The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from Marketwire

Martinrea International Inc. Releases Second Quarter 2012 Results: Ramping Up Revenues and Launches

Tuesday, August 14, 2012

Martinrea International Inc. Releases Second Quarter 2012 Results: Ramping Up Revenues and Launches17:09 EDT Tuesday, August 14, 2012TORONTO, ONTARIO--(Marketwire - Aug. 14, 2012) - Martinrea International Inc. (TSX:MRE) a leader in the production and development of quality metal parts, assemblies and modules, fluid management systems and complex aluminum products focused primarily on the automotive sector announced today the release of its financial results for the second quarter ended June 30, 2012. Martinrea currently employs over 11,000 skilled and motivated people in 37 plants in Canada, the United States, Mexico, Brazil and Europe. All amounts in this Press Release are in Canadian dollars, unless otherwise stated; and all tabular amounts are in thousands of Canadian dollars, except earnings per share and number of shares. Additional information about the Company, including the Company's Management Discussion and Analysis of Operating Results and Financial Position for the quarter ended June 30, 2012 ("MD&A") dated as of August 14, 2012, the Company's unaudited interim consolidated financial statements for the quarter ended June 30, 2012 (the "unaudited consolidated interim financial statements") and the Company's Annual Information Form for the year ended December 31, 2011, can be found at www.sedar.com. Non-IFRS Measures The Company reports its financial results in accordance with International Financial Reporting Standards ("IFRS"). However, the Company has included certain non-IFRS financial measures and ratios in this Press Release that the Company believes will provide useful information in measuring the financial performance and financial condition of the Company. These measures do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similarly titled measures presented by other publicly traded companies, nor should they be construed as an alternative to the other financial measures determined in accordance with IFRS. Non-IFRS measures referred to in the analysis include "adjusted net earnings", and "adjusted earnings per share on a basic and diluted basis" and are defined in Tables A and B under "Adjustments to Net Income" of this Press Release. Results of OperationsREVENUEThree months ended June 30, 2012Three months ended June 30, 2011Change% ChangeNorth America$603,190$473,723129,46727.3%Europe145,195864144,331-Rest of World14,168-14,168-Revenue$762,553$474,587287,96660.7%Second Quarter 2012 to Second Quarter 2011 comparisonThe Company's revenues for the second quarter of 2012 increased by $288.0 million or 60.7% to $762.6 million as compared to $474.6 million for the second quarter of 2011. The increase was partially due to $180.8 million in incremental revenue resulting from the inclusion of Martinrea Honsel in the consolidated financial results of the Company effective July 29, 2011, which caused sales in both the Company's Europe and Rest of World operating segments to increase significantly year-over-year. Included in the $129.5 million increase in revenue generated in North America was $23.3 million related to the operations of the Company's plant in Queretaro, Mexico which formed part of the Honsel acquisition. The remainder of the increase in revenue in North America was due to improved production volumes in North American light vehicle platforms, the launch of new programs during or subsequent to the second quarter of 2011, an increase in tooling revenue relating to upcoming new programs which is typically dependent on the timing of tooling construction and final inspection and acceptance by the customer, and the impact of exchange rates on the translation of U.S. dollar denominated revenue, which had a positive impact on revenue for the second quarter of 2012 of $12.9 million in comparison to the second quarter of 2011.Overall tooling revenue increased by $23.0 million from $39.3 million for the second quarter of 2011 to $62.3 million for the second quarter of 2012, $10.0 million of which was generated by Martinrea Honsel. Three months ended June 30, 2012Three months ended March 31, 2012Change% ChangeNorth America$603,190$568,36634,8246.1%Europe145,195153,281(8,086)(5.3%)Rest of World14,16814,0071611.1%Revenue$762,553$735,65426,8993.7%Second Quarter 2012 to First Quarter 2012 comparison The Company's revenues for the second quarter of 2012 increased by $26.9 million or 3.7% to $762.6 million as compared to $735.7 million for the first quarter of 2012. The total increase was driven by an increase in revenue in the North American operating segment and an overall increase in tooling revenue, partially offset by a decrease in revenue in Europe. Overall North American OEM light vehicle production for the second quarter of 2012 was essentially flat compared to the first quarter of 2012. The quarter-over-quarter increase in revenue in the Company's North American operating segment for the second quarter of 2012 outpaced overall North American light vehicle production due largely to the launch of incremental new programs during or subsequent to the first quarter of 2012, including the new Ford Escape. The decrease in revenue in Europe was driven by a quarter-over-quarter decrease in OEM light vehicle and engine production in Western Europe, which decreased sequentially by approximately 