UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 6-K
Report of Foreign Private Issuer Pursuant to
Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
For the month of August 2023
Commission
File Number 001-11444
MAGNA
INTERNATIONAL INC. |
(Exact
Name of Registrant as specified in its Charter) |
|
337
Magna Drive, Aurora, Ontario, Canada L4G 7K1 |
(Address
of principal executive office) |
Indicate
by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ¨ Form 40-F x
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
MAGNA INTERNATIONAL INC. |
|
|
|
(Registrant) |
Date: August 4, 2023 |
|
|
|
|
|
|
By: |
/s/ “Bassem Shakeel” |
|
|
Bassem A. Shakeel, |
|
|
Vice-President, Associate General Counsel and Corporate Secretary |
EXHIBITS
Exhibit 99.1 | Press release issued August 4, 2023, in which the Registrant
announced its interim unaudited financial results for the three-month and six-month periods ended June 30, 2023, and declared a
quarterly dividend. |
| |
Exhibit 99.2 | The Second Quarter Report of the Registrant, including its unaudited
interim consolidated financial statements and Management's Discussion and Analysis of Results of Operations and Financial Position for
the period ended June 30, 2023. |
| |
Exhibit 99.3 | Certificate of the Chief Executive Officer of the Registrant,
Seetarama (Swamy) Kotagiri, dated August 4, 2023 on Form 52-109F2 pursuant to the Canadian Securities Administrators' Multilateral
Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings. |
| |
Exhibit
99.4 | Certificate of the Chief Financial Officer of the Registrant,
Patrick W.D. McCann, dated August 4, 2023 on Form 52-109F2 pursuant to the Canadian Securities Administrators' Multilateral
Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings. |
Exhibit 99.1
|
PRESS RELEASE |
MAGNA
ANNOUNCES SECOND QUARTER 2023 RESULTS |
| · | Sales
increased 17% to $11.0 billion, compared to global light vehicle production increase of 15% |
| · | Diluted
earnings per share were $1.18 |
| · | Adjusted
diluted earnings per share increased 81% to $1.50 |
| · | Completed
the acquisition of Veoneer Active Safety |
| · | Raised
2023 outlook for Total Sales, Adjusted EBIT Margin and Adjusted Net Income attributable to Magna |
AURORA, Ontario,
August 4, 2023 — Magna International Inc. (TSX: MG; NYSE: MGA) today reported financial results for the second quarter ended
June 30, 2023.
| |
THREE MONTHS ENDED
JUNE 30, | | |
SIX MONTHS ENDED
JUNE 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Reported | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Sales | |
$ | 10,982 | | |
$ | 9,362 | | |
$ | 21,655 | | |
$ | 19,004 | |
| |
| | | |
| | | |
| | | |
| | |
Income (loss) from operations before income taxes | |
$ | 483 | | |
$ | (88 | ) | |
$ | 758 | | |
$ | 332 | |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) attributable to Magna International Inc. | |
$ | 339 | | |
$ | (156 | ) | |
$ | 548 | | |
$ | 208 | |
| |
| | | |
| | | |
| | | |
| | |
Diluted earnings (loss) per share | |
$ | 1.18 | | |
$ | (0.54 | ) | |
$ | 1.91 | | |
$ | 0.70 | |
| |
| | | |
| | | |
| | | |
| | |
Non-GAAP Financial Measures(1) | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Adjusted EBIT | |
$ | 603 | | |
$ | 358 | | |
$ | 1,040 | | |
$ | 865 | |
| |
| | | |
| | | |
| | | |
| | |
Adjusted diluted earnings per share | |
$ | 1.50 | | |
$ | 0.83 | | |
$ | 2.61 | | |
$ | 2.11 | |
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. |
MAGNA ANNOUNCES SECOND QUARTER 2023 RESULTS | CONNECT WITH MAGNA | 1 |
|
“I am
pleased with our second quarter operating performance, which reflects continued strong execution on higher organic sales and cost
reduction actions being taken across the company. We remain highly focused on executing our strategy and remain confident in our
ability to meet our short- and long-term growth and margin outlooks.
With
the closing of the Veoneer Active Safety acquisition, we have hit the ground running on integration plans and delivering synergies
from the combined business.”
-
Swamy Kotagiri, Magna’s Chief Executive Officer
|
THREE MONTHS ENDED JUNE 30, 2023
We posted sales
of $11.0 billion for the second quarter of 2023, an increase of 17% from the second quarter of 2022, which compares to a 15% increase
in global light vehicle production, including 14%, 13% and 21% higher production in North America, Europe and China, respectively. In
addition to higher global production, our sales benefitted from the launch of new programs and higher sales in our Complete Vehicles
segment, while the net weakening of foreign currencies against the U.S. dollar negatively impacted sales.
Adjusted EBIT increased
to $603 million in the second quarter of 2023 compared to $358 million in the second quarter of 2022. Our focus on operational excellence
and cost initiatives helped drive strong earnings on higher sales. In addition, the EBIT increase reflects losses in our Russian facilities
during the second quarter of 2022, and commercial items in the second quarter of 2023 and 2022, which had a net favourable impact on
a year over year basis. These were partially offset by higher production input costs net of customer recoveries, higher engineering,
launch and other costs, including for new vehicle assembly business, and acquisitions, net of divestitures subsequent to the second quarter
of 2022.
Income from operations
before income taxes was $483 million for the second quarter of 2023 compared to a loss of $88 million in the second quarter of 2022,
which includes Other expense, net(2) of $86 million and $426 million in the second quarters of 2023 and 2022, respectively.
Excluding Other expense, net from both periods, income from operations before income taxes increased $231 million in the second quarter
of 2023 compared to the second quarter of 2022.
Net income attributable
to Magna International Inc. was $339 million for the second quarter of 2023 compared to a loss of $156 million in the second quarter
of 2022, which includes Other expense, net(2), after tax of $91 million and $399 million in the second quarters of 2023 and
2022, respectively. Excluding Other expense, net, after tax from both periods, net income attributable to Magna International Inc. increased
$187 million in the second quarter of 2023 compared to the second quarter of 2022.
Diluted earnings
per share increased to $1.18 in the second quarter of 2023, compared to a loss of $0.54 in the second quarter of 2022, and Adjusted diluted
earnings per share increased 81% to $1.50 in the second quarter of 2023 compared to $0.83 in the second quarter of 2022.
In the second quarter
of 2023, we generated cash from operations before changes in operating assets and liabilities of $879 million and used $332 million in
operating assets and liabilities. Investment activities for the second quarter of 2023 included $1.48 billion to acquire Veoneer Active
Safety, $502 million in fixed asset additions, a $96 million increase in investments, other assets and intangible assets, and $3 million
in public and private equity investments.
(2)
Other expense, net is comprised of restructuring and impairment costs and net losses on the revaluation of certain public company warrants
and equity investments during the three and six months ended June 30, 2022 & 2023. The three and six months ended June 30,
2023 also includes impairment of an investment and business acquisition costs. Net Income in Q1 2022 includes a $29 million benefit related
to Adjustments to Deferred Tax Valuation Allowances. A reconciliation of these Non-GAAP financial measures is included in the back of
this press release.
MAGNA ANNOUNCES SECOND QUARTER 2023 RESULTS | CONNECT WITH MAGNA | 2 |
SIX MONTHS ENDED JUNE 30, 2023
We posted sales
of $21.7 billion for the six months ended June 30, 2023, an increase of 14% from the six months ended June 30, 2022, as global
light vehicle production increased 10%.
Adjusted EBIT increased
to $1.04 billion for the six months ended June 30, 2023 compared to $865 million for the six months ended June 30, 2022, primarily
due to earnings on higher sales, productivity and efficiency improvements, including lower costs at certain previously underperforming
facilities, and higher equity income, partially offset by higher engineering, launch and other costs, including for new assembly business,
higher production input costs net of customer recoveries, and commercial items in the first six months of 2023 and 2022, which had a
net unfavourable impact on a year over year basis.
During the six
months ended June 30, 2023, income from operations before income taxes was $758 million, net income attributable to Magna International
Inc. was $548 million and diluted earnings per share was $1.91, increases of $426 million, $340 million, and $1.21, respectively, each
compared to the first six months of 2022.
During the first
six months ended June 30, 2023, Adjusted diluted earnings per share increased 24% to $2.61 compared to the first six months of 2022.
For the six months
ended June 30, 2023, we generated cash from operations before changes in operating assets and liabilities of $1.45 billion and used
$673 million in operating assets and liabilities. Investment activities for the six months ended June 30, 2023 included $1.48 billion
to purchase Veoneer Active Safety, $926 million in fixed asset additions, a $197 million increase in investments, other assets and intangible
assets, and $3 million in public and private equity investments.
RETURN OF CAPITAL TO SHAREHOLDERS
During the three
months ended June 30, 2023, we paid $129 million in dividends.
Our Board of Directors
declared a second quarter dividend of $0.46 per Common Share, payable on September 1, 2023 to shareholders of record as of the
close of business on August 18, 2023.
MAGNA ANNOUNCES SECOND QUARTER 2023 RESULTS | CONNECT WITH MAGNA | 3 |
SEGMENT SUMMARY
| |
For the three months ended June 30, | |
| |
Sales | | |
Adjusted EBIT | |
($Millions unless otherwise noted) | |
2023 | | |
2022 | | |
Change | | |
2023 | | |
2022 | | |
Change | |
Body Exteriors & Structures | |
$ | 4,540 | | |
$ | 3,947 | | |
$ | 593 | | |
$ | 392 | | |
$ | 191 | | |
$ | 201 | |
Power & Vision | |
| 3,462 | | |
| 2,888 | | |
| 574 | | |
| 116 | | |
| 91 | | |
| 25 | |
Seating Systems | |
| 1,603 | | |
| 1,253 | | |
| 350 | | |
| 66 | | |
| 2 | | |
| 64 | |
Complete Vehicles | |
| 1,526 | | |
| 1,403 | | |
| 123 | | |
| 34 | | |
| 63 | | |
| (29 | ) |
Corporate and Other | |
| (149 | ) | |
| (129 | ) | |
| (20 | ) | |
| (5 | ) | |
| 11 | | |
| (16 | ) |
Total Reportable Segments | |
$ | 10,982 | | |
$ | 9,362 | | |
$ | 1,620 | | |
$ | 603 | | |
$ | 358 | | |
$ | 245 | |
| |
For the three months ended June 30, | |
| |
| | |
Adjusted EBIT as a percentage of sales | |
| |
| | |
| | |
| | |
2023 | | |
2022 | | |
Change | |
Body Exteriors & Structures | |
| | | |
| | | |
| | | |
| 8.6 | % | |
| 4.8 | % | |
+ | 3.8 | % |
Power & Vision | |
| | | |
| | | |
| | | |
| 3.4 | % | |
| 3.2 | % | |
+ | 0.2 | % |
Seating Systems | |
| | | |
| | | |
| | | |
| 4.1 | % | |
| 0.2 | % | |
+ | 3.9 | % |
Complete Vehicles | |
| | | |
| | | |
| | | |
| 2.2 | % | |
| 4.5 | % | |
- | 2.3 | % |
Consolidated Average | |
| | | |
| | | |
| | | |
| 5.5 | % | |
| 3.8 | % | |
+ | 1.7 | % |
| |
For the six months ended June 30, | |
| |
Sales | | |
Adjusted EBIT | |
($Millions unless otherwise noted) | |
2023 | | |
2022 | | |
Change | | |
2023 | | |
2022 | | |
Change | |
Body Exteriors & Structures | |
$ | 8,979 | | |
$ | 8,024 | | |
$ | 955 | | |
$ | 662 | | |
$ | 420 | | |
$ | 242 | |
Power & Vision | |
| 6,785 | | |
| 5,934 | | |
| 851 | | |
| 200 | | |
| 245 | | |
| (45 | ) |
Seating Systems | |
| 3,089 | | |
| 2,629 | | |
| 460 | | |
| 102 | | |
| 51 | | |
| 51 | |
Complete Vehicles | |
| 3,152 | | |
| 2,678 | | |
| 474 | | |
| 86 | | |
| 113 | | |
| (27 | ) |
Corporate and Other | |
| (350 | ) | |
| (261 | ) | |
| (89 | ) | |
| (10 | ) | |
| 36 | | |
| (46 | ) |
Total Reportable Segments | |
$ | 21,655 | | |
$ | 19,004 | | |
$ | 2,651 | | |
$ | 1,040 | | |
$ | 865 | | |
$ | 175 | |
| |
For the six months ended June 30, | |
| |
| | |
Adjusted EBIT as a percentage of sales | |
| |
| | |
| | |
| | |
2023 | | |
2022 | | |
Change | |
Body Exteriors & Structures | |
| | | |
| | | |
| | | |
| 7.4 | % | |
| 5.2 | % | |
+ | 2.2 | % |
Power & Vision | |
| | | |
| | | |
| | | |
| 2.9 | % | |
| 4.1 | % | |
- | 1.2 | % |
Seating Systems | |
| | | |
| | | |
| | | |
| 3.3 | % | |
| 1.9 | % | |
+ | 1.4 | % |
Complete Vehicles | |
| | | |
| | | |
| | | |
| 2.7 | % | |
| 4.2 | % | |
- | 1.5 | % |
Consolidated Average | |
| | | |
| | | |
| | | |
| 4.8 | % | |
| 4.6 | % | |
+ | 0.2 | % |
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.
MAGNA ANNOUNCES SECOND QUARTER 2023 RESULTS | CONNECT WITH MAGNA | 4 |
2023 OUTLOOK
We first disclose
a full-year Outlook annually in February, with quarterly updates. The following Outlook is an update to our previous Outlook in May 2023.
Updated 2023
Outlook Assumptions
| |
Current | |
Previous |
Light Vehicle Production (millions of units) | |
| |
|
North America | |
15.2 | |
15.0 |
Europe | |
17.0 | |
16.3 |
China | |
26.2 | |
26.2 |
| |
| |
|
Average Foreign exchange rates: | |
| |
|
1 Canadian dollar equals | |
U.S. $0.746 | |
U.S. $0.748 |
1 euro equals | |
U.S. $1.096 | |
U.S. $1.086 |
Updated 2023
Outlook
| |
Current | |
Previous |
Segment Sales | |
| |
|
Body Exteriors & Structures | |
$17.3 - $17.9 billion | |
$16.8 - $17.4 billion |
Power & Vision | |
$14.0 - $14.4 billion | |
$13.0 - $13.4 billion |
Seating Systems | |
$5.8 - $6.1 billion | |
$5.6 - $5.9 billion |
Complete Vehicles | |
$5.4 - $5.7 billion | |
$5.3 - $5.6 billion |
Total Sales | |
$41.9 - $43.5 billion | |
$40.2 - $41.8 billion |
| |
| |
|
Adjusted EBIT Margin(3) | |
4.8% - 5.2% | |
4.7% - 5.1% |
| |
| |
|
Equity Income (included in EBIT) | |
$110 - $140 million | |
$95 - $125 million |
| |
| |
|
Interest Expense, net | |
Approximately $150 million | |
Approximately $150 million |
| |
| |
|
Income Tax Rate(4) | |
Approximately 21% | |
Approximately 21% |
| |
| |
|
Adjusted
Net Income attributable to Magna(5) | |
$1.4 - $1.6 billion | |
$1.3 - $1.5 billion |
| |
| |
|
Capital Spending | |
Approximately $2.5 billion | |
Approximately $2.4 billion |
Notes:
(3) Adjusted EBIT
Margin is the ratio of Adjusted EBIT to Total Sales. Adjusted EBIT used in the Current Outlook above excludes the amortization of acquired intangible assets. Refer to the reconciliation
of Non-GAAP financial measures in the back of this press release for further information
(4) The Income
Tax Rate has been calculated using Adjusted EBIT and is based on current tax legislation
(5)
Adjusted Net Income attributable to Magna represents Net Income excluding Other expense, net and amortization of acquired intangible
assets
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 2023 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.
MAGNA ANNOUNCES SECOND QUARTER 2023 RESULTS | CONNECT WITH MAGNA | 5 |
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 and 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 can impact 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 can impact vehicle sales, including through mandatory stay-at-home orders which restrict operations of car dealerships, as well
as through a deterioration in consumer confidence.
MAGNA ANNOUNCES SECOND QUARTER 2023 RESULTS | CONNECT WITH MAGNA | 6 |
NON-GAAP FINANCIAL MEASURES RECONCILIATION
The reconciliation of Non-GAAP financial measures is as follows:
| |
THREE MONTHS ENDED
JUNE 30, | | |
SIX MONTHS ENDED
JUNE 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Adjusted EBIT | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Net Income (Loss) | |
$ | 354 | | |
$ | (145 | ) | |
$ | 571 | | |
$ | 234 | |
Add: | |
| | | |
| | | |
| | | |
| | |
Interest expense, net | |
| 34 | | |
| 20 | | |
| 54 | | |
| 46 | |
Other expense, net | |
| 86 | | |
| 426 | | |
| 228 | | |
| 487 | |
Income taxes | |
| 129 | | |
| 57 | | |
| 187 | | |
| 98 | |
Adjusted EBIT | |
$ | 603 | | |
$ | 358 | | |
$ | 1,040 | | |
$ | 865 | |
During the third quarter of 2023, we will revise our calculation of Adjusted EBIT to exclude the amortization of acquired intangible assets
(primarily customer relationships and technology). We believe that excluding the amortization of acquired intangible assets from Adjusted
EBIT will help management and investors in understanding our underlying performance and will improve comparability between our segmented
results of operations and our peers.
