Q4 2023 Linamar Corporation Earnings Call

Operator: and many more. Thank you. Good afternoon, ladies and gentlemen, and welcome to Linamar's Q4 2023 earnings conference call. At this time, all lines are in listen-only mode.

Okay.

Good afternoon, ladies and gentlemen, and welcome to <unk> Q4, 2020 earnings Conference call.

At this time all lines are in listen only mode.

Operator: Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, March 6, 2021. I would now like to turn the conference over to Linda Hasenfratz, Executive Chair and CEO of Linamar. Please go ahead.

Following the presentation, we will conduct a question and answer session.

Is that any time during this call you require immediate assistance. Please press star zero for the operator.

This call is being recorded on Wednesday March six 2024.

I would now like to turn the conference over to Dana So Linda Hudson threats Executive Chair and CEO Lee Nomura. Please go ahead.

Linda S. Hasenfratz: Thanks so much, and good afternoon everyone. Welcome to our fourth quarter conference call. Joining me this afternoon are members of our senior team, Jim Jarrell, Mark Stoddart, Dale Schneider, Elliot Berger, and Kevin Hallahan, as well as members of our corporate IR marketing, finance, and legal teams. Before I begin, I'll draw your attention to the disclaimer currently being broadcast.

Thanks, so much and good afternoon, everyone and welcome to our fourth quarter Conference call. Joining me. This afternoon are members of our senior team, Jim Gero, Mark daughter, Dale Schneider Elliott Berger, and then hallahan as well as the members of our corporate IR marketing finance and legal team before I begin I'll draw your attention.

And to the disclaimer currently being broadcast.

Linda S. Hasenfratz: I'll start off with a high-level review of the quarter. Q4 was an excellent quarter and a solid finish to an outstanding year. Financially, we saw record results for the year and double-digit top and bottom line growth for both the quarter and the year. Strategically, we had some great progress in the quarter with our Mobex acquisition closed, and our Borgo acquisition announced. Both are solid profitable businesses which are immediately added to earnings, and both boost proprietary technology we're excited to bring to market and grow. Markets showed good growth last year with more modest growth expected for 2024.

I'll start off with a high level review of the quarter Q4 was an excellent quarter and a solid finish to an outstanding year financially. We saw record results for the year and double digit top and bottom line growth for both the quarter and the year.

Basically we had some great progress in the quarter with our <unk> acquisition closed and our Borgo acquisition announce both our solid profitable businesses, which are immediately adding earnings and both boost proprietary technology, we're excited to bring to market and growth.

Markets showed good growth last year was more modest growth expected for 2024 market growth last year was amplified by record market share in our mobility business and excellent market share growth in our largest most important product families in our industrial businesses and on the innovation and new business.

Linda S. Hasenfratz: Market growth last year was amplified by record market share in our mobility business and excellent market share growth in our largest, most important product families in our industrial businesses. And on the innovation and new business side, we saw another strong quarter, with our strongest quarter of the year for new business in a balance of technology and propulsion areas and new innovations launching in each business. So let's take a close look at each of these areas, starting with the financial results. Sales for the year hit a new record of $9.73 billion, up 23% from last year on solid launches, market share growth, our two mobility group acquisitions, as well as better prices. Normalized EPS for the year was up 40% to $8.78, which is outstanding, and margins expanded to 5.6%.

We saw another strong quarter with our strongest quarter of the year on new business and a balance of technology and propulsion areas and to new innovations launching in each business. So let's take a closer look at each of these areas starting with the financial results.

Sales for the year hit a new record of $9 $73 billion up 23% last year on a solid launch is market share growth are two mobility group acquisitions as well as better pricing.

Normalized EPS for the year was up 40% to $8, 78%, which is outstanding and market and margins expanded to five 6% for.

Linda S. Hasenfratz: For the quarter, we also saw double-digit top and bottom line growth, with sales up 19% to $2.45 billion and normalized EPS up 23% to $1.98. I think it was particularly notable to see the upward trend in the mobility segment, with earnings and margins growing again after a challenging few quarters. Some of the key factors impacting results in the quarter were, firstly, an unusually strong quarter for the industrial segment, which normally sees a much bigger dial back in Q4. Normally, we would see Q4 sales drop 30% or more in comparison to Q3, whereas in 2023, we only saw a 10% reduction. OE can drop 40% or more from Q4 to Q3, whereas this year, we saw only an 18% decline to the third quarter. MacDon, in particular, had a very strong fourth quarter, the strongest in their history, in fact, which is largely what was moving the dial in that segment.

For the quarter. We also saw a double digit top and bottom line growth with sales up 19% to $2 45 billion and normalized EPS up 23% to $1 98.

I think it was particularly notable to see the upward trend in the mobility segment with earnings and margins growing to get growing again after a challenging Q quarters.

Some of the key factors impacting results in the quarter were first and unusually strong quarter for the industrial segment, which normally sees a much bigger dialed back in Q4 normally we would see Q4 sales dropped 30% or more in comparison to Q3, whereas in 2023, we only saw.

10% reduction OA can drop 40% or more Q4 to Q3, whereas this year, we saw only an 18% decline to the third quarter Macron in particular had a very strong fourth quarter. Its strongest in their history. In fact, which is largely what was moving the dial in that segment.

Linda S. Hasenfratz: Other key factors included launching business in the mobility segment, where total launches for 2023 represented incremental sales of $700 million. Also, key factors included our two mobility group acquisitions, as well as better pricing to offset higher costs, which was all partially offset by higher FG&A fixed costs that are supporting that growth. And again, unfavorable changes in FX rates since last year for the mobility segment, which was, again, a meaningful factor in comparison to the prior year in terms of both earnings and margins, mainly related to another significant appreciation of the peso. Although mobility segment earnings saw a solid 7% growth over the prior year, if we were to do the analysis on a constant currency basis to last year, the growth would have been in the double digits, and we would have seen margin growth last year as well. It's great to see the continued positive trend in our financial results over the long term. We are back over pre-COVID earnings levels and for the full year to 2023.

Other key factors included launching business in the mobility segment, where total launches for 2000 2023 represented incremental sales of $700 million.

Also key factors included our two mobility group acquisitions, as well as better pricing to offset higher costs.

Which was all partially offset by higher SG&A and fixed costs that are supporting macro and again unfavorable changes in FX rates since last year for the mobility segment, which was again a meaningful factor in comparison to prior year in terms of both earnings and margin mainly related.

Another significant appreciation of the peso.

Although mobility segment earnings saw solid 7% growth over prior year. If we were to Gd analysis on a constant currency basis to last year. The growth would have been in the double digits and we would've seen margin growth to prior year as well.

It's great to see the continued positive trends in our financial results over the long term, we are back over pre COVID-19 earnings level and as our full year 2023, and we are on track for a new record level of earnings performance in 2024.

Linda S. Hasenfratz: And we are on track for a new record level of earnings performance in 2024. Turning to the balance sheet, we see a similarly positive performance. Our balance sheet has remained consistently strong despite higher acquisition activity and a resumption of more normal capex spending after a couple of light spending years during COVID. Net debt is sitting at 1.12 billion at the end of Q4, which is 0.85 times EBITDA. Our balance sheet has remained consistently strong and conservative for years.

Turning to the balance sheet, we see a similarly positive performance our balance sheet has remained consistently strong despite higher acquisition activity and a resumption of more normal capex spending after a couple of like seven years during the call that net debt is sitting at 1.12 billion at the end of Q4, which is <unk>.

Eight five times EBITDA, our balance sheet has remained consistently strong and conservative for years. Our goal is to stay under one five times EBITDA on net debt with only brief excursions above such for various strategic opportunities such as an acquisition and only then if we have.

Linda S. Hasenfratz: Our goal is to stay under 1.5 times EBITDA on net debt with only brief excursions above that level for various strategic opportunities such as an acquisition and only then if we have a great line of sight to rapidly de-lever under 1.5. We do expect leverage to increase to the 1.5 level in Q1 due to the Borgo acquisition, but it is our expectation to be back under 1.5 times EBITDA within 12 to 18 months. We saw positive free cash flow in the quarter of 83.1 million, to complete the year in a net positive position.

Great line of sight to rapidly Delever under a one five we do expect leverage to increase to the $1 five level in Q1 due to the <unk> acquisition, but it is our expectation to be back under one times EBITDA within 12 to 18 months.

