MARTINREA INTERNATIONAL INC · is king! plant. business unit. company. ... pride is the enemy. pride kills continuous improvement ... severity score. improved by 30%.

©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.

MARTINREA INTERNATIONAL INC.

Q4 2017 Company Presentation

COMPANY OVERVIEW

2


MARTINREA OVERVIEW

Leading Tier One automotive supplier in steel metal forming, fluid management systems and aluminum parts

One of the fastest growing automotive parts suppliers in the past 15 years ($0 to ~$4.0 billion in sales)

Operating 44 manufacturing facilities with approximately 10 million square feet of manufacturing space and 15,000 motivated employees in 8 countries: Canada, United States, Mexico, Brazil, Germany, Slovakia, Spain and China *All dollar values are in CAD

Market statistics (TSX: MRE)Market Cap – approx. $1.3 BillionEnterprise Value – approx. $1.9 BillionF2017 Adj. EBITDA – $401 MillionF2017 Adj. FD EPS – $1.91

3


MARTINREA’S GLOBAL PRESENCE

US12 Plants

GERMANY3 Plants

MEXICO10 Plants

CANADA13 Plants

BRAZIL1 Plant

SLOVAKIA1 Plant

SPAIN2 Plants

CHINA2 Plants

4


MARTINREA’S EVOLUTION

5

NOV 2001Royal Laser

APR 2002AcquiresRea International(Fluid Management Systems)

JUN 2002Royal Laser

changes name to:Martinrea

International Inc.

DEC 2002Acquires Pilot Industries(Fluid Management Systems)

DEC 2005Acquires plant from Oxford Automotive(Metallics)

MAY 2006AcquiresDepco International(Metallics)

MAR 2009AcquiresSKD Automotive(Metallics)

JUL 2011Acquires majorityof Honsel(Aluminum)

AUG 2014Acquires balanceof Honsel

Footprint in place

20182001

DEC 2006AcquiresThyssenKrupp Budd Fabco North America(Metallics)

5


MARTINREA’S PRODUCTS

STEEL METAL FORMING ALUMINUM COMPONENTS

FLUID MANAGEMENT SYSTEMS

6


COMPETITIVE LANDSCAPE

PRIMARY COMPETITORS

OTHER COMPETITORS

PRIMARY COMPETITORS

OTHER COMPETITORS

STEEL METAL FORMING(North America)

Second largest North American metal former by sales

PRIMARY COMPETITORS

OTHER COMPETITORS

FLUID MANAGEMENT SYSTEMS (North America, China, Slovakia)

Top three supplier in North America

Leader in growth since 2005

ALUMINUM COMPONENTS (Worldwide)

Leading supplier of light metal components

7

MARTINREA 2.0

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BOOK OF MARTINREA

2001 – 2014 2015 – 2020

Where We Have Been

Where We Are Now

Where We Are Going

9


2.54x

<1.50x

0.00

0.50

1.00

1.50

2.00

2.50

3.00

Q3 2014 2017

NET DEBT TO ADJUSTED EBITDA RATIO

4.1%

>6.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

2014 2017

ADJUSTED OPERATING INCOME MARGIN

2017 TARGETS (ESTABLISHED AT THE END OF 2014)

10

>50% Improvement


MARTINREA VISION, MISSION AND PRINCIPLES

MARTINREA PRINCIPLES

Our success will be based on the execution of our guiding principles, applied with integrity, in all that we do:

1. We make great, high quality products

2. Every location must be a centre of excellence

3. Discipline is key

4. We attract, train and work with excellent people, and we motivate our people to perform well

5. We are a team

6. Challenges make us better

7. Think differently

8. Work hard, play hard

9. The Golden Rule – Treat everyone with dignity and respect

10. Our leadership team has to drive these messages consistently and simply.

MARTINREA VISION

Our vision for the future is to be the best, preferred and most valued automotive parts supplier in the world in the products and services we provide our customers.

MARTINREA MISSION IS TO DELIVER:

• Outstanding quality products and services to our customers

• Meaningful opportunity, job satisfaction and job security to our people through competitiveness and prudent growth

• Superior long term investment returns to our stakeholders

• Positive contributions to our communities as good corporate citizens.

