I would like to welcome everyone to the Linamar Q2 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star and then number one on your telephone keypad. If you would like to withdraw your question, press the pound key. I would now like to turn the call over to today's speaker, Ms. Linda Hasenfratz. You may begin your conference, ma'am.
Thank you. Good afternoon, everyone, and welcome to our second quarter conference call. Joining me this afternoon are members of my executive team, Jim Jarrell, Dale Schneider, Roger Fulton, Mark Stoddart, and members of our corporate marketing, finance, and legal team. Before I begin, I will draw your attention to the disclaimer currently being brought up. I'm going to start off with sales earnings and content as usual. Sales for the quarter were $2.09 billion, down somewhat from last year but meaningfully outperforming markets. Global vehicle markets were down 5.6%, whereas our transportation segment only slipped 1.3%. Boom sales were up in North America despite markets down more than 7%.
Tough declines in the European and North American scissor market of an average 8.5% and a drop in the North American combine market of 19% also put pressure on our top line, making a modest decline of 3.3% excellent performance. It's important to note that the combine market declines in particular are highly correlated to the trade and tariff war with China, and in the event of such getting resolved, we would expect to see that market bounce back quite quickly based on the pent-up demand that we see out there. Operating earnings were $225.3 million, normalized for balance sheet exchange impacts and any unusual items, down 15.8% over last year. A few factors were key in driving our performance this quarter. First, launches in the transportation business are running strong and doing a great job of driving top-line growth in some challenging markets.
Number two, despite access market softness, we are seeing sales increases on both boom and telehandler products. A few factors were a challenge this quarter and hurt our results. First, Skyjack's scissor sales declined due to market declines in North America and Europe in the quarter. Secondly, lower sales at MacDon due to tariff and trade issues just described. Third, global market declines in the light vehicle market felt mainly in Europe but also in North America. Fourth was launch costs and transition impacts. This is the transition to next-generation platforms weighing on margins as both launching and declining platforms running at suboptimal levels. And secondly, just the cost of launches globally given the high level of programs that are currently launching. Both issues are showing signs of improvement already and will continue to temper over the next few quarters.
Normalized net earnings as a percent of sales in Q2 was 7.6%, down from last year due to these factors but up from last quarter despite production declines compared to Q1. On the positive side, our overall normalized EBITDA performance remained strong at 15.6% of sales, a top quartile performance in comparison to our peers. The transportation segment saw earnings and margins decline due to launch and transition impact as described, but we are already seeing improvements on the launch and transition side as noted. The industrial segment saw earnings and margins decline as well due to market conditions. In North America, content per vehicle for the quarter reached $165.82, up 2.6% from last year thanks to launching business in a market that was down 2.4%. Q2 automotive sales in North America as a result were flat over last year at $727.1 million.
In Europe, content per vehicle for the quarter was CAD 81.56, up 1% over last year thanks to launching business in the region in a market that was down 6.7%. Q2 automotive sales in Europe as a result were down 5.7% over last year at CAD 456.5 million. In Asia Pacific, content per vehicle for the quarter was CAD 9.52, down 6.3% from last year. The market in Asia Pacific was down 6.1% but notably, China production down 10.7%, which was the key driver in our Q2 2019 automotive sales in AP being down 12% compared to last year to reach CAD 109.2 million. Asia will be a significant growth area for us over the next several years with more than 55% growth over current sales levels booked already. Much of that growth is coming from electrified vehicle program launches, as you might expect given the stronger focus for new energy vehicles in China.
In fact, nearly 25% of our China sales will be for electrified vehicles by 2023. It's great to see continued content per vehicle growth in the quarter in most regions, reflecting our increasing market share thanks to large amounts of launching business. Market share growth is absolutely key to accelerating growth when volumes start to pick up and mitigating declines during the period of decline. Other automotive sales not captured in these content calculations were $104.1 million, up over last year due mainly to increased tooling sales. Commercial and industrial sales were down 7.6% in the quarter at $689.2 million compared to $745.7 last year due to lower MacDon sales driven by the trade and tariff concerns mentioned and lower scissor sales at Skyjack offset by higher boom and telehandler sales.