We saw positive free cash flow in the quarter of $83 1 million to complete the year in a net positive position. This is our 11th consecutive year of generating positive free cash flow 2024, we will see a more significant level of positive free cash flow driving out of higher earnings and <unk>.

Linda S. Hasenfratz: This is our 11th consecutive year of generating positive free cash flow. 2024 will see a more significant level of positive free cash flow driving out higher earnings and lower capex levels. CapEx has continued to run at an elevated level due to the significant constraints that we put on spending during COVID.

Lower capex level.

Capex has continued to run at an elevated level to the significant constraints that we put on spending during COVID-19 capex as a percentage of sales was seven 8% right in line with our normal range of 6% to 8% to drive double digit growth.

Linda S. Hasenfratz: CapEx as a percentage of sales was 7.8%, right in line with a normal range of 6 to 8% to drive double-digit growth. Turning to strategy and operations, it has certainly been a busy quarter. As noted, we closed one acquisition, our Mobex casting and machining business, and we announced another, our Borgo seeding business, complementing our existing short-line agricultural equipment product portfolio perfectly.

Turning to our strategy and operations that has certainly been a busy quarter. As noted we closed one acquisition, our <unk> casting and machining business and we announced another hour borgo seating business complementing our existing short line agricultural equipment product portfolio perfectly.

Linda S. Hasenfratz: I'd like to take a minute to remind you of the powerful, synergistic diversification model that Linamar has developed. We have two key businesses, as you know, mobility and industrial. The mobility business is very large and global, with excellent technology systems and a deep talent pool. There are significant growth opportunities for this business, which is capital-intensive. The industrial business is more regional, with a stronger presence in North America and less purchasing power than our mobility segment.

I'd like to take a minute to remind you of the powerful synergistic diversification model that <unk> has developed we had to keep key businesses as you know mobility and industrial the mobility business is very large and global with excellent technology systems and a deep talent pool there are <unk>.

<unk> growth opportunities for this business, which is capital in Texas.

The industrial business is more regional with a stronger presence in North America, and less purchasing power than our mobility segment that says they have low capex requirements, making them a good generator of cash. They also do an excellent job of managing their various brands of Skyjack knocked on software and that will go and have X.

Linda S. Hasenfratz: That said, they have low CapEx requirements, making them a good generator of cash. They also do an excellent job of managing their various brands of SkyJack, MacDon, Sulphur, and now Borgo, and have excellent global growth potential. So here's how it works.

<unk> global growth potential so as you know how it works. So the mobility group helped to improve the performance of the industrial group by supplying talent system expertise and our global network to enable global growth and importantly, significant purchasing power to improve profit and cash flow the industrial group.

Linda S. Hasenfratz: The mobility group helps improve the performance of the industrial group by supplying talent, system expertise, and a global network to enable global growth, and importantly, significant purchasing power to improve profit and cash flow. The industrial group then provides much-needed cash for investment to the mobility segment, as well as knowledge around effective brand management. It's a unique model, but it works exceptionally well to help us drive strong and consistent profitable growth and positive free cash flow, all the while maintaining a strong balance for our customers. Now, you don't need to take my word for it that this model delivers consistent, sustainable results. You only need to look at our track record.

That provides much needed cash for investment city mobility segment as well as knowledge around infection of brand management.

It's a unique model, but it works exceptionally well to help us drive strong and consistent profitable growth positive free cash flow all the while maintaining a strong balance sheet.

You don't need to take my word for it that this model drives consistent sustainable results, we only need to look at our track record year ending year out with very few exceptions, we're delivering top and bottom line growth. The strong majority of those years in double digits as well as free cash flow and double digit returns on capital return on capital.

Linda S. Hasenfratz: Year in and year out, with very few exceptions, we're delivering top to bottom line growth, the strong majority of those years in double digits, as well as free cash flow and double digit returns on capital. Return on capital has actually been in double digits 93% of the last 14 years, with the exception being 2020, the peak year of the pandemic.

Has actually been in double digits, 93% of the last 14 years every single year, but one that exception being 2020, the peak year of the pandemic, we generated free cash flow 11 out of the last 14 years and every single year for the last 11 years and expect to again in 2024, that's more than $4 two.

Linda S. Hasenfratz: We've generated free cash flow 11 out of the last 14 years, and every single year for the last 11 years, and expect to again in 2024. That's more than $4.2 billion of free cash flow over the last 14 years. Our latest acquisition, Borgo, is a great next step in that diversification strategy. Borgo is a technology leader in seeding systems with patented technology that places the seed in the seed bed and fertilizer for soil nutrition adjacent to it to optimize seed performance and field yield.

$1 billion of free cash flow over the last 14 years.

Our latest acquisition forgo is a great next step in that diversification strategy Margo is a technology leader in seating systems with patented technology that places the seed in the seabed as fertilizer for soil nutrition adjacent dispatch to optimize speed performance and field yields this.

Linda S. Hasenfratz: The business generates about $450 million in sales annually and generates an OE level in line with our other industrial businesses. The acquisition, which closed on February 1st, will be immediately accreted to earnings. Orgo completes the picture in terms of our agricultural strategy, complementing our other agricultural businesses perfectly. We now have products that complete the full span of agricultural equipment, from field preparation to seeding and planting, crop nutrition, harvest, and post-harvest. I feel like Borgo really checked the boxes for our growth strategy in the egg sector. It's another successful short-line OEM that does not compete head-to-head with the big guns in the industry. It is differentiated through technology and has excellent brand recognition and close customer connections. We are very excited to welcome the Borgo team to the Linamar family.

<unk> generates about $450 million in sales annually and generating an OE level in line with our other industrial businesses the acquisition, which closed on February 1st will be immediately accretive to earnings.

Or go completes the picture in terms of our agricultural strategy complementing our other agricultural businesses perfectly. We now have products that complete the full span of agricultural equipment from field preparation to seeding and planting and crop nutrition harvest and post harvest.

I feel like Borgo really check the boxes for our growth strategy in the AG sector. It's another successful short line OEM that does not compete head to head with the big guys in the industry. It is differentiated through technology and has excellent brand recognition of close customer connections we are very.

Welcome the wargo team to the <unk> family.

Linda S. Hasenfratz: Turning to markets and market share, I would say we have had a very successful quarter and year once again. In the mobility business, we saw 9.5% growth in light vehicle market volumes in 2023, with an expectation of modest growth in North America this year and a brighter outlook globally. We saw solid content for vehicle growth in North America, both from launches and acquisitions, and reached record levels of full year content for vehicles in North America and Europe. Markets are flat this year globally, but up in North America.

Turning to markets and market share I would say, we have had a very successful quarter and year once again and the mobility business, we saw 95% growth in light vehicle market volumes in 2023 with an expectation of modest growth in North America. This year and a flash our outlook globally, we saw.

Solid content per vehicle growth in North America, both from launches and acquisitions and reached record levels of full year content per vehicle in North America and Europe.

Markets are flat this year globally.

But up in North America. However, our strong launch for us is driving double digit sales growth for it in the mobility business.

Linda S. Hasenfratz: However, our strong launch book is driving double-digit sales growth for us in the mobility business. The access markets saw high single-digit growth in 2023, with more modest growth forecast for 2024 regionally in Europe and Asia and the rest of the world, and a flat global forecast for the market. We increased global market share in key products, such as our ScissorList, our largest product family at SkyJack. Despite flat markets, our strong order book is supporting double-digit sales growth at SkyJack this year. The agricultural markets saw flat markets last year, with a flat-to-down outlook this year.

The access market saw a high single digit growth in 2023 with more modest growth forecast for 2024 regionally in Europe, and Asia and the rest of the world.

At a flat global forecast for the market, we increased global market share in key products, such as our scissor lifts, our largest product family at Skyjack.

Slight flat markets, our strong order book is supporting double digit sales growth at Skyjack This year yeah.

Coastal market swap flat markets last year with a flat to down the outlook. This year, we saw excellent market share growth for key products here as well, notably our core combined Draper headers, which is the largest product family at an accurate despite.

Linda S. Hasenfratz: We saw excellent market share growth for key products here as well, notably our Core Combined Draper headers, which is the largest product family at NACDA. Despite flat markets, our strong order book is supporting double-digit sales growth in our ag business this year. You can see here the summarized market data for 2024, which again is looking at more modest growth or flat performance in general and some areas of decline.

Despite a flat market our strong order book is reporting double digit sales growth in our AG business. This year.

