Category: Canada

Maple Leaf Foods Inc. continued to navigate weaker consumer demand in the third quarter as it looked ahead to the spinoff of its pork business in 2025.

“This environment has a particularly significant impact on a premium portfolio like ours and I want you to know that we are not sitting still waiting for the macro environment to recover on its own,” said CEO Curtis Frank on a call with analysts.

Frank said the company is working to adapt its strategies to consumer demand. As inflation has stabilized and interest rates decline, he said pressure on consumers is expected to ease.

Maple Leaf reported a third-quarter profit of $17.7 million compared with a loss of $4.3 million in the same quarter last year.

The company says the profit amounted to 14 cents per share for the quarter ended Sept. 30 compared with a loss of four cents per share a year earlier. Sales for the quarter totalled $1.26 billion, up from $1.24 billion a year ago.

“At a strategic level … we’re certainly seeing the transitory impacts of an inflation-stressed consumer environment play through our business,” Frank said.

“We are seeing more trade-down than we would like. And we are making more investments to grow our volume and protect our market share than we would like in the moment. But again, we believe that those impacts will prove to be transitory as they have been over the course of history.”

Financial results are improving in the segment as feed costs have stabilized, said Dennis Organ, president, pork complex.

Maple Leaf, which is working to spin off its pork business into a new, publicly traded company to be called Canada Packers Inc. and led by Organ, also said it has identified a way to implement the plan through a tax-free “butterfly reorganization.”

Frank said Wednesday that the new structure will see Maple Leaf retain slightly lower ownership than previously intended.

The company said it continues to expect to complete the transaction next year. However, the spinoff under the new structure is subject to an advance tax ruling from the Canada Revenue Agency and will take longer than first anticipated.

Maple Leaf announced the spinoff in July with a plan to become a more focused consumer packaged goods company, including its Maple Leaf and Schneiders brands.

“The prospect of executing the transaction as a tax-free spin-off is a positive development as we continue to advance our strategy to unlock value and unleash the potential of these two unique and distinct businesses,” Frank said in the news release.

He also said that Maple Leaf is set on delivering profitability for its plant protein business in mid-2025.

“This includes the recent completion of a procurement project aimed at leveraging our purchasing scale,” he said.

On an adjusted basis, Maple Leaf says it earned 18 cents per share in its latest quarter compared with an adjusted profit of 13 cents per share in the same quarter last year.

The results were largely in line with expectations, said RBC analyst Irene Nattel in a note.

Maple Leaf shares were down 4.5 per cent in midday trading on the Toronto Stock Exchange at $21.49.

This report by The Canadian Press was first published Nov. 13, 2024.

Companies in this story: (TSX:MFI)

Rosa Saba, The Canadian Press

The scientific and technical information disclosed in this release has been reviewed and approved by Darren Holden, BSc.(Hons), Ph.D., FAusIMM, a “Qualified Person” as defined under the Canadian Institute of Mining National Instrument 43-101, 2014 Standards of Disclosure for Mineral Projects. Dr. Holden is a Technical Advisor to the Company.

*Readers are cautioned that mineral deposits on adjacent properties are not indicative of mineral deposits on the Company’s properties.

About South Pacific Metals Corp.

South Pacific Metals Corp is an emerging gold-copper exploration company operating in the heart of Papua New Guinea’s proven gold and copper production corridors. With an expansive 3,100 km2 land package and four transformative gold-copper projects contiguous with major producers K92 Mining, PanAust and neighbouring Barrick/Zijin, new leadership and experienced in-country teams are prioritizing thoughtful and rigorous technical programs focused on boots-on-the-ground exploration to prioritize discovery across its portfolio projects: Anga, Osena, Kili Teke and May River.

Immediately flanking K92’s active drilling and gold producing operations to the northeast and southwest, SPMC’s Anga and Osena Projects are located within the high-grade Kainantu Gold District – each having the potential to host similar-style lode-gold and porphyry copper-gold mineralization as that present within K92’s tenements. Kili Teke is an advanced exploration project situated only 40 km from the world-class Porgera Gold Mine and hosts an existing Inferred Mineral Resource with multiple opportunities for expansion and further discovery. The May River Project is located adjacent to the world-renowned Frieda River copper-gold project, with historical drilling indicating potential for a significant, untapped-gold mineralized system. SPMC common shares are listed on the TSX Venture Exchange (TSXV: SPMC), the OTCQB Marketplace (OTCQB: SPMEF) and Frankfurt Stock Exchange (FSE: 6J00).

With a background as a business journalist and a pioneer in capital markets, Helen Kearns knows the importance of identifying powerful stories in the investment world.

Today she is the CEO of Bell Kearns & Associates Ltd. in Toronto, a family office that builds deep relationships with money managers while making portfolios understandable to its ultra-high-net-worth clients.

Kearns began as a freelance business reporter in Montreal, which introduced her to the quarterly reports of companies based there. She joined the Montreal Gazette to cover the flight of capital from Quebec following the election of the Parti Québécois, then was hired by Business Week magazine in Toronto to report on Canada.

She moved to the investment business in 1980 when she was recruited by Richardson Securities as just the second woman in Canada on an institutional desk in the industry. She advanced to head of institutional sales and trading for the company, which became Richardson Greenshields of Canada Ltd., the first woman in North America in that role.

She founded her own institutional investment firm, Kearns Capital Ltd., served three terms as a governor of the Toronto Stock Exchange and became the first president of Nasdaq Canada.

In 2005, Kearns became a member of the Ontario Teachers’ Pension Plan board and joined Robert Bell in his company, RS Bell & Associates Ltd. Within a year she became an equity owner and president of the firm, which was renamed Bell Kearns & Associates in 2009.

Today the firm has 14 staff, including two artificial intelligence experts who have joined it under a program of the Vector Institute, which works to accelerate the use of AI in business.

Bell Kearns has 45 clients, 80 per cent of them families and the rest foundations and investment corporations, with some $2.5 billion in assets under management. Robert Bell remains as chairman while daughter Susan Bell serves as president.

Kearns spoke with Canadian Family Offices about the influence of her early career, how the company applies a pension playbook to investing and the power of high-performance thinking.

How did your background in journalism shape what you do today?

I was really good at identifying powerful ideas and stories in the investment world. At Business Week, you had to have high-performance ideas to get in the magazine, and you need high-performance ideas if you’re going to keep, win and build client trust and relationships in the investment business.

How did your transition to the investing business go at Richardson?

On an institutional sales desk at an integrated brokerage firm, the job is to sell great ideas to the large financial institutions, pension plans and money managers. But I did not know the language of the investment business at all.

Were there other challenges?

Being the only woman, it was a very tough start. There was lots of bias.

After the first year, my boss called all the guys on the sales desk into a meeting room to vote on whether or not to let Helen into the bonus pool. And the vote was no. I’m the only person I know who spent a year in the wading pool for a bonus!

How did you get past that?

When someone tells you you can’t do something, it starts a real fire inside. I had a mentor named Jalynn Bennett who said, ‘Helen, I want you to call me every day and give me your latest research and what is going to be moving markets.’ That helped me grow. From there I became a top gun in sales for the next 16 years.

After that you became the first woman to start an institutional brokerage firm in Canada and then head of Nasdaq Canada. What was next?

I got two phone calls in June of 2005, one from the Ontario Teachers’ Pension Plan to go on the board and one from Rob Bell. And I took both calls.

How did the Ontario Teachers’ position influence you?

Going on the Ontario Teachers’ board was a masterclass in long-term investing and the innovative platforms it was bringing into the mix. Neil Petroff was CIO, and as he said, ‘We’re going to use all the tools in the toolbox, which is all the asset classes, to drive long-term risk-adjusted returns.’

And what about Rob Bell?

Rob had built BellCharts, a successful mutual fund research firm he sold to Morningstar, and he started our firm in 1991. I had been researching the family office business, and I knew this was a very disparate business, but interesting. I could take 25 years of investing experience and bring it to clients.

What is the raison d’être of Bell Kearns?

Bringing high-performance thinking. We do not get paid by any managers; we are truly independent. If you scratch below the surface, there’s a lot of ties to fee-based compensation in the family-office industry. Our only source of revenue is our fees from our clients.

It’s incredibly important, because it perfectly aligns you with your client. If you have a fee-based link to some manager, it’s going to cause you to think twice about whether or not that manager should be fired, because you’ve got this source of extra revenue.

We deliver a framework for making informed decisions to create a sustainable, long-term portfolio. I think of this framework as a house. The foundation layer is risk appetite. And if there’s more than one person around the table, we make sure that we hear all the voices.

Then we go to the second level in the house and we do portfolio construction. What asset classes, what mix do we need to drive the risk-adjusted returns that this client is looking for?

Was your experience at Ontario Teachers’ important in that?

Yes. That’s really one of the things that I brought to the company, leaning into pension thinking. I just wrote a piece for our quarterly letter on why we admire Canadian pension funds. Number one is they set in place an outstanding governance system to incentivize long-term thinking.

Following a pension playbook helps an investor do that?

We want our clients to understand the structure of their portfolios and whether they are achieving the long-term, risk-adjusted rate-of-return goals that will meet their needs. Because we’ve been doing this for 33 years, we understand cycles. We know there’s going to be down cycles. So one of our biggest messages is: ‘Thou shalt not sell when markets are correcting.’

Any examples of such investments to mention?

We don’t manage any money. We hire outside managers and our clients allocate to these managers. We help them choose managers in every asset class, whether it’s equities, fixed income, real estate, private equity, hedge funds, infrastructure.

How do you choose these managers?

We send our team out to more than 300 manager meetings a year. We’re like super talent scouts in investing.

In the ultra-high-net-worth sphere, everyone is talking alternatives these days.

There is what I call ‘the cocktail party feature’ to alternatives. It’s a cool factor to talk about private equity. But it’s only cool until there’s a downturn and you can’t get out of it for 10 years-plus. Liquidity is incredibly important.

So, proceed cautiously?

Absolutely. You have to ensure that the allocations to alternatives are sized appropriately, given the additional risk.

For instance, you can find an alternatives hedge fund manager who specializes in fixed income and is taking on more risk than your core manager, but you don’t want to allocate half of your fixed-income assets to a higher-risk strategy. You might give them five per cent, and that five per cent is going to be ‘sweating.’ Then, if taking on that additional alternatives risk takes a bad turn, it’s not going to take down the whole portfolio.

How does your company ensure that clients really understand their portfolios?

Coming from journalism and growing up in the investment industry, I realized that the investment industry loves to make people feel that the investment industry is smarter than them. That’s the modus operandi. And I don’t buy that. Our firm goes by a quote I love from Albert Einstein: ‘The definition of genius is to make the complex simple.’

We write clearly and we meet with each client to go through our quarterly report, which is typically invested through multi-manager strategies. We show each manager’s returns and how they’re doing, very clearly. But we also aggregate all of the manager returns into a custom benchmark at the top, so they know how all their assets are doing.

Speaking of complexity, tell me about this interest in AI and your work with the Vector Institute.

We have been part of the FastLane project, started by the Vector Institute, which gives us access to two masters students in computer engineering generative AI. They were selected by Bell Kearns and seconded to the firm for four months. We paid a portion of the cost.

What have they been doing?

We proposed three use cases but went with the one we call ‘low-hanging-fruit.’

Though we only have 45 clients, we have over 200 strategies that are up and running, so we have what I call the Niagara Falls of quarterly reporting. It just pours in here, and we have to distill it. So we want to build a tool for how these different strategies are doing.

Did it work?

We’re not at a solution, but we’re close, so we have hired them for another four months to complete the project. It’s not perfect, but man, is it exciting.

Is client privacy protected?

They are not part of the Bell Kearns system. So we’ve completely ring-fenced our client information. The only thing they have access to is capital markets information.

What is the overall promise of AI in your industry?

Let’s put it this way: If Bell Kearns receives the Niagara Falls of information every quarter and reports on it, what do you think it’s like at Ontario Teachers’, with $250 billion in assets? It’s an efficiency tool.

What’s the top issue wealthy families are facing today?

They’re thinking about their legacies. They want to make sure they have all the pieces in place for a smooth transition to the next gen.

How does Bell Kearns help with that?

Many of our clients have been with us for a long, long time, so they have seen the benefits of long-term thinking. Long-term thinking is easy to say and really, really hard to do, especially when the market drops 20 per cent.

So they have seen the benefit over this long sweep of time where we’ve had COVID, a rapid rise in interest rates, the global financial crisis, two wars. When we build portfolios, we say we’re building a ship that can go through the North Atlantic. We know there’s going to be storms, but it’s going to get from shore to shore.

Responses have been lightly edited for clarity and length.

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In this edition, the BofA Securities Research Investment Committee describes five less commonly discussed reasons to buy U.S. equities, while some experts are questioning the post-election rally. Our diversion looks for answers for the surging crime rate in the 1970s and, as always, we look ahead to important data releases.

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Portfolio strategy

Less-obvious reasons to buy equities

BofA Securities’ Research Investment Committee (RIC) presented five unconventional reasons to own U.S. equities in their most recent monthly update. Many of these bullish drivers are more structural than tactical and might thus be more consistent positive forces for the longer term.

Increasing longevity, and its role in increasing demand for equities, is one under-discussed reason for all investors to own more stocks. Conventional portfolio strategy and products like target funds automatically decrease equity weightings in favour of fixed income as investors age. This strategy is designed to reduce risk but since 2020, inflation has made fixed income volatile. Portfolios with 80 per cent fixed income and 20 per cent equities, for instance, have failed to preserve capital in the past four years.

Current asset allocation recommendations are suited for the current average U.S. lifespan of 77 years. But if U.S. longevity increases to the OECD average of 80, portfolios would require a 2 percentage point higher equity weighting to maintain the same standard of living. Another five years of life would require a 6 percentage point higher equity weighting.

The Canadian average lifespan is already much better than the U.S., at 81. If this improves because of new medical technology, however, equity weightings would have to increase to maintain the same standards of living.

Bullish reason number two is that equities are scarce at a time when demand could increase and scarce entities fetch higher prices. There are now 4,642 publicly traded U.S. companies, roughly half of the number in 1996. The supply of stocks from IPOs, secondary issuance and stock compensation has been hugely outpaced by share buybacks. The amount of available U.S. stock has decreased in 12 of the past 16 years.

The RIC also noted that U.S. stocks are showing strong momentum – reason three to buy. Adding equities to a portfolio when the S&P 500 is at new highs has historically outperformed random entry points by five percentage points.

Reason number four to buy stocks utilizes the work of BofA’s equity and quant strategist Savita Subramanian. Ms. Subramanian emphasizes that the equal weighted S&P 500 is trading at a record discount to the conventional, Magnificent Seven-dominated cap weighted index.

The strategist believes that profit growth for non-technology sectors will play catch-up in 2025, broadening market leadership and driving the benchmark higher. As legendary Merrill Lynch strategist Bob Farrell noted as one of his ten rules of investing, “markets are stronger when they are broad.”

