Linamar Announces Second Quarter Results Strong Performance Despite Automotive Trend

Business Wire, August 10, 2005

GUELPH, Ontario -- Linamar Corporation (TSX:LNR) ("Linamar" or "the company"), a global supplier who designs, develops and manufactures precision machined components, modules and systems for engine, transmission, chassis and industrial applications primarily for the North American, European and Asia Pacific automotive marketplace, today announced its financial results for the second quarter ended June 30, 2005.

(CDN dollars in thousands except per share figures)

Three Months Ended   Six Months Ended
                                           June 30            June 30
                                    2005      2004      2005     2004
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                                       $         $         $        $

Sales                            578,805   460,626 1,108,279  891,223
Gross Margin                      77,790    63,913   141,276  122,600
Operating Earnings(1)             51,875    40,292    91,567   76,683
Earnings from Continuing
 Operations                       29,757    24,621    52,162   46,351
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Diluted Earnings per Share from
 Continuing Operations              0.42      0.35      0.73     0.65
Diluted Earnings per Share          0.42      0.32      0.73     0.61
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Second Quarter Operating Highlights

Second quarter sales increased by 25.7% or $118.2 million to $578.8 million, compared to $460.6 million in the same quarter last year. The second quarter contributed to a strong six months year to date where sales increased $217.1 million or 24.4% to $1,108.3 million from $891.2 million in 2004. The second quarter sales increase was lead by continued strong growth in North American Automotive Systems, related to both light vehicles, and medium and heavy trucks, the ramp up of new programs launched in recent periods (net of programs ending), and volume increases on other new and established programs. Second quarter sales for the Industrial segment increased 51.8% to $85.9 million, compared to $56.6 million in the same quarter 2004, as sales of Skyjack Inc. ("Skyjack") products continue to increase driven by customer demand volume increases. Europe segment sales have improved 13.6% to $39.8 million over the second quarter of 2004. Geographically and operationally, the Asia Pacific segment has been segregated from the Canadian and North American Automotive Systems segment during the quarter. This segment is currently experiencing losses as it incurs costs related to the commencement of operations.

Three Months Ended   Six Months Ended
                                           June 30            June 30
                                    2005      2004      2005     2004
---------------------------------------------------------------------
                                       $         $         $        $

Gross margin                      77,790    63,913   141,276  122,600
Selling, general and
 administrative                   25,915    23,621    49,709   45,917
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Operating earnings                51,875    40,292    91,567   76,683
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Under Canadian generally accepted accounting principles ("GAAP"), this financial measure does not have a standardized meaning and, therefore is unlikely to be comparable to similar measures presented by other issuers.

The effect of the stronger Canadian dollar compared with the U.S. dollar in the first half of 2005 versus the first half of 2004 reduced automotive sales by $45.1 million ($25.3 million for the second quarter). Sales would have otherwise increased by 31.2% for the quarter and 29.4% year to date.

Operating earnings in the second quarter increased by 28.5% to $51.8 million, compared to $40.3 million for the same period last year. The company's operating earnings grew by $14.9 million or 19.4% for the first six months compared with 2004. Geographically, the improvement is attributed to growth in both the automotive and industrial businesses. Gross margin declined slightly due to changes in product mix and the effect of new automotive program launches yet to achieve full operational efficiency.

The operational segments also showed substantial growth in operating earnings. The growth is attributed to the volume increases in the North American Automotive Systems segment, while the Europe segment swung to an operating profit on sales increases for products with lower material content. The Industrial segment's earnings continue to expand, reaching $12.2 million for the quarter.

Earnings from continuing operations for the quarter were $29.8 million or 5.1% of sales compared to $24.6 million or 5.3% representing a 21.1% increase year over year. Year to date earnings from continuing operations were $52.2 million or 4.7% versus $46.4 million or 5.2% in 2004. The increased earnings can be attributed to increasing sales dollars and stable selling, general and administrative costs. In contrast, earnings growth was impacted by higher interest costs, and a slightly higher tax rate.