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5. Linamar Corporation Business Report FY ended Dec. 2018

Linamar Corporation Business Report FY ended Dec. 2018

Factors
1) Transportation segment sales
-In the fiscal year ended December 31, 2018, sales in the Company’s Transportation segment increased by 5.6% over the previous year to CAD 5,734.3 million. Factors in Q4 were impacted by

• Additional sales from programs that are currently launching
• A favourable impact on sales from the changes in foreign exchange rates from Q4 2017; partially offset by
• Market declines in Europe related to both the Worldwide Harmonized Light Vehicles Test Procedure (“WLTP”) issues in addition to the impact of consumer sentiment for diesel engines which is impacting volumes with key customers;
• Market declines in Asia which are impacting certain key customers

And the factors that impacted Q4 2018 similarly impacted the YTD results.

2) Transportation segment operating income
-The Transportation segment had operating income of CAD 473.7 million in the fiscal year ended December 31, 2018, an decrease of 13.2% over the previous year. Factors were impacted by the following:

• The impact of the lower mature volumes related to the market declines in Europe and Asia which naturally have higher margins than volumes from new launching programs;
• Additional costs related to heavy launch activity globally
• One-time restructuring costs incurred in Q4 2018; partially offset by
• The impact of additional sales from launching programs
• A favourable impact on sales and expenses from the changes in foreign exchange rates from Q4 2017

And the factors that impacted Q4 2018 similarly impacted the YTD results coupled with decreased volumes in Asia for certain programs that the company has significant business with.

Recent Developments

Partnership with Protean Electric
-Protean Electric announced that the Company has become the manufacturing partner for ProteanDrive in key growth segments globally. The agreement covers the full range of ProteanDrive models, with Linamar providing manufacturing capacity to support market opportunities in all passenger car and commercial vehicle segments for North American OEMs worldwide. With over 150 patents, Protean Electric is an automotive technology firm. The Company provides a stand-alone electric drive solution with software that enables digital vehicle control and enhances customization. (From a press release on November 1, 2018)

Support by the government of Ontario 
-The government of Ontario, Canada, announced that it will support Linamar Corporation (Linamar), an automotive parts supplier, for its development of next-generation vehicle parts. Linamar, which plans to invest CAD 500 million (JPY 44 billion), will receive a CAD 50 million (JPY 4.5 billion) grant from the Ontario government. The Ontario and federal governments will provide about CAD 100 million (JPY 9 billion) in total. Linamar will create 1,500 new jobs in Ontario over the next 10 years, and maintain the existing 8,000 employees. (From an article in the Nikkan Jidosha Shimbun on February 19, 2018)

Investments outside Canada

<Hungary>
-Hungarian Investment Promotion Agency announced that the investment of EUR 28 million by the Company shall create a total of 200 jobs in Oroshaza, Bekescsaba and Gyongyos. The current development concerns the lifting machinery production and the extension of automotive capacities. The principal activity of the Hungarian subsidiary, Linamar Hungary Autoipari es Gepgyarto is the manufacturing of the accessories of road vehicles and vehicle engines. (From a press release on February 27, 2018)

-Hungarian Investment Promotion Agency informed that the Company is going to establish its European electromobility centre in Bekescsaba, its third site in Hungary. It will produce electric drivetrains. Due to a complex investment worth EUR 78 million, the emobility related development covers 56.6 million creating 250 competitive jobs. Linamar will construct a production hall of 10,000 squaremeters in Bekescsaba. (From HIPA press release on December 12, 2018)

<Mexico> 
-Announced plans to invest USD 50 million to revamp and expand its manufacturing site in Gomez Palacio, Mexico. The investment will primarily be used to acquire new machinery with state-of-the-art technology, while a smaller amount will be used to expand the facility. Linamar has five plants in Mexico, located in Nuevo Laredo, Gomez Palacio, Torreon and two manufacturing facilities in Ramos Arizpe. These sites manufacture precision machined and assembled components for engines and transmissions, as well as drive shafts, axles and differentials for light vehicles, heavy trucks and agricultural machinery. (From a Mexico-Now article on March 23, 2018)