Corporate America owns oceans of cash and that is reason five to buy U.S. stocks. S&P 500 companies own almost US$8-trillion in cash that can be either returned to shareholders via higher dividends (the index dividend yield is currently near record lows) or benefit investors through buybacks. Companies executing buybacks have outperformed the broader market by 2 percentage points per year since 1994.

The RIC team recommend three U.S.-traded ETFs in this report. The S&P 500 Equal-weight Invesco ETF (RSP-A) and the S&P Bank ETF SPDR (KBE-A) are poised to benefit from the broadening of U.S. profit growth. The third suggestion, RBA American Industrial Renaissance ETF FT (AIRR-Q), is part of an unrelated on-shoring theme.

Market risks

There’s market downsides for the new president, too

The S&P 500 has climbed a full per cent since last Wednesday morning and the S&P/TSX Composite is up 1.2 per cent. Expectations for faster U.S. growth due to deregulation and a corporate tax cut are the obvious drivers of the rally. However, there are some experts urging caution about the rally’s sustainability.

Wells Fargo investment strategy analyst Austin Pickle urged investors to avoid letting elections and emotions determine portfolio strategy. He notes that campaign promises historically “give way to prioritization and give-and-take with Congress and the legal system.”

Mr. Pickle reminded investors that the first Trump administration incentivized a rally in small caps, real estate and energy stocks before these sectors underperformed to the next election in 2020. Additionally, President Joe Biden enacted incentives for clean energy companies only to see them lag the benchmark.

Wells Fargo recommends watching for the enactment of specific policies while remaining cognizant of the economic and earnings outlook for any new investment.

Former president of the Federal Reserve Bank of New York Bill Dudley also sounded a note of caution in a recent Bloomberg column. He conceded that a potential corporate tax cut and deregulation effort was positive for equities but listed a number of countervailing trends. These include the inflationary effects of expected tariffs and labour scarcity where deportations occur. He also noted that a half percentage point increase in inflation-adjusted yields in the past 10 weeks was negative for risk assets.

I don’t think any of this implies an imminent market bloodbath but I’m also not interested in chasing the rally at this point.

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Diversions

1970s crime wave: was it lead poisoning?

The Marginal Revolution podcast continued its study of the 1970s, this time discussing the sharp spike in violent crime. George Mason economics professors Alex Tabarrok and Tyler Cowen detail the doubling of homicides and tripling of overall violent crime between 1960 and 1980.

The professors paint a picture of New York City that was truly dire – violent crime, fires, graffiti and terrorism could not be handled by a city on the verge of bankruptcy. Off-duty police officers handed out Welcome to Fear City pamphlets to tourists with recommendations including never to ride the subway for any reason.

Potential explanations for the trend are weighed. These include the rise in youth population from 13 to 19 per cent, lead poisoning, hard drug popularization and contagion effects from the rise of serial killers.

The essentials

Looking for our updates on market movers, analyst actions, stock technicals, insider trades and other daily, weekly and monthly insight? Click here to visit our Inside the Market page.

Globe Investor highlights

Million-dollar TFSAs are a thing, but Rob Carrick finds out what’s a “normal” amount to have in your account

Trump’s presidential election win has forced bond strategists to make a material change in their outlook towards higher longer-dated Treasury yields. Meanwhile, here’s a rundown of where Wall Street is placing its bets for Trump 2.0

Investors see safety in India as Trump’s election win casts shadow on emerging markets

What’s up next

A 0.8 per cent month over month decline in domestic manufacturing sales for September is expected when those results are released on Friday. Existing home sales will also be announced that day. For earnings, Brookfield Corp is expected to earn US$0.826 per share when announced Thursday. George Weston reports next Tuesday (C$3.553) and Metro Inc. (C$0.989).

U.S. PPI ex food and energy for October will be out Thursday and a 0.2 per cent month-over-month increase is forecast. (U.S. October CPI ex-food and energy came in Wednesday morning as expected – 0.3 per cent higher month over month). October advance retail sales will be released Friday – a 0.3 per cent month over month gain is expected – and industrial production for October is out the same day (a 0.3 per cent month over month decline expected).

Profits for Walt Disney Corp. are reported Thursday (US$1.102 per share forecasted) along with Applied Materials Inc. (US$2.193). Next Wednesday is a big day, not so much because of Palo Alto Networks Inc. earnings (US$1.48) but because semiconductor behemoth Nvidia Corp. (US$0.739) reports.

See our full economic and earnings calendar here (You can bookmark the page – it gets updated weekly)

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Published Nov 13, 2024  •  4 minute read

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ROUYN-NORANDA, Quebec, Nov. 13, 2024 (GLOBE NEWSWIRE) — GLOBEX MINING ENTERPRISES INC. (GMX – Toronto Stock Exchange, G1MN – Frankfurt, Stuttgart, Berlin, Munich, Tradegate, Lang & Schwarz, LS Exchange, TTMzero, Düsseldorf and Quotrix Düsseldorf Stock Exchanges
and GLBXF – OTCQX International in the US) is pleased to inform shareholders that we have initiated our planned 17-hole, infill drill program on our 100% owned Ironwood Gold Deposit located in Cadillac Township, Quebec. The Ironwood deposit is located in close proximity of the gold localizing Cadillac Break and Globex’s historical Wood and Central Cadillac gold mines both of which have excellent exploration drill potential.

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The Ironwood deposit is currently an inferred resource of 243,200 tonnes grading 17.26 g/t Au and 2.61 g/t Ag. (see Technical Report for The Mineral Resource Estimate, Ironwood Project, Cadillac Township, Quebec, (NTS 32D01), by Reno Pressacco, M.Sc. (A)., P.Geo., February 2008 for the Pandora-Wood Joint Venture).

The aim of the drill program is to confirm and upgrade the current Ironwood inferred resource and possibly test for an extension of the zone. The 17-hole drill program will be undertaken with two drills and is expected to total approximately 3000 m. Once drilling, logging and assaying are completed, further metallurgical testing will be undertaken to better define various methods of recovery of the gold and silver. The ore zone is within a sulphidized iron formation with arsenopyrite, pyrrhotite and pyrite contents of 12.2%, 8.6% and 6.4% respectively. Precious metals occur as a gold/silver alloy freely within arsenopyrite and to a lesser degree within pyrite. Several metallurgical tests have been undertaken including cyanidation of a bulk sulphide concentrate with a gold recovery of 97% and cyanidation of the bulk concentrate produced a gold recovery factor of 93%. Flotation of a high-grade concentrate with low arsenic content produced a gold recovery of 86%. These tests were preliminary in nature and a more exhaustive test work program is planned using mineralized core from the current drill program to determine, based upon a number of available custom milling and smelting avenues, more comprehensive overall recovery factors.

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Globex is initiating this drill program to upgrade the resource as a first step toward possible production at Ironwood. The deposit is small but hi-grade and is located near infrastructure such as an all-season highway, power, skilled labour and several gold mills. Despite the grade and location, there are many risks involved in trying to bring this project to production. They include, permitting under Quebec Mining Act, metallurgical processing and recoveries yet to be detailed, the arsenical nature of the ore, public acceptability that will need to be established through the BAP system, completion of environmental and other studies, choosing the best mining method and negotiating various terms, considering ore sorting of waste material by magnetics, colour sorting or other methods, establishing a relationship with a local mill if we proceed in this way, to treat the ore and dispose of the tailings in an environmentally sound manner, negotiating pricing for the sale of the concentrate, precious metal prices, financing, just to name a few. Another way forward yet to be considered is DSO (Direct Smelting Ore), shipping the ore as mined, crushed, screened and/or sized to a convenient size distribution for a client’s processing offshore. This would eliminate the need for milling. In other words, there is still a lot of work to do.

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Despite our optimism there is no guarantee that the project will be put into production by Globex and if it does how long it will take to achieve the required permitting, establish onsite infrastructure, etc.

The Quebec Government currently has proposed a series of changes to the Quebec Mining Act, which will directly affect proposed mining projects and exploration. Globex will need to study the potential effect of these law changes upon its efforts to work out a mining and processing plan including potentially disposal of the arsenic bearing tailings.

This press release was written by Jack Stoch, P. Geo., President and CEO of Globex in his capacity as a Qualified Person (Q.P.) under NI 43-101.

We Seek Safe Harbour.	Foreign Private Issuer 12g3 – 2(b)
	CUSIP Number 379900 50 9 LEI 529900XYUKGG3LF9PY95
For further information, contact:
Jack Stoch, P.Geo., Acc.Dir. President & CEO Globex Mining Enterprises Inc. 86, 14th Street Rouyn-Noranda, Quebec Canada J9X 2J1	Tel.: 819.797.5242 Fax: 819.797.1470 info@globexmining.com www.globexmining.com

Forward Looking Statements: Except for historical information, this news release may contain certain “forward looking statements”.  These statements may involve a number of known and unknown risks and uncertainties and other factors that may cause the actual results, level of activity and performance to be materially different from the expectations and projections of Globex Mining Enterprises Inc. (“Globex”).  No assurance can be given that any events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits Globex will derive therefrom.  A more detailed discussion of the risks is available in the “Annual Information Form” filed by Globex on SEDAR at www.sedar.com.

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Young people may be at a disadvantage when it comes to affordable home ownership, but instead of getting mad, they can aim to get rich

Published Nov 13, 2024  •  Last updated 1 hour ago  •  8 minute read

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Kristy Shen, who is in her early 40s, has never bought a home and doesn’t plan to (unless you count her shares in real estate investment trusts).

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But when she was in her late twenties and working in the tech sector, Shen felt the pressure to become a homeowner, too.

“I was actually trying to buy a house, just like everybody else in Toronto,” Shen acknowledged. “Back (in 2015), it was already getting to the point where people couldn’t afford to buy. The average single-family (detached) home (in the city) was near $1 million.”

Still, after the 2008 financial crisis, Shen no longer felt like she had the same job security and was concerned about losing her position due to outsourcing. She said her goals changed drastically after a coworker at her job collapsed at his desk and underwent emergency surgery after overworking himself.

Shen decided she didn’t want to continue working until she was 65 just so that she could pay off a massive mortgage, and sought financial independence instead.

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“Instead of taking the money that I saved to put a down payment towards a house, I put it into a portfolio and bought index funds, instead. And then that portfolio grew over time,” she said.

When she was 32, Shen and her husband managed to retire with $1 million in savings and started travelling the world.

The math on home ownership doesn’t make sense

Shen, who grew up in poverty in China, said she took an engineering degree just because she thought it would bring her financial stability.

“I did the math to figure out whether this was actually the correct career and it was a good return on investment,” she said, recalling that her father once told her that if she followed her dreams of becoming a writer, he couldn’t financially support her if things didn’t work out.

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The math on homeownership did not make sense for her, however, and doesn’t for many other young Canadians today. The underlying issues have much less to do with avocado toast (the stereotypical critique of younger generations unable to save because they spend on luxuries) and much more to do with increasing housing unaffordability.

“I think that we need to write a new rule book, because the rule book is coming from our parents who actually were able to afford houses that were only two to three times their annual salary,” Shen said. “And now my peers and the next generation are trying to buy a house that’s 20 times their annual salary. It doesn’t make sense.”

Jason Heath, managing director and certified financial planner at Objective Financial Partners Inc., pointed to the rapidly rising cost of real estate compared with slower income growth as a major impediment preventing younger generations from building wealth the way their parents did.

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“I think there’s been too much of an emphasis on real estate and that being the only path for people to accumulate financial wealth, perhaps at the expense of other options, like investing in the stock market,” Heath said. “If you were to look at (the S&P 500 index’s returns) over the course of the last 10 years, it’s generated about a 13 per cent annual rate of return — much higher, frankly, than real estate prices have appreciated in most parts of Canada.”

According to the Canadian Real Estate Association, the benchmark home price has climbed from $399,000 in September 2014 to $713,200 in September 2024. Crunching the numbers translates to a 6.3 per cent average annual increase.

However, it is important to note that in the past year, home prices have declined by 3.3 per cent.

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“Even though real estate has done relatively well over the last generation in Canada, I think it’s super important that people don’t put all of their eggs into that basket,” Heath warned.

“We tend to suffer from a recency bias, where just because something has done well recently, we anticipate or expect that it will (do well) going forward. And I’m in the camp where I think the next 25 years may be very different.”

Can a renter generate the same wealth as a homeowner via investing?

It is possible for someone to become a wealthy renter today, Heath believes, noting that renting is typically cheaper compared with paying off a mortgage.

“I don’t think that real estate is necessarily the only path to become wealthy.”

He said a renter could potentially build the same kind of wealth that someone could generate through homeownership in an ideal scenario where a person who has extra cash invests their savings into the stock market.

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“A disciplined renter, especially if they were investing in stocks and a low-cost portfolio and they were taking advantage of tax-sheltered accounts — could they be in the same position (as a homeowner) years from now? I think they could be.”

Tsur Somerville, who holds a real estate finance professorship at the University of British Columbia’s Sauder School of Business, published a study in 2007 that compared wealth accumulation between homeowners and renters.

One of the key findings that still holds true today is that homeowners benefit from the “forced savings” aspect of making monthly payments on a mortgage, which allows them to build equity, Somerville said. It is much harder for renters to set extra funds aside and invest them on their own.

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The report concluded that for renters to accumulate the same amount of wealth as homeowners, they needed to be “extremely diligent savers, invest in a high yield instrument, do so with minimal fees, and have the good fortune to live in one of the cities where the right combination of low rents and/or low house price growth allows them to invest more in a relatively higher return asset.”

For example, in the “best-case” scenario — which required renters to invest 100 per cent of the difference between owner and renter payments in the Toronto Stock Exchange and pay very low investment management fees — renters in Edmonton, Halifax, Montreal and Regina could accumulate 20 per cent more wealth than homebuyers.

However, the report found investment-savvy renters in Calgary and Toronto could not match the wealth gains of homeowners due to expensive rental rates in the former and rapidly rising home prices in the latter.

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Can the average millennial or younger Canadian afford to invest?

Shen and her husband, who worked in high-paying tech jobs, had already saved about half a million dollars by 2012. Shen said her scarcity mindset meant she tried to be as thrifty as possible, taking public transportation and cooking at home instead of eating out.

However, the couple’s fixed expenses have been relatively low as well. They rented the second floor of a townhouse in Greektown in Toronto for about a decade at about $850 a month. During the COVID-19 pandemic, rent prices dipped and they found a place in a rent-controlled building in Toronto for $1,576 a month.

For other working young adults who live with their parents and pay little to no rent, it makes sense for them to start investing early and benefit from compounding rates of return. The most recent census data from 2021 shows more than 35 per cent of Canadians aged 20 to 34 were living with at least one parent.

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The solution is not so simple for people who rent and do not receive financial assistance from their family, or who don’t work in high-paying jobs. The renting and investing scenario is contingent on whether the renter has the excess cash to invest in the first place, Somerville noted.

“A lot of renters are lower income, and therefore their ability to accumulate wealth is compromised by their lower income, not by the fact that they’re renters,” he said, adding that rent prices have escalated in the past three to four years.

