Magna International Inc. (TSX: MG; NYSE: MGA) today reported
financial results for the first quarter ended March 31, 2022.
Please click HERE for full first quarter Financial
Statements and MD&A.
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THREE MONTHS ENDED |
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March 31, 2022 |
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March 31, 2021 |
Reported |
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Sales |
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$ |
9,642 |
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$ |
10,179 |
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Income from operations before income taxes |
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$ |
420 |
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$ |
805 |
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Net income attributable to Magna International Inc. |
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$ |
364 |
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$ |
615 |
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Diluted earnings per share |
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$ |
1.22 |
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$ |
2.03 |
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Non-GAAP Financial Measures(1) |
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Adjusted EBIT |
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$ |
507 |
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$ |
770 |
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Adjusted diluted earnings per share |
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$ |
1.28 |
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$ |
1.86 |
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All results are reported in millions of U.S. dollars,
except per share figures, which are in U.S. dollars |
(1) |
Adjusted EBIT and Adjusted diluted earnings per share are Non-GAAP
financial measures that have no standardized meaning under U.S.
GAAP, and as a result may not be comparable to the calculation of
similar measures by other companies. A reconciliation of these
Non-GAAP financial measures is included in the back of this press
release. |
A photo accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/d6b9ebcc-18df-424a-a889-e7538c1a2811
THREE MONTHS ENDED MARCH 31, 2022
Adjusted EBIT came in ahead of our expectations
for the first quarter of 2022. This was mainly the result of
contribution earned on slightly higher sales and higher commercial
items, partially offset by increased production input costs.
In the first quarter of 2022, global light
vehicle production decreased 7%, largely due to a 16% decrease in
Europe.
We posted sales of $9.6 billion for the first
quarter of 2022, a decrease of 5% from the first quarter of 2021,
mainly as a result of lower global light vehicle production and
assembly volumes, and the net weakening of foreign currencies
against the U.S. dollar, partially offset by the launch of new
programs. Excluding foreign currency translation and divestitures
net of acquisitions, sales decreased 2%.
Adjusted EBIT of $507 million in the first
quarter of 2022 decreased 34% from the first quarter of 2021, and
Adjusted EBIT as a percentage of sales decreased to 5.3% in the
first quarter of 2022 compared to 7.6% in the first quarter of
2021, both largely as a result of higher production input
costs.
Income from operations before income taxes was
$420 million for the first quarter of 2022 compared to $805 million
in the first quarter of 2021. Included in Income from operations
before income taxes in the first quarter of 2022 was Other expense
of $61 million, comprised of realized and net unrealized losses on
the revaluations of investments. Included in Income from operations
before income taxes in the first quarter of 2021 was Other income,
net of $58 million, comprised of gains on business combinations and
unrealized gains on the revaluations of investments, partially
offset by restructuring costs. Excluding Other expense (income),
net from the first quarters of 2022 and 2021, income from
operations before income taxes decreased $266 million in the first
quarter of 2022 compared to the first quarter of 2021.
Net income attributable to Magna International
Inc. was $364 million for the first quarter of 2022 compared to
$615 million in the first quarter of 2021. Net income attributable
to Magna International Inc. included Other expense of $48 million
after tax and Adjustments to Deferred Tax Valuation Allowances of
$29 million for the first quarter of 2022 and Other income, net of
$49 million after tax for the first quarter of 2021. Excluding
Other expense (income), net and Adjustments to Deferred Tax
Valuation Allowances from both periods, net income attributable to
Magna International Inc. decreased $183 million in the first
quarter of 2022 compared to the first quarter of 2021.
Diluted earnings per share decreased to $1.22 in
the first quarter of 2022, compared to $2.03 in the comparable
period, and Adjusted diluted earnings per share decreased 31% to
$1.28 compared to $1.86 in the first quarter of
2021.
In the first quarter of 2022, we generated cash
from operations before changes in operating assets and liabilities
of $749 million and used $569 million in operating assets and
liabilities. Investment activities for the first quarter of 2022
included $238 million in fixed asset additions, a $64 million
increase in investments, other assets and intangible assets, and $2
million in public and private equity investments.
RETURN OF CAPITAL TO SHAREHOLDERS
During the three months ended March 31, 2022, we
paid dividends of $133 million and repurchased for cancellation 5.8
million shares for $383 million.
Our Board of Directors declared a first quarter
dividend of $0.45 per Common Share, payable on May 27, 2022 to
shareholders of record as of the close of business on May 13,
2022.
