Q2 2023 Magna International Inc Earnings Call

August 4, 2023

Please standby the conference will begin momentarily we thank you for your patience and I say you. Please remain on the line.

Speaker 1: Please stand by. The conference will begin momentarily. We thank you for your patience and ask that you please remain on the line.

[music].

Okay.

Operator: Greetings, and welcome to the Q2 2023 Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, please press star zero. As a reminder, this conference is being recorded, Friday, 4 August 2023. I would now like to turn the conference over to Louis Tonelli, Vice President, Investor Relations. Please go ahead.

Greetings and welcome to the Q2 2023 results conference call.

Speaker 1: Greetings and welcome to the Q2 2023 results conference call.

Speaker 1: During the presentation, our participants will be in a listen only mode. Afterwards, we will conduct a question and answer session.

During the presentation, all participants will be in a listen only mode.

Afterwards, we will conduct a question and answer session.

Speaker 1: At that time, if you have a question, please press the 1 followed by the 4 on your telephone.

At that time, if you have a question. Please press the one followed by the four on your telephone.

Speaker 1: If at any time during the conference you need to reach an operator, please press star zero.

At any time during the conference you need to reach an operator, Please press star zero.

Speaker 1: As a reminder, this conference is being recorded Friday, August 4, 2023.

As a reminder, this conference is being recorded Friday August 4th 2023.

Speaker 1: I would now like to turn the conference over to Louis Tenelli, Vice President, Investor Relations. Please go ahead.

I would now like to turn the conference over to Louis Tonelli, Vice President Investor Relations. Please go ahead.

Louis Tonelli: Thanks, Rita. Hello, everyone, and welcome to our conference call covering our Q2 2023. Joining me today are Swamy Kotagiri and Patrick McCann. Yesterday, our board of directors met and approved our financial results for the Q2 2023, as well as our 2023 outlook, our updated 2023 outlook. We issued a press release this morning outlining our results. You'll find the press release, today's conference call webcast, the slide presentation to go along with the call, and our updated quarterly financial review all in the investor relations section of our website at magna.com. Before we get started, just as a reminder, the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation.

Thanks, Rita Hello, everyone and welcome to our conference call covering our second quarter 2023, joining.

Speaker 2: Thanks Rita, hello everyone and welcome to our conference call covering our second quarter 2023. Joining me today are Swami Kudugiri and Pat McCann.

Joining me today are swamy quota, Gary and patent Mccann.

Speaker 2: Yesterday, I boarded directors met and approved our financial results the second quarter of 23, as well as our 23 outlook, our updated 23 outlook. We issued a press release this morning outlining our results.

Yesterday, our board of directors met and approved our financial results for the second quarter of 'twenty, three as well as our 'twenty three outlook, our updated to 'twenty three outlook, we issued a press release this morning outlining our results.

You'll find the press release today's conference call webcast. The slide presentation to go along with the call and our updated quarterly financial review all in the Investor Relations section of our website at <unk> Dot com.

Speaker 2: You'll find the press release, today's conference call webcast, the slide presentation to go along with the call, and our updated quarterly financial review, all in the investor relations section of our website at nagla.com.

Before we get started just as a reminder, the discussion today may contain forward looking information or forward looking statements within the meaning of applicable securities legislation.

Speaker 2: Before we get started, just as a reminder, the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation.

Louis Tonelli: Such statements involve certain risks, assumptions, and uncertainties which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements. Please refer to today's press release for a complete description of our safe harbor disclaimer. Please also refer to our reminder slide included in the presentation that relates to our commentary today. With that, I'll pass it over to Swamy.

Speaker 2: Such statements involve certain risks, assumptions, and uncertainties, which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements.

Such statements involve certain risks assumptions and uncertainties, which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements. Please refer to today's press release for a complete description of our safe Harbor disclaimer.

Speaker 2: Please refer to today's press release for a complete description of our Safe Harbor Disclaimer.

Please also refer to a reminder, slide included in the presentation deck.

Speaker 2: Please also refer to our reminder slide included in the presentation that relates to our commentary today. And with that I'll pass it over to Swami.

Rates to our commentary today and with that I'll pass it over to swamp.

Swamy Kotagiri: Thank you, Louis. Good morning, everyone. I appreciate you joining our call today, and I'm happy to kick off today's call with an update on our progress. Following a financial update from Pat, I look forward to answering your questions. Before diving into the details, let me walk you through some key highlights. We successfully completed the acquisition of Veoneer Active Safety during Q2, solidifying our position as a global leader in active safety. There is a lot of excitement and energy around Magna as a result of this acquisition. Our organic sales grew by 17% year-over-year, surpassing weighted production by 5% excluding complete vehicles and 3% including complete vehicles. Our Q2 showcased strong Q2 operating performance with high organic sales contributing to robust earnings.

Speaker 3: Thank you, Louis. Good morning, everyone. I appreciate you joining our call today and I'm happy to kick off today's call with an update on our progress. And following your financial update from Pat, I look forward to answering your questions.

Thank you Louis good morning to everyone. I appreciate you joining our call today and I'm happy to kick off today's call with an update on our progress and following your financial update from packed.

To answering your questions.

Before diving into the details let me walk you through some key highlights.

Speaker 3: Before diving into the details, let me walk you through some key highlights.

We successfully completed the acquisition of <unk> active safety during the second quarter solidifying our position as a global leader in active safety.

Speaker 3: We successfully completed the acquisition of V&E active safety during the second quarter, solidifying our position as a global leader in active safety.

There is a lot of excitement and energy.

Speaker 3: There is a lot of excitement and energy around MAGNA as a result of this acquisition.

And on Magna as a result of this acquisition.

Speaker 3: our organic sales grew by 17% year-over-year for passing rate of production by 5% excluding complete vehicles and 3% including complete vehicles.

Our organic sales grew by 17% year over year, surpassing weighted production by 5%, excluding complete vehicles and 3% including complete vehicles.

Speaker 3: Our second quarter showcased strong Q2 operating performance with high organic sales contributing to robust learning.

Our second quarter showcased strong Q2 operating performance with high organic sales contributing to robust earnings.

Swamy Kotagiri: These results represent a significant improvement both year over year and compared to the Q1 of this year. We have raised our 2023 sales, adjusted EBIT margin, and adjusted net income outlook ranges for 2023. This upward revision in our EBIT margin range demonstrates solid operating performance even with the inclusion of Veoneer Active Safety, which is launching significant new business over the next 18 months. We are highly committed to executing our strategy and remain confident in our ability to achieve our long-term growth and margin outlook. We continue to win business across all product areas, which supports our go-forward strategy. It is important to note that the industry has seen some positive developments, including reduced supply constraints, stronger and more stable production schedules, and resilient auto sales in a number of markets.

Speaker 3: These results represent a significant improvement both year or year and compared to the first quarter of this year.

These results represented significant improvement year or year and compared to the first quarter of this year.

Speaker 3: We have raised our 2023 sales, adjusted EBIT margin, and adjusted net income outlook ranges for 2023. This upward revision in our EBIT margin range demonstrates solid operating performance, even with the inclusion of V&A active safety, which is launching significant new business over the next 18 months.

We have raised our 2023 sales.

Adjusted EBIT margin and adjusted net income outlook ranges for 2023.

This upward revision in our EBIT margin range demonstrates solid operating performance, even with the inclusion of <unk> active.

Active safety, which is launching significant new business over the next 18 months.

Speaker 3: We are highly committed to executing our strategy and remain confident in our ability to achieve our long-term growth and margin out.

We are highly committed to executing our strategy and remain confident in our ability to achieve our long term growth and margin outlook.

And we continue to win business across all product data, yes. It.

Speaker 3: And we continue to win business across all product areas which supports our Gold Powered Status.

Supports our go forward strategy.

It is important to note that the industry has seen some positive developments, including reduced supply constraints stronger and more stable production schedules and resilient auto sales and a number of markets.

Speaker 3: It is important to note that the industry has seen some positive developments, including reduced supply constraints, stronger and more stable production schedules, and resilient auto sales in a number of markets. However, the global economy continues to face some interlocking challenges, including continuing elevated inflation, high interest rates, geopolitical risks, and slowing economic growth. These challenges are impacting our...

Swamy Kotagiri: However, the global economy continues to face some interlocking challenges, including continuing elevated inflation, high interest rates, geopolitical risks, and slowing economic growth. These challenges are impacting our entire industry. In North America, there are concerns about upcoming OEM labor negotiations when union contracts expire in September, which may have short-term impacts on production. Rest assured, efforts to contain costs and improve our margins remains a top priority for us. This is being achieved through ongoing operational improvement initiatives, recovering costs from our customers, and executing flawless launches across Magna. Earlier this year, we estimated about $100 million of incremental input costs, net of recoveries over 2022. Based on our initiatives, together with improvements in market prices for energy and certain commodities, we now expect to mitigate about half of the incremental net input costs. We also continue to take proactive measures in various other areas.

Over the global economy continues to face some interlocking challenges, including continued elevated inflation higher interest rates geopolitical risks and slowing economic growth. These.

These challenges are impacting our entire industry.

Speaker 3: In North America, there are concerns about upcoming OEM labor negotiations when union contracts expire in September , which may have short-term impacts on products.

In North America, there are concerns about upcoming OEM labor negotiations.

Contract expired in September , which may have short term impacts on production.

Speaker 3: Rest assured, efforts to contain costs and improve our margins remains a top priority for us.

Rest assured efforts to contain costs and improve our margins remains a top priority for us.

Speaker 3: This has been achieved through ongoing operational improvement initiatives, recovering costs from our customers, and executing flawless launches across mags.

This is being achieved through ongoing operational improvement initiatives.

Covering costs from our customers and executing flawless launches across magna.

Earlier this year, we estimated about $100 million.

Speaker 3: Earlier this year, we estimated about 100 million of incremental input costs. NetAffric Power is over 2022.

Mental input costs net of recoveries for 2022.

Speaker 3: based on our initiatives together with improvements in market prices for energy and certain commodities, we now expect to mitigate about half of the incremental net input costs.

Based on our initiatives together with improvements in market prices for energy and certain commodities, we now expect to mitigate about half of the incremental net input costs.

We also continued to take proactive measures in various other areas, we have executed already initiated consolidation restructuring and cost containment activities at different levels across the company.

Speaker 3: We also continue to take proactive measures in various other areas. We have executed our initiated consolidation, restructuring, and cost-containment activities at different levels across the country.

Swamy Kotagiri: We have executed or initiated consolidation, restructuring, and cost containment activities at different levels across the company. We are engaged in ongoing commercial negotiations with our customers to recover costs, transitioning to various index programs, and address pricing on challenging programs. At the same time, we continue to intensify our efforts in areas that are core to our daily business, including hedging activities and our enterprise-wide global purchasing initiative. Automation installations and smart factory initiatives with a digital ecosystem implementation are also well underway. Lastly, I am pleased to report that our underperforming European BES facility is tracking to our expectations, supported by a number of these initiatives. All these efforts are yielding positive results, enabling us to generate strong earnings on our sales growth and reinforcing our confidence in delivering on our expectations for margin expansion in the coming years.

Speaker 3: We are engaged in ongoing commercial negotiations with our customers to recover costs, transitioning to various index programs, and address pricing on challenging programs.

We are engaged in ongoing commercial negotiations with our customers to recover cost transitioning to radius index programs.

And address pricing on challenging programs.

At the same time, we continued to intensify our efforts in areas that are core to our daily business <unk>.

Speaker 3: At the same time, we continue to intensify our efforts in areas that are core to our daily business, including hedging activities and our enterprise-wide global purchasing initiative.

Including hedging activities and our enterprise wide global purchasing initiative.

Automation installations, and smart factory initiatives with the digital ecosystem implementation are also well underway.

Speaker 3: Automation installations in smart factory initiatives with the digital ecosystem implementation are also well underway.

Speaker 3: Lastly, I'm pleased to report that our underperforming European BES facility is tracking to our expectations supported by a number of these initiatives.

Lastly, I am pleased to report that our underperforming European <unk> facility is tracking to our expectations supported by a number of these initiatives.

Speaker 3: All these efforts are yielding positive results, enabling us to generate strong earnings on our sales growth and reinforcing our confidence in delivering on our expectations for margin expansion in the coming year.

All of these efforts are yielding positive results and enabling us to generate strong earnings on our sales growth and reinforcing our confidence in delivering on our expectations for margin expansion in the coming years.

Swamy Kotagiri: In early June, we successfully completed the Veoneer Active Safety transaction, and I would like to thank all those involved for their efforts. This transaction has expanded our active safety portfolio by incorporating complementary products, customers, geographies, engineering, and software resources. The response from both the acquired business and our existing active safety unit has been overwhelmingly positive. There is a great deal of excitement surrounding the immense potential of the combined business. The business is on track with the expectations as outlined when we announced the acquisition, including being neutral to earnings before purchase price amortization in 2024. We hit the ground running and are fully dedicated to ensuring a smooth integration and realizing the $70 million in synergies identified at the outset.

In early June we successfully completed the <unk> active safety transaction and I would like to thank all of those involved for their efforts.

Speaker 3: In early June , we successfully completed the V&EA active safety transaction, and I would like to thank all those involved for that effort.

Speaker 3: This transaction has expanded our active safety portfolio by incorporating complementary products, customers, geographies, engineering, and software resources.

This transaction has expanded our active safety portfolio by incorporating complementary products customers geographies engineering and software resources.

Speaker 3: The response from both the acquired business and our existing active safety unit has been overwhelmingly positive.

The response from both the acquired business and our existing active safety unit has been overwhelmingly positive.

Speaker 3: There is a great deal of excitement surrounding the immense potential of the combined business.

There is a great deal of excitement surrounding the immense potential of the combined business.

Speaker 3: The business is on track with the expectations as outlined when we announced acquisition, including being neutral to earnings before purchase price and motivation in 2024.

The business is on track with the expectations as outlined when we announced the acquisition, including being neutral to earnings before purchase price amortization in 2024.

We hit the ground running and are fully dedicated to ensuring a smooth integration and realizing the $70 million in synergies identified at the outset.

Speaker 3: We hit the ground running and are fully dedicated to ensuring a smooth integration and realizing the 70 million in synergies identified at the outset.

Swamy Kotagiri: We are excited to share more insights about our combined active safety business and to update our 2025 outlook to reflect the acquisition during our upcoming virtual investor event in early September. We continue to execute our strategy aimed at accelerating our growth in megatrend areas. Recently, we were awarded the battery enclosure for Ford's next-generation F-150 Lightning EV pickup truck. To support this exciting new program, we are adding capacity in Tennessee. This award further strengthens our competitive position in the rapidly growing market for battery enclosures. In powertrain electrification, we are actively supporting our customers with a combination of components and systems. We are proud to have recently won an award for our first-to-market modular standalone decoupling unit for electric vehicles. The innovative unit contributes to an increase in electric drive range by up to 9%.

Speaker 3: We are excited to share more insights about our combined active safety business and to update our 2025 outlook to reflect the acquisition during our upcoming virtual investor event in early September .

We are excited to share more insights about our combined active safety business and to update our 2020 outlook to reflect the acquisition during the upcoming virtual investor event in September .

We continue to execute our strategy aimed at accelerating our growth and megatrend areas.

Speaker 3: We continue to execute our strategy aimed at accelerating our growth in Megatron areas.

Speaker 3: Recently, we were awarded the battery enclosure for Ford's next generation F-150 Lightning EV pickup truck. To support this exciting new program, we are adding capacity in Tennessee.

Recently.

The battery enclosure for Forbes next generation F 150, Lightning EV pickup truck to support this exciting new program, we are adding capacity in Tennessee.

Speaker 3: This award for this sentence are competitive positions in the rapidly growing market for bad-ranked inclusion.

This award further strengthens our competitive position in the rapidly growing market for Bachelor enclosures.

In powertrain electrification.

Speaker 3: In powertrain electrification, we are actively supporting our customers with a combination of components and systems.

Actively supporting our customers with a combination of components and systems. We are proud to have recently won an award for our first to market modular stand alone decoupling unit for electric vehicles.

Speaker 3: We are proud to have recently won an award for our first to market modular stand-alone decoupling unit for electric wake.

Speaker 3: The innovative unit contributes to an increase in electric drive range by up to 9%.

<unk> unit contributes to an increase in electric drive range by up to 9%.

Swamy Kotagiri: We have already begun launching this product on multiple vehicles of a German-based premium OEM. We recently announced a long-term supply agreement with onsemi. This agreement allows Magna to integrate silicon carbide-based technology into our future eDrive systems. The advanced technology will enhance our ability to deliver better cooling performance, as well as faster acceleration and charging rates, which contribute to improved efficiency and increased EV range. These activities highlight our commitment to driving innovation and positioning ourselves as a leader in the rapidly evolving field of electric mobility. Our success in winning business across all product lines continues to drive growth. In addition to securing the contract for the battery enclosure, we were pleased to announce that we have also recently been awarded the frame and seats for the next generation F-150 Lightning.

Speaker 3: We have already begun launching this product on multiple vehicles of a German-based premium OEM.

We have already begun launching this product on multiple vehicles of a German based premium OEM.

We recently announced a long term supply agreement with on semi.

Speaker 3: We recently announced a long-term supply agreement with ONSEME. This agreement allows Magna to integrate SiliconCard-Bite-based technology into our future eDrive system.

This agreement allows magna to integrate silicon carbide based technology into our future E drive systems.

The advanced technology will enhance our ability to deliver better cleaning performance as well as faster acceleration and charging grades which contribute to improved efficiency and increased EV range.

Speaker 3: The advanced technology will enhance our ability to deliver better cooling performance as well as faster acceleration and charging rates, which contribute to improved efficiency and increased UV rays.

Speaker 3: These activities highlight our commitment to driving innovation and positioning ourselves as a leader in the rapidly evolving field of electric mobility.

These activities highlight our commitment to driving innovation and positioning ourselves as the leader in the rapidly evolving field of electric mobility.

Speaker 3: Our success in winning business across all product lines continues to drive growth.

Our success in winning business across all product lines continues to drive growth.

Speaker 3: In addition to securing the contract for the battery enclosure, we were pleased to announce that we have also recently been awarded the frame and seats for the next generation F-150 Lite.

In addition to securing the contract for the battery enclosure. We were pleased to announce that we have also recently been awarded the frame and seats for the next generation F 150 lightning.

Swamy Kotagiri: The seating award represents yet another seat complete program for pickup trucks in North America, following our previous seat award for GM's pickup trucks to be produced at Lake Orion. We were also recently awarded the replacement vehicle assembly business for the iconic Mercedes-Benz G-Class. This award allows us to maintain our 40+ year history as the exclusive producer of this off-road vehicle. We produced over 45,000 G-Class vehicles in our Graz, Austria facility in 2022, bringing our lifetime total to over 500,000. The next generation G-Class is expected to launch in 2024 and continue to run towards the end of the decade. We were awarded significant new fascia business on multiple programs from a Europe-based global OEM. We will supply the OEM's assembly plant in North America from an existing exteriors facility beginning in 2026.

Speaker 3: The seating award represents yet another seat complete program for pickup trucks in North America. Following our previous seat award for GM's pickup trucks to be produced at Lake Korea.

The seating awards represents yet another seat complete program for pickup trucks in North America. Following the previous seat awards for Gms pickup trucks to be produced at La Korea.

Speaker 3: We were also recently awarded the replacement vehicle assembly business for the iconic Mercedes-Benz G-Class. This award allows us to maintain our 40-plus year history as the exclusive producer of this off-road weight.

We were also recently awarded the replacement vehicle Assembly business for the iconic Mercedes Benz G Class. This award allows us to maintain our 40 plus year history ethics cruising producer of this off road vehicle.

We produced over 40000 45000 G class vehicles in our Graz, Austria facility in 2022, bringing our lifetime total to over half a million.

Speaker 3: We produced over 40,000, 45,000 G-Class vehicles in our grads Austria facility in 2022, bringing our lifetime total to over half a million.

Speaker 3: The next generation G-Class is expected to launch in 2024 and continue to run towards the end of the decade.

The next generation G class is expected to launch in 2024 and continue to run towards the end of the decade.

And we were awarded significant new face your business on multiple programs from a Europe based global OEM.

Speaker 3: and we were awarded significant new FASHA business on multiple programs from a Euro-based global OEM.

Speaker 3: We will supply the OEM for some new plant in North America from an existing exterior facility beginning in 2026. With that, I'll pass the call or the fact. I'll pass the call or the fact.

We will supply the Oems Assembly plant in North America from an existing exteriors facility beginning in 2026.

Swamy Kotagiri: With that, I'll pass the call over to Pat.

With that I'll pass the call over to Pat.

Patrick McCann: Thanks, Swamy, and good morning, everyone. As Swamy indicated, we delivered strong Q2 earnings and free cash flow, both above our expectations. Now, comparing the Q2 of 2023 to 2022, consolidated sales were $11 billion, up 17% compared to a 15% increase in global light vehicle production. EBIT was $603 million, and EBIT margin increased 170 basis points to 5.5%. It was also up 140 basis points from the Q1 of 2023. Adjusted EPS came in at $1.50, up 81% year-over-year. Free cash flow used in the quarter was $7 million, compared to $52 million generated in the Q2 of 2022, in part reflecting our higher capital spend to support record program awards in 2022.

Thanks, Swamy and good morning, everyone.

Speaker 2: As Swami indicated, we delivered strong second quarter earnings and free cash flow. Both above are expectations.

As Swamy indicated we delivered strong second quarter earnings and free cash flow both above our expectations.

Now comparing the second quarter of 2023 to 2022 consolidated sales were $11 billion.

Speaker 2: Now, comparing the second quarter of 2023 to 2022, consolidated sales were 11 billion. Up 17% compared to a 15% increase in global light vehicle production.

Up 17% compared to a 15% increase in global light vehicle production.

Speaker 2: even was 603 million, and even margin increased 170 basis points to 5.5%.

EBIT was $603 million and EBIT margin increased 170 basis points to five 5%.

It was also up 140 basis points from the first quarter of 2023.

Speaker 2: with also out 140 basis points from the first quarter of 2023. Adjusted EPS came in at $1.50.

Adjusted EPS came in at $1 50.

Up 81% year over year.

And free cash flow used in the quarter was $7 million.

Speaker 2: And free cash flow used in the quarter was $7 million compared to $52 million generated in the second quarter of 2022. In part, reflecting our higher capital spend support record program awards in 2022.

Compared to $52 million generated in the second quarter of 2022 and.

In part, reflecting our higher capital spend to support record program Awards in 2022.

Patrick McCann: During the quarter, we paid dividends of $129 million. In addition to raising our sales outlook, we increased our adjusted EBIT margin and earnings outlook. Let me take you through some of the details. North American, European, and Chinese light vehicle production were up 14%, 13%, and 21% respectively, netting to a 15% increase in global production. Our consolidated sales were $11 billion, up 17% over Q2 2022. On an organic basis, our sales also increased 17% year over year, for a 3% growth over market or 5% growth over market excluding complete vehicles.

Speaker 2: During the quarter, we paid dividends of $129 million. And in addition to raising our sales outlook, we increased our adjusted EBIT margin and earnings outlook. Let me take you.

During the quarter, we paid dividends of $129 million and in addition to raising our sales outlook, we increased our adjusted EBIT margin and earnings outlook.

Let me take you through some of the details.

North American European and Chinese light vehicle production were up 14%, 13% and 21%, respectively, netting to a 15% increase in global production.

Speaker 2: North American, European, and Chinese light vehicle production were up 14%, 13%, and 21% respectively, netting to a 15% increase in global production.

Our consolidated sales were 11 billion up 17% over the second quarter of 2022.

Speaker 2: Our consolidated sales were 11 billion, up 17% over the second quarter of 2022.

Speaker 2: On an organic basis, our sales also increased 17th percent year over year. For a 3% growth over market, or 5% growth over market, excluding complete vehicles.

On an organic basis, our sales also increased 17% year over year for a 3% growth over market or 5% growth over market excluding complete vehicles.

Patrick McCann: The sales increase was primarily due to higher global vehicle production and complete vehicle assembly sales, the launch of new programs, price increases to recover certain higher input costs, and the acquisition of Veoneer Active Safety on 1 June, net of divestitures. These are partially offset by the impact of foreign currency translation and contractual customer price givebacks. Adjusted EBIT was $603 million and adjusted EBIT margin was 5.5%, compared to 3.8% in Q2 2022. Our focus on operational excellence and performance on cost initiatives helped drive strong earnings on higher sales. This was partially offset by the impact of the acquisition of Veoneer Active Safety.

Speaker 2: The sales increase was primarily due to higher global vehicle production and complete vehicle assembly sales. The launch of new programs.

The sales increase was primarily due to higher global vehicle production and complete vehicle Assembly sales the launch of new programs.

Speaker 2: price increases to recover certain higher input costs and the acquisition of the and air active safety on June 1st, net of debestitures.

Price increases to recover certain higher input costs and the acquisition of D&A or active safety on June 1st net of divestitures.

Speaker 2: These are partially offset by the impact of foreign currency translation and contractual customer price give-fasts.

These are partially offset by the impact of foreign currency translation and contractual customer price give backs.

Yeah.

Adjusted EBIT was $603 million and adjusted EBIT margin was five 5% compared to three 8% in Q2 2022.

Speaker 2: Adjusted EBIT was $603 million and adjusted EBIT margin was 5.5%. Compared to 3.8% in Q2 2022.

Our focus on operational excellence and performance on cost initiatives helped drive strong earnings on higher sales.

Speaker 2: Our focus on operational excellence and performance on cost initiatives help drive strong earnings on higher sales.

Speaker 2: This was partially offset by the impact of the acquisition of the Anir Active Safety.

This was partially offset by the impact of the acquisition of <unk> active safety.

Patrick McCann: Adjusted EBIT margin was also possibly impacted by about 25 basis points of net operational items, including productivity and efficiency improvements at certain facilities and higher tooling contribution, partially offset by higher program related engineering spending and launch costs, and higher equity income, which benefited margins by about 10 basis points. EBIT margin was negatively impacted by higher net input costs, primarily lower scrap prices and higher labor costs, partially offset by lower costs for energy, commodities, and freight, which combined to about 45 basis points, and non-recurring items, which subtracted about 5 basis points. Interest expense increased primarily reflecting the senior notes issued in Q1, increased borrowings, and higher interest rates, partially offset by higher interest income. Our adjusted effective income tax rate came in at 21.8%, largely in line with our 2023 expectations, but lower than Q2 of last year.

Adjusted EBIT margin was also possibly impacted by about 25 basis points of net operational items, including productivity and efficiency improvements at certain facilities and higher Thule contribution partially offset.

Speaker 2: Adjusted EBIT margin was also possibly impacted by about 25 basis points of net operational items, including productivity and efficiency improvements at certain facilities and higher tooling contribution, partially offset by higher program related engineering spending and launch costs, and higher equity income, which benefited margins by about 10 basis points.

A higher program related engineering spending and launch costs and higher equity income, which benefited margins by about 10 basis points.

Speaker 2: Even margin was negatively impacted by higher net input costs, primarily lower scrap prices and higher labor costs, partially offset by lower costs for energy, commodities, and freight, which combined to about 45 basis points, and non-recuring items, which subtracted about five basis points.

EBIT margin was negatively impacted by higher net input costs, primarily lower scrap prices and higher labor costs, partially offset by lower costs for energy commodities and freight.

Combined to about 45 basis points.

And non recurring items, which subtracted about five basis points.

Okay.

Interest expense increased primarily reflecting the senior notes issued in the first quarter increased borrowings and higher interest rates, partially offset by higher interest income.

Speaker 2: Interest expense increased primarily reflecting the senior notes issued in the first quarter, increased forearms and higher interest rates, partially offset by higher interest income.

Speaker 2: Our adjusted effective income tax rate came in at 21.8%. Largely in line with our 2023 expectations, but lower than Q2 of last year.

Our adjusted effective income tax rate came in at 21, 8%.

Largely in line with our 2023 expectations, but lower than Q2 of last year.

Patrick McCann: Adjusted net income attributable to Magna was $430 million, up 77% over Q2 of 2022, reflecting the higher EBIT and lower tax rate, partially offset by higher interest expense, and minority interest. Adjusted diluted EPS was $1.50, up 81% compared to Q2 of last year. The increase is the result of higher net income and fewer shares outstanding. The reduced number of shares outstanding primarily reflects the impact of share repurchases during and subsequent to Q2 of 2022. Turning to a review of our cash flows and investment activities. In Q2 of 2023, we generated $879 million in cash from operations before changes in working capital. We invested $332 million in working capital, primarily reflecting the higher sales in Q2 of 2023.

Speaker 2: And at just a net income, a trivial pomegna was 430 million of 77% over the second quarter of 2022, reflecting the higher EBIT and lower tax rate partially offset by higher interest expense and minority interest.

And adjusted net income attributable to Magna was $430 million up 77% over the second quarter of 2022, reflecting the higher EBIT and lower tax rate, partially offset by higher interest expense and minority interest.

Speaker 2: Adjusted diluted EPS was $1.50 up 81% compared to Q2 of last year.

Adjusted diluted EPS was $1 50 up 81% compared to Q2 of last year.

The increase is the result of higher net income and fewer shares outstanding.

Speaker 2: The increase is the result of higher net income and fewer share-ethode standards.

