Martinrea International Inc. (MRE) Earnings Call Transcript

Good evening, everyone. Thank you for joining our conference call on the fourth quarter 2025 results. At this point, I'll hand the meeting over to Mr. Rob Wildeboer. Go ahead, please.

Good evening, everyone, and thanks for being with us today. We’re always glad to speak with our shareholders, give you an update on the business, and take your questions. We’re also mindful that we have other stakeholders, among them many employees listening in, and our comments are meant for them too, since we share our results and commentary across our network. Joining me this evening are Pat D'Eramo, Martinrea CEO; our President, Fred Di Tosto; and our CFO, Peter Cirulis. Today we’ll be covering Martinrea's results for the fourth quarter and full year ended December 31, 2025. Please refer to the usual disclaimer in our press release and our filed documents. On this call, Pat will walk through some key highlights and achievements in 2025, briefly touch on the quarter, and comment on some of our key initiatives, including machine learning and artificial intelligence. Fred will cover operations, Peter will take you through the financials and our outlook for 2026 and beyond, and I’ll wrap up with some comments on the current trade environment, capital allocation, and valuation. After that, we’ll open it up to Q&A. Without further ado, here's Pat.

Thanks, Rob, and good evening to everyone. I'd like to begin by touching on several highlights from the year just ended. When it comes to safety, the results we post remain the best anywhere. In 2025, our Total Recordable Injury Rate, or TRIR, came in at 0.71, a figure that ranks among the strongest in our sector and is far superior to the roughly 3 that represents the average. As we've noted previously, nothing demonstrates to your workforce that you genuinely care for them more effectively than making sure they stay safe. Turning to cash, we produced slightly less than $200 million of free cash flow during 2025, setting a fresh record for this company. That makes three consecutive years in which our free cash flow has landed within the $150 to $200 million band. We have honored our pledge to serve as a steady producer of robust free cash flow. By now our history on this front is firmly established, and that will remain true as we move ahead. We achieved all of this even as we kept putting money into the business, with capital expenditures totaling $238 million, an amount below what we laid out in recent years. That speaks to better capital management, encompassing optimization and reuse of assets we already own. Thanks to this strong cash performance, we managed to bring down leverage, with net debt to adjusted EBITDA finishing the year at 1.35 times, which sits below the upper bound of our target of 1.5 times or better.

We pulled that off while also restarting activity under our NCIB, using $8 million to buy back roughly 779,000 shares during the fourth quarter. Moving on, we raised our adjusted operating income margin, as we kept pushing operational enhancements throughout the organization and secured commercial recoveries from customers tied to EV volume shortfalls and persistent inflationary costs. On top of that, we earned several supplier awards, among them the General Motors Supplier of the Year award, plus honors from Toyota, Volvo, Nissan, ZF, and Caterpillar. In addition, our advanced manufacturing team, or AMT, has made solid progress rolling out machine learning installations across the plant network. To further underpin our machine learning strategy, we took a 10% equity stake in PolyAlgorithm Machine Learning, or PolyML, which supplies advanced machine learning and data analytics solutions that act as the core intelligence behind Martinrea's machine learning AI. PolyML relies on a proprietary technology known as Feature Importance Insights, or FINs AI, to reveal the most valuable signals within complex data sets. Most conventional black box machine learning emphasizes predictive accuracy, and there's no way to see inside. PolyML's technology produces more accurate models that are transparent and fully explainable. That's a unique breakthrough feature. This approach is generating significant gains in weld quality, efficiency, and energy usage.

That system is also in use for monitoring press health, delivering early warning capability that should cut unplanned downtime and maintenance expense considerably. A central piece of Martinrea's machine learning effort is FINs AI, and we anticipate that our partnership with PolyML will expand as time goes on. Last October, we bought the assets of Lycion North America. To recap, Lycion operated one plant, located in Tulsa, Oklahoma, focused mainly on producing metal parts and subassemblies for school buses across the US. Through this deal we pick up business with International Motors, known previously as Navistar — a strong customer where the company sees substantial room to expand over time in buses and commercial vehicles alike. It additionally widens what we offer and takes the business further into nonautomotive markets. Integration, I'm glad to report, is proceeding quite smoothly. We're happy with how things are going there, along with the possibility of bringing additional business into that facility down the road. All areas produced noteworthy accomplishments during a busy 2025. For their effort and commitment in achieving these results, I want to express appreciation to our team. As for the fourth quarter, we're happy with how we performed operationally and financially.