9%.In addition to the above, the translation of U.S. dollar, Euro and Brazilian Real denominated revenue into Canadian dollars negatively impacted revenue in the North America, Europe and Rest of World operating segments for the second quarter of 2012 by approximately $3.8 million, $2.5 million and $1.1 million, respectively.Overall tooling revenue increased by $10.4 million from $51.9 million for the first quarter of 2012 to $62.3 million for the second quarter of 2012. Approximately $4.3 million of the $10.4 million increase was generated in Europe.GROSS MARGINThree months ended June 30, 2012Three months ended June 30, 2011Change% ChangeGross margin$76,067$49,99226,07552.2%% of revenue10.0%10.5%Second Quarter 2012 to Second Quarter 2011 comparisonThe gross margin percentage, before adjustments, for the second quarter of 2012 of 10.0% decreased by 0.5% as compared to the gross margin percentage for the second quarter of 2011 of 10.5%. Excluding the operations of Martinrea Honsel, which was acquired on July 29, 2011 and, as a consequence, is not included in the financial results of the comparative quarter, the unusual and other items recorded as cost of sales in Table A under "Adjustments to Net Income", including the impact of a major equipment failure at one of the Company's facilities in the U.S., and tooling revenue, which increased significantly year-over-year and typically earns low or no margins for the Company, Martinrea's gross margin percentage for the second quarter of 2012 would have been 11.7%, an increase over 11.5% realized in the second quarter of 2011. The increase was primarily due to increased gross margin as a result of higher light vehicle production volumes in North America and productivity and efficiency improvements at certain North American operating facilities offset by launch activity costs which negatively impacted gross margin for the quarter. The launch activity costs incurred during the quarter relate to several new programs currently ramping up or scheduled to launch during the second half of 2012, which will generate approximately $450 million in annualized business when fully launched. The most significant of the new programs is the new Ford Escape which is launching in four Martinrea facilities in the U.S., including the Company's facility in Shelbyville, Kentucky. In addition to the content on the new Ford Escape, current or upcoming launches during the second half of the year include content on the following OEM platforms: Ford CD4, GM Global Gamma, GM Alpha, GM Epsilon, Nissan L12F and Honda C-5.The Company's Shelbyville facility, approximating one million square feet, represents about 20% of the Company's square footage in North America and had a revenue run rate of about $50 million per year prior to the launch of the new Ford Escape. A total of approximately $275 million in anticipated annualized business related to Ford's C520 program is in the process of being launched at this facility, which has increased from the award of the program, as anticipated sales and production volumes have increased. The new work will greatly expand throughput and capacity utilization at Shelbyville, and is expected to turn a very large plant with negative gross margin and earnings and current ramp up costs into a positive gross margin and earnings contributor during the fourth quarter of 2012 when full vehicle production volumes are expected to peak and current launch activity costs begin to subside. This Ford C520 business consists of approximately $150 million in value added internally produced components (some of which are or will be manufactured by other Martinrea facilities) and $125 million in components purchased from other suppliers that will be integrated with internally produced components to produce finished welded assemblies. The gross margins on components purchased from other suppliers are typically lower than for value added work, although return on capital is higher. After the launch of the Ford C520 program in Shelbyville, approximately 25% of Martinrea's business excluding Martinrea Honsel will involve integrator or assembly work.Three months ended June 30, 2012Three months ended March 31, 2012Change% ChangeGross margin$76,067$80,309(4,242)(5.3%)% of revenue10.0%10.9%Second Quarter 2012 to First Quarter 2012 comparisonGross margin percentage, before adjustments, for the second quarter of 2012 of 10.0% decreased by 0.9% as compared to the gross margin percentage for the first quarter of 2012 of 10.9%. Excluding the unusual and other items recorded as cost of sales in Table B under "Adjustments to Net Income", which included the impact of a major equipment failure at one of the Company's facilities in the U.S., and tooling revenue, which increased significantly quarter-over-quarter and typically earns no or low margins for the Company, gross margin percentage for the second quarter of 2012 decreased by 0.3% to 11.5% from 11.8% for the first quarter of 2012. The gross margin percentage for the second quarter was positively impacted by productivity and efficiency improvements at certain North American facilities and the commencement of operations at the Company's new facility in Silao. The positive impact was more than offset by a decrease in production volumes in Europe as previously noted, launch activity costs which increased quarter-over-quarter, and the impact of exchange rates on the translation of U.S. dollar and Euro denominated gross margin, which