Speaker 2: reduced number of shares of standing primarily reflects the impact of share repurchases during and subsequent to the second quarter of 2022.

The reduced number of shares outstanding primarily reflects the impact of share repurchases during and subsequent to the second quarter of 2022.

Yeah.

Speaker 2: Turn it to a review of our cash flows and investment activity.

Turning to a review of our cash flows and investment activities.

Speaker 2: In the second quarter of 2023, we generated 879 million in cash from operations before changes in working capital.

In the second quarter of 2023, we generated $879 million in cash from operations before changes in working capital.

Speaker 2: We invested $332 million in working capital, primarily reflecting the higher sales in the second quarter of 2023.

We invested $332 million in working capital, primarily reflecting the higher sales in the second quarter of 2023.

Patrick McCann: Investment activities in the quarter included $502 million for fixed assets and $96 million for investments, other assets, and intangibles. The $502 million in CapEx is higher than the $329 million in Q2 of last year to support our record program awards in 2022. Overall, we used free cash flow of $7 million in Q2, better than we had anticipated. We also acquired Veoneer Active Safety for $1.48 billion and paid $129 million in dividends in the quarter. Our balance sheet continues to be strong, with major credit rating agencies recently reaffirming our ratings. At the end of Q2, we had over $4.6 billion in liquidity, including about $1.3 billion in cash.

Investment activities in the quarter included 502 billion for fixed assets and $96 million for investments other assets and intangibles.

Speaker 2: Investment activities in the quarter include $502 million for fixed assets, and $96 million for investments, other assets, and the tangibles.

Speaker 2: The 500 to 2 million cat-backs is higher than 329 million in Q2 of last year to support our record program awards in 2022.

The 502 billion in Capex is higher than the 329 billion in Q2 of last year to support our record program Awards in 2022.

Speaker 2: Overall, we use free cash flow of 7 million in Q2s, better than we had anticipated.

Overall, we used free cash flow of $7 million in Q2, better than we had anticipated.

We also acquired via near active safety for 148 billion and paid 129 million in dividends in the quarter.

Speaker 2: We also acquired the Adir Act of Safety for 1.48 billion and paid $129 million in dividends in the quarter.

Okay.

Speaker 2: Our balance sheet continues to be strong with major credit rating agencies recently reaffirming our rating.

Our balance sheet continues to be strong with major credit rating agencies recently reaffirmed our ratings.

At the end of the second quarter, we had over $4 6 billion in liquidity, including about $1 3 billion in cash.

Speaker 2: At the end of the second quarter, we had over 4.6 billion in liquidity, including about 1.3 billion in cash.

Patrick McCann: Currently, our adjusted debt to adjusted EBITDA ratio is 2.19 times. Excluding approximately $400 million in cash we're holding to pay down our euro debt set to mature later this year, our ratio would be 2.08. These ratios are tracking better than our previous expectations as a result of our improved operating results. We anticipate a reduction in our leverage ratio by the end of this year and a further decline through 2024. Next, I will cover our updated outlook, which incorporates slightly higher than expected vehicle production in both North America and Europe, mainly as a result of better production in Q2.

Currently our adjusted EBIT.

Speaker 2: Currently, our adjusted ebit, our adjusted death to adjusted ebit da ratio is 2.19 times.

Just a debt to adjusted EBITDA ratio is 219 times excluding.

Speaker 2: excluding approximately 400 million in cash we're holding to pay down our Euro debt September later this year. Our ratio would be 2.08.

Approximately $400 million in cash, we're holding to pay down our euro debt set to mature later this year our ratio would be 2.08.

Speaker 2: These ratios are tracking better than our previous expectations as a result of our improved operating results.

These ratios are tracking better than our previous expectations as a result of our improved operating results.

We anticipate a reduction of our leverage ratio by the end of this year and a further declined through 2024.

Speaker 2: We anticipate a reduction in our leverage ratio by the end of this year and a further decline through 2024.

Okay.

Speaker 2: Next, though, a cover or updated outlook, which incorporates slightly higher than expected vehicle production in both North America and Europe , mainly as a result of better production in Q2.

Next I will cover our updated outlook, which incorporates slightly higher than expected vehicle production in both North America and Europe .

Mainly as a result of better production in Q2.

Patrick McCann: Our assumption for production in China is unchanged from our previous outlook. We also assume exchange rates in our outlook will approximate current rates. We now expect a slightly stronger euro and slightly lower Canadian dollar and RMB for 2023 relative to our previous outlook. We have increased our expected sales range, largely reflecting the acquisition of Veoneer Active Safety, higher North American and European production in Q2, as well as the higher euro. As a result of our strong performance so far in 2023 and expectations for continued operational execution, partially offset by higher costs to launch new programs, we have also increased our adjusted EBIT margin range. This is despite the short term 20 basis point impact from the Veoneer Active Safety acquisition. We're increasing our equity income range, mainly reflecting lower spend and expected commercial items.

Speaker 2: Our assumption for production in China is unchanged from our previous outlook.

Our assumption for production in China is unchanged from our previous outlook.

Speaker 2: We also assume exchange rates in our outlook will approximate current rates.

We also assume exchange rates in our outlook will approximate current rates.

Speaker 2: We now expect a slightly stronger Euro and slightly lower Canadian dollar and RMB for 2023 relative to our previous outlook.

We now expect a slightly stronger euro and slightly lower Canadian dollar and RMB for 2023 relative to our previous outlook.

Yeah.

Speaker 2: We have increased our expected sales range, largely reflecting the acquisition of the and the interactive safety, higher North American and European production and Q2, as well as the higher Europe .

We have increased our expected sales range, largely reflecting the acquisition of <unk> active safety higher North American and European production in Q2, as well as the higher euro.

As a result of our strong performance so far in 2023.

Speaker 2: As a result of our strong performance so far in 2023, and expectations for continued operational execution, partially offset by higher cost to launch new programs, we have also increased our adjusted EBIT margin range.

And expectations for continued operational execution, partially offset by higher cost to launch new programs. We have also increased our adjusted EBIT margin range.

Speaker 2: This is despite the short term 20 basic point impact from the Indian Air Act to save the acquisition.

This is despite the short term 2020 basis point impact from the <unk> safety acquisition.

Speaker 2: where increasing our equity and cover range mainly reflected lower span and expected commercial life.

We're increasing our equity income range, mainly reflecting lower spend and expected commercial items.

Patrick McCann: As a result of increasing the ranges for our sales and adjusted EBIT margin, we are also raising our range for adjusted net income attributable to Magna. Our capital spending outlook has increased to reflect the Veoneer acquisition in line with our previous expectations. Our interest expense and tax rate are unchanged from our previous outlook. In addition, free cash flow expectations are unchanged even after incorporating Veoneer Active Safety for the last 7 months of 2023. Note that beginning in Q3, Magna's adjusted EBIT will exclude the amortization of acquired intangibles, the most significant of which is associated with the Veoneer Active Safety acquisition. In summary, we are pleased with our strong operating performance in Q2. Once again, we outgrew our end markets by 3% on a consolidated basis, and 5% excluding complete vehicles.

Speaker 2: As a result of increasing the ranges for our sales and adjusted even margin, we're also raising our range for adjusted net income at your visible demand.

As a result of increase in the ranges for our sales and adjusted EBIT margin. We're also raising our range for adjusted net income attributable to Magna.

Our capital spending outlook has increased to reflect the <unk> acquisition in line with our previous expectations.

Speaker 2: Our capital spending outlook has increased to reflect the linear acquisition in line with our previous expectations.

Our interest expense and tax rate are unchanged from our previous outlook.

Speaker 2: our interest expense and tax rate run chains for a previous outlook.

Speaker 2: In addition, pre-cache flow expectations are unchanged. Even after incorporating the interactive safety for the last seven months of 2023.

In addition, free cash flow expectations are unchanged, even after incorporating D&A or active safety for the last seven months of 2023.

Note that beginning in Q3 Magnus adjusted EBIT will exclude the amortization of acquired intangibles. The most significant of which is associated with the <unk> active safety acquisition.

Speaker 2: Note that beginning in Q3, Magnus adjusted e. but will exclude the amortization of acquired intangibles, the most significant of which is associated with the being here active safety acquisition.

<unk>.

Speaker 2: In summary, we are pleased with our strong operating performance in the second quarter.

In summary, we are pleased with our strong operating performance in the second quarter.

Speaker 2: Once again, we outgrow our end markets by 3% on a consolidated basis and 5% excluding complete vehicles.

Once again, we outgrew our end markets by 3% on a consolidated basis and 5% excluding complete vehicles.

Patrick McCann: We continue to win new business across our portfolio, supporting our go forward strategy, and largely as a result of our continued strong execution, we are raising our earnings outlook for the year. Thanks for your attention. We'd be happy to answer your questions.

We continue to win new business across our portfolio supporting our go forward strategy and largely as a result of our continued strong execution, we are raising our earnings outlook.

Speaker 2: We continue to win new business across our portfolio, supporting our GoFour strategy, and largely as a result of our continued strong execution, we are raising our earnings outlook for the year. Thanks for your attention. We'd be happy to answer your question.

For the year. Thanks for your attention we'd be happy to answer your questions.

Operator: Thank you. If you would like to register a question, please press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. Again, as a reminder, to register for a question, it is the one followed by the four on your telephones. One moment please for the first question. Our first question comes from the line of John Murphy with Bank of America. Please proceed with your question.

Thank you.

Speaker 1: Thank you. If you would like to register a question, please press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. Again, as a reminder to register for a question, it is the one followed by the four on your telephone. One moment please for the first question.

I would like to register a question. Please press the one followed by the four on your telephone.

Here with three tone prong to acknowledge a request. If your question has been answered and you would like to withdraw your registration.

Please press the one followed by the three.

And as a reminder to register for a question. It is the one followed by the four on your telephone.

One moment please for the first question.

Yeah.

Speaker 1: Our first question comes on the line of John Murphy with Bank of America. Please proceed with your question.

Our first question comes from the line of John Murphy with Bank of America. Please proceed with your question.

John Murphy: Good morning, guys, and thanks for the time. Just a first question. You know, as you look at what went on in the quarter, you know, obviously, volumes were up big time on a year-over-year basis, but there was also a stabilization in schedules, right? So you knew what you were doing and how to plan for it. Which do you think was, I mean, obviously the rise in volume is important, but how important was the stabilization in schedules, and how should we think about that going forward in the business?

Speaker 4: Good morning guys and thanks for the time. Just a first question, as you look at what went on in the quarter, obviously vimes were up big time on a year of a year basis, but there was also a stabilization in schedules, right? So you knew what you were doing and how to plan for it. Just want me, which do you think was, I mean, obviously the rise in volume is important, but how important was the stabilization in schedules and how should we think about that going forward in the business?

Good morning, guys and thanks for the time.

At first question if you look at what went on in the quarter.

Obviously volumes were up big time on a year over year basis, but there was also a stabilization.

In schedules right. So you knew what you were doing and how to plan for it.

Which do you think I mean, obviously the rise environment is important but how important was the stabilization in schedules and how should we think about that going forward in the business.

Patrick McCann: Good morning, John. For sure, both of them, but I think if they have to prioritize, if you look at all the initiatives that we've been talking about play a bigger role, you know, in getting the flow through that we would expect. Definitely the stabilization of production schedules is what helps those efforts in a big way, right? To get to the bottom line and get the intended effect of all the activities that we're going through, the big variable would be the stable production. Obviously, the higher volumes help, but the important thing is, once you get the higher volumes, can I get the, you know, the flow through the way we expect, right? Definitely helped both of them this time.

Swamy Kotagiri: Good morning, John. For sure, both of them, but I think if they have to prioritize, if you look at all the initiatives that we've been talking about play a bigger role, you know, in getting the flow through that we would expect. Definitely the stabilization of production schedules is what helps those efforts in a big way, right? To get to the bottom line and get the intended effect of all the activities that we're going through, the big variable would be the stable production. Obviously, the higher volumes help, but the important thing is, once you get the higher volumes, can I get the, you know, the flow through the way we expect, right? Definitely helped both of them this time.

Good morning, John .

Speaker 3: Good morning, John . For sure, both of them, but I think if they have to fair or twice, if you look at all the initiatives that we've been talking about, play a bigger role in getting the flow through that we would expect.

For sure both of them, but I think if they have to prioritize if you look at all the initiatives that we've been talking about play a bigger role.

And getting the flow through that you would expect.

Speaker 3: but definitely the stabilization of productions schedules is what helps those efforts in a big way, right? To get to the bottom line and get the intended effect.

But definitely the stabilization of production schedules is what helps those airports in a big way right to get to the bottom line and get the intended effect of all the activities that we're going through the big variable would be the stable production obviously the baked.

Speaker 3: of all the activities that we're going through, the big variable would be this table product.

Speaker 3: Obviously the big time in the higher volume shelf but

The higher volumes helped but the important thing is once you get the higher volumes can I get the.

Speaker 3: The important thing is once you get the higher volumes, can I get the flow through the way we expect? So, it's definitely helped both of them this time.

The flow through of the way, we expect right. So definitely helped both of them at this time.

John Murphy: Okay. Just a second question on the battery enclosure business for the F-150 Lightning. You know, the fact that you're getting the frame as well, you know, seats as well is good, but I mean, the frame and the battery enclosure seem like they might be interrelated, Swamy. How interrelated was that sort of bidding process? How much of part of the structure of that truck is that battery enclosure business, and does that set you up well for future wins on other trucks that maybe, you know, other unibody, that's not unibody, but on unibody structures as well?

Speaker 4: And then just a second question on the battery enclosure business for the the F150 lightning You know the fact that you're getting the frame as well You know seats as well as good, but I mean the frame and the battery enclosure seem like they might be interrelated to me How interrelated is was that sort of bidding process?

Okay, and then just a second question on the battery business for the F 150 lightening.

The fact that youre getting the frame as well seats as well as good but I mean, the frame and battery enclosure.

Seem like they might be interrelated swamy.

Interrelated was that sort of bidding process, how much of part of the structure of that truck is that battery enclosure business and does that set you up well for future wins on other trucks, but maybe other unit body, that's not unit body been on unit body structures as well.

Speaker 4: How much of part of the structure of that truck is that battery enclosure business? And does that set you up well for future wins on other trucks that maybe other unibody, that's not unibody, but on unibody structures as well.

Patrick McCann: John, I'll answer the question from a Magna perspective, and we talked about highly integrated systems and the value that Magna brings when we look at not individual component, but more how you bring things together. I think this plays a role. I won't comment specifically on the architecture of this vehicle because I don't think it would be right for me at this point. That expertise of knowing the frame, knowing the body enclosures and the whole vehicle definitely comes into play. As we look forward, we see in some cases, like you talked about, a framed vehicle with a separate enclosure today. As you go to the next generation, there is definitely a thought process of how we can get the synergies for structural performance, for safety, and efficiency and so on.

Swamy Kotagiri: John, I'll answer the question from a Magna perspective, and we talked about highly integrated systems and the value that Magna brings when we look at not individual component, but more how you bring things together. I think this plays a role. I won't comment specifically on the architecture of this vehicle because I don't think it would be right for me at this point. That expertise of knowing the frame, knowing the body enclosures and the whole vehicle definitely comes into play. As we look forward, we see in some cases, like you talked about, a framed vehicle with a separate enclosure today. As you go to the next generation, there is definitely a thought process of how we can get the synergies for structural performance, for safety, and efficiency and so on.

Speaker 3: John , I'll answer the question of a magna perspective and we talked about highly integrated systems and a...

John I'll answer the question from a magnet perspective, and we talked about highly integrated systems in there.

Value that Magnum brings when we look at not individual component, but more how we can bring things together and I think this plays a role I won't comment specifically on the architecture of bis ratio because I am I don't think it would be right for me at this point.

Speaker 3: value that Magnor brings when we look at not individual component, but more how you bring things together. And I think this plays a role. I won't comment specifically on the architecture of this vehicle, because I am. I don't think it will be right for me at this point.

Speaker 3: But that expertise of knowing the frame, knowing the body and the whole vehicle definitely comes into play. And as we look forward, we see...

But that expertise of knowing the frame knowing their back body enclosures in the whole vehicle definitely comes into play and as we look forward we see.

Speaker 3: In some cases, like you talked about the framed vehicle.

In some cases like you talked about a framed waco.

Speaker 3: with a separate enclosure today, but as you go to the next generation, there is definitely a thought process of how you can get the synergies for structural performance, for safety, and efficiency, and so on. So us being in the program now on actually multiple track programs, I think definitely gives us a, I think a big advantage in not only addressing what's needed today, but taking this product line and evolving into the future.

With the separate enclosure today, but as you go to the next generation. There is definitely a thought process. So how we can get the synergies or structural performance for safety and efficiency and so on so us being in the programme now on actually multiple truck programs I think definitely gives us a I think a bit.

Patrick McCann: Us being in the program now on actually multiple truck programs, I think, definitely gives us a

Swamy Kotagiri: Us being in the program now on actually multiple truck programs, I think, definitely gives us a, I think a big advantage in not only addressing what's needed today, but taking this product line and evolving into the future.

Swamy Kotagiri: I think a big advantage in not only addressing what's needed today, but taking this product line and evolving into the future.

Advantage.

<unk> not only addressing what's needed today, but taking this product line and evolving into the future.

John Murphy: If I could sneak just one last one in. Commercial discussions with your automaker customers seem to be a little bit more amicable and conciliatory than they have been in the past. Is that a correct interpretation? Has something changed here where they're partnering a lot more on sort of cost-sharing, particularly as costs are inflating? Or is it more just, you know, more the same and you guys are just doing a better job with these discussions?

And then if I could sneak just one last one in commercial discussions with your automaker customers seem to be a.

Speaker 2: And then if I could speak just one last one and commercial discussions with your automaker customer seem to be a little bit more amicable and conciliatory than they have been in the past. Is that a correct interpretation and has something changed here with their partnering a lot more on sort of cost sharing, particularly as cost are inflating, or is it more just more the same and you guys are just doing a better job with these discussions.

A little bit more amicable and conciliatory than they have been in the past is that a correct interpretation and has something changed here with their partnering a lot more on sort of cost sharing particularly as costs are inflating or is it more just more of the same and you guys are just doing a better job with these discussions.

Okay.

Swamy Kotagiri: It's a difficult one, John, but I definitely think I think we had a gritty six months is how I would put it. You know, the reactions and the interactions are somewhat mixed. I can tell you we are laser-focused on it. It's just not a person, but teams and cross-functional across finance and sales and commercial and operations. The entire organization is around this topic. I think I won't be able to explain in a few sentences the effort that goes into this. I would say there is an openness to have the discussion in different forums. You know, like I said, some are a little bit tougher than the other, but it is, I mean, we cannot afford not to do this. It's a must for us, right?

Speaker 3: It's a difficult one, John , but I definitely think we had a greedy six months.

It's a difficult one John but I definitely think.

I think <unk> had a good six months.

Is how I would put it.

Uh huh.

Speaker 3: you know, the reactions and the interactions are somewhat mixed. But I can tell you, your laser focused on it is just not a person, but a team that is cross-functional across finance and sales and commercial and operations. The entire organization is around this topic. I cannot, I think I won't be able to explain a few sentences the effort that goes into this. But I would say there is a...

You know their reactions and their interactions are somewhat mixed.

But I can tell you we are laser focused on it it's just not a person, but it teams and cross functional across finance and sales in commercial and operations. The entire organization is.

Around this topic.

I cannot I think I won't be explaining able to explain and fuel center assist the effort that goes into this but I would say there is a.

Speaker 3: openness to have the discussion in different forms. Like I said, some are a little bit tougher than the other, but it is, I mean, we cannot afford not to do this. It's a must for us, right? And I think the conversations are tough, but I would say they're fair.

Openness to have the discussion in different forums.

Like I said, some are little bit tougher than the other but it is.

We cannot afford not to do this it's a must for US right and I think the conversations are tough, but I would say they are fair.

Swamy Kotagiri: I think the conversations are tough, but I would say they're fair.

John Murphy: Okay. Thank you very much, guys.

Okay. Thank you very much guys.

Operator: Thank you. Our next question comes from the line of Tamy Chen with BMO Capital Markets. Please proceed with your question.

Thank you.

Speaker 1: Thank you. Our next question comes from the line of Tammy Chen with BMO Capital Markets. Please proceed with your question.

Our next question comes from the line of Tami Chen with BMO capital markets. Please proceed with your question.

Tamy Chen: Hi, good morning. Thanks for the question. First, I wanted to talk about Veoneer. I saw you've given the impact it had on your guidance. Could you just talk a little bit more about how you expect that to trend through the year? You're expecting it to break even before the incremental amortization next year. Could you just remind us the steps or the path for the business to get to that next year?

Speaker 5: Hi, good morning. Thanks for the question. First wanted to talk about VNIR. So I saw you've given the impact that had on your guidance. Could you just talk a little bit more about how you've got to trend through the year and you're expecting it to break even before the incremental amortization next year? Could you just remind us the steps of the past for the business to get to that next year?

Hi, Good morning. Thanks for the question first wanted to talk about <unk>.

So you've given the <unk>.

Impact it had on your on your guidance could you just talk a little bit more about how you got to trend through the year.

You're expecting it to breakeven before the incremental amortization next year could you just remind us that that's in the past.

To get to that next tier.

Swamy Kotagiri: Good morning, Tammy. I'll give you a few key points, and Pat, you can jump in. As we said, we closed the transaction, you know, happy to say that we hit the ground running on the integration efforts. I think I could summarize by saying that we are comfortable with what we talked about when we did the acquisition announcement. Some of the facts that we talked about at that time, 2023 sales, about $1 billion, and we said it would have a 20 basis points impact on consolidated EBIT margin. CapEx was roughly around $100 million. EBITDA positive in 2023. We expect the $70 million in synergies by 2025. I think we are, you know, tracking very well, and there could be tailwinds, you know, going forward.

Speaker 3: Good morning, Tammy. I'll give you a few key points and part you can jump in. As we said, we close the transaction, happy to say that we hit the ground running on the integration efforts.

Good morning, Tommy I'll give you a few key points and Pat you can jump in.

As we said we closed the transaction happy to say that <unk> hit the ground running on the integration efforts.

Speaker 3: And I think I could summarize by saying that we are comfortable with what we talked about when we did the acquisition announcement. So some of the facts that we talked about at that time 2020 pre sales about a billion dollars and we said it would have a 20 basis points impact on consolidated EBIT margins.

And I think I could summarize by saying that we are comfortable with what we talked about when we did the acquisition announcement.

So some of the facts that we talked about at that time.

2023 sales.

About $1 billion, and we said it would have a 20 basis points impact on consolidated EBIT margin.

Speaker 3: Capix was roughly around 100 million EBD up positive in 2023.

Capex was roughly around $100 million.

EBITDA positive in 2023.

Speaker 3: We expect the 70 million in synergies by 2025. I think we are, you know, tracking very well and there could be tailwinds going forward. EBIT neutral in 2024, XPPA. And a little bit more color on 2025 impacts. We should be able to do that in our virtual investor day update that's coming up, Tammy in September .

We expect the $70 million in synergies by 2025, I think we are.

Tracking very well and there could be a tailwind going forward.

Swamy Kotagiri: EBIT neutral in 2024 ex PPA. A little bit more color on 2025 impact. We should be able to do that in our virtual investor day update that's coming up, Tammy, in September.

EBIT neutral in 2020 poll ex PPA.

And a little bit more color on 2025 impact we should be able to do that in our virtual investor day.

They update that's coming up time in September .

Tamy Chen: Okay. Can you talk specifically, though, about in next year, the business going to EBIT neutral from now being a drag? Can you just remind us of some of the steps to get there?

Speaker 5: Okay, can you talk specifically about in next year the business going to even neutral from now being a drag? Can you just remind us of some of the steps to get there?

Okay.

Talk specifically about next year in that business going to EBIT neutral from now being a drag can you just remind us of some of the steps to get there.

Patrick McCann: Morning, Tammy, and congratulations on your new role. When you think about the Veoneer business, it's quite similar to our existing electronics business, and they're experiencing rapid growth. Really the driver, what's happening is a combination of two things. One is a lot of their launch costs are being incurred this year, and they're gonna continue through next year. What's happening is as that business launches, it's driving a lot of contribution margin that's gonna benefit as the volumes ramp. To be honest with you, that's really the inflection point we're seeing in their business, and it's similar to what we're seeing in our business, and that's what's gonna drive the dollar growth and the margin improvement.

So.

Speaker 6: So, morning Tammy, and congratulations on your new role. When you think about the Be and Ear business, it's quite similar to our existing electronics business, and their experiencing rapid growth. So really the driver, what's happening, is a combination of two things.

Good morning, Tammy and congratulations on your new role.

When you think about the <unk> business is quite similar to our existing electron.

<unk> electronics business and they're experiencing rapid growth. So really the driver of what's happening is a combination of two things. One is there a lot of their launch costs are being incurred this year and they're going to continue through next year, but what's happening is as that business launches, it's driving a lot of contribution margin that's going to benefit.

Speaker 6: One is, a lot of their launch costs are being incurred this year, and they're going to continue through next year. But what's happening is, as that business launches, it's driving a lot of contribution margin, that's going to benefit as the volumes ramp. To be honest, we give that's really the inflection point we're seeing in their business, and it's similar to what we're seeing in our business, and that's what's going to drive the dollar growth and the margin improvement.

As the volumes ramp.

To be honest with you. That's that's really the inflection point, we're seeing in their business and it's similar to what we're seeing in our business and that's what's going to drive.

The dollar growth in the margin improvement.

Tamy Chen: Got it. Okay. Thanks. My other question is, you know, it's quite a strong performance in your Cosma business. I don't think we've seen, you know, the 8% or above EBIT margin really since early 2021. I know you called out through the call all the positive factors that have happened this quarter. Could you just specifically on the Cosma business talk a bit about what really drove quite a strong performance? It was strong sequentially as well. Can you also talk a little bit about within that business, you know, there had been that underperforming plant? Just, you touched on it a bit earlier in your comments, but a little bit more detail on that. Are you largely through that headwind as well? Thank you.

Got it okay. Thanks, and then my other question is you.

Speaker 5: Got it. Okay. Thanks. And then my other question is, um, it was quite a strong performance in your Cosm of business that I don't think we've seen, you know, you

It's quite a strong performance in Europe cause my business I don't think we've seen it.

Speaker 5: that the 8% or above even March and really since early 2021. I know you called out through the call, all the positive factors that have happened this quarter, but could you just specifically on the Cosmo business talk a bit about what really drove quite a strong performance, it was strong sequentially as well. Can you also talk a little bit about within that business, there had been that underperforming plant, just you touched on it a bit earlier in your comments, but a little bit more detail on that. Are you largely through that headwind as well? Thank you.

The 8%, 8% or above EBIT margin really since early 2021, I know you called out the call.

All of that positive factors that happened this quarter, but could you just specifically on the Cosmo business talk a bit about what really drove quite a strong performance. It was strong sequentially as well.

Can you also talk a little bit about within that business there had been that underperforming plants.

You touched on it earlier in your comments that a little bit more detail on that or are you largely through that.

That headwind as well thank you.

Swamy Kotagiri: Yeah. Tamy, you know, from a Cosma perspective, like you said, we've seen those type of numbers before. You know, as we discussed, the production stability, having the volumes coming back up, ticking back up, and all the initiatives are a combination. It's really good execution on higher sales is one, and kind of operational improvement in a couple of facilities. You touched on the BES facility that we had issues with, and it's tracking. The predominant factor, as I discussed previously, was the efficiency hit that we were having and therefore had to outsource capacity. I'm happy to say now that. Yeah, we improved our efficiency, so the capacity opens up, and we are able to bring back work, which obviously helps.

Yes.

Speaker 3: Yeah, Tammy, you know, from a cosmic perspective, like you said, they've seen those types of...

From a Cosmo perspective, like you said, we have seen those type of.

Speaker 3: numbers before and you know as we discussed the production stability having the volumes coming back up, taking back up and all the initiatives that are combination. It's really good execution on higher sales is one and kind of operational improvement in a couple of facilities you touched on the BES facility that we had issues with and it's tracking.

The numbers speak for an.

As we discussed the production stability.

Having the volumes coming back up ticking back up and all the initiatives that are combination.

So really good execution on higher sales is one.

And kind of operational improvement and a couple of facilities you touched on the BS first from IP that we had issues with.

And it's tracking.

Speaker 3: The predominant factor I've discussed previously was the efficiency hit that we were having and therefore had the outsource capacity. So I'm happy to say now that.

The predominant factor as I discussed previously was.

The efficiency hit that people are having and therefore had to outsource capacity. So I'm happy to say now that you.

Speaker 3: We improved our efficiency, so the capacity opens up and we are able to bring back work, which obviously helps. And that's, I would say, its on track and continuing to make progress as we are discussed towards the end of 2024. And one other thing would be comparing to 2022 Q2, it would be Russia Blossess at the turnout there.

We improved our efficiency.

The capacity opens up and we are able to bring back work.

Which obviously helps and that's a I would say, it's on track and continuing to make.

Swamy Kotagiri: That's, I would say it's on track and continuing to make progress, as we had discussed towards the end of 2024. One other thing would be comparing to 2022 Q2, it would be Russia losses, Pat, which are not there. You know, some of it is also commercial resolutions in the quarter, including retro from, you know, that goes back into the previous part of the year. But also wanna mention that there is some benefit going forward in a run rate perspective. I would say those are the combination of things that led to the expected strong performance in just in BES, but specifically in Cosma.