SEGMENT SUMMARY
($Millions) |
For the three months ended March 31, |
Sales |
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Adjusted EBIT |
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2022 |
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2021 |
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Change |
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2022 |
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2021 |
Change |
Body Exteriors & Structures |
$ |
4,077 |
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$ |
4,025 |
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$ |
52 |
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$ |
229 |
$ |
327 |
$ |
(98 |
) |
Power & Vision |
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3,046 |
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3,156 |
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(110 |
) |
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154 |
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297 |
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(143 |
) |
Seating Systems |
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1,376 |
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1,303 |
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73 |
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49 |
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55 |
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(6 |
) |
Complete Vehicles |
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1,275 |
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1,850 |
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(575 |
) |
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50 |
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80 |
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(30 |
) |
Corporate and Other |
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(132 |
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(155 |
) |
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23 |
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25 |
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11 |
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14 |
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Total Reportable Segments |
$ |
9,642 |
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$ |
10,179 |
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$ |
(537 |
) |
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$ |
507 |
$ |
770 |
$ |
(263 |
) |
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For the three months ended March 31, |
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Adjusted EBIT as a percentage of
sales |
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2022 |
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2021 |
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Change |
Body Exteriors & Structures |
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5.6 |
% |
8.1 |
% |
(2.5 |
)% |
Power & Vision |
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5.1 |
% |
9.4 |
% |
(4.3 |
)% |
Seating Systems |
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3.6 |
% |
4.2 |
% |
(0.6 |
)% |
Complete Vehicles |
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3.9 |
% |
4.3 |
% |
(0.4 |
)% |
Consolidated Average |
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5.3 |
% |
7.6 |
% |
(2.3 |
)% |
For further details on our segment results,
please see our Management’s Discussion and Analysis of Results of
Operations and Financial Position and our Interim Financial
Statements.
2022 OUTLOOK
We disclose a full-year Outlook annually in
February with quarterly updates. The following Outlook is an update
to our previous Outlook in February 2022.
Updated 2022 Outlook
Assumptions
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Current |
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Previous |
Light Vehicle
Production (millions of units) |
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North America |
14.7 |
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15.2 |
Europe |
16.4 |
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18.5 |
China |
24.4 |
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24.2 |
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Average Foreign exchange
rates: |
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1 Canadian dollar equals |
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U.S. $0.790 |
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U.S. $0.800 |
1 euro equals |
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U.S. $1.091 |
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U.S. $1.130 |
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Updated 2022 Outlook
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Current |
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Previous |
Segment Sales |
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Body Exteriors & Structures |
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$15.8 - $16.4 billion |
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$16.2 - $16.8 billion |
Power & Vision |
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$11.6 - $12.0 billion |
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$11.9 - $12.3 billion |
Seating Systems |
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$5.2 - $5.5 billion |
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$5.4 - $5.7 billion |
Complete Vehicles |
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$5.2 - $5.5 billion |
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$5.8 - $6.1 billion |
Total Sales |
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$37.3 - $38.9 billion |
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$38.8 - $40.4 billion |
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Adjusted EBIT Margin(2) |
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5.0% - 5.4% |
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6.0% - 6.4% |
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Equity Income (included in
EBIT) |
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$70 - $100 million |
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$70 - $100 million |
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Interest Expense, net |
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Approximately $90 million |
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Approximately $80 million |
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Income Tax Rate(3) |
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Approximately 21% |
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Approximately 21% |
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Net Income attributable to
Magna(4) |
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$1.3 - $1.5 billion |
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$1.7 - $1.9 billion |
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Capital Spending |
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Approximately $1.8 billion |
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Approximately $1.8 billion |
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Notes:(2) Adjusted EBIT Margin is the ratio of Adjusted EBIT to
Total Sales(3) The Income Tax Rate has been calculated using
Adjusted EBIT and is based on current tax legislation(4) Net Income
attributable to Magna represents Net Income excluding Other expense
(income), net |
Our Outlook is intended to provide information
about management's current expectations and plans and may not be
appropriate for other purposes. Although considered reasonable by
Magna as of the date of this document, the 2022 Outlook above and
the underlying assumptions may prove to be inaccurate. Accordingly,
our actual results could differ materially from our expectations as
set forth herein. The risks identified in the “Forward-Looking
Statements” section below represent the primary factors which we
believe could cause actual results to differ materially from our
expectations.
Key Drivers of Our Business
Our operating results are primarily dependent on
the levels of North American, European and Chinese car and light
truck production by our customers. While we supply systems and
components to every major original equipment manufacturer (“OEM”),
we do not supply systems and components for every vehicle, nor is
the value of our content consistent from one vehicle to the next.
As a result, customer and program mix relative to market trends, as
well as the value of our content on specific vehicle production
programs, are also important drivers of our results.