Our adjusted operating income margin rose compared with a year earlier, since we kept pushing operating enhancements and worked out commercial recoveries with customers, mainly covering volume shortfalls on EV programs. And remember, last year's Q4 took a hit from an inventory correction in North America that touched several of our key programs, most notably Stellantis. We're still managing the effect of tariff costs on the business. For us, the overwhelming majority of parts we ship from Canada or Mexico into the United States meets USMCA terms and so isn't subject to tariffs. We do carry some exposure, most notably involving Section 232 tariffs on steel and aluminum products, which affect certain components of ours. I'm glad to say we've succeeded in recovering the overwhelming majority of those tariff costs via commercial settlements with our OEM customers. That's a remarkable achievement. Our supply chain operations, sales, and commercial teams worked tirelessly to pull it off, and we're proud of that, and we appreciate all their efforts. Turning to the full year of 2025, we hit our outlook for sales and adjusted operating income margin, which landed at 5.6%, above the midpoint of our 5.3% to 5.8% outlook range.

During our previous call, we discussed the continuing talks with our customer regarding certain substantial commercial matters—chiefly tied to EV volume shortfalls—and noted those could land either in Q4 of '25 or during the first half of 2026. Those conversations are moving along nicely, and we plan to finalize these matters within the first half of the year. Above all, as I noted before, we delivered record free cash flow for the year at slightly below $200 million—comfortably exceeding our guidance of $150 to $175 million—which speaks to how we ran the business and our discipline on capex. We anticipate another robust year in 2026, and Peter will elaborate on what we see for 2026 and beyond afterward on this call. On that note, I want to wrap up by thanking the Martinrea team for their unflagging effort and ongoing commitment to improving our business daily. I'll now hand things over to Fred.

Thanks, Pat. Good evening, everyone. As Pat noted, we are executing well, both operationally and financially, in the face of ongoing industry dynamics pertaining to trade, tariffs, and electric vehicle volumes. We are doing well managing what's in our control and mitigating what isn't in our control through a focus on continuous improvement, overhead cost reduction, leveraging investments in automation and machine learning, and recovery of costs related to tariffs and volume shortfalls on EV programs through commercial settlements with our customers. We have full confidence in our team, and I would like to thank our people for their dedication and hard work in delivering these results. Turning to our segments, starting with North America, Q4 adjusted operating income margin came in at 6.9%, up 110 basis points year-over-year on the flow-through impact of higher production sales, improved operating performance, and higher favorable commercial settlements year-over-year. We ended the full year 2025 at an adjusted operating income margin of 7.3%, up from 6.7% in 2024, a nice year-over-year increase. We continue to operate at a healthy margin in North America, the main growth engine of our business, and expect that to continue. In Europe, our Q4 adjusted operating income margin improved significantly year-over-year, narrowing the loss to -1.4% from -3.6% in Q4 of last year, driven by better flow-through on higher production sales and the benefits of the restructuring actions we previously undertook.