had a negative impact on gross margin for the second quarter of 2012 of $0.5 million as compared to the first quarter of 2012.ADJUSTMENTS TO NET INCOME(ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY)Adjusted net earnings excludes certain unusual and other items, as set out in the following tables and described in the notes thereto. Management uses adjusted earnings as a measurement of operating performance of the Company and believes that, in conjunction with IFRS measures, it provides useful information about the financial performance and condition of the Company. TABLE A For the three months ended June 30, 2012For the three months ended June 30, 2011(a)(b)(a)-(b)IFRSIFRSChangeNET EARNINGS (A)14,37215,546(1,174)Add back - Unusual Items:Employee related severance costs (1)1,054-1,054Other restructuring costs (1)1,413-1,413Add back - Other Items:Executive separation agreement (recorded in SG&A) (2)5,177-5,177Impact of a major equipment failure at an operating facility in the U.S. (recorded as COS) (3)4,503-4,503Transaction costs associated with the Honsel acquisition (recorded as SG&A) (4)-1,436(1,436)TOTAL UNUSUAL AND OTHER ITEMS BEFORE TAX12,1471,43610,711Tax impact of above items(2,367)(359)(2,008)Non-controlling interest on above items(102)-(102)TOTAL UNUSUAL AND OTHER ITEMS AFTER TAX (B)9,6781,0778,601ADJUSTED NET EARNINGS (A + B)24,05016,6237,427Number of Shares Outstanding - Basic ('000)82,97583,276Adjusted Basic Earnings Per Share0.290.20Number of Shares Outstanding - Diluted ('000)83,71583,977Adjusted Diluted Earnings Per Share0.290.20 TABLE B For the three months endedFor the three months endedJune 30, 2012March 31, 2012(a-b)(a)(b)ChangeNET EARNINGS (A) - Per IFRS14,37223,055(8,683)Add back - Unusual Items:Employee related severance costs (1)1,054846208Other restructuring costs (1)1,4131,31895Add back - Other Items:Executive separation agreement (recorded in SG&A) (2)5,177-5,177Impact of a major equipment failure at an operating facility in the U.S. (recorded as COS) (3)4,503-4,503Transaction and integration costs associated with the Honsel acquisition (recorded as SG&A) (4)-581(581)TOTAL UNUSUAL AND OTHER ITEMS BEFORE TAX12,1472,7459,402Tax impact of above items(2,367)(528)(1,839)Non-controlling interest in above items(102)(535)433TOTAL UNUSUAL AND OTHER ITEMS AFTER TAX (B)9,6781,6827,996ADJUSTED NET EARNINGS (A + B)24,05024,737(687)Number of Shares Outstanding - Basic ('000)82,97582,907Adjusted Basic Earnings Per Share0.290.30Number of Shares Outstanding - Diluted ('000)83,71583,591Adjusted Diluted Earnings Per Share0.290.30(1) Employee related severance and other restructuring costsAs part of the acquisition of Honsel, a certain level of restructuring was planned, in particular, at the Company's German facility in Meschede. The restructuring efforts commenced immediately after the closing of the acquisition and, as a result, $11.4 million of employee related severance was recognized during the year ended December 31, 2011. An additional $0.6 million and $0.2 million of employee related severance was recognized during the three months ended March 31, 2012 and three months ended June 30, 2012, respectively. The majority of the restructuring costs expected to be incurred will be in the nature of employee related severance as the Company rationalizes the overhead cost structure and improves the efficiency of the operations. The Company anticipates that additional employee related severance will be incurred during the remainder of 2012.In addition, during the fourth quarter of 2011, the Company began the process of closing one of its small operating facilities in Mexico. The existing business and equipment of this facility will be moved to other Company facilities in Mexico including a new facility the Company opened in Silao, Mexico in 2011. Restructuring costs relating to this closure during the fourth quarter of 2011 totaled $2.4 million consisting primarily of employee related severance ($1.5 million) and the dismantling and transporting of PP&E between Company facilities ($0.9 million). An additional $1.5 million and $1.4 million of primarily other restructuring costs were recognized during the three months ended March 31, 2012 and three months ended June 30, 2012, respectively, related to the dismantling and transporting of PP&E between Company facilities. Costs associated with other restructuring activities incurred during the three months ended June 30, 2012 totaled $0.9 million for employee related severance relating to the right sizing of certain other manufacturing facilities.At this time, the Company does not expect to incur any further significant restructuring costs with the exception of the settlement of the Windsor pension and OPEB plans which the Company will continue to fund over the next twelve months, the windup of the Martinrea Fabco Hot Stampings pension plan, the completion of the closure of the small operating facility in Mexico and any restructuring required relating to the acquired assets of Honsel (as discussed above). (2) Executive separation agreementOn June 29, 2012, the Company announced that Nat Rea stepped down as Vice Chairman and Director of Martinrea, effective immediately, to pursue other opportunities. As part of the separation agreement and based on the terms of his employment contract, the Company paid Mr. Rea $5.2 million which was expensed during the second quarter of 2012 and included in SG&A expense. The Company does not expect to incur any further costs associated with Mr. Rea's departure.