourcing and Insourcing Trends;
  • The risk of increased costs associated with product warranty liability and recalls together with the associated liability;
  • Product Development and Technological Change;
  • Dependence on Key Personnel;
  • Availability of Consumer Credit or Cost of Borrowing;
  • Limited Financial Resources/Uncertainty of Future Financing/Banking;
  • Risks associated with the integration of acquisitions;
  • Potential Tax Exposures;
  • Cybersecurity Threats;
  • Costs associated with rationalization of production facilities;
  • Launch and Operational Cost Structure;
  • Labour Relations Matters;
  • Trade Restrictions;
  • Changes in Governmental Regulations;
  • Litigation and Regulatory Compliance and Investigations;
  • Quote/Pricing Assumptions;
  • Currency Risk - Hedging;
  • Currency Risk – Competitiveness in Certain Jurisdictions;
  • Fluctuations in Operating Results;
  • Internal Controls Over Financial Reporting and Disclosure Controls and Procedures;
  • Environmental Regulation and Climate Change;
  • Loss of Use of Key Manufacturing Facilities;
  • A Shift Away from Technologies in Which the Company is Investing;
  • Intellectual Property;
  • Competition with Low Cost Countries;
  • The Company’s ability to shift its manufacturing footprint to take advantage of opportunities in growing markets;
  • Risks of conducting business in foreign countries, including China, Brazil and other markets;
  • Change in the Company’s mix of earnings between jurisdictions with lower tax rates and those with higher tax rates;
  • The risks associated with Pension Plan and Other Post-Employment Benefits
  • Impairment Charges;
  • Potential Volatility of Share Prices;
  • Dividends;
  • Risks associated with private or public investment in technology companies;
  • Risks associated with joint ventures;
  • 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 Tosto
Chief Financial Officer
Martinrea International Inc.
3210 Langstaff Road
Vaughan, Ontario  L4K 5B2
Tel: 416-749-0314
Fax: 289-982-3001

  
Martinrea International Inc. 
Interim Condensed Consolidated Balance Sheets 
(in thousands of Canadian dollars) (unaudited)     
      
      
 Note March 31, 2021 December 31, 2020
ASSETS     
Cash and cash equivalents $145,348$152,786
Trade and other receivables3 660,236 589,315
Inventories4 528,468 492,659
Prepaid expenses and deposits  25,450 23,550
Income taxes recoverable  12,919 13,527
TOTAL CURRENT ASSETS  1,372,421 1,271,837
Property, plant and equipment5 1,613,680 1,615,197
Right-of-use assets6 183,549 192,630
Deferred tax assets  189,594 195,538
Intangible assets7 50,957 52,644
Investments8 51,439 40,557
TOTAL NON-CURRENT ASSETS  2,089,219 2,096,566
TOTAL ASSETS $3,461,640$3,368,403
      
LIABILITIES     
Trade and other payables $1,031,996$967,952
Provisions9 3,807 4,258
Income taxes payable  13,045 13,230
Current portion of long-term debt10 20,326 19,492
Current portion of lease liabilities11 33,079 34,064
TOTAL CURRENT LIABILITIES  1,102,253 1,038,996
Long-term debt10 852,996 815,730
Lease liabilities11 168,447 177,749
Pension and other post-retirement benefits  67,050 74,030
Deferred tax liabilities  87,240 86,174
TOTAL NON-CURRENT LIABILITIES  1,175,733 1,153,683
TOTAL LIABILITIES  2,277,986 2,192,679
      
EQUITY     
Capital stock13 662,530 662,427
Contributed surplus  44,171 43,860
Accumulated other comprehensive income  60,919 96,645
Retained earnings  416,034 372,792
TOTAL EQUITY  1,183,654 1,175,724
TOTAL LIABILITIES AND EQUITY $3,461,640$3,368,403
      

Contingencies (note 19)

Subsequent Events (note 8, note 10)

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)                         
  
      
   Three months ended   Three months ended  
 Note March 31, 2021  March 31, 2020 
      
SALES $997,150 $872,706 
      
Cost of sales (excluding depreciation of property, plant and equipment and right-of-use assets)  (822,074) (702,486)
Depreciation of property, plant and equipment and right-of-use assets (production)  (54,219) (49,983)
Total cost of sales  (876,293) (752,469)
GROSS MARGIN  120,857  120,237 
      
Research and development costs  (7,809) (9,453)
Selling, general and administrative  (60,750) (57,408)
Depreciation of property, plant and equipment and right-of-use assets (non-production)  (3,839) (3,871)
Restructuring costs9 (1,029) - 
Amortization of customer contracts and relationships  -  (300)
OPERATING INCOME  47,430  49,205 
      
Share of loss of an associate8 (926) (700)
Gain on dilution of investment in associate8 7,800  - 
Finance expense15 (8,411) (9,462)
Other finance income (expense)15 5,762  1,130 
INCOME BEFORE INCOME TAXES  51,655  40,173 
      
Income tax expense12 (12,954) (11,210)
NET INCOME FOR THE PERIOD $38,701 $28,963 
      
      
Basic earnings per share14$0.48 $0.36 
Diluted earnings per share14$0.48 $0.36 

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, except per share amounts) (unaudited)                         
 
 
   Three months ended  Three months ended 
   March 31, 2021  March 31, 2020 
      
NET INCOME FOR THE PERIOD$38,701 $28,963 
Other comprehensive income (loss), net of tax:    
 Items that may be reclassified to net income    
 Foreign currency translation differences for foreign operations (36,357) 107,886 
 Cash flow hedging derivative and non-derivative financial instruments:    
 Unrealized gain (loss) in fair value of financial instruments 892  (5,759)
 Reclassification of loss (gain) to net income (269) 195 
 Items that will not be reclassified to net income    
 Share of other comprehensive income of an associate (note 8) 8  26 
 Remeasurement of defined benefit plans 8,556  (5,749)
Other comprehensive income (loss), net of tax  (27,170) 96,599 
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD$11,531 $125,562 