The latest report from Rentals.ca Network Inc. showed the average asking rent for all property types across the country climbed from $1,845 in October 2019 to $2,152 in October 2024.

“The whole system here depends on (whether) I can rent at a rate that allows me to accumulate,” Somerville said.

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Statistics Canada’s 2023 survey of financial security revealed the median net worth of younger families (where the highest income earner was under 35) who owned their principal residence swelled by $142,800 from 2019 to hit $457,100 in 2023.

In comparison, the median net worth of younger families who did not own their principal residence increased by just $26,700 to $44,000 in 2023.

That said, the survey also found that an increasing share of young families who did not own their principal residence were generating wealth. Among young families who rented their principal residence and had no employer pension plan, 15 per cent had a net worth greater than $150,000 in 2023, compared with just 5 per cent in 2019.

These families were likely to hold assets in real estate (that wasn’t their principal residence), in registered retirement savings plans (RRSPs) or tax-free savings accounts (TFSAs).

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Other tips for millennials and gen z on investing and wealth creation

People in their early 20s might not necessarily be ready to invest all their savings in an RRSP, which places penalties on early withdrawals, Objective Financial’s Heath cautioned.

Instead, they could consider using a TFSA, so that they can make tax-free withdrawals when needed, whether for their tuition or to cover their next month’s rent, or even eventually make a down payment on a home.

“It’s good to think long term, but you also need to realize that there are a lot of short-term things that come up when you’re young,” he said.

He also advised that young investors avoid making investments in speculative stocks or relying on social media influencers for financial advice. He recommended that people who cannot afford to work with a financial professional consider low-cost exchange-traded funds that include Canadian stocks, U.S. stocks, international stocks and bonds.

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“Wealth creation and becoming financially independent tends to be slow and steady and boring,” Heath said. “I wish there were a magic solution to it, but, usually, it’s just doing a whole bunch of small things right over a long period of time.”

Shen, who co-authored a book, Quit Like a Millionaire, and, with her husband, created Millennial Revolution, a personal finance blog, said she understands why younger Canadians today are frustrated and anxious about their future, whether that’s due to inflation, artificial intelligence or even climate change.

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However, while they can’t change their situation, she said they can change their strategy.

“It’s very easy to get very nihilistic,” she said. “But I would advise trying to look for opportunities to do things differently, instead of just banging your head against the wall and trying to follow the old advice from 20 or 30, 40 years ago.”

• Email: slouis@postmedia.com

Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here.

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This section is

Partnership Content supplied

by GlobeNewswire

Author of the article:

GlobeNewswire

Published Nov 13, 2024  •  28 minute read

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– Revenue of $45 million, up 8% Q/Q and up 30% Y/Y –
– Gross mining margin of 38%, compared to 51% in Q2 2024 and 44% in Q3 2023 –
– Current hashrate of 11.9 EH/s, up from 10.4 EH/s in Q2 2024 –
– Current efficiency of 21 w/TH, a 16% improvement from June 30, 2024 –
– Synthetic HODL increased to 802 at October 31, 2024 from 208 long-dated BTC call options at June 30, 2024, up 286% –

This news release constitutes a “designated news release” for the purposes of the Company’s amended and restated prospectus supplement dated October 4, 2024, to its short form base shelf prospectus dated November 10, 2023.

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TORONTO, Ontario and BROSSARD, Québec, Nov. 13, 2024 (GLOBE NEWSWIRE) — Bitfarms Ltd. (Nasdaq/TSX: BITF), a global vertically integrated Bitcoin data center company, reported its financial results for the third quarter ended September 30, 2024. All financial references are in U.S. dollars.

During the quarter, Bitfarms continued to execute its transformational fleet upgrade and executed upon its strategic rebalancing and expansion of its operations in the U.S.

To that end, Bitfarms announced its acquisition of Stronghold Digital Mining, Inc. (Nasdaq: SDIG) (“Stronghold”), which is expected to put Bitfarms on track to increase its energy portfolio to over 950 MW by year-end 2025 with potential for multi-year expansion capacity of up to 1.6 GW. This represents a significant shift of Bitfarms’ portfolio towards the U.S., which will come to represent approximately 66% of the Company’s total portfolio, an eleven-fold increase from 6% operating power in the U.S. today. Bitfarms has already begun maximizing the utility of the Stronghold sites with two consecutive hosting agreements totaling 20,000 miners, signed in September and October, supporting approximately 4 EH/s. Upon close of the Stronghold acquisition, these hosting agreements will revert to self-mining operations.

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The Company continues to make progress on its fleet upgrade program, deploying 5,400 additional miners during the quarter and achieving its efficiency target of 21 w/TH three months ahead of schedule. This efficiency represents a 40% improvement year-to-date, reducing direct operating costs per terahash and improving gross margins.

In addition, Bitfarms will be upgrading the remaining 18,853 T21 miners to be delivered by Bitmain as part of Bitfarms’ fleet upgrade program announced last year. Under the agreement, Bitfarms will be installing more powerful and efficient S21 Pro miners, operating at 234 TH/s and 15 w/TH, which represents more than a 20% improvement from the T21 miners in both energy efficiency and hashrate.

During the quarter, Bitfarms took significant steps to strengthen its leadership team with new hires and a new management structure, providing greater scalability and accountability in data center development and operations, and laying the foundation for the establishment of HPC/AI operations. Bitfarms also strengthened its corporate governance with the appointment of two new directors and the appointment of the former Lead Director to Independent Chairman. The Bitfarms Board of Directors now consists of five members, four of whom are independent. The Company will hold a Special Meeting on November 20th to vote on an expansion of the Board from five to six members, the nomination of Andrew J. Chang to the Board, and the ratification of the Company’s Shareholder Rights Plan.

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In line with its strategy to diversify beyond Bitcoin mining and maximize the value of its power assets, Bitfarms has selected two U.S. sites for a one to two MW HPC/AI pilot site. While still early stages, the land and power are secured at both sites, with active conversations taking place with potential partners and suppliers to discuss potential accelerated deployment in 2025. The Company is currently in the process of finalizing terms, plans and budgets as the first step in executing a comprehensive long-term HPC/AI strategy.

CFO Jeff Lucas concluded, “Despite third quarter headwinds of record low hashprices for the Bitcoin mining industry, a 62% year-over-year increase in network difficulty, and the first full quarter following the April Halving Event, our mining operations remained profitable and continued to drive free cash flow. While we achieved our year-end efficiency target of 21 w/TH in the third quarter, shipping delays and continued miner servicing of our Bitmain T21s impacted our ability to reach 21 EH/s in 2024. We are working closely with Bitmain on warranty servicing and miner upgrades and expect to reach 21 EH/s in the first half of 2025.”

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“As previously communicated, 2024 has been a transformative year for Bitfarms,” stated CEO Ben Gagnon. “Year-to-date, we’ve refreshed nearly our entire fleet of miners, significantly improving our mining economics, acquired one new site and entered agreements to acquire two additional new sites in the U.S., and completely revamped our operational and Board structure, strengthening our leadership and corporate governance.  We are now uniquely positioned with a strategic pipeline of over 950 MW in 2025 with nearly half a gigawatt of power infrastructure unallocated with miners. This represents a massive, secured, and cost-effective near-term growth opportunity with the flexibility necessary to maximize shareholder value as we approach the anticipated 2025 Bitcoin bull cycle.”

Q3 2024 & Recent Operating Highlights

Operations

• Current hashrate of 11.9 EH/s, up from 10.4 EH/s in Q2 2024.
• Averaged 7.6 BTC per day in daily production for Q3 2024.

Data Center Portfolio Expansion & Fleet Upgrade

• Deployed 5,400 additional miners across three data centers in Canada, U.S., and Paraguay, for a total of approximately 47,900 miners deployed year-to-date in 2024.
• Entered into a definitive merger agreement, pursuant to which the Company will acquire Stronghold, a vertically integrated crypto asset mining company with operations located in Pennsylvania, in a stock-for-stock merger transaction.
• Closed the lease agreement in Sharon, Pennsylvania, providing the Company with an immediate capacity of 12 MW of electricity with up to 98 MW of additional development capacity. Bitfarms also signed a letter of intent for a lease to an additional 10 MW site, which would bring total site capacity to 120 MW.
• Entered into two miner hosting agreements with Stronghold as of October 31, 2024, which will accelerate the deployment of 20,000 miners supporting approximately 4.0 EH/s.
• On November 12, 2024, the Company amended its agreements with Bitmain to upgrade the remaining 18,853 Bitmain T21 miners to be delivered by Bitmain to superior performing S21 Pro miners. The upgrade will cost an incremental $33.2 million payable in cash or Bitcoin with the option for the Company to redeem the Bitcoin for cash in four quarterly payments based on the price of Bitcoin at the time the Bitcoin is originally tendered.

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Personnel Appointments & Corporate Updates

• Appointed Ben Gagnon as Chief Executive Officer (“CEO”) and Director of the Board of Directors (“the Board”), Liam Wilson as Chief Operating Officer, Benoit Gobeil as Chief Infrastructure Officer, Alex Brammer as SVP of Mining Operations, and Rachel Silverstein as U.S. General Counsel.
• Appointed Amy Freedman as Independent Director of the Board and Lead Director Brian Howlett as Independent Chairman of the Board; accepted the resignations of Nicolas Bonta and Andrés Finkielsztain from the Board.
• Entered into a settlement agreement with Riot Platforms, Inc. on September 24, 2024
• Settled the employment dispute with the former CEO.
• Nominated Andrew Chang for election to the Board at the Special Meeting of Shareholders, taking place on November 20, 2024.

Q3 2024 Financial Highlights

• Total revenue of $45 million, up 8% Q/Q.
• Gross mining profit* and gross mining margin* of $17 million and 38%, respectively, down from $21 million and 51% in Q2 2024, respectively.
• General and administrative expenses of $28 million, up 123% Q/Q.
• Operating loss of $44 million, which included $10 million accelerated depreciation on older miners in connection with the transformative fleet upgrade, compared to an operating loss of $24 million in Q2 2024, which included $46 million accelerated depreciation on older miners.
• Net loss of $37 million, or $(0.08) per basic and diluted share which included a $6 million non-cash gain for revaluation of warrant liabilities in connection with 2023 financing activities. This compares to a net loss of $27 million, or $(0.07) per basic and diluted share in Q2 2024, which included a $1 million non-cash expense for revaluation of warrant liabilities in connection with 2021 and 2023 financing activities.
• Adjusted EBITDA* of $6 million, or 14% of revenue, down from $12 million, or 28% of revenue, in Q2 2024.
• The Company earned 703 BTC at an average direct cost of production per BTC* of $36,000, compared to $30,600 in Q2 2024.
• Total cash cost of production per BTC* was $52,400 in Q3 2024, up from $47,300 in Q2 2024 due to higher energy cost, increased network difficulty and lower transaction fees.

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Liquidity**
As of September 30, 2024, the Company had total liquidity** of $146 million, comprised of $73 million in cash and 1,147 BTC valued at $73 million based on a BTC price of $63,300 at September 30, 2024. As of October 31, 2024, the Company held 1,188 BTC.

Q3 2024 and Recent Financing Activities

• Sold 461 BTC at an average price of $60,600 for total proceeds of $28 million in Q3 2024 and sold 194 of the 236 BTC earned during October 2024, generating total proceeds of $13 million. A portion of the funds was used to pay capital expenditures.
• Added 41 BTC to treasury in October 2024 for a total of 1,188 BTC held in treasury, representing a total value of $84 million based on a $71,000 BTC price on October 31, 2024.
• Synthetic HODL increased to 802 as of October 31, 2024 from 208 Bitcoin in Q2 2024, up 286%.
• Raised $66 million in net proceeds during Q3 2024 bringing the total year-to-date net proceeds to $279 million through November 12^th, 2024 through the Company’s 2024 at-the-market equity offering program.
• Deposited a total of $15.6 million with Stronghold as of October 31, 2024, which is refundable on December 31, 2025, in connection with the two hosting agreements.
• Collected the remaining $5 million balance of the Canadian sales tax recovery of the approximately $24 million total claims between February 5, 2022 and April 2024, for which the refund was confirmed by the provincial tax authorities in the second quarter of 2024.

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Quarterly Operating Performance

	Q3 2024	Q2 2024	Q3 2023
Total BTC earned	703	614	1,172
Average Watts/Average TH efficiency***	23	28	36
BTC sold	461	515	1,018

	As of September 30,	As of June 30,	As of September 30,
	2024	2024	2023
Operating EH/s	11.3	10.4	6.1
Operating capacity (MW)	310	310	234
Hydropower (MW)	256	256	183

Quarterly Average Revenue**** and Cost of Production per BTC*

	Q3 2024		Q2 2024		Q1 2024		Q4 2023		Q3 2023
Avg. Rev****/BTC	$60,900		$65,800		$52,400		$36,400		$28,100
Direct Cost*/BTC	$36,000		$30,600		$18,400		$14,400		$15,100
Total Cash Cost*/BTC	$52,400		$47,300		$27,900		$23,200		$20,800

^{* Gross mining profit, gross mining margin, EBITDA, EBITDA margin, Adjusted EBITDA, Adjusted EBITDA margin, Direct Cost per BTC and Total Cash Cost per BTC are non-IFRS financial measures or ratios and should be read in conjunction with, and should not be viewed as alternatives to or replacements of measures of operating results and liquidity presented in accordance with IFRS. Readers are referred to the reconciliations of non-IFRS measures included in the Company’s MD&A and at the end of this press release.
** Liquidity represents cash and balance of digital assets.
*** Average watts represent the energy consumption of miners.
**** Average revenue per BTC is for mining operations only and excludes Volta revenue.}

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Conference Call

Management will host a conference call today at 8:00 am EST. A presentation of the Q3 2024 results will be accessible before the call on the Investor website and can be accessed here.

The live webcast and a webcast replay of the conference call can be accessed here. To access the call by telephone, register here to receive dial-in numbers and a unique PIN to join the call.

Upcoming Conferences & Events

November 14: Cantor Crypto, Digital Assets & AI Infrastructure Conference (Miami)
November 19-20: ROTH Technology Conference (NYC)
November 20: Special Meeting of Bitfarms Shareholders (Virtual)
December 4: B. Riley Crypto & Energy Infrastructure Conference (NYC)
December 12: Northland Growth Conference (Virtual)
January 14-15, 2025: Needham Growth Conference (NYC)

Non-IFRS Measures*
As a Canadian company, Bitfarms follows International Financial Reporting Standards (IFRS) which are issued by the International Accounting Standard Board (IASB). Under IFRS rules, the Company does not reflect the revaluation gains on the mark-to-market of its Bitcoin holdings in its income statement. It also does not include the revaluation losses on the mark-to-market of its Bitcoin holdings in Adjusted EBITDA, which is a measure of the cash profitability of its operations and does not reflect the change in value of its assets and liabilities.

