Linamar Corporation (LNR) Earnings Call Transcript

Good afternoon, ladies and gentlemen, and welcome to the Linamar Corporation Second Quarter 2026 Earnings Call. [Operator Instructions]. This call is being recorded on Wednesday, August 12, 2026. I would now like to turn the conference over to Linda Hasenfratz, Executive Chair of Linamar. Please go ahead.

Thanks so much. Good afternoon, everyone, and welcome to our second quarter conference call. Before I begin, I will draw your attention to the disclaimer that we are currently broadcasting. Joining me this afternoon, as usual, are Jim Jarrell, our CEO and President; and Dale Schneider, our CFO, both of whom will be addressing the call formally. Also available for questions are Mark Stoddart, Chris Merchant and other members of our corporate IR, marketing, finance and legal team. I'll start off with some highlights as usual. So a good place to start always is a quick reminder of the key value drivers that make Linamar such a great investment and how they played out this past quarter. First, Linamar has a long track record of consistent, sustainable results driving out of our diverse business. And Q2 was another great example of that with exceptional earnings growth in our Mobility business, more than offsetting soft markets in our Ag business and other dynamics such as tariffs more broadly in our industrial businesses. Being invested in both businesses helps trim big swings up and down in individual markets and leaves us with a more consistent, sustainable level of performance. Notably, again, this quarter, record sales and close to 10% earnings growth. The second key point is our flexibility to mitigate risk. Our equipment is programmable, flexible equipment. It can be used on a large variety of types of products across different vehicle platforms and types of propulsion. It can also be assigned to our industrial divisions as well as our Mobility divisions. This flexibility is allowing us to reallocate programs, our equipment from programs running under capacity to new launches or new areas in the business, which is really critical in this time frame of changing volumes. Third, we've always run a prudent, conservative balance sheet. We target keeping net debt-to-EBITDA under 1.5x. Q2 saw net debt-to-EBITDA at 0.52 despite significant investment in CapEx for new programs. Our peers are much more heavily embedded with net debt to EBITDA more than 2.7x. That makes Linamar much more flexible to chase growth prospects in this opportunistic time, which we absolutely are doing. Lastly, returning cash to shareholders is a key value creation driver at Linamar as well. And you saw that play out this quarter with a 10% increase to our dividend, continuing our pattern of regular dividend increases, reflective of our strong performance in terms of cash management. I also note the continued repurchase of shares in the market, which we have been steadily doing since November of 2024. Turning to financial highlights for the quarter and highlights more broadly. It's been another excellent record-breaking quarter, illustrative of a strong strategy that's delivering results for today and tomorrow. We saw record sales in the quarter and strong earnings growth for our overall business. Our Mobility business, in particular, had an exceptionally strong quarter, delivering record sales and record earnings. In fact, nearly 30% earnings growth. We also saw market share growth in every region as well as solid new business wins, notably in Canada and the U.S. specifically. We are firing on all cylinders in the Mobility segment. And this despite global automotive markets being down again in terms of production volumes compared to prior year this quarter. Finally, we are managing that tariff line field very well indeed with, again, more than 90% of our sales this year not impacted by tariffs. I will review the tariff situation in a little more detail in a minute. Turning to the numbers. We saw record sales of $3.1 billion, up 18.8% over last year. Sales were up 14% in our industrial business with access markets growing, offset by continued softness on the Ag side. Sales were up 21% in the Mobility segment, thanks to recent acquisitions, but also launching business and several programs that are running at stronger volumes than the market as whole, offsetting those soft markets globally on the light vehicle side. Normalized net earnings were $183 million or 5.8% of sales, up 8.7% over last year, and normalized EPS was $3.08, up 9.6% over last year on the back of a very strong Mobility segment performance. Finally, free cash flow was again excellent at nearly $240 million. Strong cash flow drove from those strong earnings and continued focus on reallocating capital to control our CapEx spending. I would summarize our results this quarter as being most impacted by recent acquisitions adding to top and bottom line, launches and strong production sales in Mobility and growth in Skyjack sales great continued efficiency and productivity improvements, all of which was offset by negative impact of tariffs in the Industrial Group and the negative impact of FX, the majority related to a weaker U.S. dollar in comparison to both the Canadian dollar and the peso as well as those weak agricultural markets. Let's have a look at an update on the tariff side. So as mentioned a moment ago, more than 90% of our sales this year are not impacted by any tariffs. I think that is the most important takeaway for you on tariffs. The new 232 tariff scheme that came into effect April 1 on metal product derivatives are definitely creating a bigger impact to certain products in our industrial business than the previous scheme. 