11


WHAT IS MARTINREA 2.0?

Martinrea 2.0 is the framework to become a great company . . . diverse people and groups working together toward a single vision.• Fostering principles-based leadership• Promoting positive behaviors• Creating a strong lean culture• Implementing best practices

Through our 4-Pillar Business Strategy

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13©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.

OUR STRATEGY

DEPLOYMENT PLANS

4-PILLAR BUSINESS STRATEGY

HIGH PERFORMANCE

CULTURE

OPERATIONAL EXCELLENCE

FINANCIAL MANAGEMENT

CUSTOMER IS KING!

PLANT

BUSINESS UNIT

COMPANY

TAKE ACTION!


CHANGE THE WAY WE THINK

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LEARN TO UN-LEARN–Break the habit, cherish the experience

PRIDE IS THE ENEMY. PRIDE KILLS CONTINUOUS IMPROVEMENT

–Pride for your people not for your practice–Be humble about the way you operate–Always remember there is a better way–Share what you learn

TOOLS WILL FOLLOW


RESPECTING our people

DEVELOPING our people

Learn by DOING

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ATTRIBUTES OF THE MARTINREA 2.0 MANUFACTURING SYSTEM

RESULTS TO DATE

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4.1%4.6%

5.0%

6.4%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

2014A 2015A 2016A 2017A

FINANCIAL PERFORMANCE

2.54x2.37x

2.16x1.89x

1.45x

0.00

0.50

1.00

1.50

2.00

2.50

3.00

Q3 2014A 2014A 2015A 2016A 2017A

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2017 FINANCIAL TARGETS WERE ACHIEVED

NET DEBT TO ADJUSTED EBITDA RATIOADJUSTED OPERATING INCOME MARGIN


SEVERITY SCORE

Improved by 30%

Improved by 65%

PR/R’sTOTAL RECORDABLE INJURY FREQUENCY

Improved by 60%

SAFETY

SAFETY AND QUALITY PERFORMANCE

18

SAFETY AND QUALITY PERFORMANCE HAVE IMPROVED

QUALITY

19

MARTINREA 2.0 – NEXT STEPS2017-2020


4.1%

6.4%

>8.0%>9.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

NEW TARGET SETTING THROUGH 2020

20

2014 - 2017Achieved predominantly through operational improvements


2017 - 2020EXPECTED DRIVERS- Operational Excellence/Lean- Innovative Flexible Processing- Evolution of Book of Business

2014A 2017A 2019F 2020F

PROCESS INNOVATION

21


FLEXIBLE ASSEMBLY – METALLICS

IMPLEMENT FLEXIBLE BUILD PROCESSES (WELD EXAMPLE)

THEN NOW

Lifespan: 6 YearsTooling change-over: 4 weeksService part Capability: NoneVolume Flex Capability: Low

Lifespan: 12+ YearsTooling change-over: 30 MinutesService part Capability: CapableVolume Flex Capability: High

40%Less Capital

20%Less Labor

22


PROCESS INNOVATION FOR HIGH PRESSURE DIE CASTING

MICRO SPRAY TECHNOLOGY – FOR HP DIE CASTING:IS A TECHNOLOGY FOR DIE SURFACE LUBRICATION WHICH USES A MINIMUM AMOUNT OF LUBRICANT

AND INTERNAL COOLING

Effects: improvement of casting surface, extension of die life up to approx. 120-150k shots (from 100k), improved mechanical properties

CONVENTIONAL SPRAYING AFTER33,788 SHOTS

MICRO SPRAYING AFTER103,826 SHOTS

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PRODUCTS, INNOVATION AND BEYOND 2020

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A LIGHT WEIGHTING COMPANY

DEFINITION:Continuously developing and evolving core metallic products (high strength steel, aluminum, assemblies, etc.) to reduce vehicle weight and CO2

emissions, improving overall vehicle efficiency (MPG).

