Martinrea International Inc Q3 2024 Earnings Call Transcript

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

Question: David Ocampo - Cormark Securities - Analyst : Thanks. Good evening, gentlemen. I appreciate the commentary on the margin front as it relates to Q4. And it does seem like you guys have made some pretty good progress in your commercial negotiations throughout the year. Just curious, now that you have some of that behind you, how we should be thinking about the margin improvements, as we head into 2025?

Question: David Ocampo - Cormark Securities - Analyst : Got it. And then Pat, I mean, you guys have always secured new business every quarter. And when you look back at the stuff that you've won this year, have you been able to put any safeguards against minimum volumes or inflationary pressures, just given all the negotiations that you have done have to deal with your customers over the last year or two?

Question: David Ocampo - Cormark Securities - Analyst : Yes. Have you been able to put any safeguards against minimum volumes or inflationary items? Just on the new contracts that you guys have been signing.

Question: David Ocampo - Cormark Securities - Analyst : I appreciate the details there, though. Look, you guys have gone through a period of investment. A lot of that has gone into supporting new business on electric vehicles. I read Neil's letter, ROIC is still running in the 11% range that's up from pandemic levels, but still well below the 15% you guys achieved in pre-COVID. If you guys just look exclusively at your ICE business lines, are you guys back at that 15% so all the weakness that we're seeing in that ROIC print is from EV? Peter Cirulis - Martinrea International Inc - Chief Financial Officer & Lead for Lightweight Structures Commercial Group Well, I would say that, we've been consistent. The real issue here is the EV production not meeting what customers anticipated or governments anticipated. And when that happens, you're not earning, what you normally would if you're running at full capacity. Our ICE programs are -- much are running at a higher level of capacity. So I'd say at least directionally, the answer would be yes. Our ROIC on --

Question: David Ocampo - Cormark Securities - Analyst : Okay. That's perfect. I appreciate the commentary and answers to all my questions a lot back. Thank you.

Question: Michael Glen - Raymond James - Analyst : Hi. Good evening. Rob, I guess I just am curious. When I listen to you speak about North America versus Europe, it seems like the setup for North America over the next few years is much more favorable than how we should think about Europe. And the headline you see out of Europe seem to be more negative than what you read out of North America with regard to EV mandates and things like tariffs. So I'm just curious, like, why allocate more M&A capital to Europe versus North America right now?

Question: Michael Glen - Raymond James - Analyst : Just coming off the conference call from one of your peers, their commentary indicated that there is a tremendous amount of rebid or work opportunities coming available from some distressed suppliers out there. Are you seeing -- is that consistent with what you're seeing in the market right now?

Question: Michael Glen - Raymond James - Analyst : Rob, maybe just or anybody just to push a little bit more on the trade aspect of it. Can you just speak to Mexico in particular? I think Doug Ford was out this morning talking about maybe just setting up a Canada US free trade agreement, if Mexico doesn't move ahead with some of the consistent policy. Can you speak to how important Mexico is right now into the supply base, and if that would indeed be disruptive if some action was taken on Mexico?

Question: Brian Morrison - TD Securities - Analyst : Yes. Sorry. I'm doing the call late, but can you just explain this tax rate and how it works with the depreciation of the Mexican peso and what you think your effective tax rate is going forward? I look back several years and it's kind of a low to mid-twenty tax rate and you're pointing towards an effective tax rate of $0.31 here, but pardon me, 31%. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2024 / 10:30PM, MRE.TO - Q3 2024 Martinrea International Inc Earnings Call

Question: Brian Morrison - TD Securities - Analyst : Yes. I understand that. Thank you. I guess and I don't really want to talk about taxes. Can you just maybe elaborate on this? And I don't know if you did during the script, but certainly it was squeezed in, at the end. What is this acquisition that you've done in terms of content? And in terms of the magnitude of the acquisition, how big is it?

Question: Brian Morrison - TD Securities - Analyst : And then my last question. I think if I understood correctly, you said in the first half of 2025, you expect your margins to be similar to the first half of '24. Is that correct?

Question: Brian Morrison - TD Securities - Analyst : When we're looking at 2025, we should be thinking sort of similar rate or low end of what you had through this year? Peter Cirulis - Martinrea International Inc - Chief Financial Officer & Lead for Lightweight Structures Commercial Group

Question: Brian Morrison - TD Securities - Analyst : And is that simply a function of volumes, or is it you also have a lot of efficiencies and maybe commercial recoveries? Like is it -- what are the drivers of that?

Question: Brian Morrison - TD Securities - Analyst : Yes, understood. Thanks very much, gentlemen.