Make progress.

As we had discussed towards the end of 2024.

And one other thing would be comparing to 2022 Q2, it would be Russia losses be thrown out there.

Speaker 3: And some of it is also commercial resolutions in the quarter, including retro from, you know, that goes back into the...

Hey.

Some of it is also commercial resolutions in the quarter.

Including breakthrough from that goes back into the.

Speaker 3: previous part of the year, but also want to mention that there is some benefit going forward in everyone's rate perspective. So I would say those are the combination of things that led to the expected strong performance in just in BS, but specifically in Cosmo. And Tammy, you mentioned Cosmo, but it's all VFB. Biggest chocolate is Cosmo, but we have our theories of the center as well.

Previous parts of the year, but also want to mention that there is some benefit.

Benefit going forward in a run rate perspective, so I would say those are the combination of things that led to the expected strong performance in just in BS, but specifically in Cosmo and Tammy you mentioned Cosmo, but yes. It's all of the biggest chunk of that is causing them, but we have <unk> the center as well.

Louis Tonelli: Tamy, you mentioned Cosma, but it's all BES. Biggest chunk of it is Cosma, but we have our steering business in there as well.

Patrick McCann: Tamy, you mentioned Cosma, but it's all BES. Biggest chunk of it is Cosma, but we have our steering business in there as well. Yeah. There was some commercial items. Tamy, when you think about where we're pushing for recoveries, we're pushing for commercial recoveries as well. When we talk commercials, it's, you know, cancellation claims, low volume claims. Some of that benefit did come through in the quarter, and part of it was retro, as Swamy mentioned.

Patrick McCann: Yeah. There was some commercial items. Tamy, when you think about where we're pushing for recoveries, we're pushing for commercial recoveries as well. When we talk commercials, it's, you know, cancellation claims, low volume claims. Some of that benefit did come through in the quarter, and part of it was retro, as Swamy mentioned. Okay. Got it. Thank you.

And there was some commercial items.

Speaker 6: And there was some commercial items, you know, when you think about where we're pushing for, where companies were pushing for commercial recoveries as well. And we talk commercials, it's, you know, cancellation claims, low volume claims. So some of that benefit, it come through in the quarter and part of it was retro as Swami mentioned.

Jamie when you think about where we're pushing for recoveries were pushing.

For commercial recoveries as well and when we talk commercials.

Cancellation claims low volume claims so some of that benefit come through in the quarter and part of it was retro as to what we mentioned.

Yeah.

Tamy Chen: Okay. Got it. Thank you.

Okay got it thank you.

Operator: Thank you. Our next question comes from the line of Chris McNally with Evercore. Please proceed with your question.

Thank you. Our next question comes from the line of Chris Mcnally with Evercore. Please proceed with your question.

Speaker 1: Thank you. Our next question comes from the line of the Christmas Malley with Evercore. Please proceed with your question.

Yeah.

Chris McNally: Thanks so much, team. Just wanted to follow up on the last set of questions on body. If we look at the implied H2 versus sort of Q2, where you put up the impressive margins, was there any particular, you know, sort of price that was taken in Q2 that was retroactive? You know, some of the suppliers are talking about looking at sort of H1 margins, for example, for divisions because, you know, of the timing of some of these price recoveries. Then, you know, as a follow-through, you know, how do we think about pros and cons or headwinds, tailwinds for body in the H2?

Speaker 7: Thanks so much team. Just wanted to follow up on the last set of questions on body. If we look at the implied second half, we're sort of Q2, we put the impressive margin.

Thanks, so much team.

Just wanted to follow up on on the last set of questions on <unk>.

On body.

If we look at the implied second half.

We're sort of Q2, we put a impressive margins.

Was there any was there any.

Speaker 7: Was there any particular price that was taken in Q2 that was retroactive? Some of the suppliers were talking about looking at first half margins, for example, for divisions, because of the timing of some of these price recoveries. And then, you know, as a follow-through, how do we think about pros and cons, or headwinds, tailwinds, for body in a second half?

Particular sort of price that was taken in Q2 that was retroactive some of the suppliers talking about looking at sort of first half margins for example for divisions because of the timing of some of the E SAP a price recovery.

And then you guys have.

<unk>, how do we think about pros and cons.

Headwinds tailwind for body in second half.

Patrick McCann: Morning, Chris, I guess afternoon to you. I think you're correct. You're absolutely correct. When you think about these commercial items and the inflation recoveries, a portion of them, as these are being negotiated throughout the year, a portion by default becomes retro. There are some retro recoveries in Q2 related to Q1 and a little bit from 2022, but it's primarily a Q1 issue as we push forward. It's fair to say that our margin in that our BES segment's gonna peak in Q2 and normalize to those guidance range in H2.

Yes.

Speaker 6: morning, Chris, I guess afternoon to you. I think you're correct. You're absolutely correct when you think about these commercial items and the inflation recoveries. A portion of them, I just these are being negotiated throughout the year. A portion by default becomes retro.

Good morning.

Chris I guess afternoon to you.

I think Youre correct Youre absolutely correct. When you when you think about these commercial items and the inflation recoveries a portion of them.

These are being negotiated throughout the year a portion by default becomes retro. So there are some retro recoveries in the second quarter related to Q1, and a little bit from 2022, but it's primarily a Q1 issue as we push forward. So it's fair to say that our margin at RBS segment is going to peak in Q2 and normally.

Speaker 6: So there are some retro recovery in the second quarter related to Q1 and a little bit from 2022, but it's primarily a Q1 issue as we push forward. So it's fair to say that our margin in that our BES segment is going to peak in Q2 and normalize to those guidance range in the second half of the year.

Eyes to those guidance range.

In the second half of the year.

Louis Tonelli: Super, super-

But it does.

Speaker 6: But I don't want to, like there is a commercial portion, but the real drive here is volumes and execution on that volume increase. That is...

Patrick McCann: I don't wanna focus. Like, there is a commercial portion, but the real drive here is volumes and execution on that volume increase. That's really what's driving the performance improvement going forward.

I don't want.

Like there is a commercial portion, but the real driver here is volumes and execution on that volume increase that is.

Speaker 6: That's really what's driving the performance improvement. I keep it month forward. Keep in mind, in, you know, each few versus each one, we do see volumes down. So that's just regular seasonality, but volumes and sales will be expected to be down.

That's really what's driving the performance improvement and keep them out for and keep in mind.

Louis Tonelli: Keep in mind, you know, H2 versus H1, we do see volumes down. Just some of that's just regular seasonality, but volumes and sales will be expected to be down.

HP versus H, one when you do see volumes down just so that's just regular seasonality, but volumes and sales will be expected to be down.

Chris McNally: No. That makes sense. I mean, you know, one of the things we're in the analyst community dealing with is, you know, the suppliers are being appropriately conservative, but basically by your implied production, you have H2 down versus H1, which, where the forecasters have, you know, slightly up. That makes sense. If we stick on margin, seating, it looks like it's starting to turn a corner and seating has been, you know, this sort of persistent low margin. You had some of the BMW business that came on that had different margin characteristics.

Speaker 7: No, and that makes sense. I mean, you know, one of the things where in the analyst community, we're dealing with this.

No.

No that makes sense I mean.

One of the things we're in the analyst community, we are dealing with this.

The suppliers are being appropriately conservative, but basically by your implied production you had second half down versus first half.

Speaker 7: The suppliers are being appropriately conservative, but basically by your implied production.

Speaker 7: You have second half down versus first half, which the pork gets just slightly up. So that makes sense. If we stick on margin feeding, it's starting to turn a corner and seating has been this sort of persistent little marginy at some of the BMW business that came on in a different margin characteristics.

<unk> forecast.

Slightly up so.

That makes sense.

If we stick on margin feeding it looks like it's starting to turn a corner and seeding has been.

Sort of persistent low margin you had some of the BMW business that came on that at different margin characteristics.

Chris McNally: Are we turning a corner and does the European volumes that are turning actually start to really help here, which has been a drag for, you know, for several years?

Speaker 3: Are we turning a volume, turning it a corner, and does the European volumes that are turning actually start to really help here, which has been a drag for several years.

Are we turning a volume turning at a corner and.

Does the European volumes that are turning actually start to really help here, which has been a drag for for several years.

Swamy Kotagiri: Hi. Good morning, Chris, or good afternoon as Pat said. I think we talked about the mix issue that we've had in seating, right? That was disproportionately impacting us. As the volumes are coming back, and the mix is, you know, becoming more normalized than lopsided, we are starting to see those effects come through. I also have to give a lot of credit to the seating team on how they are being part of this overall initiative that we're looking at and starting to see the impact of that, whether it's some of the digitization efforts, some of just block and tackle type things that we're going through. We also talked about some of the wins in the truck segment in North America and some actual discussions on existing non-performing programs.

Hi, Good morning, Chris sorry production less pass that.

Speaker 3: I'm running Chris or a production as pass that I think we talked about makes issue that they've had in sitting right that was

I think.

We talked about the mix issue that <unk> had in seating right. Therefore.

Speaker 3: This, unfortunately, impacting us and as the volumes are coming back at the mixes, becoming more normalized than lost-sided, we are starting to see those effects come through. But I also have to give a lot of credit to the seeding team on how they're...

Disproportionately impacting us and as the volumes are coming back and the mixes.

Becoming more normalized than lopsided, we are starting to see those effects come through but I also have to give a lot of credit to the seating team on how theyre being part of this overall initiative that we're looking at and starting to see the impact of that.

Speaker 3: being part of this overall initiative that we're looking at and starting to see the impact of that, whether it's some of the digitization effort, some of just block and tackle type things that we're going through. And we also talked about some of the...

Whether it's some of the Digitization that put some of them just block and tackle type things that were going through and we also talked about some of the.

Speaker 3: wins in the truck segment in North America and some actual discussions on existing non-performing programs. It's a combination of all of this that we are seeing today. In fact, just not today, but I think we are very optimistic about what we could see in the coming years in seeding.

Vince.

In the truck segment in North America, and some actual discussions on existing nonperforming.

Swamy Kotagiri: It's a combination of all of this that we are seeing the effect, just not today, but I think we are very optimistic about what we could see in the coming years in seating.

Programs.

Swamy Kotagiri: It's a combination of all of this that we are seeing the effect, just not today, but I think we are very optimistic about what we could see in the coming years in seating.

It's a combination of all of this that we are seeing today in fact, just not today, but I think we are very optimistic.

Domestic about what we could see in the coming years in seating.

Chris McNally: Okay. Great. I'll hold back on the ADAS and the radar questions. I look forward to the event in September. Thanks so much.

Okay, great and I'll hold back on the Adas and the radar questions look forward to the to the events in September thanks, So much.

Speaker 7: Great, and I'll hold back on the ADAS and the radar questions look forward to the event in September . Thanks so much.

Patrick McCann: Great.

Swamy Kotagiri: Thank you.

Great. Thank you.

Operator: Thank you. Our next question comes from the line of Mark Delaney with Goldman Sachs. Please proceed with your question.

Speaker 1: Thank you. Our next question comes on the line of Mark Delaney with Goldman Sachs. Please proceed with your question.

Thank you.

Our next question comes from the line of Mark Delaney with Goldman Sachs. Please proceed with your question.

Mark Delaney: Good morning. Thank you very much for taking my questions. I believe last year Magna's megatrend revenue was about $1 billion, and I think you guided it to approximately double this year and then to reach about $4 billion in 2025, excluding the Veoneer Active Safety. Now, given some of the volatility that's been happening with some of the EV plans from certain OEMs, I'm curious if you could give us an update about how you're tracking in those megatrend areas relative to the prior targets.

Speaker 8: Good morning. Thank you very much for taking my questions. I believe last year, Magnus Megatrend revenue was about a billion, and I think you guided it to approximately double this year, and then to reach about four billion in 2025, excluding the near active safety. I give them some of the volatility that's been happening with some of the EV plans from during OEMs. I'm curious if you give us an update about how you're tracking in those Megatrend areas relative to the parts.

Good morning. Thank you very much for taking my questions I believe last year Magna as Mega trend revenue was about 1 billion and I think you guided it to approximately double this year and then to reach about $4 billion in 2025, excluding venier active safety given some of the volatility that's been happening with some of the EV plan.

From certain Oems I'm curious if you could give us an update about how youre tracking and those megatrend areas relative to the prior targets.

Swamy Kotagiri: Hi, good morning, Mark. I would say to answer your question, looking at what we know today, obviously in terms of take rates and so on and so forth, we are tracking to what we had talked about. You mentioned the numbers, it's roughly about $4 billion in 2025, right? As you said, it's very early days of electrification, I think. We all know that it's a secular trend for sure, and it's here to stay. The real trick is in predicting the trajectory. You know, that's something that we all have to wait and see. We are taking, you know, all the tools in the toolbox to look at, how can we have that flexibility and how can we pivot, how can we look at different programs and so on and so forth.

Hi, good morning, Mark.

Speaker 3: Hi, good morning Mark. I would say to answer your question, looking at what we know today, obviously in terms of take rates and so on and so forth, we're tracking to what we had talked about. And you mentioned the numbers, it's roughly what for began in 2025, right?

Hi.

I would say to answer your question looking at what we know today, obviously in terms of take rates and so on and so forth. We are tracking to what we have talked about and you mentioned the numbers, it's roughly about 4 billion in 2025 right.

<unk>.

Speaker 3: But as you said, it's very early days of electrification, I think we all know that it's a secular trend for sure and it's here to stay. But the real trick is in predicting that trajectory. You know, that's something that we all have to wait and see. And we're taking, you know, all the tools in the toolbox to look at.

But as you said, it's very early days of electrification I think.

I'll note that it's a secular trend for short and it's here to stay.

But the real trick is.

Predicting their trajectory.

That's something that we all have to wait and see and we are taking you know all the tools in the toolbox to look at.

Speaker 3: How can we have that flexibility and how can we pivot, how can we look at different programs and so on and so forth. But overall, whether it's electrification or ADAS, I think we're tracking to the numbers that we talked about.

How can we have that flexibility and how can we pivot.

When we look at different programs and so on and so forth, but overall, whether it's electrification or as I think we are tracking to the numbers that we talked about.

Swamy Kotagiri: Overall, whether it's electrification or ADAS, I think we are tracking to the numbers that we talked about.

Mark Delaney: That's helpful. In terms of the margin improvement opportunities, you know, you spoke a little bit around commercial negotiations already. Slide 9 though mentions repricing underperforming programs as one of the margin opportunities. I was hoping to understand that dynamic specifically, if possible, and to have a better sense of how broad-based these underperforming programs are. I mean, is it isolated to a few or is that a wider initiative? You know, any color you can share on your progress and, you know, how likely you think it is that you'll be able to restructure some of those programs? Thanks.

Speaker 9: that's that this level and then in terms of the

That's helpful and then in terms of the <unk>.

Speaker 8: margin improvement opportunities. You know, you took a little bit around commercial negotiations already. Slide nine, they'll mention repricing underperforming programs is one of the margin opportunities. So I was hoping to understand that dynamic specifically if possible and have a better sense of how broad-based these underperforming programs are. I mean, is it isolated to a few or is that a wider initiative and any color you can share on your progress and how, you know, how likely you think it is that you'll be able to restructure some of those programs?

Margin improvement opportunities.

Look a little bit around commercial negotiations already slide nine I mentioned repricing underperforming programs. There's one on the margin opportunity. So I was hoping to understand that dynamic specifically if possible to have a better sense of how broad based are these underperforming programs or I mean is it isolated to a few or is that a wider initiative and any.

Any color you can share on your on your progress and how.

How likely you think it is that youll be able to restructure some of those programs.

Swamy Kotagiri: Hey, Mark Delaney, I wouldn't call it wider. It's actually call it a granular look, which is a normal process. It's very targeted, very granular, very deliberate. We are looking at programs as they come towards the end of a program, right, end of production cycle. There are some where there is replacement coming through. There is some, you know, extensions that come through. We look at all of these opportunities and sometimes it's change of scope on the project. We are looking at everything out there to see how do we effectively, you know, reprice, get the economics to where they really need to, which meets our financial hurdles. I can definitely say we have had success in some of these cases, and some are still an ongoing discussion.

Swamy Kotagiri: Hey, Mark, I wouldn't call it wider. It's actually call it a granular look, which is a normal process. It's very targeted, very granular, very deliberate. We are looking at programs as they come towards the end of a program, right, end of production cycle. There are some where there is replacement coming through. There is some, you know, extensions that come through. We look at all of these opportunities and sometimes it's change of scope on the project. We are looking at everything out there to see how do we effectively, you know, reprice, get the economics to where they really need to, which meets our financial hurdles. I can definitely say we have had success in some of these cases, and some are still an ongoing discussion.

Great markets.

Speaker 3: In markets, I would call it wider. It's actually very, call it a granular look, which is a normal process. It's very targeted, very granular, very deliberate.

Colleague wider factually.

We collect a granular loan book, which is a normal process, it's very targeted very granular very deliberate.

Speaker 3: We are looking at programs as they come towards the end of the program, right? End of production cycle. There are some ways, there is replacement coming through, there is some allowries, like extensions that come through. We look at all of these opportunities and sometimes it's changes scope on the project.

We are looking at programs as they come towards the end of the program right.

Production cycle.

There are some way if there is a replacement coming through there is some inventories are extensions that come through.

All of these opportunities and sometimes it changes.

Change of scope on the project has been looking at everything out there to see how can we effectively.

Speaker 3: We are looking at everything out there to see how to be effectively, you know, reprise, get the economics to where there really need to, which meets our financial hurdles. And I can definitely say we have had success in some of these cases and some are still an ongoing discussion.

Reprice.

Get the economics to rapidly meet too which meets our financial hurdles.

<unk> and I can definitely say, we have had success in some of these cases.

And some are still an ongoing discussion.

Mark Delaney: Thank you. I'll turn it over.

Thank you I'll turn it over.

Okay.

Operator: Thank you. Our next question comes from the line of Tom Narayan with RBC. Please proceed with your question.

Thank you. Our next question comes from the line of Tom Narayan with RBC. Please proceed with your question.

Speaker 1: Our next question comes from the line of Tom Narayan with RBC. Please proceed with your question.

Tom Narayan: Hi, guys. Thanks for taking the question. The first one is, could you remind us what your, I guess your D3 US exposure is? Just asking and just maybe, it may help us understand maybe how we should think about potential strike implications.

Hi, guys. Thanks for taking the question.

Speaker 2: Hi guys, thanks for taking the question. The first one is, could you or remind us what your, Mr. D3 US exposure is? Just asking and just may help us understand maybe how we should think about potential strike implications.

The first one is could you remind us what your I guess your <unk> III.

U S exposure is.

Just asking just me it may help us understand maybe how.

How we should think about potential strike applications.

Patrick McCann: Yeah, I think I'm gonna say we're probably 75% in North America. We're about 75% of our business in that area. We do disclose that. I haven't got that handy, but it's in that range.

Yeah, I think I'm going to say, we're probably 75% in North America, we're about 75% of our business in that area.

Speaker 7: Yeah, I think I'm going to say we're probably 75% in North America. We're going to be 70% of our business in the area.

Speaker 7: You just close the, like, I haven't got that handy, but it's in that range.

We do disclose that I haven't got that Andy but its in that range.

Tom Narayan: Okay. Any details like splitting

Speaker 2: okay in any faction ok and anything which is... an Indonesian

Okay, and it always feels like splitting.

Swamy Kotagiri: The North American business.

Patrick McCann: The North American business.

The North American business.

Tom Narayan: Any breakout of the three OEMs or?

Any breakout of the three Oems or I can do.

Speaker 2: Any breakout of the three aliens or I can get that for you. Tell me I don't have it on my finger tips. Okay.

Patrick McCann: I can get that for you, Tom. I don't have it at my fingertips.

Get that for you Tom I don't have it at my fingertips, Okay. Okay no worries.

Tom Narayan: Okay. Okay, no worries. The other one is, you know, we've been hearing about some BEV slowdown chatter, specifically with legacy North American OEMs. It's coming up in a lot of these supplier calls. Just curious if you're seeing this, if this is impacting kind of your EV business, kind of more near term, or if you're seeing anything there.

Speaker 2: And then the other one is, you know, we've been hearing about some

And then the.

The other the other one is we've been hearing about some.

Speaker 2: some VEV slowdown chatter, specifically with legacy North American opians. It's coming up in a lot of these supplier calls.

Some of the slowdown.

<unk>, specifically with legacy North American Oems.

It's coming up in a lot of the supplier calls.

Speaker 2: Just curious if you're seeing this, if this is impacting kind of your easy business, kind of more near term, or if you're seeing anything there.

Just curious if you're seeing this if this is impacting kind of.

Your <unk> business.

More near term.

Or if youre seeing anything there.

Swamy Kotagiri: Yeah, Tom, good morning. This is Swamy. I think if you look at it, I mean, really the EV business is just at a, call it early days. It's just launching and it's just taking. If you look at the numbers, right, we are like what, 2 million or so in vehicles. So it's more about how you position yourself on the right programs and, you know, looking at each of this, how we go about and what type of thinking you have in processing these programs. I think that's the important part. I don't know. If you go back two or three years, we talked with a different tone, and today it's with a different tone. I think we need to take a more calm approach.

Speaker 3: Yeah, Tom, good morning. This is Swami. I think if you look at it, I mean, really, the UV business is just a very quality day. It's just launching and it's just taking. If you look at the numbers, right, we are like what, two million or so in vehicle. So it's more about how you position yourself on the right programs and, you know, looking at each of this, how we go about. And...

Yeah, Tom Good morning. This is swamy I think if you look at it I mean.

Really the Hubert business.

Take a call. It early days is just launching and just taking a look at the numbers right. We have like one 2 million or so.

Vehicles so.

It's more about how you position yourself on the right programs and looking at each of this how we go about and what type of.

Speaker 3: what type of thinking you have in processing this program. I think that's the important part.

Thinking you'll have in processing. These programs I think that's the important part.

Speaker 3: I don't know if you go back two or three years, we talked with a different tone and today it's with a different tone. I think we need to take a more calm approach. And as I said, I believe, and we believe at Magnet that it's a friend here to stay, we have to figure out how to manage the transition. And that's where our focus is.

I don't know if you go back two or three years.

We talked with a different tone and today, it's with a different tone.

I think we need to take a more calm approach and as I said I believe and we believe that magna that it's a trend here to stay.

Swamy Kotagiri: As I said, I believe and we believe at Magna that it's a trend here to stay. We have to figure out how to manage the transition and that's where our focus is.

We have to figure out how to manage that transition and that's where our focus is.

Tom Narayan: Okay, thanks. Then lastly, if I look at these two segments that I think were pretty interesting in Q2, you know, BES, very strong and then P&V maybe a little bit lighter than maybe some folks expected, but then you've raised sales forecasts for both. I know things can be kind of lumpy from quarter to quarter. Just curious about Q2 sustainability in these two segments in H2. Clearly, you're expecting an improvement in P&V. How should we think about, yeah, these two segments, Q2 versus H2? Thanks.

Speaker 2: Okay, thanks. And then lastly, if I look at the two segments, I think we're pretty interesting in Q2, BNS, very strong, and then PNV, maybe a little bit lighter than maybe some folks expected, but then you raise sales forecast for both.

Okay. Thanks, and then lastly, if I look at the two segments I think were pretty interesting in Q2.

BNS very strong and then <unk>, maybe a little bit lighter than maybe some folks expected, but then you've raised sales forecast for both.

Speaker 2: I know things can be kind of lumpy from quarter to quarter. Just curious about Q2 sustainability in these two segments in NH2, clearly, or as you're expecting improvement in P and V. And I should we think about, yeah, these two segments, Q2 versus H2. Thanks.

Things can be kind of lumpy from quarter to quarter, just curious about Q2 sustainability in these two segments in each to clearly I guess, you're expecting an improvement in <unk> and how should we think about these two segments Q2 versus HD.

Swamy Kotagiri: Yeah. I think we touched on some of the factors that contributed to the strong BES contribution, right? We kinda see that going forward. There's no reason for us to think any different, given there is no other major disruption or some industry-wide thing. We are starting to see, like I said, the efforts on all the initiatives that we have in place and stability in production and increasing volumes. The P&V, as you mentioned, really, the net input costs were a headwind year over year in the H1. The acquisition of Veoneer Active Safety negatively impacted the Q2. You know, we talked about a few things in the Q1, which was a warranty item. There was a net negative commercial items in Q2 and some higher engineering costs that were associated with the launch of the program.

Yes, I think we've touched on some of the factors that contributed to the strong b, yes contribution right and we kind of see that going forward. There is no reason for us to think any different.

Speaker 3: Yeah, I think we touched on some other factors that contributed to this strong BES contribution, right? And we kind of see that going forward. There is no reason for us to think any different. Given there is no other major disruption or some industry, why I think we are starting to see, like I said, the efforts on all the initiatives that we have in place and stability in production and increasing volumes.

Given there is no other major disruption or some industry wide thing.

We are starting to see like I said the efforts on all the initiatives that we have in place and stability in production and increasing volumes.

Speaker 3: The P&V, as you mentioned, really, the net input cost where a headwind year over year in the first half.

<unk> as you mentioned really.

The net input costs were a headwind year over year in the first half the acquisition of <unk>.

Speaker 3: The acquisition of Reunion Active Safety negatively impacted the Q2.

<unk> safety negatively impacted the Q2.

Speaker 3: And we talked about a few things in the first quarter, which was a warranty item. There was a net negative commercial items in Q2, and some high-ranging cost that were associated with the launch of the program. So operationally is good. All of this.

And we've talked about a few things in the first quarter, which was a warranty item. There was a net negative commercial items in Q2, and some hiring training costs that were associated with the launch of the program.

Swamy Kotagiri: Operationally, it's good. All of this, call it one-timers, you know, were lumped in H1. We see going forward, if you exclude those things, a better run rate.

So operationally it's good all of this call it one timers.

Speaker 3: Colleague, one-timers, you know, were lumped in the first half of the year. So we see going forward if you exclude those things a better one day. Yeah, if you kind of...

And we're locked in the first half of the year. So we see going forward. If you exclude those things a better run rate and if.

Louis Tonelli: Yeah. If you're kind of excluding those items, the pull-through is actually quite good in P&V in the quarter.

Patrick McCann: Yeah. If you're kind of excluding those items, the pull-through is actually quite good in P&V in the quarter.

If you kind of.

Speaker 7: Excluding those items the poll through is actually quite good in PMV and the quarter

Excluding those items the pull through was actually quite good in PV in the court.

Swamy Kotagiri: Exactly.

Colin Langan: Got it. Okay. Thanks a lot.

Tom Narayan: Got it. Okay. Thanks a lot.

Got it okay. Thanks a lot.

Yes.

Operator: Thank you. Our next question comes from the line of Colin Langan with Wells Fargo. Please proceed with your question.

Yeah.

Speaker 1: Thank you. Our next question comes from a line of Colin Langen with Wells Fargo. Please proceed with your question.

Thank you. Our next question comes from the line of Colin Langan with Wells Fargo. Please proceed with your question.

Colin Langan: Oh, great. Thanks for taking my questions. Just at a high level, if I look at the guidance H1 to H2, you have sales down $600 million, and that's with Veoneer, which I assume that means it's over $1 billion in H1, H2, but EBIT up. What are the major puts and takes that get that up? I assume also that the guidance doesn't include any sort of factor for UAW. Confirm that.

Speaker 2: Oh, great. Thanks for making my questions. Just at a high level, if I look at the guidance first half to second half, you have sales down to 600 and that's with me in here, which

Oh, great. Thanks for taking my questions.

Just at a high level, if I look at the guidance first half to second half you have sales down six hunters and that's what's being here, which I assume that means that's over $1 billion in first half second half, but EBIT up so what are the major puts and takes that get that up and I assume also that the guidance doesn't include any sort of.

Speaker 2: So what are the major puts and takes? I assume also that the guidance doesn't include any sort of factor for you.

Factor for you light up here.

Uh huh.

Patrick McCann: Sorry. Morning, Colin. H1 versus H2, I think was your question, just the Magna consolidated variance. The second part of your question was, you're correct. We haven't modeled in or factored in a UAW disruption, if any. I think Swamy's touched on a lot of the points, but big picture, when you take a step back and look at our H1 versus H2, there's a couple of factors. We expect on the recoveries, we expect those to be more back half versus first half, and that's what we've projected from beginning of the year, and that's what we're continuing to see. That's number one. Number two, there were some discrete items that happened in the first half of the year that aren't expected to recover.

So your so called good morning, Colin so.

Speaker 6: H1 versus H2, I think was your question just the magnet consolidated variance. So the second part of your question was you're correct. We haven't modeled in or factored in a UAW disruption if any. When you think of, I think Swami has touched on a lot of the points, but big picture when you take a step back and look at our H1 versus H2, there's a couple of factors. The...

H one versus age two I think was your question just the can.

Can exit consolidated variance. So the second part of your question was you're correct, we haven't modeled in or factored in the UAW disruption if any.

When you think about I think <unk> touched on a lot of the points, but big picture when you take a step back and look at our H one verse Sage two there's a couple of factors.

<unk>.

The.

Speaker 6: We expect, on the recovery, we expect those to be more back half versus first half. And that's what we've projected from beginning of year and that's what we're continuing to see. So that's number one. Number two, there were some discrete items that happened in the first half of the year.