When you look at the whole year, we're basically at break-even, and that reflects a volume backdrop that's still weaker than we had anticipated. If volumes were normalized and you factor in the gains we've achieved throughout our European operations, we'd be in positive territory there. From a strategic standpoint, what we're aiming for is a disciplined, steady presence in that region instead of chasing aggressive growth. Our Rest of the World segment turned in a substantially better full-year performance, finishing 2025 at a positive operating income margin of 1.3%, which is a meaningful jump from the -2.1% posted in 2024. During the fourth quarter, we did record an operating loss, and that mirrored a smaller amount of favorable commercial settlements compared with the prior year. As I've mentioned previously, this segment is small — under 3% of our consolidated sales — and results can swing from quarter to quarter depending on program timing and commercial settlements. Our approach in this region stays deliberate, concentrating on keeping only the footprint we need to support our global business. Consistent with that strategy, following the quarter we signed an agreement to divest a small plant located in Anting, China. Our relationship with the buyer is a strong one, and we will hold a minority interest through a transition period that is planned. Turning to the next item, I'm delighted to report that we've won new business, including some attractive takeover work, valued at $210 million in annualized sales at mature volumes. That figure includes $180 million in structural components within our Lightweight Structures Commercial Group from Stellantis, Toyota, General Motors, and Audi; $20 million in our Propulsion Systems Group with Stellantis and Ford; and $10 million in our Flexible Manufacturing Group with Volvo Truck and JCB.

Over the past 12 months, new business awards came to $340 million. Quoting activity right now is pretty strong, and we've lately secured work on several program extensions with a range of customers, worth more than $1 billion in annualized sales at mature volumes. One thing worth noting: although extensions represent replacement work, they back up our sales outlook and in the end assist our margin profile, since we can usually reprice that business to fully incorporate the inflationary costs we've had to absorb during the last few years. Extensions likewise call for less capital for an equivalent volume than new programs do, and that supports our free cash flow. As you can see, we posted a strong quarter for new business awards across a diverse set of customers, and we're very pleased about that. We believe some solid momentum is developing here, with a very healthy pipeline of quoting activity and opportunities ahead of us. A strong quarter for new business awards highlights not only the confidence our customers have in us but also our capacity to provide the service, expertise, and innovation they depend on. Securing new business, especially takeover work, shows our team's ability to react swiftly to customer needs and deliver solutions that generate genuine value.

That's our job—we fix issues for customers, and we're extremely skilled at it. Given this momentum, we now anticipate a robust 2026 for new business wins, which in the end will mostly begin launching during 2028, underpinning our 2028 outlook, which Peter will discuss shortly. Thanks for your time, and I'll hand things over to Peter.

Thanks, Fred. When we look at the year-over-year results, adjusted operating income was $55.1 million, which is a 37% increase year-over-year, on production sales that rose roughly 7%, or 6% on an organic basis, once you exclude $14 million in sales from the Lycion acquisition. Adjusted operating income margin was 4.6%, which is up 110 basis points year-over-year. That margin improvement reflected the flow-through on higher volumes along with operational improvements. Free cash flow was $108 million before IFRS 16 lease payments, or $93.3 million after IFRS 16 lease payments, compared with $76.4 million before lease payments, or $63 million after lease payments, in quarter four of last year, mainly because of lower capex as well as higher EBITDA and lower cash interest and taxes paid. As Pat noted, 2025 free cash flow, excluding these lease payments, was $199 million, a new record for the company. Part of that is timing-related, but overall our free cash flow performance reflects improved capital discipline and optimization and reuse of our existing assets. Adjusted net earnings per share was 67 cents, compared with a loss of 21 cents in the fourth quarter of 2024.

If you remember, in the fourth quarter of last year, an unusually high tax rate hit us. That came from a non-cash loss running through tax expense on the P&L, caused by the Mexican peso depreciating quickly versus the US dollar, and it cut EPS by 40 cents. In quarter four this year, the peso moved up, so we saw the reverse, with a non-cash gain passing through tax expense on the P&L that lifted EPS by 30 cents. Once more, these are accounting adjustments that arise solely under IFRS and have no effect on cash or operating income. Moving to the balance sheet, net debt, excluding IFRS 16 lease liabilities, fell by roughly $73 million from quarter three to $695 million, which shows the strong free cash flow we generated that quarter. Net debt to adjusted EBITDA finished the quarter at 1.35. Our goal is 1.5 or better, and we are comfortably inside that target. We achieved this while restarting share buybacks under our normal course issuer bid, repurchasing about 779,000 shares in the quarter for $8 million. We brought long-term debt down by roughly $113 million in 2025, cutting financing costs by around $12 million. We favor a balanced mix of share repurchases and debt reduction.