25% tariffs on full equipment value versus 50% on only the non-U.S. metal is, of course, quite different. But 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, detracted from our earnings growth this year, as you saw illustrated in the Industrial segment results this quarter, but is diluted in our overall results by our strong Mobility earnings. I will highlight the tariff impact expected for the next two quarters will certainly be less acute than we saw in Q2. Q2 is our strongest quarter seasonally for all of our industrial businesses, meaning it will experience the biggest tariff impact for the year. We continue to fully expect to grow earnings to new record levels this year, as Dale will shortly outline for you in our outlook. Meanwhile, we're working on various mitigation strategies to minimize the impact of the tariffs, as Jim will outline for you. I will also note that the new Section 338 tariff, scheduled to take effect mid-August do not impact our market for our products. 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 have multiple revenue streams, those same dynamics are not impacting all areas of your business. They also, of course, have a little bit different economic cycles. All of that helps to ensure a more consistent, sustainable level of growth as you have seen us deliver quarter after quarter and year after year here at Linamar. I'll take a moment to also reflect on the impact of the decision by the U.S. on July 1 to not support an amendment to the USMCA agreement that would have both extended the agreement to 2042 from its current expiry date of 2036 and eliminated the need for annual reviews during that period. In short, there is little to no impact to the trade agreement or any of the three countries of the U.S., Mexico or Canada from this decision from the U.S. I think there's been widespread misunderstanding of what is happening with USMCA, which I hope this chart helps clear out for you. Some folks think USMCA was not renewed by the U.S. That is not correct. First, the agreement wasn't up for renewal. There was a proposed amendment on the table, which wasn't adopted. Second, the decision by the U.S. to not amend the agreement did not impact the current agreement in any way. USMCA is still fully enforced and will continue until at least 2036. USMCA is currently expected to continue as not for at least another 10 years until 2036. And in my opinion, will continue well beyond that simply because the agreement has created enormous efficiency and prosperity for all three countries and what is a largely well-balanced trade portfolio, in particular between Canada and the U.S. U.S. has not notified of its intent to pull out of or terminate USMCA in any way, and in my opinion, will not do so. The agreement is too important to too many businesses in the U.S. and the vast majority of states cannot continue. Further, regardless of the fact that the amendment wasn't supported, the agreement could obviously be amended for further extension or anything else, including forgetting the annual review at any time with the agreement of all three parties. I, in fact, believe that will happen as well. On the positive side, we are continuing to see customers looking at onshoring into North America parts and systems that they are currently buying from Asia or Europe. We are building up a significant list of new business opportunities and business wins for our North American plants in all of Canada, the U.S. and Mexico. New business wins and quoting activity is quite strong in all regions. We're seeing continued very strong new business wins for our Canadian plants, continuing the momentum after a very strong year in 2025. So far this year, we have won quite a significant amount of business for our Canadian plants. In fact, we have already won 90% of the value of the full year of new business wins last year for the Canadian plants, and we're only halfway through the year. And 2025, I will remind you, saw the highest level of business wins in Canada that we've seen in the last three years. Our strong, highly capable Canadian plants are punching way above their weight in terms of wins compared to the size of our global footprint, which is great to see. We're also 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 the total value of new business wins in all of 2025, again, only halfway through the year. I think it's key to note as well that our portfolio expansion, notably into additional structural components is dramatically increasing RFQ activity. This strategy has played out very positively for us. The tariff situation is also adding to stress in an already stressed supplier base, notably in the U.S. and Europe, which has, as you have seen, led to acquisition opportunities for us. We have so far completed three distressed acquisitions over the last three years. Finally, I would like to again emphasize that our strong results and positive outlook is very much a result of what I think is an excellent and unique business culture at Linamar. Our culture has been fine-tuned over the last 60 years to be opportunistic, entrepreneurial and find something positive and actionable to grow our business regardless of the circumstances. We are naturally responsive, nimble and move fast. We're innovative and creative in dealmaking and mitigating challenging situations, and we get things done. Those are the critical elements to not just survive, but to thrive in a challenging time like what we're experiencing. So with that, I'm going to turn it over to our CEO, Jim Jarrell, to review industry and operational updates in a little more detail. Over to you, Jim.