We expect on the on the recoveries, we expect those to be more back half versus first half and that's what we've projected from beginning of the year and that's what we're continuing to see so that's number one number two there were some discrete items that happened in the first half of the year.

Speaker 6: that aren't expected to recover. So when we touched on the warranty issue that we had in Q1, there was a few commercial settlements that had happened that positively impacted us that were in the second quarter that were retro back into.

Not unexpected recover swamy touched on the warranty issue that we had in Q1 there was.

Patrick McCann: Swamy touched on the warranty issue that we had in Q1. There was a few commercial settlements that had happened that positively impacted us that were in the second quarter that were retro back into Q1 and a portion back into Q2. Then as we move forward, we're still seeing stabilization of the production schedules, which is benefiting us. I think, again, I just wanna reinforce, when you come in with a lot of these operational improvements that we talk about is they take time to gain traction. You implement a strategy, and then you start permeating them across the various divisions, and you gain acceleration as you go through. For example, Swamy touched on our ability to make improvements on our underperforming division in Germany. That's what we're seeing.

A few commercial settlements that had happened that positively impacted us that we are in.

In the second quarter that were retro back into queue.

Q1, and a portion back into Q2.

Speaker 6: Q1, the portion back into Q2. And then as we move forward,

And then as we move forward.

Speaker 6: We're still seeing stabilization of the production schedules, which is benefiting us. I think, again, I just want to reinforce, when you come in with a lot of these operational improvements that we talk about is they take time to gain traction. You implement a strategy, and then you start.

We're still seeing stabilization of the.

<unk> production schedules, which is benefiting us, but I think again I just want to reinforce.

When you come in with a lot of these operational improvements that we talk about as they take time to gain traction. So will you implement a strategy and then you start.

Speaker 6: permutating them across the various divisions and you gain acceleration as you go through. So for example, Swami touched on our ability to make improvements in our underperforming division in Germany, that's what we're seeing. So those are sequential improvements that we're seeing from H1 and H2. And then obviously the acquisition of V&EAR comes in in the second half of the year with the $1 billion of sales.

Mutating them across the various divisions and you gain acceleration.

As you go through so for example, swamy touched on our ability to make improvements in our underperforming division in Germany. That's what we're seeing so those are sequential improvements that we're seeing from each one of the H two.

Patrick McCann: Those are sequential improvements that we're seeing from H1 into H2. Obviously, the acquisition of Veoneer comes in in H2 with about $1 billion of sales coming in, which strikes the margin, as we pointed out, by about 20 basis points, which goes the other way.

And then obviously the acquisition of <unk> near comes in.

In the second half of the year with about $1 billion of sales.

Speaker 6: coming in which which does strike the margin as we pointed out by a book 20 basis points which post the other way.

Coming in which which does strike in margin.

As we pointed out by about 20 basis points, which goes the other way.

Colin Langan: Got it. Any color on the change in adjusted EBIT, you know, now excluding amortization, how big of a factor will that be? I wasn't really sure. I think you didn't include it as an adjustment in Q1, Q2, but for the rest of the year it'll be adjustments. Does Q1, Q2 eventually get restated to exclude amortization too? Will that be driving some of the comparisons we're looking at?

Speaker 2: Any color on the change in Adjusted EBIT, you know now excluding Emeritization, how big of an effect or will that be? And then wasn't really sure. I think you didn't include it as an adjustment in Q1, Q2, but for the rest of the year, it'll be in adjustments. So, Q1, Q2 eventually get restated to exclude Emeritization 2 and Lapi driving from the comparison.

Got it.

And any color on the change in.

Adjusted EBIT now excluding amortization.

Big of a factor will that be and then I wasn't really sure I think you didn't include it as an adjustment in Q1 Q2, but for the rest of the year it'll be adjustments or does Q on Q to eventually get restated to exclude amortization too and well that'd be driving some of the comparisons we're looking at.

Louis Tonelli: Yeah. We're still working through the impacts. It'll take a little bit of time to refine that calculation, but our estimate on an annual basis is about $60 million, so about $30 million in H2.

Speaker 6: We're still working through the impacts and taking a little bit of time to refine that calculation, but our estimate on an annual basis is about $60 million, so folks are already in the back half of the

Yes, we're still working through that.

The impacts will take a little bit of time debt to refine that calculation, but our estimate on an annual basis is about $60 million. So up 30 in the back half of the year.

Patrick McCann: Colin, that's preliminary. That's part of the reason we're excluding it as well at this point. Just the basis for why we've done it, so you're correct. On a go-forward basis, we're gonna exclude it. What we're excluding specifically is acquired purchased intangibles. So the amortization of such amounts. It's not regular increments. The reason we're doing it is, effectively, we're trying to improve how we manage our businesses. We have an existing electronics business, roughly the same size as the acquired entity, and we wanna manage, you know, evaluate them, their performance and their execution on an apples-to-apples basis. That's why we've made the decision to exclude it.

And Collyn that's preliminary that's part of the reason, we're excluding that as well at this point, but just the basis for why we've done. It. So you are correct on a go forward basis, we're going to exclude it and what we are excluding specifically is declared purchased intangibles.

Speaker 10: and calling that's preliminary, and that's part of the reason we're excluding it as well, at this point, but just the basis for why we've done it. So you're correct, we're on a go-forward basis, we're gonna exclude it. And what we're excluding specifically is acquired purchased intangibles. So the amortization of such amounts, so it's not regular increments. And the reason we're doing it is,

So the amortization of such amount so it's not regular increments and the reason we're doing it is.

Speaker 10: effectively we're trying to improve how we manage our businesses so we have an existing

Effectively we're trying to improve how we manage our businesses. So we have an existing electric.

Speaker 10: Electronics business, roughly the same size as the acquired entity, and we want to manage, you know, evaluate them their performance and their execution on an Apple's, Apple's basis. So that's why we've made the decision to exclude it. The other factor was when you, from an investor's perspective, when we're thinking about sitting in your seat is, I want to be able to evaluate how magnets, electronics, businesses performing versus our peers. And we did an analysis.

Electronics business roughly the same size as the acquired entity and we want to manage it.

Evaluate them their performance of their execution on an apples to apples basis. So that's why we've made the decision to exclude it. The other factor was when you from from an investor's perspective.

Patrick McCann: The other factor was from an investor's perspective, when we're thinking if I was sitting in your seat, is I wanna be able to evaluate how Magna's electronics business is performing versus our peers. We did an analysis, just to make sure we're consistent with our peer group in that regard.

We were thinking.

I was sitting in your seat is I want to be able to evaluate.

Evaluate held magna's electronics business is performing versus our peers and we did an analysis.

Speaker 10: just to make sure we're consistent with our peer group in that regard.

Just to make sure we're consistent with our peer group in that regard.

Colin Langan: Just one quick follow-up. The $60 million estimate, is that just Veoneer? Because I think there's in the 10-K, so there'd be around $90 million of amortization, you know, just going into the year. Does that also get pulled out so I'm comparing apples to apples?

And just one quick follow up the 60 million estimate is that just being here because I think there's about a 10-K said there'd be around $90 million.

Speaker 2: just one quick call. The 60 million estimate is that just be in here? Because I think there's about the 10K for the beer on 90 million of ourization.

Amortization.

Just going into the year. So that also get pulled out I'm comparing apples to apples.

Patrick McCann: We're talking specifically amortization of acquired intangibles. I don't know what the $90 you're referring to is. There's other amounts. If you're referring back to the cash flow statement, there's other amounts in that $90.

So you're talking.

Speaker 7: So you're talking, it wears talking specifically amortization of acquired intangibles. I don't know what the 90 you're referring to is.

Talking specifically.

Amortization of acquired intangibles I don't know what the 19, you're referring to is.

Speaker 7: If you're referring back to the cash flow statement, there's other amounts in that 90. But the approximately 60.

Theres other if you referred back to the cash flow statement.

They're a bounce in that 90%.

Louis Tonelli: The approximately 60 is Veoneer Active Safety.

But the approximately $60 would be in there.

In active safety.

Colin Langan: Okay. That, that'll be the full year charge going forward, $60 million will be pulled out as a special item. It's kind of the.

Okay. So that that would be the full year charge going forward 60 million will be pulled out of the special items kind of them.

Speaker 2: Okay, so that will be the full year charge going forward 60 million will be pulled out of the special life.

Patrick McCann: Once we finalize the purchase accounting-

Speaker 7: approximately once you finalize the appropriate account if I can do that correct.

Once we finalize the purchase accounting to that correct.

Louis Tonelli: Yes, if I do that.

Patrick McCann: Correct.

Colin Langan: Okay. All right. Thanks for taking my questions.

Okay, all right. Thanks for taking my questions.

Yeah.

Operator: Thank you. Our next question comes from the line of Dan Levy with Barclays. Please proceed with your question.

Speaker 1: Thank you. Our next question comes from the line of Ben Levy with Barclays. Please proceed with your question.

Thank you. Our next question comes from the line of Dan Levy with Barclays. Please proceed with your question.

Dan Levy: Hi, good morning. Thanks for taking questions. First wanted to go back to this theme of H1 to H2, and specifically wanted to focus on complete vehicles, where I think your guidance is implying the business to be, you know, almost break even, you know, just very slightly positive. There's some significant deceleration versus H1. So maybe you can just talk about some of the puts and takes on what's happening in complete vehicles in H2. You know, does this change the way we should think about the out year forecast for complete vehicles?

Speaker 11: Hi, good morning. Thanks for taking questions. First, I wanted to go back to this theme of first half of the second happen. Specifically, we wanted to focus on complete vehicles.

Hi, good morning, Thanks for taking the questions.

Just wanted to go back to this.

The first half the second happened specifically wanted to focus on the complete vehicle.

Where I think your guidance is implying.

Speaker 11: Um, where I think your guidance is implying. Business to be, you know, almost break even, you know, this is very slightly positive. There's a significant deceleration versus the 1st, half. And if you can just talk about some of the puts and takes on what's happening in complete vehicles in the 2nd, happened. Does this change the way we should think about the how year forecast for complete vehicles?

On the business to be.

Almost breakeven.

Slightly positive.

Significant deceleration versus the first half and maybe you can just talk about some of the puts and takes on what's happening in complete vehicles and so that can happen.

And does this change the way, we should think about the out year forecast both with vehicles.

Patrick McCann: Morning, Dan. I'm pausing here to answer. When you think about our complete vehicles business, you really have to consider a bunch of factors. One is what products are in that facility at that point in time. In H1, we were still producing the BMW 5 Series, and that's rolled off. Now we're in the middle of launching the Fisker program. What you see more broadly when you think about a European business like Steyr is there is a quite a difference in profitability between H1 and H2, just more broadly. I don't think...

Morning, Dan.

It's.

Speaker 7: I'm pausing here to answer. When you think about our complete vehicles business, you really have to consider a bunch of factors. What products are in that facility at that point in time? So in the first half of the year, we were still producing the BMW 5 Series and that's rolled off. And now we're going into, we're in the middle of launching the Fisker Program.

Im pausing here to answer them.

When you think about our complete vehicles business you really have to consider a bunch of factors. One is what products are in that facility at that point in time. So in the first half of the year, we were still producing the BMW five series and that's rolled off.

Now we're going into where.

In the middle of launching the Fisker program, but what you see more broadly when you think about our European business like Shire is there is.

Speaker 7: But what you see more broadly when you think about a European business like Steyr is there is,

There is a.

Speaker 7: Quite a difference in profitability in the first time for the year and the second half, the year just more broadly.

Quite a difference in profitability in the first half of the year in the second half year just more broadly.

Speaker 7: I don't, we haven't changed our expectations for, I keep saying that, but our complete vehicles business for the full year. We had a few, we had some positive engineering outcomes in the first half of the year, but those were factored in and we get into this.

I don't we haven't changed our our expectations for our I keep saying there, but our complete vehicles business for the full year, we had a few.

Patrick McCann: We haven't changed our expectations for Magna Steyr or I keep saying Steyr, but our complete vehicles business for the full year. We had some positive engineering outcomes in H1, but those were factored in. We get into H2, we're still pushing towards that target margin expectations. Long answer, but I don't see anything unusual in H2 that we should be reflecting just this launch. It's planned downtime.

We had some positive engineering outcomes in the first half of the year.

But those were factored in and we get into the second half.

Speaker 7: We're still pushing towards that that was margin expectations. So long answer, but I don't see anything unusual in this second half of the year. If that, that we should be reflecting just a bit of launch. And as it, but it's planned downtime. I mean, we started the year at one to one percent, the two percent, we're at 1.6 to 2.1. So it's all in. We're actually increasing our outlook in that.

Still pushing towards that gross margin expectations, So long answer, but I don't see anything unusual in the second half of the year.

That we should be reflecting just this launch.

And as it but its planned downtime.

Operator: I mean, we started the year at 1% to 2%. We're at 1.6% to 2.1%. All in, we're actually increasing our outlook in the complete vehicles.

Swamy Kotagiri: I mean, we started the year at 1% to 2%. We're at 1.6% to 2.1%. All in, we're actually increasing our outlook in the complete vehicles.

Starting here at 1% to 1% to 2% we're at one six to 201, so all in we're actually increasing our outlook and that complete vehicles.

Yeah.

Dan Levy: Right. I know that generally we shouldn't look at the quarter, as you know, there is seasonality and whatnot. Is that second half, I think you talked about it, specifically being dragged by launch of new programs? Or is there something just timing of input costs?

Speaker 11: Right, and I know that generally we shouldn't look at the quarterly, you know, there is seasonality and whatnot. But is that second half, I think you talked about it? Is that that specifically being dragged by launch of new programs or is there something just timing of input costs?

Right and I know that generally we shouldn't look at all the quarters, you know there is seasonality and whatnot, but.

Is that second half I think you can talk about it.

Specifically being dragged by launching.

New programs or there was something just timing of input costs.

Patrick McCann: No, it's a few of the German plants. If you think about what happened, it's primarily the launch, the planned downtime that you have through the summer, and then you have another downtime through the December period.

No.

Speaker 7: No, it's a few of the Burmer deaths. So if you think about what happened, it's primarily the launch, the planned downtime that you have through the summer, and then you have another downtime through the December period. And we've expected that through with the year, which is every single year. Okay. All right.

Just a few of the Bourbon <unk>. So if you think about what happened it's primarily the launch.

Planned downtime that you have through the summer and then you have another downtime through the.

December period, when we would expect it to add throughout the year, which is every single year.

Operator: We've expected that throughout the year.

Swamy Kotagiri: We've expected that throughout the year.

Patrick McCann: Which is every single year.

Dan Levy: Okay. All right. That's not something we should extrapolate going forward.

Okay, Alright, so that's not something we should extrapolate going forward.

Patrick McCann: No, absolutely.

No absolutely.

Dan Levy: Okay. Okay, great. Thank you. Second, Swamy, just a question on your vertical integration efforts in EVs. Historically in EV, you know, setting aside LG, you were mostly focused on the drive unit and you'd outsource motors and inverters. Can you just talk about the supply agreement with onsemi? Is this a foray into making your own inverters, or is this just a partnership to get inverters from a third party?

Speaker 7: Okay, great, thank you. Second, Swami, just a question on your vertical integration efforts in EVs. Historically in EV, setting aside LG, you were mostly focused on the drive unit and you outsourced motors and inverters.

Okay. Okay, great. Thank you.

And then second.

Swamy just a question on your vertical integration efforts in Evs historically.

Setting aside LG you were mostly focused on the drive unit you to outsource motors and Inverters.

Can you just talk about the supply agreement with on semi.

Speaker 7: Can you just talk about the supply agreement with on Semi? Is this a full ray into making your own inverter? Or is this just a partnership to get invertebrates from a third party?

Semi.

Is this a foray into making your own inventories or was this just a partnership to get injured or from a third party.

Swamy Kotagiri: Yeah. I think, Dan, we talked about it a little bit over time, right? In terms of the building blocks and what are some of the key pieces to get to the full eDrive system. Even before the LG JV that you mentioned, we made inverters, and we had the capacity to do that between Magna Powertrain and Magna Electronics group. We're just taking one step forward when we talk about onsemi. It's just looking at whether it is, you know, silicon carbide or GaN or something, just the overall power electronics strategy, how and what should we be doing. It is just part of that overall strategy. We always had the ability to do inverters. Now we're just doing it collectively, in our LG JV.

Speaker 3: Yeah, I think Dan, we talked about it a little bit over time, right? In terms of the building blocks and what are some of the key pieces to get to the full E-DRIG system. Even before the LGJV that you mentioned, we made it workers and we had the capacity to do that between Magna Plough train and Magna Electronics Group.

Yeah, I think Dan we talked about it that may make them more time right.

In terms of the building blocks and what are some of the key pieces to get to the E drive system.

Even before the <unk> JV that you mentioned be made it workers and we have the capacity to do that between Magna powertrain and Magna Electronics group.

Speaker 3: So we're just taking one step forward when we talk about anatomy. It's just looking at whether it is Silicon carbide or GAN or something, just big overall power electronics strategy. How and what should we be doing?

So we are just taking one step forward when we talk about on semi you just looking at whether it is silicon.

Silicon carbide are gone or something just think overall power electronics strategy.

Howard what should we be doing so it is just part of that overall strategy. So we always have the ability to do in water smart, we're just doing it collectively.

Speaker 3: So it is just part of that overall strategy. So we always had the ability to do inverters. Now we're just doing it collectively in our NGJB. So this is just for the vertical integration to bring value add into the system.

And our <unk> JV. So this is just further vertical integration to bring value added into our system.

Swamy Kotagiri: This is just further vertical integration to bring value add into the system.

Okay.

Dan Levy: Great. Thank you.

Great. Thank you.

Operator: Thank you. Our next question comes from the line of James Picariello with BNP Paribas. Please proceed with your question.

Speaker 1: Thank you. Our next question comes from the line of James Picarielo with B&P Parabas. Please proceed with your question.

Thank you.

Our next question comes from the line of James Picariello with BNP Paribas. Please proceed with your question.

Okay.

Speaker 15: Hi, everyone. Just to clarify, you know, more of a housekeeping item on the intangibles amortization. Can you just quantify for legacy Magna what the intangibles amortization amount was for last year? Just to have some bearing as to, I mean, I know it's immaterial, but what was that number?

James Picariello: Hi, everyone. Just to clarify, you know, more of a housekeeping item on the intangibles amortization. Can you just quantify for legacy Magna what the intangibles amortization amount was for last year? Just to have some bearing as to, I mean, I know it's immaterial, but what was that number?

Speaker 7: Hi everyone. Just to clarify more of a housekeeping item on the Integible Dimerization, can you just quantify for legacy magna what the tangible's amortization amount loads for last year just to have some bearing as to, I mean, I know it's in material, but...

Hi, everyone.

Just to clarify more of a housekeeping item on the intangibles amortization.

Can you just quantify for legacy Magna, what the intangibles amortization amount was for last year just to have some bearing as to I mean, I know, it's immaterial, but.

What was that number.

Patrick McCann: We'll have to get back to you, James, because it is immaterial. It wouldn't be a big number. If you think fundamentally, we haven't done an acquisition of a technology company, so we haven't experienced a situation where you have such a significant amount of acquired technology intangibles, and that's really what's driving the $60 million Louis was referring to. We can get back to you with the exact number, but it's not material.

We will have to get back to you James because it is immaterial it wouldn't be a big number.

Speaker 10: We'll have to get back to you James because it is immaterial. It wouldn't be a big number.

Speaker 12: If you think fundamentally, we haven't done an acquisition of a technology company. So we have an experience in this situation where you have such a significant amount of acquired technology intangibles. And that's really much driving the 60 million Lewis was referring to. But what we can get back to with the exact number.

If you think funding funded.

Fundamentally we haven't done an acquisition of a technology company. So we haven't experienced a situation where you have such a significant amount of.

Acquired technology intangibles, and that's really what's driving the $60 million Louis was referring to.

But what we can get back to you with the exact number.

Speaker 15: Okay. Understood. Just on Veoneer, it looks like the guide shows $1 billion in revenue and, based on the 20 basis points, you know, margin dilution impact about, you know, $30 to 35 million operating loss for the seven months. If we annualize that, right, for Veoneer, we'd be looking at $1.7 billion in revenue and an approximate $60 million operating loss. Just curious if you could, you know, kind of bless, you know, the thinking on, you know, the annualized run rate for being near here.

James Picariello: Okay. Understood. Just on Veoneer, it looks like the guide shows $1 billion in revenue and, based on the 20 basis points, you know, margin dilution impact about, you know, $30 to 35 million operating loss for the seven months. If we annualize that, right, for Veoneer, we'd be looking at $1.7 billion in revenue and an approximate $60 million operating loss. Just curious if you could, you know, kind of bless, you know, the thinking on, you know, the annualized run rate for being near here.

But it's not material.

Understood.

Speaker 7: And then just on V&Ear, it looks like the guide shows a billion in revenue and based on the 20 basis points margin-delusion impact about 30 to 35 million operating loss.

And then just on veneer it looks like the guide shows $1 billion in revenue and based on the 20 basis points margin dilution impact about $30 million to $35 million operating loss.

Speaker 7: Uh, for the 7 month, the 7 months, if we annualize that. Right for being here, we'd be looking at 1.7B in revenue and an approximate 60M operating loss.

For the seven months seven months, if we annualize that right for being here, we'd be looking at $1 7 billion in revenue and an approximate $60 million operating loss. Just curious if you could kind of bless that.

Speaker 7: Just curious if you could kind of bless the thinking on the annualized run rate for

Thinking on.

The annualized run rate for being here.

Swamy Kotagiri: Yeah. I think maybe there's two things to consider, Pat, you can add to it. I think when we bring all of this stuff together, there is synergies in terms of how we look at platforms, how we look at, you know, coordinated efforts on some core projects, some purchasing initiatives. I think it's better maybe, in my opinion, to look at run rates going forward from the combined entities rather than look at each one separately. Hopefully we'll be able to give some color, you know, when we talk in September. You know, all of this will be included when we come back as we're doing all, you know, bottoms up, you know, the business planning process, and will be included when we come out and talk in 2024.

Yeah, I think maybe there is two things to consider or perhaps you can add to it.

Speaker 3: Yeah, I think maybe there's two things to consider, but you can add to it.

Speaker 3: I think when we bring all of this stuff together, there is synergies in terms of how you look at platforms, how you look at coordinated efforts on some core projects.

I think when we bring all of this talk together there is synergies in terms of a positive look at platforms, probably look at you know coordinated efforts on some core projects.

Speaker 3: some purchasing initiatives. So I think it's better, maybe my opinion, to look at run rates going forward from the combined entities rather than look at each one separately. And hopefully we'll be able to give some color when we talk in September , but all of this will be included when we come back as we're doing all you know, bottom stop.

Some purchasing initiatives. So I think it's better maybe my opinion to look at run rates going forward from the combined entities rather than look at each one separately.

And hopefully we'll be able to give some color.

When we talk in September but.

Now all of this will be included when we come back as we're doing all.

Bottoms up you know the business planning process and will be included when we come out and talk in 2024.

Speaker 3: the business planning process and we'll be included when we come out and talk in 2024.

Yeah.

Speaker 15: Okay. All right. That's all for now.

James Picariello: Okay. All right. That's all for now.

Speaker 7: Okay. All right, that's all for all. Thank you. Thank you. Sorry, James, did they keep mine? Well, we said earlier about neutral in 2024 rate, so Matt, tell us something about the run rate relative to the back half of the year.

Okay, Alright, that's helpful.

Swamy Kotagiri: Sorry, James. Keep in mind what we said earlier about neutral in 2024, right? That tells us something about the run rate relative to the back half of the year.

Sorry, James do they keep in mind, what we said earlier about a neutral in 2024 rate something that tells us something about the run rate relative to the back half of the year.

Speaker 15: Yeah.

James Picariello: Yeah.

Swamy Kotagiri: Neutral and even.

Yes neutral on EBIT.

Speaker 15: In Q2, just a quick one, was there any retroactive, you know, material recovery, you know, tied to Q1 in the Q2 numbers, you know, particularly in, you know, in the Body Exteriors and Structures segment? Thanks.

Speaker 7: In the second quarter, just a quick one, was there any retroactive material recovery tied to the first quarter in the second quarter numbers, particularly in the body, exterior instructor segment? Thanks.

James Picariello: In Q2, just a quick one, was there any retroactive, you know, material recovery, you know, tied to Q1 in the Q2 numbers, you know, particularly in, you know, in the Body Exteriors and Structures segment? Thanks.

In the second quarter, just a quick one was there any retroactive material recovery tied to the first quarter in this in the second quarter numbers, particularly in.

In the body exteriors <unk> structures segment.

Thanks.

Patrick McCann: Yeah. I think we talked about this earlier, James. I'm not gonna repeat everything, but the short answer is yes.

And so I think we've talked about this earlier.

Speaker 10: James, I'm not going to repeat everything, but the short answer is yes.

So I am not going to.

Repeat everything but the short answer is yes.

Speaker 15: Yeah. Okay. No, you just can't qualify it.

James Picariello: Yeah. Okay. No, you just can't qualify it.

Okay.

You just can't quantify it.

Patrick McCann: No.

No.

Speaker 15: Okay. Thank you.

James Picariello: Okay. Thank you.

Okay. Thanks.

Operator: Thank you. Our next question comes from the line of Brian Morrison with TD Securities. Please proceed with your question.

Thank you our.

Speaker 1: Thank you. Our next question comes from the line of Brian Morrison with TD Securities. Please proceed with your question.

Our next question comes from the line of Brian Morrison with TD Securities. Please proceed with your question.

Speaker 16: Oh, good morning. I have a housekeeping question as well. Pat or Swamy, in the prepared comments on net inflationary costs, you said something to the tune of incremental $100 million for 2023, and you'd recover half of that. Can you just clarify what the net exposure is now? I know you started the year at $680 million. You made progress in Q1. You did an update on scrap and energy, but start with the $680 and update what's baked into your new guidance, and maybe break down what is labor and what's commodity, please. I think labor was about $200 million of your previous forecast.

Brian Morrison: Oh, good morning. I have a housekeeping question as well. Pat or Swamy, in the prepared comments on net inflationary costs, you said something to the tune of incremental $100 million for 2023, and you'd recover half of that. Can you just clarify what the net exposure is now? I know you started the year at $680 million. You made progress in Q1. You did an update on scrap and energy, but start with the $680 and update what's baked into your new guidance, and maybe break down what is labor and what's commodity, please. I think labor was about $200 million of your previous forecast.

Hello, Good morning, I had a housekeeping question as well so powder swamy in the prepared comments on net inflationary costs and you said something to the tune of incremental $100 million for 2023, and you would recover half of that can you just clarify what the net exposure is now I know you started the year at 680 million need progressing Q on Q1, you Didnt update on scrap and <unk>.

Speaker 7: Oh, good morning. I have a housekeeping question as well. Phil, Pat or Swami, in the prepared comments on net inflationary costs, you said something to the tune of an increment to 100 million for 2023, and you'd recover half of that. Can you just clarify what the net exposure is now? I know you started the year at 680 million. You need progress in Q1. You did an update on scrap and energy, but start with the 680, and update what's baked into your new guidance, and maybe break down what is labor, and what's commodity-produced. I think labor was about 200 million of your previous forecast.

But start with the 680, an update what's baked into your new guidance and maybe break down what is labor and what's commodity. Please I think labor was about $200 million of your previous forecast.

Swamy Kotagiri: I think the 680, let me break it down, was the 530 coming from 2022, incremental 100 plus the 15 scrap. That's how we came to the 680. What we're looking at, you know, the movement in some of the commodities, energy and all the other initiatives that you are working through, we said that 100 is now 50, and the scrap, which was 50, is now 25. Yeah. I don't know if you can get into the details of, you know, how much is labor and how much is the breakdown. It gets combined in terms of all the efforts that I talked about, so it's very difficult to exactly quantify how much and where.

So I think.

Speaker 3: So I think the 680, let me break it down, was the 530 coming from 2022, incremental 100 plus the 15 scrap. That's how we came to the 680.

The 680, let me break it down was the 530 coming from 'twenty to 'twenty, two incremental 100, plus the 15th crap. That's how we came to the 680. So what he is looking at the moment and some of the commodities.

Speaker 3: So what is looking at, you know, the movement and some of the commodities, energy, and all the other initiatives that you are working through, we said that 100 is now 50.

Energy and all the other initiatives that you are working through just hit that 100 is now 50.

Speaker 3: and this crop which was 50 is not 25.

And this crop which was 50 is not 25.

Yeah.

I don't know if he can get into the details.

Speaker 3: I don't know if you can get into the details of how much is labor and how much is the breakdown. It gets combined in terms of all the efforts that I talked about. So it's very difficult to exactly quantify how much and where.

Now how much is labor and how much is the breakdown.

It gets combined in terms of all the efforts that I talked about so it's really difficult to exactly quantify how much in there.

Swamy Kotagiri: We can say that labor is the sticky part, and we continue to look at optimizing that going forward, not just, you know, from a restructuring today perspective, but as we are launching this business into 2024 and 2025, you know, how do we manage it? We have to have so much hiring, so the question is how do you level or normalize what we have now and, you know, look at optimizing the hiring but at the same time protect the programs and the launches. It's a little bit of a complex set of variables that we're going through. I don't know, Patrick, if you wanna add any color to that.