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The Company uses Adjusted EBITDA to measure its operating activities’ financial performance and cash generating capability.

2023 Restatement
During the preparation of the Company’s financial statements for the year ended December 31, 2023, the Company reassessed the application of IFRS Accounting Standards on the accounting for warrants issued in connection with private placement financings conducted in 2021 and, as such, restated (the “Restatement”) its consolidated statements of financial position as of December 31, 2022 and January 1, 2022, its consolidated statements of profit or loss and comprehensive profit or loss for the year ended December 31, 2022,and the three and nine months ended September 30, 2024 and its consolidated statements of cash flows for the year ended December 31, 2022 and the nine months ended September 30, 2023, which were previously filed on SEDAR+ and EDGAR. For further details, consult Note 3e of the audited consolidated financial statements for the year ended December 31, 2023, and Note 3d of the interim condensed consolidated financial statements for the three and nine months ended September 30, 2024, available on SEDAR+ and EDGAR. As described in the interim MD&A for three and nine months ended September 30, 2024, available on SEDAR+ and EDGAR, the Company is undertaking remediation efforts in light of the Restatement and in order to improve the overall effectiveness of its internal control over financial reporting for the accounting of complex financial instruments.

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About Bitfarms Ltd.
Founded in 2017, Bitfarms is a global Bitcoin data center company that contributes its computational power to one or more mining pools from which it receives payment in Bitcoin. Bitfarms develops, owns, and operates vertically integrated mining farms with in-house management and company-owned electrical engineering, installation service, and multiple onsite technical repair centers. The Company’s proprietary data analytics system delivers best-in-class operational performance and uptime.

Bitfarms currently has 12 operating Bitcoin data centers and two under development, and two under Hosting agreements, situated in four countries: Canada, the United States, Paraguay, and Argentina. Powered predominantly by environmentally friendly hydro-electric and long-term power contracts, Bitfarms is committed to using sustainable and often underutilized energy infrastructure.

To learn more about Bitfarms’ events, developments, and online communities:

www.bitfarms.com
https://www.facebook.com/bitfarms/
https://twitter.com/Bitfarms_io
https://www.instagram.com/bitfarms/
https://www.linkedin.com/company/bitfarms/

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Glossary of Terms

• BTC BTC/day = Bitcoin or Bitcoin per day
• EH or EH/s = Exahash or exahash per second
• MW or MWh = Megawatts or megawatt hour
• w/TH = Watts/Terahash efficiency (includes cost of powering supplementary equipment)
• Q/Q = Quarter over Quarter
• Y/Y = Year over Year
• Synthetic HODL™ = the use of instruments that create Bitcoin equivalent exposure
• HPC/AI = High Performance Computing / Artificial Intelligence

Forward-Looking Statements  

This news release contains certain “forward-looking information” and “forward-looking statements” (collectively, “forward-looking information”) that are based on expectations, estimates and projections as at the date of this news release and are covered by safe harbors under Canadian and United States securities laws. The statements and information in this release regarding the impact of the hosting agreements, projected growth, target hashrate, opportunities relating to the Company’s geographical diversification and expansion, deployment of miners as well as the timing therefore, closing of the Stronghold acquisition on a timely basis and on the terms as announced, the ability to gain access to additional electrical power and grow hashrate of the Stronghold business, performance of the plants and equipment upgrades and the impact on operating capacity including the target hashrate and multi-year expansion capacity, the opportunities to leverage Bitfarms’ proven expertise to successfully enhance energy efficiency and hashrate, and other statements regarding future growth, plans and objectives of the Company are forward-looking information.

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Any statements that involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “prospects”, “believes” or “intends” or variations of such words and phrases or stating that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken to occur or be achieved) are not statements of historical fact and may be forward-looking information.

This forward-looking information is based on assumptions and estimates of management of Bitfarms at the time they were made, and involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of Bitfarms to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. Such factors, risks and uncertainties include, among others: receipt of the approval of the shareholders of Stronghold and the Toronto Stock Exchange for the Stronghold acquisition as well as other applicable regulatory approvals; that the Stronghold acquisition may not close within the timeframe anticipated or at all or may not close on the terms and conditions currently anticipated by the parties for a number of reasons including, without limitation, as a result of a failure to satisfy the conditions to closing of the Stronghold acquisition; the construction and operation of new facilities may not occur as currently planned, or at all; expansion of existing facilities may not materialize as currently anticipated, or at all; new miners may not perform up to expectations; revenue may not increase as currently anticipated, or at all; the ongoing ability to successfully mine digital currency is not assured; failure of the equipment upgrades to be installed and operated as planned; the availability of additional power may not occur as currently planned, or at all; expansion may not materialize as currently anticipated, or at all; the power purchase agreements and economics thereof may not be as advantageous as expected; potential environmental cost and regulatory penalties due to the operation of the Stronghold plants which entail environmental risk and certain additional risk factors particular to the business of Stronghold including, land reclamation requirements may be burdensome and expensive, changes in tax credits related to coal refuse power generation could have a material adverse effect on the business, financial condition, results of operations and future development efforts, competition in power markets may have a material adverse effect on the results of operations, cash flows and the market value of the assets, the business is subject to substantial energy regulation and may be adversely affected by legislative or regulatory changes, as well as liability under, or any future inability to comply with, existing or future energy regulations or requirements, the operations are subject to a number of risks arising out of the threat of climate change, and environmental laws, energy transitions policies and initiatives and regulations relating to emissions and coal residue management, which could result in increased operating and capital costs and reduce the extent of business activities, operation of power generation facilities involves significant risks and hazards customary to the power industry that could have a material adverse effect on our revenues and results of operations, and there may not have adequate insurance to cover these risks and hazards, employees, contractors, customers and the general public may be exposed to a risk of injury due to the nature of the operations, limited experience with carbon capture programs and initiatives and dependence on third-parties, including consultants, contractors and suppliers to develop and advance carbon capture programs and initiatives, and failure to properly manage these relationships, or the failure of these consultants, contractors and suppliers to perform as expected, could have a material adverse effect on the business, prospects or operations; the digital currency market; the ability to successfully mine digital currency; it may not be possible to profitably liquidate the current digital currency inventory, or at all; a decline in digital currency prices may have a significant negative impact on operations; an increase in network difficulty may have a significant negative impact on operations; the volatility of digital currency prices; the anticipated growth and sustainability of hydroelectricity for the purposes of cryptocurrency mining in the applicable jurisdictions; the inability to maintain reliable and economical sources of power to operate cryptocurrency mining assets; the risks of an increase in electricity costs, cost of natural gas, changes in currency exchange rates, energy curtailment or regulatory changes in the energy regimes in the jurisdictions in which Bitfarms and Stronghold operate and the potential adverse impact on profitability; future capital needs and the ability to complete current and future financings, including Bitfarms’ ability to utilize an at-the-market offering program ( “ATM Program”) and the prices at which securities may be sold in such ATM Program, as well as capital market conditions in general; share dilution resulting from an ATM Program and from other equity issuances; volatile securities markets impacting security pricing unrelated to operating performance; the risk that a material weakness in internal control over financial reporting could result in a misstatement of financial position that may lead to a material misstatement of the annual or interim consolidated financial statements if not prevented or detected on a timely basis; historical prices of digital currencies and the ability to mine digital currencies that will be consistent with historical prices; and the adoption or expansion of any regulation or law that will prevent Bitfarms from operating its business, or make it more costly to do so. For further information concerning these and other risks and uncertainties, refer to Bitfarms’ filings on www.sedarplus.ca (which are also available on the website of the U.S. Securities and Exchange Commission (the “SEC”) at www.sec.gov), including the MD&A for the year-ended December 31, 2023, filed on March 7, 2024 and the MD&A for the three and nine months ended September 30, 2024 filed on November 13, 2024, and its registration statement on Form F-4 (File No. 333-282657) filed by Bitfarms with the SEC (the “registration statement”), which includes a proxy statement of Stronghold that also constitutes a prospectus of Bitfarms (the “proxy statement/prospectus”). Although Bitfarms has attempted to identify important factors that could cause actual results to differ materially from those expressed in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended, including factors that are currently unknown to or deemed immaterial by Bitfarms. There can be no assurance that such statements will prove to be accurate as actual results, and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on any forward-looking information. Bitfarms does not undertake any obligation to revise or update any forward-looking information other than as required by law. Trading in the securities of the Company should be considered highly speculative. No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein. Neither the Toronto Stock Exchange, Nasdaq, or any other securities exchange or regulatory authority accepts responsibility for the adequacy or accuracy of this release.

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Additional Information about the Merger and Where to Find It
This communication relates to a proposed merger between Stronghold and Bitfarms. In connection with the proposed merger, Bitfarms has filed the registration statement with the SEC. After the registration statement is declared effective, Stronghold will mail the proxy statement/prospectus to its shareholders. This communication is not a substitute for the registration statement, the proxy statement/prospectus or any other relevant documents Bitfarms and Stronghold has filed or will file with the SEC. Investors are urged to read the proxy statement/prospectus (including all amendments and supplements thereto) and other relevant documents filed with the SEC carefully and in their entirety if and when they become available because they will contain important information about the proposed merger and related matters.

Investors may obtain free copies of the registration statement, the proxy statement/prospectus and other relevant documents filed by Bitfarms and Stronghold with the SEC, when they become available, through the website maintained by the SEC at www sec.gov. Copies of the documents may also be obtained for free from Bitfarms by contacting Bitfarms’ Investor Relations Department at investors@bitfarms.com and from Stronghold by contacting Stronghold’s Investor Relations Department at SDIG@gateway-grp.com.

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No Offer or Solicitation
This communication is not intended to and does not constitute an offer to sell or the solicitation of an offer to buy, sell or solicit any securities or any proxy, vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be deemed to be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Participants in Solicitation Relating to the Merger 
Bitfarms, Stronghold, their respective directors and certain of their respective executive officers may be deemed to be participants in the solicitation of proxies from Stronghold’s shareholders in respect of the proposed merger. Information regarding Bitfarms’ directors and executive officers can be found in Bitfarms’ annual information form for the year ended December 31, 2023, filed on March 7, 2024, as well as its other filings with the SEC. Information regarding Stronghold’s directors and executive officers can be found in Stronghold’s proxy statement for its 2024 annual meeting of stockholders, filed with the SEC on April 29, 2024, and supplemented on June 7, 2024, and in its Form 10-K for the year ended December 31, 2023, filed with the SEC on March 8, 2024. This communication may be deemed to be solicitation material in respect of the proposed merger. Additional information regarding the interests of such potential participants, including their respective interests by security holdings or otherwise, is set forth in the proxy statement/prospectus and other relevant documents filed with the SEC in connection with the proposed merger if and when they become available. These documents are available free of charge on the SEC’s website and from Bitfarms and Stronghold using the sources indicated above.

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Investor Relations Contacts:

Bitfarms
Tracy Krumme
SVP, Head of IR & Corp. Comms.
+1 786-671-5638
tkrumme@bitfarms.com

Media Contacts:

Québec: Tact
Louis-Martin Leclerc
+1 418-693-2425
lmleclerc@tactconseil.ca        

Bitfarms Ltd. Consolidated Financial & Operational Results
		Three months ended September 30,								Nine months ended September 30,
(U.S.$ in thousands except where indicated)		2024		2023 (3)		$ Change		% Change		2024		2023 (3)		$ Change		% Change
Revenues		44,853		34,596		10,257		30	%	136,718		100,125		36,593		37	%
Cost of revenues		(56,642	)	(43,462	)	(13,180	)	30	%	(170,464	)	(123,384	)	(47,080	)	38	%
Gross loss		(11,789	)	(8,866	)	(2,923	)	33	%	(33,746	)	(23,259	)	(10,487	)	45	%
Gross margin (1)		(26	)%	(26	)%	—		—		(25	)%	(23	)%	—		—
Operating expenses
General and administrative expenses		(27,600	)	(8,372	)	(19,228	)	230	%	(53,198	)	(25,887	)	(27,311	)	106	%
(Revaluation loss) reversal of revaluation loss on digital assets		—		(1,183	)	1,183		100	%	—		1,512		(1,512	)	(100	)%
Loss on disposition of property, plant and equipment and deposits		(875	)	(217	)	(658	)	303	%	(606	)	(1,776	)	1,170		(66	)%
Impairment on short-term prepaid deposits, property, plant and equipment and assets held for sale		(3,628	)	—		(3,628	)	(100	)%	(3,628	)	(9,982	)	6,354		(64	)%
Operating loss		(43,892	)	(18,638	)	(25,254	)	135	%	(91,178	)	(59,392	)	(31,786	)	54	%
Operating margin (1)		(98	)%	(54	)%	—		—		(67	)%	(59	)%	—		—
Net financial income		7,241		2,532		4,709		186	%	17,367		12,492		4,875		39	%
Net loss before income taxes		(36,651	)	(16,106	)	(20,545	)	128	%	(73,811	)	(46,900	)	(26,911	)	57	%
Income tax (expense) recovery		2		(401	)	403		100	%	4,583		23		4,560		nm
Net loss		(36,649	)	(16,507	)	(20,142	)	122	%	(69,228	)	(46,877	)	(22,351	)	48	%
Basic and diluted loss per share (in U.S. dollars)		(0.08	)	(0.06	)	—		—		(0.17	)	(0.19	)	—		—
Change in revaluation surplus – digital assets, net of tax		721		(824	)	1,545		188	%	12,699		1,567		11,132		710	%
Total comprehensive loss, net of tax		(35,928	)	(17,331	)	(18,597	)	107	%	(56,529	)	(45,310	)	(11,219	)	25	%
Gross Mining profit (2)		16,699		14,527		2,172		15	%	68,689		44,823		23,866		53	%
Gross Mining margin (2)		38	%	44	%	—		—		52	%	47	%	—		—
EBITDA (2)		(9,836	)	5,999		(15,835	)	(264	)%	38,563		18,633		19,930		107	%
EBITDA margin (2)		(22	)%	17	%	—		—		28	%	19	%	—		—
Adjusted EBITDA (2)		6,352		8,883		(2,531	)	(28	)%	41,424		27,226		14,198		52	%
Adjusted EBITDA margin (2)		14	%	26	%	—		—		30	%	27	%	—		—

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1	Gross margin and Operating margin are supplemental financial ratios; refer to Section 9 – Non-IFRS and Other Financial Measures and Ratios of the Company’s MD&A.
2	Gross Mining profit, Gross Mining margin, EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-IFRS measures or ratios; refer to Section 9 – Non-IFRS and Other Financial Measures and Ratios of the Company’s MD&A.
3	Prior year figures are derived from restated financial statements. Refer to the Q3 2024 interim financial statements Note 3d – Basis of Presentation and Material Accounting Policy Information – Restatement.