Adjusted EBIT as a percentage of sales (“Adjusted EBIT margin”) | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Sales | |
$ | 10,982 | | |
$ | 9,362 | | |
$ | 21,655 | | |
$ | 19,004 | |
Adjusted EBIT | |
$ | 603 | | |
$ | 358 | | |
$ | 1,040 | | |
$ | 865 | |
Adjusted EBIT as a percentage of sales | |
| 5.5 | % | |
| 3.8 | % | |
| 4.8 | % | |
| 4.6 | % |
| |
| | | |
| | | |
| | | |
| | |
Adjusted diluted earnings per share | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) attributable to Magna International Inc. | |
$ | 339 | | |
$ | (156 | ) | |
$ | 548 | | |
$ | 208 | |
Add (deduct): | |
| | | |
| | | |
| | | |
| | |
Other expense, net | |
| 86 | | |
| 426 | | |
| 228 | | |
| 487 | |
Tax effect on Other expense, net | |
| 5 | | |
| (27 | ) | |
| (27 | ) | |
| (40 | ) |
Adjustments to Deferred Tax Valuation Allowances | |
| - | | |
| - | | |
| - | | |
| (29 | ) |
Adjusted net income attributable to Magna International Inc. | |
$ | 430 | | |
$ | 243 | | |
$ | 749 | | |
$ | 626 | |
Diluted weighted average number of Common Shares outstanding during the period (millions): | |
| 286.3 | | |
| 291.1 | | |
| 286.4 | | |
| 295.0 | |
Adjusted diluted earnings per shares | |
$ | 1.50 | | |
$ | 0.83 | | |
$ | 2.61 | | |
$ | 2.11 | |
MAGNA ANNOUNCES SECOND QUARTER 2023 RESULTS | CONNECT WITH MAGNA | 7 |
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 second quarter ended June 30, 2023 results on Friday, August 4,
2023 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 1-800-899-2086. International callers should use 1-416-641-6701. 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.
TAGS
Quarterly earnings,
financial results, vehicle production
INVESTOR CONTACT
Louis 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
TELECONFERENCE CONTACT
Nancy Hansford, Executive Assistant, Investor
Relations
nancy.hansford@magna.com │
905.726.7108
OUR
BUSINESS (6)
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 174,000(7) employees and an organizational structure designed to innovate like a startup. With 65+ 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 351 manufacturing operations and 103 product development,
engineering and sales centres spanning 30 countries.
For further
information about Magna (NYSE:MGA; TSX:MG), please visit www.magna.com
or follow us on Twitter @MagnaInt.
(6)
Manufacturing operations, product development, engineering and sales centres include certain operations accounted for under the equity
method.
(7) Number
of employees includes over 162,000 employees at our wholly owned or controlled entities and over 12,000 employees at certain operations
accounted for under the equity method.
MAGNA ANNOUNCES SECOND QUARTER 2023 RESULTS | CONNECT WITH MAGNA | 8 |
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:
Material Forward-Looking Statement |
Material Potential Risks Related to Applicable Forward-Looking Statement |
Light Vehicle Production |
· |
Light vehicle sales levels |
|
· |
Production disruptions, including as a result of labour disruptions |
|
· |
Supply disruptions |
|
· |
Production allocation decisions by OEMs |
|
· |
Same risks as for Light Vehicle Production above |
Total Sales
Segment Sales |
· |
The impact of elevated interest rates and availability of credit on consumer confidence and in turn vehicle sales and production |
|
· |
Potential supply disruptions |
|
· |
The impact of the Russian invasion of Ukraine on global economic growth and industry production volumes |
|
· |
The impact of rising interest rates and availability of credit on consumer confidence and, in turn, vehicle sales and production |
|
· |
The impact of deteriorating vehicle affordability on consumer demand, and in turn vehicle sales and production |
|
· |
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 Margin |
· |
Same risks as for Total Sales and Segment Sales above |
Net Income Attributable to Magna |
· |
Successful execution of critical program launches, including complete vehicle manufacturing of the Fisker Ocean SUV |
|
· |
Operational underperformance |
|
· |
Production inefficiencies in our operations due to volatile vehicle production allocation decisions by OEMs |
|
· |
Higher costs incurred to mitigate the risk of supply disruptions |
|
· |
Inflationary pressures |
|
· |
Our ability to secure cost recoveries from customers and/or otherwise offset higher input costs |
|
· |
Price concessions |
|
· |
Commodity cost volatility |
|
· |
Scrap steel price 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 |
Veoneer Active Safety Acquisition Benefits |
· |
Same risks as for Total Sales/Segment Sales above |
|
· |
Consumer adoption of ADAS features |
|
· |
Our ability to grow sales with new OEM entrants |
|
· |
Our ability to consistently develop and commercialize innovative products or processes |
|
· |
Intellectual property risks |
|
· |
Risks related to alignment of our product mix with the “Car of the Future” |
|
· |
Acquisition integration risk |
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:
Macroeconomic, Geopolitical and Other Risks
| · | impact of the Russian invasion of Ukraine; |
| · | inflationary pressures; |
| · | interest rate levels; |
| · | risks related to COVID-19; |
Risks Related to the Automotive Industry
| · | economic cyclicality; |
| · | regional production volume declines; |
| · | deteriorating vehicle affordability; |
| · | potential consumer hesitancy with respect to Electric Vehicles (“EVs”); |
| · | intense competition; |
Strategic Risks
| · | alignment of our product mix with the “Car of the Future”; |
| · | our ability to consistently develop and commercialize innovative products
or processes; |
| · | our investments in mobility and technology companies; |
| · | 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; |
Customer- Related Risks
| · | concentration of sales with six customers; |
| · | inability to significantly grow our business with Asian customers; |
| · | emergence of potentially disruptive EV OEMs, including risks related to limited
revenues/operating history of new OEM entrants; |
| · | evolving counterparty risk profile; |
| · | dependence on outsourcing; |
| · | OEM consolidation and cooperation; |
| · | shifts in market shares among vehicles or vehicle segments; |
| · | shifts in consumer "take rates" for products we sell; |
| · | quarterly sales fluctuations; |
| · | potential loss of any material purchase orders; |
| · | potential OEM production-related disruptions; |
IT Security/Cybersecurity Risk
| · | IT/Cybersecurity breach; |
| · | product Cybersecurity breach; |
Pricing Risks
| · | pricing risks between time of quote and start of production; |
| · | price concessions; |
| · | commodity price 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; |
Climate Change Risks
| · | transition risks and physical risks; |
| · | strategic and other risks related to the transition to electromobility; |
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; |
| · | intellectual property risks; |
| · | risks of conducting business in foreign markets; |
| · | fluctuations in relative currency values; |
| · | an increase in pension funding obligations; |
| · | tax risks; |
| · | reduced financial flexibility as a result of an economic shock; |
| · | inability to achieve future investment returns that equal or exceed past
returns; |
MAGNA ANNOUNCES SECOND QUARTER 2023 RESULTS | CONNECT WITH MAGNA | 9 |
Supply Chain Risks
| · | semiconductor chip supply disruptions and price increases, and the impact
on customer production volumes and on the efficiency of our operations; |
| · | supply disruptions and applicable costs related to supply disruption mitigation
initiatives; |
| · | regional energy shortages/disruptions and pricing; |
| · | a deterioration of the financial condition of our supply base; |
Manufacturing/Operational Risks
| · | product and new facility launch risks; |
| · | operational underperformance; |
| · | restructuring costs; |
| · | impairment charges; |
| · | labour disruptions; |
| · | skilled labour attraction/retention; |
| · | leadership expertise and succession; |
| · | changes in credit ratings assigned to us; |
| · | the unpredictability of, and fluctuation in, the trading price of our Common
Shares; |
| · | a reduction of suspension of our dividend; |
Legal, Regulatory and Other Risks
| · | antitrust risk; |
| · | legal claims and/or regulatory actions against us; |
| · | changes in laws and regulations, including those related to vehicle emissions,
taxation, or made as a result of the COVID-19 pandemic. |
| · | potential restrictions on free trade; |
| · | trade disputes/tariffs; and |
| · | environmental
compliance costs. |
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 revised Annual Information Form filed with securities commissions in Canada,
our annual report on Form 40-F / 40-F/A 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.
MAGNA ANNOUNCES SECOND QUARTER 2023 RESULTS | CONNECT WITH MAGNA | 10 |
Exhibit 99.2
Magna International Inc.
Second Quarter
Report
2023
MAGNA INTERNATIONAL INC.
Management's
Discussion and Analysis of Results of Operations and Financial Position
Unless otherwise
noted, all amounts in this Management's Discussion and Analysis of Results of Operations and Financial Position ["MD&A"]
are in U.S. dollars and all tabular amounts are in millions of U.S. dollars, except per share figures, which are in U.S. dollars. When
we use the terms "we", "us", "our" or "Magna", we are referring to Magna International Inc. and
its subsidiaries and jointly controlled entities, unless the context otherwise requires.
This MD&A should
be read in conjunction with the unaudited interim consolidated financial statements for the three and six months ended June 30,
2023 included in this Quarterly Report, and the audited consolidated financial statements and MD&A for the year ended December 31,
2022 included in our 2022 Annual Report to Shareholders.
This MD&A may
contain statements that are forward looking. Refer to the "Forward-Looking Statements" section in this MD&A for a more
detailed discussion of our use of forward-looking statements.
This MD&A has
been prepared as at August 3, 2023.
HIGHLIGHTS
Comparing the second quarter of 2023
to the second quarter of 2022:
| · | Global
light vehicle production increased 15%, including 14%, 13% and 21% higher production in North
America, Europe and China, respectively. |
| · | Total
sales increased 17% to $11.0 billion, largely reflecting higher global vehicle production,
the launch of new programs and higher complete vehicle assembly sales. These were partially
offset by the net weakening of foreign currencies against the U.S. dollar. |
| · | Diluted
earnings per share were $1.18 and Adjusted diluted earnings per share(1) increased
$0.67 or 81% to $1.50 primarily due to earnings on higher sales including higher margins
as a result of a focus on operational excellence and cost initiatives. |
| · | Cash
from operating activities increased $126 million to $547 million. |
In addition, in the second quarter of
2023:
| · | We
completed the acquisition of the Veoneer Active Safety Business ["Veoneer AS"]. The
transaction broadens our Active Safety portfolio with complementary products, customers,
geographies, engineering and software resources. |
| · | We
were awarded significant new business, including: |
| · | Battery
enclosures, truck frames and complete seats on Ford’s second-generation electric pick-up
truck. |
| · | Replacement
vehicle assembly business on the Mercedes-Benz G-Class, continuing a 40+ year history of
producing the vehicle in our facility in Graz, Austria. |
OVERVIEW
OUR BUSINESS(2)
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 over 174,000(3) employees and an organizational structure designed to innovate like a startup. With 65+ 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 351 manufacturing operations and 103
product development, engineering and sales centres spanning 30 countries. Our common shares trade on the Toronto Stock Exchange (MG)
and the New York Stock Exchange (MGA).
1 Adjusted
diluted earnings per share is a non-GAAP financial measure. Refer to the section "Use of Non-GAAP Financial Measures".
2 Manufacturing
operations, product development, engineering and sales centres include certain operations accounted for under the equity method.
3 Number of employees includes
over 162,000 employees at our wholly owned or controlled entities and over 12,000 employees at operations accounted for under the equity
method.
| Magna International Inc. Second Quarter Report 2023 1 |
INDUSTRY
TRENDS & RISKS
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.
Ordinarily, OEM
production volumes are 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 and infrastructure; availability and relative
cost of skilled labour; regulatory considerations, including those related to environmental emissions and safety standards; and other
factors.
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.
While the foregoing
economic, political and other factors are part of the general context in which the global automotive industry operates, there have been
a number of significant industry trends that are shaping the future of the industry and creating opportunities and risks for automotive
suppliers. We continue to implement a business strategy which is rooted in our best assessment as to the rate and direction of change
in the automotive industry, including with respect to trends related to vehicle electrification and advanced driver assistance systems,
as well as new mobility business models/"mobility-as-a-service" ["MaaS"]. Our short- and medium-term operational
success, as well as our ability to create long-term value through our business strategy, are subject to a number of risks and uncertainties.
Significant industry trends, our business strategy and the major risks we face, are discussed in our revised Annual Information Form ["AIF"]
and Annual Report on Form 40-F / 40-F/A ["Form 40-F"] in respect of the year ended December 31, 2022, together
with subsequent filings. Those industry trends and risk factors remain substantially unchanged in respect of the second quarter ended
June 30, 2023.
USE
OF NON-GAAP FINANCIAL MEASURES
In addition to
results presented in accordance with accounting principles generally accepted in the United States of America ["U.S. GAAP"],
this report includes the use of Adjusted earnings before interest and taxes ["Adjusted EBIT(4)"], Adjusted EBIT
as a percentage of sales, Adjusted diluted earnings per share, Return on Invested Capital, and Adjusted Return on Invested Capital [collectively,
the "Non-GAAP Measures"]. We believe these non-GAAP financial measures provide additional information that is useful to investors
in understanding our underlying performance and trends through the same financial measures employed by our management for this purpose.
Readers should be aware that Non-GAAP Measures have no standardized meaning under U.S. GAAP and accordingly may not be comparable to
the calculation of similar measures by other companies. We believe that Return on Invested Capital is useful to both management and investors
in their analysis of our results of operations and reflect our ability to generate returns. Similarly, we believe that Adjusted EBIT,
Adjusted EBIT as a percentage of sales, Adjusted diluted earnings per share and Adjusted Return on Invested Capital provide useful information
to our investors for measuring our operational performance as they exclude certain items that are not reflective of ongoing operating
profit or loss and facilitate a comparison with prior periods. The presentation of any Non-GAAP Measures should not be considered in
isolation or as a substitute for our related financial results prepared in accordance with U.S. GAAP. Non-GAAP financial measures are
presented together with the most directly comparable U.S. GAAP financial measure, and a reconciliation to the most directly comparable
U.S. GAAP financial measure, can be found in the "Non-GAAP Financial Measures Reconciliation" section of this MD&A.
4 During
the third quarter of 2023, we will revise our calculation of Adjusted EBIT to exclude the amortization of acquired intangible assets.
Refer to the "Non-GAAP Financial Measures Reconciliation" section of this MD&A for further information.
2 Magna International Inc. Second Quarter Report 2023 | |
RESULTS
OF OPERATIONS
AVERAGE FOREIGN
EXCHANGE
| |
For the three months | | |
For the six months | |
| |
ended June 30, | | |
ended June 30, | |
| |
2023 | | |
2022 | | |
Change | | |
2023 | | |
2022 | | |
Change | |
1 Canadian dollar equals U.S. dollars | |
| 0.745 | | |
| 0.783 | | |
- | 5 | % | |
| 0.743 | | |
| 0.786 | | |
- | 5 | % |
1 euro equals U.S. dollars | |
| 1.089 | | |
| 1.064 | | |
+ | 2 | % | |
| 1.081 | | |
| 1.094 | | |
- | 1 | % |
1 Chinese renminbi equals U.S. dollars | |
| 0.143 | | |
| 0.151 | | |
- | 5 | % | |
| 0.144 | | |
| 0.154 | | |
- | 6 | % |
The preceding table
reflects the average foreign exchange rates between the most common currencies in which we conduct business and our U.S. dollar reporting
currency.
The results of
operations for which the functional currency is not the U.S. dollar are translated into U.S. dollars using the average exchange rates
for the relevant period. Throughout this MD&A, reference is made to the impact of translation of foreign operations on reported U.S.
dollar amounts where relevant.
Our results can
also be affected by the impact of movements in exchange rates on foreign currency transactions (such as raw material purchases or sales
denominated in foreign currencies). However, as a result of hedging programs employed by us, foreign currency transactions in the current
period have not been fully impacted by movements in exchange rates. We record foreign currency transactions at the hedged rate where
applicable.
Finally, foreign
exchange gains and losses on revaluation and/or settlement of monetary items denominated in a currency other than an operation's functional
currency impact reported results. These gains and losses are recorded in selling, general and administrative expense.
LIGHT VEHICLE
PRODUCTION VOLUMES
Our operating results
are mostly dependent on light vehicle production in the regions reflected in the table below:
Light Vehicle
Production Volumes (thousands of units)
| |
For the three months | | |
For the six months | |
| |
ended June 30, | | |
ended June 30, | |
| |
2023 | | |
2022 | | |
Change | | |
2023 | | |
2022 | | |
Change | |
North America | |
| 4,036 | | |
| 3,551 | | |
+ | 14 | % | |
| 7,929 | | |
| 7,172 | | |
+ | 11 | % |
Europe | |
| 4,532 | | |
| 4,009 | | |
+ | 13 | % | |
| 9,070 | | |
| 8,011 | | |
+ | 13 | % |
China | |
| 6,648 | | |
| 5,488 | | |
+ | 21 | % | |
| 12,584 | | |
| 11,855 | | |
+ | 6 | % |
Other | |
| 6,916 | | |
| 6,125 | | |
+ | 13 | % | |
| 13,969 | | |
| 12,450 | | |
+ | 12 | % |
Global | |
| 22,132 | | |
| 19,173 | | |
+ | 15 | % | |
| 43,552 | | |
| 39,488 | | |
+ | 10 | % |
Overall, global
light vehicle production increased 15% over the second quarter of 2022. This increase largely reflects the rebalancing of supply chains
in the second quarter of 2023 compared to the significant industry production disruptions during the second quarter of 2022 caused by
global semiconductor chip shortages.
| Magna International Inc. Second Quarter Report 2023 3 |
RESULTS
OF OPERATIONS – FOR THE THREE MONTHS ENDED JUNE 30, 2023
SALES
Sales increased
17% or $1.62 billion to $10.98 billion for the second quarter of 2023 compared to $9.36 billion for the second quarter of 2022 primarily
due to:
| · | the
launch of new programs during or subsequent to the second quarter of 2022; |
| · | higher
global light vehicle production; |
| · | higher
complete vehicle assembly sales; |
| · | acquisitions,
net of divestitures, subsequent to the second quarter of 2022, which increased sales by $87
million; and |
| · | customer
price increases to recover certain higher production input costs. |
These factors were
partially offset by the net weakening of foreign currencies against the U.S. dollar, which decreased reported U.S. dollar sales by $56
million and net customer price concessions subsequent to the second quarter of 2022.