Investing in our future continues to be a priority for us at Linamar, but given economic uncertainties, this is an area we're using a very disciplined approach around. CapEx in the quarter was CAD 126.4 million, or 6.1% of sales, still down over the back half of 2018 as expected. We expect 2019 to see lower CapEx than 2018 overall and end up at the low end of our normal 6%-8% range. 2020 will see a similar picture of spending at the low end of our normal range. We had a fantastic quarter in terms of free cash flow with CAD 179 million of cash generated. This brought our net debt level down to CAD 1.93 billion and our net debt to EBITDA to 1.73, and it is expected to be back down under 1.25 times by the end of the year.
We expect to be under 0.5 next year based on continued strong and positive cash flows. We have repaid CAD 229 million of debt since our peak in Q1 of last year despite soft markets, great evidence, I think, of Linamar's excellent cash control. Leverage of under 1.25 times EBITDA will be achieved this year thanks to continued excellent free cash flows that we are expecting in the back half of this year. We continue to expect to generate between CAD 500 million and CAD 700 million of free cash flow this year thanks to still strong earnings, lower CapEx, and a focused non-cash working capital improvement program. Non-cash working capital as a percent of sales reached 12.7% of sales this quarter, well down from the 15% we ended 2018 with, and we expect to finish the year at an even lower level after a normal seasonal bump in Q3.
Turning to our market outlook, we are seeing soft markets in most areas this year and next. Industry experts are predicting on-highway medium-heavy-duty truck volumes to be flat to moderately growing this year in North America and Europe at -1.7% and +0.2% respectively, but declining in Asia. Next year, declines are expected in both North America and Asia with Europe flat. Off-highway medium-duty and heavy-duty volumes are in a bit of a holding pattern right now thanks to trade issues and a hold-up on the infrastructure spending bill in the U.S. Turning to the access market, the industry is expecting flat markets for the aerial work platform market globally this year. Performance is being driven by declines in North America this year, which is offset by growth in Europe and Asia.
Industry consolidation, tariffs driving higher construction costs, and economic uncertainties, as well as Brexit issues in the key UK market, are the key drivers of these forecasts. Scissors and booms will be down globally this year and more so next year, offset by growth in telehandlers this year but not in 2020. This will result in mid-single-digit contraction for the aerial work platform market in 2020. Both North America and Europe will decline next year, but we will see some growth in Asia. Asia is starting to become a more important market, and Skyjack is rapidly positioning itself for growth in the region. Skyjack's backlog is softer than last year but still at a reasonable level. We're now looking at flat to somewhat softer revenues at Skyjack this year and single-digit declines next year.
Turning to the agricultural market, the industry expectation is for a declining combine header market this year in North America thanks to tariffs and political backlash, which is hurting North American farmers and therefore dampening demand, particularly in US soybean and even more so in Canadian canola crops. Europe, CIS, South America, and Australia are also expected to decline, driving the overall global market down in the double-digit range. MacDon continues to build market share in certain regions to offset these market declines, but nevertheless, we will see flat to somewhat down sales for 2019 despite the extra month of sales and single declines for 2020 unless we see a speedy resolution to the political situation. The good news again is if the tariff situation is resolved, and we do expect a quick bounce back as the industry was just coming off cyclical lows when this situation developed.
For the global light vehicle business, the forecast here is for declining light vehicle volumes globally again this year to 16.6 million, 21.5 million, and 48 million vehicles in North America, Europe, and Asia respectively. 2019 represents the second consecutive year of global vehicle volume declines and the third year of declines in North America. Next year, we'll see flat volumes of ±1%-2% depending on the region, resulting in global growth resuming in 2020. Apologies for the presentation. We're just getting it back up on the screen right now, so we should be back in business in a minute. We'll continue in the meantime. Lower light vehicle performance in the first half of the year looks to be shifting to some year-over-year growth in the back half in most regions, according to the latest industry estimates.
Current forecasts show a global trough of production in 2019 and growth resuming in 2020 in most regions at this point. A few comments on the typical cycle itself, and again, these slides apologize for them not being available at the moment, but they will be posted on our website for your reference shortly as well. In North America, down cycles have typically lasted four years on average if we ignore the outliers. Recall we are in the third year of declines right now in North America, and 2020 is forecast to be the fourth year. The other key point is sharp declines have rarely happened. In fact, only three times in the last 35 years have we seen a drop of 10% or more, twice during the financial crisis, which of course was not a normal cycle.