Speaker 3: We can say that labor is the sticky part, and we continue to look at optimizing that, going forward not just from a restructuring today perspective, but as we are...

We can say that labor is best to keep park.

And we continue to look at optimizing that going towards not just you know from a restructuring perspective, but as we have.

Speaker 3: launching this business into 24 and 25.

Launching this business into 'twenty, four and 'twenty five.

You know.

Speaker 3: How do we manage it? We have to have so much hiring. So the question is how do you level or normalize what we have now and look at optimizing the hiring but at the same time protect the programs and the launches. Look, it's a little bit of a complex set of variables that we're going through. I don't know if you want to add any color to that. That's enough, thank you.

How do we manage it we have to have so much hiring. So the question is how do you level more normalized.

What we have now and you know.

Look at optimizing the hiring but at the same time protect the programs and the launches.

It's a little bit of a complex.

Set up variables that we're going through I don't know Pat if you want to add any color because I know.

Patrick McCann: No. I have nothing to add. Thank you.

Thank you.

Yes.

Speaker 16: That's helpful. I just wanna this 30 basis points of margin improvement ex Veoneer, how much of that is related to inflationary impact? It looks like it could be about 10 of the basis points. Is that correct?

Brian Morrison: That's helpful. I just wanna this 30 basis points of margin improvement ex Veoneer, how much of that is related to inflationary impact? It looks like it could be about 10 of the basis points. Is that correct?

That's helpful. So I just wanted to just 30 basis points.

Speaker 7: That's helpful. So I just want to this 30 basis points of margin improvement, X, V, and year.

Improvement ex me in here how.

Speaker 7: How much of that is related to inflationary impact? It looks like it could be about 10 at the base of points. That correct?

How much of that is related to inflationary impact it looks like it could be about 10 of the basis points that correct.

Okay.

Swamy Kotagiri: Sorry. I could do the math.

Sorry, I can do the matching for a calculator.

Speaker 6: All right, I can do the matching per calculator.

Patrick McCann: Reaching for a calculator here.

Okay.

Oh.

Swamy Kotagiri: Yeah. $70 million.

75 million Bucks right.

Yeah.

Patrick McCann: Yes. It's probably 10 to 13 basis points, Brian.

Speaker 6: Yeah, it's probably 10 to 13 basis points, Brian . Okay. Thanks. Thanks, Pat. And then last, I was keeping question on that. Under performing best facility where you're making great progress, I think you said you were going to, you're tracking to about half of the 35 basis points. I think it was a $149 drag last year. How much, how much of that do you expect to recover this year? Is it still tracking half and then eliminated in 2024? That's correct.

Yes, it's probably 10 to 13 basis points Brian .

Speaker 16: Okay. Thanks. Thanks, Pat. Then last housekeeping question on that underperforming BES facility where you're making great progress. I think you said you're tracking to about half of the 35 basis points. I think it was a 149 drag last year. How much of that do you expect to recover this year? Is it still tracking half and then eliminated in 2024?

Brian Morrison: Okay. Thanks. Thanks, Pat. Then last housekeeping question on that underperforming BES facility where you're making great progress. I think you said you're tracking to about half of the 35 basis points. I think it was a 149 drag last year. How much of that do you expect to recover this year? Is it still tracking half and then eliminated in 2024?

Okay. Thanks, and then last housekeeping question I'm, not underperforming beds facility, where we're making great progress I think you said youre going to youre tracking to about half of the 35 basis points I think was $140 million drag last year, how much how much of that do you expect to recover this year is it still tracking happen and then eliminated in 2024.

Swamy Kotagiri: That's correct.

That's correct.

Speaker 16: Great. Thanks very much for your time.

Brian Morrison: Great. Thanks very much for your time.

Right. Thank you very much for your time.

Swamy Kotagiri: Good. Thanks, Brian.

Okay. Thanks, Brian .

Operator: Thank you. If there are no further questions, I will now turn the call back to Swamy Kotagiri for closing remarks.

Thank you if there are no further questions I will now turn the call back to Swamy could I gave me for closing remarks.

Speaker 1: Thank you. If there are no further questions, I will now turn the call back to Swami Kudagiri for closing remarks.

Swamy Kotagiri: Thanks everyone for listening in today. As you heard from us, we are happy with the continued progress in Q2, but we are already looking ahead to keep our focus into the remaining part of the year and launching not just 2023 but 2024 and 2025 and keep the progress going. We look forward to providing an update on the progress of our strategy during our investor event next month. You know, hoping to see you all there. Have a great day. Thank you.

Speaker 3: Thank you everyone for listening in today. As you heard from us, we are happy with the continued progress in the second quarter, but we are already looking ahead to keep our focus into the remaining part of the year and launching not just 23, but 24 and 25 and keep the progress going. We look forward to providing an update on the progress of our strategy during our investor event next month. You know, hoping to see you all there. Have a great day. Thank you.

Thanks, everyone for listening in today.

As you heard from US we are happy with the continued progress in the second quarter, but.

We are already looking ahead to keep our focus into the remaining part of the year and monitoring not just 'twenty, three but 24 and 25 and keep the progress going.

Look forward to providing an update on the progress of our strategy during our investor event next month.

Hoping to see you all there I have a great day. Thank you.

Operator: Thank you. That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Greetings, and welcome to the Q2 2023 Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, please press star zero. As a reminder, this conference is being recorded Friday, 4 August 2023. I would now like to turn the conference over to Louis Tonelli, Vice President, Investor Relations. Please go ahead.

Operator: Thank you. That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.

Speaker 1: Thank you. That does conclude the conference call for today. We thank you for your participation. MSA, you please disconnect your lines.

Thank you that does conclude the conference call for today, we thank you for your participation and I say you. Please disconnect your lines.

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Greetings and welcome to the Q2 2023 results conference call.

Speaker 1: Greetings and welcome to the Q2 2023 Results Conference call.

Speaker 1: During the presentation, our participants will be in a listen only mode. Afterwards, we will conduct a question and answer session.

During the presentation, all participants will be in a listen only mode.

We will conduct a question and answer session.

Speaker 1: At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, please press star zero.

At that time, if you have a question. Please press the one followed by the four on your telephone.

If at any time during the conference you need to reach an operator, Please press star zero.

Speaker 1: As a reminder, this conference is being recorded Friday, August 4, 2023.

As a reminder, this conference is being recorded Friday August 4th 2023.

I would now like to turn the conference over to Louis Tonelli, Vice President Investor Relations. Please go ahead.

Speaker 1: I would now like to turn the conference over to Lewis Tenele, Vice President and Investor Relations. Please go ahead.

Louis Tonelli: Thanks, Rita. Hello, everyone, and welcome to our conference call covering our Q2 2023. Joining me today are Swamy Kotagiri and Patrick McCann. Yesterday, our board of directors met and approved our financial results for the Q2 of 2023, as well as our 2023 outlook, our updated 2023 outlook. We issued a press release this morning outlining our results. You'll find the press release, today's conference call webcast, the slide presentation to go along with the call, and our updated quarterly financial review all in the investor relations section of our website at magna.com. Before we get started, just as a reminder, the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation.

Speaker 14: Thanks Rita. Hello everyone and welcome to our conference call covering our second quarter of 2023. Joining me today are Swami Kaudigiri and Pat McCann.

Thanks, Rita Hello, everyone and welcome to our conference call covering our second quarter of 2023. Joining me today are so let me go to Gary and Pat Mccann.

Speaker 3: Yesterday, our Board of Directors met and approved our financial results for the second quarter of 23, as well as our 23 outlook, our updated 23 outlook. We issued a press release this morning outlining our results.

Speaker 3: You'll find the press release, today's conference call webcast, the slide presentations that go along with the call, and our updated quarterly financial review, all in the Investor Related Section of our website at nagga.com.

Speaker 3: Before we get started, just as a reminder, the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation.

Before we get started just as a reminder, the discussion today may contain forward looking information or forward looking statements within the meaning of the applicable securities legislation.

Louis Tonelli: Such statements involve certain risks, assumptions, and uncertainties, which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements. Please refer to today's press release for a complete description of our safe harbor disclaimer. Please also refer to our reminder slide included in the presentation that relates to our commentary today. With that, I'll pass it over to Swamy.

Speaker 3: Such statements involve certain risks, assumptions, and uncertainties, which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements.

Speaker 3: Please refer to today's press release for a complete description of our State Park Redis Slammer.

Please also refer to a reminder, slide included in the presentation that relates to our commentary today and with that I'll pass it over to swamp.

Speaker 3: Please also refer to our reminder slide, included in the presentation that relates to our commentary today. And with that, I'll pass it over to Swam.

Swamy Kotagiri: Thank you, Louis. Good morning, everyone. I appreciate you joining our call today, and I'm happy to kick off today's call with an update on our progress. Following a financial update from Pat, I look forward to answering your questions. Before diving into the details, let me walk you through some key highlights. We successfully completed the acquisition of Veoneer Active Safety during Q2, solidifying our position as a global leader in active safety. There is a lot of excitement and energy around Magna as a result of this acquisition. Our organic sales grew by 17% year over year, surpassing rated production by 5% excluding complete vehicles and 3% including complete vehicles. Our second quarter showcased strong Q2 operating performance with high organic sales contributing to robust earnings.

Thank you Louis Good morning, everyone. I appreciate you joining our call today and I'm happy to kick off today's call with an update on our progress and following your financial update from Pat I look forward to answering your questions.

Speaker 15: Thank you Lewis, good morning everyone. I appreciate you joining our call today and I'm happy to kick off today's call. It's an update on our progress and following your financial update from Pat, I look forward to answering your questions.

Before diving into the details let me walk you through some key highlights.

Speaker 15: Before diving into the details, let me walk you through some key highlights.

Speaker 15: We successfully completed the acquisition of V&E active safety during the second quarter, solidifying our position as a global leader in active safety.

We successfully completed the acquisition of the EMEA active safety during the second quarter solidifying our position as a global leader in active safety.

Speaker 15: There is a lot of excitement and energy around Magna as a result of this act position.

There is a lot of excitement and energy around Magna as a result of this acquisition.

Our organic sales grew by 17% year over year, surpassing weighted production by 5%, excluding complete vehicles and 3% including complete vehicles.

Speaker 15: Our organic sales grew by 17% year over year for passing rate of production by 5% excluding complete weight loss and 3% including complete weight loss.

Our second quarter showcased strong Q2 operating performance with high organic sales contributing to robust earnings.

Speaker 15: Our second quarter showcased strong Q2 operating performance with high organic sales contributing to robust learning.

Swamy Kotagiri: These results represent a significant improvement both year over year and compared to Q1 of this year. We have raised our 2023 sales, adjusted EBIT margin and adjusted net income outlook ranges for 2023. This upward revision in our EBIT margin range demonstrates solid operating performance even with the inclusion of Veoneer Active Safety, which is launching significant new business over the next 18 months. We are highly committed to executing our strategy and remain confident in our ability to achieve our long-term growth and margin outlooks. We continue to win business across all product areas, which supports our go-forward strategy. It is important to note that the industry has seen some positive developments, including reduced supply constraints, stronger and more stable production schedules, and resilient auto sales in a number of markets.

Speaker 15: These results represent a significant improvement both year or year and compared to the first quarter of this year.

These results represented significant improvement both year over year and compared to the first quarter of this year.

We have raised our 2023 sales.

Speaker 15: We have raised our 2023 sales, adjusted EBIT margin, and adjusted net income outlook ranges for 2023. This upward revision in our EBIT margin range demonstrates solid operating performance, even with the inclusion of VMA active safety, which is launching significant new business over the next 18 months.

Adjusted EBIT margin and adjusted net income outlook ranges for 2023.

This upward revision in our EBIT margin range demonstrate solid operating performance, even with the inclusion of <unk> and active safety, which is launching significant new business over the next 18 months.

Speaker 15: We are highly committed to executing our strategy and remain confident in our ability to achieve our long-term growth and margin out.

We are highly committed to executing our strategy and remain confident in our ability to achieve our long term growth and margin outlook.

Speaker 15: and we continue to win business across all product areas which supports our global power status.

And we continue to win business across all product areas, which supports our go forward strategy.

Okay.

Speaker 15: It is important to note that the industry has seen some positive developments including reduced supply constraints, stronger and more stable production schedules, and resilient auto sales in a number of markets. However, the global economy continues to face some interlocking challenges, including continuing elevated inflation, high-resistant rates, geopolitical risks, and slowing economic growth. These challenges are impacting our...

However, the global economy continues to face some interlocking challenges, including continued elevated inflation higher interest rates geopolitical risks and slowing economic growth.

These challenges are impacting our entire industry.

In North America, there are concerns about upcoming OEM labor negotiations.

Speaker 15: In North America, there are concerns about upcoming OEM labor negotiations when union contracts expire in September , which may have short term impacts on products.

<unk> contract expired in September , which may have short term impacts on production.

Speaker 15: Rest assured, efforts to contain costs and improve our margins remains a top priority for us.

Rest assured efforts to contain costs and improve our margins remains a top priority for us.

Speaker 15: This has been achieved through ongoing operational improvement initiatives, recovering costs from our customers, and executing flawless launches across Mag.

This is being achieved through ongoing operational improvement initiatives.

Covering costs from our customers and executing flawless launches across magna.

Okay.

Speaker 15: Earlier this year, we estimated about 100 million of incremental input costs. NetAffric Power is over 2022.

Earlier this year, we estimated about 100 million of incremental input costs net of recoveries over 2022.

Speaker 15: Based on our initiatives together with improvements in market prices for energy and certain commodities, we now expect to mitigate about half of the incremental net input costs.

Based on our initiatives together with improvements in market prices, our energy and certain commodities, we now expect to mitigate about half of the incremental net input costs.

We also continued to take proactive measures in various other areas. We have executed our initiated consolidation restructuring and cost containment activities had different levels across the company.

Speaker 15: We also continue to take proactive measures in various other areas. We have executed or initiated consolidations, restructuring, and cost containment activities at different levels across the country.

Swamy Kotagiri: We have executed or initiated consolidation, restructuring, and cost containment activities at different levels across the company. We are engaged in ongoing commercial negotiations with our customers to recover costs, transitioning to various index programs, and adverse pricing on challenging programs. At the same time, we continue to intensify our efforts in areas that are core to our daily business, including hedging activities and our enterprise-wide global purchasing initiative. Automation installations and smart factory initiatives with a digital ecosystem implementation are also well underway. Lastly, I am pleased to report that our underperforming European BES facility is tracking to our expectations, supported by a number of these initiatives. All these efforts are yielding positive results, enabling us to generate strong earnings on our sales growth and reinforcing our confidence in delivering on our expectations for margin expansion in the coming years.

Speaker 15: We are engaged in ongoing commercial negotiations with our customers to recover costs, transitioning to various index programs, and address pricing on challenging programs.

We are engaged in ongoing commercial negotiations with our customers to recover costs transitioning to radius index programs.

And address pricing on challenging programs.

At the same time, we continued to intensify our efforts in areas that are core to our daily business.

Speaker 15: At the same time, we continue to intensify our efforts in areas that are core to our daily business, including hedging activities and our enterprise-wide global purchasing initiative.

<unk> hedging activities and our enterprise wide global purchasing initiative.

Speaker 15: Automation installations in smart factory initiatives with the digital ecosystem implementation are also well underway.

Automation installations, and smart factory initiatives with a digital ecosystem implementation are also well underway.

Lastly, I am pleased to report that our underperforming European <unk> facility is tracking to our expectations supported by a number of these initiatives.

Speaker 15: Lastly, I am pleased to report that our underperforming European BES facility is tracking to our expectations supported by a number of these initiatives.

Speaker 15: All these efforts are yielding positive results, enabling us to generate strong earnings on our sales growth, and reinforcing our confidence in delivering on our expectations for margin expansion in the coming years.

Speaker 15: In early June , we successfully completed the V&EA active safety transaction, and I would like to thank all those involved for their efforts.

In early June we successfully completed the <unk> active safety transaction and I would like to thank all of those involved for their efforts.

Speaker 15: This transaction has expanded our active safety portfolio by incorporating complementary products, customers, geographies, engineering and software resources.

This transaction has expanded our active safety portfolio by incorporating complementary products customers and geographies engineering and software resources.

The response from both the acquired business and our existing active safety unit has been overwhelmingly positive.

Speaker 15: The response from both a quiet business and a existing active safety unit has been overwhelmingly positive.

Speaker 15: There is a great deal of excitement surrounding the immense potential of the combined business.

There is a great deal of excitement surrounding the immense potential of the combined business.

The business is on track with the expectations as outlined when we announced the acquisition, including being neutral to earnings before purchase price amortization in 2024.

Speaker 15: The business is on track with the expectations as outlined when we announced acquisition, including being neutral to earnings before purchase price and motivation in 2024.

Speaker 15: We hit the ground running and are fully dedicated to ensuring a smooth integration and realizing the 70 million in synergies identified at the outset.

We hit the ground running and are fully dedicated to ensuring a smooth integration and realizing the $70 million in synergies identified at the outset.

Swamy Kotagiri: We are excited to share more insights about our combined active safety business and to update our 2025 outlook to reflect the acquisition during our upcoming virtual investor event in early September. We continue to execute our strategy aimed at accelerating our growth in megatrend areas. Recently, we were awarded the battery enclosure for Ford's next generation F-150 Lightning EV pickup truck. To support this exciting new program, we are adding capacity in Tennessee. This award further strengthens our competitive position in the rapidly growing market for battery enclosures. In powertrain electrification, we are actively supporting our customers with a combination of components and systems. We are proud to have recently won an award for our first to market modular standalone decoupling unit for electric vehicles. The innovative unit contributes to an increase in electric drive range by up to 9%.

We are excited to share more insights about our combined active safety business and to update our 2025 outlook to reflect the acquisition during our upcoming investor event in early September .

Speaker 15: We are excited to share more insights about our combined active safety business and to update our 2025 outlook to reflect the acquisition during our upcoming virtual investor event in early September .

Speaker 15: We continue to execute our strategy aimed at accelerating our growth in Megatron areas.

We continue to execute our strategy aimed at accelerating our growth and megatrend areas.

Recently.

Speaker 15: Recently, we were awarded the battery enclosure for fourths next generation F-150 Lightning EV pickup truck. To support this exciting new program, we are adding capacity in Tennessee.

What is the battery enclosure for Forbes next generation F 150, lightening EV pickup truck to support this exciting new program, we are adding capacity in Tennessee.

Speaker 15: This award for those trends are competitive positions in the rapidly growing market for bad-ranked

This award further strengthens our competitive position in the rapidly growing market for Bachelor enclosures.

Speaker 15: In powertrain electrification, we are actively supporting our customers with a combination of components and systems.

In powertrain electrification, we are actively supporting our customers with a combination of components and systems. We are proud to have recently won an award for our first to market modular stand alone decoupling unit for electric vehicles.

Speaker 15: We are proud to have recently won an award for our first to market modular standalone decoupling unit for electric wake.

Speaker 15: The innovative unit contributes to an increase in electric drive range by up to 9%.

<unk> unit contributes to an increase in electric drive range by up to 9%.

Swamy Kotagiri: We have already begun launching this product on multiple vehicles of a German-based premium OEM. We recently announced a long-term supply agreement with onsemi. This agreement allows Magna to integrate silicon carbide-based technology into our future eDrive systems. The advanced technology will enhance our ability to deliver better cooling performance as well as faster acceleration and charging rates, which contribute to improved efficiency and increased EV range. These activities highlight our commitment to driving innovation and positioning ourselves as a leader in the rapidly evolving field of electric mobility. Our success in winning business across all product lines continues to drive growth. In addition to securing the contract for the battery enclosure, we were pleased to announce that we have also recently been awarded the frame and seats for the next generation F-150 Lightning.

Speaker 15: They have already begun launching this product on multiple vehicles of a German-based premiumremember.

We have already begun launching this product on multiple vehicles, often German based premium OEM.

We recently announced a long term supply agreement with on semi this agreement allows magna to integrate silicon carbide based technology into our future E drive systems.

Speaker 15: We recently announced a long-term supply agreement with Ensemi. This agreement allows Magna to integrate Silicon Carbide-based technology into our future eDrive system.

Speaker 15: The advanced technology will enhance our ability to deliver better cooling performance as well as faster acceleration and charging rates, which contribute to improved efficiency and increased EV range.

These activities highlight our commitment to driving innovation and positioning ourselves as the leader in the rapidly evolving field of electric mobility.

Speaker 15: These activities highlight a commitment to driving innovation and positioning ourselves as a leader in the rapidly evolving field of electric mobility.

Our success in winning business across all product lines continues to drive growth.

Speaker 15: Our success in winning business across all product lines continues to drive growth.

Speaker 15: In addition to securing the contract for the battery enclosure, we were pleased to announce that we have also recently been awarded the frame and seats for the next generation F-150 Lite.

In addition to securing the contract for the battery enclosure.

We're pleased to announce that we have also recently been awarded the frame and seats for the next generation F 150 lightning.

Speaker 15: The seeding award represents yet another seed complete program for pickup trucks in North America. Following our previous seed award for GM's pickup trucks to be produced at Lake Korea.

Thats hitting award represents yet another seed complete program for pickup trucks in North America. Following our previous seat award for Gm's pickup trucks to be produced at Lee Korea.

We were also recently awarded the replacement vehicle Assembly business for the iconic Mercedes Benz G Class. This award allows us to maintain our 40 plus year history ethics Clusium producer of this off road ratable.

Speaker 15: We were also recently awarded the replacement vehicle assembly business for the iconic Mercedes-Benz G-Class. This award allows us to maintain our 40 plus year history as the exclusive producer of this off-road vehicle.

Speaker 15: We produced over 40,000, 45,000 G-Class vehicles in our grads on Stray Facility in 2022, bringing our lifetime total to over half a million.

We produced over 40 45000 G class vehicles in our Graz, Austria facility in 2022, bringing our lifetime total to over half a million.

Speaker 15: The next generation G-Class is expected to launch in 2024 and continue to run towards the end of the decade.

The next generation G class is expected to launch in 2024 and continue to run towards the end of the decade.

Speaker 15: And we were awarded significant new FESHIA business on multiple programs from a Euro-based global OEM.

And we have been awarded significant new base business on multiple programs from a Europe based global OEM we.

Speaker 15: We will supply the OEM's assembly plant in North America from an existing exterior facility beginning in 2026. With that, I'll pass the call or to that. We will supply the OEM's assembly plant in North America from an existing exterior facility beginning in 2026.

We will supply the Oems Assembly plant in North America from an existing exteriors facility beginning in 2026.

Swamy Kotagiri: With that, I'll pass the call over to Pat.

I'll pass the call over to Pat.

Patrick McCann: Thanks, Swamy, and good morning, everyone. As Swamy indicated, we delivered strong Q2 2023 earnings and free cash flow, both above our expectations. Now, comparing Q2 2023 to 2022, consolidated sales were $11 billion, up 17% compared to a 15% increase in global light vehicle production. EBIT was $603 million, and EBIT margin increased 170 basis points to 5.5%. It was also up 140 basis points from Q1 2023. Adjusted EPS came in at $1.50, up 81% year over year. Free cash flow used in the quarter was $7 million, compared to $52 million generated in Q2 2022, in part reflecting our higher capital spend to support record program awards in 2022.

Thanks, Swamy and good morning, everyone.

As Swamy indicated we delivered strong second quarter earnings and free cash flow both above our expectations.

Speaker 3: As Swami indicated, we delivered strong second quarter earnings and free cash flow. Both above are expectations.

Speaker 3: Now comparing the second quarter of 2023 to 2022, consolidated sales were 11 billion, up 17% compared to a 15% increase in global light vehicle production.

Now comparing the second quarter of 2023 to 2022 consolidated sales were 11 billion up 17% compared to a 15% increase in global light vehicle production.

EBIT was $603 million and EBIT margin increased 170 basis points to five 5%.

Speaker 3: even was 603 million, and even margin increased 170 basis points to 5.5%.

Speaker 3: was also up 140 basis points from the first quarter of 2023. And just an EPS came in of $1.50.

It was also up 140 basis points from the first quarter of 2023.

Adjusted EPS came in at $1 50.

Up 81% year over year.

Speaker 3: And free cash flow used in the quarter was $7 million compared to $52 million generated in the second quarter of 2022. In part, reflecting our higher capital spend support record program awards in 2022.

And free cash flow used in the quarter was $7 million.

<unk> to $52 million generated in the second quarter of 2022.

In part, reflecting our higher capital spend to support record program Awards in 2022.

Patrick McCann: During the quarter, we paid dividends of $129 million, and in addition to raising our sales outlook, we increased our adjusted EBIT margin and earnings outlook. Let me take you through some of the details. North American, European, and Chinese light vehicle production were up 14%, 13%, and 21% respectively, netting to a 15% increase in global production. Our consolidated sales were $11 billion, up 17% over Q2 2022. On an organic basis, our sales also increased 17% year over year for a 3% growth over market or 5% growth over market excluding complete vehicles.

During the quarter, we paid dividends of $129 million and in addition to raising our sales outlook, we increased our adjusted EBIT margin and earnings outlook.

Speaker 3: During the quarter, we paid dividends of $129 million. And in addition to raising our sales outlook, we increased our adjusted EBIT margin and earnings outlook. Let me take you.

Let me take you through some of the details.

Yeah.

North American European and Chinese light vehicle production were up 14%, 13% and 21%, respectively, netting to a 15% increase in global production.

Speaker 3: North American, European, and Chinese light vehicle production were up 14%, 13%, and 21% respectively, netting to a 15% increase in global production.

Speaker 3: Our consolidated sales were 11 billion, up 17% over the second quarter of 2022.

Our consolidated sales were 11 billion up.

Up 17% over the second quarter of 2022.

On an organic basis, our sales also increased 17% year over year for a 3% growth over market or 5% growth over market excluding complete vehicles.

Speaker 3: On an organic basis, our sales also increased 17th percent year over year. For a 3% growth over market or 5% growth over market, excluding complete vehicles.

Patrick McCann: The sales increase was primarily due to higher global vehicle production and complete vehicle assembly sales, the launch of new programs, price increases to recover certain higher input costs, and the acquisition of Veoneer Active Safety on 1 June, net of divestitures. These are partially offset by the impact of foreign currency translation and contractual customer price givebacks. Adjusted EBIT was $603 million, and adjusted EBIT margin was 5.5% compared to 3.8% in Q2 2022. Our focus on operational excellence and performance on cost initiatives helped drive strong earnings on higher sales. This was partially offset by the impact of the acquisition of Veoneer Active Safety.

The sales increase was primarily due to higher global vehicle production and complete vehicle Assembly sales.

Speaker 3: The sales increase was primarily due to higher global vehicle production and complete vehicle assembly sales. The launch of new program.

The launch of new programs.

Speaker 3: Price increases to recover certain higher input costs and the acquisition of V&A active safety on June 1st, net of debestitures.

Price increases to recover certain higher input costs and the acquisition of D&A or active safety on June 1st net of divestitures.

These are partially offset by the impact of foreign currency translation and contractual customer price give backs.

Speaker 3: These are partially offset by the impact of foreign currency translation in contractual customer price give-back.

Yeah.

Speaker 3: Adjusted EBIT was $603 million and adjusted EBIT margin was 5.5% compared to 3.8% in Q2 2022.

Adjusted EBIT was $603 million and adjusted EBIT margin was five 5% compared to three 8% in Q2 2022.

Speaker 3: Our focus on operational excellence and performance on cost initiatives help drive strong earnings on higher sales.

Our focus on operational excellence and performance on cost initiatives helped drive strong earnings on higher sales.

This was partially offset by the impact of the acquisition of <unk> active safety.

Speaker 3: This was partially offset by the impact of the acquisition of the B&EAR Active Safety.

Patrick McCann: Adjusted EBIT margin was also possibly impacted by about 25 basis points of net operational items, including productivity and efficiency improvements at certain facilities and higher tooling contribution, partially offset by higher program-related engineering spending and launch costs, and higher equity income, which benefited margins by about 10 basis points. EBIT margin was negatively impacted by higher net input costs, primarily lower scrap prices and higher labor costs, partially offset by lower costs for energy, commodities, and freight, which combined to about 45 basis points and non-recurring items, which subtracted about 5 basis points. Interest expense increased primarily reflecting the senior notes issued in Q1, increased borrowings and higher interest rates, partially offset by higher interest income. Our adjusted effective income tax rate came in at 21.8%, largely in line with our 2023 expectations, but lower than Q2 of last year.

Speaker 3: Adjusted EBIT margin was also possibly impacted by about 25 basis points of net operational items, including productivity and efficiency improvements at certain facilities and higher tooling contribution, partially offset by higher program related engineering spending and launch costs, and higher equity income, which benefited margins by about 10 basis points.

And higher equity income, which benefited margins by about 10 basis points.

EBIT margin was negatively impacted by higher net input costs, primarily lower scrap prices and higher labor costs, partially offset by lower costs for energy commodities and freight which combined to about 45 basis points.

Speaker 3: Even margin was negatively impacted by higher net input costs, primarily lower scrap prices and higher labor costs, partially offset by lower costs for energy, commodities, and freight, which combined to about 45 basis points and non-recuring items which subtracted about five basis points.

And nonrecurring items, which subtracted about five basis points.

Okay.

Interest expense increased primarily reflecting the senior notes issued in the first quarter increase.