Thanks, Linda, and great to be with everyone listening here tonight. As we reflect on the first half of '26, one word stands out to us, which is grit. We delivered record quarterly sales of more than $3 billion and record operating earnings in Mobility. Importantly, these results were not driven by a single market customer or short-term tailwind. They were the product of disciplined execution across a diversified global platform. What makes these results particularly meaningful is the environment in which we were achieving them. We continue to navigate uneven demand, trade uncertainty and cost pressures, yet like a well-built ship moving confidently through rough seas, Linamar continues to advance because of our strength of our operating model, the resilience of our teammates and the diversity of our business. Across the organization, we are seeing the benefits of scale, operational excellence, commercial discipline and strategic acquisitions translating into strong earnings and cash flow. At the same time, we continue to win new business, reinforcing the value of our technology, our manufacturing footprint and long-standing customer relationships. We are also maintaining a balanced approach to capital allocation, returning cash to shareholders, investing for future growth and preserving a strong balance sheet that provides flexibility in uncertain times. Ultimately, these records are not the goal, they are the outcome. They are the evidence that our grit strategy is working, growth in revenue, income and our team continues to build the foundation for sustainable long-term value creation. Records are milestones. They're not our destination. They simply confirm that our grid is moving Linamar in the right direction. As we are all aware, Linda mentioned, tariffs are causing a lot of uncertainty in global trade markets impacting business decisions, performance and the overall economy. It takes grit to deal with these tariffs and geopolitical issues, and we continue to proactively mitigate tariff impact through practical no-regret actions that improve our competitiveness regardless of how the tariff environment evolves. We look at everything and anything to improve the situation, including regulatory and class reviews, distribution and structural optimization, target operational actions using our footprints supply chain rebalancing, cost actions, including supplier pricing, rebased resourcing adjustments and really disciplined commercial actions. Importantly, these initiatives do not require significant capital investment, any facility closures, major restructuring or disruptive operational changes. We believe these targeted actions will help minimize tariff exposure while supporting continued growth, profitability and cash flow generation. Several of the measures are already in place, while others are actively underway, and we continue to weigh other additional measures as we continue to manage this environment to protect the long-term value. This is not a static situation. Things are consistently changing and will improve as clarity improves. Let's turn to Skyjack. What was another great outstanding quarter for us. Despite ongoing tariff and market uncertainty, Skyjack delivered exceptional growth with volumes up 46% in the quarter and 53% year-to-date. Growth was broad-based across all major regions and product categories, demonstrating the strength of our brand, our execution and our customer relationships. Even more encouraging, the industry outlook has improved dramatically since last quarter. What was expected to be a declining global market is now forecast to grow nearly 14% in '26, driven by strong demand from data center construction, infrastructure investment and continued fleet expansion by rental companies. Looking ahead, industry forecast suggest growth moderates in '27, but remains positive across all major regions. Importantly, the underlying drivers supporting demand today, including data centers, infrastructure, housing and industrial construction remain firmly in place, providing a constructive backdrop for continued growth. While product mix always influence revenue performance, the bigger story is pretty clear. Skyjack is winning. We're strengthening our competitive position, gaining momentum in key markets and capitalizing on attractive long-term growth drivers around the world. Innovation continues to be a key differentiator. During the quarter, we launched the SJ6940 RTE, setting a new benchmark in compact rough terrain electric scissors. We were also proud to see the LanyardGO receive the Best New Product Award at the HIRE26 event in Australia, recognizing