OEM production volumes are generally aligned
with vehicle sales levels and thus affected by changes in such
levels. Aside from vehicle sales levels, production volumes are
typically impacted by a range of factors, including: general
economic and political conditions; labour disruptions; free trade
arrangements; tariffs; relative currency values; commodities
prices; supply chains; infrastructure; availability and relative
cost of skilled labour; regulatory considerations, including those
related to environmental emissions and safety standards; and other
factors. Additionally, COVID-19 has been impacting vehicle
production volumes, including through: mandatory stay-at-home
orders which restrict production; elevated employee absenteeism;
and supply chain disruptions.
Overall vehicle sales levels are significantly
affected by changes in consumer confidence levels, which may in
turn be impacted by consumer perceptions and general trends related
to the job, housing and stock markets, as well as other
macroeconomic and political factors. Other factors which typically
impact vehicle sales levels and thus production volumes include:
interest rates and/or availability of credit; fuel and energy
prices; relative currency values; regulatory restrictions on use of
vehicles in certain megacities; and other factors. Additionally,
COVID-19 has been impacting vehicle sales, including through
mandatory stay-at-home orders which restrict operations of car
dealerships, and could impact vehicle sales if consumer confidence
declines due to deterioration in household incomes.
Russian Invasion of Ukraine
Magna's operations in Russia remain
substantially idled. These operations currently consist of six
facilities and approximately 2,000 employees which generated sales
of $371 million in 2021, substantively to Hyundai and Volkswagen.
As at March 31, 2022, our consolidated balance sheet included $440
million related to our investment in Russia, including $160 million
of net assets and $280 million of deferred cumulative translation
losses in accumulated other comprehensive loss. In addition to the
risk factors discussed in our Annual Information Form and Annual
Report on Form 40-F in respect of the year ended December 31, 2021,
the continuing conflict is creating or exacerbating a broad range
of risks, including with respect to:
- global economic growth;
- global vehicle production
volumes;
- inflationary pressures, including
in energy, commodities, and transportation/logistics;
- energy security in Western Europe,
particularly in Germany and Austria where we have significant
operations; and
- supply chain fragility.
A material deterioration in any of the foregoing
could have a material adverse effect on our business and results of
operations.
Additionally, the sanctions regime imposed by G7
and other countries includes a range of measures which reduce the
ability of companies from such sanctioning countries to fund or
provide products or services to or through their Russian
operations. The combination of continuing suspensions of production
by western OEMs in Russia, as well as our own continuing idling of
operations, may result in material changes to income for amounts
recorded on our consolidated balance sheet related to our
investment in Russia.
NON-GAAP FINANCIAL MEASURES
RECONCILIATION
Adjusted EBIT |
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The following table reconciles net income to Adjusted EBIT: |
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For the three months ended March 31, |
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2022 |
|
2021 |
|
|
|
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Net Income |
$ |
379 |
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$ |
622 |
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Add: |
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Interest expense, net |
|
26 |
|
|
|
23 |
|
Other expense (income), net |
|
61 |
|
|
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(58 |
) |
Income taxes |
|
41 |
|
|
|
183 |
|
Adjusted EBIT |
$ |
507 |
|
|
$ |
770 |
|
|
|
|
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Adjusted EBIT as a percentage of sales (“Adjusted EBIT
margin”) |
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Adjusted EBIT as a percentage of sales is calculated in the table
below: |
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For the three months ended March 31, |
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2022 |
|
2021 |
|
|
|
|
Sales |
$ |
9,642 |
|
|
$ |
10,179 |
|
Adjusted EBIT |
$ |
507 |
|
|
$ |
770 |
|
Adjusted EBIT as a percentage of sales |
|
5.3 |
% |
|
|
7.6 |
% |
|
|
|
|
|
|
|
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Adjusted diluted earnings per share |
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The following table reconciles net income attributable to Magna
International Inc. to adjusted diluted earnings per share: |
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For the three months ended March 31, |
|
2022 |
|
2021 |
|
|
|
|
Net income attributable to Magna International Inc. |
$ |
364 |
|
|
$ |
615 |
|
Add (deduct): |
|
|
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Other expense (income), net |
|
61 |
|
|
|
(58 |
) |
Tax effect on Other expense (income), net |
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(13 |
) |
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9 |
|
Adjustments to Deferred Tax Valuation Allowances |
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(29 |
) |
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- |
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Adjusted net income attributable to Magna International Inc. |
$ |
383 |
|
|
$ |
566 |
|
Diluted weighted average number of Common Shares outstanding during
the period (millions): |
|
298.1 |
|
|
|
303.6 |
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Adjusted diluted earnings per share |
$ |
1.28 |
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$ |
1.86 |
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Certain of the forward-looking financial
measures above are provided on a Non-GAAP basis. We do not provide
a reconciliation of such forward-looking measures to the most
directly comparable financial measures calculated and presented in
accordance with U.S. GAAP. To do so would be potentially misleading
and not practical given the difficulty of projecting items that are
not reflective of on-going operations in any future period. The
magnitude of these items, however, may be significant.