 

Bitfarms Ltd. Reconciliation of Consolidated Net Income (loss) to EBITDA and Adjusted EBITDA
		Three months ended September 30,								Nine months ended September 30,
(U.S.$ in thousands except where indicated)		2024		2023 (1)		$ Change		% Change		2024		2023 (1)		$ Change		% Change
Revenues		44,853		34,596		10,257		30	%	136,718		100,125		36,593		37	%
Net loss before income taxes		(36,651	)	(16,106	)	(20,545	)	128	%	(73,811	)	(46,900	)	(26,911	)	57	%
Interest (income) and expense		(2,014	)	338		(2,352	)	(696	)%	(4,009	)	2,538		(6,547	)	(258	)%
Depreciation and amortization		28,829		21,767		7,062		32	%	125,143		62,995		62,148		99	%
Sales tax recovery – depreciation and amortization		—		—		—		—	%	(8,760	)	—		(8,760	)	100	%
EBITDA		(9,836	)	5,999		(15,835	)	(264	)%	38,563		18,633		19,930		107	%
EBITDA margin		(22)%		17	%	—		—		28	%	19	%	—		—
Share-based payment		5,159		2,011		3,148		157	%	9,928		7,009		2,919		42	%
Impairment on short-term prepaid deposits, property, plant and equipment and assets held for sale		3,628		—		3,628		100	%	3,628		9,982		(6,354	)	(64	)%
Revaluation loss (reversal of revaluation loss) on digital assets		—		1,183		(1,183	)	100	%	—		(1,512	)	1,512		100	%
Gain on extinguishment of long-term debt and lease liabilities		—		—		—		—	%	—		(12,835	)	12,835		100	%
(Gain) loss revaluation of warrants		(5,704	)	(2,196	)	(3,508	)	160	%	(13,289	)	214		(13,503	)	nm
Gain on disposition of marketable securities		(780	)	(4,120	)	3,340		(81	)%	(1,531	)	(11,246	)	9,715		(86	)%
Service fees not associated with ongoing operations		9,253		—		9,253		100	%	12,479		—		12,479		100	%
Sales tax recovery – prior years – energy and infrastructure and general and administrative expenses (2)		—		2,366		(2,366	)	100	%	(16,081	)	6,796		(22,877	)	(337	)%
Net financial expense and other		4,632		3,640		992		27	%	7,727		10,185		(2,458	)	(24	)%
Adjusted EBITDA		6,352		8,883		(2,531	)	(28	)%	41,424		27,226		14,198		52	%
Adjusted EBITDA margin		14	%	26	%	—		—		30	%	27	%	—		—

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1	Prior year figures are derived from restated financial statements. Refer to the Q2 2024 interim financial statements Note 3d – Basis of Presentation and Material Accounting Policy Information – Restatement.
2	Sales tax recovery relating to energy and infrastructure and general and administrative expenses have been allocated to their respective periods; refer to the Q3 2024 interim financial statements Note 23b – Additional Details to the Statement of Profit or Loss and Comprehensive Profit or Loss (Canadian sales tax refund).

Bitfarms Ltd. Calculation of Gross Mining Profit and Gross Mining Margin
		Three months ended September 30,								Nine months ended September 30,
(U.S.$ in thousands except where indicated)		2024		2023		$ Change		% Change		2024		2023		$ Change		% Change
Gross loss		(11,789	)	(8,866	)	(2,923	)	33	%	(33,746	)	(23,259	)	(10,487	)	45	%
Non-Mining revenues¹		(1,451	)	(1,697	)	246		(14	)%	(3,510	)	(3,775	)	265		(7	)%
Depreciation and amortization		28,829		21,767		7,062		32	%	125,143		62,995		62,148		99	%
Sales tax recovery – depreciation and amortization		—		—		—		—	%	(8,760	)	—		(8,760	)	(100	)%
Electrical components and salaries		1,097		1,299		(202	)	(16	)%	2,678		3,050		(372	)	(12	)%
Sales tax recovery – prior years – energy and infrastructure²		—		2,138		(2,138	)	100	%	(14,338	)	6,155		(20,493	)	(333	)%
Other		13		(114	)	127		nm		1,222		(343	)	1,565		nm
Gross Mining profit		16,699		14,527		2,172		15	%	68,689		44,823		23,866		53	%
Gross Mining margin		38	%	44	%	—		—		52	%	47	%	—		—

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(1)		Non-Mining revenues reconciliation:

		Three months ended September 30,								Nine months ended September 30,
(U.S.$ in thousands except where indicated)		2024		2023		$ Change		% Change		2024		2023		$ Change		% Change
Revenues		44,853		34,596		10,257		30	%	136,718		100,125		36,593		37	%
Less Mining related revenues for the purpose of calculating gross Mining margin:
Mining revenues³		(43,402	)	(32,899	)	(10,503	)	32	%	(133,208	)	(96,350	)	(36,858	)	38	%
Non-Mining revenues		1,451		1,697		(246	)	(14	)%	3,510		3,775		(265	)	(7	)%

(2)		Sales tax recovery relating to energy and infrastructure expenses has been allocated to their respective periods; refer to Q3 2024 interim financial statements Note 23b – Additional Details to the Statement of Profit or Loss and Comprehensive Profit or Loss (Canadian sales tax refund).
(3)		Mining revenues include Revenues from sale of computational power used for hashing calculations and Revenue from computational power sold in exchange of services.

Bitfarms Ltd. Calculation of Direct Cost and Direct Cost per BTC
		Three months ended September 30,								Nine months ended September 30,
(U.S.$ in thousands except where indicated)		2024		2023		$ Change		% Change		2024		2023		$ Change		% Change
Cost of revenues		56,642		43,462		13,180		30	%	170,464		123,384		47,080		38	%
Depreciation and amortization		(28,829	)	(21,767	)	(7,062	)	32	%	(125,143	)	(62,995	)	(62,148	)	99	%
Sales tax recovery – depreciation and amortization		—		—		—		—	%	8,760		—		8,760		100	%
Electrical components and salaries		(1,097	)	(1,299	)	202		(16	)%	(2,678	)	(3,050	)	372		(12	)%
Infrastructure		(1,432	)	(600	)	(832	)	139	%	(4,328	)	(2,303	)	(2,025	)	88	%
Sales tax recovery – prior years – energy and infrastructure (1)		—		(2,138	)	2,138		(100	)%	14,338		(6,155	)	20,493		(333	)%
Other		—		—		—		—	%	—		82		(82	)	(100	)%
Direct Cost		25,284		17,658		7,626		43	%	61,413		48,963		12,450		25	%
Quantity of BTC earned		703		1,172		(469	)	(40	)%	2,260		3,692		(1,432	)	(39	)%
Direct Cost per BTC (in U.S. dollars)		36,000		15,100		20,900		138	%	27,200		13,300		13,900		105	%

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Bitfarms Ltd. Calculation of Total Cash Cost and Total Cost per BTC
		Three months ended September 30,								Nine months ended September 30,
(U.S.$ in thousands except where indicated)		2024		2023		$ Change		% Change		2024		2023		$ Change		% Change
Cost of revenues		56,642		43,462		13,180		30	%	170,464		123,384		47,080		38	%
General and administrative expenses		27,600		8,372		19,228		230	%	53,198		25,887		27,311		106	%
		84,242		51,834		32,408		63	%	223,662		149,271		74,391		50	%
Depreciation and amortization		(28,829	)	(21,767	)	(7,062	)	32	%	(125,143	)	(62,995	)	(62,148	)	99	%
Non-cash service expense (2)		(564	)	—		(564	)	100	%	(564	)	—		(564	)	100	%
Sales tax recovery – depreciation and amortization		—		—		—		—	%	8,760		—		8,760		100	%
Electrical components and salaries		(1,097	)	(1,299	)	202		(16	)%	(2,678	)	(3,050	)	372		(12	)%
Share-based payment		(5,159	)	(2,011	)	(3,148	)	157	%	(9,928	)	(7,009	)	(2,919	)	42	%
Service fees not associated with ongoing operations		(9,253	)	—		(9,253	)	100	%	(12,479	)	—		(12,479	)	100	%
Sales tax recovery – prior years – energy and infrastructure and general and administrative expenses (1)		—		(2,366	)	2,366		100	%	16,081		(6,796	)	22,877		nm
Other		(2,500	)	23		(2,523	)	nm		(5,659	)	510		(6,169	)	nm
Total Cash Cost		36,840		24,414		12,426		51	%	92,052		69,931		22,121		32	%
Quantity of BTC earned		703		1,172		(469	)	(40	)%	2,260		3,692		(1,432	)	(39	)%
Total Cash Cost per BTC (in U.S. dollars)		52,400		20,800		31,600		152	%	40,700		18,900		21,800		115	%

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1	Sales tax recovery relating to energy and infrastructure and general and administrative expenses have been allocated to their respective periods; refer to Q3 2024 interim financial statements Note 23b – Additional Details to the Statement of Profit or Loss and Comprehensive Profit or Loss (Canadian sales tax refund).
2	Non-cash service expense, included in infrastructure, which was exchanged for computational power sold.

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With Donald Trump entering the White House in January, some Americans may consider a fresh start in a stable, welcoming, and progressive country like Canada.

Known for its high quality of life, universal healthcare, and multicultural environment, Canada has long been a preferred destination for those seeking a secure and peaceful lifestyle.

Here, we explore six Canadian cities that offer a variety of lifestyle options for Americans who may be contemplating relocation.

Each city has its unique character, opportunities, and amenities, providing a new beginning that feels like home.

1. Toronto, Ontario

Overview:
Toronto, Canada’s largest city, offers a dynamic, metropolitan lifestyle reminiscent of New York or Chicago. It’s an economic powerhouse with a rich cultural scene and unparalleled diversity, making it a natural choice for Americans looking for job opportunities and cultural vibrancy.

Why It Appeals to Americans:

• Job Opportunities: Toronto’s job market is robust, particularly in finance, tech, healthcare, and media. The city is also home to the Toronto Stock Exchange and many multinational companies.
• Diversity and Community: Known as one of the most multicultural cities worldwide, Toronto is welcoming to people from all walks of life.
• Urban Amenities and Quality of Life: Ranked as one of the safest and most livable cities, Toronto offers excellent healthcare, education, and entertainment.

Considerations:
Toronto’s cost of living, especially housing, is among the highest in Canada. Those relocating for job opportunities may find it easier to manage expenses, but careful budgeting is essential.

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2. Vancouver, British Columbia

Overview:
Nestled between mountains and the Pacific Ocean, Vancouver is famous for its stunning natural beauty, mild climate, and thriving industries in tech, film, and environmental sciences. It’s ideal for those who want access to outdoor adventures without sacrificing urban amenities.

Why It Appeals to Americans:

• Natural Beauty and Climate: Vancouver’s landscape includes beaches, mountains, and forests, making it a haven for outdoor enthusiasts. Its mild winters and cool summers are also attractive for those avoiding harsher climates.
• Booming Tech and Media Sectors: Often called “Hollywood North,” Vancouver attracts many professionals in film, tech, and media, making it especially appealing for Americans from the West Coast.
• Sustainability and Progressiveness: Vancouver’s eco-friendly policies and community focus make it a great fit for those who prioritize environmental consciousness.

Considerations:
Vancouver’s cost of living, especially in housing, is high, so it’s ideal for those with established careers or remote work flexibility.

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3. Montreal, Quebec

Overview:
Montreal combines the charm of Europe with North American comforts, creating a vibrant, bilingual atmosphere with affordable living and a thriving cultural scene. Known for its arts, festivals, and unique history, Montreal is a great choice for those who appreciate a mix of tradition and modernity.

Why It Appeals to Americans:

• Affordable Living: Compared to Toronto and Vancouver, Montreal offers lower housing costs, making it a great option for families or those on a budget.
• Cultural Richness: Montreal is known for its world-class festivals, art galleries, and music scene, attracting creative and artistic individuals.
• Bilingual Lifestyle: While French is the primary language, English is widely spoken, making it accessible yet giving newcomers a chance to embrace bilingualism.

Considerations:
Learning some French is beneficial in Montreal, especially for social integration and work, as the city embraces its Francophone roots.

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4. Calgary, Alberta

Overview:
Calgary provides a balance of urban energy and outdoor adventure, with a strong economy and proximity to the stunning Rocky Mountains. Known for its friendly residents and practical living costs, Calgary is ideal for those seeking career opportunities and easy access to nature.

Why It Appeals to Americans:

• Affordable Housing and Lower Taxes: Calgary offers affordable housing compared to other major Canadian cities and has no provincial sales tax, making it attractive for families.
• Booming Job Market: Calgary’s job market is strong, particularly in the oil, gas, and renewable energy sectors, though tech is also on the rise.
• Outdoor Lifestyle: With the Rockies just an hour away, Calgary is perfect for those who enjoy skiing, hiking, and other outdoor activities.

Considerations:
Calgary has long winters with significant snowfall, so newcomers should be prepared for colder temperatures during winter months.

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5. Ottawa, Ontario

Overview:
Canada’s capital, Ottawa, is known for its political significance, high quality of life, and beautiful architecture. It’s a city that combines urban sophistication with a community feel, making it ideal for professionals, families, and retirees alike.

Why It Appeals to Americans:

• Stable Job Market: Ottawa has a strong job market, especially in government, tech, and education, and is home to Canada’s largest high-tech park.
• Quality of Life: Known for its clean environment, safe neighborhoods, and extensive green spaces, Ottawa consistently ranks high in quality of life.
• Bilingual and Multicultural: While English is widely spoken, Ottawa’s bilingual nature adds a cultural dimension that may be appealing to Americans interested in embracing new experiences.

Considerations:
Winters in Ottawa can be long and cold, though the city has plenty of winter activities, such as skating on the Rideau Canal, to make the season enjoyable.

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6. Halifax, Nova Scotia

Overview:
Halifax offers a slower pace of life, with strong community ties, proximity to the Atlantic Ocean, and affordable living costs. It’s perfect for those seeking a more relaxed lifestyle in a friendly environment with rich maritime history.

Why It Appeals to Americans:

• Affordable Living: Halifax’s cost of living is more manageable than in larger cities, making it attractive for remote workers, retirees, or those looking to downsize.
• Growing Job Market: Halifax’s economy is growing, especially in ocean tech, healthcare, and education. Its accessible job market makes it a viable option for many professionals.
• Community and Nature: Halifax’s strong community feel and access to coastal beauty make it an ideal place for Americans seeking a close-knit, friendly city near the sea.

Considerations:
Halifax may not have the same job diversity as larger Canadian cities, so it’s best suited for remote workers, retirees, or those with job offers.

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Each of these Canadian cities offers a unique mix of opportunities, culture, and lifestyle that may appeal to Americans considering relocation. Whether you’re drawn to the metropolitan buzz of Toronto, the outdoor beauty of Vancouver, the European flair of Montreal, the balanced lifestyle of Calgary, the political and cultural richness of Ottawa, or the coastal charm of Halifax, Canada offers diverse and welcoming cities that align with a wide range of priorities and lifestyles.

FAQ: Moving to Canada from the U.S.