Skyjack's continued leadership in innovation, productivity and safety. The combination of strong execution, market recovery and product leadership positions Skyjack exceptionally well for continued growth. Skyjack isn't just participating in recovery, it's helping to lead it. Turning to Agriculture. Market conditions remain challenging, with industry demand expected to be down approximately 15% in North America with Europe and the rest of the world flat to marginally down for the year. Despite that backdrop, all three of our brands continue to gain market share on key product lines. MacDon increased global windrower share. Salford continued to grow its tillage position and Bourgault gained share in the U.S. air seeder market. In a down cycle, that's the ultimate proof point. It speaks to the strength of our products, our customer relationships and the execution of our teammates. In North America, commodity prices remained largely unchanged, though we have started to see modest trends in the right direction. Overall, U.S. farmer sentiment remains less optimistic due to higher input costs. However, sentiment should become more clear when the USDA predicts its '26 yields following the summer crop tour process. U.S. net farm income is expected to be $159 billion, up over $154 billion in '25, largely on the $14 billion increase in direct government payments. However, fertilizer and diesel fuel prices are squeezing farmer profitability. As stated in Europe and rest of the world, the market outlooks remain largely unchanged. In Europe, the market is seen as being resilient in the face of geopolitical and commodity pricing headwinds ultimately resulting in a flat '26. In the rest of the world, it's mixed. An example, South America, Brazil, corn and soybean yields are favorable and have some of the largest crop yields on record. In Australia, crop yield is expected to be down versus last year. However, still yielding crop results above the long-term average. As well, we continue to monitor global trade tensions, government bridge payments and channel inventory to react to all the key market signals that we need to see. Just as exciting as what we're doing behind the scenes across our Agriculture business, we're accelerating automation and leveraging expertise developed in our Mobility operations to transform manufacturing productivity. During the year, MacDon installed advanced mobile vending robots and continue to add automation to its facility to improve efficiency, throughput, quality and cost competitiveness. By the year-end, MacDon will operate approximately 340 robots per 10,000 employees, well above Canada's average of 240 and more than double the global average of 132. At Linamar, overall, we are proud to say we run at a rate of 1,200 per 10,000, which I believe is a benchmark. This is another example of the Linamar advantage, transferring technology, automation and best practices across our businesses to strengthen competitiveness and drive long-term value. In Agriculture, we're doing what great companies do during downturns, gaining share, improving productivity and preparing for the recovery to win. Finally, looking at the automotive industry, we're seeing some tempered expectations quarter-over-quarter for '26 and into '27. In North America, '26 expectations are that light vehicles will be down 1.3% as production is expected to soften as affordability challenges, elevated vehicle prices and growing inventory levels weigh on demand. Although sales have proven much more resilient than expected, the ongoing volatility in trade environment, coupled with higher energy costs are continuing to create a cautious outlook in the near term. For '27, light vehicles are expected to be flat to slightly down versus prior expectation of being up 2.3% as production is forecast to normalize and OEMs are aligning production with demand. In Europe, expectations are that the light vehicle production will be down 0.9% versus the prior expectation of being down 1.8%. Production is forecasted to decline due to higher manufacturing and energy costs continued competitive pressure from Chinese imports and weaker export opportunities are weighing on regional output. Growth in EV demand is providing some support for profitability and capacity utilization remain under pressure. For '27, light vehicle is expected to be largely flat versus prior expectations of being slightly up as more gradual recovery is expected, supported by improving vehicle demand, electrification adoption, although cost pressure and competition will remain. In Asia, light vehicle production is expected to decline 2.1% versus prior