COST OF GOODS
SOLD
| |
For the three months | | |
| |
| |
ended June 30, | | |
| |
| |
2023 | | |
2022 | | |
Change | |
Material | |
$ | 6,802 | | |
$ | 5,829 | | |
$ | 973 | |
Direct labour | |
| 820 | | |
| 698 | | |
| 122 | |
Overhead | |
| 1,922 | | |
| 1,732 | | |
| 190 | |
Cost of goods sold | |
$ | 9,544 | | |
$ | 8,259 | | |
$ | 1,285 | |
Cost of goods sold
increased $1.29 billion to $9.54 billion for the second quarter of 2023 compared to $8.26 billion for the second quarter of 2022, primarily
due to:
| · | higher
material, direct labour and overhead associated with higher sales; |
| · | acquisitions,
net of divestitures, subsequent to the second quarter of 2022; |
| · | higher
production input costs net of customer recoveries, including for labour, partially offset
by lower prices for energy, commodities and freight; |
| · | higher
engineering, launch and other costs including to launch new assembly business; and |
| · | higher
net engineering costs including spending related to our electrification and active safety
businesses. |
These factors were partially offset
by:
| · | the
net weakening of foreign currencies against the U.S. dollar, which decreased reported U.S.
dollar costs of goods sold by $32 million; |
| · | commercial
items in the second quarters of 2023 and 2022, which had a net favourable impact on a year
over year basis; |
| · | a
focus on operational excellence and cost initiatives; and |
| · | productivity
and efficiency improvements, including lower costs at certain previously underperforming
facilities. |
DEPRECIATION
AND AMORTIZATION
Depreciation and
amortization increased $6 million to $366 million for the second quarter of 2023 compared to $360 million for the second quarter of 2022
primarily due to increased capital deployed at new and existing facilities to support the launch of programs subsequent to the second
quarter of 2022, and acquisitions, net of divestitures, subsequent to the second quarter of 2022 partially offset by the end of production
of certain programs and the net weakening of foreign currencies against the U.S. dollar, which decreased reported U.S. dollar depreciation
and amortization by $2 million.
4 Magna International Inc. Second Quarter Report 2023 | |
SELLING, GENERAL
AND ADMINISTRATIVE ["SG&A"]
SG&A expense
increased $95 million to $505 million for the second quarter of 2023 compared to $410 million for the second quarter of 2022, primarily
as a result of:
| · | higher
labour and benefit costs; |
| · | higher
costs to accelerate our operational excellence initiatives; |
| · | commercial
items in the second quarters of 2023 and 2022, which had a net unfavourable impact on a year
over year basis; |
| · | higher
incentive compensation; |
| · | higher
pre-operating costs incurred at new facilities; and |
| · | acquisitions,
net of divestitures, subsequent to the second quarter of 2022. |
These factors were
partially offset by higher net transactional foreign exchange gains.
INTEREST EXPENSE,
NET
During the second
quarter of 2023, we recorded net interest expense of $34 million compared to $20 million for the second quarter of 2022. The $14 million
increase is primarily a result of interest expense on the $1.6 billion of Senior Notes issued during the first quarter of 2023, and higher
interest expense due to an increase in borrowings and higher interest rates. These factors were partially offset by higher interest income
earned on cash and investments due to higher interest rates.
EQUITY INCOME
Equity income increased
$11 million to $36 million for the second quarter of 2023 compared to $25 million for the second quarter of 2022, primarily as a result
of earnings on higher sales at certain equity-accounted entities and acquisitions subsequent to the second quarter of 2022 partially
offset by higher production input costs, net of recoveries, and the net weakening of foreign currencies against the U.S. dollar, which
decreased reported U.S. dollar equity income by $1 million.
OTHER EXPENSE,
NET
| |
For the three months | |
| |
ended June 30, | |
| |
2023 | | |
2022 | |
Restructuring (1) | |
$ | (35 | ) | |
$ | — | |
Impairments (2) | |
| — | | |
| 376 | |
Investments (3) | |
| 98 | | |
| 50 | |
Veoneer AS transaction costs (4) | |
| 23 | | |
| — | |
| |
$ | 86 | | |
$ | 426 | |
| |
For the three months | |
| |
ended June 30, | |
| |
2023 | | |
2022 | |
Power & Vision (i) | |
$ | (44 | ) | |
$ | — | |
Body Exteriors & Structures | |
| 9 | | |
| — | |
Other expense, net | |
| (35 | ) | |
| — | |
Tax effect | |
| 9 | | |
| — | |
Net loss attributable to Magna | |
$ | (26 | ) | |
$ | — | |
| (i) | During
the second quarter of 2023, our Power & Vision segment reversed $39 million of charges
due to a change in the restructuring plans related to a plant closure, and recorded a $10
million gain on the sale of two buildings as a result of restructuring activities. |
During
the second quarter of 2022, we recorded a $376 million [$361 million after tax] impairment charge related to our investment in Russia
as a result of the expected lack of future cashflows and the uncertainties connected with the Russian economy. This included net asset
impairments of $173 million and a $203 million reserve against the related foreign currency translation losses that were included in
accumulated other comprehensive loss. The net asset impairments consisted of $163 million and $10 million in our Body Exteriors &
Structures and Seating Systems segments, respectively. Refer to the "Subsequent Event" section of this MD&A.
| Magna International Inc. Second Quarter Report 2023 5 |
| |
For the three months | |
| |
ended June 30, | |
| |
2023 | | |
2022 | |
Non-cash impairment charge (ii) | |
$ | 85 | | |
$ | — | |
Revaluation of public company warrants | |
| 13 | | |
| 51 | |
Revaluation of public and private equity investments | |
| — | | |
| 2 | |
Gain on sale of public equity investments | |
| — | | |
| (3 | ) |
Other expense, net | |
| 98 | | |
| 50 | |
Tax effect | |
| (3 | ) | |
| (12 | ) |
Net loss attributable to Magna | |
$ | 95 | | |
$ | 38 | |
| (ii) | The
non-cash impairment charge relates to impairment of a private equity investment and related
long-term receivables within Other assets. |
| (4) | Veoneer AS transaction costs |
During
2023, we incurred $23 million [$22 million after tax] of transaction costs relating to our acquisition of Veoneer AS. Refer to Note 5,
"Business Combination" of our unaudited interim consolidated financial statements for the three and six months ended June 30,
2023.
INCOME (LOSS)
FROM OPERATIONS BEFORE INCOME TAXES
Income (loss) from
operations before income taxes was income of $483 million for the second quarter of 2023 compared to a loss of $88 million for the second
quarter of 2022. This $571 million increase is a result of the following changes, each as discussed above:
| |
For the three months | | |
| |
| |
ended June 30, | | |
| |
| |
2023 | | |
2022 | | |
Change | |
Sales | |
$ | 10,982 | | |
$ | 9,362 | | |
$ | 1,620 | |
| |
| | | |
| | | |
| | |
Costs and expenses | |
| | | |
| | | |
| | |
Cost of goods sold | |
| 9,544 | | |
| 8,259 | | |
| 1,285 | |
Depreciation and amortization | |
| 366 | | |
| 360 | | |
| 6 | |
Selling, general and administrative | |
| 505 | | |
| 410 | | |
| 95 | |
Interest expense, net | |
| 34 | | |
| 20 | | |
| 14 | |
Equity income | |
| (36 | ) | |
| (25 | ) | |
| (11 | ) |
Other expense, net | |
| 86 | | |
| 426 | | |
| (340 | ) |
Income (loss) from operations before income taxes | |
$ | 483 | | |
$ | (88 | ) | |
$ | 571 | |
INCOME TAXES
| |
For the three months ended June 30, | |
| |
2023 | | |
2022 | |
Income Taxes as reported | |
$ | 129 | | |
| 26.7 | % | |
$ | 57 | | |
| (64.8 | )% |
Tax effect on Other expense, net | |
| (5 | ) | |
| (4.9 | ) | |
| 27 | | |
| 89.7 | |
| |
$ | 124 | | |
| 21.8 | % | |
$ | 84 | | |
| 24.9 | % |
Excluding the tax
effect on Other expense, net, our effective income tax rate decreased to 21.8% for the second quarter of 2023 compared to 24.9% for the
second quarter of 2022 primarily due to lower losses not benefitted in Europe and non-taxable foreign exchange adjustments recognized
for U.S. GAAP purposes. These factors were partially offset by a change in mix of earnings and higher accrued tax on undistributed foreign
earnings.
INCOME ATTRIBUTABLE
TO NON-CONTROLLING INTERESTS
Income attributable
to non-controlling interests was $15 million for the second quarter of 2023 compared to $11 million for the second quarter of 2022. This
$4 million increase was primarily due to higher net income at our non-wholly owned operations in China.
6 Magna International Inc. Second Quarter Report 2023 | |
NET INCOME (LOSS) ATTRIBUTABLE
TO MAGNA INTERNATIONAL INC.
Net income (loss)
attributable to Magna International Inc. was $339 million for the second quarter of 2023 compared to a loss of $156 million for the second
quarter of 2022. This $495 million increase was as a result of: an increase in income from operations before income taxes of $571 million;
partially offset by an increase in income taxes of $72 million; and an increase of $4 million in income attributable to non-controlling
interests.
EARNINGS (LOSS)
PER SHARE
| |
For the three months | | |
| |
| |
ended June 30, | | |
| |
| |
2023 | | |
2022 | | |
Change | |
Earnings (loss) per Common Share | |
| | |
| | |
| |
Basic | |
$ | 1.18 | | |
$ | (0.54 | ) | |
| — | |
Diluted | |
$ | 1.18 | | |
$ | (0.54 | ) | |
| — | |
Weighted average number of Common Shares outstanding (millions) | |
| | | |
| | | |
| | |
Basic | |
| 286.2 | | |
| 291.1 | | |
- | 2 | % |
Diluted | |
| 286.3 | | |
| 291.1 | | |
- | 2 | % |
Adjusted diluted earnings per share | |
$ | 1.50 | | |
$ | 0.83 | | |
+ | 81 | % |
Diluted earnings
per share was $1.18 for the second quarter of 2023 compared to diluted loss per share of $0.54 for the second quarter of 2022. The $1.72
increase was as a result of higher net income attributable to Magna International Inc., as discussed above, and a decrease in the weighted
average number of diluted shares outstanding during the second quarter of 2023. The decrease in the weighted average number of diluted
shares outstanding was primarily due to the purchase and cancellation of Common Shares, during or subsequent to the second quarter of
2022, pursuant to our normal course issuer bids.
Other expense,
net, after tax, negatively impacted diluted earnings per share by $0.32 in the second quarter of 2023 and $1.37 in the second quarter
of 2022, respectively, as discussed in the "Other expense, net" and "Income Taxes" sections above. Adjusted diluted
earnings per share, as reconciled in the "Non-GAAP Financial Measures Reconciliation" section, was $1.50 for the second quarter
of 2023 compared to $0.83 in the second quarter of 2022, an increase of $0.67.
| Magna International Inc. Second Quarter Report 2023 7 |
NON-GAAP
PERFORMANCE MEASURES – FOR THE THREE MONTHS ENDED JUNE 30, 2023
ADJUSTED EBIT
AS A PERCENTAGE OF SALES
The table below
shows the change in Magna's Sales and Adjusted EBIT by segment and the impact each segment's changes had on Magna's Adjusted EBIT as
a percentage of sales for the second quarter of 2023 compared to the second quarter of 2022:
| |
| | |
| | |
Adjusted EBIT | |
| |
| | |
Adjusted | | |
as a percentage | |
| |
Sales | | |
EBIT | | |
of sales | |
| |
| | |
| | |
| |
Second quarter of 2022 | |
$ | 9,362 | | |
$ | 358 | | |
| 3.8 | % |
Increase (decrease) related to: | |
| | | |
| | | |
| | |
Body Exteriors & Structures | |
| 593 | | |
| 201 | | |
+ | 1.6 | % |
Power & Vision | |
| 574 | | |
| 25 | | |
| — | |
Seating Systems | |
| 350 | | |
| 64 | | |
+ | 0.5 | % |
Complete Vehicles | |
| 123 | | |
| (29 | ) | |
- | 0.3 | % |
Corporate and Other | |
| (20 | ) | |
| (16 | ) | |
- | 0.1 | % |
Second quarter of 2023 | |
$ | 10,982 | | |
$ | 603 | | |
| 5.5 | % |
Adjusted EBIT as
a percentage of sales increased to 5.5% for the second quarter of 2023 compared to 3.8% for the second quarter of 2022 primarily due
to:
| · | earnings
on higher sales including higher margins as a result of a focus on operational excellence
and cost initiatives; |
| · | productivity
and efficiency improvements, including lower costs at certain previously underperforming
facilities; |
| · | losses
in our Russian facilities during the second quarter of 2022; |
| · | commercial
items in the second quarters of 2023 and 2022, which had a net favourable impact on a year
over year basis; |
| · | higher
equity income; and |
| · | higher
tooling contribution in the second quarter of 2023 compared to the second quarter of 2022. |
These factors were partially offset
by:
| · | higher
production input costs net of customer recoveries, including for labour, partially offset
by lower prices for energy, commodities and freight; |
| · | higher
engineering, launch and other costs including to launch new assembly business; |
| · | acquisitions,
net of divestitures, subsequent to the second quarter of 2022; |
| · | lower
amortization related to the initial value of public company securities; and |
| · | higher
incentive compensation and employee profit sharing. |
8 Magna International Inc. Second Quarter Report 2023 | |
ADJUSTED RETURN
ON INVESTED CAPITAL AND RETURN ON INVESTED CAPITAL
Adjusted Return
on Invested Capital increased to 10.7% for the second quarter of 2023 compared to 6.7% for the second quarter of 2022 as a result of
an increase in Adjusted After-tax operating profits partially offset by higher Average Invested Capital. Other expense, net, after tax
negatively impacted Return on Invested Capital by 2.0% in the second quarter of 2023 and by 9.9% in the second quarter of 2022.
Average Invested
Capital increased $1.58 billion to $17.59 billion for the second quarter of 2023 compared to $16.01 billion for the second quarter of
2022, primarily due to:
| · | acquisitions,
net of divestitures, during and subsequent to the second quarter of 2022; |
| · | average
investment in fixed assets in excess of our average depreciation expense on fixed assets;
and |
| · | an
increase in average operating assets and liabilities. |
These factors were
partially offset by:
| · | the
net weakening of foreign currencies against the U.S. dollar; |
| · | the
impairment of our Russian assets recorded during the second quarter of 2022; and |
| Magna International Inc. Second Quarter Report 2023 9 |
SEGMENT
ANALYSIS
We are a global
automotive supplier that has complete vehicle engineering and contract manufacturing expertise, as well as product capabilities which
include body, chassis, exterior, seating, powertrain, active driver assistance, electronics, mechatronics, mirrors, lighting and roof
systems. We also have electronic and software capabilities across many of these areas.
Our reporting segments
are: Body Exteriors & Structures; Power & Vision; Seating Systems; and Complete Vehicles.
| |
For the three months ended June 30, | |
| |
Sales | | |
Adjusted EBIT | |
| |
2023 | | |
2022 | | |
Change | | |
2023 | | |
2022 | | |
Change | |
Body Exteriors & | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Structures | |
$ | 4,540 | | |
$ | 3,947 | | |
$ | 593 | | |
$ | 392 | | |
$ | 191 | | |
$ | 201 | |
Power & Vision | |
| 3,462 | | |
| 2,888 | | |
| 574 | | |
| 116 | | |
| 91 | | |
| 25 | |
Seating Systems | |
| 1,603 | | |
| 1,253 | | |
| 350 | | |
| 66 | | |
| 2 | | |
| 64 | |
Complete Vehicles | |
| 1,526 | | |
| 1,403 | | |
| 123 | | |
| 34 | | |
| 63 | | |
| (29 | ) |
Corporate and Other | |
| (149 | ) | |
| (129 | ) | |
| (20 | ) | |
| (5 | ) | |
| 11 | | |
| (16 | ) |
Total reportable segments | |
$ | 10,982 | | |
$ | 9,362 | | |
$ | 1,620 | | |
$ | 603 | | |
$ | 358 | | |
$ | 245 | |
BODY EXTERIORS &
STRUCTURES
| |
For the three months | | |
| | |
| |
| |
ended June 30, | | |
| | |
| |
| |
2023 | | |
2022 | | |
Change | |
Sales | |
$ | 4,540 | | |
$ | 3,947 | | |
$ | 593 | | |
+ | 15 | % |
Adjusted EBIT | |
$ | 392 | | |
$ | 191 | | |
$ | 201 | | |
+ | 105 | % |
Adjusted EBIT as a percentage of sales | |
| 8.6 | % | |
| 4.8 | % | |
| | | |
+ | 3.8 | % |
Sales –
Body Exteriors & Structures
Sales increased
15% or $593 million to $4.54 billion for the second quarter of 2023 compared to $3.95 billion for the second quarter of 2022 primarily
due to:
| · | the
launch of programs during or subsequent to the second quarter of 2022, including the: |
| · | Jeep
Grand Cherokee; |
| · | Ford
F-Series Superduty; |
| · | Honda
CR-V; and |
| · | BMW
X1 & iX1; |
| · | higher
global light vehicle production; and |
| · | customer
price increases to recover certain higher production input costs. |
These factors were
partially offset by the net weakening of foreign currencies against the U.S. dollar, which decreased reported U.S. dollar sales by $44
million and net customer price concessions subsequent to the second quarter of 2022.