You can see here summarized market data for 2024, which again is looking at more modest growth or flat performance in general and some areas of decline on the mobility side, we're looking for flat production on days inventory at more normalized levels. The big shift this year.

Linda S. Hasenfratz: On the mobility side, we're looking for flat production on days of inventory at more normalized levels. The big shift this year in this business is the dialing back on battery electric vehicles in favor of more traditional internal combustion and hybrid electric models. Linamar's flexible strategy of securing business in every type of propulsion and utilizing flexible equipment that can shift from one product to another is very helpful in this more volatile production environment. But more on that in a minute.

In this business is the dial back on battery electric vehicles in favor of more traditional internal combustion and hybrid electric models, Linda most flexible strategy of securing business and every type of propulsion and utilizing flexible equipment that can shift from one product to another is very helpful. In this.

More volatile production environment more on that in a minute.

Linda S. Hasenfratz: On the access side, supply chains have allowed order backlogs to moderate, but they remain at historically elevated levels. Industry experts are predicting modest growth in the access market in Europe and Asia this year, but flat expectations globally. North America is expecting modest growth in some products, such as the Boom product, which is a key growth area for us. Our backlog at Skyjack is strong and ahead of historical norms. With stable markets and predicted market share growth, we feel confident we can again grow Skyjack's sales by double digits this year. We're, of course, keeping a close eye on potentially shifting market conditions in the event of an economic slowdown. On the agricultural side, industry expectations are for large ag products to be down, but flat markets for the combined grapefruit header market this year in North America, with declines in other parts of the world. The windrower market will also see fairly flat markets globally this year. Nevertheless, the order book remains strong for MacDon.

On the access side supply chain have allowed or the backlog to moderate but they remain at historically elevated levels.

Industry experts are predicting modest growth in the access market in Europe, and Asia. This year, but flat expectations globally, North America is expecting modest growth in some products such as the boom product, which is a key growth area for us.

While that Skyjack is strong and ahead of historical norms with stable market and predictive market share growth. We feel confident we can again grow skyjack sales in double digits. This year, we're of course, keeping a close eye on potentially shifting market conditions in the event of an economic slowdown.

On the agricultural side industry expectations are for large AG products to be down, but flat markets for the combined Draper header market. This year in North America with declines in other parts of the world. The window market. We'll also see fairly flat market globally. This year.

Nevertheless, the order book remains strong from act on orders for combine Drapers, our largest product family are well ahead of orders at this point last year. Our current forecast is for mid to high single digit growth for <unk>. This year on the topline tillage at cross fertilization equipment more aligned to the high horsepower.

Linda S. Hasenfratz: Orders for Combined Drapers, our largest product family, are well ahead of orders at this point last year. Our current forecast is for mid-to-high single-digit growth for MacDon this year on the top line. Pillage and crop fertilization equipment more aligned to the high-horsepower tractor market is also seeing flat-to-dam markets this year on a global basis.

Tractor market is also seeing flat stab markets. This year on a global basis. Nevertheless software. It is also seeing solid orders and has had a strong start to the year on shipments, notably in core tillage products. We are also forecasting mid to high single digit growth for silk with this year.

Linda S. Hasenfratz: Nevertheless, Saltford is also seeing solid orders and has had a strong start to the year on shipments, notably in core tillage products. We are also forecasting mid-to-high single-digit growth for Saltford this year. Finally, the order book for our new Borgo business is consistent with historical levels and looking for a stable year in terms of performance. As a reminder, this business runs at about $450 million in annual revenue, and we acquired it as of February 1st of this year. Overall, with the inclusion of Borgo in our ag business, we expect double-digit sales growth in 2024 compared to last year. We saw another year of solid market share growth in our mobility business, with global content-per-vehicle up over last year. Both Europe and North America saw content-per-vehicle growth on launching business to new record levels for the year.

Finally, the order book for our new <unk> business is consistent with historical levels and looking towards stable year in terms of the performance. As a reminder, this business runs at about $450 million in annual revenue and when we acquired it at the February 1st of this year.

Overall with the inclusion of forgo in our AG business, we expect double digit sales growth in 2024 compared to last year.

We saw another year of solid market share growth in our mobility business with global concept of vehicle up over last year, both Europe, and North America content per vehicle growth on launching business to new record levels for the year.

Linda S. Hasenfratz: We're also growing market share in key product segments and regions within our industrial segment businesses. Here, you can see that MacDon's global Draper header market share is on a solid upward trend, reflecting the continued adoption of the MacDon Flex Draper technology over legacy Augur headers on a global basis. And SkyJack's share of the North American boom market continues to progress as well. Many of the same features and advantages that SkyJack's well-known scissors offer are carried over into the design of our boom product lines.

We're also growing market share in key product segments and regions within our industrial segment businesses. So you can see that Mcdonald's global Draper header market share is on a solid upward trend, reflecting the continued adoption of the mapped on flex rate for technology over legacy Auger headers on a global basis.

At Skyjack share of the North American market continues to progress as well many of the same features and advantages of Skyjack squamous scissors offer are carried over into the design of our boom product line the product reliability ease of maintenance at a total cost of ownership are hallmarks of Skyjack and it's showing.

Linda S. Hasenfratz: The product reliability, ease of maintenance, and total cost of ownership are hallmarks of SkyJack, and it's showing in our market share results. Turning to innovation and new business, we've seen another strong quarter in wind for the mobility business. The winds are a great balance of products for hybrid electric vehicles, internal combustion, and battery electric vehicles in alignment with our strategy to maintain strong content potential and sales exposure to each.

And our market share results.

Turning to innovation and new business, we've seen another strong quarter and wins for the mobility business. The Windsor, a great balance of product for hybrid electric vehicles, internal combustion and battery electric vehicles and alignment with our strategy to maintain strong content potential and sales exposure to each.

Linda S. Hasenfratz: In our access business, our eDrive program ROLA continues to receive positive market reaction, and in the ag business, all of our businesses are launching new innovation. Q4 was our strongest quarter of the year for new business wind, topping off a very strong year overall for our mobility business. As noted, we saw wind in a good blend of technologies, propulsion agnostic, as well as power trains for all battery-electric, hybrid electric, and internal combustion vehicles.

And our access business our E drive program rollout continues to positive market reaction and in the AG business all of our businesses are launching new innovation.

Q4 was our strongest quarter of the year for new business wins topping off a very strong year overall for our mobility business. As noted we saw wins in a good blended technology propulsion agnostic as wireless power transfer all of battery electric hybrid electric and internal combustion vehicles.

Linda S. Hasenfratz: Some interesting wins in the quarter were for more propulsion agnostic structural components and great wins on the hybrid side as well as differential assemblies. With respect to our launch book, we are now seeing ramping volumes on launching programs which are predicted to reach 35 to 45 percent of mature levels this year, generating incremental sales of $700 to $900 million. Sales of these launching programs last year were $682 million.

Some interesting wins in the quarter were for more propulsion agnostic structural components of great wins on hybrid side as well as differential assembly.

With respect to our launch book, we are now seeing ramping volumes on launching programs, which are predicted to reach 35% to 45% of mature levels. This year generating incremental sales of $700 million to $900 million.

Sales of these launching programs last year were $682 million. These programs will peak at nearly $3 7 billion in sales nearly $250 million of program moved from launch to production last quarter more than offset by business wins.

Linda S. Hasenfratz: These programs will peak at nearly $3.7 billion in sales. Nearly $250 million of programs moved from launch to production last quarter, more than offset by business wins and the Porter. You can see here the split of Linamar's business once we get out to the 2028 timeframe as a result of those launches, with a great blend of propulsion agnostic, which is basically anything for the driveline body and chassis system, EV powertrain, and ICE powertrain driving out of this good mix of business wins. I think this is a good position to be in to potentially shift market adoption of different technologies, have As time goes on, the proportion that is EV powertrain will naturally grow as these vehicles become more prominent.

In the quarter.

You can see here the split of <unk> business once we get out to the 2028 timeframe as a result of those launches with a great blend of propulsion agnostic, which is basically anything for the driveline body and chassis systems.

Powertrain and ice powertrain driving out of this good mix of business wins I think this is a good position to be in to whether potentially shifting market adoption of different technologies have a solid chunk of propulsion agnostic business and a good blend of powertrain for different forms of propulsion.

As time goes on the proportion that is EV powertrain will naturally grow as these vehicles become more prominent in 2028, there will still be plenty of ice vehicles being produced hence the heavier ice powertrain focus and sales at that time that will shrink over the ensuing five years to become more and more hybrid and battery electric and ultimate.