expectations of being down 1.2%, mainly driven by weaker domestic demand in China, offsetting strong growth in India and parts of Asia. Export strength, government incentives and continued electrification provide some support. However, geopolitical risks and higher input costs are the main headwinds. For 2027, production is expected to be flat to slightly up 0.4% versus the prior expectation of up to 0.8%, supported by demand in India and continued electrification. Globally, this positions light vehicle production expectations for '26 as being down 2.1% versus the previous 1.8%. And for '27, slightly flat growth of 0.7% versus the previous 1.5% increase. Turning to our CTD performance for the quarter. Our key strategic acquisitions of Aludyne North America, and beginning in Q2 with the winning groups in Remscheid and Penzberg facilities are driving strong gains in existing and new customers. North America CTD was up 25% to $363. Europe was up 10.2% to $107 basically, and Asia Pacific saw growth with an increase of 12.6% year-over-year to $12.65. Globally, our CTD grew an astounding 20% year-over-year to $97.72. Looking at new business wins for the quarter across both Mobility and Industrial, Linamar saw a new business win value of close to $800 million. Through our strategic acquisitions and takeover work, we saw significant program wins for components such as metals and a significant cylinder head program win. Our propulsion-agnostic new business wins on metals emphasizes our sustained momentum in Linamar's structural and chassis expansion, allowing Linamar to expand its propulsion agnostic portfolio across all powertrain types. As I mentioned last quarter, Linamar services eight different mega markets in our 2100 plan, which are being displayed there. These mega markets have a combined potential between $15 trillion and $20 trillion in the next decade. Looking at two of our new segments that I've spoken about in the past few quarters, there are a few exciting developments that I'd like to discuss. First, Defense. We continue to make excellent strides on displaying to the key primes and governments that Linamar's capabilities are directly applicable to this space. Our scalability, automation and expertise and core capabilities are being received extraordinarily well as has recently translated into an MOU with a large international prime, we're very excited to continue working with. Looking at Robotics, the team continues to also make amazing strides. We've signed an LOI to be a manufacturer in North America for cobots and have recently signed a third LOI for manufacturing for humanoid robots. The takeaway is pretty clear and simple. Linamar is not defined by one industry. Automotive is proof of our capabilities, not the limit of them. We are a global advanced manufacturing and product development technology partner. So before I hand it over to Dale, I'd like to spend just a moment looking ahead. While much of our conversation today is focused on navigating tariffs, market uncertainty and other challenges, what excites us here most is the opportunity in front of us. Linamar enters '27 with significant momentum across our business. We're built for growth. We have a strong launch pipeline, growing exposure to attractive end markets, increasing operational efficiency and a track record of winning in challenging environments. These are not future opportunities we're hoping to capture. They are opportunities we are actively launching, investing in and executing today. As a result, we expect continued topline growth, another year of strong earnings improvement and further margin expansion. Our focus remains unchanged: profitable growth, operational excellence, creating increasing value for our shareholders. We're also investing for the future. Capital spending will support major program launches, capacity expansion, automation and strategic growth initiatives. At the same time, we remain committed to maintaining a strong balance sheet, generating robust free cash flow and preserving the flexibility to pursue both organic and inorganic opportunities as they arise. When I look at Linamar today, I see a company that is stronger, more diversified and better positioned than any time in our history. Our markets are evolving, technology is accelerating and our customers continue to look for innovative capable partners. We believe Linamar is uniquely positioned to capitalize on those trends. The future isn't something we're waiting for. It's something we're building and certainly, the best is yet to come. With that, I'll turn it over to Dale to walk through a financial overview of the quarter.