10 | Magna International Inc. Second Quarter Report 2023 | |
Adjusted EBIT
and Adjusted EBIT as a percentage of sales – Body Exteriors & Structures
Adjusted EBIT increased
$201 million to $392 million for the second quarter of 2023 compared to $191 million for the second quarter of 2022 and Adjusted EBIT
as a percentage of sales increased to 8.6% from 4.8%. These increases were primarily as a result of earnings on higher sales including
higher margins due to a focus on operational excellence and cost initiatives. Other factors positively impacting Adjusted EBIT and Adjusted
EBIT as a percentage of sales include:
| · | commercial
items in the second quarters of 2023 and 2022, which had a net favourable impact on a year
over year basis; |
| · | higher
tooling contribution in the second quarter of 2023 compared to the second quarter of 2022;
and |
| · | losses
in our Russian facilities during the second quarter of 2022. |
These factors were partially offset
by:
| · | higher
production input costs net of customer recoveries, including for labour, freight and commodities,
partially offset by lower prices for energy; and |
| · | the
net weakening of foreign currencies against the U.S. dollar, which had a $8 million unfavourable
impact on reported U.S. dollar Adjusted EBIT. |
POWER &
VISION
| |
For the three months | | |
| |
| |
ended June 30, | | |
| |
| |
2023 | | |
2022 | | |
Change | |
Sales | |
$ | 3,462 | | |
$ | 2,888 | | |
$ | 574 | | |
+ |
20 | % |
Adjusted EBIT | |
$ | 116 | | |
$ | 91 | | |
$ | 25 | | |
+ |
27 | % |
Adjusted EBIT as a percentage of sales | |
| 3.4 | % | |
| 3.2 | % | |
| | | |
+ |
0.2 | % |
Sales – Power & Vision
Sales increased
20% or $574 million to $3.46 billion for the second quarter of 2023 compared to $2.89 billion for the second quarter of 2022 primarily
due to:
| · | the
launch of programs during or subsequent to the second quarter of 2022, including the: |
| · | BMW
X1 & iX1; |
| · | Jeep
Grand Cherokee; |
| · | Chery
Omoda 5; and |
| · | Alfa
Romeo Tonale; |
| · | higher
global light vehicle production; |
| · | acquisitions,
net of divestitures, subsequent to the second quarter of 2022, which increased sales by $85
million; and |
| · | customer
price increases to recover certain higher production input costs. |
These factors were
partially offset by the net weakening of foreign currencies against the U.S. dollar, which decreased reported U.S. dollar sales by $24
million and net customer price concessions subsequent to the second quarter of 2022.
| Magna International Inc. Second Quarter Report 2023 | 11 |
Adjusted EBIT
and Adjusted EBIT as a percentage of sales – Power & Vision
Adjusted EBIT increased
$25 million to $116 million for the second quarter of 2023 compared to $91 million for the second quarter of 2022 and Adjusted EBIT as
a percentage of sales increased to 3.4% from 3.2%. These increases were primarily as a result of earnings on higher sales including higher
margins due to a focus on operational excellence and cost initiatives. Other factors positively impacting Adjusted EBIT and Adjusted
EBIT as a percentage of sales include:
| · | cost
savings and efficiencies realized, including as a result of restructuring actions taken;
and |
| · | lower
net warranty costs of $5 million. |
These factors were partially offset
by:
| · | commercial
items in the second quarters of 2023 and 2022, which had a net unfavourable impact on a year
over year basis; |
| · | acquisitions,
net of divestitures, subsequent to the second quarter of 2022; |
| · | higher
production input costs net of customer recoveries, including for labour, partially offset
by lower prices for freight, commodities and energy; |
| · | the
net weakening of foreign currencies against the U.S. dollar, which had an $12 million unfavourable
impact on reported U.S. dollar Adjusted EBIT; and |
| · | higher
net engineering costs including spending related to our electrification and active safety
businesses. |
SEATING SYSTEMS
| |
For the three months | | |
| |
| |
ended June 30, | | |
| |
| |
2023 | | |
2022 | | |
Change | |
Sales | |
$ | 1,603 | | |
$ | 1,253 | | |
$ | 350 | | |
+ | 28 | % |
Adjusted EBIT | |
$ | 66 | | |
$ | 2 | | |
$ | 64 | | |
| N/A | |
Adjusted EBIT as a percentage of sales | |
| 4.1 | % | |
| 0.2 | % | |
| | | |
+ | 3.9 | % |
Sales –
Seating Systems
Sales increased
28% or $350 million to $1.60 billion for the second quarter of 2023 compared to $1.25 billion for the second quarter of 2022 primarily
due to:
| · | the
launch of programs during or subsequent to the second quarter of 2022, including the: |
| · | Jeep
Grand Cherokee; |
| · | BMW
XM; |
| · | Changan
Shenlan SL03; and |
| · | Ford
Ranger; |
| · | higher
global light vehicle production; and |
| · | customer
price increases to recover certain higher production input costs. |
These factors were
partially offset by the net weakening of foreign currencies against the U.S. dollar, which decreased reported U.S. dollar sales by $18
million and net customer price concessions subsequent to the second quarter of 2022.
12 | Magna International Inc. Second Quarter Report 2023 | |
Adjusted EBIT
and Adjusted EBIT as a percentage of sales – Seating Systems
Adjusted EBIT increased
$64 million to $66 million for the second quarter of 2023 compared to $2 million for the second quarter of 2022 and Adjusted EBIT as
a percentage of sales increased to 4.1% from 0.2%. These increases were primarily as a result of earnings on higher sales including higher
margins due to a focus on operational excellence and cost initiatives. Other factors positively impacting Adjusted EBIT and Adjusted
EBIT as a percentage of sales include:
| · | productivity
and efficiency improvements, including lower costs at certain previously underperforming
facilities; and |
| · | commercial
items in the second quarters of 2023 and 2022, which had a net favourable impact on a year
over year basis. |
These factors were
partially offset by:
| · | higher
launch costs; |
| · | net
transactional foreign exchange losses in the second quarter of 2023 compared to net transactional
foreign exchange gains in the second quarter of 2022; and |
| · | higher
production input costs net of customer recoveries, including for labour and freight, partially
offset by lower commodities prices. |
COMPLETE VEHICLES
| |
For the three months | | |
| |
| |
ended June 30, | | |
| |
| |
2023 | | |
2022 | | |
Change | |
Complete Vehicle Assembly Volumes (thousands of units)(i) | |
| 26.9 | | |
| 31.0 | | |
| (4.1 | ) | |
- | 13 | % |
Sales | |
$ | 1,526 | | |
$ | 1,403 | | |
$ | 123 | | |
+ | 9 | % |
Adjusted EBIT | |
$ | 34 | | |
$ | 63 | | |
$ | (29 | ) | |
- | 46 | % |
Adjusted EBIT as a percentage of sales | |
| 2.2 | % | |
| 4.5 | % | |
| | | |
- | 2.3 | % |
| (i) | Vehicles produced at our Complete
Vehicle operations are included in Europe Light Vehicle Production volumes. |
Sales –
Complete Vehicles
Sales increased
9% or $123 million to $1.53 billion for the second quarter of 2023 compared to $1.40 billion for the second quarter of 2022 while assembly
volumes decreased 13%. The increase in sales is primarily a result of favourable program mix and a $31 million increase in reported U.S.
dollar sales as a result of the strengthening of the euro against the U.S. dollar, partially offset by lower assembly volumes.
| Magna International Inc. Second Quarter Report 2023 | 13 |
Adjusted EBIT
and Adjusted EBIT as a percentage of sales – Complete Vehicles
Adjusted EBIT decreased
$29 million to $34 million for the second quarter of 2023 compared to $63 million for the second quarter of 2022 and Adjusted EBIT as
a percentage of sales decreased to 2.2% from 4.5%. These decreases were primarily due to higher engineering, launch and other costs including
to launch new assembly business.
This factor was
partially offset by earnings on higher sales and favourable program mix, net of contractual fixed cost recoveries on certain programs.
CORPORATE AND
OTHER
Adjusted EBIT was
a loss of $5 million for the second quarter of 2023 compared to income of $11 million for the second quarter of 2022. The $16 million
decrease was primarily the result of:
| · | lower
amortization related to the initial value of public company securities; |
| · | higher
incentive compensation; |
| · | higher
investments in research, development and new mobility; and |
| · | higher
labour and benefit costs. |
These factors were
partially offset by:
| · | net
transactional foreign exchange gains in the second quarter of 2023 compared to net transactional
foreign exchange losses in the second quarter of 2022; and |
| · | an
increase in fees received from our divisions. |
14 | Magna International Inc. Second Quarter Report 2023 | |
FINANCIAL
CONDITION, LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
| |
For the three months | | |
| |
| |
ended June 30, | | |
| |
| |
2023 | | |
2022 | | |
Change | |
Net income (loss) | |
$ | 354 | | |
$ | (145 | ) | |
| | |
Items not involving current cash flows | |
| 525 | | |
| 705 | | |
| | |
| |
| 879 | | |
| 560 | | |
$ | 319 | |
Changes in operating assets and liabilities | |
| (332 | ) | |
| (139 | ) | |
| (193 | ) |
Cash provided from operating activities | |
$ | 547 | | |
$ | 421 | | |
$ | 126 | |
Cash provided
from operating activities
Comparing the second
quarter of 2023 to 2022, cash provided from operating activities increased $126 million primarily as a result of:
| · | a
$1.22 billion increase in cash received from customers; and |
| · | higher
dividends received from equity investments of $65 million. |
These factors were
partially offset by:
| · | a
$890 million increase in cash paid for materials and overhead; |
| · | a
$178 million increase in cash paid for labour; and |
| · | a
$84 million increase in cash taxes. |
Changes in operating assets and liabilities
During the second
quarter of 2023, we used $332 million for operating assets and liabilities primarily consisting of:
| · | a
$307 million increase in production receivables; |
| · | an
$82 million increase in other accounts receivables; |
| · | a
$76 million increase in tooling investment in the second quarter of 2023; and |
| · | a
$47 million increase in cash taxes paid. |
These uses of cash
were partially offset by:
| · | a
$116 million increase in other accrued liabilities; |
| · | a
$63 million increase in accounts payable; and |
| · | a
$26 million decrease in inventories due to a reduction in safety stocks. |
| Magna International Inc. Second Quarter Report 2023 | 15 |
INVESTING
ACTIVITIES
| |
For the three months | | |
| |
| |
ended June 30, | | |
| |
| |
2023 | | |
2022 | | |
Change | |
Fixed asset additions | |
$ | (502 | ) | |
$ | (329 | ) | |
| | |
Increase in public and private equity investments | |
| (3 | ) | |
| (2 | ) | |
| | |
Increase in investments, other assets and intangible assets | |
| (96 | ) | |
| (80 | ) | |
| | |
Fixed assets, investments, other assets and intangible assets additions | |
| (601 | ) | |
| (411 | ) | |
| | |
Acquisitions | |
| (1,475 | ) | |
| — | | |
| | |
Proceeds from dispositions | |
| 44 | | |
| 40 | | |
| | |
Cash used for investing activities | |
$ | (2,032 | ) | |
$ | (371 | ) | |
$ | (1,661 | ) |
Cash used for investing
activities in the second quarter of 2023 was $1.66 billion higher compared to the second quarter of 2022. The change between the second
quarter of 2023 and the second quarter of 2022 was primarily due to the acquisition of Veoneer AS and a $190 million increase of cash
used for fixed assets and other assets.
FINANCING
ACTIVITIES
| |
For the three months | | |
| |
| |
ended June 30, | | |
| |
| |
2023 | | |
2022 | | |
Change | |
Issues of debt | |
$ | 402 | | |
$ | 3 | | |
| | |
Increase in short-term borrowings | |
| 143 | | |
| — | | |
| | |
Contributions by non-controlling interests of subsidiaries | |
| — | | |
| 5 | | |
| | |
Repayments of debt | |
| (1 | ) | |
| (34 | ) | |
| | |
Tax withholdings on vesting of equity awards | |
| (1 | ) | |
| (1 | ) | |
| | |
Repurchase of Commons Shares | |
| (2 | ) | |
| (212 | ) | |
| | |
Dividends paid to non-controlling interests | |
| (24 | ) | |
| (12 | ) | |
| | |
Dividends | |
| (129 | ) | |
| (130 | ) | |
| | |
Cash provided from (used for) financing activities | |
$ | 388 | | |
$ | (381 | ) | |
$ | 769 | |
During the second
quarter of 2023, we drew $100 million from the 3-year tranche and $300 million from the 5-year tranche of our syndicated unsecured, delayed
draw term loan (the "Term Loan").
Short-term borrowings
increased $143 million in second quarter of 2023 primarily due to the issuance of $150 million in Commercial Paper.
During the second
quarter of 2023 we repurchased 0.1 million Common Shares to settle certain equity compensation plans under our normal course issuer bid
for aggregate cash consideration of $2 million.
Cash dividends
paid per Common Share were $0.46 for the second quarter of 2023 compared to $0.45 for the second quarter of 2022.
16 | Magna International Inc. Second Quarter Report 2023 | |
FINANCING RESOURCES
| |
As at | | |
As at | | |
| |
| |
June 30, | | |
December 31, | | |
| |
| |
2023 | | |
2022 | | |
Change | |
Liabilities | |
| | | |
| | | |
| | |
Short-term borrowings | |
$ | 150 | | |
$ | 8 | | |
| | |
Long-term debt due within one year | |
| 1,426 | | |
| 654 | | |
| | |
Current portion of operating lease liabilities | |
| 303 | | |
| 276 | | |
| | |
Long-term debt | |
| 4,159 | | |
| 2,847 | | |
| | |
Operating lease liabilities | |
| 1,345 | | |
| 1,288 | | |
| | |
| |
$ | 7,383 | | |
$ | 5,073 | | |
$ | 2,310 | |
Financial liabilities
increased $2.31 billion to $7.38 billion as at June 30, 2023 primarily as a result of the $1.6 billion issuance of Senior Notes
during the first quarter of 2023, combined with the $400 million increase in the Term Loan and $150 million issuance of Commercial Paper
in the second quarter of 2023.
CASH RESOURCES
In the second quarter
of 2023, our cash resources decreased by $1.1 billion to $1.3 billion, primarily as a result of cash used for investing activities partially
offset by cash provided from operating and financing activities, as discussed above. In addition to our cash resources at June 30,
2023, we had term and operating lines of credit totaling $4.1 billion, of which $3.4 billion was unused and available.
On March 6,
2023, we entered into a Term Loan with a 3-year tranche of $800 million and a 5-year tranche of $600 million. During the second quarter
of 2023, we drew $100 million from the 3-yr tranche and $300 million from the 5-year tranche. The remaining balance of the facility was
subsequently cancelled.
On April 27,
2023, we amended our $2.7 billion syndicated revolving credit facility, including to: (i) extend the maturity date from June 24,
2027 to June 24, 2028, and (ii) cancel the $150 million Asian tranche and allocate the equivalent amount to the Canadian tranche.
On May 26,
2023, we extended the maturity date of our $800 million 364-day syndicated revolving credit facility from June 24, 2023 to June 24,
2024. As of June 30, 2023, we have not borrowed any funds under this credit facility.
MAXIMUM NUMBER
OF SHARES ISSUABLE
The following table
presents the maximum number of shares that would be outstanding if all of the outstanding options at August 3, 2023 were exercised:
Common Shares | |
| 286,309,052 | |
Stock options (i) | |
| 6,148,812 | |
| |
| 292,457,864 | |
| (i) | Options
to purchase Common Shares are exercisable by the holder in accordance with the vesting provisions
and upon payment of the exercise price as may be determined from time to time pursuant to
our stock option plans. |
CONTRACTUAL OBLIGATIONS
There have been
no material changes with respect to the contractual obligations requiring annual payments during the second quarter of 2023 that are
outside the ordinary course of our business. Refer to our MD&A included in our 2022 Annual Report.
| Magna International Inc. Second Quarter Report 2023 | 17 |
RESULTS
OF OPERATIONS – FOR THE SIX MONTHS ENDED JUNE 30, 2023
| |
For the six months ended June 30, | |
| |
Sales | | |
Adjusted EBIT | |
| |
2023 | | |
2022 | | |
Change | | |
2023 | | |
2022 | | |
Change | |
Body Exteriors & Structures | |
$ | 8,979 | | |
$ | 8,024 | | |
$ | 955 | | |
$ | 662 | | |
$ | 420 | | |
$ | 242 | |
Power & Vision | |
| 6,785 | | |
| 5,934 | | |
| 851 | | |
| 200 | | |
| 245 | | |
| (45 | ) |
Seating Systems | |
| 3,089 | | |
| 2,629 | | |
| 460 | | |
| 102 | | |
| 51 | | |
| 51 | |
Complete Vehicles | |
| 3,152 | | |
| 2,678 | | |
| 474 | | |
| 86 | | |
| 113 | | |
| (27 | ) |
Corporate and Other | |
| (350 | ) | |
| (261 | ) | |
| (89 | ) | |
| (10 | ) | |
| 36 | | |
| (46 | ) |
Total reportable segments | |
$ | 21,655 | | |
$ | 19,004 | | |
$ | 2,651 | | |
$ | 1,040 | | |
$ | 865 | | |
$ | 175 | |
BODY EXTERIORS &
STRUCTURES
| |
For the six months | | |
| |
| |
ended June 30, | | |
| |
| |
2023 | | |
2022 | | |
Change | |
Sales | |
$ | 8,979 | | |
$ | 8,024 | | |
$ | 955 | | |
+ | 12 | % |
Adjusted EBIT | |
$ | 662 | | |
$ | 420 | | |
$ | 242 | | |
+ | 58 | % |
Adjusted EBIT as a percentage of sales | |
| 7.4 | % | |
| 5.2 | % | |
| | | |
+ | 2.2 | % |
Sales –
Body Exteriors & Structures
Sales increased
12% or $955 million to $8.98 billion for the six months ended June 30, 2023 compared to $8.02 billion for the six months ended June 30,
2022, primarily due to:
| · | the
launch of programs during or subsequent to the first six months of 2022, including the: |
| · | Jeep
Grand Cherokee; |
| · | Honda
CR-V; |
| · | Rivian
R1T & R1S; and |
| · | BMW X1 & iX1; |
| · | higher
global light vehicle production; and |
| · | customer
price increases to recover certain higher production input costs. |
These factors were
partially offset by:
| · | the
net weakening of foreign currencies against the U.S. dollar, which decreased reported U.S.
