Linamar Business Report FY2006(FY ended Dec. 2006)
Business Highlights
Financial overview
in
million Canadian dollars (CAD) |
FY2006 | FY2005 | Rate of change (%) | Business Activities |
Sales | 2,262.1 | 2,161.4 | +4.7 | See below 1) |
Operating Earnings | 158.4 | 176.0 | -10.0 | See below 2) |
1) Sales for the year have increased
100.7million CAD or 4.7%, to 2,262.1million CAD, compared to 2,161.4million
CAD in 2005.
Sales growth for Powertrain/Driveline was modest at 21.9million CAD,
or 1.2%. Sales were affected by a number of factors, most notably the
significant extent of plant shutdowns and production reductions by North
American original equipment manufacturers ("OEMs") commencing
in the third quarter of 2006, increased pricing pressure from these
same customers and the maturation or re-sourcing of some contracts,
offset by a net increase in medium/heavy duty truck sales for the year
reflecting the substantial pre-buy activity in the first half of 2006,
the ramping up of 6-speed transmission production (although at a slower
than expected rate), and strong growth in Europe.
2) Operating earnings declined 17.6million CAD year over year, or 10%.
Strong gross margin growth in Industrial, applied to robust sales increases
reflecting an increased market share of an overall growth market, led
to operating earnings for this group in 2006 of 59.7million CAD, an
increase of 21.2million CAD(55%) over 2005. Powertrain/Driveline experienced
significant pressure in 2006 on operating earnings, which were lower
year over year by 38.8million CAD(28.2%). This was due to non-variable
cost burdens in North America associated with OEM shutdowns/reduced
volumes and slower than expected ramp-ups particularly in 6-speed transmission,
ongoing start-up costs in Asia-Pacific, pricing and other productivity
givebacks, and asset impairment charges, somewhat offset by improved
results in Europe.
Geographical Segment Sales
- Canadian geographic segment sales showed modest growth of 14.1million
CAD year over year, to reach a level of 1,672.8million CAD for the year
ended December 31, 2006. Powertrain/Driveline sales in Canada were slightly
down overall due to a combination of production volume declines, increased
pricing pressure and a strengthened Canadian dollar, somewhat offset
by strong pre-buy of medium/heavy duty trucks in the first half of 2006.
Strong market demand for aerial work platforms through fleet replacements
and reconditioning services and increased market share resulted in strong
sales growth in Canada for Industrial.
A substantial portion of the company's property, plant and equipment
(68%, 599.1million CAD) continues to be located in Canada. This reflects
the 25 manufacturing facilities located in Ontario, 22 of which support
the capital-intensive Powertrain/ Driveline segment.
- The U.S. geographic segment has enjoyed a 15.0% increase in sales,
reaching 192.6million CAD during the year, an increase of 25.1million
CAD over 2005. Sales to the U.S. customers of Skyjack have been driven
by market demand and an increased market share. Sales have remained
steady for McLaren Performance Technologies Inc., the testing and engineering
development business acquired by the company in late 2003. This is offset
by a decline at the company's engine plant in Kentucky as sales demand
for cylinder heads, bedplates, and other heavy duty truck volumes declined.
- Sales in the Asia Pacific geographic group remain insignificant at
3.5million CAD during this start-up phase.
- Mexican sales continue to improve, reaching 186.5million CAD during
2006, a 30.1% increase or 43.1million CAD over 2005. Strong new and
growing programs continue to improve sales results in Mexico. The programs
are diverse and include 4-speed transmission for light vehicle, liners
for medium and heavy duty truck and high feature camshaft supporting
a variety of platforms.
- Sales in Europe increased 17.3million CAD or 9.1% to 206.7million
CAD in 2006. The increase is primarily due to a camshaft program launched
in late 2005 for a German automaker utilizing its industry leading innovative
technology and a substantial cylinder head and block program.
Environmental Activities
-The Company has established an Environment Committee of senior management
to oversee the Company’s environmental programs and to ensure that it
complies with applicable environmental laws. As well, the Company has
regular environmental compliance audits performed to check that wastes
are disposed of in accordance with such laws.
R&D
- Linamar acquired McLaren Performance Technologies in 2003 to integrate the team with Linamar's Operating Group as an internal advanced product and process development resource. In 2005, McLaren Performance Technologies Division developed a new mission statement and organizational structure to focus on delivering innovative cost-effective products in support of the Linamar Group strategies and goals. In early January 2006, Linamar announced the establishment of the Linamar Automotive Customer Center that combined the Detroit-based sales team with McLaren Performance Technologies to support the Group. Throughout 2006, McLaren Performance Technologies Division will focus on delivering their mandate, which is to offer support in the design, testing and analysis of engine transmission and chassis systems.
Investment Activities
- In February 2007, the Company announced its public purchase offer for the balance of the outstanding shares of its consolidated subsidiary Linamar Hungary Nyrt. The company currently owns 58.63% of Linamar Hungary Nyrt, which is a public company listed on the Budapest Stock Exchange. The offer is valued at 3,003 Huf (18.00 CAD) per share, for the
cumulative value of 63.9million CAD for the residual holdings, and expires 60 days after approval by local regulatory authorities. The transaction had been completed prior to December 31, 2006.