Thank you, Jim. Good afternoon, everyone. Linda covered at a high level the financial performance in the quarter, so I'll jump directly into the business segment review, starting with the Mobility segment. Mobility sales increased by $400.8 million or 20.5% over Q2 last year to $2.4 billion. This growth was mainly due to the increased sales from the recent acquisitions, which made a significant contribution in the quarter. Additionally, the higher launch and mature program volumes further boosted sales. Positive impacts from FX changes since last year also provided a benefit in the quarter. However, these gains were partially offset by lower volumes on certain ending programs and reduced volumes on some EV programs. Q2 normalized operating earnings for Mobility were up 28.6% over last year to $194 million. The improvement was driven by increased earnings from our higher volumes on launching mature programs, the recent acquisitions and operational efficiencies, though partially offset by lower volumes on ending programs and reduced EV volumes and the FX impact compared to Q2 2025. Turning to the Industrial. Sales increased by 13.8% or $95.3 million to $783.5 million in Q2. This increase was driven by the significantly higher access equipment sales as a result of strong market demand. This was partially offset by lower agricultural sales in a significantly down market despite global market share gains on key products such as windrowers, air seeders and tillage equipment. Normalized industrial operating earnings in Q2 decreased by $24.6 million or 23.8% over last year to $78.7 million. The decline reflected the impact of the new 232 tariffs and the lower agricultural sales, partially offset by the increased earnings from strong access equipment sales and operational efficiencies. Starting with our overall cash position, which came in at $1.3 billion on June 30, an increase of $266.1 million compared to June 25. During the second quarter, we generated $341.4 million in cash from operating activities, which was partially used to fund the Q2 debt repayments, CapEx and share buybacks. In Q2, we generated $236.5 million in free cash flow. And year-to-date, we've generated nearly $500 million in free cash flow. Turning to leverage. Net debt to EBITDA was 0.52x of the quarter, an improvement from 1.02x a year ago. The amount of available credit on our credit facilities was $725.2 million, and our liquidity at the end of Q2 increased to $2 billion. Our NCIB program that was launched in Q3 '25 earnings call and will expire on November 16. This program authorized the purchase and cancellation up to 3.9 million shares. To date, we have returned over $92 million to shareholders through the repurchase of over one million shares. This brings the total cash return to shareholders since November 24 to $192 million with the purchase and cancellation of approximately 2.8 million shares. In addition, the company increased its quarterly dividend by 10% from $0.29 to $0.32 per share. These initiatives reflect our disciplined capital allocation strategy, maintaining a strong balance sheet, investing in growth and returning excess cash to shareholders. Turning to outlook. I will outline Linamar's expectations for Q3, focusing on our Mobility and Industrial segment in addition to highlighting the changes to our outlook for 2026 from what was announced on our last earnings call. Please note, we're not providing segment level guidance for full year '26 currently due to the elevated volatility in the global market and the ongoing geopolitical uncertainty, which makes the segment forecast less reliable. Regarding the Mobility segment, our outlook for the third quarter is highly positive. We anticipate double-digit growth in both sales and normalized earnings driven by ongoing program launches, recent acquisitions and continued operational improvements. Third quarter margins are projected to continue to be within our normal range and to be relatively flat to Q3 '25. In the Industrial segment, agricultural markets remain weak entering Q3. We anticipate industrial sales growth, but expect normalized operating earnings to decline by double digits with margins expected to contract from Q3 '25 levels and be below our typical 14% to 18% range. The sales gains from the access markets will partially offset agricultural softness, though margins will continue to be pressured by the new amended 232 tariffs that began in April '26. As a result on a consolidated basis, we expect double-digit sales growth, growth in normalized earnings and a modest contraction in normalized net margin as well as positive free cash flow. For the full year 2026, our latest outlook is unchanged from what we provided in the Q1 call. We are expecting strong sales growth in the double digits, and we continue to expect growth in normalized EPS. We anticipate a modest reduction in normalized net margins, primarily due to the effects of the newly amended 232 tariffs as we continue to explore and pursue the mitigation strategies. We continue to expect CapEx to increase from the prior year while remaining below our normal range as a percent of sales. We continue to expect very strong balance sheet with low leverage alongside strongly positive free cash flow. This outlook reflects the strong Mobility growth given the launches, the full year contribution from Aludyne North American operations at the Leipzig casting facility and 3/4 of the Winnings BLW facility, all supporting topline and bottom-line performance in Mobility. The Ag market rate of decline is moderating, though the conditions remain soft with stabilization expected later this year or into early next year. The access markets are showing strong growth for '26 in the double digits. Overall, the external environment remains mixed and visibility is still limited, but Linamar's fundamentals remain very strong. We have a very strong balance sheet, significant liquidity, and we continue to expect strongly positive free cash flow, which gives us flexibility to invest and execute. At the same time, Mobility is supported by launches, growth from acquisitions, which positions us well for continued growth as we continue to work through the mitigation strategies to reduce the impact of the tariffs on profitability. Jim has already covered the initial thoughts on 2026, so I will not repeat that discussion. The slide is included here for your reference. In closing, Linamar delivered a very strong quarter by delivering record sales, excellent normalized EPS and a very strong balance sheet and outstanding liquidity. We are well positioned to invest in growth, navigate volatility and continue returning capital to shareholders. Thank you, and I'd now like to open up the call for questions.