TORONTO, Nov. 12, 2024 (GLOBE NEWSWIRE) — Martinrea International Inc. (TSX : MRE), a diversified and global automotive supplier engaged in the design, development and manufacturing of highly engineered, value-added Lightweight Structures and Propulsion Systems, today announced the release of its financial results for the third quarter ended September 30, 2024, and declared a quarterly cash dividend of $0.05 per share.

HIGHLIGHTS

• Third quarter total sales of $1,237.5 million, production sales of $1,167.3 million.
• Third quarter Adjusted EBITDA(1) of $154.1 million, 12.5% of total sales.
• Third quarter Operating Income Margin of 5.3%; Adjusted Operating Income Margin(1) was 5.9% for the nine months ended September 30, 2024.
• Third quarter Free Cash Flow(1) (excluding principal payments of IFRS-16 lease liabilities) was $57.0 million; Free Cash Flow(1) was $107.4 million for the nine months ended September 30, 2024, a notable improvement over $75.5 million generated in the nine months ended September 30, 2023.
• Third quarter diluted net earnings per share of $0.19 or $0.44 per share at a normalized effective tax rate after adjusting for unusual foreign exchange movements between the Mexican Peso against the U.S. dollar. These foreign exchange movements are non-cash in nature, do not impact cash taxes and tend to balance out over time (refer to “Overall Results” section for further details).
• Net Debt-to-Adjusted EBITDA(1) ratio, excluding the impact of IFRS 16, ended the third quarter at 1.46x.
• New business awards of approximately $35 million in annualized sales at mature volumes.
• Quarterly cash dividend of $0.05 per share declared.

OVERVIEW

Pat D’Eramo, Chief Executive Officer, stated: “Our third quarter financial results were solid, and met our internal expectations based on the lower level of industry production volumes in the quarter. Our Free Cash Flow(1) was strong, and our Adjusted EBITDA(1) was solid, with Adjusted EBITDA Margin(1) up year over year. Operationally, we are executing well. We continue to drive efficiency gains and cost savings through our Martinrea Operating System. In addition, we continue to make good progress in commercial negotiations with our customers, obtaining compensation for volume shortfalls on electric vehicle programs and lingering inflationary costs. We are experiencing some further production volume shortfalls in the fourth quarter as OEMs adjust inventories on a number of platforms, some of which are big programs for us. We have been impacted by OEM production shutdowns, often with little to no advance warning, which makes it challenging to properly flex costs. The impact is being felt across all powertrain types, not just electric vehicles. While this will impact our financial performance in the fourth quarter, we expect production volumes to improve beginning in the first quarter of 2025, as inventories adjust. Interest rates, which are coming down in both the U.S. and Canada, with further cuts expected, should help to improve vehicle affordability, which in turn, should lead to higher sales for suppliers.”

He continued: “I am pleased to announce that we have been awarded new business representing $35 million in annualized sales at mature volumes, consisting of $30 million in Lightweight Structures with multiple customers including International Motors (formerly Navistar), BMW, and Nissan, and $5 million in Propulsion Systems, with Audi.”

Peter Cirulis, Chief Financial Officer, stated: “We are pleased with our financial performance in the third quarter. We are driving a healthy level of Free Cash Flow(1) from the business, and our balance sheet is in great shape. Sales for the third quarter, excluding tooling sales of $70.2 million, were $1,167.3 million. Third quarter Adjusted EBITDA was $154.1 million, and Adjusted EBITDA Margin of 12.5% was up 60 basis points year over year. Free Cash Flow(1) (excluding principal payments of IFRS-16 lease liabilities) was $57.0 million in the third quarter, and $107.4 million on a year-to-date basis, a big improvement over the $75.5 million generated in the comparable 2023 period, driven in part by lower capex. On a full year basis, we project that we will come in at the high end of our 2024 Free Cash Flow(1) outlook range of $100 million to $150 million, excluding lease payments, and potentially even better.”

He continued: “Net Debt(1) (excluding IFRS-16 lease liabilities) declined by approximately $32 million quarter over quarter, to $820.1 million, reflecting the Free Cash Flow(1) profile for the quarter. Approximately $9.5 million was spent during the quarter, repurchasing approximately 826,000 shares through our normal course issuer bid. Our-Net-Debt-to-Adjusted EBITDA(1) ratio (excluding the impact of IFRS 16) ended the quarter at 1.46x, in line with our target leverage ratio of 1.5x or better.”

Rob Wildeboer, Executive Chairman, stated: “We are executing well operationally and financially, and allocating capital with a view to maximizing returns for our stakeholders. We have previously mentioned that capital allocation would be balanced between share buybacks and debt reduction. Both are important priorities for us, and we have demonstrated disciplined execution on both fronts, including during the third quarter. In the past year and a half, since our net debt hit an all-time high of $956 million, we have paid down $136 million in debt, repurchased 6.5 million common shares, equal to 8% of shares outstanding, and reduced our Net-Debt-to-Adjusted EBITDA(1) ratio from 1.90x to 1.46x. We believe consistent Free Cash Flow(1) generation is the path to a higher valuation. On behalf of the executive management team, we would like to thank our people for their hard work in delivering a solid quarterly performance, as well as our shareholders and other stakeholders for their continued support.”

RESULTS OF OPERATIONS

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 three and nine months ended September 30, 2024 (“MD&A”), the Company’s interim condensed consolidated financial statements for the three and nine months ended September 30, 2024 (the “interim financial statements”) and the Company’s Annual Information Form for the year ended December 31, 2023 can be found at www.sedarplus.ca.     

OVERALL RESULTS

Results of operations may include certain items which have been separately disclosed, where appropriate, in order to provide a clear assessment of the underlying Company results. In addition to IFRS measures, management uses non-IFRS measures in the Company’s disclosures that it believes provide the most appropriate basis on which to evaluate the Company’s results.

The following tables set out certain highlights of the Company’s performance for the three and nine months ended September 30, 2024 and 2023. Refer to the Company’s interim financial statements for the three and nine months ended September 30, 2024 for a detailed account of the Company’s performance for the periods presented in the tables below.

	Three months ended September 30, 2024				Three months ended September 30, 2023				$ Change			% Change
Sales	$	1,237,493			$	1,378,938			(141,445	)		(10.3	%)
Gross Margin		163,350				181,194			(17,844	)		(9.8	%)
Operating Income		65,879				83,015			(17,136	)		(20.6	%)
Net Income for the period		14,157				53,744			(39,587	)		(73.7	%)
Net Earnings per Share – Basic and Diluted	$	0.19			$	0.68			(0.49	)		(72.1	%)
Non-IFRS Measures**
Adjusted Operating Income	$	65,879			$	83,015			(17,136	)		(20.6	%)
% of Sales		5.3	%			6.0	%
Adjusted EBITDA		154,129				163,482			(9,353	)		(5.7	%)
% of Sales		12.5	%			11.9	%
Adjusted Net Income*		14,157				53,744			(39,587	)		(73.7	%)
Adjusted Net Earnings per Share – Basic and Diluted*	$	0.19			$	0.68			(0.49	)		(72.1	%)

	Nine months ended September 30, 2024				Nine months ended September 30, 2023				$ Change			% Change
Sales	$	3,863,199			$	4,043,882			(180,683	)		(4.5	%)
Gross Margin		519,517				522,169			(2,652	)		(0.5	%)
Operating Income		215,019				240,628			(25,609	)		(10.6	%)
Net Income for the period		98,786				151,815			(53,029	)		(34.9	%)
Net Earnings per Share – Basic and Diluted	$	1.30			$	1.90			(0.60	)		(31.6	%)
Non-IFRS Measures**
Adjusted Operating Income	$	226,629			$	240,628			(13,999	)		(5.8	%)
% of Sales		5.9	%			6.0	%
Adjusted EBITDA		483,098				476,598			6,500			1.4	%
% of Sales		12.5	%			11.8	%
Adjusted Net Income*		106,637				147,241			(40,604	)		(27.6	%)
Adjusted Net Earnings per Share – Basic and Diluted*	$	1.40			$	1.84			(0.44	)		(23.9	%)

*Adjusted Net Income and Adjusted Net Earnings per Share for the three and nine months ended September 30, 2024 were negatively impacted by an unusually high effective tax rate. This was driven primarily by the magnitude and pace of the depreciation of the Mexican Peso against the U.S. dollar, which is the functional currency of the Company’s Mexican operations. In situations where the local and functional currencies differ, IFRS, contrary to US GAAP, requires the tax value of assets and liabilities denominated in local currency to be revalued to the operations’ functional currency at the reporting date, with the related foreign exchange movements impacting the tax expense for the period. These foreign exchange movements are non-cash in nature, do not impact cash taxes and tend to balance out over time. Including this, and other foreign exchange related items, the effective tax rate for the nine months ended September 30, 2024 was 38.8%. Excluding these foreign exchange items, the effective tax rate would have been 31.0%, which is more reflective of a typical tax rate for the Company. Using a tax rate of 31.0%, Adjusted Net Earnings per Share would have been $0.44 for the three months ended September 30, 2024, and $1.47 for the nine months ended September 30, 2024.

**Non-IFRS Measures

The Company prepares its interim financial statements in accordance with IFRS. However, the Company considers certain non-IFRS financial measures as useful additional information in measuring the financial performance and condition of the Company. These measures, which the Company believes are widely used by investors, securities analysts and other interested parties in evaluating the Company’s performance, 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 financial measures determined in accordance with IFRS. Non-IFRS measures include “Adjusted Net Income”, “Adjusted Net Earnings per Share (on a basic and diluted basis)”, “Adjusted Operating Income”, “Adjusted EBITDA”, “Free Cash Flow”, “Free Cash Flow (after IFRS 16 lease payments)”, and “Net Debt”.

The following tables provide a reconciliation of IFRS “Net Income” to Non-IFRS “Adjusted Net Income”, “Adjusted Operating Income” and “Adjusted EBITDA”:

	Three months ended September 30, 2024			Three months ended September 30, 2023
Net Income	$	14,157		$	53,744
Adjustments, after tax*		–			–
Adjusted Net Income	$	14,157		$	53,744

	Nine months ended September 30, 2024			Nine months ended September 30, 2023
Net Income	$	98,786		$	151,815
Adjustments, after tax*		7,851			(4,574	)
Adjusted Net Income	$	106,637		$	147,241

*Adjustments are explained in the “Adjustments to Net Income” section of this Press Release

	Three months ended September 30, 2024				Three months ended September 30, 2023
Net Income	$	14,157			$	53,744
Income tax expense		33,276				14,713
Other finance income		(1,084	)			(7,418	)
Share of loss of equity investments		690				600
Finance expense		18,840				21,376
Adjustments, before tax*		–				–
Adjusted Operating Income	$	65,879			$	83,015
Depreciation of property, plant and equipment and right-of-use assets		84,904				77,837
Amortization of development costs		3,084				2,488
Loss on disposal of property, plant and equipment		262				142
Adjusted EBITDA	$	154,129			$	163,482

	Nine months ended September 30, 2024				Nine months ended September 30, 2023
Net Income	$	98,786			$	151,815
Income tax expense		63,725				38,422
Other finance income		(8,140	)			(7,074	)
Share of loss of equity investments		2,147				2,630
Finance expense		58,501				60,108
Adjustments, before tax*		11,610				(5,273	)
Adjusted Operating Income	$	226,629			$	240,628
Depreciation of property, plant and equipment and right-of-use assets		246,808				228,041
Amortization of development costs		8,172				7,771
Loss on disposal of property, plant and equipment		1,489				158
Adjusted EBITDA	$	483,098			$	476,598

*Adjustments are explained in the “Adjustments to Net Income” section of this Press Release

SALES

Three months ended September 30, 2024 to three months ended September 30, 2023 comparison

	Three months ended September 30, 2024				Three months ended September 30, 2023				$ Change			% Change
North America	$	960,256			$	1,042,218			(81,962	)		(7.9	%)
Europe		250,499				302,145			(51,646	)		(17.1	%)
Rest of the World		33,638				42,644			(9,006	)		(21.1	%)
Eliminations		(6,900	)			(8,069	)		1,169			14.5	%
Total Sales	$	1,237,493			$	1,378,938			(141,445	)		(10.3	%)

The Company’s consolidated sales for the third quarter of 2024 decreased by $141.4 million or 10.3% to $1,237.5 million as compared to $1,378.9 million for the third quarter of 2023. The total decrease in sales was driven by year-over-year decreases across all operating segments.

Sales for the third quarter of 2024 in the Company’s North America operating segment decreased by $82.0 million or 7.9% to $960.3 million from $1,042.2 million for the third quarter of 2023. The decrease was due to a decrease in tooling sales of $47.5 million, which are typically dependent on the timing of tooling construction and final acceptance by the customer; programs that ended production during or subsequent to the third quarter of 2023, specifically the Ford Edge, Dodge Charger/Challenger, and Chevrolet Bolt; and lower year-over-year OEM production volumes on certain platforms, including the Jeep Grand Cherokee and Wagoneer, an engine block for Stellantis, and the Ford Mustang Mach E. These negative factors were partially offset by the launch and ramp up of new programs during or subsequent to the third quarter of 2023, including General Motors’ new electric vehicle platforms (BEV3/BET), and the Toyota Tacoma; higher year-over-year OEM production volumes on certain other light vehicle platforms, including General Motors’ large pick-up truck and SUV platform, and the Ford Maverick; and the impact of foreign exchange on the translation of U.S. denominated production sales, which had a positive impact on overall sales for the third quarter of 2024 of $21.1 million. Overall third quarter industry-wide OEM light vehicle production volumes in North America decreased by approximately 5% year-over-year.

Sales for the third quarter of 2024 in the Company’s Europe operating segment decreased by $51.6 million or 17.1% to $250.5 million from $302.1 million for the third quarter of 2023. The decrease was due to lower year-over-year OEM production volumes on certain platforms, including aluminum engine blocks for Ford and Mercedes, and the Mercedes’ new electric vehicle platform (EVA2); programs that ended production during or subsequent to the third quarter of 2023, specifically the BMW Mini; and a decrease in tooling sales of $8.8 million, which are typically dependent of the timing of tooling construction and final acceptance by the customer. These negative factors were partially offset by higher year-over-year OEM production volumes on certain platforms, including the Lucid Air, and an aluminum engine block for Jaguar Land Rover; and the impact of foreign exchange on the translation of Euro denominated production sales, which had a positive impact on overall sales for the third quarter of 2024 of $4.8 million. Overall third quarter industry-wide OEM light vehicle production volumes in Europe decreased by approximately 6% year-over-year.

Sales for the third quarter of 2024 in the Company’s Rest of the World operating segment decreased by $9.0 million or 21.1% to $33.6 million from $42.6 million in the third quarter of 2023. The decrease was largely driven by programs that came with the operations acquired from Metalsa in China that ended production during or subsequent to the third quarter of 2023, lower year-over-year production volumes on the Cadillac CT6 vehicle platform in China, and a decrease in tooling sales of $2.0 million; partially offset by the launch and ramp up of new programs, specifically the BMW 5-series in China.