This press release together with our
Management’s Discussion and Analysis of Results of Operations and
Financial Position and our Interim Financial Statements are
available in the Investor Relations section of our website at
www.magna.com/company/investors and filed electronically through
the System for Electronic Document Analysis and Retrieval (SEDAR)
which can be accessed at www.sedar.com as well as on the United
States Securities and Exchange Commission’s Electronic Data
Gathering, Analysis and Retrieval System (EDGAR), which can be
accessed at www.sec.gov.
We will hold a conference call for interested
analysts and shareholders to discuss our first quarter ended March
31, 2022 results on Friday, April 29, 2022 at 8:00 a.m. ET. The
conference call will be chaired by Swamy Kotagiri, Chief Executive
Officer. The number to use for this call from North America is
1-800-897-8505. International callers should use 1-416-981-9028.
Please call in at least 10 minutes prior to the call start time. We
will also webcast the conference call at www.magna.com. The slide
presentation accompanying the conference call as well as our
financial review summary will be available on our website Friday
prior to the call.
TAGSQuarterly earnings, financial results,
vehicle production
INVESTOR CONTACTLouis Tonelli, Vice-President,
Investor Relations louis.tonelli@magna.com │ 905.726.7035
MEDIA CONTACT Tracy Fuerst, Vice-President,
Corporate Communications & PR tracy.fuerst@magna.com │
248.761.7004
WEBCAST CONTACTNancy Hansford, Executive Assistant, Investor
Relations nancy.hansford@magna.com │ 905.726.7108
OUR BUSINESS (5)
Magna is more than one of the world’s largest
suppliers in the automotive space. We are a mobility technology
company with a global, entrepreneurial-minded team of 161,000
employees and an organizational structure designed to innovate like
a startup. With 60+ years of expertise, and a systems approach to
design, engineering and manufacturing that touches nearly every
aspect of the vehicle, we are positioned to support advancing
mobility in a transforming industry. Our global network includes
340 manufacturing operations and 89 product development,
engineering and sales centres spanning 28 countries.
For further information about Magna (NYSE:MGA; TSX:MG), please
visit www.magna.com or follow us on Twitter
@MagnaInt.
(5) Manufacturing operations, product development,
engineering and sales centres and employee figures include certain
equity-accounted operations.FORWARD-LOOKING STATEMENTS
Certain statements in this press release
constitute "forward-looking information" or "forward-looking
statements" (collectively, "forward-looking statements"). Any such
forward-looking statements are intended to provide information
about management's current expectations and plans and may not be
appropriate for other purposes. Forward-looking statements may
include financial and other projections, as well as statements
regarding our future plans, strategic objectives or economic
performance, or the assumptions underlying any of the foregoing,
and other statements that are not recitations of historical fact.
We use words such as "may", "would", "could", "should", "will",
"likely", "expect", "anticipate", "believe", "intend", "plan",
"aim", "forecast", "outlook", "project", "estimate", "target" and
similar expressions suggesting future outcomes or events to
identify forward-looking statements. The following table identifies
the material forward-looking statements contained in this document,
together with the material potential risks that we currently
believe could cause actual results to differ materially from such
forward-looking statements. Readers should also consider all of the
risk factors which follow below the table:
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Material Forward-Looking Statement |
Material Potential Risks Related to Applicable
Forward-Looking Statement |
Light Vehicle Production |
- Light vehicle sales levels
- Supply disruptions, including as a
result of the current semiconductor chip shortage, COVID-19 related
shutdowns, and/or Russia’s invasion of Ukraine
- Production allocation decisions by
OEMs
|
Total SalesSegment Sales |
- Mandatory COVID-19
lockdowns/stay-at-home orders, including in certain parts of China,
could impact vehicle sales, vehicle production and our own
production
- Economic impact of COVID-19 and/or
Russia’s invasion of Ukraine on consumer confidence
- Supply disruptions, including as a
result of a semiconductor chip shortage, COVID-19 related
shutdowns, and/or Russia’s invasion of Ukraine
- Elevated levels of inflation
- Regional energy shortages and price
increases
- Concentration of sales with six
customers
- Shifts in market shares among
vehicles or vehicle segments
- Shifts in consumer “take rates” for
products we sell
|
Adjusted EBIT MarginNet Income Attributable to Magna |
- Same risks as for Total Sales and
Segment Sales above
- Operational underperformance
- Higher costs incurred to mitigate
the risk of supply disruptions, including: materials price
increases; higher-priced substitute supplies; premium freight costs
to expedite shipments; production inefficiencies due to production