[Operator Instructions] And your first question comes from the line of Ty Collin with CIBC Capital Markets.

Maybe just to start off. So it seems like there's obviously been an inflection in the demand outlook for Skyjack, which is obviously positive to see. I mean, how do you feel that you're positioned from an inventory and a production standpoint to capture your share of that opportunity? And then why is the Q3 outlook seemingly calling for a lower growth rate than you were able to generate in Q2, considering the outlook for Skyjack and Ag have both improved?

Yes. I'll let Jim take the first question, but I'll just quickly answer the second. I mean, Q2 is always our strongest quarter for industrial. So that's just normal seasonality of the business. So I wouldn't read too much into that. And over to Jim on the inventory question.

Yes. I mean, just on overall Skyjack, we certainly have the production capability to take on any sort of uplift right now. And as we sort of talked about, all the signals are very clear in the market right now. We know a lot of the major rental companies are increasing their CapEx throughout the back end of this year and into next year. We've all talked about AI and data centers, which our products fit very well into. Our backlog is healthy. I can say it's probably almost double to what it was last year this time. Our order intake probably in the same boat, about double where we were last year. So really, all the indicators are pretty good. Utilization rates as well from the Rental companies are up. So really good signals, and we have the capability and the capacity. The only concern that I would say, and we're on it clearly is supply chain, right? Like you've got a lot of supply chain issues that companies are dealing with, but we've got a good handle on it, and we've got inventory to satisfy customers.

Okay. That's great to hear. And then turning back to the discussion around tariffs. So I think since that original Section 232 rule change came into effect, I think a number of agricultural products were removed from the scope of that change. So are those incremental tariffs only impacting Skyjack at this point? And can you talk about, I guess, how you and your customers are managing those costs given how substantial they are?

Yes. From my side in regards to how we're dealing it with our customers, I mean, obviously, no customer wants to see a price increase. But what I had mentioned earlier, we're really focused on sort of reducing and mitigating the tariffs. And again, what we look at is optimizing HS code classifications, distribution models. There's also duty recovery like IEPA was basically reversed. So there is some IEPA recovery that's going on, leverage the parts. So like, for example, a no regret thing would be have a scissor lift go across or boom go across the border into the U.S. and put a part on that you would buy in the U.S. anyway. So you reduce the value of that sort of derivative product to mitigate some of those tariff impacts going across the border.

With respect to your question about which product is it and which business, I'll just remind you that we're not disclosing which specific businesses and products. It is certainly localized to our Industrial segment. So that in itself is quite good news because, obviously, the Mobility segment is much larger, and we are not seeing any tariff impact in the Mobility automotive side of the business, which is a plus. And as Jim said, we're focused on mitigation. I will remind you, too, that we do think that Q2 will be the worst quarter from a dollar value of tariffs simply because it is the seasonal high for all of our industrial businesses. So the impact was a little higher in Q2 than it will be later in the year.

Okay. That's helpful. And if I could just sneak in one more and maybe follow up on that last comment you just made, Linda. So if I sort of plug in what's implied by the Q3 guide for the Industrial segment, it seems to imply an even lower operating margin rate compared to Q2. So I'm just wondering if that's sort of the right way to think about things for the rest of the year.

Do you mean for the industrial segment.

Sorry, that's for the Industrial segment.

Yes. Well, I mean, Q3 is always going to be lower margin-wise than Q2 in the Industrial segment for that matter, in the Mobility segment because Q3 has shut down, et cetera. And seasonally for Industrial, it's always lower. So you should always expect margins to come down in Q3.

Your next question comes from Brian Morrison of TD Cowen.

First question, should we anticipate more tuck-in acquisitions near term within Mobility? You did indicate numerous opportunities on the call, Linda, and the strategy is clearly working. And then I'm curious if they're margin enhancing out of the gate and how you're able to integrate them so seamlessly.

