Q2 2022 hedge fund letters, conferences and more
In May, the company announced the creation of Linamar MedTech, its newest operating segment. The certification of its Guelph manufacturing facility is the next step in Linamar’s plan to manufacture medical devices and precision medical components.
“With a growing and aging population, the medical device and precision components market is growing quickly. This is an exciting new area for Linamar to grow and one in which we have already proven we can excel,” Linamar CEO Linda Hasenfratz stated in May.
The global MedTech market is projected to reach US575.80 billion in 2022. Medical devices, the largest segment, account for 79%. The U.S. accounts for approximately 35% of the global MedTech market.
Linamar has a history of entering new markets and growing its share.
In February 2018, Linamar acquired Winnipeg-based MacDon, a maker of agriculture harvesting equipment such as Draper Headers, Self-Propelled Windrowers, and other aftermarket parts. The company paid CAD$1.2 billion, twice its 2017 sales of CAD$600 million.
The move increased its Industrial segment’s revenues and earnings and grew its agricultural end market to nine percent of the company's total, from one percent.
In July 2001, Linamar bought 48.5% of Skyjack, a maker of scissor lifts and other access equipment, for CAD$22.1 million. A year later, Skyjack’s business faltered, And Linamar acquired the remainder of the company for CAD$9.2 million. Today, in tandem with MacDon, it contributes significantly to Linamar’s Industrial segment and the broader business.
More recently, Linamar paid CAD$260 million to acquire the Salford Group of Companies, an Ontario manufacturer of fertilizer spreaders, crop seeders, and a range of tillage equipment. Salford has three manufacturing plants in Canada and two more in the U.S.
“Through MacDon, we already have an established market leading position in the harvesting segment. Tillage and crop nutrition are a natural complement to that product portfolio which will allow us to accelerate sales of all products. Combining Linamar’s scaled resources and global reach with Salford’s leading reputation will drive value creation for all stakeholders,” Linamar President and COO Jim Jarrell stated in early June.
In the second quarter ended June 30, Linamar’s Mobility segment increased sales by 25.0% to CAD$1.48 billion, while the Industrial segment’s sales rose 28.2% to CAD$504.6 million. As a result, the company’s normalized earnings before interest, taxes, depreciation and amortization (EBITDA) in the quarter was CAD$262.9 million, 1.2% higher than a year earlier.
CIBC analyst Krista Friesen increased her target price for Linamar in mid-August to CAD$80 from CAD$71. Friesen gives it an “outperform” rating.
Article by Will Ashworth, Fintel