Normal declines are 1%-5% declines each year over that four-year timeframe, not unlike what we've seen in the past couple of years in North America. The question is, where does 2020 end up, which is, of course, something we're keeping a very close eye on. Industry forecasts are currently for a low point of 16.4 million units next year, which is the premise for our outlook. I think a key difference to prior cycles that were down is we're not heading into it with high interest rates and high unemployment, which is a positive and likely will mean a shallower trough than we may have seen in the past. We continue to keep a close eye on these forecasts, and we'll provide another mid-quarter update to you on our website as we did just this past quarter for the latest information as it becomes available.
I do think it is important to reflect on past cycles of auto production and how they link to Linamar EPS growth. In the first decade of this century, we saw U.S. light vehicle sales decline 3.3% in the same period that Linamar grew EPS 10.9%. In the next 10 years, when U.S. sales grew at a compounded rate of 5.7%, we grew our EPS 97%. We're back in production, which is good news. Here you can see the trough I mentioned, and here you can see the historical North American auto cycles, which I think is interesting to reflect on in terms of where things might go. Finally, the track record of growth that I just described to you.
The bottom line is Linamar has a strong track record of outperformance and long-term growth regardless of auto cycles, and also a history of quickly reacting to declining volumes by cutting costs, reallocating equipment, and aggressively finding new business to grow market share and utilize both equipment and people. Good evidence of this is where we sit today, still generating strong margins and cash flow three years into a down market. There are many companies struggling out there. Some are failing, and we are actively picking up work from these companies right now thanks to our strength and our resilience during this auto cycle. Turning to an update on growth and outlook, we are seeing strong levels of new business wins and a strong book of business being quoted in our transportation business.
Q2 was another great quarter for us in terms of new business wins for our transportation business with quite a few notable strategic wins driven by outsourcing of new electrified platforms and continued acceleration of powertrain outsourcing, which is very exciting. In fact, sales to electrified vehicles at Linamar will grow between 2018 and 2023 a fantastic 10 times for a compound annual growth rate of nearly 60%. Sales to these future-focused vehicles will be nearly $1.2 billion by 2023, and in terms of content per vehicles, we'll already in 2023 be at the level we were at in internal combustion engine vehicles only two years ago. So it's great to see that continued evolution in our business happening. Our addressable market across a range of vehicle propulsion types continues to look excellent.
Global vehicle growth is forecast to grow at a compound annual rate of 1.5%-2% over the next 25 years. Each type of vehicle propulsion offers excellent and growing potential for us, and our suite of products for each continues to be developed and to grow. The total addressable market for us today is more than $125 billion, growing to nearly $325 billion in the future, an increase of more than two and a half times. We have 187 programs in launch at Linamar today. Look for ramping volumes on launching transmission engine and driveline platforms to reach 30%-40% of material levels this year. These programs will peak at nearly $4.4 billion in sales. We saw a shift of about $100 million in programs moving from launch to production last quarter, including the $40 million in incremental sales from programs shifting to production that hit this year.
We'll see total launches this year in the $700 million-$800 million range. Next year, we'll see growth in these programs of 60%-70%, which means incremental sales from launches of more than $1 billion for next year. In addition, as noted, we are now looking at flat to somewhat softer revenues at Skyjack this year and single-digit declines next year. MacDon, as noted, we'll see flat to slightly down sales for 2019 as well, and also single-digit declines for 2020 unless we see a speedy resolution to the political situation. On a positive note, 2019 corn head orders for North America have quadrupled since MacDon took over branding, sales, and distribution of the OROS products products that we make in Hungary, which is great to see and testament to the fantastic brand name and reputation MacDon has developed here in North America.
You need to temper that growth with the loss of business that naturally ends each year, noting to expect such at the high end of our normal range of 5%-10% in 2019 and 2020, as well as normal productivity give back. To summarize, expectations for the top line for this year, our strong backlog of launching business will basically offset softness in our industrial sector and the transportation sector, leaving sales fairly flat for 2018. Next year, we will see growth pick up thanks to strong launches and more stable markets to see single-digit top line growth. On the margin side, with pressures in both segments, we expect to see margin contraction in both, heading to mid-range for industrial and mid to low for transportation.