Linda S. Hasenfratz: In 2028, there will still be plenty of ICE vehicles being produced, hence the heavier ICE powertrain focus and sales at that time. That will shrink over the ensuing five years to become more and more hybrid and battery electric and ultimately fuel cell electric powertrain concentration in alignment with the market. Flexibility and a wide range of platform coverage will be the name of the game during the next decade as the mobility market transitions. In fact, flexibility is really the key to managing any major transition of technology. No technology adoption will be a straight line.

<unk> fuel cell electric powertrain concentration in alignment with the market.

Flexibility in a wide range of platform coverage is the name of the game during the next decade as the mobility market transition.

In fact flexibility is really the key to managing any major transition of technology No technology adoption will be a straight line. There's always can be ups and downs just as we're seeing now on the EV side with the dial back in the market.

Linda S. Hasenfratz: There's always going to be ups and downs, just as we're seeing now on the EV side with the dial back in the market. At Linamar, we've always believed that our level of flexibility should directly correlate to levels of uncertainty. There will be uncertainty with respect to the timing and volumes of different vehicle platforms over the coming years, which means we must be as flexible as possible. We've done that in a few really important ways.

<unk>, we've always believed that our level of flexibility should directly correlate to the levels of uncertainty there will be uncertainty with respect to timing and volumes of different vehicle platforms over the coming years that means we must be as flexible as possible. We've done that in a few really important ways first we created a product port.

Linda S. Hasenfratz: First, we've created a product portfolio with equal potential for any type of vehicle propulsion. Next, we've tried to ensure we have content across a wide variety of platforms to optimize sales potential based on market demand. And finally, we maximized the use of flexible equipment wherever possible to shift capacities between programs based on market demand. For example, we can, in many cases, use the very same equipment for components we're making for electric vehicles as those that we use to make ICE vehicle components and vice versa.

Polio with equal potential for any type of vehicle propulsion next we've tried to ensure we have content across a wide variety of platforms to optimize sales potential based on market demand.

Finally, we'd maximize the use of flexible equipment wherever possible to shift capacities between program based on market demand.

We can in many cases use the very same equipment for components, we're making for electric vehicles as those that we used to make ice vehicle components and vice versa. This flexibility is key to ensuring we minimize under utilization of assets.

Linda S. Hasenfratz: This flexibility is key to ensuring we minimize underutilization of assets. Also key are the commercial terms we agree to with customers. We must be more commercially astute in terms of contracts, commitments, and expectations than suppliers have typically been in the past with their OEM customers. Be assured that we're doing all of this in order to successfully navigate the coming transition years in the mobility industry. And of course, our growing industrial business continues to help insulate us as well from being too exposed to any one industry. On the innovation side in mobility, we recently exhibited at the Eurogust Advanced Casting Show in Germany, where we had the chance to really showcase our extensive structural and chassis and propulsion agnostic capabilities and innovations, from giga casting to structural and chassis components to battery trays.

Also keep our the commercial terms, we agreed to with customers, we must be more commercially astute in terms of contract commitments and expectations and suppliers are typically typically been in the past with our OEM customers.

Sure that we're doing all of this in order to successfully navigate the coming transition years in the mobility industry and of course, our growing industrial business continues to help insulate us as well from being too exposed to any one industry.

On the innovation side and mobility, we recently exhibited at the Euro dust advanced casting show in Germany, we have the chance to really showcase our extensive structural and chassis and propulsion agnostic capabilities and innovation from Giga casting the structural attracted components to battery grade.

Linda S. Hasenfratz: The technology was very well received at the show. Turning to innovations on the industrial side, I'd like to first highlight SkyJack's continued rollout of its new eDrive electric scissors. The system eliminates the traditional hydraulic drive units and replaces them with direct drive electric drive motors, offering an eco-friendly product with significantly reduced possibilities of hydraulic leaks, ideal for use in indoor settings.

The technology was very well received at the show.

Turning to innovations on the industrial side I'd like to first highlight Skyjack continued rollout of its new E drive electric scissors. This system eliminates the traditional hydraulic drive units and replace them with direct drive electric drive motors offering an eco friendly products was significantly reduced profitability.

<unk> of hydraulic leak ideal for use in indoor settings.

Linda S. Hasenfratz: As we've outlined in the past, electrification across SkyJack's fleet will be an R&D focus in the coming years. SkyJack now has a total of 10 models that utilize the new eVibes system. Next, we see a new product introduction at Macton. The new FC Series Flex Corn Header was introduced this past December. Recall that corn headers were a legacy Linamar product designed and manufactured in our European facility prior to our Macton acquisition. The Macton team has now been able to take the corn header product to the next level by integrating the same flex and ground following capability that Macton's Flex Draper Header has become famous for. This new FC Series demonstrates our ability to continuously innovate in the harvesting segment. And at Sulphur, the application portfolio continues to expand with the introduction of its newest chassis-mounted spinner spreader. The spreader leverages technology and knowledge from current full-type designs and can distribute both fertilizer and lime up to 120 feet accurately at variable rates for enhanced crop nutrition.

As we've outlined in the past electrification across Skyjack fleet will be in R&D focus in the coming years.

Got back now has a total of 10 models that utilize the new E drive system.

Next we see a new product introduction at marked on the new XT series Flex corn header was introduced this past December recall, the corn headers, where our legacy linde them our products designed and manufactured in our European facility. Prior to our marked on acquisition. The markdown team has now been able to take the.

Corn header product to the next level by integrating the same blast and ground following capability that knocked off bless Draper header has become famous for this new XC series demonstrates our ability to continuously innovate and harvesting segment.

And at Salford the application portfolio continues to expand with the introduction of its newest chassis mounted spinner spreader, the spreader Leverages technology and knowledge from current full type designs and can distribute both fertilizer and line up to 120 feet accurately at variable rates for enhanced.

<unk> nutrition, the new models offer a solution to both commercial applicators as well as growers and can be installed installed on the OEM chassis platform of choice.

Linda S. Hasenfratz: The new models offer a solution to both commercial applicators as well as growers and can be installed on the OEM chassis platform of choice. And lastly, you can get a sense of the kind of advanced seeding technology ProGo is bringing to the agricultural market. The recently announced XP Duo metering system is an exciting feature that can deliver seeds to either one or two row units, greatly reducing the complexity and cost of a planter. XP Duo is targeted to farmers who operate in regions where they primarily seed small grains but also plant some row crops. They can now use a single piece of ProGo equipment, the 3820 parallel cultured drill and frame mounted seeders, to not only seed wheat or canola but also plant row crops like corn and soybeans. This is something that traditionally required both a seeder drill and a corn planter, and now it can be accomplished with just one implement, a truly innovative solution from ProGo and an example of why their technology leadership is such a great addition to Lundmar's agricultural portfolio.

And lastly, you can get a sense for the kind of advanced seeding technology Franco was bringing to the agricultural market.

Recently announced XP duo metering system is an exciting feature that can't deliver seed to either one or two row unit greatly reducing the complexity and cost of a planter XP duo is targeted to farmers, who operate in regions, where they primarily Steve smugly, but also plant some real crop they cannot.

Now use a single piece of equipment in the 38, 20, Carolyn Coulter grill and brain mounted cedars to not only feed wheat or canola, but also plant row crops like corn and soybeans. This was something that traditionally required both the seed and throughout and corn planter and now it can be accomplished with just one implement it.

Truly innovative solutions from both <unk> and an example of why their technology leadership is such a great addition to Lithomarge agricultural portfolio.

Linda S. Hasenfratz: Okay, let's turn to a summary of our outlook. As I have already noted, we expect to see double-digit top-line growth in both our agricultural business and Skyjack and, therefore, the industrial segment as a whole in 2024. We're also expecting to see double-digit top-line growth in our mobility segment for 2024 based on launches of $700 to $900 million and current market production expectations. Growth in both segments will lead to double-digit top-line growth for Linamar overall this year. Net margins will expand again in 2024 on growing sales, driven mainly by margin expansion in the mobility business. The industrial segment will continue to perform in its normal 14 to 18 percent range, remaining in the top half of that range as we saw in 2023.

Okay, let's turn to a summary of our outlook as I have already noted we expect to see double digit top line growth in both our agricultural business and Skyjack and therefore in the industrial segment alcohol. In 2024, we're also expecting to see double digit top line growth in our mobility segment for 2024.