dollar sales by $180 million; |
| · | lower
sales as a result of the substantial idling of our Russian facilities; and |
| · | net
customer price concessions subsequent to the first six months of 2022. |
18 | Magna International Inc. Second Quarter Report 2023 | |
Adjusted EBIT
and Adjusted EBIT as a percentage of sales – Body Exteriors & Structures
Adjusted EBIT increased
$242 million to $662 million for the six months ended June 30, 2023 compared to $420 million for the six months ended June 30,
2022 and Adjusted EBIT as a percentage of sales increased to 7.4% from 5.2%. These increases were primarily as a result of earnings on
higher sales. Other factors positively impacting Adjusted EBIT and Adjusted EBIT as a percentage of sales include:
| · | commercial
items in the first six months of 2023 and 2022, which had a net favourable impact on a year
over year basis; |
| · | lower
employee profit sharing and incentive compensation; |
| · | productivity
and efficiency improvements, including lower costs at certain previously underperforming
facilities; and |
| · | higher
tooling contribution. |
These factors were partially offset
by:
| · | operating
inefficiencies at a facility in Europe; |
| · | higher
production input costs net of customer recoveries, including for labour, commodities, and
freight, partially offset by lower prices for energy; |
| · | the
net weakening of foreign currencies against the U.S. dollar, which had a $15 million unfavourable
impact on reported U.S. dollar Adjusted EBIT; |
| · | higher
launch costs; and |
| · | higher
pre-operating costs incurred at new facilities. |
POWER &
VISION
| |
For the six months | | |
| |
| |
ended June 30, | | |
| |
| |
2023 | | |
2022 | | |
Change | |
Sales | |
$ | 6,785 | | |
$ | 5,934 | | |
$ | 851 | | |
+ | 14 | % |
Adjusted EBIT | |
$ | 200 | | |
$ | 245 | | |
$ | (45 | ) | |
- | 18 | % |
Adjusted EBIT as a percentage of sales | |
| 2.9 | % | |
| 4.1 | % | |
| | | |
- | 1.2 | % |
| Magna International Inc. Second Quarter Report 2023 | 19 |
Sales – Power & Vision
Sales increased
14% or $851 million to $6.79 billion for the six months ended June 30, 2023 compared to $5.93 billion for the six months ended June 30,
2022, primarily due to:
| · | the
launch of programs during or subsequent to the first six months of 2022, including the: |
| · | higher
global light vehicle production; |
| · | acquisitions,
net of divestitures, subsequent to the first six months of 2022, which increased sales by
$68 million; and |
| · | customer
price increases to recover certain higher production input costs. |
These factors were partially offset
by the net weakening of foreign currencies against the U.S. dollar, which decreased reported U.S. dollar sales by $149 million and net
customer price concessions subsequent to the first six months of 2022.
Adjusted EBIT
and Adjusted EBIT as a percentage of sales – Power & Vision
Adjusted EBIT decreased
$45 million to $200 million for the six months ended June 30, 2023 compared to $245 million for the six months ended June 30,
2022 and Adjusted EBIT as a percentage of sales decreased to 2.9% from 4.1%. These decreases were primarily as a result of:
| · | commercial
items in the first six months of 2023 and 2022, which had a net unfavourable impact on a
year over year basis; |
| · | higher
production input costs net of customer recoveries, including for labour, partially offset
by lower prices for commodities, freight and energy; |
| · | higher
warranty costs of $27 million; |
| · | acquisitions,
net of divestitures, subsequent to the first six months of 2022; |
| · | the
net weakening of foreign currencies against the U.S. dollar, which had a $20 million unfavourable
impact on reported U.S. dollar Adjusted EBIT; and |
| · | higher
net engineering costs including spending related to our electrification and active safety
businesses. |
These factors were partially offset
by earnings on higher sales and higher equity income.
20 Magna International Inc. Second Quarter Report 2023 | |
SEATING SYSTEMS
| |
For the six months | | |
| | |
| |
| |
ended June 30, | | |
| | |
| |
| |
2023 | | |
2022 | | |
Change | |
Sales | |
$ | 3,089 | | |
$ | 2,629 | | |
$ | 460 | | |
+ | 17 | % |
Adjusted EBIT | |
$ | 102 | | |
$ | 51 | | |
$ | 51 | | |
+ | 100 | % |
Adjusted EBIT as a percentage of sales | |
| 3.3 | % | |
| 1.9 | % | |
| | | |
+ | 1.4 | % |
Sales –
Seating Systems
Sales increased
17% or $460 million to $3.09 billion for the six months ended June 30, 2023 compared to $2.63 billion for the six months ended June 30,
2022, primarily due to:
| · | the
launch of programs during or subsequent to the first six months of 2022, including the: |
| · | higher
global light vehicle production; and |
| · | customer
price increases to recover certain higher production input costs. |
These factors were
partially offset by the net weakening of foreign currencies against the U.S. dollar, which decreased reported U.S. dollar sales by $60
million and net customer price concessions subsequent to the first six months of 2022.
Adjusted EBIT
and Adjusted EBIT as a percentage of sales – Seating Systems
Adjusted EBIT increased
$51 million to $102 million for the six months ended June 30, 2023 compared to $51 million for the six months ended June 30,
2022 and Adjusted EBIT as a percentage of sales increased to 3.3% from 1.9%. These increases were substantially as a result of earnings
on higher sales. Other factors positively impacting Adjusted EBIT and Adjusted EBIT as a percentage of sales include productivity and
efficiency improvements, including lower costs at certain previously underperforming facilities.
These factors were
partially offset by:
| · | net
transactional foreign exchange losses in the first six months of 2023 compared to net transactional
foreign exchange gains in the first six months of 2022; and |
| · | higher
production input costs net of customer recoveries, including for labour and freight, partially
offset by lower prices for commodities. |
| Magna International Inc. Second Quarter Report 2023 21 |
COMPLETE VEHICLES
| |
For the six months | | |
| | |
| |
| |
ended June 30, | | |
| | |
| |
| |
2023 | | |
2022 | | |
Change | |
Complete
Vehicle Assembly Volumes (thousands of units)(i) | |
| 60.8 | | |
| 55.6 | | |
+ | 5.2 | | |
+ | 9 | % |
Sales | |
$ | 3,152 | | |
$ | 2,678 | | |
$ | 474 | | |
+ | 18 | % |
Adjusted EBIT | |
$ | 86 | | |
$ | 113 | | |
$ | (27 | ) | |
- | 24 | % |
Adjusted EBIT as a percentage of sales | |
| 2.7 | % | |
| 4.2 | % | |
| | | |
- | 1.5 | % |
| (i) | Vehicles produced at our Complete
Vehicle operations are included in Europe Light Vehicle Production volumes. |
Sales –
Complete Vehicles
Sales increased
18% or $474 million to $3.15 billion for the six months ended June 30, 2023 compared to $2.68 billion for the six months ended June 30,
2022 and assembly volumes increased 9%. The increase in sales is primarily a result of higher assembly volumes and favourable program
mix, partially offset by a $43 million decrease in reported U.S. dollar sales as a result of the weakening of the euro against the U.S.
dollar.
Adjusted EBIT
and Adjusted EBIT as a percentage of sales – Complete Vehicles
Adjusted EBIT decreased
$27 million to $86 million for the six months ended June 30, 2023 compared to $113 million for the six months ended June 30,
2022 and Adjusted EBIT as a percentage of sales decreased to 2.7% from 4.2%. These decreases were primarily due to:
| · | higher
engineering, launch and other costs including to launch new assembly business; and |
| · | higher
production input costs net of customer recoveries, including for labour and freight, partially
offset by lower prices for energy. |
These factors were
partially offset by earnings on higher sales and favourable program mix, net of contractual fixed cost recoveries on certain programs
and lower employee profit sharing.
22 Magna International Inc. Second Quarter Report 2023 | |
CORPORATE AND
OTHER
Adjusted EBIT was
a loss of $10 million for the six months ended June 30, 2023 compared to income of $36 million for the six months ended June 30,
2022. The $46 million decrease was primarily the result of:
| · | lower
amortization related to the initial value of public company securities; |
| · | higher
incentive compensation; |
| · | higher
investments in research, development and new mobility; |
| · | higher
costs to accelerate our operational excellence initiatives; |
| · | higher
labour and benefit costs; and |
These factors were
partially offset by:
| · | an
increase in fees received from our divisions; and |
| · | net
transactional foreign exchange gains in the first six months of 2023 compared to net transactional
foreign exchange losses in the first six months of 2022. |
NON-GAAP
PERFORMANCE MEASURES - FOR THE SIX MONTHS ENDED JUNE 30, 2023
ADJUSTED EBIT
AS A PERCENTAGE OF SALES
The table below
shows the change in Magna's Sales and Adjusted EBIT by segment and the impact each segment's changes have on Magna's Adjusted EBIT as
a percentage of sales for the six months ended June 30, 2023 compared to the six months ended June 30, 2022:
| |
| | |
| | |
Adjusted EBIT | |
| |
| | |
Adjusted | | |
as a percentage | |
| |
Sales | | |
EBIT | | |
of sales | |
Six months ended June 30, 2022 | |
$ | 19,004 | | |
$ | 865 | | |
| 4.6 | % |
Increase (decrease) related to: | |
| | | |
| | | |
| | |
Body Exteriors & Structures | |
| 955 | | |
| 242 | | |
+ | 0.9 | % |
Power & Vision | |
| 851 | | |
| (45 | ) | |
- | 0.4 | % |
Seating Systems | |
| 460 | | |
| 51 | | |
+ | 0.1 | % |
Complete Vehicles | |
| 474 | | |
| (27 | ) | |
- | 0.2 | % |
Corporate and Other | |
| (89 | ) | |
| (46 | ) | |
- | 0.2 | % |
Six months ended June 30, 2023 | |
$ | 21,655 | | |
$ | 1,040 | | |
| 4.8 | % |
Adjusted EBIT as
a percentage of sales increased to 4.8% for the six months ended June 30, 2023 compared to 4.6% for the six months ended June 30,
2022 primarily due to:
| · | earnings
on higher sales; |
| · | productivity
and efficiency improvements, including lower costs at certain previously underperforming
facilities; |
| · | higher
equity income; and |
| · | lower
employee profit sharing and incentive compensation. |
These factors were partially offset
by:
| · | higher
engineering, launch and other costs including to launch new assembly business; |
| · | higher
production input costs net of customer recoveries, including for labour, partially offset
by lower prices for energy, commodities and freight; |
| · | commercial
items in the first six months of 2023 and 2022, which had a net unfavourable impact on a
year over year basis; |
| · | operating
inefficiencies at a facility in Europe; |
| · | lower
amortization related to the initial value of public company securities; |
| · | acquisitions,
net of divestitures, subsequent to the first six months of 2022; |
| · | higher
warranty costs; and |
| · | higher
net engineering costs including spending related to our electrification and active safety
businesses. |
| Magna International Inc. Second Quarter Report 2023 23 |
ADJUSTED
RETURN ON INVESTED CAPITAL AND RETURN ON INVESTED CAPITAL
Adjusted Return
on Invested Capital increased to 9.6% for the six months ended June 30, 2023 compared to 8.6% for the six months ended June 30,
2022 as a result of an increase in Adjusted After-tax operating profits partially offset by higher Average Invested Capital. Other expense,
net, after tax and Adjustments to Deferred Tax Valuation Allowances negatively impacted Return on Invested Capital by 2.4% in the first
six months of 2023 and by 5.2% in the first six months of 2022.
Average Invested
Capital increased $1.04 billion to $17.06 billion for the six months ended June 30, 2023 compared to $16.02 billion for the six
months ended June 30, 2022, primarily due to:
| · | average
investment in fixed assets in excess of our average depreciation expense on fixed assets; |
| · | acquisitions,
net of divestitures, during and subsequent to the first six months of 2022; and |
| · | an
increase in average operating assets and liabilities. |
These factors were
partially offset by:
| · | the
net weakening of foreign currencies against the U.S. dollar; |
| · | the
impairment of our Russian assets recorded during the second quarter of 2022; and |
24 Magna International Inc. Second Quarter Report 2023 | |
NON-GAAP
FINANCIAL MEASURES RECONCILIATION
The reconciliation of Non-GAAP financial
measures is as follows:
ADJUSTED EBIT
| |
For the three months | | |
For the six months | |
| |
ended June 30, | | |
ended June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| |
| | |
| | |
| | |
| |
Net income (loss) | |
$ | 354 | | |
$ | (145 | ) | |
$ | 571 | | |
$ | 234 | |
Add: | |
| | | |
| | | |
| | | |
| | |
Interest expense, net | |
| 34 | | |
| 20 | | |
| 54 | | |
| 46 | |
Other expense, net | |
| 86 | | |
| 426 | | |
| 228 | | |
| 487 | |
Income taxes | |
| 129 | | |
| 57 | | |
| 187 | | |
| 98 | |
Adjusted EBIT | |
$ | 603 | | |
$ | 358 | | |
$ | 1,040 | | |
$ | 865 | |
During the third
quarter of 2023, we will revise our calculation of Adjusted EBIT to exclude the amortization of acquired intangible assets (primarily
customer relationships and technology). We believe that excluding the amortization of acquired intangible assets from Adjusted EBIT will
help management and investors in understanding our underlying performance and will improve comparability between our segmented results
of operations and our peers.
ADJUSTED EBIT
AS A PERCENTAGE OF SALES
| |
For the three months | | |
For the six months | |
| |
ended June 30, | | |
ended June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Sales | |
$ | 10,982 | | |
$ | 9,362 | | |
$ | 21,655 | | |
$ | 19,004 | |
Adjusted EBIT | |
$ | 603 | | |
$ | 358 | | |
$ | 1,040 | | |
$ | 865 | |
Adjusted EBIT as a percentage of sales | |
| 5.5 | % | |
| 3.8 | % | |
| 4.8 | % | |
| 4.6 | % |
ADJUSTED DILUTED
EARNINGS PER SHARE
| |
For the three months | | |
For the six months | |
| |
ended June 30, | | |
ended June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Net income (loss) attributable to Magna International Inc. | |
$ | 339 | | |
$ | (156 | ) | |
$ | 548 | | |
$ | 208 | |
Add (deduct): | |
| | | |
| | | |
| | | |
| | |
Other expense, net | |
| 86 | | |
| 426 | | |
| 228 | | |
| 487 | |
Tax effect on Other expense, net | |
| 5 | | |
| (27 | ) | |
| (27 | ) | |
| (40 | ) |
Adjustments to Deferred Tax Valuation Allowances | |
| — | | |
| — | | |
| — | | |
| (29 | ) |
Adjusted net income attributable to Magna International Inc. | |
| 430 | | |
| 243 | | |
| 749 | | |
| 626 | |
Diluted weighted
average number of Common Shares outstanding during the period (millions) | |
| 286.3 | | |
| 291.1 | | |
| 286.4 | | |
| 295.0 | |
Adjusted diluted earnings per share | |
$ | 1.50 | | |
$ | 0.83 | | |
$ | 2.62 | | |
$ | 2.12 | |
| Magna International Inc. Second Quarter Report 2023 25 |
RETURN ON INVESTED
CAPITAL AND ADJUSTED RETURN ON INVESTED CAPITAL
Return on Invested
Capital is calculated as After-tax operating profits divided by Average Invested Capital for the period. Adjusted Return on Invested
Capital is calculated as Adjusted After-tax operating profits divided by Average Invested Capital for the period. Average Invested Capital
for the three month period is averaged on a two-fiscal quarter basis and for the six month period is averaged on a three-fiscal quarter
basis.
| |
For the three months | | |
For the six months | |
| |
ended June 30, | | |
ended June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| |
| | |
| | |
| | |
| |
Net income (loss) | |
$ | 354 | | |
$ | (145 | ) | |
$ | 571 | | |
$ | 234 | |
Add (deduct): | |
| | | |
| | | |
| | | |
| | |
Interest expense, net | |
| 34 | | |
| 20 | | |
| 54 | | |
| 46 | |
Income taxes on interest expense, net at Magna's effective income tax rate: | |
| (7 | ) | |
| (5 | ) | |
| (11 | ) | |
| (9 | ) |
After-tax operating profits | |
| 381 | | |
| (130 | ) | |
| 614 | | |
| 271 | |
Other expense, net | |
| 86 | | |
| 426 | | |
| 228 | | |
| 487 | |
Tax effect on Other expense, net | |
| 5 | | |
| (27 | ) | |
| (27 | ) | |
| (40 | ) |
Adjustments to Deferred Tax Valuation Allowances | |
| — | | |
| — | | |
| — | | |
| (29 | ) |
Adjusted After-tax operating profits | |
$ | 472 | | |
$ | 269 | | |
$ | 815 | | |
$ | 689 | |
| |
As at June 30, | |
| |
2023 | | |
2022 | |
Total Assets | |
$ | 31,838 | | |
$ | 27,283 | |
Excluding: | |
| | | |
| | |
Cash and cash equivalents | |
| (1,281 | ) | |
| (1,664 | ) |
Deferred tax assets | |
| (535 | ) | |
| (491 | ) |
Less Current Liabilities | |
| (13,358 | ) | |
| (9,816 | ) |
Excluding: | |
| | | |
| | |
Short-term borrowing | |
| 150 | | |
| — | |
Long-term debt due within one year | |
| 1,426 | | |
| 105 | |
Current portion of operating lease liabilities | |
| 303 | | |
| 270 | |
Invested Capital | |
$ | 18,543 | | |
$ | 15,687 | |
| |
For the three months | | |
For the six months | |
| |
ended June 30, | | |
ended June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
After-tax operating profits | |
$ | 381 | | |
$ | (130 | ) | |
$ | 614 | | |
$ | 271 | |
Average Invested Capital | |
$ | 17,587 | | |
$ | 16,006 | | |
$ | 17,059 | | |
$ | 16,019 | |
Return on Invested Capital | |
| 8.7 | % | |
| (3.2 | )% | |
| 7.2 | % | |
| 3.4 | % |
| |
For the three months | | |
For the six months | |
| |
ended June 30, | | |
ended June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Adjusted After-tax operating profits | |
$ | 472 | | |
$ | 269 | | |
$ | 815 | | |
$ | 689 | |
Average Invested Capital | |
$ | 17,587 | | |
$ | 16,006 | | |
$ | 17,059 | | |
$ | 16,019 | |
Adjusted Return on Invested Capital | |
| 10.7 | % | |
| 6.7 | % | |
| 9.6 | % | |
| 8.6 | % |
26 Magna International Inc. Second Quarter Report 2023 | |
SUBSEQUENT EVENT
SALE OF OUR INVESTMENTS IN RUSSIA
On August 1, 2023, we completed the sale of all our investments in Russia for approximately $15 million, resulting in a loss of approximately
$15 million.
