Linamar Corporation

Good afternoon, ladies and gentlemen, and welcome to the Linnemore Corporation second quarter 2026 earnings call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, August 12 of 2026. I would now like to turn the conference over to Linda Hasenfratz, Executive Chair of Linnemore. Please go ahead.

Thanks so much. Good afternoon, everyone, and welcome to our second quarter conference call. Before I begin, I will draw your attention to the disclaimer that we are currently broadcasting. Joining me this afternoon, as usual, are Jim Jarrell, our CEO and president, and Gail Schneider, our CFO, both of whom will be addressing the call formally. Also available for questions are Mark Stoddart, Chris Merchant, and other members of our corporate IR, marketing, finance, and legal team. Okay, I'll start off with some highlights, as usual. So, a good place to start, always, is a quick reminder of the key value drivers that make Linda Marks such a great investment. and how they played out this past quarter. First one of our has a long track record and consistent sustainable results driving out of our diverse business. NQQ was another great example of that with exceptional earnings growth in our mobility business more than offsetting soft markets in our ag business and other dynamics such as tariffs more broadly in our industrial businesses. Being invested in both at Businesses helps trim base swings up and down in individual markets and leaves us with a more consistent, sustainable level of performance. Notably, again, this quarter, record sales and close to 10% earnings growth. The second key point is our flexibility to mitigate risk. Our equipment is programmable, flexible equipment. It can be used on a large variety of types of products across different vehicle platforms. and types of propulsion. It can also be assigned to our industrial divisions as well as our mobility divisions. This flexibility is allowing us to reallocate equipment from programs running under capacity to new launches or new areas in the business, which is really critical in this timeframe of changing volumes. Third, we've always run a prudent conservative balance sheet. We target keeping net debt to EBITDA under 1.5 times. Q2 saw net debt to EBITDA at 0.52, despite significant investment in CapEx for new programs. Our peers are much more heavily indebted with net debt to EBITDA more than 2.7 times. That makes Linda Mark much more flexible to change growth prospects in this opportunistic time, which we absolutely are doing. Lastly, Returning cash to shareholders is the key value creation driver at Linnemar as well, and you saw that play out this quarter with a 10% increase to our dividends, continuing our pattern of regular dividend increases, reflective of our strong performance in terms of cash management. I also note the continued repurchase of shares in the market, which we have been steadily doing since November of 2024. Okay, turning to financial highlights for the quarter and highlights more broadly, it's been another excellent record-breaking quarter, illustrative of a strong strategy that's delivering results for today and tomorrow. We saw record sales in the quarter and strong earnings growth for our overall business. Our mobility business in particular had an exceptionally strong quarter, delivering record sales and record earnings. In fact, nearly 30% earnings growth. We also saw market share growth in every region, as well as solid new business wins, notably in Canada and the U.S. specifically. We are firing on all cylinders in the mobility segment. And this despite global automotive markets being down again in terms of production volumes compared to prior year this quarter. and finally, we are managing that tariff minefield very well indeed with, again, more than 90% of our sales this year not impacted by tariffs. I will review the tariff situation in a little more detail in a minute. Turning to the numbers, we saw record sales at $3.1 billion, up 18.8% over last year. Sales were up 14% in our industrial business with access markets growing offset by continued softness on the ASI. Sales were up 21% in the mobility segment thanks to recent acquisitions, but also launching business and several programs that are running at stronger volumes than the market at full, offsetting those soft markets globally on the light vehicle side. Normalized net earnings were $183 million, or 5.8% of sales, up 8.7%. Over last year, a normalized EPS was 308, up 9.6% over last year on the back of a very strong mobility segment performance. And finally, free cash flow was again excellent at nearly $240 million. Strong cash flow drove from those strong earnings and continued focus on reallocating capital to control our CapEx spending. I would summarize our results this quarter as being most impacted by recent acquisitions adding to top and bottom line, launches and strong production sales and mobility and growth in Fagac sales, great continued efficiency and productivity improvements, all of which was offset by negative impact of tariffs in the industrial group and the negative impact of FX The majority related to a weaker U.S. dollar in comparison to both the Canadian dollar and the peso, as well as those weak agricultural markets. Okay, let's have a look at an update on the tariff side. So I've mentioned a moment ago, more than 90% of our sales this year are not impacted by any tariffs, and I think that is the most important takeaway for you on tariffs. The new 232 tariff scheme that came into effect April 1st on metal product derivatives are definitely creating a bigger impact to certain products in our industrial business than the previous scheme. 