Next year, we will see margin expansion in the transportation segment as we get to the other side of the transition to next generation platforms, but industrial will stay steady at mid-range. This, of course, means net margins will be lower as well this year, now estimated at the low end of our normal range being 6.75%-7.25%. Flat sales and margin contraction will result in single-digit declines in normalized operating earnings this year, but flat to modestly declining EBITDA. We do expect to see EBITDA growth in the back half of the year. Next year, we expect double-digit normalized operating earnings and EBITDA growth thanks to sales growth and margin expansion in the transportation segment. I would like to highlight a couple of our more interesting wins this quarter. First, we picked up several driveline components for battery electric vehicles in China.
We are quickly building a strong suite of business for electrified vehicles in China, not surprising given the focus on such in the region. As noted, electric vehicle revenues in China will soon represent nearly 25% of our overall sales. We are winning products for electric vehicles in other regions as well, of course, and in fact, saw several driveline component wins for battery electric vehicles in North America last quarter, as well as you can see illustrated here. In fact, driveline components are a hot area of growth for us at the moment. This win, also for North America, is notable in that it is for a Japanese OEM who we have been seeing some great growth with. It's great to see their confidence in us in this highly critical driveline gear product, which is not typically outsourced.
On the casting side, we saw solid wins for cylinder head castings in both Mexico and France, worth in aggregate more than $50 million in sales. Also in France was a transmission component win for a major French automaker. We start production in 2021 for this program. And finally, on the engine side, several strategic key wins for a variety of components in North America, representing more than $70 million a year in revenue. We continue to see outsourcing accelerating for these core internal combustion engine components. Our last featured win is another great example of that, a fully assembled balance shaft assembly, this time for China, which is going to launch next year. So lots of exciting wins and strategic wins right around the globe this quarter. Turning to an innovation update, we continue to invest in innovation in each of our key businesses.
I'd like to highlight a few initiatives on the industrial side this quarter. First is a unique feature Skyjack has developed to automatically run a self-health check on a machine before beginning to use it. This is a great time saver as well as a great safety feature for our customers. The feature is going to be introduced into production machines in 2020. Next, we've established a manufacturing partnership with a company called ThermoLift, a company that has designed a unique unit for home use to combine a heater, air conditioning unit, and water heater into one unique piece of equipment, which also boasts significant energy savings. At MacDon, we also broke ground on a brand new innovation center for MacDon in Madison, Wisconsin. The center is going to be completed later this fall.
And finally, the roof's on our new innovation center, the iHub in Guelph, where we will be housing our new manufacturing partnerships and other longer-term innovation projects. We also continue to make considerable progress on our broad digitization initiative summarized on this slide. We are rapidly transforming our shop floor to be more efficient, more proactive and reactive, safer and more connected, and in the progress, creating some exciting career opportunities for our employees. There's a huge amount of opportunity in these technologies to dramatically improve efficiencies of our operations, both on the shop floor and in the back office as well, which we can deploy on a global basis. In other areas of operations, our plants continue to perform well, both on mature business metrics and in terms of launch. Our launch systems are excellent, and our plant controls are world-class.
In terms of new plants, we're making great progress on our three key expansion projects that are underway at the moment. Our new state-of-the-art facility in Hungary to house a significant e-Axle gearbox program is nearing completion. We started moving equipment into the facility to continue launch preparation. We start into production next year. The expansion of our fabrication facility also in Hungary to accommodate growing corn head sales and also to house the European requirements of Skyjack is also nearing completion, as you can see here. And finally, the expansion of another facility in China is also well underway, in fact, basically complete. This facility will also take on a major e-Axle program, which launches next year, and I think the facility looks fantastic. With that, I will turn it over to our CFO, Dale Schneider, to lead us through a more in-depth financial review. Dale.
Thank you, Linda, and good afternoon, everyone. As Linda noted, Q2 was a great quarter for cash generation that led to significant levels of debt repayment, since we generated CAD 179 million in free cash flow in the quarter. With the global light vehicle market down 5.6%, the North American and European scissor markets down 8.5% on average, and the North American combine markets down 19%, Linamar was able to outperform our markets as sales declined only slightly by 3.3%. For the quarter, sales were CAD 2.09 billion, down CAD 71.3 million from CAD 2.16 billion in Q2 2018. Normalized operating earnings for the quarter were CAD 225.3 million. This compares to CAD 265 million in Q2 2018, a decrease of CAD 42 million or 15.8%.