COMMITMENTS AND CONTINGENCIES
From time to time,
we may be contingently liable for litigation, legal and/or regulatory actions and proceedings and other claims. Refer to Note 15, "Contingencies"
of our unaudited interim consolidated financial statements for the three and six months ended June 30, 2023, which describes these
claims.
For a discussion
of risk factors relating to legal and other claims/actions against us, refer to "Item 5. Risk Factors" in our AIF and Form 40-F,
each in respect of the year ended December 31, 2022.
CONTROLS
AND PROCEDURES
During the second
quarter of 2023, we acquired Veoneer AS. Other than the addition of Veoneer AS operations to our internal control over financial reporting
and any related changes in controls to integrate Veoneer AS, there have been no changes in our internal control over financial reporting
that occurred during the three months ended June 30, 2023, that have materially affected or are reasonably likely to materially
affect, our internal control over financial reporting.
| Magna International Inc. Second Quarter Report 2023 27 |
FORWARD-LOOKING
STATEMENTS
Certain statements
in this MD&A may 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.
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. 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:
Macroeconomic, Geopolitical and
Other Risks
· impact
of the Russian invasion of Ukraine;
· inflationary
pressures;
· interest
rate levels;
· risks
related to COVID-19;
Risks Related to the Automotive
Industry
· economic
cyclicality;
· regional
production volume declines;
· deteriorating
vehicle affordability;
· potential
consumer hesitancy with respect to Electric Vehicles ("EVs");
· intense
competition;
Strategic Risks
· alignment
of our product mix with the "Car of the Future";
· our
ability to consistently develop and commercialize innovative products or processes;
· our
investments in mobility and technology companies;
· 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;
Customer-Related
Risks
· concentration
of sales with six customers;
· inability
to significantly grow our business with Asian customers;
· emergence
of potentially disruptive EV OEMs, including risks related to limited revenues/operating history of new OEM entrants;
· evolving
counterparty risk profile;
· dependence
on outsourcing;
· OEM
consolidation and cooperation;
· shifts
in market shares among vehicles or vehicle segments;
· shifts
in consumer "take rates" for products we sell;
· quarterly
sales fluctuations;
· potential
loss of any material purchase orders;
· potential
OEM production-related disruptions;
Supply
Chain Risks
· semiconductor
chip supply disruptions and price increases, and the impact on customer production volumes and on the efficiency of our operations;
· supply
disruptions and applicable costs related to supply disruption mitigation initiatives;
· regional
energy shortages/disruptions and pricing;
· a
deterioration of the financial condition of our supply base; |
IT Security/Cybersecurity Risks
· IT/Cybersecurity
breach;
· Product
cybersecurity breach;
Pricing Risks
· pricing
risks following time of quote or award of new business;
· price
concessions;
· commodity
cost volatility;
· declines
in scrap steel/aluminum prices;
Warranty / Recall Risks
· costs
related to repair or replace defective products, including due to a recall;
· warranty
or recall costs that exceed warranty provisions or insurance coverage limits;
· product
liability claims;
Climate Change Risks
· transition
risks and physical risks;
· strategic
and other risks related to the transition to electromobility;
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;
· intellectual
property risks;
· risks
of conducting business in foreign markets;
· fluctuations
in relative currency values;
· an
increase in pension funding obligations;
· tax
risks;
· reduced
financial flexibility as a result of an economic shock;
· inability
to achieve future investment returns that equal or exceed past returns;
· changes
in credit ratings assigned to us;
· the
unpredictability of, and fluctuation in, the trading price of our Common Shares;
· a
reduction of suspension of our dividend; |
28 Magna International Inc. Second Quarter Report 2023 | |
Manufacturing Operational Risks
· product
and new facility launch risks;
· operational
underperformance;
· restructuring
costs;
· impairment
charges;
· labour
disruptions;
· skilled
labour attraction/retention;
· leadership
expertise and succession; |
Legal, Regulatory and Other Risks
· antitrust
risk;
· legal
claims and/or regulatory actions against us;
· changes
in laws and regulations, including those related to vehicle emissions, taxation or made as a result of the COVID-19 pandemic
· potential
restrictions on free trade;
· trade
disputes/tariffs; and
· environmental
compliance costs. |
In evaluating
forward-looking statements, 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 revised Annual Information Form filed with securities commissions in Canada,
our annual report on Form 40-F / 40-F/A 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 also be found in our Annual
Information Form.
| Magna International Inc. Second Quarter Report 2023 29 |
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF INCOME
(LOSS)
[Unaudited]
[U.S. dollars in millions, except
per share figures]
| |
| | |
Three months ended | | |
Six months ended | |
| |
| | |
June 30, | | |
June 30, | |
| |
Note | | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Sales | |
| 16 | | |
$ | 10,982 | | |
$ | 9,362 | | |
$ | 21,655 | | |
$ | 19,004 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Costs and expenses | |
| | | |
| | | |
| | | |
| | | |
| | |
Cost of goods sold | |
| | | |
| 9,544 | | |
| 8,259 | | |
| 18,960 | | |
| 16,659 | |
Depreciation and amortization | |
| | | |
| 366 | | |
| 360 | | |
| 731 | | |
| 729 | |
Selling, general and administrative | |
| | | |
| 505 | | |
| 410 | | |
| 993 | | |
| 796 | |
Interest expense, net | |
| | | |
| 34 | | |
| 20 | | |
| 54 | | |
| 46 | |
Equity income | |
| | | |
| (36 | ) | |
| (25 | ) | |
| (69 | ) | |
| (45 | ) |
Other expense, net | |
| 2 | | |
| 86 | | |
| 426 | | |
| 228 | | |
| 487 | |
Income (loss) from operations before income taxes | |
| | | |
| 483 | | |
| (88 | ) | |
| 758 | | |
| 332 | |
Income taxes | |
| 11 | | |
| 129 | | |
| 57 | | |
| 187 | | |
| 98 | |
Net income (loss) | |
| | | |
| 354 | | |
| (145 | ) | |
| 571 | | |
| 234 | |
Income attributable to non-controlling interests | |
| | | |
| (15 | ) | |
| (11 | ) | |
| (23 | ) | |
| (26 | ) |
Net income (loss) attributable to Magna International Inc. | |
| | | |
$ | 339 | | |
$ | (156 | ) | |
$ | 548 | | |
$ | 208 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Earnings (loss) per Common Share: | |
| 3 | | |
| | | |
| | | |
| | | |
| | |
Basic | |
| | | |
$ | 1.18 | | |
$ | (0.54 | ) | |
$ | 1.92 | | |
$ | 0.71 | |
Diluted | |
| | | |
$ | 1.18 | | |
$ | (0.54 | ) | |
$ | 1.91 | | |
$ | 0.70 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Cash dividends paid per Common Share | |
| | | |
$ | 0.46 | | |
$ | 0.45 | | |
$ | 0.92 | | |
$ | 0.90 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Weighted average number of Common Shares outstanding during the period [in millions]: | |
| 3 | | |
| | | |
| | | |
| | | |
| | |
Basic | |
| | | |
| 286.2 | | |
| 291.1 | | |
| 286.1 | | |
| 293.8 | |
Diluted | |
| | | |
| 286.3 | | |
| 291.1 | | |
| 286.4 | | |
| 295.0 | |
See accompanying
notes
30 | Magna International Inc. Second Quarter Report 2023 | |
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME (LOSS)
[Unaudited]
[U.S. dollars in millions]
| |
| | |
Three months ended | | |
Six months ended | |
| |
| | |
June 30, | | |
June 30, | |
| |
Note | | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Net income (loss) | |
| | | |
$ | 354 | | |
$ | (145 | ) | |
$ | 571 | | |
$ | 234 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Other comprehensive (loss) income, net of tax: | |
| 13 | | |
| | | |
| | | |
| | | |
| | |
Net unrealized loss on translation of net investment in foreign operations | |
| | | |
| (79 | ) | |
| (348 | ) | |
| (34 | ) | |
| (446 | ) |
Net unrealized gain (loss) on cash flow hedges | |
| | | |
| 48 | | |
| (50 | ) | |
| 89 | | |
| 5 | |
Reclassification of net gain on cash flow hedges to net income | |
| | | |
| (14 | ) | |
| (13 | ) | |
| (17 | ) | |
| (19 | ) |
Reclassification of net loss on pensions to net income | |
| | | |
| — | | |
| 1 | | |
| 1 | | |
| 2 | |
Reserve for cumulative translation losses | |
| | | |
| — | | |
| 203 | | |
| — | | |
| 203 | |
Pension and post retirement benefits | |
| | | |
| 1 | | |
| — | | |
| (4 | ) | |
| 1 | |
Other comprehensive (loss) income | |
| | | |
| (44 | ) | |
| (207 | ) | |
| 35 | | |
| (254 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Comprehensive income (loss) | |
| | | |
| 310 | | |
| (352 | ) | |
| 606 | | |
| (20 | ) |
Comprehensive loss (income) attributable to non-controlling interests | |
| | | |
| 11 | | |
| 11 | | |
| 1 | | |
| (2 | ) |
Comprehensive income (loss) attributable to Magna International Inc. | |
| | | |
$ | 321 | | |
$ | (341 | ) | |
$ | 607 | | |
$ | (22 | ) |
See accompanying
notes
| Magna International Inc. Second Quarter Report 2023 | 31 |
MAGNA INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
[Unaudited]
[U.S. dollars in millions]
| |
| | |
As at | | |
As at | |
| |
| | |
June 30, | | |
December 31, | |
| |
Note | | |
2023 | | |
2022 | |
ASSETS | |
| | | |
| | | |
| | |
Current assets | |
| | | |
| | | |
| | |
Cash and cash equivalents | |
| 4 | | |
$ | 1,281 | | |
$ | 1,234 | |
Accounts receivable | |
| | | |
| 8,556 | | |
| 6,791 | |
Inventories | |
| 6 | | |
| 4,664 | | |
| 4,180 | |
Income taxes receivable | |
| | | |
| 14 | | |
| — | |
Prepaid expenses and other | |
| | | |
| 455 | | |
| 320 | |
| |
| | | |
| 14,970 | | |
| 12,525 | |
| |
| | | |
| | | |
| | |
Investments | |
| 7 | | |
| 1,287 | | |
| 1,429 | |
Fixed assets, net | |
| | | |
| 8,646 | | |
| 8,173 | |
Operating lease right-of-use assets | |
| | | |
| 1,667 | | |
| 1,595 | |
Intangible assets, net | |
| | | |
| 823 | | |
| 452 | |
Goodwill | |
| | | |
| 2,771 | | |
| 2,031 | |
Deferred tax assets | |
| | | |
| 535 | | |
| 491 | |
Other assets | |
| 8 | | |
| 1,139 | | |
| 1,093 | |
| |
| | | |
$ | 31,838 | | |
$ | 27,789 | |
| |
| | | |
| | | |
| | |
LIABILITIES AND SHAREHOLDERS' EQUITY | |
| | | |
| | | |
| | |
Current liabilities | |
| | | |
| | | |
| | |
Short-term borrowings | |
| | | |
$ | 150 | | |
$ | 8 | |
Accounts payable | |
| | | |
| 7,984 | | |
| 6,999 | |
Other accrued liabilities | |
| | | |
| 2,637 | | |
| 2,118 | |
Accrued salaries and wages | |
| | | |
| 858 | | |
| 850 | |
Income taxes payable | |
| | | |
| — | | |
| 93 | |
Long-term debt due within one year | |
| | | |
| 1,426 | | |
| 654 | |
Current portion of operating lease liabilities | |
| | | |
| 303 | | |
| 276 | |
| |
| | | |
| 13,358 | | |
| 10,998 | |
| |
| | | |
| | | |
| | |
Long-term debt | |
| | | |
| 4,159 | | |
| 2,847 | |
Operating lease liabilities | |
| | | |
| 1,345 | | |
| 1,288 | |
Long-term employee benefit liabilities | |
| | | |
| 579 | | |
| 548 | |
Other long-term liabilities | |
| | | |
| 448 | | |
| 461 | |
Deferred tax liabilities | |
| | | |
| 293 | | |
| 312 | |
| |
| | | |
| 20,182 | | |
| 16,454 | |
| |
| | | |
| | | |
| | |
Shareholders' equity | |
| | | |
| | | |
| | |
Capital stock | |
| | | |
| | | |
| | |
Common Shares | |
| | | |
| | | |
| | |
[issued: 286,163,296; December 31, 2022 – 285,931,816] | |
| 12 | | |
| 3,323 | | |
| 3,299 | |
Contributed surplus | |
| | | |
| 113 | | |
| 111 | |
Retained earnings | |
| | | |
| 8,907 | | |
| 8,639 | |
Accumulated other comprehensive loss | |
| 13 | | |
| (1,055 | ) | |
| (1,114 | ) |
| |
| | | |
| 11,288 | | |
| 10,935 | |
| |
| | | |
| | | |
| | |
Non-controlling interests | |
| | | |
| 368 | | |
| 400 | |
| |
| | | |
| 11,656 | | |
| 11,335 | |
| |
| | | |
$ | 31,838 | | |
$ | 27,789 | |
See accompanying notes
32 | Magna International Inc. Second Quarter Report 2023 | |
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
[Unaudited]
[U.S. dollars in millions]
| |
| | |
Three months ended | | |
Six months ended | |
| |
| | |
June 30, | | |
June 30, | |
| |
Note | | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Cash provided from (used for): | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
OPERATING ACTIVITIES | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
| | | |
$ | 354 | | |
$ | (145 | ) | |
$ | 571 | | |
$ | 234 | |
Items not involving current cash flows | |
| 4 | | |
| 525 | | |
| 705 | | |
| 876 | | |
| 1,075 | |
| |
| | | |
| 879 | | |
| 560 | | |
| 1,447 | | |
| 1,309 | |
Changes in operating assets and liabilities | |
| 4 | | |
| (332 | ) | |
| (139 | ) | |
| (673 | ) | |
| (708 | ) |
Cash provided from operating activities | |
| | | |
| 547 | | |
| 421 | | |
| 774 | | |
| 601 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
INVESTMENT ACTIVITIES | |
| | | |
| | | |
| | | |
| | | |
| | |
Acquisitions | |
| | | |
| (1,475 | ) | |
| — | | |
| (1,475 | ) | |
| — | |
Fixed asset additions | |
| | | |
| (502 | ) | |
| (329 | ) | |
| (926 | ) | |
| (567 | ) |
Increase in public and private equity investments | |
| | | |
| (3 | ) | |
| (2 | ) | |
| (3 | ) | |
| (4 | ) |
Increase in investments, other assets and intangible assets | |
| | | |
| (96 | ) | |
| (80 | ) | |
| (197 | ) | |
| (144 | ) |
Proceeds from dispositions | |
| | | |
| 44 | | |
| 40 | | |
| 63 | | |
| 63 | |
Disposal of facilities | |
| | | |
| — | | |
| — | | |
| (25 | ) | |
| 6 | |
Cash used for investing activities | |
| | | |
| (2,032 | ) | |
| (371 | ) | |
| (2,563 | ) | |
| (646 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
FINANCING ACTIVITIES | |
