Martinrea International Beats Second Quarter Earnings Estimates

Martinrea International Inc. (MRE: CN)’s second quarter outlook remained well ahead of our estimates and consensus: the firm is guiding for EPS of $0.37 to $0.41 (on production sales of $920 million to $960 million) versus our forecast of $0.34 (on $905 million) and consensus of $0.35. First quarter saw an EPS beat: $0.36 versus our estimate/consensus at $0.33 and outlook of $0.31 to $0.35, but was mainly fuelled by an FX increase as EBIT was in-line with our estimate.

Pat D’Eramo, Martinrea’s President and Chief Executive Officer stated: “Our team has performed well this quarter, with record sales and profits. Our operations are improving as we focus on making improvements on the floor, in our processes and in all areas of our business. We continue to focus on serving our customers better every day, with quality product and performance. As a result of this, in addition to the awards announced previously, we have won $35 million in incremental new annualized business representing an aluminum diesel engine block for Volvo starting in 2018.”

Fred Di Tosto, Martinrea’s Chief Financial Officer, stated: “Sales in our second quarter, excluding tooling sales, were $946 million, in line with the previously announced sales guidance. In the second quarter, our net earnings per share, on a basic and diluted basis, was $0.39, within our quarterly guidance. Second quarter operating income and EBITDA margins improved year over year and quarter over quarter, despite continuing pre-operating costs at new plants currently preparing for upcoming launches. Strengthening of our operating income margins in North America continued in the second quarter, as our U.S. Metallic operations showed year-over-year improvement. Our operating income margins in Europe were weaker year-over-year, as anticipated, given the pre-operating and launch costs in Spain and Slovakia, as these plants ramp up, and anticipated reduction in volumes of some programs in Germany. Our adjusted EBITDA for the quarter was $83.8 million, or 8.5% of total sales, representing a 14.4% year-over-year increase, and a quarterly record for us.”

Rob Wildeboer, Martinrea’s Executive Chairman, stated: “Our company continues to strengthen, operationally and financially, and 2015 is shaping up to be a very good year for us. The third quarter of the year tends to be lower in revenues and earnings than previous quarters because of the seasonality of the business with customer shutdowns in North America and Europe, but we expect to have a record third quarter, with sales for the quarter, excluding tooling sales, in the range of $865 to $905 million, and net earnings per share in the range of $0.27 to $0.31 per share. Our people are striving to build a better Martinrea, and we want to acknowledge their commitment and drive.”

The Company’s consolidated sales for the second quarter of 2015 increased by $53.1 million or 5.7 % to $984.0 million as compared to $930.9 million for the second quarter of 2014. The total overall increase in sales was driven by increases in the Company’s North America and Rest of the World operating segments, partially offset by a year-over-year decrease in sales in Europe.

Sales for the second quarter of 2015 in the Company’s North America operating segment increased by $53.4 million or 7.2% to $798.7 million from $745.3 million for the second quarter of 2014. The increase was due to the launch of new programs during or subsequent to the second quarter of 2014, including the new Chrysler 200 and Ford Edge, and the impact of foreign exchange on the translation of U.S. denominated production sales, which had a positive impact on overall sales for the second quarter of 2015 of approximately $73.1 million as compared to the second quarter of 2014. These positive factors were partially offset by a $19.1 million decrease in tooling sales, which are typically dependent on the timing of tooling construction and final acceptance by the customer, and lower year-over-year OEM production volumes on certain light-vehicle platforms including the Chrysler Minivan platform, which was down for thirteen weeks during the first half of 2015 for re-tooling and other light-vehicle platforms late in their product life cycle such as the current GM Equinox and Cruze.

Sales for the second quarter of 2015 in the Company’s Europe operating segment decreased by $7.1 million or 4.1% to $166.0 million from $173.0 million for the second quarter of 2014. The decrease can be attributed to a $5.2 million decrease in tooling sales, the impact of foreign exchange on the translation of Euro denominated production sales, which had a negative impact on overall sales for the second quarter of 2015 of approximately $19.2 million as compared to the second quarter of 2014, and lower overall production volumes in the Company’s Martinrea Honsel German operations; partially offset by new incremental aluminum business with Jaguar Land Rover and increased production sales in the Company’s operating facility in Slovakia, which continues to ramp up and launch its backlog of business.

Sales for the second quarter of 2015 in the Company’s Rest of the World operating segment increased by $6.8 million or 54.1% to $19.4 million from $12.6 million in the second quarter of 2014. The increase was mainly due to a year-over-year increase in production sales in the Company’s new fluids systems plant in China, which began operations in 2013 and continues to ramp up its backlog of business, and a $0.6 million increase in tooling sales; partially offset by the impact of foreign exchange on the translation of foreign denominated production sales, which had a negative impact on overall sales for the second quarter of 2015 of approximately $0.6 million as compared to the second quarter of 2014. OEM production volumes in Brazil continue to trend at low levels, although production sales for the second quarter of 2015 in the Company’s operating facility in Brazil did increase slightly year-over-year generally due to sales mix.

About

Donna Hendrix, MS in Financial Analysis, is investment analyst and focuses Services, Technology and Healthcare sectors. Prior joining Equities Mogul, Donna Hendrix worked with Goldman Sachs Research. If you have a great story idea for Donna Hendrix, you can write at [donna.hendrix@equitiesmogul.com ].

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