(3) Impact of a major equipment failure at an operating facility in the U.S.During the month of June, 2012, a press in one of the Company's operating facilities in the U.S. experienced a significant failure and was not operational for approximately 23 days. As a consequence and due to the lack of press capacity at the facility, approximately thirty dies were outsourced to external stamping companies which resulted in the following incremental costs:external stamping fees; transportation costs to move the dies to the external stamping companies and stamped parts back to the Martinrea operating facility for assembly; additional manpower to ensure the quality of parts stamped by external suppliers; sorting and rework costs; and dedicated external contractor support to get the press operational again. These incremental costs, which totaled $4.5 million for the quarter, are non-recurring in nature and had a significant impact on the performance of the facility during the month of June, 2012. The press is now operational again but the incremental costs outlined above continued into July, 2012 and are expected to have an impact on the results for the third quarter but to a lesser extent.(4) Transaction costs associated with the acquisition of HonselOn July 29, 2011, the Company closed the purchase of the assets of Honsel to form the Martinrea Honsel Group. Martinrea joined with Anchorage in the transaction and, consequently, owns 55% of the Martinrea Honsel Group with Anchorage owning the remaining 45%. The Company expensed $1.4 million and $0.6 million in transaction and integration costs related to the acquisition during the quarters ended June 30, 2011 and March 31, 2012, respectively. The Company does not expect to incur any further significant transaction and integration costs related to the acquired assets of Martinrea Honsel.NET EARNINGS(ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY)Three months ended June 30, 2012Three months ended June 30, 2011Change% ChangeNet Earnings$14,372$15,546(1,174)(7.6%)Adjusted net earnings$24,050$16,6237,42744.7%Earnings per common shareBasic$0.17$0.19Diluted$0.17$0.19Adjusted earnings per common shareBasic$0.29$0.20Diluted$0.29$0.20Second Quarter 2012 to Second Quarter 2011 comparisonNet earnings, before adjustments, for the second quarter of 2012 of $14.4 million decreased by $1.2 million from $15.5 million for the second quarter of 2011. Excluding unusual and other items incurred during these two quarters as explained in Table A under "Adjustments to Net Income", the net earnings for the second quarter of 2012 improved to $24.1 million or $0.29 per share, on a basic and diluted basis, in comparison to adjusted net earnings of $16.6 million or $0.20 per share, on a basic and diluted basis, for the second quarter of 2011. The adjusted net earnings for the second quarter of 2012, as compared to the second quarter of 2011, was positively impacted by the addition of Martinrea Honsel to the consolidated financial results of the Company, which contributed $0.05 per share to the quarter after adjustments, an increase in customer light vehicle production volumes in North America, the launch of new programs during or subsequent to the second quarter of 2011 and productivity and efficiency improvements at certain North American facilities. The positive impact was partially offset by launch activity costs during the quarter.Three months ended June 30, 2012Three months ended March 31, 2012Change% ChangeNet Earnings$14,372$23,055(8,683)(37.7%)Adjusted net earnings$24,050$24,737(687)(2.8%)Earnings per common shareBasic$0.17$0.28Diluted$0.17$0.28Adjusted earnings per common shareBasic$0.29$0.30Diluted$0.29$0.30Second Quarter 2012 to First Quarter 2012 comparisonNet earnings, before adjustments, for the second quarter of 2012 of $14.4 million decreased by $8.7 million from net earnings of $23.1 million for the first quarter of 2012. Excluding unusual and other items incurred during these two quarters, as explained in Table B under "Adjustments to Net Income", net earnings for the second quarter of 2012 decreased to $24.1 million or $0.29 per share, on a basic and diluted basis, as compared to net earnings of $24.7 million or $0.30 per share, on a basic and diluted basis, for the first quarter of 2012. The decrease can be attributed to a decrease in production volumes in Europe as previously noted and launch activity costs which increased quarter over quarter. CAPITAL EXPENDITURESThree months ended June 30, 2012Three months ended June 30, 2011Change% ChangeCapital Expenditures$53,065$29,00624,05982.9%Second Quarter 2012 to Second Quarter 2011 comparisonCapital expenditures increased by $24.1 million to $53.1 million in the second quarter of 2012 from $29.0 million in the second quarter of 2011. This increase is primarily attributed to incremental capital expenditures relating to Martinrea Honsel which amounted to $18.8 million during the quarter, the purchase of new program equipment in response to newly awarded business scheduled to launch over the next two years, and capital for a new plant the Company has recently opened in Silao, Mexico. Three months ended June 30, 2012Three months ended March 31, 2012Change% ChangeCapital Expenditures$53,065$34,23318,83255.0%Second Quarter 2012 to First Quarter 2012 comparisonCapital expenditures increased by $18.8 million to $53.1 million in the second quarter of 2012 from $34.2 million in the first quarter of 2012. This increase is primarily attributed to an increase in the purchase of new program equipment in response to newly awarded business scheduled to launch over the next two years. Nick Orlando, Martinrea's Chief Executive Officer, stated: "Our second quarter results reflected record Q2 revenues, solid earnings after adjustments, and extensive launch and pre-launch activity as we continue to ramp up the largest backlog in our history. Operationally, many of our plants are performing very well and we continue to make operational improvements. Our launch of parts for the new Ford Escape at four Martinrea facilities in the U.S., including Shelbyville, the largest in our history, commenced in the middle of the quarter and has continued to ramp up under a compressed time frame. We are pleased to be launching the Ford Escape, a vehicle that is enjoying a very good reception in the market place. It appears that revenues for this program for the Shelbyville facility alone will meet or exceed $275 million when fully launched, eventually bringing our revenues in the Shelbyville facility to over $325 million per annum, a nice piece of good news. Large launches, and sometimes smaller ones too, bring their challenges but are ultimately very rewarding for a growing business. To give a sense of the magnitude of the launch activity we are currently experiencing in our Company, all programs currently ramping up or scheduled to launch during the second half of the year will generate approximately $450 million in annualized business when fully launched, a large amount of business in a short period of time. In addition to the content on the Ford Escape launching in four of our facilities in the U.S., current or upcoming launches during the second half of the year include content on the following OEM platforms: Ford CD4, GM Global Gamma, GM Alpha, GM Epsilon, Nissan L12F and Honda C-5. Due to the magnitude of the current launch activity, launch costs have impacted net earnings for the second quarter of 2012. As we have stated before, 2012 is the year of the launch for us. We also had some one time issues in the second quarter which affected us - some one time severance costs, and a major equipment failure in one of our U.S. facilities for an extended period of time, which caused us to outsource work and incur significant incremental costs in June and July as we fixed the equipment. This facility is now fully operational again and improving its efficiencies. Although we are very focused on launches this year, we continue to look for and quote appropriate new business, and have added the following new business since our last announcement: $30 million in metal forming work for the Volkswagen Golf scheduled to launch in 2013 and the takeover of some hot stamping work on the Chrysler JS platform which will generate approximately $10 million in annualized sales starting in the third quarter of 2012."Fred Di Tosto, Martinrea's Chief Financial Officer, added: "Revenues for the second quarter, excluding $62.3 million in tooling revenues, were approximately $700 million, which was within our quarterly sales guidance as previously provided. In the second quarter of 2012 our adjusted earnings per share was $0.29, after factoring out restructuring costs, the cost of an executive's separation agreement, and the cost of a major equipment failure, up from $0.20 in the second quarter of 2011 and slightly down from $0.30 in the first quarter of 2012, after adjustments and on a diluted basis, and within our quarterly earnings guidance as previously provided. Our second quarter results from the Martinrea Honsel assets were accretive to earnings, after factoring out unusual and other items, and amounted to approximately $0.05 of earnings per share for the quarter, slightly lower than our previous two quarters due mainly to some softness in Brazil and Europe. Our second quarter from Martinrea Classic amounted to approximately $0.24 of earnings per share, after factoring out unusual and other items. As noted, we did experience some launch activity costs which negatively impacted earnings in the quarter. These launch activity costs are expected to subside during the fourth quarter of 2012 but are expected to increase during the third quarter of 2012 as we continue to work through the ramp up of the largest backlog in our history."Mr. Di Tosto added: "In addition, we saw gross margin for the quarter, excluding tooling revenue, at 11.5%, a slight decrease over the previous quarter due mainly to a decrease in production volumes in Europe and launch activity costs. Aside from the short term volatility in our gross margin as a result of the extensive launch activity, we expect gross margin to continue to improve and approach historical levels as we launch a significant backlog of business over the next 24 months and as, if and when production volumes continue to improve in North America." Rob Wildeboer, Martinrea's Executive Chairman, stated: "We have had a very good first half, with record revenues and adjusted earnings per share of $0.59. Our third quarter will be less profitable, as we experience the typical July shutdowns in North America and August shutdowns in Europe for Martinrea Honsel. We anticipate that the Martinrea Honsel numbers will be lower in the third quarter than in the first two, as Europe is experiencing softness in its production and revenues. Earnings per share from Martinrea Honsel