Earnings call transcript: Linamar’s Q1 2026 results show strong growth

Linamar Corporation reported record-breaking financial performance for Q1 2026, with total sales reaching CAD 2.9 billion, a 16.1% increase year-over-year. Earnings per share (EPS) rose to CAD 3.28, up 18.8% from the previous year. The company’s diluted EPS over the last twelve months reached $7.09, while the stock has delivered an impressive 74% total return over the past year. The company’s stock closed at CAD 89.72, reflecting a 1.05% increase in after-hours trading. Linamar’s strong results were driven by significant growth in its mobility segment, despite challenges such as foreign exchange headwinds and weak demand in the electric vehicle program.

Linamar’s Q1 2026 performance was marked by robust growth across its segments, particularly in mobility, which saw a 19.2% increase in sales. The company’s industrial segment also experienced growth, albeit at a slower pace, with sales up 6.6% year-over-year. Despite global market challenges, Linamar’s strategic acquisitions and operational efficiencies contributed to its strong financial results.

Linamar’s forward guidance remains strong, with EPS forecasts for future quarters ranging from CAD 1.9 to CAD 2.32. Revenue projections for the upcoming quarters are also optimistic, indicating continued growth potential. The company plans to focus on strategic acquisitions and expanding its technology portfolio to drive future performance.

Linda Hasenfratz, CEO of Linamar, highlighted the company’s strategic acquisitions as key drivers of growth. "Our recent acquisitions have significantly expanded our capabilities and positioned us for continued success," she stated. Jim Jarrell, President, emphasized the importance of operational efficiencies, noting, "We have optimized our manufacturing processes to maintain strong performance despite market challenges."

During the earnings call, analysts inquired about Linamar’s strategy for mitigating tariff impacts and its plans for further acquisitions. Executives reiterated their commitment to leveraging operational efficiencies and strategic acquisitions to navigate these challenges and drive long-term growth.

Conference Moderator, Call Moderator: Good afternoon, ladies and gentlemen, welcome to the Linamar Corporation Q1 2026 earnings call. This call is being recorded on May 6, 2026. I would now like to turn the conference over to Linda Hasenfratz, Executive Chair. Please go ahead.

Linda Hasenfratz, Executive Chair, Linamar Corporation: Thanks so much. Good afternoon, everyone. Welcome to our 1st quarter conference call. Before I begin, I’m gonna draw your attention to the disclaimer currently being broadcast. Joining me this afternoon, as usual, are Jim Jarrell, our CEO and President, Dale Schneider, our CFO, both of whom will be addressing the call formally. Of course, available for questions, Mark Stoddart, Chris Merchant, and other members of our corporate team. I’m gonna start us off with some highlights of the quarter. A good place to start is always the key reminder of the value drivers that make Linamar such a great investment and how they played out this past year. First, Linamar has a long track record of consistent sustainable results that drive out of our diverse business.

Q1 is just another great example of that, with exceptional earnings growth in our mobility business, more than offsetting soft markets across the board, as well as other dynamics like tariff in our industrial business. Being invested in both businesses helps trim those big swings up and down in individual markets and leaves us with a more consistent, sustainable level of performance. The second key point is our flexibility to mitigate risk. As you all know, our equipment is programmable, it’s flexible, it can be used on a large variety of types of equipment across different vehicle platforms and types of propulsion in the mobility side, for instance. This flexibility allows us to reallocate equipment from programs running under capacity to new launches, which again is a big part of helping to keep our capital bill down, as you saw again this quarter.

Third, we’ve always run a prudent conservative balance sheet. We target keeping net debt to EBITDA under 1.5 times. In Q1, you certainly saw that. Net debt to EBITDA is 0.6, despite some significant investments and CapEx for new programs and acquisitions over the last year. Our peers are definitely much more heavily indebted, with net debt to EBITDA more than 2.5 times. I think this really creates financial stress for them and risk in terms of soft markets and limits their flexibility to chase new business, which of course, we are not restricted in the same way. I think that gives us a big advantage. Lastly, returning cash to shareholders is a key value creation driver at Linamar as well.

