Martinrea International Inc.

Good evening, ladies and gentlemen. Welcome to the Martin Rhea International Second Quarter 2024 Results Conference Call. Instructions for submitting questions will be provided to you later in the call. I would now like to turn the call over to Mr. Rob Wildeboer. Please go ahead, sir.

Good evening, everyone. Thank you for joining us today. We always look forward to talking with our shareholders. We hope to inform you well and answer questions. We also note that we have many other stakeholders, including many employees, on the call, and our remarks are addressed to them as well as we disseminate our results and commentary through our network. With me tonight are Pat DiRamo, Martin Ray's CEO, our President, Fred DiTosto, and our new Chief Financial Officer, Peter Cerullis. As you know, Peter is new to the call. Going forward, we will generally all be on the call to address questions you may have, but we'll balance out the presentations Sometimes all will say a few words, sometimes not all. We'll provide a variety for you. Today, we will be discussing Martin Reyes' results for the quarter end of June 30, 2024, a solid quarter, as you see from our press release. I refer you to our usual disclaimer in our press release and filed documents. First, Pat will make some comments, then Fred, then Peter, then me, then we'll do Q&A. And now, here's Pat.

Thanks, Rob. Good evening, everyone. As noted in our press release, we generate an adjusted net earnings per share of 58 cents and an adjusted EBITDA of $166 million in the second quarter, a new record for the company. Adjusted operating income margin came in at 6.3%, 30 basis points better than our first quarter on similar production sales quarter over quarter, a nice improvement. Operationally, we're performing well. We continue to effectively manage the larger headwinds. Supply constraints, inflationary cost pressures, and tight labor markets are generally improving. The slower than expected ramp up in electric vehicle programs has resulted in underutilized capacity across the automotive industry. We are able to mitigate some of the volume reductions with many of our customer contracts, some of which include volume adjustments, capital paid up front or recovery early in the contract term, along with other measures. We continue to progress related to our commercial negotiations with customers. In addition to obtaining compensation for EV volume shortfalls, we may seek compensation for some ongoing inflationary items. We expect this activity to continue for the foreseeable future, as EV volumes are likely to remain at lower levels for at least the next couple of years. North America, our results are consistent quarter over quarter on steady production sales. In general, we're performing well in North America, both operationally and financially. Our U.S. plants have led a lot of the post-pandemic improvement. In Europe, we have made progress improving our operations, and our restructuring efforts are bearing fruit. Overall, we're happy with the performance in Europe, considering the volumes in this segment, mainly EVs, remaining well below planned levels. Turning to our rest of the world segment, results were better quarter over quarter as we are now ramping up on a new program with BMW in China. In addition, we have had some favorable commercial settlements. This segment is smaller relative to the other operations, which we view as a benefit in the current environment. Overall, our performance was steady both quarter over quarter and year over year. We have capacitized for a higher level of business, so it will take time to get margins back to pre-pandemic levels. Having said that, operations are solid. We are launching better with every program, and our margins are up, as you've seen in Q2. Moving on, I'm pleased to announce that we've been awarded new business worth $125 million in annualized sales at mature volumes, which include $75 million in our lightweight structures commercial group, consisting of various structural components with multiple customers, including Volvo, Honda, Mercedes, General Motors, along with some others, and $50 million in our propulsion systems group with Ford. Overall, we're pleased with our second quarter performance. While EV softness and higher interest rates are resulting in a relatively flat year-over-year industry production volume profile, we expect 2024 will be a good year with steady production sales and strong positive free cash flow. Looking out longer term, we are well positioned within our industry First, while we are not immune to the EV slowdown and that it affects the short term, the fact that we are mostly propulsion agnostic enables us to adapt to any mix of vehicles over the long term. Our products apply to all vehicle types and architectures. This is relevant, particularly in the context of the current political environment in the United States. Given the stark contrast in views on EV mandates between the Democrats and Republicans, in an election year. Next, interest rates, although higher than recent historical standards, appear to have peaked. They are already coming down in Canada and seem likely to come down in the United States as well. This means vehicle affordability should improve, which bodes well for the future production volumes and sales. Lastly, our North American-centric orientation and limited footprint in China is a positive. Given the current geopolitical environment, the trend towards reshoring or nearshoring of supply chains, the USMCA, and the fact that the environment in China has become more challenging for foreign OEMs who are losing market share to domestic brands. For all those reasons, we believe we are well positioned in this environment. With that, I would like to thank the entire Martin Rea team for their hard work and dedication in these continued challenging times. Here's Fred.