we anticipate will be positive, but not to the level of the second quarter. In North America, we expect to experience increased launch costs related to the heavy ramp up of business. The equipment failure at one of our facilities will impact third quarter results also because of July based expenses. In our third quarter of 2012, we anticipate revenues (excluding tooling revenues) will range from $660 to $680 million, and we believe our earnings per share after adjustments will range from $0.17 to $0.22 cents per share. Our third quarter is generally our lowest quarter each year in terms of earnings, and in 2012 we believe that trend will continue. As for the full year, based on where we sit today, we continue to believe that 2012 will be our best year to date from a financial point of view, subject to market conditions. As previously stated, based on our assumptions of volumes, interest rates and our outlook, we are budgeting for consolidated revenues approaching $3 billion in 2012, and we are maintaining our guidance on earnings, where we have stated that earnings, including our interest in Martinrea Honsel, should range somewhere between $1.05 and $1.25 per share, absent unusual items in each case. Given launch costs to date and anticipated in the third quarter, and the softness in Martinrea Honsel just noted, we believe adjusted earnings will be at the lower end of the range. The risk to us meeting our budgeted numbers lies primarily in our launch costs, which we expense. We update our budgets each year in November, and we will provide our fourth quarter outlook then. Over time, as we launch our backlog, increase throughput, and increase our efficiencies, we believe increased gross margins and EBITDA margins will translate to increased earnings, and we continue to anticipate in our budgets that our earnings per share for 2013 will grow to the $1.30 to $1.50 range, based on current assumptions. Our Company maintains a strong financial position also. I am pleased to announce that we have entered into an expanded revolving credit facility with our banks. We have added three large banks to our syndicate, the overall facility has been increased by $100 million to a $400 million facility, our term has been extended to 2016, and our pricing is improved. This greater flexibility will allow us to fund our growth and, at some point, purchase the minority interest in Martinrea Honsel that we do not own at this time. We thank our lenders for their ongoing support." Forward-Looking Information Special Note Regarding Forward-Looking Statements This Press Release and the documents incorporated by reference therein contains forward-looking statements within the meaning of applicable Canadian securities laws including related to the Company's expectations as to gross margin percentage and future profitability, revenues, outlooks and earnings, statements as to the growth of the Company and pursuit of its strategies, the launching of new metal forming and fluid systems programs including expectations as to the financial impact of the launch at the Shelbyville plant and other launch costs, the opportunity to increase sales, broad geographic penetration, and the nature and duration of the economic recession to the continuation of monitoring, managing and rationalization of expenses (including of Martinrea Honsel), the Company's expectations regarding the future amount and type of restructuring expenses to be expensed (including Martinrea Honsel) and the windup of the Hot Stampings pension plan, the Company's expectation regarding the financing of future capital expenditures, the Company's views on the long term outlook of the automotive industry, statements as to the benefits of the Honsel acquisition, and the Company's ability to capitalize on opportunities in the automotive industry as well as other forward-looking statements. The words "continue", "expect", "anticipate", "estimate", "may", "will", "should", "views", "intend", "believe", "plan" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on estimates and assumptions made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that the Company believes are appropriate in the circumstances. Many factors could cause the Company's actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the following factors, some of which are discussed in detail in the Company's Annual Information Form and other public filings which can be found at www.sedar.com:North American and global economic and political conditions; the highly cyclical nature of the automotive industry and the industry's dependence on consumer spending and general economic conditions; the Company's dependence on a limited number of significant customers; financial viability of suppliers; Martinrea's reliance on critical suppliers and on suppliers for components and the risk that suppliers will not be able to supply components on a timely basis or in sufficient quantities; competition; the increasing pressure on the Company to absorb costs related to product design and development, engineering, program management, prototypes, validation and tooling; increased pricing of raw materials; outsourcing and in-sourcing trends; competition with low cost countries; the risk of increased costs associated with product warranty and recalls together with the associated liability; the Company's ability to enhance operations and manufacturing techniques; dependence on key personnel; limited financial resources; risks