Earnings were normalized for FX losses related to the revaluation of the balance sheet and a restructuring charge in the transportation segment related to certain programs that were nearing end of life. These items impacted normalized EPS by $0.12 per share. Net earnings decreased $35.3 million or 18.2% in the quarter to $158.3 million. As a result, fully diluted normalized EPS decreased $0.53 or 18.1% to $2.40. Included in earnings for the quarter was a foreign exchange loss of $8.8 million, which was related to an $8.3 million loss on the revaluation of operating balances and a $500,000 loss on the revaluation of financing balances. The net FX loss impacted the quarter's EPS by $0.10. From a business segment perspective, the Q2 FX loss due to the revaluation of operating balances of $8.3 million was a result of a $7.9 million loss in industrial and a $400,000 loss in transportation.
Further looking at the segments, industrial sales decreased 7.9% or CAD 51.5 million to CAD 591.1 million in Q2. The sales decrease for the quarter was mainly due to the lower scissor volumes in Europe and North America as a result of the 8.5% decline in the markets. Lower agricultural sales due to the continued trade pressures, which drove the North American combine market down 19%, which was also partially offset by higher telehandler and boom volumes and a favorable FX impact due to changes in rates since last year. Normalized industrial operating earnings for Q2 decreased CAD 23.2 million or 17.8% over last year. The primary drivers for the industrial operating earnings results were impacted by the net lower volumes in access and ag markets, partially offset by a favorable FX impact due to the changes in FX rates.
Turning to transportation sales, sales decreased CAD 19.8 million over Q2 last year to reach CAD 1.49 billion. The sales decrease in the second quarter was driven by lower volumes as a result of the global light vehicle markets being down 5.6% and certain programs that are naturally ending, partially offset by additional sales from launching programs and favorable FX impacts from the changes in FX rates. Q2 normalized operating for transportation were lower by CAD 19 million or 13.9% over last year.
In the quarter, transportation sales were impacted by the lower volumes in the global light vehicle markets and from ending programs, additional costs related to heavy launch activity globally, the impact of the transition to next generation powertrain programs weighing on margins as neither the launching program nor the related mature program are running efficiently at the current volume levels, partially offset by additional sales from launching and favorable FX impacts from the changes in rates. Returning to the overall Linamar results, the company's gross margin was CAD 334.4 million, a decrease of CAD 51.2 million due to a reduction in earnings from the lower volume and market declines, additional costs related to the heavy launch activity. The production ramp issues related to the transition to new powertrain platforms, partially offset by favorable impacts on sales and earnings from the changes in FX rates.
Cost of goods sold amortization expense for the second quarter was CAD 96.9 million. COGS amortization as a percent of sales increased to 4.6%, mainly due to the amortization from the adoption of the new leasing standard in Q1. Selling general administration costs decreased in the quarter to CAD 111 million from CAD 122.7 million. The decrease is mainly due to lower management costs and lower restructuring costs in comparison to last year. Finance expenses increased by CAD 1.1 million since last year due to the higher interest costs from the Bank of Canada rate hikes following Q2 2018. The lower interest earned from lower cash and long-term AR levels, which were partially offset by lower interest as a result of the cross-currency interest rate swaps on the euro-denominated debt and the reduced interest expense as we repaid the debt.
The consolidated effective interest rate for Q2 increased to 2.9%, primarily due to the Bank of Canada rate hikes, which were minimized by the lower rates achieved from our cross-currency interest rate swaps. The effective tax rate for the second quarter increased to 24.4% compared to last year, which was mainly driven by an increase in non-deductible expenses and one-time tax costs related to the repatriation of cash from certain foreign subsidiaries. We are expecting the 2019 full-year effective tax rate to remain at the high end of our range of 22%-24%. Linamar's cash position was $437.6 million on June 30th, an increase of $20.5 million compared to June 2018. The second quarter generated $319.8 million in cash from operating activities, which was used mainly to fund CapEx and debt repayments. This resulted in free cash flow generation of $179 million in the quarter.