Speaker 3: Interest expense increased primarily reflecting the senior notes issued in the first quarter, increased boring and higher interest rates, partially offset by higher interest income.

Increased borrowings and higher interest rates, partially offset by higher interest income.

Our adjusted effective income tax rate came in at 21, 8% largely in line with our 2023 expectations, but lower than Q2 of last year.

Speaker 3: Our adjusted effective income tax rate came in at 21.8%. Largely in line with our 2023 expectations, but lower than Q2 of last year.

Patrick McCann: Adjusted net income attributable to Magna was $430 million, up 77% over Q2 of 2022, reflecting the higher EBIT and lower tax rate, partially offset by higher interest expense and minority interest. Adjusted diluted EPS was $1.50, up 81% compared to Q2 of last year. The increase is the result of higher net income and fewer shares outstanding. The reduced number of shares outstanding primarily reflects the impact of share repurchases during and subsequent to Q2 of 2022. Turning to a review of our cash flows and investment activities. In Q2 of 2023, we generated $879 million in cash from operations before changes in working capital. We invested $332 million in working capital, primarily reflecting the higher sales in Q2 of 2023.

Speaker 3: And at just a net income, a trivial pomegna was 430 million of 77% over the second quarter of 2022, reflecting the higher EBIT and lower tax rate partially offset by higher interest expense and minority interest.

Yeah.

Speaker 3: Adjusted deluded EPS was $1.50 up 81% compared to Q2 of last year.

Adjusted diluted EPS was $1 50 up 81% compared to Q2 of last year.

Speaker 3: The increase is the result of higher net income and fewer share-as-out standing.

The increase is the result of higher net income and fewer shares outstanding.

Speaker 3: The reduced number of shares outstanding primarily reflects the impact of share repurchases during and subsequent to the second quarter of 2022.

Reduced number of shares outstanding primarily reflects the impact of share repurchases during and subsequent to the second quarter of 2022.

Yes.

Turning to a review of our cash flows and investment activities.

Speaker 3: Turn it to a review of our cash flows and investment activity.

Speaker 3: In the second quarter of 2023, we generated 879 million in cash from operations before changes in working capital.

In the second quarter of 2023, we generated $879 million in cash from operations before changes in working capital.

Speaker 3: We invested $332 million in working capital, primarily reflecting the higher sales in the second quarter of 2023.

We invested $332 million in working capital, primarily reflecting the higher sales in the second quarter of 2023.

Patrick McCann: Investment activities in the quarter included $502 million for fixed assets and $96 million for investments, other assets, and intangibles. The $502 million in CapEx is higher than the $329 million in Q2 of last year to support our record program awards in 2022. Overall, we used free cash flow of $7 million in Q2, better than we had anticipated. We also acquired Veoneer Active Safety for $1.48 billion and paid $129 million in dividends in the quarter. Our balance sheet continues to be strong, with major credit rating agencies recently reaffirming our ratings. At the end of the second quarter, we had over $4.6 billion in liquidity, including about $1.3 billion in cash. Currently, our adjusted EBITDA, our adjusted debt to adjusted EBITDA ratio is 2.19 times.

Speaker 3: Investment activities in the corner include 502 million for fixed assets and 96 million for investments, other assets and intangibles.

Investment activities in the quarter included 502 billion for fixed assets and $96 million for investments other assets and intangibles.

The $502 million in Capex is higher than the 329 billion in Q2 of last year to support our record program Awards in 2022.

Speaker 3: The 500 to 2 million calf backs is higher than 329 million in Q2 of last year to support our record program awards in 2022.

Overall, we used free cash flow of $7 million in Q2, better than we had anticipated.

Speaker 3: Overall, we use free cash flow of 7 million in Q2s, better than we had anticipated.

Speaker 3: We also acquired the Anir Active Safety for 1.48 billion and paid $129 million in dividends in the quarter.

We also acquired <unk> active safety for 148 billion and paid $129 million in dividends in the quarter.

Okay.

Yeah.

Our balance sheet continues to be strong with major credit rating agencies recently reaffirmed our ratings.

Speaker 3: Our balance sheet continues to be strong with major credit rating agencies recently reaffirming our rating.

At the end of the second quarter, we had over $4 6 billion in liquidity, including about $1 3 billion in cash.

Speaker 3: At the end of the second quarter, we had over 4.6 billion in liquidity, including about 1.3 billion in cash.

Currently our adjusted EBIT adjusted debt to adjusted EBITDA ratio is 219 times <unk>.

Speaker 3: Currently our adjusted ebit, our adjusted death to adjusted ebit DAW ratio is 2.19 times. Excluding approximately 400 million in cash, we're holding to pay down our Euro-Deb September later this year. Our ratio would be 2.08.

Patrick McCann: Excluding approximately $400 million in cash we're holding to pay down our EUR debt set to mature later this year, our ratio would be 2.08. These ratios are tracking better than our previous expectations as a result of our improved operating results. We anticipate a reduction in our leverage ratio by the end of this year and a further decline through 2024. Next, I will cover our updated outlook, which incorporates slightly higher than expected vehicle production in both North America and Europe, mainly as a result of better production in Q2. Our assumption for production in China is unchanged from our previous outlook. We also assume exchange rates in our outlook will approximate current rates. We now expect a slightly stronger euro and slightly lower Canadian dollar, and RMB for 2023 relative to our previous outlook.

Excluding approximately $400 million in cash, we're holding to pay down our euro debt set to mature later this year our ratio would be 2.08.

Speaker 3: These ratios are tracking better than our previous expectations as a result of our improved operating results.

These ratios are tracking better than our previous expectations as a result of our improved operating results.

We anticipate a reduction in our leverage ratio by the end of this year and a further declined through 2024.

Speaker 3: We anticipate a reduction in our leverage ratio by the end of this year and a further decline through 2024.

Yes.

Next I'll cover our updated outlook, which incorporates slightly higher than expected vehicle production in both North America and Europe , mainly as a result of better production in Q2.

Speaker 3: Next, I will cover our updated outlook, which incorporates slightly higher than expected vehicle production in both North America and Europe , mainly as a result of better production in Q2.

Speaker 3: Our assumption for production in China is unchanged from our previous oath.

Our assumption for production in China is unchanged from our previous outlook.

We also assume exchange rates in our outlook will approximate current rates.

Speaker 3: We also assume exchange rates in our outlook will approximate current rates.

Speaker 3: We now expect a slightly stronger Euro and slightly lower Canadian dollar and RMB for 2023 relative to our previous outlook.

We now expect a slightly stronger euro and slightly lower Canadian dollar and RMB for 2023 relative to our previous outlook.

Patrick McCann: We have increased our expected sales range, largely reflecting the acquisition of Veoneer Active Safety, higher North American and European production in Q2, as well as the higher euro. As a result of our strong performance so far in 2023 and expectations for continued operational execution, partially offset by higher costs to launch new programs, we have also increased our adjusted EBIT margin range. This is despite the short term 20 basis point impact from the Veoneer Active Safety acquisition. We're increasing our equity income range, mainly reflecting lower spend and expected commercial items. As a result of increasing the ranges for our sales and adjusted EBIT margin, we are also raising our range for adjusted net income attributable to Magna. Our capital spending outlook has increased to reflect the Veoneer acquisition in line with our previous expectations.

We have increased our expected sales range, largely reflecting the acquisition of <unk> active safety higher North American and European production in Q2, as well as the higher euro.

Speaker 3: We have increased our expected sales range, largely reflecting the acquisition of the and air active safety, higher North American and European production and Q2, as well as the higher Europe .

Speaker 3: As a result of our strong performance so far in 2023 and expectations for continued operational execution partially offset by higher costs to launch new programs, we have also increased our adjusted EBIT margin range.

As a result of our strong performance so far in 2023 and expectations for continued operational execution, partially offset by higher cost to launch new programs. We have also increased our adjusted EBIT margin range.

This is despite the short term 2020 basis point impact from the <unk> safety acquisition.

Speaker 3: This is despite the short term 20 basis point impact from the B and Air Act to save the acquisition.

We're increasing our equity income range, mainly reflecting lower spend and expected commercial items.

Speaker 3: who are increasing our equity income range, mainly reflecting lower spend and expected commercialization.

As a result of increase in the ranges for our sales and adjusted EBIT margin. We're also raising our range for adjusted net income attributable to Magna.

Speaker 3: As a result of increasing the ranges for our sales and the Justin Eben margin, we're also raising our range for just an income at your visible to magna.

Speaker 3: Our capital spending outlook has increased to reflect the B&E acquisition in line with our previous expectations.

Our capital spending outlook has increased to reflect the <unk> acquisition in line with our previous expectations.

Patrick McCann: Our interest expense and tax rate are unchanged from our previous outlook. In addition, free cash flow expectations are unchanged even after incorporating Veoneer Active Safety for the last seven months of 2023. Note that beginning in Q3, Magna's adjusted EBIT will exclude the amortization of acquired intangibles, the most significant of which is associated with the Veoneer Active Safety acquisition. In summary, we are pleased with our strong operating performance in Q2. Once again, we outgrew our end markets by 3% on a consolidated basis and 5% excluding complete vehicles. We continue to win new business across our portfolio, supporting our go forward strategy, and largely as a result of our continued strong execution, we are raising our earnings outlook for the year. Thanks for your attention. We'd be happy to answer your questions.

Speaker 3: our interest expense and tax rate run chains for a pre-discipline.

Our interest expense and tax rate are unchanged from our previous outlook.

Speaker 3: In addition, pre-cash flow expectations are unchanged. Even after incorporating, be an interactive safety for the last seven months of 2023.

In addition, free cash flow expectations are unchanged, even after incorporating DNA or active safety for the last seven months of 2023.

Note that beginning in Q3 Magnus adjusted EBIT will exclude the amortization of acquired intangibles. The most significant of which is associated with the pioneer active safety acquisition.

Speaker 3: Note that beginning in Q3, Magnus Adjusted E, but will exclude the amortization of acquired intangibles, the most significant of which is associated with the V&EAR Active Safety Acquisition.

Yes.

In summary, we are pleased with our strong operating performance in the second quarter.

Speaker 3: In summary, we are pleased with our strong operating performance in the second quarter.

Once again, we outgrew our end markets by 3% on a consolidated basis and 5% excluding complete vehicles.

Speaker 3: Once again, we outgrow our end markets by 3% on a consolidated basis and 5% excluding complete vehicles.

Speaker 3: We continue to win new business across our portfolio, supporting our go forward strategy. And largely as a result of our continued strong execution, we are raising our earnings outlook for the year. Thanks for your attention. We'd be happy to answer your question.

We continue to win new business across our portfolio supporting our go forward strategy and largely as a result of our continued strong execution, we are raising our earnings outlook.

For the year. Thanks for your attention we'd be happy to answer your questions.

Operator: Our first question comes from the line of John Murphy with Bank of America. Please proceed with your question.

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Okay.

Our first question comes from the line of John Murphy with Bank of America. Please proceed with your question.

Speaker 1: Our first question comes from the line of John Murphy with Bank of America. Please proceed with your question.

John Murphy: Good morning, guys, and thanks for the time. Just a first question, you know, as you look at what went on in the quarter, you know, obviously volumes were up big time on a year-over-year basis, but there was also a stabilization in schedules, right? You knew what you were doing and how to plan for it. Which do you think was... I mean, obviously the rise in volume is important, but how important was the stabilization in schedules, and how should we think about that going forward in the business?

Good morning, guys and thanks for the time.

Speaker 4: Good morning guys and thanks for the time. Just a first question, as you look at what went on in the quarter, obviously vimes were up big time on a year of a year basis, but there was also a stabilization in schedules, right? So you knew what you were doing and how to plan for it. Which do you think was, I mean, obviously the rise in volume is important, but how important was the stabilization in schedules and how should we think about that going forward in the business?

First question if you look at what went on in the quarter.

You know obviously volumes were up.

Big time on a year over year basis, but there was also a stabilization E. In schedules right. So you knew what you were doing and how to plan for it just wondering which do you think was I mean, obviously the rise environment is important but how important was the stabilization in schedules and how should we think about that going forward in the business.

Patrick McCann: Good morning, John. For sure, both of them, but I think if they have to prioritize, if you look at all the initiatives that we've been talking about play a bigger role, you know, in getting the flow through that we would expect. But definitely the stabilization of production schedules is what helps those efforts in a big way, right? To get to the bottom line and get the intended effect of all the activities that we're going through, the big variable would be the stable production. Obviously, the higher volumes help, but the important thing is once you get the higher volumes, can I get the, you know, the flow through the way we expect, right? Definitely helped both of them this time.

Speaker 15: Good morning, John . For sure, both of them, but I think if they have to prioritize, if you look at all the initiatives that we've been talking about.

Good morning, John .

For sure both of them, but I think if they have to prioritize if you look at all of the initiatives that we've been talking about play a bigger role.

Speaker 15: play a bigger role in getting the flow through that we would expect.

And getting the flow through that you would expect.

Speaker 15: but definitely the stabilization of productions can use is what helps those efforts in a big way, right? To get to the bottom line and get the intended effect.

But definitely the stabilization of production schedules is what helps those airports in a big way right to get to the bottom line and get the intended effect.

Speaker 15: of all the activities that we're going through, the big variable would be this table product.

All the activities that we're going through the big variable would be the stable production, obviously, the baked them into higher volumes helped but the important thing is once you get the higher volumes can I get the.

Speaker 15: Obviously the big time in the higher volume shelf but

Speaker 15: The important thing is once you get the higher volumes, can I get the flow through the way we expect? So it definitely helped both of them this time.

The flow through the way, we expect right. So definitely helped both of them at this time.

John Murphy: Okay. Then just a second question on the battery enclosure business for the F-150 Lightning. You know, the fact that you're getting the frame as well, you know, seats as well is good, but I mean, the frame and the battery enclosure seem like they might be interrelated, Swamy. How interrelated was that sort of bidding process? How much of a part of the structure of that truck is that battery enclosure business, and does that set you up well for future wins on other trucks that maybe, you know, other unibody, that's not unibody, but on unibody structures as well?

Okay, and then just a second question on the battery business for the F 150 Lightning.

Speaker 4: And then just a second question on the battery enclosure business for the the F150 lightning. You know the fact that you're getting the frame as well you know seats as well as good but I mean the frame and the battery enclosure seem like they might be interrelated to me. How interrelated was that sort of bidding process?

The fact that youre getting the frame as well seats as well as good but I mean, the frame and the battery enclosure Seema.

Seem like they might be interrelated swamy, how interrelated was that sort of bidding process how much of a part of the structure of that truck is that battery enclosure business and does that set you up well for future wins on other trucks, but maybe other unit body, that's not unibody been on unit body structures as well.

Swamy Kotagiri: John, I'll answer the question from a Magna perspective, and we talked about highly integrated systems and the value that Magna brings when we look at not individual component, but more how you bring things together, and I think this plays a role. I won't comment specifically on the architecture of this vehicle because I don't think it would be right for me at this point. But that expertise of knowing the frame, knowing the body enclosures and the whole vehicle definitely comes into play. As we look forward, we see in some cases, like you talked about a framed vehicle with a separate enclosure today, but as you go to the next generation, there is definitely a thought process of how we can get the synergies for structural performance, for safety, and efficiency and so on.

Speaker 15: John , I'll answer the question from a magna perspective and we talked about highly integrated systems and there.

John I'll answer the question from a magnitude perspective, and we talked about highly integrated systems and the value.

Speaker 15: value that Magnum brings when we look at not individual component, but more how you bring things together. And I think this plays a role. I won't comment specifically on the architecture of this vehicle, because I am. I don't think it will be right for me at this point.

That magnum brings when we look at not individual component, but more how do you bring things together and I think this plays at all I won't comment specifically on the architecture of this vehicle because I am I don't think it would be right for me at this point.

Speaker 15: But that expertise of knowing the frame, knowing the body and the whole wake will definitely come to play. And as we look forward, we see...

But that expertise of knowing the frame knowing their back body enclosures in the whole vehicle definitely comes into play and as we look forward we see.

Speaker 15: In some cases, like you talked about the framed vehicle

In some cases like you talked about a framed waco.

Speaker 15: With this separate enclosure today, but as you go to the next generation, there is definitely a thought process of how you can get the synergies for structural performance, for safety, and efficiency, and so on. So us being in the program now on actually multiple truck programs, I think definitely gives us a, I think a big advantage in not only addressing what's needed today, but taking this product line and evolving into the future.

With the separate enclosure today, but as you go to the next generation. There is definitely a thought process of how you can get the synergies for structural performance for safety and efficiency and so on so us being in the programme now on actually multiple truck programs I think definitely gives us a I.

Swamy Kotagiri: Us being in the program now on actually multiple truck programs, I think definitely gives us a, I think, a big advantage in not only addressing what's needed today, but taking this product line and evolving into the future.

A big advantage in not only addressing what's needed today, but taking this product line any walgreens into the future.

John Murphy: If I could sneak just one last one in. Commercial discussions with your automaker customers seem to be a little bit more amicable and conciliatory than they have been in the past. Is that a correct interpretation, and has something changed here where they're partnering a lot more on sort of cost sharing, particularly as costs are inflating, or is it more just, you know, more the same and you guys are just doing a better job with these discussions?

Speaker 2: And then if I could sneak just one last one in commercial discussions with your your automaker customers seem to be a little bit more amicable and conciliatory than they have been in the past Is that a correct interpretation and has something changed here? With their partnering a lot more on sort of cost sharing particularly as cost are inflating or is it more just You know more the same and you guys are just doing a better job with these discussions

And then if I could sneak just one last one in commercial discussions with your automaker customers seem to be.

A little bit more amicable and conciliatory than they had been in the past is that correct interpretation and has something changed here, where they're partnering a lot more on sort of cost sharing particularly as costs are inflating or is it more just more of the same and you guys are just doing a better job with these discussions.

Swamy Kotagiri: It's a difficult one, John, but I definitely think we had a gritty six months is how I would put it. You know, the reactions and the interactions are somewhat mixed. I can tell you we are laser focused on it. It's just not a person, but teams, cross-functional across finance, sales, commercial, and operations. The entire organization is around this topic. I think I won't be able to explain in a few sentences the effort that goes into this. I would say there is a openness to have the discussion in different forums. You know, like I said, some are a little bit tougher than the other, but I mean, we cannot afford not to do this. It's a must for us, right?

Okay.

Speaker 15: It's a difficult one, John , but I definitely think I think we had a greedy six months. It is.

It's a difficult one John but I definitely think.

I think we had a good six months.

How I would put it.

The reaction than their interactions are somewhat mixed.

Speaker 15: you know, the reactions and the interactions are somewhat mixed. But I can tell you, your laser focused on it is just not a person, but teams and cross-functional across finance and sales and commercial and operations. The entire organization is around this topic. I cannot, I think I won't be able to explain a few sentences the effort that goes into this. But I would say there is a...

But I can tell you we are laser focused on it it's just not a person, but it teams and cross functional across finance and sales in commercial and operations. The entire organization is.

Around this topic.

I cannot I think I won't be explaining able to explain in a few sentences. The effort that goes into this but I would say there is a.

Speaker 15: openness to have the discussion in different forms. Like I said, some are a little bit tougher than the other, but it is, I mean, we cannot afford not to do this. It's a must for us, right? And I think the conversations are tough, but I would say they're fair.

Openness to have the discussion in <unk>.

Different forums.

Like I said, some are little bit tougher than the other but it is.

We cannot afford not to go visit is a must for us right and I think the conversations are tough, but I won't say they are fair.

Swamy Kotagiri: I think the conversations are tough, but I would say they're fair.

John Murphy: Okay. Thank you very much, guys.

Okay. Thank you very much guys.

Okay.

Operator: Thank you. Our next question comes from the line of Tamy Chen with BMO Capital Markets. Please proceed with your question.

Speaker 1: Thank you. Our next question comes from the line of Tammy Chen with BMO Capital Markets. Please proceed with your question.

Thank you. Our next question comes from the line of Tommy Chen with BMO Capital markets. Please proceed with your question.

Tamy Chen: Hi, good morning. Thanks for the question. First, wanted to talk about Veoneer. So I saw you've given the impact it had on your guidance. Could you just talk a little bit more about how you expect that to trend through the year? You're expecting it to break even before the incremental amortization next year. Could you just remind us the steps or the path for the business to get to that next year?

Hi, Good morning. Thanks for the question first wanted to talk about <unk>.

Speaker 5: Hi, good morning. Thanks for the question. First, wanted to talk about VNIR. So I saw you've given the, the impact that had on your guidance. Could you just talk a little bit more about how you've expected that to trend to the year and you're expecting it to break even before the incremental amortization next year? Could you just remind us the steps of the past, for the business to get to that next year?

So you've given the.

The impact that had on your on your guidance could you just talk a little bit more about how you expect that to trend through the year.

You're expecting it to breakeven before the incremental amortization next year could you just remind us that that's in the path for the business to get to that next tier.

Swamy Kotagiri: Good morning, Tami. I'll give you a few key points, and Pat, you can jump in. As we said, we closed the transaction, you know, happy to say that we hit the ground running on the integration efforts. I think I could summarize by saying that we are comfortable with what we talked about when we did the acquisition announcement. Some of the facts that we talked about at that time, 2023 sales, about $1 billion, and we said it would have a 20 basis points impact on consolidated EBIT margin. CapEx was roughly around $100 million. EBITDA positive in 2023. We expect $70 million in synergies by 2025. I think we are, you know, tracking very well, and there could be tailwinds, you know, going forward. EBIT neutral in 2024 ex PPA.

Speaker 15: Good morning, Tammy. I'll give you a few key points and part you can jump in. As we said, we close the transaction, you know, happy to say that we hit the ground running on the integration efforts.

Good morning, Tommy I'll give you a few key points and Pat you can jump in.

As we said we closed the transaction happy to say that <unk> hit the ground running on the integration efforts.

Speaker 15: And I think I could summarize by saying that we are comfortable with what we talked about when we did the acquisition announcement. So some of the facts that we talked about at that time 2020 pre-sales about a billion dollars and we said it would have a 20 basis points impact on consolidated EBIT margins.

I think I could summarize by saying that we are comfortable with what we talked about when we did the acquisition announcement.

So some of the facts that we talked about at that time.

2023 sales about $1 billion, and we said it would have a 20 basis points impact on consolidated EBIT margin.

Speaker 15: Capix was roughly around 100 million EB-Dub positive in 2023.

Capex was roughly around $100 million.

EBITDA positive in 2023.

Speaker 15: We expect the 70 million in synergies by 2025. I think we are, you know, tracking very well and there could be tailwinds going forward.

We expect the $70 million in synergies by 2025, I think we are.

We're tracking very well and there could be tailwind going forward.

Speaker 15: EBIT neutral in 2024 XPPA.

EBIT neutral in 2020 poll ex PPA.

Swamy Kotagiri: A little bit more color on 2025 impact. We should be able to do that in our virtual investor day update, that's coming up, Tami, in September.

Speaker 15: And a little bit more color on 2025 impact, we should be able to do that in our virtual investor day update that's coming up, time in September .

And a little bit more color on 2025 impact we should be able to do that in our virtual investor.

They update that's coming up in September .

Tamy Chen: Okay. Can you talk specifically though about in next year, the business going to EBIT neutral from now being a drag? Can you just remind us of some of the steps to get there?

Okay can you talk specifically about next year that does not go into EBIT neutral now being a drag can you just remind us of some of the steps to get there.

Speaker 5: Okay, can you talk specifically about in next year the business going to either neutral from now being a drag and you just remind us of some of the steps to get there?

Swamy Kotagiri: Morning, Tami, and congratulations on your new role. When you think about the Veoneer business, it's quite similar to our existing electronics business, and they're experiencing rapid growth. Really the driver, what's happening is a combination of two things. One is a lot of their launch costs are being incurred this year, and they're gonna continue through next year. What's happening is, as that business launches, it's driving a lot of contribution margin that's gonna benefit as the volumes ramp. To be honest with you, that's really the inflection point we're seeing in their business, and it's similar to what we're seeing in our business, and that's what's gonna drive the dollar growth and the margin improvement.

So good morning, Tammy and congratulations on your new role.

Speaker 3: So, morning Tammy and congratulations on your new role. When you think about the Be and Ear business, it's quite similar to our existing.

When you think about the pioneer business is quite similar to our existing electronics.

Speaker 3: electronics business and they're experiencing rapid growth. So really the driver, what's happening is a combination of two things.

Business in there they are experiencing rapid growth so really the driver what's happening is a combination of two things. One is there are lot of other launch costs are being incurred this year and they're going to continue through next year, but what's happening is as that business launches, it's driving a lot of contribution margin that's going to benefit.

Speaker 3: One is, a lot of their launch costs are being incurred this year, and they're going to continue through next year. But what's happening is, as that business launches, it's driving a lot of contribution margin, that's going to benefit as the volumes ramp. To be honest, we get that's really the inflection point we're seeing in their business, and it's similar to what we're seeing in our business, and that's what's going to drive the dollar growth and the margin improvement.

As the volumes ramp.

To be honest with you. That's that's really the inflection point, we're seeing in their business and it's similar to what we're seeing in our business and Thats whats going to drive.

The dollar growth in the margin improvement.

Tamy Chen: Got it. Okay, thanks. Then my other question is, you know, it's quite a strong performance in your Cosma business. I don't think we've seen, you know, an 8% or above EBIT margin really since early 2021. I know you called out through the call all the positive factors that have happened this quarter. Could you just specifically on the Cosma business, talk a bit about what really drove quite a strong performance? It was strong sequentially as well. Can you also talk a little bit about within that business, you know, there had been that underperforming plant. Just, you touched on it a bit earlier in your comments, but a little bit more detail on that. Are you largely through that headwind as well? Thank you.

Got it okay. Thanks, and then my other question is.

Speaker 5: Got it. Okay. Thanks. And then my other question is, um, it was quite a strong performance in your Cosmetic business that I don't think we've seen, you know, you

It's quite a strong performance in Europe .

My business I don't think we've seen.

The 8%, 8% or above EBIT margin really since early 2020, Wang or you called out in the call.

Speaker 5: the eight percent or above even March and really since early 2021. I know you called out through the call all the positive factors that have happened this quarter, but could you just specifically on the Cosmo business talk a bit about what really drove quite a strong performance. It was strong sequentially as well. Can you also talk a little bit about within that business, you know, there had been that underperforming plant just you touched on a bit earlier in your comments but a little bit more detail on that are you largely through that headwind as well. Thank you.

All the positive factors that happen this quarter, but could you just specifically on the Cosmo business talk a bit about what really drove quite a strong performance and a strong sequentially as well can.

Can you also talk a little bit about within that business. There had been not underperforming plants just you.

You touched on it a bit earlier in your comments that a little bit more detail on that or are you largely through that.

That headwind as well thank you.

Swamy Kotagiri: Yeah. Tamy, you know, from a Cosma perspective, like you said, we have seen those type of numbers before. You know, as we discussed the production stability, having the volumes coming back up, ticking back up, and all the initiatives are a combination. It's really good execution on higher sales is one, and kinda operational improvement in a couple of facilities. You touched on the BES facility that we had issues with, and it's tracking. The predominant factor, as I discussed previously, was the efficiency hit that we were having and therefore had to outsource capacity. I'm happy to say now that we improved our efficiency, so the capacity opens up, and we are able to bring back work, which obviously helps.

Speaker 15: Yeah, Tammy, you know, from a cosmic perspective, like you said, we've seen those types of...

Yes.

You know from a Cosmo perspective, like you said, we have seen those type of.

Speaker 15: numbers before and, you know, as we discussed, the production stability, having the volumes coming back up, taking back up, and all the initiatives are a combination. It's really good execution on higher sales is one. And kind of operational improvement in a couple of facilities, you touched on the VES facility that we had issues with, and it's tracking.

The numbers speak for.

As we discussed the production stability.

Having the volumes coming back up ticking back up and all the initiatives or a combination.

It's really good execution on higher sales is one.

And kind of operational improvement and a couple of facilities you touched on the B S. S&P that'd be had issues Smith.

And it's tracking there.

Speaker 15: The predominant factor I've discussed previously was the efficiency hit that we were having and therefore had the outsource capacity. So I'm happy to say now that.

The predominant factor as I discussed previously was.

The efficiency hit that we were having and therefore had to outsource capacity. So I'm happy to say now that yeah.

Speaker 15: We improved our efficiency, so the capacity opens up and we are able to bring back work, which obviously helps. And that's, I would say, its on track and continuing to make progress as we are discussed towards the end of 2024. And one other thing would be comparing to 2022 Q2, it would be Russia losses, Pat, we try not there.

We improved our efficiency.

So the capacity opens up and we are able to bring back work.

Which obviously helps and that's a I would say, it's on track and continuing to make.

Swamy Kotagiri: That's, I would say, it's on track and continuing to make progress as we had discussed towards the end of 2024. One other thing would be comparing to 2022 Q2, it would be Russia losses at-

Make progress.

As we have discussed towards the end of 2024.

And one other thing would be comparing to 2022, Q2, which would be Russia losses be thrown out there.

Louis Tonelli: Right

Swamy Kotagiri: ... which are not there. You know, some of it is also commercial resolutions in the quarter, including retro from, you know, that goes back into the previous part of the year. I also wanna mention that there is some benefit going forward in a run rate perspective. I would say those are the combination of things that led to the expected strong performance in just BES, but specifically in Cosma.

