martinrea international inc · is king! plant. business unit. company. ... pride is the enemy....
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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
MARTINREA INTERNATIONAL INC.
Q4 2017 Company Presentation
©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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
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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
MARTINREA’S GLOBAL PRESENCE
US12 Plants
GERMANY3 Plants
MEXICO10 Plants
CANADA13 Plants
BRAZIL1 Plant
SLOVAKIA1 Plant
SPAIN2 Plants
CHINA2 Plants
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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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)
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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
MARTINREA’S PRODUCTS
STEEL METAL FORMING ALUMINUM COMPONENTS
FLUID MANAGEMENT SYSTEMS
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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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
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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
BOOK OF MARTINREA
2001 – 2014 2015 – 2020
Where We Have Been
Where We Are Now
Where We Are Going
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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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
©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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.
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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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!
©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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
©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
RESPECTING our people
DEVELOPING our people
Learn by DOING
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ATTRIBUTES OF THE MARTINREA 2.0 MANUFACTURING SYSTEM
©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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
©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
SEVERITY SCORE
Improved by 30%
Improved by 65%
PR/R’sTOTAL RECORDABLE INJURY FREQUENCY
Improved by 60%
SAFETY
SAFETY AND QUALITY PERFORMANCE
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SAFETY AND QUALITY PERFORMANCE HAVE IMPROVED
QUALITY
©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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
ADJUSTED OPERATING INCOME MARGIN
2017 - 2020EXPECTED DRIVERS- Operational Excellence/Lean- Innovative Flexible Processing- Evolution of Book of Business
2014A 2017A 2019F 2020F
©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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
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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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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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).
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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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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
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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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)
©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
MARTINREA’S POSITION
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HIGH STRENGTH
STEELS
PROPULSION AND STRUCTURAL COMPONENTS
©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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
©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
GROWING TECHNOLOGY AND INNOVATION
IDEA RESEARCH DEVELOP TESTING ANALYSIS INTRO
NEW MARTINREA TECH CENTER OPENED IN 2017
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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
WHATEVER THE FUTURE HOLDS, MARTINREA WILL BE A LEADER
ELECTRIFIED CONNECTED AUTONOMOUSSHARED
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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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
©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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
ADJUSTED OPERATING INCOME MARGIN
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
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7.0%
©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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
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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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
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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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
©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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)
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©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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
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February 2018 17.1mm SAAR
8 years
Pent-up demand
8 years
©2018 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.
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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