lines being stopped/restarted unexpectedly based on customers’
production schedules; and price increases from sub-suppliers that
have been negatively impacted by production inefficiencies
- Price concessions
- Commodity cost volatility
- Higher labour costs
- Tax risks
|
Equity Income |
- Same risks as Adjusted EBIT Margin
and Net Income Attributable to Magna
- Risks related to conducting
business through joint ventures
|
Forward-looking statements are based on
information currently available to us and are based on assumptions
and analyses made by us in light of our experience and our
perception of historical trends, current conditions and expected
future developments, as well as other factors we believe are
appropriate in the circumstances. While we believe we have a
reasonable basis for making any such forward-looking statements,
they are not a guarantee of future performance or outcomes. In
addition to the factors in the table above, whether actual results
and developments conform to our expectations and predictions is
subject to a number of risks, assumptions and uncertainties, many
of which are beyond our control, and the effects of which can be
difficult to predict, including, without limitation:
Risks Related to the
Automotive Industry
- economic cyclicality;
- regional production volume declines;
- intense competition;
- potential restrictions on free trade;
- trade disputes/tariffs;
Customer and Supplier Related Risks
- concentration of sales with six customers;
- emergence of potentially disruptive Electric Vehicle OEMs,
including risks related to limited revenues/operating history of
new OEM entrants;
- OEM consolidation and cooperation;
- shifts in market shares among vehicles or vehicle
segments;
- shifts in consumer "take rates" for products we sell;
- dependence on outsourcing;
- quarterly sales fluctuations;
- potential loss of any material purchase orders;
- a deterioration in the financial condition of our supply
base;
Manufacturing/Operational Risks
- risks arising from Russia’s invasion of Ukraine and compliance
with the sanctions the regime imposed in response;
- impact of the semiconductor chip shortages on OEM production
volumes and on the efficiency of our operations;
- risks related to COVID-19;
- supply disruptions and higher costs to mitigate such
disruptions;
- regional energy shortages and price increases;
- skilled labour attraction/retention;
- product and new facility launch risks;
- operational underperformance;
- restructuring costs;
- impairment charges;
- labour disruptions;
- climate change risks;
- leadership succession;
IT Security/Cybersecurity Risk
- IT/Cybersecurity breach;
- Product Cybersecurity breach;
Pricing Risks
- Inflationary pressures;
- pricing risks between time of quote and award of new
business;
- price concessions;
- commodity cost volatility;
- declines in scrap steel/aluminum prices;
|
Warranty/Recall
Risks
- costs related to repair or replacement of defective products,
including due to a recall;
- warranty or recall costs that exceed warranty provision or
insurance coverage limits;
- product liability claims;
Acquisition Risks
- competition for strategic acquisition targets;
- inherent merger and acquisition risks;
- acquisition integration risk;
Other Business Risks
- risks related to conducting business through joint
ventures;
- our ability to consistently develop and commercialize
innovative products or processes;
- intellectual property risks;
- our changing business risk profile as a result of increased
investment in electrification and autonomous/assisted driving,
including: higher R&D and engineering costs, and challenges in
quoting for profitable returns on products for which we may not
have significant quoting experience;
- risks of conducting business in foreign markets;
- fluctuations in relative currency values;
- tax risks;
- reduced financial flexibility as a result of an economic
shock;
- changes in credit ratings assigned to us;
Legal, Regulatory and Other Risks
- antitrust risk;
- legal claims and/or regulatory actions against us; and
- changes in laws and regulations, including those related to
vehicle emissions or made as a result of the COVID-19
pandemic.
|
In evaluating forward-looking statements or
forward-looking information, we caution readers not to place undue
reliance on any forward-looking statement. Additionally, readers
should specifically consider the various factors which could cause
actual events or results to differ materially from those indicated
by such forward-looking statements, including the risks,
assumptions and uncertainties above which are:
- discussed under the “Industry Trends and Risks” heading of our
Management’s Discussion and Analysis; and
- set out in our Annual Information Form filed with securities
commissions in Canada, our annual report on Form 40-F filed with
the United States Securities and Exchange Commission, and
subsequent filings.
Readers should also consider discussion of our
risk mitigation activities with respect to certain risk factors,
which can be also found in our Annual Information Form.
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