Speaker 15: And some of it is also commercial resolutions in the corridor, including retro that goes back into the...

Hey.

Some of it is also commercial resolutions in the quarter, including breakthrough from that goes back into the.

Speaker 15: previous part of the year, but also want to mention that there is some benefit going forward in a run rate perspective. So I would say those are the combination of things that led to expected strong performance in just in BS, but specifically in Cosmo. And Tammy, you mentioned Cosmo, but yeah, it's all BS because Chuganet is Cosmo, but we have our series of centers as well.

Previous part of the year, but also want to mention that there is some benefit.

Benefit going forward in a run rate perspective, so I would say those are the combination of things that led to the expected strong performance in just in <unk>, but specifically in Cosmo and Tammy you mentioned Cosmo, but yes. It's all of the biggest chunk of that is causing them, but we have <unk> the center as well.

Louis Tonelli: Tamy, you mentioned Cosma, but yeah, it's all BES.

Swamy Kotagiri: BES.

Louis Tonelli: The biggest chunk of it is Cosma, but we have our exterior business in there as well.

Patrick McCann: Yeah. There was some commercial items. You know, Tammy, when you think about where we're pushing for recoveries, we're pushing for commercial recoveries as well. When we talk commercials, it's you know, cancellation claims, low volume claims. Some of that benefit did come through in the quarter, and part of it was retro, as Swamy mentioned.

And there was some commercial items.

Speaker 3: And there was some commercial items, you know, when you think about where we're pushing for, recoveries, we're pushing for commercial recoveries as well. And we talk commercials, it's, you know, cancellation claims, low volume claims, so some of that benefit, it come through in the quarter and part of it was retro, as Swamy mentioned.

Jamie when you think about where we're pushing for recoveries were pushing.

For commercial recoveries as well and when we talk commercials.

Cancellation claims low volume claims so some of that benefit did come through in the quarter and part of it was retro as Swamy mentioned.

Tamy Chen: Okay. Got it. Thank you.

Okay got it thank you.

Operator: Thank you. Our next question comes from the line of Chris McNally with Evercore. Please proceed with your question.

Speaker 1: Thank you. Our next question comes from the line of the Christmas Mallor with Evercore. Please proceed with your question.

Thank you. Our next question comes from the line of Chris Mcnally with Evercore. Please proceed with your question.

Yeah.

Chris McNally: Thanks so much, team. Just wanted to follow up on the last set of questions on Body. If we look at the implied H2 versus sort of Q2, where you put up the impressive margins, was there any particular, you know, sort of price that was taken in Q2 that was retroactive? You know, some of the suppliers were talking about looking at sort of H1 margins, for example, for divisions because, you know, of the timing of some of these price recoveries. Then, you know, as a follow-through, you know, how do we think about pros and cons or headwinds, tailwinds for Body in H2?

Thanks, so much team.

Speaker 16: Thanks so much team. Just wanted to follow up on the last set of questions on body. If we look at the implied second half, we're sort of Q2, we put the impressive margin.

Just wanted to follow up on on the last set of questions on <unk>.

On body.

If we look at the implied second half there.

We're sort of Q2, we pretty impressive margins.

Was there any was there any.

Speaker 4: Was there any particular price that was taken in Q2 that was retroactive? Some of the suppliers were talking about looking at first half margins, for example, for divisions, because of the timing of some of these price recovery. And then as a follow through, how do we think about pros and cons or headwinds, tailwinds for body in a second half?

Particular sort of.

And that was taken in Q2 that was retroactive some of the suppliers talking about looking at sort of first half margins for example for divisions because of the timing of some of the SaaS a price recovery.

And then.

The fall to how do we think about pros and cons.

Headwinds tailwind for body in second half.

Patrick McCann: Morning, Chris, I guess afternoon to you. I think you're correct. You're absolutely correct. When you think about these commercial items and the inflation recoveries, a portion of them, as these are being negotiated throughout the year, a portion by default becomes retro. There are some retro recoveries in Q2 related to Q1 and a little bit from 2022, but it's primarily a Q1 issue as we push forward. It's fair to say that our margin in our BES segment's gonna peak in Q2 and normalize to those guidance range in H2. I don't want to lose focus. Like, there is a commercial portion, but the real drive here is volumes and execution on that volume increase.

Yes.

Speaker 3: morning, Chris, I guess afternoon to you. I think you're correct. You're absolutely correct when you think about these commercial items and the inflation recoveries. A portion of them, I just these are being negotiated throughout the year. A portion by default becomes retro.

Good morning, Chris I guess afternoon to you.

I think Youre correct Youre absolutely correct. When you when you think about these commercial items and the inflation recoveries a portion of them.

These are being negotiated throughout the year a portion by default becomes retro. So there are some retro recoveries in the second quarter related to Q1, and a little bit from 2022, but it's primarily a Q1 issue as we push forward. So it's fair to say that our margin in the Es segment is going to peak in Q2 and normally.

Speaker 3: So there are some retro recoveries in the second quarter related to Q1 and a little bit from 2022, but it's primarily a Q1 issue as we push forward. So it's fair to say that our margin and that our BES segment is going to be can Q2 and normalize to those guidance range in the second half of the year.

Eyes to those guidance range.

In the second half of the year.

Speaker 3: But I don't want to focus, like there is a commercial portion, but the real drive here is volume, the execution on that volume increase. That is...

But it does.

I don't want.

There is a commercial portion, but the real driver here is volumes and execution on that volume increase that is.

Patrick McCann: That's really what's driving the performance improvement going forward.

Speaker 3: That's really what's driving the performance improvement. I keep it month forward. Keep in mind, in age few versus age one, we do see volumes down. Some of that's just regular seasonality, but volumes and sales will be expected to be down.

That's really what's driving the performance improvement and keep them off or keep in mind.

Louis Tonelli: Keep in mind, you know, H2 versus H1, we do see volumes down. Just some of that's just regular seasonality, but volumes and sales will be expected to be down.

HP versus H, one where you do see volumes down just so that's just regular seasonality, but volumes in sales would be expected to be down.

Chris McNally: No. That makes sense. I mean, you know, one of the things, in the analyst community we're dealing with is, you know, the suppliers are being appropriately conservative, but basically by your implied production, you have H2 down versus H1, where the forecasters have slightly up. That makes sense. If we stick on margin, seating, it looks like it's starting to turn a corner and seating has been, you know, this sort of persistent low margin. You had some of the BMW business that came on that had different margin characteristics. Are we turning a corner?

No.

Speaker 4: No, and that makes sense. I mean, you know, one of the things where in the analyst community, we're dealing with is

I mean.

One of the things we're in the analyst community, where we're dealing with it.

Speaker 4: The suppliers are being appropriately conservative, but basically by your implied production.

The suppliers are being appropriately conservative, but basically by your implied production you have second half down versus first half.

Speaker 4: You have second half down versus first half, which the poor catchers have slightly up. So that makes sense. If we stick on margin feeding, it's starting to turn a corner and feeding has been this sort of persistent more marginy at some of the BMW business that came on that had different margin characteristics.

Forecasters have.

So slightly up so.

That makes sense.

If we stick on margin feeding it looks like it's starting to turn.

Cornering and seeding has been.

They sort of persistent low margin you had some of the BMW business that came on that have different margin characteristics.

Speaker 4: Are we turning a volume, turning a corner, and there's the European volumes that are turning, actually start to really help here, which has been a drag for several.

Are we turning a volume turning at a corner and.

Chris McNally: Does the European volumes that are turning actually start to really help here, which has been a drag for, you know, for several years?

Does the European volumes that are turning actually start to really help here, which has been a drag for for several years.

Swamy Kotagiri: Hi. Good morning, Chris, or good afternoon, it's past that. I think we talked about the mix issue that we've had in seating, right? That was disproportionately impacting us. As the volumes are coming back, and the mix is, you know, becoming more normalized than lopsided, we are starting to see those effects come through. I also have to give a lot of credit to the seating team on how they are being part of this overall initiative that we're looking at and starting to see the impact of that, whether it's some of the digitization efforts, some of just block and tackle type things that we're going through. We also talked about some of the wins in the truck segment in North America and some actual discussions on existing non-performing programs.

Speaker 4: I'm running Chris or a production as pass that I think we talked about makes issue that we've had in sitting right that was

Hi, Good morning, Chris our production with less pass that.

I think.

We talked about the mix issue that <unk> had in seating right. Therefore.

Speaker 4: This proportionately impacting us and as the volumes are coming back at the mixes.

Disproportionately impacting us and as the volumes are coming back and the mixes.

Speaker 4: becoming more normalized, then lost-sided, we are starting to see those effects come through. But I also have to give a lot of credit to the seeding team on how they're...

Becoming more normalized than lopsided, we are starting to see those effects come through but I also have to give a lot of credit to the seating team on how they're being part of this overall initiative that we're looking at and starting to see the impact of that.

Speaker 4: being part of this overall initiative that we're looking at and starting to see the impact of that, whether it's some of the digitization effort, some of just block and tackle type things that we're going through. And we also talked about some of the...

Whether it's some of the digitization effort some of them just block and tackle type things that we're going through and we also talked about some of the <unk>.

Speaker 4: wins in the track segment in North America and some actual discussions on existing non-performing programs. It's a combination of all of this that we are seeing the effect just not today, but I think we are very optimistic about what we could see in the coming years in Phoenix.

Wins.

In the truck segment in North America, and some actual discussions on existing nonperforming.

Swamy Kotagiri: It's a combination of all of this that we are seeing the effect, just not today, but I think we are very optimistic about what we could see in the coming years in seating.

Programs.

Yes, it's a combination of all of this that we are seeing today in fact, just not today, but I think we are very.

Very optimistic about what we could see in the coming years in seating.

Patrick McCann: Okay, great. I'll hold back on the ADAS and the radar questions. I look forward to the event in September. Thanks so much.

Okay, great and I'll hold back on the Adas and the radar questions look forward to the to the events in September thanks, So much.

Speaker 16: Great, and I'll hold back on the ADAS and the RADAR questions. Look forward to the event in September . Thanks so much.

Swamy Kotagiri: Great. Thank you.

Great. Thank you.

Operator: Thank you. Our next question comes from the line of Mark Delaney with Goldman Sachs. Please proceed with your question.

Thank you.

Speaker 1: Thank you. Our next question comes from the line of Mark Delaney with Goldman Sachs. Please proceed with your question.

Our next question comes from the line of Mark Delaney with Goldman Sachs. Please proceed with your question.

Speaker 8: Good morning. Thank you very much for taking my questions. I believe last year, Magno's mega trend revenue was about a billion, and I think you guided it to approximately double this year and then to reach about 4 billion in 2025, excluding the near active safety. Given some of the volatility that's been happening with some of the EV plans from certain OEMs, I'm curious if you could give us an update about how you're tracking in those mega trend areas relative to the part.

Good morning. Thank you very much for taking my questions I believe last year Magna's Megatrend revenue was about $1 billion and I think you guided it to approximately double this year and then to reach about $4 billion in 2025, excluding venier active safety given some of the volatility that's been happening with some of the EV plan.

From Sterne Oems I'm curious if you could give us an update about how youre tracking and those megatrend areas relative to the prior targets.

Swamy Kotagiri: Hi. Good morning, Mark. I would say to answer your question, looking at what we know today, obviously in terms of take rates and so on and so forth, we are tracking to what we had talked about. And you mentioned the numbers, it's roughly about $4 billion in 2025, right? But as you said, it's very early days of electrification, I think. We all know that it's a secular trend for sure and it's here to stay. But the real trick is in predicting the trajectory. You know, that's something that we all have to wait and see. We are taking, you know, all the tools in the toolbox to look at how can we have that flexibility and how can we pivot, how can we look at different programs and so on and so forth.

Hi, good morning, Mark.

Speaker 4: Hi, good morning Mark. I would say to answer your question, looking at what we know today, obviously in terms of take rates and so on and so forth, we're tracking to what we had talked about. You mentioned the numbers. It's roughly about four billion in 2025. Right.

Hi.

I would say to answer your question looking at what we know today, obviously in terms of take rates and so on and so forth. We are tracking to what we had talked about and you mentioned the numbers, it's roughly about 4 billion in 2025 right.

Yeah.

Speaker 4: But as you said, it's very early days of electrification. I think we all know that it's a secular trend for sure, and it's here to stay. But the real trick is in predicting that trajectory.

But as you said, it's very early days of electrification I think we are.

I'll note that it's a secular trend for short and it's here to stay.

But the real trick is predicting that trajectory.

That's something that we all have to wait and see and we are taking you know all of the tools in the toolbox to look at.

Speaker 4: You know, that's something that we all have to wait and see. And we're taking, you know, all the tools in the toolbox.

Speaker 4: how can we have that flexibility and how can we pivot, how can we look at different programs and so on and so forth. But overall, whether it's electrification or ADAS, I think we're tracking to the numbers that we talked about.

How can we have that flexibility and how can we pivot.

Can we look at different programs and so on and so forth, but overall, whether it's electrification. Okay Das I think we're tracking to the numbers that we talked about.

Swamy Kotagiri: Overall, whether it's electrification or ADAS, I think we are tracking to the numbers that we talked about.

Mark Delaney: That's helpful. Then, in terms of the margin improvement opportunities, you know, you spoke a little bit around commercial negotiations already. Slide nine though mentions repricing underperforming programs as one of the margin opportunities. I was hoping to understand that dynamic specifically, if possible, and to have a better sense of how broad-based these underperforming programs are. I mean, is it isolated to a few or is that a wider initiative? You know, any color you can share on your progress and how likely you think it is that you'll be able to restructure some of those programs? Thanks.

That's that's helpful and then in terms of the.

Speaker 8: that's the level and then in terms of the

Speaker 8: margin improvement opportunities. You know, you spoke a little bit around commercial negotiations already. Slide nine, they'll mention repricing underperforming programs is one of the margin opportunities. So I was hoping to understand that dynamic specifically if possible.

Margin improvement opportunities you spoke a little bit around commercial negotiations already slide nine I mentioned repricing underperforming programs I was one of the margin opportunity. So I was hoping to understand that dynamic specifically if possible and to have a better sense of how broad based studies that they're performing programs or I mean is it isolated to a.

Speaker 8: have a better sense of how broad-based these other performing programs are. Is it isolated to a few or is that a wider initiative and any color you can share on your progress and how likely you think it is that you'll be able to restructure some of those programs.

Or is that a wider initiative and any any color you can share on your on your progress and how.

How likely you think it is that youll be able to restructure some of those programs. Thanks.

Yeah.

Swamy Kotagiri: Hey, Mark. It's, I wouldn't call it wider. It's actually very granular look, which is a normal process. It's very targeted, very granular, very deliberate. We are looking at programs as they come towards the end of a program, right? End of production cycle. There are some where there is replacement coming through. There is some, you know, extensions that come through. We look at all of these opportunities and sometimes it's change of scope on the project. We are looking at everything out there to see how do we effectively, you know, reprice, get the economics to where they really need to, which meets our financial hurdles. I can definitely say we have had success in some of these cases, and some are still an ongoing discussion.

Okay markets call. It wider it's actually a very chronic that granular loan book, which is a normal process, it's very targeted very granular very deliberate.

Speaker 4: In markets, I would call it wider. It's actually very, call it a granular look, which is a normal process. It's very targeted, very granular, very deliberate.

Speaker 4: We are looking at programs as they come towards the end of the program, right? End of production cycle. There are some ways, there is replacement coming through. There is some hilarious, no extensions that come through. We look at all of these opportunities and sometimes it's changes cope on the project.

We are looking at programs as they come towards the end of the program right.

The production cycle.

There are some great. If there is a replacement coming through various Tommy lotteries are extensions that come through we look at all of these opportunities and sometimes it's a change of scope on that project.

Speaker 4: We are looking at everything out there to see how to be effectively reprise, get the economics to where there really need to, which meets our financial hurdles. And I can definitely say we have had success in some of these cases and some are still an ongoing discussion.

We are looking at everything out there to see how can we be effective me.

Re price get the economics to be able to really meet too which meets our financial hurdles.

Hurdles and I can definitely say, we have had success in some of these cases.

And some are still an ongoing discussion.

Mark Delaney: Thank you. I'll turn it over.

Thank you I'll turn it over.

Okay.

Operator: Thank you. Our next question comes from the line of Tom Narayan with RBC. Please proceed with your question.

Thank you.

Speaker 1: Our next question comes from the line of Tom Narayan with RBC. Please proceed with your question.

Our next question comes from the line of Tom Narayan with RBC. Please proceed with your question.

Tom Narayan: Hi, guys. Thanks for taking the question. The first one is, could you remind us what your, I guess, your D3 US exposure is? Just asking, and just maybe it may help us understand maybe how we should think about potential strike implications.

Hi, guys. Thanks for taking the question.

Speaker 2: Hi guys, thanks for taking the question. The first one is could you or remind us what your, Mr. D3 US exposure is? Just asking and just may it may help us understand maybe how, how we should think about potential strike and application.

First one is could you remind us what your I guess your <unk> III.

<unk> exposure is.

Just asking just me it may help us understand maybe how are.

How we should think about a potential strike applications.

Speaker 14: I think I'm going to say we're probably 75% in North America. It was 70% of our business in that area.

Yeah, I think I'm going to say, we are probably 75% in North America with about 75% of our business in that area.

Speaker 4: So, you just close the, like, I haven't got that handy, but it's in that ring.

We do disclose that I haven't got that handy, but its in that range.

Tom Narayan: Okay. Any details like splitting-

Okay, and it always feels like splitting cannot be convinced of the north American business.

Speaker 2: Okay. And any details like splitting?

Swamy Kotagiri: The North American business.

Patrick McCann: The North American business.

Tom Narayan: Any breakout of the three OEMs or?

Any breakout of the three Oems or I can get that for you Tal I don't have it at my fingertips, Okay. Okay no worries.

Speaker 2: And any breakout of the three LMS or I can get that for you, Talie, when I have it on my finger tips. Okay.

Patrick McCann: I can get that for you, Tom. I don't have it at my fingertips.

Tom Narayan: Okay. No worries. The other one is, you know, we've been hearing about some of the EV slowdown chatter, specifically with legacy North American OEMs. It's coming up in a lot of these supplier calls. Just curious if you're seeing this or if this is impacting kind of your EV business kind of more near term, or if you're seeing anything there.

Speaker 2: And then the other one is, you know, we've been hearing about some...

And then.

The other the other one is we've been hearing about some.

Speaker 2: some VEV slowdown chatter, specifically with legacy North American OVNs. It's coming up in a lot of these supplier calls.

Some of the EV slowdown chatter, specifically with legacy North American Oems.

It's coming up in a lot of the supplier calls.

Speaker 2: Just curious if you're seeing this, if this is impacting kind of your easy business, kind of more near term, or if you're seeing anything there.

Just curious if you're seeing this if this is impacting kind of.

Your <unk> business.

It kind of more near term.

Or if youre seeing anything there.

Swamy Kotagiri: Yeah. Tom, good morning. This is Swamy. I think if you look at it, I mean, really the EV business is just at a call it early days. It's just launching and it's just taking. If you look at the numbers, right? We are like, what, 2 million or so in vehicles. So it's more about how you position yourself on the right programs and, you know, looking at each of these, how we go about and what type of thinking you have in processing these programs. I think that's the important part. I don't know if you go back two or three years, we talked with a different tone, and today it's with a different tone. I think we need to take a more calm approach.

Yeah, Tom Good morning. This is swamy I think if you look at it I mean really the EV business is.

Speaker 14: Yeah, Tom, good morning. This is Swami. I think if you look at it, I mean, really the UV business is just a colleague of the early days. It's just launching and it's just taking. If you look at the numbers, right, we are like what, two million or so in vehicle. So, it is more about how you position yourself on the right programs and, you know, looking at each of this, how we go about and...

Just a call. It early days is just launching and it just taking it from the <unk>.

Members right like what $2 million or so in vehicles. So.

It's more about how you can position yourself on the right programs in.

Now looking at each of this how we go about and what type of thinking.

Speaker 14: what type of thinking you have in processing this program. I think that's the important part.

Thinking you'll have in processing. These programs I think that's the important part.

I don't know if you go back two or three years.

Speaker 14: I don't know if you go back to or three years, we talked with a different tone and today it's with a different tone. I think we need to take a more calm approach and a life that I believe and we believe at Magna that it's a trend here to stay. We have to figure out how to manage the transition and that's where our focus is.

We talked with a different tone and today, it's with a different tone.

Think we need to take a more a common approach and as I said I believe and we believe that magna that it's a trend here to stay.

Swamy Kotagiri: As I said, I believe and we believe at Magna that it's a trend here to stay. We have to figure out how to manage the transition, and that's where our focus is.

We have to figure out how to manage that transition and that's where our focus is.

Tom Narayan: Okay, thanks. Lastly, if I look at these two segments, I think we're pretty interesting in Q2, you know, BES very strong, and then P&V, maybe a little bit lighter than maybe some folks expected, but then you've raised sales forecast for both. I know things can be kind of lumpy from quarter to quarter. Just curious about Q2 sustainability in these two segments in H2. Clearly, you're expecting an improvement in P&V. How should we think about these two segments, Q2 versus H2? Thanks.

Okay. Thanks, and then lastly, if I look at the two segments I think were pretty interesting in Q2.

BNS very strong and then <unk>, maybe a little bit lighter than maybe some folks expected, but then you've raised sales forecast for both.

Speaker 2: I know things can be kind of lumpy from quarter to quarter, just curious about Q2 sustainability in these two segments in NH2, clearly, or as you're expecting improvement in P and V. And I should we think about, yeah, these two segments, Q2 versus H2. Thanks.

I know things can be kind of lumpy from quarter to quarter, just curious about Q2 sustainability in these two.

Segments at in each to clearly I guess, you're expecting an improvement in <unk> and how should we think about these two segments Q2 versus HD.

Swamy Kotagiri: Yeah. I think we touched on some of the factors that contributed to the strong, BES contribution, right? We kinda see that going forward. There's no reason for us to think any different, given there is no other major disruption or some industry-wide thing. We are starting to see, like I said, the efforts on all the initiatives that we have in place and stability in production and increasing volumes. The P&V, as you mentioned, really, the net input costs were a headwind year over year in the H1. The acquisition of Veoneer Active Safety negatively impacted the Q2. You know, we talked about a few things in the Q1, which was a warranty item. There was a net negative commercial items in Q2 and some higher engineering costs that were associated with the launch of the program.

Yes, I think we've touched on some of the factors that contributed to the strong b, yes contribution right and we kind of see that going forward. There is no reason for us to think any different.

Speaker 14: Yeah, I think we touched on some other factors that contributed to this strong BES contribution, right? And we kind of see that going forward. There is no reason for us to think any different. Given there is no other major disruption or some industry, why I think we are starting to see, like I said, the efforts on all the initiatives that we have in place and stability in production and increasing volumes.

Given there is no other major disruption or some industry wide thing.

We're starting to see like I said the efforts on all the initiatives that we have in place and stability in production and increasing volumes. The <unk>. As you mentioned really are the net input costs were a headwind year over year in the first half.

Speaker 14: The P&V, as you mentioned, really the net input cost where a headwind year or year in the first half.

Speaker 14: The acquisition of Re-Nare Active Safety negatively impacted the Q2.

The acquisition of active safety negatively impacted the Q2, and we talked about a few things in the first quarter, which was a warranty item. There was a net negative commercial items in Q2, and some higher engineering costs that were associated with the launch of the program. So operationally it's good.

Speaker 14: And we talked about a few things in the first quarter, which was a warranty item. There was a net negative commercial items in Q2 and some higher engineering costs that were associated with the launch of the program. So operationally, it's good. All of this.

Swamy Kotagiri: operationally, it's good. All of these, call it one-timers, you know-

All of this call it one timers.

Speaker 14: We call it one-timers, you know, very lumped in the first half of the year. So we see going forward, if you exclude those things a better round rate. Yeah, if you kind of...

Tom Narayan: Mm.

Swamy Kotagiri: were lumped in H1. We see going forward, if you exclude those things, a better run rate.

No.

In the first half of the year so.

Do you see going forward, if you exclude those things a better run rate.

Patrick McCann: Yeah. If you kind of excluding those items, the pull-through is actually quite good in P&V in the quarter.

You kind of <unk>.

Speaker 4: excluding those items, the poll troops are actually quite good and P and V in the corridor.

Excluding those items the pull through is actually quite good in PV in the correct.

Tom Narayan: Got it. Okay. Thanks a lot.

Got it okay. Thanks a lot.

Yes.

Yeah.

Operator: Thank you. Our next question comes from the line of Colin Langan with Wells Fargo. Please proceed with your question.

Thank you. Our next question comes from the line of Colin Langan with Wells Fargo. Please proceed with your question.

Speaker 1: Thank you. Our next question comes from a line of Colin Langen with Wells Fargo. Please proceed with your question.

Colin Langan: Oh, great. Thanks for taking my questions. Just at a high level, if I look at the guidance H1 to H2, you have sales down $600, and that's with Veoneer, which I assume that means it's over $1 billion in H1, H2, but EBIT up. What are the major puts and takes that get that up? I assume also that the guidance doesn't include any sort of factor for UAW, confirm that.

Oh, great. Thanks for taking my questions.

Speaker 17: Oh, great. Thanks for making my questions. Just at a high level, if I look at the guidance first half to second half, you have sales down 600 and that's with me in here, which

Just at a high level, if I look at the guidance first half to second half you have sales down six hundreds and that's with <unk>, which I assume that means that's over $1 billion in first half second half, but EBIT up so what are the major puts and takes that get that up and I assume also that the guidance doesn't include any sort of.

Speaker 2: So what are the major puts and takes? I assume also that the guidance doesn't include any sort of factor for you.

Factor for you light up here.

Uh huh.

Patrick McCann: Sorry. Morning, Colin. H1 versus H2, I think was your question, just the Magna consolidated variance. The second part of your question was, you're correct. We haven't modeled in or factored in a UAW disruption, if any. When you think about, I think Swamy's touched on a lot of the points. Big picture, when you take a step back and look at our H1 versus H2, there's a couple of factors. We expect on the recoveries, we expect those to be more H2 versus H1, and that's what we've projected from beginning of the year, and that's what we're continuing to see. That's number one. Number two, there were some discrete items that happened in H1 that aren't expected to recover.

So your so called good morning, Colin so.

H one versus age too I think it was your question just the <unk>.

Speaker 3: H1 versus H2, I think was your question just the magnet consolidated variance. So the second part of your question was you're correct, we haven't modeled in our factor in the UAW disruption, if any. When you think of, I think Swami's touched on a lot of the points, but big picture when you take a step back and look at our H1 versus H2, there's a couple of factors. The

The consolidated variance so the second part of your question was you're correct, we haven't modeled in or factored in our UAW disruption if any.

When you think about I think swamy has touched on a lot of the points, but big picture. When you take a step back and look at our H one versus age two there's a couple of factors.

Sure.

<unk>.

We expect.

Speaker 3: We expect, on the recoveries, we expect those to be more back half versus first half. And that's what we've projected from beginning of the year and that's what we're continuing to see. So that's number one. Number two, there were some discrete items that happened in the first half of the year.

On the on the recoveries, we expect those to be more back half versus first half and that's what we've projected from beginning of the year and that's what we're continuing to see so that's number one.

Number two there were some discrete items that happened in the first half of the year.

Patrick McCann: Swamy touched on the warranty issue that we had in Q1. There was a few commercial settlements that had happened that positively impacted us that were in Q2 that were retro back into Q1, a portion back into Q2. Then as we move forward, we're still seeing stabilization of the production schedules, which is benefiting us. I think, again, I just wanna reinforce, when you come in with a lot of these operational improvements that we talk about is they take time to gain traction. You implement a strategy, and then you start permeating them across the various divisions, and you gain acceleration as you go through. For example, Swamy touched on our ability to make improvements on our underperforming division in Germany. That's what we're seeing.

Not unexpected recovery, while we touched on the warranty issue that we had in Q1 there was.

Speaker 3: that aren't expected recover. So while we touched on the warranty issue that we had in Q1, there was a few commercial settlements that had happened that positively impacted us that were in the second quarter that were retro back into...

A few commercial settlements that had happened that positively impacted us that we are.

In the second quarter that were retro back into them.

Speaker 3: Q1, portion back into Q2. And then as we move forward.

Q1, the port portion back into Q2.

And then as we move forward.

Speaker 3: We're still seeing stabilization of the production schedules, which is benefiting us. But I think again, I just want to reinforce, when you come in with a lot of these operational improvements that we talk about is they take time to gain traction. So you implement a strategy and then you start.

We're still seeing stabilization of the of the production schedules, which is benefiting us, but I think again I just want to reinforce when you come in with a lot of these operational improvements that we talk about as they take time to gain traction. So you implement a strategy and then you start.

Speaker 3: permutating them across the various divisions and you gain acceleration as you go through. So for example, Swami touched on our ability to make improvements in our underperforming division in Germany. That's what we're seeing. So those are sequential improvements that we're seeing from H1 and H2. And then obviously the acquisition of being here comes in in the second half of the year with the $1 billion of sales.

Permutating them across the various divisions and you gain acceleration.

As you go through so for example, swamy touched on our ability to make improvements at our underperforming division in Germany. That's what we're seeing so those are sequential improvements that we're seeing from each one of <unk>.