25


20

25

30

35

40

45

50

55

60

65

2000 2005 2010 2015 2020 2025

LIGHT WEIGHTING TREND DRIVEN BY CO2/MPG REGULATIONS

TARGETS IN MPG/GRAMS OF CO2

2025 55/110

2021 61/95

2020 55/105

2020 50/116

10% reduction in weight provides a 6-7% improvement in fuel economy

26


MARKET TRENDS – ALUMINUM (NORTH AMERICA)

+ 42%

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*Source: North American Light Vehicle Content Aluminum Study, Ducker Analysis (1Q2017)

Aluminum Net Pounds per North American Light Vehicle(55 Years of Uninterrupted Growth)


MARTINREA’S POSITION

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HIGH STRENGTH

STEELS

PROPULSION AND STRUCTURAL COMPONENTS


MATERIAL OPTIONS – CROSSMEMBERS AND CONTROL ARMS

STEEL41.2 lbs

STEEL11.2 lbs

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ALUMINUM – SOLID34.0 lbs

ALUMINUM – SOLID9.9 lbs

ALUMINUM – HOLLOW27.3 lbs

ALUMINUM – HOLLOW6.2 lbs


LIGHTWEIGHT PRODUCTS

Martinrea’s metallic contenton the 2018 Equinox/Terrain

General Motors reduced the weight of the 2018 Equinox/Terrain by 10% or 400 lbs by using lighter body parts and frames.

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PLASMA SPRAY STEEL COATING FOR ENGINE BLOCKS

THERMAL SPRAY PROCESS ALUTHINFER® NO LINERS!

MARTINREA HONSEL ALUTHINFER® = BORE SPRAY COATING:IS A TECHNOLOGY TO REPLACE IRON LINERS IN ENGINE BLOCKS BY A THIN (100 MICRON) STEEL LAYER

Effects: weight reduction of block, better wear performance, less friction, less oil and fuel consumption, better heat dissipation from engine

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PRODUCT

ELECTRIC VEHICLE – ALUMINUM POTENTIAL

TODAY’S FUEL TANKTomorrow: Battery Housing TODAY’S ENGINE

Tomorrow: Inverter & Electric Motor

BODY COMPONENTSStructural

Today and Tomorrow

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GROWING TECHNOLOGY AND INNOVATION

IDEA RESEARCH DEVELOP TESTING ANALYSIS INTRO

NEW MARTINREA TECH CENTER OPENED IN 2017

33


CAPLESS FUEL FILLER

TODAY’S DESIGN OUR NEW DESIGN

• First capless unit to market

• Welded two piece design

• Requires deep draw funnel

• Best refueling performance

• Smallest in industry

• Half the weight of current model

• Eliminates deep drawn funnel cost

• Retains best refueling performance

• Self-cleaning door seal design

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HYBRID DESIGN DEVELOPMENT

LIGHTWEIGHT ALUMINUM SOLUTION

• Lower costs across platforms

• Tighter packaging

• More flexible

• Greater stiffness

• Necessary crash performance

ALUMINUM EXTRUSIONS WELDED ONTO SIDERAILS

HOLLOW ALUMINUM CASTED SIDERAILS

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WHATEVER THE FUTURE HOLDS, MARTINREA WILL BE A LEADER

ELECTRIFIED CONNECTED AUTONOMOUSSHARED

36

FINANCIALS

37


SALES

Sales growth has been staggering (CAGR ~ 20% from 2009 to 2016)

Excluding FX impacts, growth is expected to normalize over the next three years; sales expected to exceed $4.0 billion in 2020 based on budget assumptions

Module assembly business moved to a VAA pricing model in 2017 masking new business being launched

Focus is on new programsexceeding specific Martinrea 2.0 investment return hurdles

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1,091

1,570

2,076

2,706

3,019

3,354

3,705 3,715 3,479

47

119

117

195

203

245

162 253

211

1,138

1,689

2,193

2,901

3,222

3,599

3,867 3,968

3,690

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2009A 2010A 2011A 2012A 2013A 2014A 2015A 2016A 2017A

