Martinrea International Inc Q2 2022 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Peter Sklar - BMO Capital Markets Equity Research - Analyst : Fred, I just have a question on how you account for these commercial recoveries or exactly what you do negotiate. Are there -- like is it recoveries from previous quarters and an agreement on price increases going forward? Like what -- what exactly are you recovering? And how do you account for it?

Question: Peter Sklar - BMO Capital Markets Equity Research - Analyst : Okay. Okay. Got it. Sounds quite complex. And then my other question is, like your Rest of World profitability was down. It sounds like it was really out of your control because it's due to the COVID lockdowns in and around Shanghai. And so I'm just wondering if that was the larger fact, or you also talked about some mix and like have things improve, like I would think things are improving in Q3 because my understanding is, essentially, Shanghai is out of lockdown and manufacturing is back to normal levels. Can you comment on that?

Question: Peter Sklar - BMO Capital Markets Equity Research - Analyst : Because Pat, when you read the newspaper, you hear kind of these horrible stories, what you just alluded to, is that the plants are up and running because they don't allow the workers to leave. They're literally sleeping on the floor. So I wasn't too sure -- does that mean the plants are running? Or it's like you say, it's a deterrent, so people just don't show up because they know they're going to be locked in?

Question: Peter Sklar - BMO Capital Markets Equity Research - Analyst : Yes. Okay. And then, Pat, just 1 question. I mean, you're at the elevated ramp now in North America and which is suppressing your earnings. So can you call out -- are there any particular programs that are disproportionately weighing on you in terms of ramp costs that you can identify?

Question: Mark Neville - Scotiabank Global Banking and Markets, Research Division - Analyst : Good results. Maybe just on energy drops in Europe. I mean how big of a headwind is that? Or how like -- what percentage of the cost structure is that? I'm just trying to get a sense for the risk.

Question: Mark Neville - Scotiabank Global Banking and Markets, Research Division - Analyst : Right, right. And in terms of the recoveries and the conversations with customers, is there sort of any part of this that would just happen organically? Meaning, I don't know, is there a period of time where something might get reset? Or it's like the conversation is less difficult because for whatever reason? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 08, 2022 / 9:30PM, MRE.TO - Q2 2022 Martinrea International Inc Earnings Call

Question: Mark Neville - Scotiabank Global Banking and Markets, Research Division - Analyst : All right. All right. And I guess, again, just in terms of energy costs in some of these headwinds, I mean, I assume your suppliers are having similar conversations with you guys. So just sort of curious sort of how that would go on your end?

Question: Mark Neville - Scotiabank Global Banking and Markets, Research Division - Analyst : Okay. Maybe in terms of the launch costs, can you just kind of remind us the curve or the cadence of when they sort of peak and sort of how they roll out?

Question: Mark Neville - Scotiabank Global Banking and Markets, Research Division - Analyst : Right. Okay. But the expectation is, does get better. And for 2023, again, hit the $200 million, I assume, there's still some launch costs in there, but it's, I guess, materially better than where you're at now.

Question: Mark Neville - Scotiabank Global Banking and Markets, Research Division - Analyst : Yes. Okay. And I guess, just broad stroke, since we're talking about 2023, would you guys be assuming like a big increase in production volume (inaudible) what the number is, but would there be significant growth in your production volume numbers next year?

Question: Mark Neville - Scotiabank Global Banking and Markets, Research Division - Analyst : I guess while we're having this conversation, I guess what would your view be on how the OEs sort of manage inventory? I mean would the expectation be sort of back at 60, 70-day level? Or something else in between maybe more?