associated with the integration of acquisitions; costs associated with rationalization of production facilities; the potential volatility of the Company's share price; changes in governmental regulations or laws including any changes to the North American Free Trade Agreement; labour disputes; litigation; currency risk; fluctuations in operating results; internal controls over financial reporting and disclosure controls and procedures; environmental regulation; a shift away from technologies in which the Company is investing; potential tax exposures; a change in the Company's mix of earnings between jurisdictions with lower tax rates and those with higher tax rates, as well as the Company's ability to fully benefit from tax losses; the Company's ability to shift its manufacturing footprint to take advantage of opportunities in growing markets; risks of conducting business in foreign countries, including China, Brazil and other growing markets; under-funding of pension plans; and the cost of post-employment benefits. These factors should be considered carefully, and readers should not place undue reliance on the Company's forward-looking statements. The Company has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.A conference call to discuss those results will be held on Wednesday, August 15 at 8:00 a.m. (Toronto time) which can be accessed by dialing 416-340-8410 or toll free 1-866-225-2055. Please call 10 minutes prior to the start of the conference call. If you have any teleconferencing questions, please call Andre La Rosa at (416) 749-0314.There will also be a rebroadcast of the call available by dialing 1-800-408-3053 (conference id 4555837#). The rebroadcast will be available until August 29, 2012. The common shares of Martinrea trade on The Toronto Stock Exchange under the symbol "MRE".Martinrea International Inc.Condensed Consolidated Balance Sheets(in thousands of Canadian dollars) (unaudited)NoteJune 30, 2012December 31, 2011ASSETSCash and cash equivalents$26,743$26,505Trade and other receivables3514,966386,776Inventories4268,748248,588Prepaid expenses and deposits9,3358,224Income taxes recoverable9,40911,056Current portion of promissory note2,3202,263TOTAL CURRENT ASSETS831,521683,412Property, plant and equipment5667,703616,592Deferred income tax assets68,30772,715Intangible assets652,84642,397Promissory note2,4382,378TOTAL NON-CURRENT ASSETS791,294734,082TOTAL ASSETS$1,622,815$1,417,494LIABILITIESBank Indebtedness$11,360$-Trade and other payables7522,297427,072Provisions88,49812,956Income taxes payable5,5103,724Current portion of long-term debt922,11817,928TOTAL CURRENT LIABILITIES569,783461,680Long-term debt9301,506245,317Pension and other post-retirement benefits58,46053,795Deferred income tax liabilities38,89040,119Provisions82,4103,149Other financial liability277,15071,236TOTAL NON-CURRENT LIABILITIES478,416413,616TOTAL LIABILITIES1,048,199875,296EQUITYShare capital11675,404674,568Notes receivable for share capital11-(602)Contributed surplus1145,69244,165Other equity2(77,150)(71,236)Accumulated other comprehensive loss(12,131)(8,330)Accumulated deficit(136,585)(169,006)TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY495,230469,559Non-controlling interest79,38672,639TOTAL EQUITY574,616542,198TOTAL LIABILITIES AND EQUITY$1,622,815$1,417,494Subsequent event (note 9) See accompanying notes to the interim condensed consolidated financial statements. On behalf of the Board: "Robert Wildeboer"Director"Suleiman Rashid"DirectorMartinrea International Inc.Condensed Consolidated Statements of Operations (in thousands of Canadian dollars, except per share amounts) (unaudited)Three months endedThree months endedSix months endedSix months endedNoteJune 30, 2012June 30, 2011June 30, 2012June 30, 2011SALES$762,553$474,587$1,498,207$905,768Cost of sales (excluding depreciation of property, plant and equipment)(671,048)(413,999)(1,310,864)(792,728)Depreciation of property, plant and equipment (production)(15,438)(10,596)(30,967)(20,610)Total cost of sales(686,486)(424,595)(1,341,831)(813,338)GROSS MARGIN76,06749,992156,37692,430Research and development costs(3,807)(2,033)(7,135)(4,291)Selling, general and administrative(39,925)(23,361)(74,191)(41,067)Depreciation of property, plant and equipment (non-production)(1,352)(794)(2,418)(1,515)Amortization of customer contracts and relationships(1,549)(1,069)(3,127)(2,160)Restructuring and integration costs13(2,467)-(4,631)-Gain (loss) on disposal of property, plant and equipment109-71(4)OPERATING INCOME27,07622,73564,94543,393Finance costs(4,263)(1,506)(8,019)(2,937)Other finance income and expenses158434523693INCOME BEFORE INCOME TAXES22,97121,66357,44941,149Income tax expense10(5,779)(6,219)(14,148)(11,731)NET INCOME FOR THE PERIOD17,19215,44443,30129,418Non-controlling interest(2,820)102(5,874)143NET INCOME ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY$14,372$15,546$37,427$29,561Basic earnings per share12$0.17$0.19$0.45$0.35Diluted earnings per share12$0.17$0.19$0.45$0.35See accompanying notes to the interim condensed consolidated financial statements.Martinrea International Inc.Condensed Consolidated Statements of Comprehensive Income (in thousands of Canadian dollars) (unaudited)Three months endedThree months endedSix months endedSix months endedJune 30, 2012June 30, 2011June 30, 2012June 30, 2011NET INCOME FOR THE PERIOD$17,192$15,444$43,301$29,418Other comprehensive income (loss), net of tax:Foreign currency translation differences