25% tariffs on full equipment value versus 50% on only the non-U.S. metal is, of course, quite different. But the good news is the tariffs are only impacting select products in the industrial segment and not impacting the auto side of the business at all. The impact on the sales that are subject to these tariffs is, of course, detracting from our earnings growth this year, as you saw illustrated in the industrial segment results this quarter, but is diluted in our overall results by our strong mobility earnings. I will highlight that tariff impact expected for the next two quarters will certainly be less acute than we saw in Q2. is our strongest quarter seasonally for all of our industrial businesses, meaning it will experience the biggest tariff impact for the year. We continue to fully expect to grow earnings to new record levels this year, as Dale will shortly outline for you in our outlook. Meanwhile, we're working on various mitigation strategies to minimize the impact of the tariff, as Jim will outline for you. I will also note that the new Section 338, Tourist Paris, scheduled to take effect mid-August, do not impact our market or our products. I think this is another great example of the benefit of a diverse business. When all your aids are in one basket, you are more vulnerable to specific dynamics in that industry. When you have multiple revenue streams, those same dynamics are not impacting all areas of your business. They also, of course, have a little bit different economic cycles. All of that helps to ensure a more consistent, sustainable level of growth, as you have seen us deliver quarter after quarter and year after year here at Livermore. Okay, I'll take a moment to also reflect on the impact of the decision by the U.S. on July 1st to not support an amendment to the USMCA agreement that would have both extended the agreement to 2042 from its current expiry date of 2036 and eliminated the need for annual reviews during that period. In short, there's little to no impact to the trade agreement or any of the three countries of the U.S., Mexico, or Canada from this decision from the U.S. I think there's been widespread misunderstanding of what is happening with USMCA, which I hope this chart helps clear out for you. Some folks think USMTA was not renewed by the US. That is not correct. First, the agreement wasn't up for a renewal. There was a proposed amendment on the table which wasn't adopted. Second, the decision by the US to not amend the agreement did not impact the current agreement in any way. USMTA is still fully in force and will continue until at least 2036. USMTA is currently expected to continue as noted for at least another 10 years until 2036 and in my opinion will continue well beyond that simply because the agreement has created enormous efficiency and prosperity for all three countries and what is a largely well-balanced trade portfolio in particular between Canada and the U.S. The U.S. has not notified of its intent to pull out of or terminate USMCA in any way and in my opinion will not do so. The agreement is too important to too many businesses in the U.S. and the vast majority of states cannot continue. Further, regardless of the fact that the amendment wasn't supported, the agreement could obviously be amended for further extension or anything else, including forgetting the annual review at any time with the agreement of all three parties. And I, in fact, believe that will happen as well. On the positive side, we are continuing to see customers looking at on-shoring into North America parts and systems that they are currently buying from Asia or the U.S. We are building up a significant list of new business opportunities and business wins for our North American plants in all of Canada, the U.S., and Mexico. New business wins and holding activity is quite strong in all regions. We're seeing continued very strong new business wins for our Canadian plants, continuing the momentum after a very strong year in 2025. So far this year, we have won quite a significant amount of business for our Canadian plants. In fact, we have already won 90% of the value of the full year of new business wins last year for the Canadian plants, and we're only halfway through the year. and 2025, I will remind you, is about the highest level of business wins in Canada that we've seen in the last three years. Our strong, highly capable Canadian plants are punching way above their weight in terms of wins compared to their slice of our global footprint, which is great to see. We're also seeing great opportunities for our U.S. plants, particularly our newest acquisition, Aludine, but also for our other existing American facilities. are already at the total value of new business wins in all of 2025. Again, it's only halfway through the year. I think it's key to note as well that our portfolio expansion notably into additional structural components is dramatically increasing our SQ activity. This strategy has played out very positively for us. The current situation is also adding to stress in an already stressful We had so far completed three distressed acquisitions over the last three years. Finally, I would like to again emphasize that our strong results of positive outlook is very much a result of what I think is an excellent and unique business culture at Lindemark. Our culture has been fine-tuned over the last 60 years to be opportunistic, entrepreneurial, and find something positive and actionable to grow our business, regardless of the circumstances. We are naturally responsive, nimble, and move fast. We're innovative and creative in deal-making and mitigating challenging situations, and we get things done. Those are the critical elements, not just to survive, but to thrive in business. Thank you, Linda, and great to be with everyone listening here tonight. As we reflect on the first half of 26, one word stands out to us, which is grit.