Based on launches of $700 million to $900 million and current market production expectations.

Growth in both segments will lead to double digit topline cultural lend them. Our overall this year.

Net margins will expand again in 2024 on grown sales driving mainly out of margin expansion in the mobility business. The industrial segment will continue to perform and its normal 14% to 18% range remaining in the top half of that range as we saw in 2023.

Linda S. Hasenfratz: This will mean strong double-digit growth in mobility segment operating earnings this year and another year of double-digit operating earnings growth in the industrial segment as well, which of course will drive double-digit EPS growth for us overall as well. CAPEX will be down in dollars from a very robust 2023 level of spending and at the low end of our normal six to eight percent of sales spending.

This will mean strong double digit growth in mobility segment operating earnings this year and another year of double digit operating earnings growth in the industrial segment as well, which of course will drive double digit EPS growth for us overall as well capex will be down in dollars from a very robust 2000.

23 level and at the low end of our normal 6% to 8% of sales spending.

Linda S. Hasenfratz: We expect strongly positive pre-cash flow this year, leaving us in an excellent position from which to drive further growth. Looking specifically at Q1, you should expect double-digit top and bottom line growth in comparison to the prior year, with operating earnings margins up versus the prior year as well as sequentially. The mobility segment will see double-digit operating earnings growth compared to the prior year and sequentially, thanks to a full quarter for our mobility group acquisitions, normal seasonal upticks in North America and Europe, launch business, and continued expected improvements in cost and recoveries. I'll note that the ED dial-back known today has been considered in this guidance, but is, of course, a fluid situation that we are keeping an eye on.

We expect strongly positive free cash flow this year, leaving us in an excellent position from which to drive further growth.

Looking specifically at Q1, you should expect double digit top and bottom line growth in comparison to prior year with operating earning margins up versus prior year as well as sequentially.

The mobility segment will see double digit operating earnings growth to prior year and sequentially. Thanks to a full quarter for our mobility group acquisition normal seasonal upticks in North America, and Europe, launching business and continued expected improvements in costs and recoveries I'll note that <unk> dialed back known today.

It has been considered in this guidance, but it is of course, a fluid situation that we are keeping an eye on.

Linda S. Hasenfratz: The industrial segment will see double-digit OE growth to the prior year and mid- to high-single-digit growth to Q4, thanks to two months of forego coupled with some modest growth in our other businesses after that exceptionally strong modest growth to Q4. So with that, I'm going to turn it over to our CFO, Dale Schneider, to lead us through a more in-depth financial review. Thank you, Linda, and good afternoon, everyone.

The industrial segment will see double digit double digit AOI growth to prior year and mid to high single digit growth to Q4, thanks to two months of forego coupled with some modest growth in our other businesses after that exceptionally strong Q4 modest growth to Q4 I mean.

So with that I'm going to turn it over to our CFO Dale Schneider to lead us through a more in depth financial review.

Thank you Linda and good afternoon, everyone.

Dale Schneider: As Linda noted, Q4 was an exceptional quarter as we achieved double-digits of sales and earnings growth. Ability margins expanded and grew from Q3 levels, as expected. Q4 was also another positive quarter for cash generation with strong liquidity coming in. For the quarter, sales increased 19.1% to $2.5 billion. Earnings are normalized for FX gains or losses related to the revaluation of the balance sheet and potentially other items that may occur. In the quarter, earnings were normalized for the FX loss.

As Linda noted Q4 was an exceptional quarter as we achieved double digit sales and earnings growth will be margins expanded a group from Q3 levels of expected Q4 was also another positive quarter for cash generation was strong liquidity coming in at one 3 billion.

For the quarter sales increased 19, 1% so $2 million.

Earnings are normalized for FX gains or losses related to revaluation of the balance sheet and potentially other items that may have occurred.

In the quarter earnings were normalized for FX losses.

Dale Schneider: The evaluation of the balance sheet, which impacted EPS by 29%. Normalized Operating Earnings for the quarter were $191.9 million; this compares to $144.9 million last year, an increase of $51 million or $30 million. Thank you. Thank you. Thank you. Normalized net earnings increased $22.7 million. All in favor?

The revaluation of balance sheet, which impacted EPS by 29 cents per share.

Normalized operating earnings for the quarter were 191 9 million.

Compares to $140 9 million in Q4 last year, an increase of $51 million or 36 two.

Normalized net earnings increased $22 7 million or 22, 8% quarter to $122 2 million.

Dale Schneider: Aye. Opposed? Aye. Fully Diluted Normalized EPS increased by 37%. 3.3% to reach $1.99. Also included in earnings for the quarter was a foreign exchange loss of $24.8 million, which resulted from a $22.3 million loss related to the revaluation of the operating balance.

Fully diluted normalized EPS increased by 37.

23% to reach $1 90.

Right.

Included in earnings for the quarter was a foreign exchange loss of $24 8 million, which resulted from a $22 $3 million loss related to the revaluation of operating balances and a $2 $5 million loss due to the revaluation of financing balances.

Dale Schneider: $2.5 million loss due to the re-evaluation of finance. As I mentioned, the net FX impact on the quarter's EPS was 29%. For a business segment perspective, the Q4FX loss of $22.3 million related to the re-evaluation of operating balances was the result of a $14.7 million loss in industrial and a $7.6 million loss in mobility. Further looking at the segments, industrial sales increased by 19.8% or $100.3 million to reach $607.4 million in Q4.

As I mentioned.

<unk> impact on the quarter was on EPS was <unk> 29 cents.

From a business segment perspective, the Q4 FX loss of $22 3 million related to the revaluation of operating balances was the result of a $14 $7 million loss in industrial and a $7 $6 million loss in mobility.

Further looking at the segments industrial sales increased by 19, 8% or $130 million to reach $607 4 million in Q4, the sales increase for the quarter was due to the substantial increase in generic or cultural sales driven by our global market share growth Andrea.

Dale Schneider: The sales increase for the quarter was due to a substantial increase in agricultural sales driven by global market share growth on drapers, which is our primary product family in the agriculture sector. A considerable increase in access to equipment sales, driven also by global market share growth on our main product, digital equipment. And finally, we had a positive impact on FX. Normalized Industrial Operating Earnings in Q4 increased $45 million, or 81.1%, over last year to reach $100.5 million.

Which is our higher margin products, primarily in the AG market.

A considerable increase in access equipment sales driven also by global market share growth on our main products.

And finally, we had a positive impact from changes in FX rates since last year.

Normalized industrial operating earnings in Q4, and increased $45 million or 81, 1% over last year to reach $105 million.

Dale Schneider: Primary drivers impacting industrial earnings were the increased contribution from the significant increase in agricultural volumes and the increased contribution from the strong increases in access equipment volumes. These were partially offset by increased SB&A costs that were supporting the growth. Turning to mobility, sales increased by $293.6 million or 18.9% over Q4 last year to $1.8 billion. The increase in the fourth quarter was primarily driven by the additional sales from our Linamar Structures acquisitions, three, four, five, six, seven, eight, nine, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, increasing volumes on launching and certain mature programs, positive impact from changes in FX rates from last year and cost recoveries achieved These are partially offset by lower volumes on certain programs that are whining.

The primary drivers impacting industrial earnings where the increased contribution from the significant increasing agricultural volumes and the increased contribution from strong increases in access equipment volumes. These were partially offset by increased SG&A costs that were supported the growth in the segment.

Turning to mobility sales increased by $293 6 million or 18, 9% over Q4 last year to $1 8 billion.

Sales increased due to the fourth quarter was primarily driven by additional sales from our loan structures and acquisitions in 2023.

The increasing volumes on launching to certain mature programs.

Positive impact from changes in FX rates from last year and cost recoveries achieved from our customers, which these were partially offset by lower volumes on certain programs that are winding down to end of life.

Q4 normalized operating earnings for mobility were up over last year at $91 4 million in the quarter mobility earnings were impacted by the increased contribution from the higher volumes in both launching tiered program.