Patrick McCann: Those are sequential improvements that we're seeing from H1 into H2. Obviously, the acquisition of Veoneer comes in in H2 with about $1 billion of sales coming in, which does strike a margin, as we pointed out by about 20 basis points, which goes the other way.

And then obviously the acquisition of <unk> near comes in in.

In the second half of the year with about $1 billion of sales.

Speaker 3: coming in which which does strike the margin as we pointed out by about 20 basis points which both the other way.

Coming in which which does strike in margin.

As we pointed out by about 20 basis points, which goes the other way.

Colin Langan: Got it. Any color on the change in adjusted EBIT, you know, now excluding amortization? How big of a factor will that be? I wasn't really sure. I think you didn't include it as an adjustment in Q1, Q2, but for the rest of the year it'll be adjustments. Does Q1, Q2 eventually get restated to exclude amortization too? Will that be driving some of the comparisons we're looking at?

Got it.

Speaker 2: Any color on the change in Adjusted EBIT, you know now excluding amortization. How big of a factor will that be? And then wasn't really sure. I think you didn't include it as an adjustment in Q1, Q2. But for the rest of the year, it'll be in adjustments. So Q1, Q2 eventually get restated to exclude amortization too. And will that be driving some of the comparison?

And any color on the change in.

Adjusted EBIT now excluding amortization.

How big of a factor will that be and then I wasn't really sure. I think you didn't include it as an adjustment in Q1 Q2, but for the rest of the year it'll be adjustments or does Q on Q to eventually get restated to exclude amortization, two and will that be driving some of the comparisons we're looking at.

Patrick McCann: Yeah. We're still working through the impacts. It'll take a little bit of time to refine that calculation, but our estimate on an annual basis is about $60 million, so about $30 million in H2 of the year.

And we're still working through the the impacts will take a little bit of assigned that to refine that calculation, but our estimate on an annual basis is about $60 million. So up 30 in the back half of the year.

Speaker 3: And we're still working through the impacts and take a little bit of time to refine that calculation, but our estimate on an annual basis is about $60 million. So folks are reading the back half of the air.

Tom Narayan: Colin, that's preliminary. That's part of the reason we're excluding it as well at this point.

And Collyn, that's preliminary and Thats part of the reason, we're excluding that as well at this point, but just the basis for why we've done. It. So you are correct on a go forward basis, we're going to exclude it.

Speaker 6: And Colin, that's preliminary. That's part of the reason we're excluding it as well at this point. But just the basis for why we've done it. So you're correct. On a go-forward basis, we're going to exclude it. And what we're excluding specifically is acquired purchased intangibles. So the amortization of such amounts. So it's not regular increments. And the reason we're doing it is...

Patrick McCann: Just the basis for why we've done it, so you're correct. On a go-forward basis, we're gonna exclude it. What we're excluding specifically is acquired purchased intangibles. The amortization of such amounts, so it's not regular increments. The reason we're doing it is, effectively, we're trying to improve how we manage our businesses. We have an existing electronics business, roughly the same size as the acquired entity, and we wanna manage, you know, evaluate them, their performance and their execution on an apples-to-apples basis. That's why we've made the decision to exclude it. The other factor was from an investor's perspective, when we're thinking if I was sitting in your seat, is I wanna be able to evaluate how Magna's electronics business is performing versus our peers.

Excluding specifically is acquired purchased intangibles.

So the amortization of such amounts so its not regular increments and the reason we're doing it is.

Speaker 6: effectively we're trying to improve how we manage our businesses so we have an existing

Actively we're trying to improve how we manage our businesses. So we have an existing <unk>.

Speaker 6: Electronic business roughly the same size as the acquired entity and we want to manage, you know, evaluate them through their performance and their execution on an Apple's Apple's basis. So that's why we've made the decision to exclude it. The other factor was when you from an investor's perspective, when we're thinking about sitting in your seat is, I want to be able to evaluate how Magnus electronics business is performing versus our peers. And we did an analysis.

Electronics business roughly the same size as the acquired entity and we want to manage that.

Evaluate them their performance of their execution on an apples to apples basis. So that's why we've made the decision to exclude it.

Other factor was when you from from an investor's perspective.

We were thinking but.

But that was sitting in your seat is I want to be able to evaluate.

Evaluate held magna's electronics business is performing versus our peers and we did an analysis.

Patrick McCann: We did an analysis, just to make sure we're consistent with our peer group in that regard.

Speaker 6: just to make sure we're consistent with our peer group in that regard.

Just to make sure we're consistent with our peer group in that regard.

Colin Langan: Just one quick follow-up. The $60 million estimate, is that just the in year? 'Cause I think there's about the 10-K, said there'd be around $90 million of amortization, you know, just going into the year. Does that also get pulled out? I'm comparing apples to apples.

Speaker 2: I can just one quick thought that the 60 million estimate is that just the an ear? Because I think there's about the 10K said they'd be around 90 million of amortization.

And just one quick follow up the 60 million estimate is that just an ear and because I think theres about 10-K said there'd be around 90 million of.

Amortization.

Just going into the year. So that also gets pulled out I'm comparing apples to apples.

Patrick McCann: If we're talking specifically.

Speaker 6: So you're talking, it wears talking specifically amortization of acquired intangibles. I don't know what the 90 you're referring to is.

So you're talking.

If we're talking specifically amortization of acquired intangibles I don't know what the 19, you're referring to is.

Colin Langan: Yeah.

Patrick McCann: Amortization of acquired intangibles, I don't know what the $90 you're referring to is. There's other amounts. If you're referring back to the cash flow statement, there's other amounts in that $90.

Theres other if you're referring back to the cash flow statement, there's other amounts in that 90.

Speaker 2: There's other, if you're referring back to the cash flow statement, there's other amounts in that 90, but the approximately six.

Louis Tonelli: The approximately 60 is this year, the Active Safety.

But the approximately $60 of generics.

In active safety.

Colin Langan: Okay. That'll be the full year charge going forward, $60 million will be pulled out as a special item.

Oh, Okay. So that'll be the full year charge going forward 60 million will be pulled out of the special items kind of them.

Speaker 17: Okay, so that will be the full year charge going forward, $60 million will be pulled out as a special item.

Patrick McCann: Approximately. Once we finalize the previous accounting.

Speaker 2: Approximately once you've finalized the appropriate account if I can do that correct

Once we finalize the purchase accounting to that correct.

Louis Tonelli: Yes, if I do that.

Patrick McCann: Correct.

Colin Langan: Okay. All right. Thanks for taking my questions.

Okay, all right. Thanks for taking my questions.

Operator: Thank you. Our next question comes from the line of Dan Levy with Barclays. Please proceed with your question.

Speaker 1: Thank you. Our next question comes from the line of Van Levy with Barclays. Please proceed with your question.

Thank you. Our next question comes from the line of Dan Levy with Barclays. Please proceed with your question.

Dan Levy: Hi. Good morning. Thanks for taking the questions. First, wanted to go back to this theme of H1 to H2, and specifically wanted to focus on complete vehicles, where I think your guidance is implying the business to be, you know, almost break even, you know, just very slightly positive. It's a significant deceleration versus H1. Maybe you can just talk about some of the puts and takes on what's happening in complete vehicles in H2. You know, does this change the way we should think about the out year forecast for complete vehicles?

Hi, good morning, Thanks for taking the question.

Speaker 7: Hi, good morning. Thanks for taking questions. First, I wanted to go back to this theme of first half of the second happen. Just if you want to focus on the complete vehicle.

First wanted to go.

Go back to this theme.

In the first half the second happened specifically wanted to focus on the complete vehicle.

Speaker 7: Um, where I think your guidance is implying. Business to be, you know, almost break even, you know, this is very slightly positive, significant deceleration versus the 1st, half. And if you can just talk about some of the puts and takes on what's happening in the complete vehicles in the 2nd, half.

Where I think your guidance is implying.

<unk> business to be.

Almost breakeven listen very slightly positive.

A significant deceleration versus the first half and maybe you can just talk about some of the puts and takes on what's happening in complete vehicles and so that can happen.

Speaker 7: Does this change the way we should think about the out year forecast for public vehicles?

Does this change the way, we should think about the out year forecast what do we see it.

Oh.

Patrick McCann: Morning, Dan. When you think about our complete vehicles business, you really have to consider a bunch of factors. One is what products are in that facility at that point in time. In the H1, we were still producing the BMW 5 Series, and that's rolled off. Now we're in the middle of launching the Fisker program. What you see more broadly when you think about a European business like Steyr is quite a difference in profitability between the H1 and the H2, just more broadly. We haven't changed our expectations for Steyr, or I keep saying Steyr, but our complete vehicles business for the full year.

Morning, Dan.

It's.

Speaker 2: I'm pausing here to answer. When you think about our complete vehicles business, you really have to consider a bunch of factors. What products are in that facility at that point in time? So in the first half of the year, we were still producing the BMW 5 Series Nuts rolled off. And now we're going into, when the middle of launching the Fisker program.

Pausing here to answer them.

In the middle of launching the Fisker program.

What you see more broadly when you think about a European business like Shire is there is.

Speaker 2: But what you see more broadly than you think about a European business like Steyr is there is

Yes, there is.

Quite a difference in profitability in the first half of the year in the second half year just more broadly.

Speaker 2: Quite a difference in profitability in the first half of the year and the second half of the year, just more broadly.

Speaker 2: I don't, we haven't changed our expectations for, I keep saying that, but our complete vehicles business for the full year. We had a few, we had some positive engineering outcomes in the first half of the year, but those were factored in and we get into this.

We haven't changed our our expectations first I R. I keep saying start, but our complete vehicles business for the full year, we had a few.

Patrick McCann: We had some positive engineering outcomes in H1 of the year, but those were factored in. We get into H2, we're still pushing towards those margin expectations. Long answer, but I don't see anything unusual in H2 of the year that we should be reflecting, just this launch, but it's planned downtime.

We had some positive engineering outcomes in the first half of the year.

But those were factored in and we get into the second half.

Speaker 2: We're still pushing towards that that was margin expectations. So long answer, but I don't see anything unusual in this second half of the year. If that, that we should be reflecting just its launch. And as it, but it's planned downtime. I mean, we started the year at one to one percent, the two percent, we're at 1.6 to 2.1. So it's all in. We're actually increasing our outlook in that.

We're still pushing towards that that gross margin expectations. So long answer, but I don't see anything unusual in the second half of the year that we should be reflecting just its launch.

And as it but its planned downtime.

Louis Tonelli: I mean, we started the year at 1% to 2%. We're at 1.6 to 2.1. It's all in, we're actually increasing our outlook in the complete vehicles.

We started here at 1%, 1% to 2% we're at one six to $2. One so all in we're actually increasing our outlook and that complete vehicles.

Hum.

Dan Levy: Right. I know that generally we shouldn't look at the quarter, as you know, there is seasonality and whatnot. Is that H2, I think you talked about it, that's specifically being dragged by launch of new programs or is there something just timing of input costs?

Speaker 7: Right, and I know that generally we shouldn't look at the quarterly, you know, there is seasonality and whatnot. But is that second half, I think you talked about it? Is that that specifically being dragged by launch of new programs or is there something just timing of input costs?

Right and I know that generally we shouldn't look at a quarter as you know there is seasonality and whatnot, but.

Is that second half I think you talked about it.

Typically being dragged by launching.

New programs or there was something just timing of input costs.

Patrick McCann: No, it's a few of the firmer plants. If you think about what happened, it's primarily the launch, the planned downtime that you have through the summer, and then you have another downtime through the December period.

Speaker 2: No, it's a few of the Burmer deaths. So if you think about what happened, it's primarily the launch, the planned downtime that you have through the summer, and then you have another downtime through the, the, the, the Femmer period. We've expected that through up to here, which is every single year. Okay. All right.

No.

He was a bird deaths. So if you think about what happened it's primarily the launch the planned downtime that you have through the summer and then you have another downtime through the.

December period, when we would expect that that throughout the year, which is every single year.

Louis Tonelli: We've expected that throughout the year.

Patrick McCann: Which is every single year.

Okay.

Dan Levy: Okay. All right. That's not something we should extrapolate going forward.

Okay, Alright, so thats not something we should extrapolate going forward.

Patrick McCann: No, absolutely.

Absolutely.

Okay. Okay, great. Thank you.

Speaker 7: Okay, great, thank you. And second, Swami, just a question on your vertical integration efforts in EVs. Historically in EV setting aside LG, you were mostly focused on the drive unit and you outsourced motors and inverters.

Second.

Swamy just a question on your vertical integration efforts.

Historically an.

EV setting aside LG you were mostly focused on the drive unit you to outsource motors and Inverters.

Speaker 2: Can you talk about the supply agreement with Onsemi? Is this a foray into making your own inverters, or is this just a partnership to get inverters from a third party?

Can you just talk about the supply agreement with on semi.

Semi.

Is this a foray into making your own inventories or is this just a partnership to get Inverters from a third party.

Swamy Kotagiri: Yeah. I think, Dan, we talked about it a little bit over time, right? In terms of the building blocks and what are some of the key pieces to get to the full eDrive system. Even before the LG JV that you mentioned, we made inverters, and we had the capacity to do that between Magna Powertrain and Magna Electronics group. We're just taking one step forward when we talk about onsemi. It's just looking at whether it is, you know, silicon carbide or GaN or something, just the overall power electronics strategy. How and what should we be doing? It is just part of that overall strategy. We always had the ability to do inverters. Now we're just doing it collectively in our LG JV.

Yeah, I think Dan we talked about making over time right.

Speaker 14: Yeah, I think Dan, we talked about it a little bit over time, right? In terms of the building blocks and what are some of the key pieces to get to the full E-DRIG system. Even before the LGJV that you mentioned, we made it workers and we had the capacity to do that between Magna Plough train and Magna Electronics Group.

In terms of the building blocks and what are some of the key pieces to get to the E drive system.

Even before the LNG JV that you mentioned be made it workers and we have the capacity to do that between Magna powertrain and Magna Electronics group.

Speaker 14: So we're just taking one step forward when we talk about anatomy. It's just looking at whether it is a silicon carbide or GAN or something just big overall power electronic strategy. How and what should we be doing?

So we are just taking one step forward and we talked about on semi you just looking at whether it is silicon.

Silicon carbide are gone or something just big overall power electronics strategy.

Howard what should we be doing.

Speaker 14: So it is just part of that overall strategy. So we always had the ability to do inverters. Now we're just doing it collectively in our NGJB. So this is just for the vertical integration to bring value add into the system.

So it is just part of that overall strategy. So we always had the ability to do in water smart, we're just doing it collectively.

And our <unk> JV. So this is just further vertical integration to bring value added into the system.

Swamy Kotagiri: This is just further vertical integration to bring value add into the system.

Yes.

Speaker 15: Great. Thank you.

Great. Thank you.

Operator: Thank you. Our next question comes from the line of James Picariello with BNP Paribas. Please proceed with your question.

Thank you.

Speaker 1: Thank you. Our next question comes from the line of James Piccariolo with BNP Parabas. Please proceed with your question.

Our next question comes from the line of James Picariello with BNP Paribas. Please proceed with your question.

Okay.

Speaker 15: Hi, everyone. Just to clarify, you know, more of a housekeeping item on the intangibles amortization. Can you just quantify for legacy Magna what the intangibles amortization amount was for last year? Just to have some bearing. I mean, I know it's immaterial, but what was that number?

Hi, everyone.

Speaker 2: Hi, everyone just to clarify more of a housekeeping item on the tangible. Can you just quantify for legacy magna what the tangible amortization amount was for last year? Just to have some bearing as to I mean, I know it's it's immaterial, but we'll.

Just to clarify more of a housekeeping item on the intangibles amortization.

Can you just quantify for legacy Magna, what the intangibles amortization amount was for last year just to have some bearing as to I mean, I know, it's immaterial, but.

What was that number.

Speaker 3: We'll have to get back to you James because it is immaterial. It wouldn't be a big number.

We will have to get back to you James because it is immaterial it wouldn't be a big number.

If you think funding funding.

Speaker 6: If you think fundamentally, we haven't done an acquisition of a technology company. So we have an experience of situation where you have such a significant amount of acquired technology intangibles. And that's really much driving the 60 million Lewis was referring to. But what we can get back to with the exact number.

Fundamentally we haven't done an acquisition of a technology company. So we haven't experienced a situation where you have such a significant amount of <unk>.

Acquired technology intangibles, and that's really what's driving the $60 million Louis was referring to.

So what we can get back to you with the exact number.

But it's not material.

Speaker 15: Understood. Just on Veoneer, it looks like the guide shows $1 billion in revenue and, based on the 20 basis points, you know, margin dilution impact, about, you know, $30 to 35 million operating loss for the seven months. If we annualize that, right, for Veoneer, we'd be looking at $1.7 billion in revenue and an approximate $60 million operating loss. Just curious if you could, you know, kind of bless, you know, the thinking on, you know, the annualized run rate for Veoneer here.

Understood.

Speaker 2: And then just on Vianere, it looks like the guide shows a billion in revenue and based on the 20 basis points, margin dilution impact about 30 to 35 million operating loss.

And then just on veneer it looks like the guide shows $1 billion in revenue and based on the 20 basis points margin dilution impact about $30 million to $35 million operating loss.

Speaker 2: for the seven months, the seven months. If we annualize that, right, for being here, we'd be looking at 1.7 billion in revenue and approximate 60 million operating loss.

For the seven months.

Seven months, if we annualize that right for being here, we'd be looking at $1 7 billion in revenue and an approximate $60 million operating loss. Just curious if you could kind of bless that.

Speaker 2: Just curious if you could kind of bless the thinking on the annualized run rate.

The thinking on.

The annualized run rate for being here.

Swamy Kotagiri: Yeah. I think maybe there's two things to consider. Pat, you can add to it. I think when we bring all of this stuff together, there is synergies in terms of how we look at platforms, how we look at, you know, coordinated efforts, on some core projects, some purchasing initiatives. I think it's better, maybe, in my opinion, to look at run rates going forward from the combined entity rather than look at each one separately. Hopefully we'll be able to give some color, you know, when we talk in September. You know, all of this will be included when we come back, as we're doing all, you know, bottoms up, you know, the business planning process, and will be included when we come out and talk in 2024.

Yeah, I think maybe there is two things to consider.

Speaker 14: Yeah, I think maybe there's two things to consider, Pat, you can add to it.

And add to it.

Speaker 14: I think when we bring all of this stuff together, there is synergies in terms of how you look at platforms, how you look at coordinated efforts on some core projects.

I think when we bring all of this talk together there is synergies in terms of a positive look at platforms. How do we look at you know coordinated efforts are on some core projects.

Speaker 14: Some purchasing initiatives, so I think it's better. Maybe my opinion to look at run rates going forward from the combined entities other than look at each one separately and Hopefully we'll be able to give some color You know when we talk in September , but you know all of this will be included when we come back as we're doing all You know bottoms up

Purchasing initiatives. So I think it's better may be my opinion to look at run rates going forward from the combined entity rather than look at each one separately.

And hopefully we'll be able to give some color.

When we talk in September , but you know all of this will be included when we come back as we were doing all.

Bottoms up you know the business planning process and will be included when we come out and talk in 2024.

Speaker 4: the business planning process and will be included when we come out and talk in 2024.

Yeah.

Speaker 15: Okay. All right. That's all for me.

Speaker 2: Okay. All right, that's all for now. Thank you. Sorry, James, did I keep mine? Well, we said earlier about neutral in 2024, right? So, Matt, tell us something about the run rate relative to the back half of the year.

Okay, Alright, that's helpful.

Patrick McCann: Sorry, James. Keep in mind what we said earlier about neutral in 2024, right? That tells us something about the run rate relative to the H2.

Slip.

Sorry to answer today keep in mind, what we said earlier about a neutral in 2020 for rates. So that tells us something about the run rate relative to the back half of the year.

Speaker 15: Yeah.

Patrick McCann: Neutral and even.

Yes neutral on EBIT.

Speaker 2: In the second quarter, just a quick one, was there any retroactive material recovery tied to the first quarter in the second quarter numbers, particularly in the body exteriors and structure segment? Thanks.

In the second quarter, just a quick one was there any retroactive material recovery.

Tied to the first quarter in this in the second quarter numbers, particularly in the body exteriors <unk> structures segment. Thanks.

Patrick McCann: Yeah. I think we talked about this earlier, James. I'm not gonna repeat everything, but the short answer is yes.

Yes, so I think we've talked about this earlier.

James So I am not going to.

Speaker 3: James, I'm not going to repeat everything, but the short answer is yes.

Repeat everything but the short answer is yes.

Speaker 15: Yeah. Okay. You just can't qualify it.

Okay.

You just can't quantify it.

Patrick McCann: No.

No.

Speaker 15: Okay. Thank you.

Okay. Thank you.

Operator: Thank you. Our next question comes from the line of Brian Morrison with TD Securities. Please proceed with your question.

Thank you.

Speaker 1: Thank you. Our next question comes on the line of Brian Morrison with TD Securities. Please proceed with your question.

Our next question comes from the line of Brian Morrison with TD Securities. Please proceed with your question.

Speaker 16: Oh, good morning. I have a housekeeping question as well. Pat or Swamy, in the prepared comments on net inflationary costs, you said something to the tune of an incremental $100 million for 2023, and you'd recover half of that. Can you just clarify what the net exposure is now? I know you started the year at $680 million. You made progress in Q1. You did an update on scrap and energy. Start with the $680 and update what's baked into your new guidance, and maybe break down what is labor, and what's commodity, please. I think labor was about $200 million of your previous forecast.

Speaker 2: Oh, good morning. I have a housekeeping question as well. Phil, Pat or Swami, in the prepared comments on net inflationary costs, you said something to the tune of an increment to 100 million for 2023, and you'd recover half of that. Can you just clarify what the net exposure is now? I know you started the year at 680 million. You need progress in Q1. You did an update on scrap and energy, but start with the 680 and update what's baked into your new guidance, and maybe break down what is labor and what's commodity-produced. I think labor was about 200 million of your previous forecast.

Oh, good way not a housekeeping question as well so powder swamy in the prepared comments on net inflationary costs.

Said something to the tune of incremental $100 million for 2023, and you would recover half of that can you just clarify what the net exposure is now I know you started the year at 680 million need progressing key like Q1, you Didnt update on scrap and energy, but start with the 680 and update what's baked into your new guidance and maybe break down what is labor and what's commodity please I think Lee.

Or was that $200 million of your previous forecast.

Swamy Kotagiri: I think the $680, let me break it down, was the $530 coming from 2022, incremental $100 plus the $50 in scrap. That's how we came to the $680. What we're looking at, you know, the movement in some of the commodities, energy and all the other initiatives that you are working through, we said that $100 is now $50 and the scrap, which was $50, is now $25. Yeah. I don't know if you can get into the details of, you know, how much is labor and how much is the breakdown. It gets combined in terms of all the efforts that I talked about. It's very difficult to exactly quantify how much and where.

Speaker 4: So I think the 680, let me break it down, was the 530 coming from 2022, incremental 100 plus the 50 in scrap. That's how we came to the 680. So what is looking at, you know, the movement and some of the commodities, energy and all the other initiatives that you are working through, we said that 100 is now 50.

So I think.

The 680, let me break it down was the 530 coming from 'twenty to 'twenty, two incremental 100, plus the fifteens crap. That's how we came to the <unk>. So what he is looking at their won't maintain some of the commodities.

Energy and all the other initiatives that you are working through we said that 100 is now 50.

And the scrap which was 50 is not 25.

Speaker 4: and the scrap which was 50 is now 25.

Yeah.

I don't know if he can get into the details.

Speaker 4: I don't know if you can get into the details of, you know, how much is labor and how much is the breakdown. It gets combined in terms of all the efforts that I talked about. So it's very difficult to exactly quantify how much and where.

Now how much is labor and how much is the breakdown.

It gets combined in terms of all the efforts that I talked about so it's really difficult to exactly quantify how much in there.

Swamy Kotagiri: We can say that labor is the sticky part, and we continue to look at optimizing that going forward, not just, you know, from a restructuring today perspective, but as we are launching this business into 2024 and 2025, you know, how do we manage it? We have to have so much hiring. The question is, how do you level or normalize what we have now and, you know, look at optimizing the hiring but at the same time protect the programs and the launches. It's a little bit of a complex set of variables that we're going through. I don't know, Pat, if you wanna add any color to that.

Speaker 4: we can say that labor is the sticky part and we continue to look at optimizing that going forward not just you know from a restructuring today perspective but as we are...

We can say that labor is best to keep park and.

And we continue to look at optimizing that going forward not just from a restructuring today perspective, but as we have.

Speaker 4: launching this business into 24 and 25.

Launching this business into 'twenty, four and 'twenty five.

You know.

Speaker 4: How do we manage it? We have to have so much hiring. So the question is, how do you level or normalize what we have now and look at optimizing the hiring, but at the same time, protect the programs and the launches? So it's a little bit of a complex set of variables that we're going through. I don't know, Pat, if you want to add any color to that. No, Pat, just an add. Thank you.

How do we manage it we have to have so much hiring. So the question is how do you level more normalized.

What we have now and you know look at optimizing the hiring but at the same time protect the programs and the launches.

It's a little bit of a complex.

Set up variables that we're going through I don't know Pat if you want to add any color because I know.

Patrick McCann: No, I have nothing to add. Thank you.

Thank you.

Yes.

Speaker 16: That's helpful. I just wanna this 30 basis points of margin improvement ex Veoneer. How much of that is related to inflationary impact? It looks like it could be about 10 of the basis points. Is that correct?

That's helpful. So I just wanted to this 30 basis points.

Speaker 2: That's helpful. So I just want to this 30 basis points of margin improvement X, V, and year.

Margin improvement ex me in here how.

How much of that is related to.

Speaker 2: How much of that is related to inflationary impact? It looks like it could be about 10 of the basis points. That correct?

Inflationary impact it looks like it could be about 10 of the basis points that correct.

Okay.

Swamy Kotagiri: Sorry.

Louis Tonelli: I could do the math.

Sorry, I could do imagine for a calculator.

Swamy Kotagiri: Reaching for a calculator here. Yeah.

Speaker 18: All right, I can do the matching per calculator in it.

Okay.

Yes.

Louis Tonelli: $75 million, right?

Yeah, I have 75 million Bucks right.

Swamy Kotagiri: Yeah. It's probably 10 to 13 basis points, Brian.

Yes, it's probably 10 to 13 basis points Brian .

Speaker 3: Yeah, it's probably 10 to 13 basis points, Brian . Okay, thanks. Thanks, Pat. And then last, I was keeping question on that underperforming best facility where you're making great progress. I think you said you were going to, you're tracking to about half of the 35 basis points. I think it was $149 million drag last year. How much, how much of that do you expect to recover this year? Is it still tracking half and then eliminated in 2024? That's correct.

Speaker 16: Okay. Thanks. Thanks, Pat. Last housekeeping question on that underperforming BES facility where you're making great progress. I think you said you're tracking to about half of the 35 basis points. I think it was a $149 drag last year. How much of that do you expect to recover this year? Is it still tracking half and then eliminated in 2024?

Okay. Thanks, Thanks, Pat and then last housekeeping question on that underperforming bed facility, where we're making great progress I think you said youre going to youre tracking to about half of the 35 basis points to $140 million drag last year, how much how much of that do you expect to recover this year is it still tracking happened and then eliminated in 2024.

Swamy Kotagiri: That's correct.

That's correct.

Speaker 16: Great. Thanks very much for your time.

Great. Thanks, very much for your time.

Swamy Kotagiri: Great. Thanks, Brian.

Okay. Thanks, Brian .

Yes.

Operator: Thank you. If there are no further questions, I will now turn the call back to Swamy Kotagiri for closing remarks.

Speaker 1: Thank you. If there are no further questions, I will now turn the call back to Swami Kaudagiri for closing remarks.

Thank you.

There are no further questions I will now turn the call back to Swamy could I gave me for closing remarks.

Swamy Kotagiri: Thanks, everyone, for listening in today. As you heard from us, we are happy with the continued progress in Q2, but we are already looking ahead to keep our focus into the remaining part of the year and launching not just 2023, but 2024, and 2025 and keep the progress going. We look forward to providing an update on the progress of our strategy during our investor event next month. You know, hoping to see you all there. Have a great day. Thank you.

Thanks, everyone for listening in today.

Speaker 4: Thank you everyone for listening in today. As you heard from us, we are happy with the continued progress in the second quarter, but we are already looking ahead to keep our focus into the remaining part of the year and launching not just 23, but 24 and 25 and keep the progress going. We look forward to providing an update on the progress of our strategy during our investor event next month. You know, hoping to see you all there. Have a great day. Thank you.

You heard from US we are happy with the continued progress in the second quarter, but.

We are already looking ahead to keep our focus into the remaining part of the year and launching not just 'twenty, three but 24 and 25 and keep the progress going and look forward to providing an update on the progress of our strategy during our investor event next month.

Hoping to see you all there have a great day. Thank you.

Operator: Thank you. That does conclude the conference call for today. We thank you for your participation, and I ask you please disconnect your lines.

Thank you that does conclude the conference call for today.

Speaker 1: Thank you. That does conclude the conference call for today. We thank you for your participation. MSA, you please disconnect your lines.

Thank you for your participation and ask that you. Please disconnect your lines.

Q2 2023 Magna International Inc Earnings Call

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