for foreign operations6,014(2,377)(2,928)(11,574)Defined benefit plan actuarial losses(4,943)(1,809)(5,006)(170)Other comprehensive income (loss), net of tax1,071(4,186)(7,934)(11,744)TOTAL COMPREHENSIVE INCOME FOR THE PERIOD18,26311,25835,36717,674Attributable to:Equity holders of the Company13,97811,37928,62017,927Non-controlling interest4,285(121)6,747(253)TOTAL COMPREHENSIVE INCOME FOR THE PERIOD$18,263$11,258$35,367$17,674See accompanying notes to the interim condensed consolidated financial statements.Martinrea International Inc.Condensed Consolidated Statements of Changes in Equity(in thousands of Canadian dollars) (unaudited)Equity attributable to equity holders of the CompanyNotesreceivableCumulativeNon-Sharefor shareContributedOthertranslationAccumulatedcontrollingTotalcapitalcapitalsurplusequityaccountdeficitTotalinterestequityBalance at December 31, 2010$682,495$(2,700)$41,241$-$(18,822)$(214,028)$488,186$922$489,108Net income for the period-----29,56129,561(143)29,418Compensation expense related to stock options--1,140---1,140-1,140Exercise of employee stock options499-(40)---459-459Repurchase of common shares(1,505)----65(1,440)-(1,440) Other comprehensive income, net of tax Actuarial gains-----(170)(170)-(170) Foreign currency translation differences----(11,574)-(11,574)-(11,574)Balance at June 30, 2011681,489(2,700)42,341-(30,396)(184,572)506,162779506,941Net income for the period-----24,96924,9691,86326,832Compensation expense related to stock options--1,824---1,824-1,824Contribution from non-controlling interest - Honsel acquisition-------67,92467,924Acquired non-controlling interest - Honsel acquisition-------5,4155,415Fair value of put option granted to non-controlling interest (note 2)---(71,236)--(71,236)-(71,236)Repayment of notes receivable-2,098--2,098-2,098Repurchase of common shares(6,921)----1,031(5,890)-(5,890) Other comprehensive income, net of tax Actuarial losses-----(10,434)(10,434)-(10,434) Foreign currency translation differences----22,066-22,066(3,342)18,724Balance at December 31, 2011674,568(602)44,165(71,236)(8,330)(169,006)469,55972,639542,198Net income for the period-----37,42737,4275,87443,301Compensation expense related to stock options--1,771---1,771-1,771Fair value adjustment of put option granted to non-controlling interest---(5,914)--(5,914)-(5,914)Repayment of notes receivable-602----602-602Exercise of employee stock options836-(244)---592-592 Other comprehensive income, net of tax Actuarial losses-----(5,006)(5,006)-(5,006) Foreign currency translation differences----(3,801)-(3,801)873(2,928)Balance at June 30, 2012$675,404$-$45,692$(77,150)(12,131)$(136,585)$495,230$79,386$574,616See accompanying notes to the interim condensed consolidated financial statements.Martinrea International Inc.Condensed Consolidated Statements of Cash Flows(in thousands of Canadian dollars) (unaudited)Three months endedThree months endedSix months endedSix months endedJune 30, 2012June 30, 2011June 30, 2012June 30, 2011CASH PROVIDED BY (USED IN):OPERATING ACTIVITIES:Net Income for the period$17,192$15,444$43,30129,418Adjustments for:Depreciation of property, plant and equipment16,79011,39033,38522,125Amortization of customer contracts and relationships1,5491,0693,1272,160Amortization of development costs4372083420Accretion of interest on promissory note(58)(135)(117)(268)Unrealized losses / (gains) on foreign exchange forward contracts(280)(212)89(492)Finance costs4,2631,5068,0192,937Income tax expense5,7796,21914,14811,731(Gain) loss on disposal of property, plant and equipment(109)-(71)4Stock-based compensation7955701,7711,140Pension and other post-retirement benefits expense7841421,497796Contributions made to pension and other post-retirement benefits(1,634)(4,145)(3,614)(5,564)45,50831,868102,36964,007Changes in non-cash working capital items:Trade and other receivables(14,990)3,484(132,922)(79,902)Inventories4,0852,134(22,503)(21,426)Prepaid expenses and deposits(520)(851)(1,111)(1,818)Trade, other payables and provisions25,03710,55294,87245,83859,12047,18740,7056,699Interest paid(4,103)(1,639)(7,624)(2,856)Income taxes paid(4,832)(4,120)(6,908)(6,284)NET CASH PROVIDED / (USED) IN OPERATING ACTIVITIES50,18541,42826,173(2,441)FINANCING ACTIVITIES:Increase / (decrease) in bank indebtedness(2,358)(15,760)11,360-Repurchase of common shares-(1,215)-(1,440)Receipt of payment on notes receivable for share capital--602-Exercise of employee stock options28-592459Increase in long-term debt19,13213,78874,62644,157Repayment of long-term debt(5,660)(3,173)(12,707)(6,495)NET CASH PROVIDED / (USED) IN FINANCING ACTIVITIES11,142(6,360)74,47336,681INVESTING ACTIVITIES:Purchase of property, plant and equipment(53,065)(29,006)(87,298)(54,081)Promissory note (net of principal repayments)-1,500-1,500Capitalized development costs(6,073)(741)(14,486)(2,161)Proceeds on disposal of property, plant and equipment205-29547NET CASH USED IN INVESTING ACTIVITIES(58,933)(28,247)(101,489)(54,695)Effect of foreign exchange rate changes on cash and cash equivalents1,705(1,455)1,081(206)INCREASE IN CASH AND CASH EQUIVALENTS4,0995,366238(20,661)CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD22,644-26,50526,027CASH AND CASH EQUIVALENTS, END OF PERIOD$26,743$5,366$26,7435,366See accompanying notes to the interim condensed consolidated financial statements.FOR FURTHER INFORMATION PLEASE CONTACT: Fred Di TostoMartinrea International Inc.Chief Financial Officer(416) 749-0314(289) 982-3001 (FAX)