| | | |
| | | |
| | | |
| | | |
| | |
Issues of debt | |
| | | |
| 402 | | |
| 3 | | |
| 2,043 | | |
| 31 | |
Increase in short-term borrowings | |
| | | |
| 143 | | |
| — | | |
| 140 | | |
| 1 | |
Repayments of debt | |
| | | |
| (1 | ) | |
| (34 | ) | |
| (3 | ) | |
| (391 | ) |
Issues of Common Shares on exercise of stock options | |
| | | |
| — | | |
| — | | |
| 6 | | |
| 4 | |
Tax withholdings on vesting of equity awards | |
| | | |
| (1 | ) | |
| (1 | ) | |
| (10 | ) | |
| (15 | ) |
Contributions to subsidiaries by non-controlling interests | |
| | | |
| — | | |
| 5 | | |
| — | | |
| 5 | |
Repurchase of Common Shares | |
| 12 | | |
| (2 | ) | |
| (212 | ) | |
| (11 | ) | |
| (595 | ) |
Dividends paid to non-controlling interests | |
| | | |
| (24 | ) | |
| (12 | ) | |
| (31 | ) | |
| (12 | ) |
Dividends | |
| | | |
| (129 | ) | |
| (130 | ) | |
| (261 | ) | |
| (263 | ) |
Cash provided from (used for) financing activities | |
| | | |
| 388 | | |
| (381 | ) | |
| 1,873 | | |
| (1,235 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Effect of exchange rate changes on cash and cash equivalents | |
| | | |
| (51 | ) | |
| (1 | ) | |
| (37 | ) | |
| (4 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net (decrease) increase in cash, cash equivalents during the period | |
| | | |
| (1,148 | ) | |
| (332 | ) | |
| 47 | | |
| (1,284 | ) |
Cash and cash equivalents, beginning of period | |
| | | |
| 2,429 | | |
| 1,996 | | |
| 1,234 | | |
| 2,948 | |
Cash and cash equivalents, end of period | |
| 4 | | |
$ | 1,281 | | |
$ | 1,664 | | |
$ | 1,281 | | |
$ | 1,664 | |
See accompanying
notes
| Magna International Inc. Second Quarter Report 2023 | 33 |
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CHANGES
IN EQUITY
[Unaudited]
[U.S. dollars in millions]
| |
Six months ended June 30, 2023 | |
| |
| | |
Common
Shares | | |
| | |
| | |
| | |
Non- | | |
| |
| |
| | |
| | |
Stated | | |
Contributed | | |
Retained | | |
| | |
controlling | | |
Total | |
| |
Note | | |
Number | | |
Value | | |
Surplus | | |
Earnings | | |
AOCL
[i] | | |
Interest | | |
Equity | |
| |
| | |
[in millions] | | |
| | |
| | |
| | |
| | |
| | |
| |
Balance,
December 31, 2022 | |
| | | |
| 285.9 | | |
$ | 3,299 | | |
$ | 111 | | |
$ | 8,639 | | |
$ | (1,114 | ) | |
$ | 400 | | |
$ | 11,335 | |
Net
income | |
| | | |
| | | |
| | | |
| | | |
| 548 | | |
| | | |
| 23 | | |
| 571 | |
Other
comprehensive income (loss) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 59 | | |
| (24 | ) | |
| 35 | |
Shares
issued on exercise of stock options | |
| | | |
| 0.2 | | |
| 7 | | |
| (1 | ) | |
| | | |
| | | |
| | | |
| 6 | |
Release
of stock and stock units | |
| | | |
| 0.4 | | |
| 19 | | |
| (19 | ) | |
| | | |
| | | |
| | | |
| | |
Tax
withholdings on vesting of equity awards | |
| | | |
| (0.2 | ) | |
| (2 | ) | |
| | | |
| (8 | ) | |
| | | |
| | | |
| (10 | ) |
Repurchase
and cancellation under normal course issuer bid | |
| 12 | | |
| (0.2 | ) | |
| (2 | ) | |
| | | |
| (9 | ) | |
| | | |
| | | |
| (11 | ) |
Stock-based
compensation expense | |
| | | |
| | | |
| | | |
| 22 | | |
| | | |
| | | |
| | | |
| 22 | |
Dividends
paid to non-controlling interests | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (31 | ) | |
| (31 | ) |
Dividends
paid | |
| | | |
| 0.1 | | |
| 2 | | |
| | | |
| (263 | ) | |
| | | |
| | | |
| (261 | ) |
Balance,
June 30, 2023 | |
| | | |
| 286.2 | | |
$ | 3,323 | | |
$ | 113 | | |
$ | 8,907 | | |
$ | (1,055 | ) | |
$ | 368 | | |
$ | 11,656 | |
| |
Three months ended June 30, 2023 | |
| |
| | |
Common Shares | | |
| | |
| | |
| | |
Non- | | |
| |
| |
| | |
| | |
Stated | | |
Contributed | | |
Retained | | |
| | |
controlling | | |
Total | |
| |
Note | | |
Number | | |
Value | | |
Surplus | | |
Earnings | | |
AOCL [i] | | |
Interest | | |
Equity | |
| |
| | |
[in millions] | | |
| | |
| | |
| | |
| | |
| | |
| |
Balance, March 31, 2023 | |
| | | |
| 286.1 | | |
$ | 3,319 | | |
$ | 104 | | |
$ | 8,699 | | |
$ | (1,036 | ) | |
$ | 403 | | |
$ | 11,489 | |
Net income | |
| | | |
| | | |
| | | |
| | | |
| 339 | | |
| | | |
| 15 | | |
| 354 | |
Other comprehensive loss | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (18 | ) | |
| (26 | ) | |
| (44 | ) |
Release of stock and stock units | |
| | | |
| 0.1 | | |
| 4 | | |
| (4 | ) | |
| | | |
| | | |
| | | |
| | |
Tax withholdings on vesting of equity awards | |
| | | |
| | | |
| | | |
| | | |
| (1 | ) | |
| | | |
| | | |
| (1 | ) |
Repurchase and cancellation under normal course issuer bid | |
| 12 | | |
| | | |
| | | |
| | | |
| (1 | ) | |
| (1 | ) | |
| | | |
| (2 | ) |
Stock-based compensation expense | |
| | | |
| | | |
| | | |
| 13 | | |
| | | |
| | | |
| | | |
| 13 | |
Dividends paid to non-controlling interests | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (24 | ) | |
| (24 | ) |
Dividends paid | |
| | | |
| | | |
| | | |
| | | |
| (129 | ) | |
| | | |
| | | |
| (129 | ) |
Balance, June 30, 2023 | |
| | | |
| 286.2 | | |
$ | 3,323 | | |
$ | 113 | | |
$ | 8,907 | | |
$ | (1,055 | ) | |
$ | 368 | | |
$ | 11,656 | |
[i]
AOCL is Accumulated Other Comprehensive Loss.
See accompanying notes
34 | Magna International Inc. Second Quarter Report 2023 | |
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CHANGES
IN EQUITY
[Unaudited]
[U.S. dollars in millions]
| |
Six months ended June 30, 2022 | |
| |
| | |
Common Shares | | |
| | |
| | |
| | |
Non- | | |
| |
| |
| | |
| | |
Stated | | |
Contributed | | |
Retained | | |
| | |
controlling | | |
Total | |
| |
Note | | |
Number | | |
Value | | |
Surplus | | |
Earnings | | |
AOCL [i] | | |
Interest | | |
Equity | |
| |
| | |
[in millions] | | |
| | |
| | |
| | |
| | |
| | |
| |
Balance, December 31, 2021 | |
| | | |
| 297.9 | | |
$ | 3,403 | | |
$ | 102 | | |
$ | 9,231 | | |
$ | (900 | ) | |
$ | 389 | | |
$ | 12,225 | |
Net income | |
| | | |
| | | |
| | | |
| | | |
| 208 | | |
| | | |
| 26 | | |
| 234 | |
Other comprehensive loss | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (230 | ) | |
| (24 | ) | |
| (254 | ) |
Contribution by non-controlling interest | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 5 | | |
| 5 | |
Shares issued on exercise of stock options | |
| | | |
| 0.1 | | |
| 5 | | |
| (1 | ) | |
| | | |
| | | |
| | | |
| 4 | |
Release of stock and stock units | |
| | | |
| 0.5 | | |
| 20 | | |
| (20 | ) | |
| | | |
| | | |
| | | |
| | |
Tax withholdings on vesting of equity awards | |
| | | |
| (0.2 | ) | |
| (2 | ) | |
| | | |
| (13 | ) | |
| | | |
| | | |
| (15 | ) |
Repurchase and cancellation under normal course issuer bid | |
| 12 | | |
| (9.3 | ) | |
| (104 | ) | |
| | | |
| (497 | ) | |
| 6 | | |
| | | |
| (595 | ) |
Stock-based compensation expense | |
| | | |
| | | |
| | | |
| 15 | | |
| | | |
| | | |
| | | |
| 15 | |
Dividends paid to non-controlling interests | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (12 | ) | |
| (12 | ) |
Dividends paid | |
| | | |
| | | |
| 4 | | |
| | | |
| (267 | ) | |
| | | |
| | | |
| (263 | ) |
Balance, June 30, 2022 | |
| | | |
| 289.0 | | |
$ | 3,326 | | |
$ | 96 | | |
$ | 8,662 | | |
$ | (1,124 | ) | |
$ | 384 | | |
$ | 11,344 | |
| |
Three months ended June 30, 2022 | |
| |
| | |
Common Shares | | |
| | |
| | |
| | |
Non- | | |
| |
| |
| | |
| | |
Stated | | |
Contributed | | |
Retained | | |
| | |
controlling | | |
Total | |
| |
Note | | |
Number | | |
Value | | |
Surplus | | |
Earnings | | |
AOCL [i] | | |
Interest | | |
Equity | |
| |
| | |
[in millions] | | |
| | |
| | |
| | |
| | |
| | |
| |
Balance, March 31, 2022 | |
| | | |
| 292.3 | | |
$ | 3,358 | | |
$ | 95 | | |
$ | 9,126 | | |
$ | (942 | ) | |
$ | 402 | | |
$ | 12,039 | |
Net (loss)
income | |
| | | |
| | | |
| | | |
| | | |
| (156 | ) | |
| | | |
| 11 | | |
| (145 | ) |
Other comprehensive loss | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (185 | ) | |
| (22 | ) | |
| (207 | ) |
Contribution by non-controlling interest | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 5 | | |
| 5 | |
Release of stock and stock units | |
| | | |
| 0.2 | | |
| 6 | | |
| (6 | ) | |
| | | |
| | | |
| | | |
| | |
Tax withholdings on vesting of equity awards | |
| | | |
| | | |
| | | |
| | | |
| (1 | ) | |
| | | |
| | | |
| (1 | ) |
Repurchase and cancellation under normal course issuer bid | |
| 12 | | |
| (3.5 | ) | |
| (40 | ) | |
| | | |
| (175 | ) | |
| 3 | | |
| | | |
| (212 | ) |
Stock-based compensation expense | |
| | | |
| | | |
| | | |
| 7 | | |
| | | |
| | | |
| | | |
| 7 | |
Dividends paid to non-controlling interests | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (12 | ) | |
| (12 | ) |
Dividends paid | |
| | | |
| | | |
| 2 | | |
| | | |
| (132 | ) | |
| | | |
| | | |
| (130 | ) |
Balance, June 30, 2022 | |
| | | |
| 289.0 | | |
$ | 3,326 | | |
$ | 96 | | |
$ | 8,662 | | |
$ | (1,124 | ) | |
$ | 384 | | |
$ | 11,344 | |
[i]
AOCL is Accumulated Other Comprehensive Loss.
See accompanying notes
| Magna International Inc. Second Quarter Report 2023 | 35 |
MAGNA INTERNATIONAL INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
[Unaudited]
[All
amounts in U.S. dollars and all tabular amounts in millions unless otherwise noted]
| 1. | SIGNIFICANT ACCOUNTING POLICIES |
The unaudited
interim consolidated financial statements of Magna International Inc. and its subsidiaries [collectively "Magna" or the "Company"]
have been prepared in U.S. dollars following accounting principles generally accepted in the United States of America ["GAAP"]. The
unaudited interim consolidated financial statements do not conform in all respects to the requirements of GAAP for annual financial statements.
Accordingly, these unaudited interim consolidated financial statements should be read in conjunction with the December 31, 2022
audited consolidated financial statements and notes thereto included in the Company's 2022 Annual Report.
The unaudited
interim consolidated financial statements reflect all adjustments, which consist only of normal and recurring adjustments, necessary
to present fairly the financial position as at June 30, 2023 and the results of operations, changes in equity, and cash flows for
the three and six-month periods ended June 30, 2023 and 2022.
The preparation
of the unaudited interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the amounts reported and disclosed in the interim consolidated financial statements and accompanying notes. Due to the inherent
uncertainty involved in making estimates, actual results could ultimately differ from those estimates.
36 | Magna International Inc. Second Quarter Report 2023 | |
MAGNA INTERNATIONAL INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
[Unaudited]
[All
amounts in U.S. dollars and all tabular amounts in millions unless otherwise noted]
| |
| |
Three months ended | | |
Six months ended | |
| |
| |
June 30, | | |
June 30, | |
| |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Restructuring | |
[a] | |
$ | (35 | ) | |
$ | — | | |
$ | 83 | | |
$ | — | |
Impairments | |
[b] | |
| — | | |
| 376 | | |
| — | | |
| 376 | |
Investments | |
[c] | |
| 98 | | |
| 50 | | |
| 122 | | |
| 111 | |
Veoneer Active Safety Business transaction costs | |
[d] | |
| 23 | | |
| — | | |
| 23 | | |
| — | |
| |
| |
$ | 86 | | |
$ | 426 | | |
$ | 228 | | |
$ | 487 | |
| |
Three months ended | | |
Six months ended | |
| |
June 30, | | |
June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Power & Vision [i] | |
$ | (44 | ) | |
$ | — | | |
$ | 61 | | |
$ | — | |
Body Exteriors & Structures | |
| 9 | | |
| — | | |
| 22 | | |
| — | |
Other expense, net | |
| (35 | ) | |
| — | | |
| 83 | | |
| — | |
Tax effect | |
| 9 | | |
| — | | |
| (17 | ) | |
| — | |
Net loss attributable to Magna | |
$ | (26 | ) | |
$ | — | | |
$ | 66 | | |
$ | — | |
[i]
During the second quarter of 2023, the Company’s Power & Vision segment reversed $39 million of charges due to a
change in the restructuring plans related to a plant closure, and recorded a $10 million gain on the sale of two buildings as a result
of restructuring activities.
During
the second quarter of 2022, the Company recorded a $376 million [$361 million after tax] impairment charge related to its investment
in Russia as a result of the expected lack of future cashflows and the uncertainties connected with the Russian economy. This included
net asset impairments of $173 million and a $203 million reserve against the related foreign currency translation losses that were included
in accumulated other comprehensive loss. The net asset impairments consisted of $163 million and $10 million in our Body Exteriors &
Structures and Seating Systems segments, respectively. Refer to Note 17, "Subsequent Event", in these financial statements.
| |
Three months ended | | |
Six months ended | |
| |
June 30, | | |
June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Non-cash impairment charge [ii] | |
$ | 85 | | |
$ | — | | |
$ | 85 | | |
$ | — | |
Revaluation of public company warrants | |
| 13 | | |
| 51 | | |
| 35 | | |
| 89 | |
Revaluation of public and private equity investments | |
| — | | |
| 2 | | |
| 2 | | |
| 23 | |
Gain on sale of public equity investments | |
| — | | |
| (3 | ) | |
| — | | |
| (1 | ) |
Other expense, net | |
| 98 | | |
| 50 | | |
| 122 | | |
| 111 | |
Tax effect | |
| (3 | ) | |
| (12 | ) | |
| (9 | ) | |
| (25 | ) |
Net loss attributable to Magna | |
$ | 95 | | |
$ | 38 | | |
$ | 113 | | |
$ | 86 | |
[ii]
The non-cash impairment charge relates to impairment of a private equity investment and related long-term receivables within Other
assets.
| [d] | Veoneer Active Safety Business
transaction costs |
During
2023, the Company incurred $23 million [$22 million after tax] of transaction costs related to the acquisition of the Veoneer Active
Safety Business [“Veoneer AS”]. Refer to Note 5, “Business Combination”, in these financial statements.