We delivered record quarterly sales of more than $3 billion and record operating earnings in mobility. Importantly, these results were not driven by a single market customer or short-term tailwind. They were the product of disciplined execution across a diversified global platform. What makes these results particularly meaningful is the environment in which we were achieving them. We continue to navigate uneven demand, trade uncertainty, and cost pressures. Yet like a well-built ship moving confidently through rough seas, Linamar continues to advance because of our strength, of our operating models, the resilience of our teammates, and the diversity of our business. Across the organization, we are seeing the benefits of scale, operational excellence, commercial discipline, and strategic acquisitions translating into strong earnings and cash flow. At the same time, we continue to win new businesses, Reinforcing the value of our technology, our manufacturing footprint and long-standing customer relationships. We are also maintaining a balanced approach to capital allocation, returning cash to shareholders, investing for future growth and preserving a strong balance sheet that provides flexibility in uncertain times. Ultimately, these records are not the goal, they are the outcome. They are the evidence that our great strategy is working Growth in revenue, income, and our team continues to build a foundation for sustainable long-term value creation. Records are milestones. They're not our destination. They simply confirm that our grit is moving Linamar in the right direction. Okay, as we're all aware, Linda mentioned, tariffs are causing a lot of uncertainty in global trade markets, impacting business decisions, performance, and the overall economy. It takes grit to deal with these tariffs and geopolitical issues, and we continue to proactively mitigate tariff impact through practical, no-regret actions that improve our competitiveness, regardless of how the tariff environment evolves. We look at everything and anything to improve the situation, including regulatory and class reviews, distribution and structural optimization, target operational actions using our footprints, Supply Chain Rebalancing, Cost Actions, including Supplier Pricing, Rebates, Resources Adjustments, and Really Disciplined Commercial Actions. Importantly, these initiatives do not require significant capital investment, any facility closures, major restructuring, or disruptive operational changes. We believe these targeted actions will help minimize tariff exposure while supporting continued growth, profitability, and cash flow generation. Several of the measures are already in place while others are actively underway. And we continue to weigh other additional measures as we continue to manage this environment to protect long-term values. This is not a static situation. Things are consistently changing and will improve as clarity improves. Okay, let's turn to Sky Jack, what was another great outstanding quarter for us despite ongoing tariff and market uncertainty. Skyjack delivered exceptional growth with volumes up 46% in the quarter and 53% year-to-date. Growth was broad-based across all major regions and product categories, demonstrating the strength of our brand, our execution, and our customer relationships. Thank you very much. Thank you very much. Thank you very much. We were also proud to see the Lanyard Go receive the best new product award at the Hire26 event in Australia, recognizing Skyjack's continued leadership in innovation, productivity, and safety. The combination of strong execution, market recovery, and product leadership positions Skyjack exceptionally well for continued growth. Skyjack isn't just participating in recovery, it's helping to lead it. Turning to agriculture, market conditions remain challenging, with industry demand expected to be down approximately 15% in North America, with Europe and the rest of the world flat to marginally down for the year. Despite that backdrop, all three of our brands continue to gain market share on key product lines. MacDon increased global windrower share, Salford continued to grow its tillage position, and Borgo gained share in the U.S. air feeder market. In a down cycle, that's the ultimate proof point. It speaks to the strength of our products, our customer relationships, and the execution of our teammates. In North America, commodity prices remain largely unchanged, though we have started to see modest trends in the right direction. Overall, U.S. farmer sentiment remains less optimistic due to higher input costs. However, sentiment should become more clear when the USDA predicted 26 yields following the summer crossover The U.S. net farm income is expected to be $159 billion, up over $154 billion in 2025, largely on the $14 billion increase in direct government payments. However, fertilizer and diesel fuel prices are squeezing farmer profitability. As stated in Europe and the rest of the world, the market outlooks remain largely unchanged. In Europe, the market is seen as being resilient in the face of geopolitical and commodity crises. Headwinds ultimately resulting in a flat 26. In the rest of the world, it's mixed. In example, South America, Brazil, corn, and soy yields are favorable and have some of the largest crop yields on record. In Australia, crop yields expected to be down versus last year, however, still yielding crop results above the long-term average. As well, we continue to monitor global trade tensions, government-rich payments, and channel inventories to react to all the key market signals that we need to see. just as exciting as what we're doing behind the scenes. Across our agriculture business, we're accelerating automation and leveraging expertise developed in our mobility operations to transform manufacturing productivity. During the year, MacDon installed advanced mobile vending robots and continued to add automation to its facility to improve efficiency, throughput, quality, and cost competitiveness. By the year end, MacDon will operate approximately 340 Robots for 10,000 employees, well above Canada's average of 240, and more than double the global average of 132. At Linamar overall, we are proud to say we run at a rate of 1,200 for 10,000, which I believe is a benchmark. This is another example of the Linamar advantage, transferring technology, automation, and best