Dale Schneider: Q4 normalized operating earnings for mobility were up over last year at $99 million. The quarter mobility earnings were impacted by the increased contribution from the higher volumes on both launching and mature programs, sales related to the acquisitions in 2023, which were partially offset by lower volumes of lending programs, the increased SG&A costs that are sporing the segment's growth, and an unfavorable impact at the OE level from changes in FX rates since last year. Returning to the overall Lenmar results, the company's gross margin was $320.2 million, an increase of $71.4 million compared to last year, and this was due to the same factors as last year, cost of goods sold. Amortization expense for the fourth quarter increased to $135.8 million compared to Q4 last year, mainly due to the Linamar Structure's acquisitions in addition to launching programs. Cogs amortization as a print of sales, though remains flat at 5.5. Selling General Administration costs increased in the quarter to $131.5M from $110.1M last year.

Sales related to the acquisitions in 2023, which were partially offset by lower volumes on new programs. The increased SG&A costs that are scoring segment's growth and an unfavorable impact at the OE level from changes in FX rates.

Turning to the overall <unk> results. The company's gross margin was $320 2 million, an increase of $71 4 million compared to last year and this was due to the same factors that drove the segment's results.

Cost of goods sold amortization amortization expense for the fourth quarter increased to $135 8 million compared to Q4 last year, mainly due to the limit of our structures acquisitions. In addition to launching programs.

Amortization as a percentage of sales remained flat five 5%.

Selling general and administration costs increased in the quarter to $131 5 million from $110 1 million last year.

This increase was primarily the result of the increased management sales cost supporting the overall growth.

In addition to the incremental SG&A costs from the numerous structures acquisitions.

Yeah.

Dale Schneider: This increase is primarily the result of increased management and sales costs affording the overall growth, in addition to the incremental SG&A costs from the Linamar Structures Act to the General Administration. The overall growth is primarily the result of the increased management and sales costs affording the overall growth, in addition to the incremental SG&A costs from Linamar. Finance expenses increased $13.3 million since last year, primarily due to the private placement notes issued in June 2023 to fund the Linamar Structure's acquisition and additional interest expense due to the Bank of Canada and the U.S. Fed rates that increased since last year. These are partially offset, though, by decreased average bank debt levels since Q4 last year. Solid A's Effective Interest Rate for Q4 was 4.6%. The effective tax rate for the fourth quarter increased to 28% compared to last year.

Financing expenses increased $13 3 million since last year.

Mainly due to the private placement notes issued in June 2023 to fund a lot of our structure Zacks acquisitions.

And additional interest expense due to the bank of Canada, and the U S fed rate increase since last year. These were partially offset though by a decrease.

Average bank debt levels since Q4 last year.

The consolidated effective interest rate for Q4 was four 6%.

Effective tax rate for the fourth quarter increased to 28% last year.

This was due to a decreased benefit from the utilization of unrecorded deferred assets compared to last year, a less favorable mix of foreign tax rates, which were partially offset by a decrease in non deductible expenses compared to last year.

The 2023 full year effective tax rate, excluding the net withholding tax in Q1 and Q2 related to the dividends received from our China operations was 25, 6%.

Dale Schneider: This is due to a decreased benefit from the utilization of unrecorded deferred assets compared to last year, and a less favorable mix of foreign tax rates, which were partially offset by a decrease in non-deductible expenses compared to last year. The 2023 full-year effective tax rate, excluding the net withholding tax in Q1 and Q2 related to the dividends received from our China operations, was 25.6% and was within our expected range of 24 to 26 percent. For 2024, the full-year effective tax rate is expected to be in the same range of 24% to 26% and is currently expected to be less than our full-year 23%.

And was within our expected range of 24% to 26%.

For <unk> for 2020 for the full year effective tax rate is expected to be in the same range of 24% to 26% and is currently expected to be less than our full year 'twenty three.

<unk> cash position was $653 3 million as of December 31, a decrease of $207 2 million compared to last year.

The fourth quarter generated $276 4 million in cash from operating activities.

It's primarily to fund the Q4, Capex and the Q4 acquisition of mobiles.

As a result net debt to EBITDA increased slightly to <unk> 80.

Dale Schneider: Linamar's cash position was $653.3 million as of December 31st, a decrease of $207.2 million compared to last year. The fourth quarter generated $276.4 million in cash from operating activities, being used primarily to fund the Q4 CapEx and the Q4 acquisition of mobile phones. As a result, Net Debt to EBITDA increased slightly to 0.85 times a quarter from a year ago, mainly due to the acquisitions in 2023. Based on our current estimates, we're expecting 2024 to maintain our strong balance sheet, and leverage is expected to remain. The amount of available credit on our credit facilities was $600,000 at the end of the quarter, and available liquidity at the end of Q4 remains strong. As a result, we currently believe we have sufficient liquidity to satisfy our financial obligations. To recap, sales and earnings for the quarter were a story of improving markets and increasing market share in both segments, which drove double-digit sales growth in each quarter. The industrial segment grew market share and sales significantly.

Eight five times in the quarter from a year ago, mainly due to the acquisitions of 2023.

Based on our current estimates we are expecting 2024 to remains to be.

Maintain our strong balance sheet and leverage is expected to remain low.

The amount of available credit on our credit facilities with $668 4 million at the end of the quarter our available liquidity at the end of Q4 remained strong after one 3 billion.

As a result, we currently believe we have sufficient liquidity to satisfy our financial obligations through 2024.

To recap sales and earnings for the quarter.

As a story of improving markets and increasing market share in both segments, which drove double digit sales growth and EPS growth.

Adjusted segment grew market share and sales significantly mobility results were solid with double digit sales growth over last year. In addition to expanding margins since Q3 of your plant.

Additionally, in Q4 had solid free cash flow generation and were still be able to maintain our strong liquidity at $1 3 billion. Despite the acquisitions.

It was a great quarter for sales growth.

<unk> performance and cash generation.

That concludes my commentary and I'd like to open it up for questions.

Thank you, ladies and gentlemen, we will now conduct the question and answer session. If you have a question. Please press star followed by the number one on your telephone keypad.

Dale Schneider: The results were solid, with double-digit sales growth over last year in addition to expanding margins. Additionally, Q4 had solid free cash flow generation, and we will still be able to maintain our strong liquidity, billionaires. It was a great quarter for sales growth. Earnings, Performance, and Cash Shares. That concludes my commentary, and I'd like to say, Thank you, ladies and gentlemen. We will now conduct the question and answer session. If you have a question, please press star followed by the number 1 on your telephone keypad. If you wish to cancel your request, please press star 2.

If you wish to cancel George request, Please press star two.

Your first question comes from Christopher <unk> from CIBC. Your line is now.

Hi, Thanks for taking my question and congrats on the good quarter.

Wondering if you could just expand a little bit more on the on the industrial Division.

Very solid performance.

Operator: Your first question comes from Krista Friesen from CIBC. Your line is now up. Hi, thanks for taking my question and congrats on a good quarter. I was wondering if you could just expand a little bit more on the industrial division. Very solid performance out of both the access equipment and the ag equipment, it sounds like. Even if you can just speak about the market share gains, where those are happening geographically, and if you're also seeing gains kind of as you expand your product lines as well. Yes, sure.

Although both the access equipment and.

AG it sounds like even if you can just speak about the market share gains.

Where are those are hopping geographically.

And if you're also seeing gains kind of do you expand your product lines as well.

Yes, sure we did have quite a strong quarter as I was mentioning in my formal comments, we would normally see Q4 dialing back from Q3.

And a fairly significant way it is the lowest quarter seasonally for all of our businesses, we would often see as much as 30% decline, but we actually only saw about a 10% decline in and sales compared to the third.

Linda S. Hasenfratz: We did have quite a strong quarter. As I was mentioning in my formal comments, we would normally see Q4 dialing back from Q3 in a fairly significant way. It is the lowest quarter seasonally for all of our businesses.

Third quarter, we are seeing global market share growth in our combined Draper products.

Linda S. Hasenfratz: We would often see as much as 30% decline, but we actually only saw about a 10% decline in sales compared to the third quarter. We are seeing global market share growth in our Combined Draper product, which is great to see. That has been a big driver of Macton's performance.

Which is great to see.

That has been a big driver of marked on performance.

Thanks.

Wondering if you can if you can just touch on the capex or for this year I believe previously you had been guiding to to be the normal range.

Linda S. Hasenfratz: Thanks, and I was just wondering if you could, if you could just touch on the CapEx for this year. I believe previously you had been guiding to the normal range, and now you're guiding to the low end of the normal range. Has something changed there in your CapEx expectations? No, I was guiding to the normal range.

And now you're guiding to the low end of normal range has something changed in your AR and your Capex expectation.

And no I was guiding to normal range I'm still guiding to normal range I'm, just giving you a little more granularity to say it'll be a little more.