Net debt to EBITDA decreased to 1.73 times since the acquisition of MacDon, despite the addition of $80 million of new debt as the adoption of the new IFRS standard took place in Q1 2019. We expect the net debt to EBITDA to be under 1.25 times by the end of 2019. The amount available credit on our credit facilities was $774.4 million at the end of quarter. To recap, Linamar had a great cash generation quarter. Sales outperformed the declines in the light vehicle, scissor, and combine markets that we served. In the quarter, we generated $179 million in free cash flow, which was used to pay down debt. Linamar was able to maintain strong normalized EBITDA margins of 15.6%, even with the tough market conditions in the quarter. That concludes my commentary, and I now like to open it up for questions.
At this time, I would like to remind everyone, in order to ask a question, please press star then the number one on your telephone keypad. Again, that is star one to ask a question at this time. We'll pause for just a moment to compile the Q&A roster. Your first question from Peter Sklar from BMO Capital Markets.
Thanks. On the tail off in Skyjack, can you talk a little bit about your interpretation of what's happening in the market? Is it replacement demand that's tailed off or non-residential construction? Are you still seeing the United Rentals hangover from that acquisition they've done? What's your interpretation of the softness you saw in the quarter?
Yeah, it's a couple of things that I mentioned in my formal comments. One, industry consolidation, as you've just noted with the United Rentals acquisition, was an impact.
Higher construction costs thanks to tariffs has been another issue. In the UK, there were some concerns around Brexit that are impacting as well. So it was a variety of issues.
Right. And so you know how things are going to unfold, I would think, over the next couple of quarters by looking into your backlog. How is your backlog looking?
Yeah. I mean, as I say, the backlog is a little softer than last year, which is why I'm suggesting that Skyjack sales will be flat to modestly down this year. So in terms of visibility farther out, I mean, part of it is going to be related to resolution on some of these political issues and where things land. I think that the economic uncertainties are not helping the situation.
Yeah.
I think to add a little bit, Peter, the customers have sort of given us signals in Q2 that they're going to cut back on their projections for the future. So that's why we're scaling back on our forecast going forward. We also see, again, as Linda mentioned, some of the things in Europe were the big issue. UK is a big market for us, and this Brexit nervousness is really, I think, taking hold. Material costs based off tariffs are hitting. Just this uncertainty is creating a volume concern. Based on that, we're basically taking our level load down to a different level than we anticipated. Now we're dealing with inventory issues and things like that as well to right size for this new expected volume.
Peter, also, you asked about non-residential construction. It is trending a little bit down.
We saw some downturn a little bit in Q2. I think too, the market is adjusting to the delay in the infrastructure bill. Obviously, a lot of expectation of that getting passed earlier, and that's been hurting markets also.
Okay. And I think you're experiencing, and I understand that Asia and particularly China is a big growing market for this type of equipment. And I noticed that Terex has a manufacturing plant in China. And so I'm just wondering how you're positioned relative to your competitors in the China market.
Yeah. We're fully aware of the market in China, and we have a strategy to implement into China. Ultimately, we have to get production on the ground over there in some form or fashion. And so that is sort of a plan of attack that we're dealing with with the Skyjack folks. So that's number one.
Number two is how do you distribute in that market to ensure that you're getting to the customer base, right? So those are the two things that we are factoring into our strategy that we're really planning to roll out in the next 12, 18 months.
Okay. Thanks very much. Thanks, Peter.
Again, if you would like to ask a question, please press star one. Your next question comes from the line of Kevin Chiang with CIBC.
Hey, good afternoon, everybody. Thanks for taking my question here. Maybe just a couple on MacDon for me. I'm just trying to reconcile, I guess, if I look at your 2020 expectations of, I guess, single-digit decline here.
Just trying to reconcile that with comments that the North American combine market was down 19% in the quarter and why that pressure wouldn't just continue for the next, let's say, 12-18 months just given the uncertainty we're seeing in the ag market. Are you making an assumption around trade, or is it that you're offsetting that with market share gains? Just some color in terms of bridging those two numbers there.
Yeah. I mean, the big issue, as you've pointed out for the agricultural market, is the tariff and trade issue, which we don't think is something that is going to be a multi-year phenomenon. We think that resolution will start to evolve. The timeframe of that, obviously, is not entirely predictable. What we do know is that the combine market was coming off a cyclical low.
