• Adjusted EBITDA: $154.1 million in Q3 2024.

• Operating Income: $65.9 million in Q3 2024.

• Adjusted EBITDA Margin: 12.5% in Q3 2024.

• Operating Income Margin: 5.3% in Q3 2024.

• Production Sales: Down about 8% quarter over quarter.

• Tooling Sales: Increased by more than 80% quarter over quarter.

• Free Cash Flow: $57 million before IFRS 16 lease payments in Q3 2024.

• Net Earnings Per Share: 19 for Q3 2024.

• Net Debt: Decreased by approximately $32 million to $820 million.

• Net Debt to Adjusted EBITDA Ratio: 1.46 at the end of Q3 2024.

• New Business Awards: $35 million in annualized sales at mature volumes.

• 2024 Free Cash Flow Outlook: Expected at the high end of $101-150 million excluding lease payments.

• Capital Expenditures: $81 million in Q3 2024.

• Share Buybacks: Approximately 826,000 shares repurchased for $9.5 million.

• Warning! GuruFocus has detected 3 Warning Signs with MRETF.

Release Date: November 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Martinrea International Inc (MRETF) reported a strong free cash flow of $57 million in the third quarter, surpassing the previous quarter's $51.7 million.

• The company achieved an adjusted EBITDA margin of 12.5%, an improvement from the previous year's 11.9%.

• Martinrea International Inc (MRETF) has been awarded new business worth $35 million in annualized sales, indicating growth potential.

• The company is investing in innovative machine learning technology to enhance efficiency, safety, and quality, which is expected to provide a competitive advantage.

• Martinrea International Inc (MRETF) has successfully reduced its net debt by $32 million in the quarter, maintaining a strong balance sheet with a net debt to adjusted EBITDA ratio of 1.46.

Negative Points

• Production sales were down about 8% quarter over quarter, impacting operating income.

• The company anticipates lower production sales in Q4 due to OEM inventory adjustments, which is atypical from a seasonality perspective.

• Martinrea International Inc (MRETF) faced challenges with OEM production volume shortfalls, impacting their ability to flex costs effectively.

• The company reported an unusually high effective tax rate of approximately 70% for the third quarter due to foreign exchange fluctuations, impacting net earnings.

• The EV volume weakness is expected to persist, leading to underutilization of plants with EV business.

Q & A Highlights

Q: How should we think about margin improvement as we head into 2025? A: Robert Wildeboer, Executive Chairman of the Board, stated that margins in the first half of 2025 are expected to be similar to those experienced in the first part of 2024. The expectation is that margins will begin to normalize as volume comes back, with next year being better than the second half of this year.