That keeps our balance sheet in a strong position while we serve our investors, and it leaves us well-positioned to seize opportunities, as we did with the recent Lycion acquisition and other investments we've made. Rob will say more about our capital allocation priorities in a few moments. After year end, we amended our banking facility, pushing our maturity out to 2030 from 2027. We also added two new banks to the syndicate, which now totals 12. The facility's size is unchanged except that the accordion feature was raised from US$300 million to US$400 million. Covenant terms are unchanged. Our relationship with our lenders is great, and we thank them for their ongoing support and continued vote of confidence. Looking ahead, we are rolling out our 2026 outlook, which calls for sales of $4.5 to $4.9 billion, an adjusted operating income margin of 5.5% to 6%, and free cash flow of $125 to $175 million. Unpacking this, starting with sales, the midpoint of the $4.5 to $4.9 billion range reflects a modest year-over-year change that is largely driven by two known and isolated factors: the wind-down of the Ford Escape program, which contributed roughly $200 million of sales in 2025, and an expected decrease of tooling sales compared to an unusually strong 2025 level.

If you set those items aside, we expect our underlying production sales to come in roughly in line with 2025. Next, our outlook for the adjusted operating income margin range of 5.5% to 6% presumes an improvement over 2025. The key assumption behind that is the flow-through effect of lower sales should be offset by ongoing operating improvements, among them the automation and machine learning investments Pat talked about. It also presumes continued commercial recoveries tied to EV volume shortfalls, plus recovery of most of our tariff-related costs, much as we did in 2025. Finally, we project another strong year of free cash flow, in the $125 to $175 million range. That assumes capex of roughly $300 million, higher than where we ended up last year, partly because of some of the new business awards Fred mentioned. Certain capital items also slipped from the fourth quarter into 2026 on timing, but overall capex sits at a good level, reflecting the capital discipline we continue to apply. As Pat noted, we keep extending our record of strong, consistent free cash flow generation, which is now well-established. Further out, we see plenty of opportunity for our business, including customer inquiries asking us to consider taking over business from distressed suppliers.

There are also opportunities we see stemming from global trade rebalancing, which ought to bring meaningful volumes being sourced to the US, along with rising quote activity and possible acquisitions. Our annual budget process was finished not long ago, and the pace of our launches should deliver meaningful organic sales across the coming few years. Fred discussed these new business awards, product extensions, and quoting activity during his remarks, and those factors strengthen our confidence. According to budgets approved by our board, we anticipate total sales between $5.3 billion and $5.5 billion in 2028, with no acquisitions assumed. Once more, this mirrors the pace of our launch activity plus some modest gains in overall vehicle production volumes. Notably, 75% of the production sales we project for 2028 is already booked, with the remainder stemming from replacement work in which we are the incumbent supplier and from high-probability new business opportunities. That is good organic growth within a relatively flat market. It should help push adjusted operating income margin into a range of 6.5% to 7% in 2028, reflecting the flow-through impact of higher sales volumes, continued operating improvements, including gains from our automation and machine learning initiatives, and lower SG&A costs as we realize and sustain the full benefit from our $50 million in targeted savings.

Keep in mind that 2027 is going to be a hectic year for launches, and a larger portion of the sales and margin gains will arrive in 2028. The main point to take away is that our future looks bright, even with the continuing tariff problems and sluggish EV sales, both of which we are steering through successfully. On that note, I want to express gratitude to our team for the dedication and effort they have shown during these constantly changing times. At this point, I will hand things over to Rob.

