Release Date: May 07, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Linamar Corp (LIMAF, Financial) achieved normalized earnings growth despite down markets in both segments.
- The company maintained a strong balance sheet with net debt to EBITDA at 1.04 times, allowing for market opportunities.
- Linamar Corp (LIMAF) continued to return cash to shareholders through share repurchases and increased dividends.
- Operational improvements and cost reductions led to a target operating earnings margin of 10%.
- The company saw positive free cash flow in Q1, which is unusual for the first quarter, strengthening its financial position.
Negative Points
- Sales decreased by 7% to $2.5 billion, with significant declines in the industrial and mobility segments.
- The industrial segment saw a 15% sales decline, largely due to lower Skyjack sales in a down market.
- Mobility segment sales were down 5%, impacted by reduced production volumes and lower EV program volumes.
- The agricultural market is in a multi-year down cycle, with significant declines in North American volumes.
- Tariffs and economic headwinds are impacting demand in the access equipment market, leading to challenges in AWP volumes.
Q & A Highlights
Q: Are customers starting to respond to the recent US tariff clarifications, and what actions might they take if tariffs remain?
A: Linda Hassanutz, Executive Chair, explained that the US is respecting the USMCA agreement, allowing tariff-free trade for compliant products. Customers are considering onshoring parts currently bought offshore, which presents opportunities for Linamar's facilities in North America. Jim Jarro, CEO, added that customers are not asking Linamar to relocate components but are interested in opportunities due to tariffs on European and Asian imports.
Q: What is the direct impact of the current tariff regime on Linamar, and can you recover costs from customers?
A: Linda Hassanutz confirmed that the impact is minimal and not material. Metal tariffs on the mobility side are managed through normal market mechanisms, and most steel and aluminum are sourced from the US. Jim Jarro mentioned that Linamar is working with customers and suppliers to mitigate any impacts, including potential changes in sourcing locations.
Q: Will Linamar continue its share buyback program given the current uncertainties?
A: Linda Hassanutz stated that Linamar has been active in its buyback program, viewing it as a good use of capital given depressed share prices. However, the company will balance buybacks with growth opportunities, especially as they see many growth prospects in the market.
Q: How are tariffs factored into Linamar's guidance, and what are the expected light vehicle production volumes for North America?
A: Linda Hassanutz noted that minimal direct impact from tariffs is factored into guidance, but they remain vigilant for changes. Jim Jarro added that they work with customers for cost recovery and use IHS or S&P mobility forecasts, which have adjusted for tariff impacts. The main concern is how tariffs might affect volumes.
Q: What drove the industrial segment's margin improvement despite sales declines?
A: Dale Schneider, CFO, explained that the margin improvement was primarily due to a favorable mix, operational efficiencies, and some FX impact. The mix was a significant driver, with stronger performance in higher-margin agricultural businesses.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