So it's not like we were at a high, and this has just accelerated a trough that was already going to happen. We were already at a trough in that market, and we're starting to come out of it over the last year or so. So we know that there's pent-up demand in the market and feel that as soon as we see some resolution, we will see demand pop up.
Yeah. I think the other couple of other factors, I mean, farmers, it's all about weather, right? And that's a normal sort of thing. And if you look at this year through the MacDon eyes, I mean, it's been a drier year in Western Canada, which means volumes have been hit. There's been a lot of flooding in the U.S., which has an implication. The political risk that Linda laid out on tariffs has a big issue.
The canola commodity prices are lower right now. Net farm income is lower. The new and used inventory right now is at a level. So everybody is really cautious, I think, with the uncertainty. But on the good side, I mean, Linda highlighted our performance on the MacDon corn header, which is a really important aspect that helps us grow. I would say that Europe, this is sort of our second year into Europe. So that is another good way for us. And Brazil is another area that we're looking at as well. And there's some things that we're looking at there as well. So I think that's probably why we're not hit as hard on the market share.
Yeah. So I mean, we're obviously building some market share growth for next year as well to help temper market conditions.
That's helpful.
And if I recall correctly, when you had acquired MacDon, I think it was, call it a CAD 600 million run rate revenue business, about a 25% EBITDA margin business. When you look at some of these, I guess, unexpected pressures, I know a lot of this has been who could have called any of this stuff. But when you look at the decremental margins of this business, I suspect your revenue is outside of the range you had provided at the time you made the acquisition. Is your sense of what the decrementals are here? Is it similar to what you would see in your transportation division?
Yeah. I mean, the margins are definitely higher in MacDon than they are in the transportation division. But they also have flexibility in terms of managing their cost structure as well. So I mean, yes, sales are obviously down.
For the year, they're flat, mostly down. But don't forget, we have the extra month of sales. So at this point, sales are clearly down from prior year. But margins are actually still pretty good. So they're not obviously at the level that they were pre-acquisition. But I mean, they've been able to maintain a decent margin, as has Skyjack. I mean, I don't think we should overly panic here about what's going on. I mean, for us to contract to mid-range of our 14%-18% operating margin range this year and stay flat at that next year is actually pretty good, I think. And we should keep focused on that sort of macro level too.
That's helpful. Maybe just one last one for me. Maybe just more of a philosophical question.
I think you've had a strategy to become this kind of global manufacturing industrial company, not leave it to one end market. I think we see the benefits of diversification in theory. But you're sitting here today with effectively all your end markets seeing some level of softness here. A lot of it's politically driven. Does that kind of change how you think about this portfolio over the next 10 years, what you've put together, maybe what you might invest in the future in terms of what can maybe reduce the overall or maybe improve the diversification or reduce the coordinated pressure you're seeing today?
Yeah. I mean, I think that what's happening in ag is 100% politically created. That's an unfortunate situation that hopefully doesn't repeat in the future.
So I think that's anomalous that its cycle happens to have now overlapped with that of auto and access. The three industries do not follow the same cycle. In fact, as noted, we're in the third year of an auto decline out of possibly four years. Industrial was meant to start declining next year. So obviously, the cycle is offset from auto. So I think overall, it's actually still a pretty good picture to create consistent sustainable growth. I think the fact that we're going to have single-digit declines for one year on the earnings side and flat to modest declines on EBITDA this year, followed by double-digit growth next year, is evidence that this strategy is a good one.
That's it for me. Thank you for taking my questions. No problem.
And at this time, we have no other questions.
Okay.
Well, to conclude this evening, I would like to leave you with three key messages. First, we are thrilled with the strong performance in the quarter on free cash flow of nearly $180 million. This has been a key priority for us, and we are delivering on it. We continue to expect to see strong free cash flow for the year of $500 million-$700 million, which will further fortify our already strong balance sheet. Second, we are pleased to see market share growth doing a great job of offsetting market softness with sales only slightly down and markets down much more significantly. In addition, cost control and improving launch cost means the gap to prior year on transportation segment margins is improving. EBITDA margins at 15.6% are strong. We expect to see growth in EBITDA in the back half of the year and strong growth next year.
Finally, we saw another great quarter in new business wins, which is building our business for the future with a notable emphasis on new products for electrified vehicles seen globally. Thanks very much, and have a great evening.
This concludes today's teleconference. You may now disconnect at this time.