practices across our businesses to strengthen competitiveness and drive long-term value. In agriculture, we're doing what great companies do during downturn, gaining share, improving productivity, and preparing for the recovery to win. Finally, looking at the automotive industry, we're seeing some temperate expectations quarter over quarter for 26 and into 27. In North America, 26 expectations are that light vehicles will be down 1.3 as production is expected to soften as affordability challenges, elevated vehicle prices, and growing inventory levels weigh on demand. Although sales have proven much more resilient than expected, the ongoing volatility in trade environments, coupled with higher energy costs, are continuing to create a cautious outlook in the near term. For 27, light vehicles are expected to be flat to slightly down versus prior expectation of being up 2.3% as production is forecast to normalize and OEMs are aligning production with demand. In Europe, expectations are that the light vehicle production will be down 0.9% versus the prior expectation of being down 1.8%. Production is forecasted to decline due to higher manufacturing and energy costs continued competitive pressure from Chinese imports and weaker export opportunities are weighing on regional output. Growth in EV demand is providing some support, but profitability and capacity utilization remain under pressure. For 27, light vehicle is expected to be largely flat versus prior expectations of being slightly up as more gradual recover is expected. Support by improving vehicle demand, electrification adoption, Although cost pressure and competition will remain. In Asia, light vehicle production is expected to decline 2.1% versus prior expectations of being down 1.2%, mainly driven by weaker domestic demand in China, offsetting strong growth in India and parts of Asia. Headquarters strength, government incentives, and continued electrification provide some support. However, geopolitical risks and higher input costs are the main headwinds. For 2027, production is expected to be flat to slightly up 0.4% versus the prior expectation of up 2.8%, supported by demand in India and continued electrification. Globally, this position's light vehicle production expectations for 2026 have been down 2.1% versus the previous 1.8%, and for 2027, slightly flat growth of 0.7% versus the previous 1.5% increase. Turning to our CTV performance for the quarter, our key strategic acquisitions of Aludai North America, Leipzig, and beginning in Q2 with the winning groups in Renscheid and Penfer facilities are driving strong gains in existing and new customers. North America's CTV was up 25% to $363. Europe was up 10.2 to $107 basically, and Asia-Pacific stock growth for the increase of 12.6% year-over-year to $12.65. Globally, our CCB grew an astounding 20% year-over-year to $97.72. Looking at new business wins for the quarter across both mobility and industrial, Linnemar saw a new business win value of close to $800 million. Through our strategic acquisitions and takeover work, we saw significant program wins For components such as knuckles and a significant cylinder head program wind, our propulsion agnostic new business winds on knuckles emphasizes our sustained momentum in Linnemar's structural and chassis expansion, allowing Linnemar to expand its propulsion agnostic portfolio across all powertrain types. As I mentioned last quarter, Linnemar services eight different mega markets, in our 2100 plan, which are being displayed there. These mega markets have a combined potential between $15 and $20 trillion in the next decade. Looking at two of our new segments that I've spoken about in the past few quarters, there are a few exciting developments that I'd like to discuss. Earth Defense, we've made a continue to make excellence rise on displaying to the key primes and governments that Linamar's capabilities are directly applicable to this phase. Our scalability, automation, and expertise and core capabilities are being received extraordinarily well, as has recently translated into an MOU with a large international prime who we're very excited to continue working with. Looking at robotics, the team continues to also make amazing strides. We've signed an LOI to be a manufacturer in North America for Cobots. and have recently signed a third LOI for manufacturing for humanoid robots. The takeaway is pretty clear and simple. LITMAR is not defined by one industry. Automotive is proof of our capabilities, not the limit of them. We are a global advanced manufacturing and product development technology partner. So before I hand it over to Dale, I'd like to spend just a moment looking ahead. While much of our conversation today is focused on navigating from terrorist market uncertainty and other challenges, what excites us here most is the opportunity in front of us. Littemar enters 27 with significant momentum across our business We're built for growth. We have a strong launch pipeline, growing exposure to attractive end markets, increasing operational efficiency, and a track record of winning in challenging environments. These are not future opportunities we're hoping to capture. They are opportunities we are actively launching, investing in, and executing today. As a result, we expect continued top-line growth, another year of strong earnings improvement, and further margin expansions. Our focus remains unchanged. Profitable growth, operational excellence, creating increasing value for our shareholders. We're also investing for the future. Capital spending will support major program launches, capacity expansion, automation, and strategic growth initiatives. At the same time, we remain committed to maintaining a strong balance sheet, generating robust Free Cash Flow and Preserving the Flexibility to Pursue both Organic and Inorganic Opportunities as They Arrive. When I look at Lidamar today, I see a company that is stronger, more diversified and better positioned than any time in our history. Our markets are evolving, technology is accelerating and our customers continue to look for innovative, capable partners. We believe Linamar is uniquely positioned to capitalize on those trends. The future isn't something we're waiting for, it's something we're building, and certainly the best is yet to come. With that, I'll turn it over to Dale to walk through a financial overview of the quarter.