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  Contributed surplus  Accumulated other comprehensive income  Retained earnings  Total equity 
BALANCE AT DECEMBER 31, 2019$661,422 $42,449 $89,107 $425,445 $1,218,423 
Net income for the period -  -  -  28,963  28,963 
Compensation expense related to stock options -  604  -  -  604 
Dividends ($0.05 per share) -  -  -  (3,998) (3,998)
Repurchase of common shares (2,474) -  -  (893) (3,367)
Other comprehensive income (loss) net of tax          
 Remeasurement of defined benefit plans -  -  -  (5,749) (5,749)
 Foreign currency translation differences -  -  107,886  -  107,886 
 Share of other comprehensive income of an associate -  -  26  -  26 
 Cash flow hedging derivative and non-derivative          
 financial instruments:          
  Unrealized loss in fair value of financial instruments -  -  (5,759) -  (5,759)
  Reclassification of loss to net income -  -  195  -  195 
BALANCE AT MARCH 31, 2020 658,948  43,053  191,455  443,768  1,337,224 
Net loss for the period -  -  -  (56,280) (56,280)
Compensation expense related to stock options -  1,812  -  -  1,812 
Dividends ($0.15 per share) -  -  -  (12,032) (12,032)
Exercise of employee stock options 3,479  (1,005) -  -  2,474 
Other comprehensive income (loss) net of tax          
 Remeasurement of defined benefit plans -  -  -  (2,664) (2,664)
 Foreign currency translation differences -  -  (103,986) -  (103,986)
 Share of other comprehensive loss of an associate -  -  (105) -  (105)
 Cash flow hedging derivative and non-derivative          
 financial instruments:          
  Unrealized gain in fair value of financial instruments -  -  8,474  -  8,474 
  Reclassification of loss to net income -  -  807  -  807 
BALANCE AT DECEMBER 31, 2020 662,427  43,860  96,645  372,792  1,175,724 
Net income for the period -  -  -  38,701  38,701 
Compensation expense related to stock options -  340  -  -  340 
Dividends ($0.05 per share) -  -  -  (4,015) (4,015)
Exercise of employee stock options 103  (29) -  -  74 
Other comprehensive income (loss) net of tax          
 Remeasurement of defined benefit plans -  -  -  8,556  8,556 
 Foreign currency translation differences -  -  (36,357) -  (36,357)
 Share of other comprehensive income of an associate -  -  8  -  8 
 Cash flow hedging derivative and non-derivative          
 financial instruments:          
  Unrealized gain in fair value of financial instruments -  -  892  -  892 
  Reclassification of gain to net income -  -  (269) -  (269)
BALANCE AT MARCH 31, 2021$662,530 $44,171 $60,919 $416,034 $1,183,654 

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, except per share amounts) (unaudited)                         
 
 
   Three months ended   Three months ended  
   March 31, 2021  March 31, 2020 
CASH PROVIDED BY (USED IN):    
OPERATING ACTIVITIES:    
Net Income for the period$38,701 $28,963 
Adjustments for:    
 Depreciation of property, plant and equipment and right-of-use assets 58,058  53,854 
 Amortization of customer contracts and relationships -  300 
 Amortization of development costs 3,298  2,818 
 Unrealized loss (gain) on foreign exchange forward contracts (744) 108 
 Finance expense 8,411  9,462 
 Income tax expense 12,954  11,210 
 Deferred and restricted share units benefit (1,707) (4,180)
 Stock options expense 340  604 
 Share of loss of an associate 926  700 
 Gain on dilution of investment in associate (7,800) - 
 Pension and other post-retirement benefits expense 1,015  1,250 
 Contributions made to pension and other post-retirement benefits (938) (812)
   112,514  104,277 
Changes in non-cash working capital items:    
 Trade and other receivables (84,801) (1,537)
 Inventories (47,996) (44,260)
 Prepaid expenses and deposits (2,339) (1,891)
 Trade, other payables and provisions 99,859  46,607 
  77,237  103,196 
 Interest paid (9,176) (9,921)
 Income taxes paid (10,646) (11,743)
NET CASH PROVIDED BY OPERATING ACTIVITIES$57,415 $81,532 
      
FINANCING ACTIVITIES:    
 Increase in long-term debt 50,976  56,428 
 Repayment of long-term debt (4,540) (4,090)
 Principal payments of lease liabilities (8,593) (7,365)
 Dividends paid (4,015) (3,612)
 Exercise of employee stock options 74  - 
 Repurchase of common shares -  (3,367)
NET CASH PROVIDED BY FINANCING ACTIVITIES$33,902 $37,994 
      
INVESTING ACTIVITIES:    
 Purchase of property, plant and equipment (excluding capitalized interest)* (90,811) (74,054)
 Business acquisition (note 2) -  (10,503)
 Capitalized development costs (2,557) (1,783)
 Investment in NanoXplore Inc. (note 8) (4,000) - 
 Proceeds on disposal of property, plant and equipment -  266 
NET CASH USED IN INVESTING ACTIVITIES$(97,368)$(86,074)
      
Effect of foreign exchange rate changes on cash and cash equivalents (1,387) 4,090 
      
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (7,438) 37,542 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 152,786  118,973 
CASH AND CASH EQUIVALENTS, END OF PERIOD$145,348 $156,515 

*As at March 31, 2021, $51,249 (December 31, 2020 - $61,207) of purchases of property, plant and equipment remain unpaid and are recorded in trade and other payables and provisions.

See accompanying notes to the interim condensed consolidated financial statements.


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