You saw that playing out this quarter with our continued repurchase of shares in the market, which we have been steadily doing since November of 2024. Okay, turning to highlights for Q1, I would say it’s been an excellent record-breaking quarter that well represented Linamar as the entrepreneurial, opportunistic and technology-driven business that we are that’s really delivering growth both for today and for tomorrow. We saw record sales and earnings in the quarter for our overall business and our mobility business specifically, despite every market being down and a world that’s really devolved into a minefield of tariffs and volatility. Our mobility business saw earnings growth of nearly 50%, driving partially out of acquisitions, but also launches in our global operations.

We saw great success in growing our technology portfolio with another strategically important acquisition of Winning BLW’s Remscheid and transfer facilities. Through these acquisitions, Linamar significantly expanded forging expertise to include warm forging, expanding our already significant offering of precision gears to include precision bevel and helical gears for both the light vehicle and commercial vehicle market. Having more products and processes to sell, notably proprietary technologies that our customers are looking for, really expands the pathways of growth potential for us at Linamar. Another key highlight for me of the quarter is the excellent level of new business wins. By the way, at record-setting levels for our first quarter. Finally, we’re managing that tariff mine field very well indeed, with actually more than 90% of our sales at Linamar not impacted by tariff.

I’m gonna review the tariff situation in a little more detail in a minute. Turning to the numbers, we saw sales at CAD 2.9 billion, up 16.1% over last year. Sales were up 6% in our industrial business as the access markets start to recover, offset by continued softness on the ag side. Sales were up 19.2% in the mobility segment, thanks to our Aludyne and Leipzig acquisitions, as well as launching business offsetting those soft markets globally on the light vehicle side. Normalized net earnings were CAD 195.8 million or 6.7% of sales, up 17.1% over last year. Normalized EPS was CAD 3.28, up 18.8% over last year on the back of a very strong mobility segment performance.

Finally, free cash flow was excellent at nearly CAD 220 million, unusual for Q1, which often has negative cash flow. Strong cash flow drove from those strong earnings and a continued focus on reallocating capital to control our capital spending. I would summarize our results this quarter as being most impacted by launches and strong production sales in mobility, the Aludyne and Leipzig acquisitions, growth in Skyjack sales, which was offset by negative impacts of FX, the majority related to a weaker US dollar in comparison to the Canadian dollar and the peso, as well as weak agricultural markets. Let’s have a look at an update on the tariff side. As mentioned a moment ago, more than 90% of our sales are not impacted by any tariff.

I think that is the most important takeaway for you on tariffs. That does include the new 232 tariff scheme that came into effect April 1st on metal product derivatives. That is creating a bigger impact to certain products in our industrial business than the prior scheme of 232. Obviously, 25% tariff on full equipment value compared to 50% on only non-U.S. metal is quite different. The good news is the tariffs are only impacting select products in the industrial segment and not impacting the auto side of the business at all. The impact on the sales that are subject to these tariffs is, of course, it’s detracting from our growth this year, but in no way wiping it out given its impact on a smaller percentage of our sales.

We fully expect to grow earnings this year, as Dale will shortly outline for you in our outlook. Meanwhile, we’re working on various mitigation strategies to minimize the impacts of the tariff. You know, I think this is another great example of the benefit of a diverse business. When all your eggs are in one basket, you are more vulnerable to specific dynamics in that industry. When you’ve got multiple revenue streams, those same dynamics are not impacting all areas of your business and also have, of course, differing economic cycles. All of that helps to ensure that more consistent, sustainable level of growth as you have seen us deliver quarter after quarter and year after year. On the positive side, we are continuing to see customers looking at onshoring into North America parts and systems that they’re currently buying from Asia or Europe.

We’re building up a significant list of new business opportunities and of course, new business wins for our North American plants in all of Canada, the U.S., and Mexico. New business win and quoting activity is quite strong in all regions. We’re seeing great opportunities for our U.S. plants, particularly our newest acquisition, Aludyne, but also for our other existing American facilities. U.S. new business wins are already at 60% of the total that was won in 2025, and we’re only 25% into the year. We ar