Overall tooling sales decreased by $58.3 million (including outside segment sales eliminations) to $70.2 million for the third quarter of 2024 from $128.6 million for the third quarter of 2023.

Nine months ended September 30, 2024 to nine months ended September 30, 2023 comparison

	Nine months ended September 30, 2024				Nine months ended September 30, 2023				$ Change			% Change
North America	$	2,908,778			$	3,063,277			(154,499	)		(5.0	%)
Europe		871,469				893,638			(22,169	)		(2.5	%)
Rest of the World		102,600				113,092			(10,492	)		(9.3	%)
Eliminations		(19,648	)			(26,125	)		6,477			24.8	%
Total Sales	$	3,863,199			$	4,043,882			(180,683	)		(4.5	%)

The Company’s consolidated sales for the nine months ended September 30, 2024 decreased by $180.7 million or 4.5% to $3,863.2 million as compared to $4,043.9 million for the nine months ended September 30, 2023. The total decrease in sales was driven by year-over-year decreases across all operating segments.

Sales for the nine months ended September 30, 2024 in the Company’s North America operating segment decreased by $154.5 million or 5.0% to $2,908.8 million from $3,063.3 million for the nine months ended September 30, 2023. The decrease was due generally to a decrease in tooling sales of $154.2 million which are typically dependent on the timing of tooling construction and final acceptance by the customer; programs that ended production during or subsequent to the corresponding period of 2023, specifically the Dodge Charger/Challenger, the Ford Edge, and Chevrolet Bolt; and lower year-over-year OEM production volumes on certain platforms, including an engine block for Stellantis, the Jeep Grand Cherokee and Wagoneer, the Ford Mustang Mach E, and Mercedes’ new electric vehicle platform (EVA2). These negative factors were partially offset by the launch and ramp up of new programs, including General Motors’ new electric vehicle platforms (BEV3/BET), and the Toyota Tacoma; higher year-over-year production volumes of certain light vehicle platforms including the Ford Escape and Maverick, and General Motors’ large pick-up truck and SUV platform; and the impact of foreign exchange on the translation of U.S. denominated production sales, which had a positive impact on overall sales for the nine months ended September 30, 2024 of $26.1 million.

Sales for the nine months ended September 30, 2024 in the Company’s Europe operating segment decreased by $22.2 million or 2.5% to $871.5 million from $893.6 million for the nine months ended September 30, 2023. The decrease was due to programs that ended production during or subsequent to the corresponding period of 2023, specifically the BMW Mini; and lower year-over-year production volumes of certain other light vehicle platforms, including the Mercedes’ new electric vehicle platform (EVA2) and aluminum engine blocks for Ford and Mercedes. These negative factors were partially offset by higher year-over-year OEM production volumes on certain platforms, including an aluminum engine block for Jaguar Land Rover; an increase in tooling sales of $21.0 million, which are typically dependent on the timing of tooling construction and final acceptance by the customer; and the impact of foreign exchange on the translation of Euro denominated production sales, which had a positive impact on overall sales for the nine months ended September 30, 2024 of $9.9 million.

Sales for the nine months ended September 30, 2024 in the Company’s Rest of the World operating segment decreased by $10.5 million or 9.3% to $102.6 million from $113.1 million for the nine months ended September 30, 2023. The decrease was largely driven by programs that came with the operations acquired from Metalsa in China that ended production during or subsequent to the nine months ended September 30, 2023, and lower year-over-year production volumes on the Cadillac CT6 vehicle platform in China; partially offset by the launch and ramp up of new programs, specifically the BMW 5-series in China, and an increase in tooling sales of $4.0 million.

Overall tooling sales decreased by $128.1 million (including outside segment sales eliminations) to $174.7 million for the nine months ended September 30, 2024 from $302.8 million for the nine months ended September 30, 2023.

GROSS MARGIN

Three months ended September 30, 2024 to three months ended September 30, 2023 comparison

	Three months ended September 30, 2024				Three months ended September 30, 2023				$ Change			% Change
Gross margin	$	163,350			$	181,194			(17,844	)		(9.8	%)
% of Sales		13.2	%			13.1	%

The gross margin percentage for the third quarter of 2024 of 13.2% increased slightly as a percentage of sales as compared to the gross margin percentage for the third quarter of 2023 of 13.1% due to:

• productivity and efficiency improvements at certain operating facilities and other improvements; and
• a decrease in tooling sales which typically earn low margin for the Company.

These factors were essentially offset by:

• overall lower production sales volume and corresponding contribution;
• operational inefficiencies at certain operating facilities; and
• a negative sales mix, including additional depreciation expense from recent new program investments.

Overall market related inflationary pressures on labour, material and energy costs, along with offsetting commercial settlements, were generally stable for the quarter on a year-over-year basis.

Nine months ended September 30, 2024 to nine months ended September 30, 2023 comparison

	Nine months ended September 30, 2024				Nine months ended September 30, 2023				$ Change			% Change
Gross margin	$	519,517			$	522,169			(2,652	)		(0.5	%)
% of Sales		13.4	%			12.9	%

The gross margin percentage for the nine months ended September 30, 2024 of 13.4% increased as a percentage of sales by 0.5% as compared to the gross margin percentage for the nine months ended September 30, 2023 of 12.9%. The increase in gross margin as a percentage of sales was generally due to:

• productivity and efficiency improvements at certain operating facilities and other improvements; and
• a decrease in tooling sales which typically earn low margin for the Company.

These factors were partially offset by:

• operational inefficiencies at certain other operating facilities;
• overall lower production sales volume and corresponding contribution;
• an unfavourable impact from a year-over-year change in foreign exchange rates in Mexico; and
• a negative sales mix, including additional depreciation expense from recent new program investments.

Overall market related inflationary pressures on labour, material and energy costs, along with offsetting commercial settlements, were generally stable year-over-year.

ADJUSTMENTS TO NET INCOME

Adjusted Net Income excludes certain items as set out in the following tables and described in the notes thereto. Management uses Adjusted Net Income 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

Three months ended September 30, 2024 to three months ended September 30, 2023 comparison

No adjustments were noted during the three months ended September 30, 2024 and 2023.

TABLE B

Nine months ended September 30, 2024 to nine months ended September 30, 2023 comparison

	Nine months ended September 30, 2024				Nine months ended September 30, 2023				$ Change
NET INCOME	$	98,786			$	151,815			$	(53,029	)
Adjustments:
Restructuring costs (1)		11,610				–				11,610
Net gain on disposal of equity investments (2)		–				(5,273	)			5,273
ADJUSTMENTS, BEFORE TAX	$	11,610			$	(5,273	)		$	16,883
Tax impact of adjustments		(3,759	)			699				(4,458	)
ADJUSTMENTS, AFTER TAX	$	7,851			$	(4,574	)		$	12,425
ADJUSTED NET INCOME	$	106,637			$	147,241			$	(40,604	)
Number of Shares Outstanding – Basic (‘000)		76,191				79,933
Adjusted Basic Net Earnings Per Share	$	1.40			$	1.84
Number of Shares Outstanding – Diluted (‘000)		76,194				79,989
Adjusted Diluted Net Earnings Per Share	$	1.40			$	1.84

(1)   Restructuring costs

Additions to the restructuring provision during the nine months ended September 30, 2024 totaled $11.6 million and represent employee-related severance resulting from the rightsizing of certain operations in Germany, Mexico, Canada, and the United States.

(2)   Net gain on disposal of equity investments

On March 24, 2023, Martinrea sold its equity interest in VoltaXplore Inc. (“VoltaXplore) to NanoXplore Inc. (“NanoXplore”) for 3,420,406 common shares of NanoXplore at $2.92 per share representing an aggregate consideration of $10.0 million. The sale transaction resulted in a gain on disposal of equity investments during the first quarter of 2023 as follows:

Gross gain (Total consideration of $10.0 million less book value of investment)	$	6,821
Less: gain attributable to indirect retained interest		(1,548	)
Net gain on disposal of equity investments	$	5,273

Subsequent to this transaction, the Company no longer holds a direct equity interest in VoltaXplore while its equity ownership interest in NanoXplore increased from 21.1% to 22.7%.

NET INCOME

Three months ended September 30, 2024 to three months ended September 30, 2023 comparison

	Three months ended September 30, 2024			Three months ended September 30, 2023			$ Change			% Change
Net Income	$	14,157		$	53,744		(39,587	)		(73.7	%)
Net Earnings per Share
Basic and Diluted	$	0.19		$	0.68

Net Income for the third quarter of 2024 decreased by $39.6 million to $14.2 million or $0.19 per share, on a basic and diluted basis, from Net Income of $53.7 million or $0.68 per share, on a basic and diluted basis, for the third quarter of 2023.

Net Income for the third quarter of 2024, as compared to the third quarter of 2023, was negatively impacted by the following:

• lower gross margin from lower year-over-year sales volume;
• a net foreign exchange gain of $1.3 million for the third quarter of 2024 compared to a gain of $7.1 million for the third quarter of 2023; and
• a higher effective tax rate (70.2% for the third quarter of 2024 compared to 21.5% for the third quarter of 2023) driven primarily by the IFRS accounting treatment of the rapid depreciation of the Mexican Peso against the U.S. dollar that does not impact cash.

These factors were partially offset by the following:

• a year-over-year decrease in SG&A expense, as previously explained; and
• a $2.5 million year-over-year decrease in finance expense as a result of lower borrowing rates on the Company’s revolving bank debt.

Nine months ended September 30, 2024 to nine months ended September 30, 2023 comparison

	Nine months ended September 30, 2024			Nine months ended September 30, 2023			$ Change			% Change
Net Income	$	98,786		$	151,815		(53,029	)		(34.9	%)
Adjusted Net Income		106,637			147,241		(40,604	)		(27.6	%)
Net Earnings per Share
Basic and Diluted	$	1.30		$	1.90
Adjusted Net Earnings per Share
Basic and Diluted	$	1.40		$	1.84

Net Income, before adjustments, for the nine months ended September 30, 2024 decreased by $53.0 million to $98.8 million or $1.30 per share, on a basic and diluted basis, from Net Income of $151.8 million or $1.90 per share, on a basic and diluted basis, for the nine months ended September 30, 2023. Excluding the adjustments explained in Table B under “Adjustments to Net Income”, Adjusted Net Income for the nine months ended September 30, 2024 decreased by $40.6 million to $106.6 million or $1.40 per share on a basic and diluted basis, from $147.2 million or $1.84 per share on a basic and diluted basis, for the nine months ended September 30, 2023.

Adjusted Net Income for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was negatively impacted by the following:

• a year-over-year increase in SG&A expense, as previously explained;
• a $3.8 million year-over-year increase in research and development costs driven generally by increased new product and process development activity;
• lower gross margin on lower year-over-year sales volume;
• a $1.5 million loss on the disposal of property, plant and equipment for the nine months ended September 30, 2024; and
• a higher effective tax rate (38.8% for the nine months ended September 30, 2024 compared to 20.4% for the nine months ended September 30, 2023) driven primarily by the IFRS accounting treatment of the rapid depreciation of the Mexican Peso against the U.S. dollar that does not impact cash.

These factors were partially offset by the following:

• a net foreign exchange gain of $8.1 million for the nine months ended September 30, 2024 compared to a gain of $6.5 million for the nine months ended September 30, 2023; and
• a $1.6 million year-over-year decrease in finance expense as a result of lower borrowing rates on the Company’s revolving bank debt.

Adjusted Net Income and Adjusted Net Earnings per Share for the three and nine months ended September 30, 2024 were negatively impacted by an unusually high effective tax rate. This was driven primarily by the magnitude and pace of the depreciation of the Mexican Peso against the U.S. dollar, which is the functional currency of the Company’s Mexican operations. In situations where the local and functional currencies differ, IFRS, contrary to US GAAP, requires the tax value of assets and liabilities denominated in local currency to be revalued to the operations’ functional currency at the reporting date, with the related foreign exchange movements impacting the tax expense for the period. These foreign exchange movements are non-cash in nature, do not impact cash taxes and tend to balance out over time. Including this, and other foreign exchange related items, the effective tax rate for the nine months ended September 30, 2024 was 38.8%. Excluding these foreign exchange items, the effective tax rate would have been 31.0%, which is more reflective of a typical tax rate for the Company. Using a tax rate of 31.0%, Adjusted Net Earnings per Share would have been $0.44 for the three months ended September 30, 2024, and $1.47 for the nine months ended September 30, 2024.

DIVIDEND

A cash dividend of $0.05 per share has been declared by the Board of Directors payable to shareholders of record on December 31, 2024, on or about January 15, 2025.

ABOUT MARTINREA

Martinrea International Inc. is a leader in the development and production of quality metal parts, assemblies and modules, fluid management systems, and complex aluminum products focused primarily on the automotive sector. Martinrea currently operates in 56 locations in Canada, the United States, Mexico, Brazil, Germany, Slovakia, Spain, China, South Africa, and Japan. Martinrea’s vision is making lives better by being the best supplier we can be in the products we make and the services we provide. For more information on Martinrea, please visit www.martinrea.com. Follow Martinrea on X and Facebook.

CONFERENCE CALL DETAILS

A conference call to discuss the financial results will be held on Tuesday, November 12, 2024 at 5:30 p.m. Eastern Time. To participate, please dial 416-641-6104 (Toronto area) or 800-952-5114 (toll free Canada and US) and enter participant code 1624622#. Please call 10 minutes prior to the start of the conference call.

The conference call will also be webcast live in listen‐only mode and archived for twelve months. The webcast and accompanying presentation can be accessed at: https://www.martinrea.com/investor-relations/events-presentations/.

There will also be a rebroadcast of the call available by dialing 905-694-9451 or toll free 800-408-3053 (Conference ID – 9076430#). The rebroadcast will be available until December 14, 2024 at 5:00 p.m.

If you have any teleconferencing questions, please call Ganesh Iyer at 416-749-0314.