Thanks, Peter. Now that you've heard from our team, I want to offer a few closing thoughts on where things stand with USMCA and trade matters, on capital allocation, and on valuation. I'll also say a brief word about the Mid-East conflict. As you've heard, plenty of great things are happening at our company. We had a good 2025 — better than many expected in the midst of considerable trade and tariff uncertainty. Operations are running well. We're adopting new technologies in a prudent manner. We're spotting opportunities and capitalizing on them. Our financials are really strong, and our future is bright. On USMCA and the trade discussions, while there's always plenty of noise, it seems to me quite clear that we very likely won't see any tariffs on North American-made auto parts. Scott Bessent himself told me that tariffs on auto parts are a very bad idea. That's good for us. This is a consensus view in Washington, Mexico, and Canada. I also foresee no tariffs eventually on Canadian-made autos. That's what we're negotiating for, and it's what the entire industry wants. Let me make an observation that I don't think many realize — and that's perhaps our fault for not emphasizing it more.

The reality is that more than 97% of what we sell goes to assembly plants located outside Canada. Put differently, under 3% of our worldwide revenues come from selling our products to Canadian assembly plants. Already, the bulk of what we produce in Canada gets shipped to US assembly plants, and it does so without tariffs. Our footprint in the US is considerably larger than Canada's, and Mexico's is larger still. So to me it's obvious that our auto parts sales in North America probably won't be materially affected, even if — say — Canada were to face a tariff on assembly, or if USMCA talks between Canada and the United States were to go badly. I genuinely think there's enormous consensus across our industry — among OEMs and suppliers alike — in favor of a tariff-free North American auto industry, for both vehicle and parts manufacturers. Look, for instance, at the submissions industry made to the administration and to Congress, and I'm confident we'll get there. And even if we don't, we'll be fine. As for USMCA and the other negotiations, we're deeply engaged. Mexico is progressing with the US on a renewed USMCA, and Canada is certainly part of the discussions as well. Mexico and Canada both insist on a tripartite deal. I'd note that Prime Minister Carney unveiled Canada's auto policy at our Allfield plant on February 5, which happens to be my birthday.

That was a nice birthday gift. The PM and everyone extended birthday wishes to me, and what I got was their statement that auto is Canada's central manufacturing sector, along with a commitment from this federal government through a Made in Canada auto policy. That's welcome news. The government's approach on remissions—rewarding firms that build vehicles here and employing the remission system as both incentive and deterrent to draw more assembly into Canada—has my strong backing. Welcome news for parts makers and for us. Incentives through taxes and grants for investing here also get my strong support. More good news. I back scrapping a hypothetical and unachievable EV mandate in favour of a somewhat more realistic approach. Like others, I have some worries regarding Chinese EVs in the market, though that is a quota, and Chinese EVs don't qualify for government incentives. On balance, the government has acknowledged the need for a strong auto industry here, and in that regard this is a good time for us. I'd also note that governments in the US and Mexico back us unequivocally as a parts maker. The USMCA rules of origin provisions will be tightened in some fashion, and penalties for non-compliance will go up, which is welcome news for North American parts suppliers and Martinrea.

My view is that the tariffs the US has placed on parts and vehicles from other jurisdictions, no matter what shape they end up taking, will gradually push more manufacturing into North America. That is, once again, positive for suppliers and for Martinrea. Whenever I travel to the US or Mexico, the first thing people usually ask me is what they can do to back us, to champion us, to encourage us to put more money in, to encourage us to bring on more staff. It is a wonderful setting. In the US and Mexico, both our company and our whole industry are simply adored. As you remember, we laid out growth, a large share of it in North America, across the coming years. When this decade wraps up, my expectation is that we will sit at roughly $6 billion in revenues, more or less, absent major acquisitions. I realize that part of our added revenues could come from picking up a plant here or there, which is what we did with Tulsa in November, but I don't count that as a major acquisition. Now let me move to share price and begin with the USMCA backdrop. Before Donald Trump entered the race for office and began threatening Canada and practically everyone with tariffs, our share price stood significantly above where it is today. In my view, a USMCA cloud hangs over our stock.