IN M

ILLI

ON

S O

F C

AN

AD

IAN

DO

LLA

RS

Production Sales Tooling Sales


HIGHLIGHTS OF RECENT NEW BUSINESS AWARDS

Customer Products Annualized Sales at Peak Volumes SOP

Jaguar/Land-Rover Aluminum knuckles and control arms $200,000,000 2015-2018

Jaguar/Land-Rover Aluminum battery housing and other components $20,000,000 2020

General Motors Pick-up trucks and SUVs – steel metal forming and fluid handling $195,000,000 2018-2020

General Motors Transmission engine fluids systems $20,000,000 2018

General Motors Fluids systems - Small Car $25,000,000 2018-2019

General Motors Steel Metal Forming – Mid Size SUVs $25,000,000 2019

General Motors Steel structural components – Bolt AV $15,000,000 2018

Cadillac VAA module assembly – SRX $10,000,000 2019

Ford Motor Company 2.0L aluminum engine block $100,000,000 2018

Ford Motor Company 3.5L V6 engine block $50,000,000 2020

Ford Motor Company Pick-up trucks and SUVs - aluminum structural components and fluid handling $15,000,000 2020

FCA Fluids systems (RAM/Wrangler) $20,000,000 2018

Daimler Steel Metal Forming – Compact Sedan $30,000,000 2018

Daimler V8 AMG aluminum engine block $25,000,000 2017-2018

BMW Aluminum structural components $25,000,000 2020

BMW Aluminum transmission (X5) $15,000,000 2018

BMW Steel Metal Forming $10,000,000 2019

Volvo 4 cyl aluminum diesel engine block $35,000,000 2018

Lucid Aluminum structural components $20,000,000 2019

Nissan Steel metal forming – Rogue Crossover $40,000,000 2020

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NORTH AMERICAN PLATFORM PORTFOLIO – F2017

1. Ford Escape

2. GM Equinox /Terrain

3. Ford Fusion/Edge

4. GM Pickups, SUVs

5. GM Malibu/Impala

6. Chrysler 300/Challenger/Charger

7. Jeep Wrangler

8. Dodge Ram

9. Jeep Grand Cherokee

10. BMW SUV

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4.1%

4.6%

5.0%

6.4%

>8.0%

>9.0%

2%

3%

4%

5%

6%

7%

8%

9%

10%

2014A 2015A 2016A 2017A 2019F 2020F

AD

JUST

ED O

PER

ATI

NG

INC

OM

E M

AR

GIN

%

Note: Operating income margins presented have been adjusted for unusual and other items highlighted in our most recent MD&A filed on www.sedar.com


Operating income margin of 6.4% for 2017 representing a >50% improvement from 2014

Margins expected to continue to increase to >8% by 2019 and > 9% by 2020

Road map in place to get to targets

41

7.0%


DRIVERS OF MARGIN EXPANSION

Lean transformation

Lean, efficient, always improving

Scale up by sharing (read across)

Purchasing initiatives

Innovative, flexible manufacturing

Cost saving road maps

Strong program management

OPERATIONAL EXCELLENCE

Lower margin work rolling off and being replaced with higher margin work

Strict adherence to Martinrea 2.0 investment hurdle rates

Operations competing for capital

Capital to be allocated to projects with the greatest margins and returns

EVOLUTION OF BOOK OF BUSINESS

42


5267 73

82 83

119130

166

$0.61

$0.79$0.88

$0.97 $0.98

$1.38$1.50

$1.91

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

2010A 2011A 2012A 2013A 2014A 2015A 2016A 2017A

ADJUSTED NET EARNINGS PER SHARE

IN M

ILLI

ON

S O

F CA

NAD

IAN

DO

LLAR

S

NET EARNING* DILUTED NET EARNINGS PER SHARE*

*Note: Adjusted for Unusual and Other Items. If any, as highlighted and described in our most recent MD&A filed on www.sedar.com

FULL YEAR FINANCIALS

43


BALANCE SHEET

$91

$149 $201 $189 $204 $215

$249 $252

0

50

100

150

200

250

2010A 2011A 2012A 2013A 2014A 2015A 2016A 2017A

The Company is a significant cash flow generator with operating cash flow increasing every year since 2010

Investments in the business continue to be made; Capex in 2018 expected to be ~ $300M based on expected growth