Yes. I mean from my side, Brian, again, there's a lot of opportunities out there for distress. I mean I think we get to look at all of them. And I think the first thing that the strategy for growth and technology. So again, I would, in my mind, though, some of it has slowed a little bit through the last couple of months. I would say Europe has a lot more than North America today. But in Europe, it takes a little longer to get people's head around making those deals. So yes, for sure, we're looking at those and how we tuck those in is work with customers and Linamarize it as quick as we can. And you need to have a good solid plan upfront of how you'll consolidate, if you have to take plants out or change things, we really do an active job of that for day one.

I think the integration, I mean, we've done our fair share of acquisitions there for integrations over the last 10 years. I think we've learned a lot along the road, and we've developed a pretty good road map and process that we follow that we're always learning and adding to the playbook as well. So with every integration, you get a little bit better.

Okay. Maybe, Jim, if I turn to industrial, we all knew access was going to be strong, but it's, I think it was better than what we thought. And I understand the data centers and infrastructure. But is this largely scissor? Or are we seeing strength in booms and telehandlers as well?

We're getting strength across the board. But I would say, and maybe, Mark, you want to comment on this, like AI data centers is such a good place for our scissors today, right? And our new technology product lines really fit that, Brian. So yes, I think we're seeing a lot of scissor uplift but we're getting booms and telehandlers as well.

Yes. Brian, we've got some new products that have come out on the booms and we've got some electrified version and hybrid version. So some new technology that has been driving on the boom side of things. But yes, definitely, the new models that we've come out on scissors have really gained a lot of traction.

If you remember last quarter, we were basically saying that it would be more or less flat for the year, and we're seeing up for the market. And as I said, our backlog is probably about double last year. Our order intake about double, utilization rates, they're up. Another indicator we look at is canceled orders, which sounds a little weird. But yes, I mean, those are way down canceled orders. So, the uptick is really there and rental company signals are that they're going to buy more capital.

Okay. My last question, I was going to ask specifically on the impact of the tariffs, but Linda doesn't want me to go there. So is it fair to say that one of the industrial segments is more impacted than the others? And then I apologize in advance because you went through this, but I'm not totally straight on the 232. Is this largely direct tariff exposure on metal derivatives? Or is there also an impact to the margin decrements as volumes are down as you're not the importer of record?

Yes. I mean the biggest tariff impact is from the 232 metal derivative product tariffs, right, that come when you're, like there's a whole list of products that are covered that when you're shipping into the U.S. are going to be subject to tariffs. And when they changed the methodology for calculating the tariffs at the beginning of April, that did create a bigger impact for some of our industrial products. So I think the thing to focus on is a couple of things. One, as I've mentioned a couple of times, Q2 should be the peak dollar-wise on the tariff side. Secondly, I think quite important to just remind you that the Industrial segment is less than 25% of our overall sales. So the bottom line impact to our blended business on the tariff side is much less impactful, right? I mean if I look at the full year, the impact of tariffs on our overall operating earnings is in single digits, and that's before any kind of mitigation.

Is it fair to say one of the industrial segment is far more impacted than the other?

We're not commenting on specific businesses within the Industrial segment. It's right down to the product level, right?

Like there's product levels depending on the derivatives and the HS code. So it's something you wouldn't really want to have out there.

Your next question comes from Michael Glen of Raymond James.

Can we just work through the Mobility margin expectation for Q3 again? I'm just want to make sure I'm clear. Is the Q3 Mobility margin, I think Dale might have indicated it's closer to flat year-over-year. Last year, it was 8.6%. But then I think you're also talking about there might be some seasonal weakness in Q3. I'm just trying to make sure I get the right number in my model.

Yes. Yes. We're guiding to flat to last year, which was sort of, by the way, a little bit of an unusually high margin for a variety of reasons of things that were happening in Q3 of last year. So we do think that Mobility margins are going to stay within our normal margin range in Q3. They'll be at a seasonally consistent level to what was achieved in the first half of the year. And again, yes, the reason you don't see expansion from last year is more to do with last year than it did this year. So we're still feeling good about where we're at with margins in the Mobility side.

Okay. And just you're talking about the record business wins that you're seeing? And maybe can you just speak to how that might impact your CapEx in '27 relative to '26? Should we think that there, we could be in for a bit of a bump in CapEx in '27?