Closer to the bottom end of that range and then it'll be down dollar wise from.

From this year, but still in that 6% to 8%.

Linda S. Hasenfratz: I'm still guiding to the normal range. I'm just giving you a little more granularity to say it'll be a little closer to the bottom end of that range. And it'll be down dollar-wise from this year, but still in that 68%. I think as well, just what Linda said in her comments, some of the EB dial-back, right, is also, we're watching that and obviously not spending where we have to be. Okay, great. And if I can just ask one last question, how are the conversations going with the OEMs this year in terms of pricing? Obviously, they have some pressures with some of their labor contracts that they signed. How are you finding your conversations with them?

It's Walter.

She said in her comments, who some of the VEB dialed back.

And Walter.

Spending more with us.

Yes.

<unk>.

Okay, great and if I can just ask one last one.

Then how are the conversations going with the Oems. This year in terms of pricing obviously, they have some pressures with some of their labor contracts. At this time are you finding your conversations with them.

So I would say that.

Very good relationships with our customers, but certainly their view.

Hi.

<unk> had some pretty big and they're looking to try and go back to times, where youre, giving annual productivity working on those sites.

Linda S. Hasenfratz: Well, I would say that we have very good relationships with our customers, but certainly their view, as you just cited, is that the labor hits them pretty hard, and they're looking to try and go back to times where you're giving annual productivity bonuses and really working on those sides. But I think each customer is unique, and Wendy Smith. Thanks. Congratulations on the quarter. I'll jump back in the queue.

Thank you.

<unk> is.

It is unique.

Julien.

Certainly we accomplished.

Yes.

Okay.

On the cost curve.

Thank you.

Cool.

Thanks, Congrats on the quarter, all ultra back in the queue.

Operator: Thank you. Your next question comes from Tamy Chen from BMO. Your line is now. Good afternoon. Sorry, can you hear me now?

James.

Your next question comes from Tami Chen from BMO. Your line is now open.

Good afternoon.

Okay.

Okay.

We can't hear you.

Yeah.

Sorry can you hear me now.

Operator: Yes, that's better. Thanks. Okay, perfect. So my first question is about the mobility segment. As I recall, in Q3, there was this unusual negative FX impact. And Linda, I think you said without it, based on your commentary describing that, I think the Q3 margin for mobility might have been closer to 5%. And I think for this quarter, you've reported just under 5%. So flat or sequentially, is that the right way to think about it, stripping out the unusual items? Or is that not the way it works?

Yes, that's better.

Perfect.

So my first question is for the mobility segment as I recall in Q3, there to happen. This unusual negative FX impact and Linda I think you said without it.

On your commentary describing not I think the Q3 margin for mobility, you might've been closer to 5%.

I think for this quarter that you've reported just just under 5%. So flattish sequentially is that the right way to think about it stripping out the unusual items or is that not the way to think about it.

Linda S. Hasenfratz: It's not the way to think about it because when I'm citing constant currency, it's in comparison to the prior year order. So if you're looking at Q3'23 compared to Q3'22, that's got a different comparison in terms of currency changes than looking at Q4'23 compared to Q4'22. So if you're adjusting for that to get back to a constant currency, Q3'22, then you can't now be comparing that to Q4'23, if you know what I mean. Okay, I think I know what you mean.

It's not the way to think about it because.

When I am citing constant currency, it's in comparison to the prior year quarter. So if youre looking at Q3 23 compared to Q3 'twenty two that's got a different comparison in terms of currency and.

Changes, then and looking at Q4 2003 compared to Q4 'twenty two so if you're if you're adjusting out that.

To get back to a constant currency Q3 'twenty. Two then you can't now be comparing that to Q4 'twenty three if you know what I mean.

Okay, I think I know, what you mean, what I'm trying to get at it.

Linda S. Hasenfratz: What I'm trying to get at is... the underlying did see some good margin improvement, I guess, sequentially, is that fair to say? Yes, I would say that in both Q3 and Q4, our margins were well understated based on the currency impact in comparison to the prior year. So we did see sort of unusual currency fluctuations, like this quarter we saw the peso appreciate pretty significantly against both the Canadian dollar and the U.S. dollar, so that impacted that, you know, considerably from a margin perspective. So, you're absolutely right.

The underlying business did see some good margin improvement I guess sequentially is that fair to say.

Yes, I would say that in both Q3 and Q4, our margins were well understated based on the currency impact in comparison to prior year. So we did see sort of unusual currency fluctuations like this.

This quarter, we saw the peso appreciate pretty significantly against the Canadian dollar and the U S dollar sales.

That impacted that.

It.

Considerably from a from a margin perspective, so you're absolutely right. The underlying business is performing more strongly than the margins would suggest.

Linda S. Hasenfratz: The underlying business is performing more strongly than the margins would suggest. Okay, and for 2024, I noticed for your guidance on mobility, you raised the OE dollar growth commentary, but I'm curious about margin. There are just some puts and takes, right?

Okay.

And for 2024 I noticed for your guidance on mobility, you've raised the <unk> dollar growth commentary, but I'm curious about margin because there's just some puts and takes right because as you have alluded to industry production is expected to be fairly flat.

Linda S. Hasenfratz: Because, as you alluded to, industry production's expected to be fairly flat this year. There's the EV dynamic. Margin Expansion, because that's what you're guiding for. I'm just curious now versus before in the context of production and EV expectations where they are like have that expectation of margin here. Come down a bit.

This year, there's the EV dynamic.

In terms of margin expansion, because that's what you're guiding for just curious now versus before in the context of production E V expectations, where they are like has that expectation.

The expectation of margin expansion this year come down a bit or still the same thing.

Linda S. Hasenfratz: Yeah, I mean, obviously, it's gonna fluctuate around a little bit, but honestly, it's not totally different from what we were forecasting before. And, importantly, dramatically higher than what we saw in 2023. So we are expecting to see some good margin expansion in our mobility business in 2024 compared to 2023. And I think that's the key takeaway, which is impressive considering the industry backdrop. And so are you attributing that to this maturing of a number of your new program launches? That's part of it, for sure.

Yeah, I mean, obviously, it's going to fluctuate around a little bit, but honestly, it's not not terribly different to what we were forecasting before and I think importantly dramatically higher than what we saw in 2023. So we are expecting to see.

Some good margin expansion in our mobility business in 2024 compared to 2023 and I think that's the key takeaway.

Which is impressive considering the industry backdrop, and so are you attributing that to this maturing of a number of your new program launches.

Linda S. Hasenfratz: I mean, we're continuing to launch a pretty significant book of business, so that is certainly helping. You know, continued improvements on the cost side are helping as well. So there are a few different factors.

That's part of it for sure.

We're continuing to launch a pretty significant book of business. So that is that is certainly helping.

Continued improvements on the cost side.

Is that is helping as well.

So it's a few different factors.

Operator: Okay, thank you. Your next question comes from... Brian Morrison from TD Cowen. Your line is now open.

Okay. Thank you.

Your next question comes from.

Brian Morrison from TD Cowen Your line is now open.

Operator: Yes, thanks very much, and I echo a good quarter. I want to just dive down if FX is still ahead. Q4 What were the operational improvements that drove the sequential margin? And to take it one step further, I hear you say that you're going to improve operating margins next year. What does it take to get back to 7 to 10%? Is it volumes? Is it maturing launches, maturing acquisitions, class recovery, what drives you back there, and when can that happen?

Yes, thank you very much and good.

Good quarter comments I wanted to start doing this FX is still a headwind in Q4, what was the operational improvements that drove the sequential margin improvement and I guess to take it one step further I hear you that you can improve operating margins next year, what does it take to get back to 7% to 10% is it volumes is it maturing launches we turned.

<unk> cost recovery, what drives you back there and when can that.

Linda S. Hasenfratz: Yeah, I mean, it's all of those things that you've talked about. So, you know, maturing business on the launch side, continued cost improvement, and the mix of business that we see coming. We absolutely believe we'll be back in our normal 7-10% range within the next couple of years. I would also, Brian, say we need supplier stabilization globally. It's still, you know, fragile in a lot of areas; certainly, labor instability is another factor.

Yeah, I mean I, it's all of those things that you've talked about so you know maturing.

Business from from the launch site continued.

Cost improvement the mix of business that we see coming we absolutely.

Absolutely believe we'll be back in our normal 7% to 10% range.

Within the next couple of years I would also.