Net Debt to Adjusted EBITDA ratio has decreased significantly to 1.45X at the end of 2017, 2017 target achieved

IN M

ILLI

ON

S O

F CA

NAD

IAN

DO

LLAR

SIN

MIL

LIO

NS

OF

CAN

ADIA

N D

OLL

ARS

OPERATING CASH FLOW

CAPEX

NET DEBT TO LTM ADJUSTED EBITDA

44

1.75x 1.62x

2.54x 2.37x2.16x

1.89x1.45x

0

0.5

1

1.5

2

2.5

3

2012A 2013A Q3 2014A 2014A 2015A 2016A 2017A

$89 $142 $146

$237 $259 $308

$348 $406

0

100

200

300

400

2010A 2011A 2012A 2013A 2014A 2015A 2016A 2017A

MACROECONOMIC OUTLOOK

45


MACROECONOMIC OUTLOOK – AUTOMOTIVE

19 MILLION UNITS

will likely increase by over

BETWEEN 2016 AND 2023GLOBAL VEHICLE PRODUCTION

GLOBAL PRODUCTION VOLUME BRIDGE – 2016 TO 2023F (MILLIONS)

46


U.S. AUTOMOTIVE SALES

FUNDAMENTALS ARE STILL STRONG:

• Financing is available at low rates

• Employment/participation levels are strong

• U.S. housing is healthy

• Consumer debt levels in the U.S. have improved

• Oil and gas prices remain low

• Average vehicle age ~ 12 years

• Annual population growth adding new drivers

• New vehicles have more features, may be more economical to drive

47

February 2018 17.1mm SAAR

8 years

Pent-up demand

8 years


LEGAL DISCLAIMER

• The Company prepares its financial statements in accordance with International Financial Reporting Standards (“IFRS”). 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” and "Adjusted EBITDA”. This presentation contains forward-looking statements within the meaning of applicable Canadian securities laws, including, but not limited to, statements relating to future expectations of our sales or revenues, (adjusted) operating income margins, (adjusted) earnings and (adjusted) net earnings and (adjusted) net earnings per share, cash flow from operations, operating performance, investment in capital and programs; strategy, market opportunity and vision; views on the outlook of and growth of the automotive industry and Martinrea’s ability to capitalize on those opportunities, including expectations of aluminum in electric vehicles as well as other forward-looking statements. The words “continue”, “expect”, “anticipate”, “estimate”, “may”, “will”, “intend”, “believe”, “plan” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on estimates and assumptions made by the Company in light of its experience and perception of historical trends, current conditions and expected future developments and other factors that the Company believes are appropriate in the circumstances, such as expected sales, industry production estimates, current foreign exchange rates (FX), timing of product launches, operational improvements 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. Forward-looking statements are subject to risks, uncertainties and assumptions that may cause actual results, performance or achievements to differ materially from those expected or implied by the forward-looking statements. Factors that may cause such differences include, but are not limited to, North American and global economic and political conditions; the highly cyclical nature of the automotive industry, the industry’s dependence on consumer spending and general economic conditions; Martinrea’s dependence on a limited number of significant customers and reliance on critical suppliers for components; competition; the factors discussed under the headings “Industry Highlights” and “Trends and Risks and Uncertainties” in Martinrea’s most recent Management Discussion and Analysis and Annual Information Form filed with applicable securities commissions, as well as other risk factors identified therein, available at www.sedar.com, and the documents incorporated by reference therein. These factors should be considered carefully, and readers should not place undue reliance on forward-looking statements. If any of such risks actually occur, they could materially adversely affect our business, financial condition or results of operations. In that case, the trading price of our common shares could decline, perhaps materially. We provide forward-looking statements solely for the purpose of providing information about management's current expectations and plans relating to the future. You are cautioned that such information may not be appropriate for other purposes. Except as required by law, we do not undertake or accept any obligation or undertaking to release publicly any updates or revisions to forward-looking statements to reflect any change in our expectations or any change in events, conditions, assumptions or circumstances on which any such statement is based.

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MARTINREA INTERNATIONAL INC · is king! plant. business unit. company. ... pride is the enemy. pride kills continuous improvement ... severity score. improved by 30%.

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