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Posted May 9 , 2013

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Quarterly Report

Linamar Posts Record Quarter in Earnings with Strong Margin Performance, Launch Book Grows

GUELPH - Sales for the first quarter of 2013 ("Q1 2013") were $846.6 million, up $6.8 million from $839.8 million in Q1 2012.

• Operating earnings up 24.7% over the first quarter of 2012 ("Q1 2012") to reach $71.7 million;
• Adjusted net earnings up 26.0% over Q1 2012 to reach $48.4 million;
• Adjusted EPS is up 27.1% over Q1 2012 to reach $0.75;
• New business wins continue to be strong, launch book at nearly $2.5 billion;
• Industrial segment operating earnings up 120.0% to $14.3 million on slightly declining sales; showing significant margin improvements from Q1 2012;
• Powertrain/Driveline operating earnings up 12.5% from Q1 2012 on sales up 1.5% despite market declines; and
• Return on Equity reaches 17.9% and Return on Capital Employed improves to 13.3%.

Sales for the Powertrain/Driveline segment increased by $10.6 million, or 1.5% in Q1 2013 to $709.1 million compared to $698.5 million in Q1 2012. The sales increase in the first quarter was impacted by:

• increased North American sales as a result of the significant levels of newly launched programs being largely offset by reductions in the on and off highway commercial vehicle markets;
• increased European sales due to substantial levels of programs being launched being offset by the reduction in both the automotive vehicle and the on and off highway commercial vehicle markets; and
• increased Asian sales as a result of the ramp up of programs in launch and higher volumes on mature programs.

Industrial segment sales decreased slightly by 2.7% or $3.8 million from Q1 2012 to $137.5 million. The sales decrease was:

• due to decreases in demand in the access equipment markets in Europe; largely offset by:
• higher sales from newly established operations in emerging global markets such as Brazil.

The company's operating earnings for Q1 2013 were $71.7 million, an increase of $14.2 million or 24.7%.

Q1 2013 operating earnings of $57.4 million for the Powertrain/Driveline segment were higher by $6.4 million from operating earnings of $51.0 million in Q1 2012. The segment experienced the following in Q1 2013:

• improved margins as production volumes increased on launching and mature programs;
• better margins as a result of productivity and efficiency improvements;
• higher margins as a result of a favourable sales mix to highly capital intensive programs which inherently have higher margins to meet return expectations;
• lower amount of start-up costs in comparison to the level of start-up activity in Q1 2012; partially offset by:
• decreases due to the reduced volumes in the on and off highway commercial markets in Europe and North America; and
• investments in fixed labour and overhead costs to support the future growth of the market.

The Q1 2013 operating earnings for the Industrial segment were $14.3 million, a 120.0% improvement from operating earnings of $6.5 million in Q1 2012. The Industrial operating earnings were predominantly driven by:

vthe strengthening EUR against other currencies in the quarter compared to the same period in 2012 that resulted in a foreign exchange gain in Q1 2013 as compared to a foreign exchange loss in Q1 2012;
• margin improvements on product launches in the access equipment market;
• decreased launch costs associated with the energy programs; and
• favourable mix towards higher margin sales.

"We are thrilled with our first quarter results, notching another new record in earnings performance," said Linamar CEO Linda Hasenfratz. "Launches are performing extremely well, our launch book continues to grow and a strong focus on efficiency and productivity is driving fantastic margin improvement. Despite a reasonably flat outlook for global markets our outlook remains extremely positive for double digit earnings growth in 2013."

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