Once the matters I just described are resolved, my view is that cloud will go away. There won't be a daily report for Canadian investors and analysts to read about another problem in the auto industry. Keep in mind that during Trump's first term, we along with other auto parts companies experienced pressure on stock prices, followed by a rebound after the USMCA was signed. My sense is that a larger issue exists here: how receptive Canadian shareholders are to auto parts companies and to their valuations, at least right now. It's possible I'm not alone in noticing or voicing this, and in my view it's a perception problem rather than a genuine risk or operational problem. Auto parts suppliers headquartered in Canada rank among the most competitive anywhere in the world. Consider our growth, particularly outside the country. Our metrics stack up favorably against any of our competitors, especially internationally. For public US-traded auto parts companies, the average EV or enterprise value to EBITDA ratio is well above 4 times, closer to 5 times or more in most cases. And yet we trade at a discount. When you look at comparisons with our peer group, companies in similar spaces, our margins sit at the top end in comparison, our free cash flow is top end of the range, and our leverage ratio is near the bottom of the range, or very strong.

You can't attribute that discount to our having significant revenue exposure to Canadian assembly plants. Our North American sales are larger than most of theirs, and our exposure to Canadian assembly plants is comparatively small. My belief is that this discount will disappear over time, beginning with clarity in the North American tariff environment. Our share price rose roughly 15% last year in 2025. That's a decent return. Year to date, our share price is pretty flat. Even if we trade at 4 times EBITDA, our price is around 20 bucks, depending, of course, on debt levels, share levels, and so forth. Getting it there is our job, and a simple look at valuations in the US market shows where valuations sit. Now let's touch briefly on the Mideast Iran conflict, which has roiled the markets this week and may do so for a while. Wars are generally not good for markets in general, although they could be positive for some sectors such as oil and defense stocks. Sustained high oil prices are generally not good for automotive sales, at least ICE vehicles. We anticipate that the current situation will eventually stabilize, and that oil prices will stabilize too.

As a person in this industry once put it, the remedy for elevated oil prices is elevated oil prices. Looking ahead a few years, we continue to be optimistic about the industry and the role we play in it. Let's now discuss capital allocation. Our approach is laid out on our website, and we've adhered to it quite well across the past several years, including through COVID, chip shortages, inflation, the EV fiasco, and tariff issues. Our first priority for investment has been sustaining, expanding, and enhancing the business organically by means of strategic technology investments. That has made us a stronger company, and we are stronger today than at any prior point. We've kept a solid balance sheet, which matters in this industry when you're a supplier bidding on jobs. We've aimed for a net debt to EBITDA ratio of 1.5 times or better, and we're better than that now. That was our position in 2019, and we've reduced it from above 3 times in early 2022. We've repaid more than $200 million of debt across the past 3 years through the end of 2025. We think that's good. Simultaneously, we've bought back shares when it made sense. Over the past 3 years, we've repurchased 10% of our outstanding shares and are now down to roughly 72 million shares outstanding.

Starting from 2009, which was the last time we issued shares, we have repurchased nearly 20% of our outstanding shares on a fully diluted basis. During the past year we didn't repurchase much, adopting a cautious stance because of the tariff situation, though we started again in Q4. We'll keep balancing how we allocate capital, but honestly, in my view the intrinsic value of our shares exceeds the market value. That's something we must address, and we will. I observe that companies in the US are valued more richly than we are, and I reflect that we are as much a US company as most of them are. I do recall periods when we and other Canadian companies traded at a premium to our US counterparts. I hope we get there again. Peter talked about us being a consistent free cash flow producer. That cash will be used to invest in our company, strengthen the balance sheet, and buy back some shares. We're making decent money. As a stock market guru we all know once said, at some point, making good money has got to stand for something. Thanks for your time. Our future is bright, our people are great, and our time in the sun is coming soon.

We’re going to move to Q&A now. On the line we have investors, analysts, staff members, and even a few rivals, so we might want to choose our words somewhat carefully—but whatever we can address, we will. Thanks to everyone for joining the call.

Ladies and gentlemen, the question-and-answer portion of the call starts now. Should you wish to ask something, on your touch-tone phone press * and then 1. A prompt will confirm that your hand has been raised. To take yourself out of the polling, press * followed by 2. Those of you on a speakerphone, please pick up the handset before you press any keys. Our first question is from Ty Collen at CIBC. You may proceed.