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 those related to the Company’s expectations as to, or its views or beliefs in or on, the impact of, or duration of, or factors affecting, or expected response to or growth of, improvements in, expansion of and/or guidance or outlook (including for 2024) as to future results, revenue, sales, margin, gross margin, earnings, and earnings per share, adjusted earnings per share, free cash flow, volumes, adjusted net earnings per share, operating income margins, operating margins, adjusted operating income margins, leverage ratios, net debt to adjusted EBITDA(1), debt repayment, Adjusted EBITDA(1), improvements in interest rates, tax rates, supply constraints, inflation and labour, the growth of the Company and pursuit of, and belief in, its strategies, the strength, recovery and growth of the automotive industry and continuing challenges, capital allocation strategies, contemplated purchases under the NCIB, 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, such as expected sales and industry production estimates, current foreign exchange rates, timing of product launches and operational improvement during the period, and current Board approved budgets. 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 AIF and MD&A for the year ended December 31, 2023, and other public filings which can be found at www.sedarplus.ca:   

• North American and Global Economic and Political Conditions (including war) and Consumer Confidence
• Automotive Industry Risks
• Pandemics and Epidemics, Force Majeure Events, Natural Disasters, Terrorist Activities, Political and Civil Unrest or War, and Other Outbreaks
• Russia and Ukraine War and Hamas-Israel War
• Semiconductor Chip Shortages and Price Increases
• Inflationary Pressures
• Regional Energy Shortages
• Dependence Upon Key Customers
• Customer Consolidation and Cooperation
• Emergence of Potentially Disruptive EV OEMs
• Outsourcing and Insourcing Trends
• Financial Viability of Suppliers and Key Suppliers and Supply Disruptions
• Competition
• Customer Pricing Pressures, Contractual Arrangements, Cost and Risk Absorption and Purchase Orders
• Material and Commodity Prices and Volatility
• Scrap Steel/Aluminum Price Volatility
• Quote/Pricing Assumptions
• Launch and Operational Costs and Cost Structure
• Fluctuations in Operating Results
• Product Warranty, Repair/Replacement Costs, Recall, Product Liability and Liability Risk
• Product Development and Technological Change
• A Shift Away from Technologies in Which the Company is Investing
• Dependence Upon Key Personnel
• Limited Financial Resources/Uncertainty of Future Financing/Banking
• Cybersecurity Threats
• Acquisitions
• Joint Ventures
• Private or Public Equity Investments in Technology Companies
• Potential Tax Exposures
• Potential Rationalization Costs, Turnaround Costs and Impairment Charges
• Labour Relations Matters
• Trade Restrictions or Disputes
• Changes in Laws and Governmental Regulations
• Environmental Regulation and Climate Change
• Litigation and Regulatory Compliance and Investigations
• Risks of Conducting Business in Foreign Countries, Including China, Brazil and Other Growing Markets
• Currency Risk
• Internal Controls Over Financial Reporting and Disclosure Controls and Procedures
• Loss of Use of Key Manufacturing Facilities
• Intellectual Property
• Availability of Consumer Credit or Cost of Borrowing
• Evolving Business Risk Profile
• Competition with Low Cost Countries
• The Company’s Ability to Shift its Manufacturing Footprint to Take Advantage of Opportunities in Growing Markets
• Change in the Company’s Mix of Earnings Between Jurisdictions with Lower Tax Rates and Those with Higher Tax Rates
• Pension Plans and Other Post-Employment Benefits
• Potential Volatility of Share Prices
• Dividends
• Lease Obligations           

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.

The common shares of Martinrea trade on The Toronto Stock Exchange under the symbol “MRE”.

For further information, please contact:

Peter Cirulis

Chief Financial Officer

Martinrea International Inc.

3210 Langstaff Road

Vaughan, Ontario L4K 5B2

Tel:   416-749-0314

Fax: 289-982-3001

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1 The Company prepares its financial statements in accordance with IFRS Accounting Standards (“IFRS”). However, the Company considers certain non-IFRS financial measures as useful additional information in measuring the financial performance and condition of the Company. These measures, which the Company believes are widely used by investors, securities analysts and other interested parties in evaluating the Company’s performance, 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 financial measures determined in accordance with IFRS. Non-IFRS measures, included anywhere in this press release, include “Adjusted Net Income”, “Adjusted Net Earnings per Share (on a basic and diluted basis)”, “Adjusted Operating Income”, “Adjusted EBITDA”, “Free Cash Flow”, “Free Cash-Flow (after IFRS 16 lease payments)” and “Net Debt”. The relevant IFRS financial measure, as applicable, and a reconciliation of certain non-IFRS financial measures to measures determined in accordance with IFRS are contained in the Company’s Management Discussion and Analysis for the three and nine months ended September 30, 2024 and in this press release.

Martinrea International Inc.

Interim Condensed Consolidated Balance Sheets

(in thousands of Canadian dollars) (unaudited)

	Note	September 30, 2024		December 31, 2023
ASSETS
Cash and cash equivalents		$	177,267	$	186,804
Trade and other receivables	2		801,012		695,819
Inventories	3		564,558		568,274
Prepaid expenses and deposits			35,611		33,904
Income taxes recoverable			35,644		11,089
TOTAL CURRENT ASSETS			1,614,092		1,495,890
Property, plant and equipment	4		1,945,783		1,943,771
Right-of-use assets	5		224,230		238,552
Deferred tax assets			193,175		192,301
Intangible assets			40,193		42,743
Investments	6		66,124		60,170
Pension assets			17,046		16,303
TOTAL NON-CURRENT ASSETS			2,486,551		2,493,840
TOTAL ASSETS		$	4,100,643	$	3,989,730
LIABILITIES
Trade and other payables		$	1,185,482	$	1,176,579
Provisions	7		8,843		29,892
Income taxes payable			52,364		25,017
Current portion of long-term debt	8		11,290		12,778
Current portion of lease liabilities	9		52,177		48,507
TOTAL CURRENT LIABILITIES			1,310,156		1,292,773
Long-term debt	8		986,063		956,458
Lease liabilities	9		192,233		210,469
Pension and other post-retirement benefits			40,055		37,261
Deferred tax liabilities			26,059		27,588
TOTAL NON-CURRENT LIABILITIES			1,244,410		1,231,776
TOTAL LIABILITIES			2,554,566		2,524,549
EQUITY
Capital stock	11		611,101		645,256
Contributed surplus			45,950		45,903
Accumulated other comprehensive income			139,934		95,753
Retained earnings			749,092		678,269
TOTAL EQUITY			1,546,077		1,465,181
TOTAL LIABILITIES AND EQUITY		$	4,100,643	$	3,989,730

Contingencies (note 16)

Subsequent event (note 18)

See accompanying notes to the interim condensed consolidated financial statements.

On behalf of the Board:

“Robert Wildeboer”	Director
“Terry Lyons”	Director

Martinrea International Inc.

Interim Condensed Consolidated Statements of Operations

(in thousands of Canadian dollars, except per share amounts) (unaudited)

	Note	Three months ended September 30, 2024			Three months ended September 30, 2023			Nine months ended September 30, 2024			Nine months ended September 30, 2023
SALES		$	1,237,493		$	1,378,938		$	3,863,199		$	4,043,882
Cost of sales (excluding depreciation of property, plant and equipment and right-of-use assets)			(993,212	)		(1,124,326	)		(3,109,104	)		(3,306,836	)
Depreciation of property, plant and equipment and right-of-use assets (production)			(80,931	)		(73,418	)		(234,578	)		(214,877	)
Total cost of sales			(1,074,143	)		(1,197,744	)		(3,343,682	)		(3,521,713	)
GROSS MARGIN			163,350			181,194			519,517			522,169
Research and development costs			(10,852	)		(9,628	)		(32,037	)		(28,257	)
Selling, general and administrative			(82,384	)		(83,990	)		(247,132	)		(239,962	)
Depreciation of property, plant and equipment and right-of-use assets (non-production)			(3,973	)		(4,419	)		(12,230	)		(13,164	)
Loss on disposal of property, plant and equipment			(262	)		(142	)		(1,489	)		(158	)
Restructuring costs	7		–			–			(11,610	)		–
OPERATING INCOME			65,879			83,015			215,019			240,628
Share of loss of equity investments	6		(690	)		(600	)		(2,147	)		(2,630	)
Net gain on disposal of equity investments			–			–			–			5,273
Finance expense	13		(18,840	)		(21,376	)		(58,501	)		(60,108	)
Other finance income	13		1,084			7,418			8,140			7,074
INCOME BEFORE INCOME TAXES			47,433			68,457			162,511			190,237
Income tax expense	10		(33,276	)		(14,713	)		(63,725	)		(38,422	)
NET INCOME FOR THE PERIOD		$	14,157		$	53,744		$	98,786		$	151,815
Basic earnings per share	12	$	0.19		$	0.68		$	1.30		$	1.90
Diluted earnings per share	12	$	0.19		$	0.68		$	1.30		$	1.90

See accompanying notes to the interim condensed consolidated financial statements.

Martinrea International Inc.

Interim Condensed Consolidated Statements of Comprehensive Income

(in thousands of Canadian dollars) (unaudited)

	Three months ended September 30, 2024			Three months ended September 30, 2023		Nine months ended September 30, 2024			Nine months ended September 30, 2023
NET INCOME FOR THE PERIOD	$	14,157		$	53,744	$	98,786		$	151,815
Other comprehensive income (loss), net of tax:
Items that may be reclassified to net income
Foreign currency translation differences for foreign operations		(1,472	)		28,682		44,206			(2,345	)
Items that will not be reclassified to net income
Share of other comprehensive income (loss) of equity investments (note 6)		14			14		(25	)		(4	)
Remeasurement of defined benefit plans		322			3,184		(814	)		5,630
Other comprehensive income (loss), net of tax		(1,136	)		31,880		43,367			3,281
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD	$	13,021		$	85,624	$	142,153		$	155,096

See accompanying notes to the interim condensed consolidated financial statements.

Martinrea International Inc.

Interim Condensed Consolidated Statements of Changes in Equity

(in thousands of Canadian dollars) (unaudited)

	Capital stock			Contributed surplus			Accumulated other comprehensive income			Retained earnings			Total equity
BALANCE AT DECEMBER 31, 2022	$	663,646		$	45,558		$	124,065		$	543,636		$	1,376,905
Net income for the period		–			–			–			151,815			151,815
Compensation expense related to stock options		–			331			–			–			331
Dividends ($0.15 per share)		–			–			–			(11,939	)		(11,939	)
Exercise of employee stock options		358			(97	)		–			–			261
Repurchase of common shares (note 11)		(13,370	)		–			–			(7,474	)		(20,844	)
Other comprehensive income (loss) net of tax
Remeasurement of defined benefit plans		–			–			–			5,630			5,630
Foreign currency translation differences		–			–			(2,345	)		–			(2,345	)
Share of other comprehensive loss of equity investments		–			–			(4	)		–			(4	)
BALANCE AT SEPTEMBER 30, 2023		650,634			45,792			121,716			681,668			1,499,810
Net income for the period		–			–			–			1,850			1,850
Compensation expense related to stock options		–			111			–			–			111
Dividends ($0.05 per share)		–			–			–			(3,907	)		(3,907	)
Repurchase of common shares (note 11)		(5,378	)		–			–			(2,847	)		(8,225	)
Other comprehensive income (loss) net of tax
Remeasurement of defined benefit plans		–			–			–			1,505			1,505
Foreign currency translation differences		–			–			(25,949	)		–			(25,949	)
Share of other comprehensive loss of equity investments		–			–			(14	)		–			(14	)
BALANCE AT DECEMBER 31, 2023		645,256			45,903			95,753			678,269			1,465,181
Net income for the period		–			–			–			98,786			98,786
Compensation expense related to stock options		–			127			–			–			127
Dividends ($0.15 per share)		–			–			–			(11,281	)		(11,281	)
Exercise of employee stock options		350			(80	)		–			–			270
Repurchase of common shares (note 11)		(34,505	)		–			–			(15,868	)		(50,373	)
Other comprehensive income (loss) net of tax
Remeasurement of defined benefit plans		–			–			–			(814	)		(814	)
Foreign currency translation differences		–			–			44,206			–			44,206
Share of other comprehensive loss of equity investments		–			–			(25	)		–			(25	)
BALANCE AT SEPTEMBER 30, 2024	$	611,101		$	45,950		$	139,934		$	749,092		$	1,546,077

See accompanying notes to the interim condensed consolidated financial statements.

Martinrea International Inc.

Interim Condensed Consolidated Statements of Cash Flows

(in thousands of Canadian dollars) (unaudited)

	Three months ended September 30, 2024			Three months ended September 30, 2023			Nine months ended September 30, 2024			Nine months ended September 30, 2023
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES:
Net income for the period	$	14,157		$	53,744		$	98,786		$	151,815
Adjustments for:
Depreciation of property, plant and equipment and right-of-use assets		84,904			77,837			246,808			228,041
Amortization of development costs		3,084			2,488			8,172			7,771
Unrealized loss (gain) on foreign exchange forward contracts		(4,382	)		298			(913	)		215
Finance expense		18,840			21,376			58,501			60,108
Income tax expense		33,276			14,713			63,725			38,422
Loss on disposal of property, plant and equipment		262			142			1,489			158
Deferred and restricted share units expense		2,893			2,294			6,261			9,505
Stock options expense		43			110			127			331
Share of loss of equity investments		690			600			2,147			2,630
Net gain on disposal of equity investments		–			–			–			(5,273	)
Pension and other post-retirement benefits expense		571			693			1,702			2,087
Contributions made to pension and other post-retirement benefits		(489	)		(666	)		(1,657	)		(1,886	)
		153,849			173,629			485,148			493,924
Changes in non-cash working capital items:
Trade and other receivables		(2,739	)		(1,108	)		(87,575	)		(128,104	)
Inventories		12,159			25,395			15,897			23,500
Prepaid expenses and deposits		(2,163	)		(2,854	)		(1,226	)		2,595
Trade, other payables and provisions		(5,529	)		(5,741	)		(17,128	)		73,577
		155,577			189,321			395,116			465,492
Interest paid		(21,839	)		(25,278	)		(65,306	)		(73,041	)
Income taxes paid		(1,849	)		(10,839	)		(50,533	)		(74,622	)
NET CASH PROVIDED BY OPERATING ACTIVITIES	$	131,889		$	153,204		$	279,277		$	317,829
FINANCING ACTIVITIES:
Increase (decrease) in long-term debt (net of deferred financing fees)		(29,094	)		(27,011	)		18,847			8,320
Equipment loan repayments		(1,329	)		(3,895	)		(5,899	)		(12,471	)
Principal payments of lease liabilities		(13,096	)		(11,845	)		(38,852	)		(34,732	)
Dividends paid		(3,743	)		(3,981	)		(11,489	)		(12,019	)
Exercise of employee stock options		–			–			270			261
Repurchase of common shares		(9,471	)		(10,804	)		(49,393	)		(20,844	)
NET CASH USED IN FINANCING ACTIVITIES	$	(56,733	)	$	(57,536	)	$	(86,516	)	$	(71,485	)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (excluding capitalized interest)*		(80,814	)		(62,444	)		(191,681	)		(222,300	)
Capitalized development costs		(1,457	)		(1,397	)		(4,601	)		(5,598	)
Increase in investments (note 6)		–			–			(8,130	)		(1,000	)
Proceeds on disposal of property, plant and equipment		4,122			16			5,311			402
NET CASH USED IN INVESTING ACTIVITIES	$	(78,149	)	$	(63,825	)	$	(199,101	)	$	(228,496	)
Effect of foreign exchange rate changes on cash and cash equivalents		(1,178	)		1,127			(3,197	)		(778	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(4,171	)		32,970			(9,537	)		17,070
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		181,438			145,755			186,804			161,655
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	177,267		$	178,725		$	177,267		$	178,725

*As at September 30, 2024, $46,104 (December 31, 2023 – $75,800) of purchases of property, plant and equipment remain unpaid and are recorded in trade and other payables.

See accompanying notes to the interim condensed consolidated financial statements.