Brian.

Higher stabilization.

Phil It's Stuart.

Probably drove a lot of areas.

The labor.

Got it.

Another factor.

Jim Jarrell: And of course, the cost recovery side is always critical. The ability to drive cost and uncertainty. Right, thank you. And sorry, just to go back. So what did drive the 50 basis points of margin improvement this quarter done sequentially? I mean, more of the same, right?

And of course, the cost recovery signs as always.

Stability is driving cost.

Yes.

Great. Thank you and sorry, just to go back so what did drive.

Sorry about that what drove the 50 basis points of margin this quarter done sequentially.

I mean more of the same right I mean, just more programs coming online.

Linda S. Hasenfratz: I mean, just more programs coming online. We had our acquisitions come into play for a small portion of the quarter, and we continued improvements on the cost side. Okay, the acquisitions were margin accretive. Yeah. Okay, can you just run through, Linda, maybe on that note, can you just run through, you know, Jura Shiloh, Mobex, and I realize it's early, but the initial findings with Virgo, how they're performing relative to your pre-acquisition expectations. I can walk you through it, for sure, Brian, so the Mobax, I would say, is performing right around where we had anticipated the Dura. Acquisition from a performance operational side is excellent, but the volume... is dialed back just based on the easy nature of that business and Borgo. You know, from February 1st to today, excellent so far, but we're right into it, but again, excellent technology, excellent management team there. It's gone very well.

Had our acquisition.

Come into play for a small portion of the quarter and continued in frequency on the cost side.

Okay, the acquisitions were margin accretive.

Yeah.

Okay can you just run through Linda maybe on that note can you just run through.

Shiloh Rollbacks and I realize it's early but the initial findings with perrigo, how they're performing relative to your pre acquisition expectations.

Welcome Tom.

Hi, Brian.

So I would say is.

Right around where we had anticipated.

<unk>.

Acquisition.

Performance operational excellence, but the volumes are dialed back.

Thank you.

Nature of that.

Yeah.

Okay.

Excellent.

Right now again.

Again excellent technology.

The transition has gone very well.

Jim Jarrell: As you know, when we do an acquisition, we set up a very detailed integration plan with a group of people. And at Borgo, that's well underway. And I think the other thing for those overall businesses is that we've created inside Linamar, Linamar Ag Operating Group, which basically is the group that sort of controls and operates those three businesses separately because we have customer-facing brands. So I would say, in each case, with Borgo right on track, with Mobax right on track, and with the Adura side, probably the volume...

We do an acquisition.

Detailed integration.

Plan with a group of people.

Oh well underway.

And I think the other thing.

Overall businesses, we've created inside.

Mark.

Operating costs, which basically is.

The group that sort of control offerings, those three businesses separately.

Because we have customer facing brands, so I would say.

Each case.

Right on track.

Most of our time on truck.

Yeah.

Probably the volumes.

Jim Jarrell: Okay, and Jim, maybe just one follow-up to that. I realize you guys have been very successful being flexible to utilize your equipment for different programs. Should we be a little bit cautious with respect to margin improvement if volumes come down substantially, or are you able to..., be quite seamless with your flexibility? I think it's pretty seamless for us, just because of what Linda said, right, if we're not doing EV, we're doing ICE, and as you guys know, we've been very, very bullish on being agnostic and flexible. Like a lot of companies have baked in and said, let's go all in on EV. I think we've been really clear in the market, really clear with our customers; you've got to do both. A couple of good examples, too, Brian, flexible equipment; Linda mentioned this.

Okay, and Jim maybe just one follow up to that I realize you guys have been very successful flexible to utilize your equipment for different programs with the threat of CEB volumes coming down.

Should we be a little bit cautious with respect to margin improvement.

Volumes come down substantially or you're able to be quite seamless what's your flexibility.

Yes.

I think it's pretty seamless for us.

Because.

We're not.

Got it.

We're very bullish.

Ignostic and flexible with a lot of competition.

So it does go all in on EV.

Really clear in the market.

You've got a couple of good examples.

Flexible equipment, Linda mentioned that so.

Jim Jarrell: So in the last two months, you know, we've seen EV dial back on certain customers. We've been able to take gear equipment and cross it over into a hybrid production site, so utilization. And the other thing that was really excellent as well, which you'll see in mobility to industrial, was that there was some dialing back on some EV, and we had welders, seamers, and things like that that were able to move from the mobility side over to the industrial side to do fabrication type work. So again, I think our way, and just being sort of agnostic and flexible and nimble is key for the next Yeah, I totally agree.

And the last two months.

Donald.

Customers.

Equipment Crawford.

Hi, Greg.

Hybrid production on time utilization for the other thing that was really tough comps as well, which we see it.

<unk>.

Dialed back on some welders steamers and things like that.

We will continue ability side.

Industrial side to do fabrication type work, so again I think our.

Our way I think I'm, just being through the agnostic and flexible and nimble is key.

Yeah, I totally agree and I would say that like two factors, there right that flexibility and equipment and as Joe has just described.

Dale Schneider: And I would say that, like, two factors there, right, that flexibility of equipment, as Jim just described, which is really important, but also the fact that we have content on a variety of platforms. And I think that was a really important thing that Jim just mentioned as well, that, you know, your EV is softening up, but at the same time, your ICE projects and hybrid projects are getting more volume. So we're certainly seeing that with some pretty robust volumes on more traditional technology. Yeah, I would also add to that, as the mix shifts, you're moving, launching, and equipment from launching EV programs most likely to mature power training programs, which are more profitable.

Is really important but also the fact that we have content and a variety of platforms and I think that was a really important thing that Jim just mentioned as well that you know your EV is softening up but at the same time your eyes.

<unk> and hydro projects are getting more volume. So we're certainly seeing that with some pretty robust volumes on a on more traditional technology, yes.

Yes, I would also add to that is that the mix shifts here youre moving launching equivalent from launching EV programs, most likely to mature.

Dream programs, which are more profitable richer margins.

Dale Schneider: Yeah, good point. Yeah, good point. Yeah, good point, Dale. Hey, Dale, is the pro forma Brigo leveraged at 1.3 times a year, and I think you said 25 times as your leverage. Is it 1.3 times pro forma Brigo? We're expecting by the end of Q1 to be a 1.5 vs. 2.

Yeah good.

Good point, though that deal is the pro forma Brugos languages of one three times at year end I think you said 25 times as your leverage is at 1.3 pro forma pro forma brookdale.

Yes.

We're expecting by the end of Q3 to Q1 to be a one five versus okay.

Dale Schneider: But, like Linda commented, we should quickly de-lever the fact that under one... are under in the next 12. Just like all the other ARC divisions I've worked on and wanted to pay before that. All right, we're done. Thanks for the information. Ladies and gentlemen, as a reminder, should you have a question, please press star followed by the number one on your keypad. There are no further questions at this time. Linda, please continue. Great! Thank you so much.

We are today, but what I wanted to comment that we should quickly delever.

Under one into the next.

Yes under in the next 12 18 months. So just like all the other acquisitions like marathon marketing before that quickly delever.

Alright.

Color.

Ladies and gentlemen.

Should you have a question. Please press star followed by the number one on your keypad.

Okay.

There are no further questions at this time Linda please continue.

Great. Thank you so much well to conclude this evening I'd like to leave you as always with three key messages first we're thrilled to deliver another quarter and another year of double digit top and bottom line growth as well as margin expansion.

Linda S. Hasenfratz: Well, to conclude this evening, I'd like to leave you, as always, with three key messages. First, we're thrilled to deliver another quarter and another year of double-digit top and bottom line growth, as well as margin expansion. Secondly, and we didn't talk much about this, but it's great to see both return on equity and return on capital employed increasing, a continued positive trend since the lows that we saw in 2020. And finally, we're excited to welcome another acquisition to the Linamar family with Borgo and its solid seeding technology, completing our full line of agricultural short-line equipment.

Secondly, it and we didn't talk much about this but it's great to see both return on equity and return on capital employed increasing a continued positive trend since lows that we saw in 2020 and finally, we're excited to welcome another acquisition to the Linda My family with Fargo, and it's solid seething technology, completing our full line of.

Agricultural short line equipment, thanks, everybody and have a great evening.

Operator: Thanks, everybody, and have a great evening. Ladies and gentlemen, this concludes today's conference call. Thank you for joining. You may now disconnect, and many more. Thank you. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for joining you may now disconnect.

Okay.