Hi there, good evening everyone, and thanks for the chance to ask something. Perhaps to kick things off on the 2026 guidance: which assumptions sit behind the top and bottom ends of the ranges you provided? How would you frame those two ends of the outlook?

Thanks, Tye. A key element here is that, as we said, our tariff compensation sits at the same level, or close to it, as 2025. That assumption forms the foundation at both the low end and the high end of the range, all right? Second, we're assuming that our operational efficiency — some of the items Pat mentioned, plus what we discussed, I believe, on the second quarter earnings call regarding our AI development and rolling it out across our footprint — is likewise a major underpinning, depending on how fast we can put some of those cost savings in place. That piece would fall more, I'd say, toward the high end of the range. Then another major underpinning within our range is some recovery at certain of our plants that produce fluid products.

Okay, so the expectation is that recoveries come in margin-neutral on a year-over-year basis. Is that what I heard?

Yes, essentially, compared with a year earlier, there won’t be any effect on margin — that’s right.

Regarding the tariffs.

Regarding tariffs, that's correct.

All right. And then regarding EVs, or other recoveries tied to commercial business — what should we expect there as part of the 2026 outlook?

Absolutely, and that's a good question too. You should anticipate that commercial negotiations and offsets will occur as the oscillation and the EV fits and starts keep happening. That is going to be a component of our business moving forward in the middle term. Regarding performance, so to speak, it's more or less unchanged on a year-over-year basis. Timing-wise, it's going to be somewhat lumpy, just as we actually mentioned last quarter. We were engaged in a major negotiation, and it didn't happen to land when we kind of wanted it to, if you will, but we're still working on it. The lumpiness of the OCIs, as we refer to them here, the commercial issues that we negotiate, will continue to be present. In terms of being a component of our guidance, it will be a component of that throughout 2026.

If that OCI had landed last year, I think it's fair to say the year-over-year comparison would probably be down, since I really do believe that activity, while it's still going on, is beginning to normalize. We've grown less dependent on it simply because volume is starting to settle into a particular band.

Every part of this industry is beginning to make adjustments.

That's right.

Right. Okay. So, yeah, I suppose staying on that topic about the EV business — clearly, as you mentioned, expectations there have undergone a fairly major reset. At this stage, do you feel production plans are aligned appropriately with where the market stands, or would you say EVs remain possibly a risk area this year?

Pat here. As you're aware, they've fallen quite a lot. From where we are now through the rest of this year, I don't expect any major shifts from any of our customers, whether upward or downward. My sense is that for the most part, they'll stay fairly flat.

I believe a few of the recent announcements from General Motors about their EV platforms wrapping up somewhat early — that also forms part of our current outlook. Those items have already been made public.

Appreciate it. If I can squeeze in just one more question about the 2028 outlook you provided — clearly there's quite substantial growth factored into that. How should we think about how much investment will be required across the coming few years to underpin that outlook?

That's a great question too. For that, I'd say roughly $700 million over the next couple of years. The way to look at it is probably somewhere in the $300 million range, approaching the depreciation and amortization levels we currently have, I would say. As we've discussed, that represents quite a lot of growth and requires substantial capital, but on the other hand, as we've said, we're deploying capital in a more flexible manner. Our new generation of, say, weld cells and so on — these are more flexible and can be redeployed toward new growth, which helps mitigate our costs. In addition, we've talked about our replacement business, which takes less capital, and also some of these extensions customers have mentioned. Fred noted as well that those will inherently require less capital than a brand new program. For those reasons, we believe around $300 million is a good figure to use at the moment.

I believe this is worth understanding — Peter mentioned it — but we've gotten especially skilled at reusing capital. As you may remember, when we began putting money into all those new lines 5 or 6 years ago, during the period we won all that work in '18 and '19, we indicated several of them would last for multiple generations, and that is now beginning to deliver returns as we move ahead.