| Magna International Inc. Second Quarter Report 2023 | 37 |
MAGNA INTERNATIONAL INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
[Unaudited]
[All
amounts in U.S. dollars and all tabular amounts in millions unless otherwise noted]
| 3. | EARNINGS (LOSS) PER SHARE |
| |
Three months ended | | |
Six months ended | |
| |
June 30, | | |
June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Basic earnings (loss) per Common Share: | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) attributable to Magna International Inc. | |
$ | 339 | | |
$ | (156 | ) | |
$ | 548 | | |
$ | 208 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average number of Common Shares outstanding | |
| 286.2 | | |
| 291.1 | | |
| 286.1 | | |
| 293.8 | |
| |
| | | |
| | | |
| | | |
| | |
Basic earnings (loss) per Common Share | |
$ | 1.18 | | |
$ | (0.54 | ) | |
$ | 1.92 | | |
$ | 0.71 | |
| |
| | | |
| | | |
| | | |
| | |
Diluted earnings (loss) per Common Share [a]: | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) attributable to Magna International Inc. | |
$ | 339 | | |
$ | (156 | ) | |
$ | 548 | | |
$ | 208 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average number of Common Shares outstanding | |
| 286.3 | | |
| 291.1 | | |
| 286.4 | | |
| 295.0 | |
| |
| | | |
| | | |
| | | |
| | |
Diluted earnings (loss) per Common Share | |
$ | 1.18 | | |
$ | (0.54 | ) | |
$ | 1.91 | | |
$ | 0.70 | |
| [a] | For the
three and six months ended June 30, 2023, diluted earnings per Common Share excluded
4.2 million [2022 – 6.0 million] and 2.8 million [2022 – 1.2 million] Common
Shares, respectively, issuable under the Company's Incentive Stock Option Plan because these
options were not "in-the-money". The dilutive effect of participating securities
using the two-class method was excluded from the calculation of earnings per share because
the effect would be immaterial. |
38 | Magna International Inc. Second Quarter Report 2023 | |
MAGNA INTERNATIONAL INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
[Unaudited]
[All
amounts in U.S. dollars and all tabular amounts in millions unless otherwise noted]
Cash
from operating activities
| [a] | Cash
and cash equivalents: |
| |
June 30, | | |
December 31, | |
| |
2023 | | |
2022 | |
Bank term deposits and bankers' acceptances | |
$ | 542 | | |
$ | 720 | |
Cash | |
| 739 | | |
| 514 | |
| |
$ | 1,281 | | |
$ | 1,234 | |
| [b] | Items
not involving current cash flows: |
| |
Three months ended | | |
Six months ended | |
| |
June 30, | | |
June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Depreciation and amortization | |
$ | 366 | | |
$ | 360 | | |
$ | 731 | | |
$ | 729 | |
Amortization of other assets included in cost of goods sold | |
| 53 | | |
| 31 | | |
| 118 | | |
| 78 | |
Deferred revenue amortization | |
| (14 | ) | |
| (50 | ) | |
| (89 | ) | |
| (109 | ) |
Other non-cash charges | |
| 28 | | |
| 7 | | |
| 29 | | |
| 14 | |
Deferred tax recovery | |
| (35 | ) | |
| (29 | ) | |
| (72 | ) | |
| (119 | ) |
Dividends received in excess of equity income | |
| 29 | | |
| (25 | ) | |
| 37 | | |
| 10 | |
Non-cash portion of Other expense, net [note 2] | |
| 98 | | |
| 411 | | |
| 122 | | |
| 472 | |
| |
$ | 525 | | |
$ | 705 | | |
$ | 876 | | |
$ | 1,075 | |
| [c] | Changes
in operating assets and liabilities: |
| |
Three months ended | | |
Six months ended | |
| |
June 30, | | |
June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Accounts receivable | |
$ | (411 | ) | |
$ | 24 | | |
$ | (1,581 | ) | |
$ | (738 | ) |
Inventories | |
| (43 | ) | |
| 31 | | |
| (278 | ) | |
| (319 | ) |
Prepaid expenses and other | |
| 11 | | |
| 18 | | |
| 7 | | |
| 13 | |
Accounts payable | |
| 106 | | |
| (188 | ) | |
| 799 | | |
| 253 | |
Accrued salaries and wages | |
| (13 | ) | |
| (83 | ) | |
| (34 | ) | |
| (45 | ) |
Other accrued liabilities | |
| 65 | | |
| 100 | | |
| 556 | | |
| 185 | |
Income taxes payable | |
| (47 | ) | |
| (41 | ) | |
| (142 | ) | |
| (57 | ) |
| |
$ | (332 | ) | |
$ | (139 | ) | |
$ | (673 | ) | |
$ | (708 | ) |
Cash
from investment activities
During
the fourth quarter of 2022, the Company entered into an agreement to sell a European Power & Vision operation. Under the terms
of the arrangement, the Company is contractually obligated to provide the buyer with up to $42 million of funding. During the first quarter
of 2023, the Company completed the sale of this operation which resulted in a net cash outflow of $25 million.
| Magna International Inc. Second Quarter Report 2023 | 39 |
MAGNA INTERNATIONAL INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
[Unaudited]
[All
amounts in U.S. dollars and all tabular amounts in millions unless otherwise noted]
On June 1,
2023, the Company completed the acquisition of 100% of the common shares and voting interests of the entities holding the Veoneer Active
Safety Business. Veoneer AS supplies active safety products globally including active safety integration systems, radar, camera systems,
internal cabin sensing, thermal sensing, and light detection. The purchase price was $1,475 million [net of $111 million cash acquired]
and is subject to working capital and other customary purchase price adjustments.
The
acquisition of Veoneer AS was accounted for as a business combination and is recorded in the Company’s Power & Vision
segment. The Company recorded a purchase price allocation for the assets acquired and liabilities assumed based on their estimated fair
values as of June 1, 2023. The following table summarizes the preliminary purchase price allocation:
Non-cash working capital | |
$ | 170 | |
Fixed assets | |
| 204 | |
Other assets | |
| 79 | |
Intangible assets | |
| 395 | |
Goodwill | |
| 728 | |
Other liabilities | |
| (84 | ) |
Deferred tax liabilities | |
| (17 | ) |
Net cash outflow | |
$ | 1,475 | |
The
estimated fair values of the assets acquired and liabilities assumed are based on the Company’s preliminary estimates and assumptions.
The preliminary purchase price allocation is subject to change within the measurement period and will be subsequently adjusted to reflect
final valuation results and other adjustments, primarily related to measurement of fixed assets, and identification and measurement of
intangible assets and goodwill.
Recognized
goodwill is attributable to the assembled workforce, expected synergies and other intangible assets that do not qualify for separate
recognition.
40 | Magna International Inc. Second Quarter Report 2023 | |
MAGNA INTERNATIONAL INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
[Unaudited]
[All
amounts in U.S. dollars and all tabular amounts in millions unless otherwise noted]
Inventories
consist of:
| |
June 30, | | |
December 31, | |
| |
2023 | | |
2022 | |
Raw materials and supplies | |
$ | 1,770 | | |
$ | 1,640 | |
Work-in-process | |
| 463 | | |
| 427 | |
Finished goods | |
| 536 | | |
| 537 | |
Tooling and engineering | |
| 1,895 | | |
| 1,576 | |
| |
$ | 4,664 | | |
$ | 4,180 | |
Tooling
and engineering inventory represents costs incurred on tooling and engineering services contracts in excess of billed and unbilled amounts
included in accounts receivable.
| |
June 30, | | |
December 31, | |
| |
2023 | | |
2022 | |
Equity method investments | |
$ | 953 | | |
$ | 997 | |
Public and private equity investments | |
| 224 | | |
| 290 | |
Warrants | |
| 110 | | |
| 142 | |
| |
$ | 1,287 | | |
$ | 1,429 | |
Cumulative
unrealized gains and losses on equity securities held as at June 30, 2023 were $46 million and $246 million [$74 million and $205
million as at December 31, 2022], respectively.
Other
assets consist of:
| |
June 30, | | |
December 31, | |
| |
2023 | | |
2022 | |
Preproduction costs related to long-term supply agreements | |
$ | 692 | | |
$ | 679 | |
Long-term receivables | |
| 293 | | |
| 262 | |
Pension overfunded status | |
| 40 | | |
| 41 | |
Unrealized gain on cash flow hedges | |
| 8 | | |
| 26 | |
Other, net | |
| 106 | | |
| 85 | |
| |
$ | 1,139 | | |
$ | 1,093 | |
The
following is a continuity of the Company's warranty accruals, included in Other accrued liabilities:
| |
2023 | | |
2022 | |
Balance, beginning of period | |
$ | 257 | | |
$ | 247 | |
Expense, net | |
| 49 | | |
| 17 | |
Settlements | |
| (23 | ) | |
| (4 | ) |
Foreign exchange and other | |
| 1 | | |
| (5 | ) |
Balance, March 31 | |
| 284 | | |
| 255 | |
Expense, net | |
| 5 | | |
| 7 | |
Settlements | |
| (20 | ) | |
| (14 | ) |
Acquisition | |
| 3 | | |
| — | |
Foreign exchange and other | |
| 22 | | |
| (9 | ) |
Balance, June 30 | |
$ | 294 | | |
$ | 239 | |
| Magna International Inc. Second Quarter Report 2023 | 41 |
MAGNA INTERNATIONAL INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
[Unaudited]
[All
amounts in U.S. dollars and all tabular amounts in millions unless otherwise noted]
| [a] | During
the second quarter of 2023, the Company drew $100 million from the 3-year tranche and $300
million from the 5-year tranche of its unsecured, delayed draw term loan (the “Term
Loan”). The remaining balance of the facility was subsequently cancelled. The amounts
are drawn in advances of 1,3 or 6-month loans and may be rolled over until the end of the
3 and 5 year terms. |
| [b] | On May 26,
2023, the Company extended the maturity date from June 24, 2023 to June 24, 2024
of its $800 million 364-day syndicated revolving credit facility. The Company had not borrowed
any funds under this credit facility. |
| [c] | During the first quarter of 2023, the Company issued the following Senior Notes: |
|
|
Issuance
Date |
|
Amount
in USD at Issuance Date |
|
Maturity
Date |
Cdn$350 million Senior Notes at 4.950% [i] |
|
March 10, 2023 |
|
$258 million |
|
January 31, 2031 |
€550 million Senior Notes at 4.375% [ii] |
|
March 17, 2023 |
|
$591 million |
|
March 17, 2032 |
$300 million Senior Notes at 5.980% [i] |
|
March 21, 2023 |
|
$300 million |
|
March 21, 2026 |
$500 million Senior Notes at 5.500% [i] |
|
March 21, 2023 |
|
$500 million |
|
March 21, 2033 |
The total
cash proceeds received from the Senior Note issuances was $1,637 million, which consists of $1,649 million of Senior Notes less debt
issuance costs of $12 million.
The Senior
Notes are unsecured obligations and do not include any financial covenants. The Company may redeem the notes in whole or in part at any
time, and from time to time, at specified redemption prices determined in accordance with the terms of the indenture governing the Senior
Notes.
| [i] | The Cdn$350
million Senior Notes, $300 million Senior Notes, and $500 million Senior Notes were issued
to both finance a portion of the cost of the acquisition of Veoneer AS and to pay related
fees and expenses, and for general corporate purposes. |
| [ii] | The €550
million Senior Notes were issued for general corporate purposes, which may include the repayment
of the Company’s existing indebtedness of €550 million in Senior Notes coming
due in November 2023. |
For
the three and six months ended June 30, 2022 and 2023, the Company’s effective income tax rate does not reflect the customary
rate primarily due to the impairment charges described in note 2.
For
the three months ended June 30, 2022, the Company’s effective income tax rate is also adversely affected by losses not benefited
in Europe and the six-months ended June 30, 2022, the Company’s income tax rate is favourably affected by a partial release
of valuation allowances against deferred tax assets resulting from a tax reorganization.
| [a] | During
the six month period ended June 30, 2023, the Company repurchased 0.2 million shares
under a normal course issuer bid for cash consideration of $11 million to settle certain
equity compensation plans. |
| [b] | The following
table presents the maximum number of shares that would be outstanding if all the dilutive
instruments outstanding at August 3, 2023 were exercised or converted: |
Common Shares | |
| 286,309,052 | |
Stock options [i] | |
| 6,148,812 | |
| |
| 292,457,864 | |
[i]
Options to purchase Common Shares are exercisable by the holder in accordance with the vesting provisions and upon payment of the
exercise price as may be determined from time to time pursuant to the Company's stock option plans.
42 | Magna International Inc. Second Quarter Report 2023 | |
MAGNA INTERNATIONAL INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
[Unaudited]
[All amounts in U.S. dollars and
all tabular amounts in millions unless otherwise noted]
| 13. | ACCUMULATED OTHER COMPREHENSIVE
LOSS |
The
following is a continuity schedule of accumulated other comprehensive loss:
| |
2023 | | |
2022 | |
Accumulated net unrealized loss on translation of net investment in foreign operations | |
| | | |
| | |
Balance, beginning of period | |
$ | (1,018 | ) | |
$ | (735 | ) |
Net unrealized gain (loss) | |
| 43 | | |
| (96 | ) |
Repurchase of shares under normal course issuer bid | |
| 1 | | |
| 3 | |
Balance, March 31 | |
| (974 | ) | |
| (828 | ) |
Repurchase of shares under normal course issuer bid | |
| (1 | ) | |
| 3 | |
Reserve for cumulative translation losses | |
| — | | |
| 203 | |
Net unrealized loss | |
| (53 | ) | |
| (326 | ) |
Balance, June 30 | |
| (1,028 | ) | |
| (948 | ) |
Accumulated net unrealized gain on cash flow hedges [i] | |
| | | |
| | |
Balance, beginning of period | |
| 5 | | |
| 24 | |
Net unrealized gain | |
| 41 | | |
| 55 | |
Reclassification of net gain to net income | |
| (3 | ) | |
| (6 | ) |
Balance, March 31 | |
| 43 | | |
| 73 | |
Net unrealized gain (loss) | |
| 48 | | |
| (50 | ) |
Reclassification of net gain to net income | |
| (14 | ) | |
| (13 | ) |
Balance, June 30 | |
| 77 | | |
| 10 | |
Accumulated net unrealized loss on pensions | |
| | | |
| | |
Balance, beginning of period | |
| (101 | ) | |
| (189 | ) |
Revaluation | |
| (5 | ) | |
| 1 | |
Reclassifications to net income | |
| 1 | | |
| 1 | |
Balance, March 31 | |
| (105 | ) | |
| (187 | ) |
Revaluation | |
| 1 | | |
| — | |
Reclassifications to net income | |
| — | | |
| 1 | |
Balance, June 30 | |
| (104 | ) | |
| (186 | ) |
| |
| | | |
| | |
Total accumulated other comprehensive loss | |
$ | (1,055 | ) | |
$ | (1,124 | ) |
| [i] | The
amount of income tax expense that has been netted in the accumulated net unrealized gain
on cash flow hedges is as follows: |
| |
2023 | | |
2022 | |
Balance, beginning of period | |
$ | — | | |
$ | (8 | ) |
Net unrealized loss | |
| (15 | ) | |
| (18 | ) |
Reclassification of net gain to net income | |
| 1 | | |
| 2 | |
Balance, March 31 | |
| (14 | ) | |
| (24 | ) |
Net unrealized (loss) gains | |
| (17 | ) | |
| 17 | |
Reclassifications of net gain to net income | |
| 4 | | |
| 4 | |
Balance, June 30 | |
$ | (27 | ) | |
$ | (3 | ) |
The
amount of other comprehensive loss that is expected to be reclassified to net income over the next 12 months is $111 million.
| Magna International Inc. Second Quarter Report 2023 | 43 |
MAGNA INTERNATIONAL INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
[Unaudited]
[All
amounts in U.S. dollars and all tabular amounts in millions unless otherwise noted]
| [a] | Financial
assets and liabilities |
The Company's
financial assets and financial liabilities consist of the following:
| |
June 30, | | |
December 31, | |
| |
2023 | | |
2022 | |
Financial assets | |
| | | |
| | |
Cash and cash equivalents | |
$ | 1,281 | | |
$ | 1,234 | |
Accounts receivable | |
| 8,556 | | |
| 6,791 | |
Warrants and public and private equity investments | |
| 334 | | |
| 432 | |
Long-term receivables included in other assets | |
| 293 | | |
| 262 | |
| |
$ | 10,464 | | |
$ | 8,719 | |
| |
| | | |
| | |
Financial liabilities | |
| | | |
| | |
Short-term borrowings | |
$ | 150 | | |
$ | — | |
Long-term debt (including portion due within one year) | |
| 5,585 | | |
| 3,501 | |
Accounts payable | |
| 7,984 | | |
| 6,999 | |
| |
$ | 13,719 | | |
$ | 10,508 | |
| |
| | | |
| | |
Derivatives designated as effective hedges, measured at fair value | |
| | | |
| | |
Foreign currency contracts | |
| | | |
| | |
Prepaid expenses | |
$ | 132 | | |
$ | 65 | |
Other assets | |
| 8 | | |
| 26 | |
Other accrued liabilities | |
| (21 | ) | |
| (43 | ) |
Other long-term liabilities | |
| (13 | ) | |
| (31 | ) |
| |
$ | 107 | | |
$ | 17 | |
| [b] | Supplier
financing program |
The Company
has a supplier financing program with third-party financial institutions that provides financing to suppliers who provide tooling related
materials. This arrangement allows these suppliers to elect to be paid by a financial institution at a discount earlier than the maturity
date of the receivable, which may extend from 6 to 18 months. The Company will pay the full amount owing to the financial institution
on the maturity dates. Amounts outstanding under this program as at June 30, 2023 were $135 million [$135 million at December 31,
2022] and are presented within accounts payable.
The Company
determined the estimated fair values of its financial instruments based on valuation methodologies it believes are appropriate; however,
considerable judgment is required to develop these estimates. Accordingly, these estimated fair values are not necessarily indicative
of the amounts the Company could realize in a current market exchange. The estimated fair value amounts can be materially affected by
the use of different assumptions or methodologies. The methods and assumptions used to estimate the fair value of financial instruments
are described below:
Cash
and cash equivalents, accounts receivable, accounts payable and short-term borrowings
Due to
the short period to maturity of the instruments, the carrying values as presented in the consolidated balance sheets are reasonable estimates
of fair values.
Publicly
traded and private equity securities
The fair
value of the Company’s investments in publicly traded equity securities is determined using the closing price on the measurement
date, as reported on the stock exchange on which the securities are traded. [Level 1 input based on the GAAP fair value hierarchy.]
The Company
estimates the value of its private equity securities based on valuation methods using the observable transaction price at the transaction
date and other observable inputs including rights and obligations of the securities held by the Company. [Level 3 input based on the
GAAP fair value hierarchy.]
44 | Magna International Inc. Second Quarter Report 2023 | |
MAGNA INTERNATIONAL INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
[Unaudited]
[All
amounts in U.S. dollars and all tabular amounts in millions unless otherwise noted]
| 14. | Financial
instruments (CONTINUED) |
Warrants
The Company
estimates the value of its warrants based on the quoted prices in the active market for Fisker's common shares. [Level 2 inputs based
on the GAAP fair value hierarchy.]
Term
loan
The Company's
Term Loan consists of advances, which are rolled over until repayment for up to 3 years and 5 years, respectively. Due to the short-term
maturity of each loan, the carrying value as presented in the consolidated balance sheets is a reasonable estimate of its fair value.
Senior
Notes
At June 30,
2023, the net book value of the Company's Senior Notes was $5.0 billion and the estimated fair value was $4.9 billion. The net book value
of the Company’s Senior Notes due within one year is $1.3 billion. The fair value of our Senior Notes are classified as Level 1
when we use quoted prices in active markets and Level 2 when the quoted prices are from less active markets or when other observable
inputs are used to determine fair value.
The Company's
financial assets that are exposed to credit risk consist primarily of cash and cash equivalents, accounts receivable, long-term receivables,
and foreign exchange forward contracts with positive fair values.
Cash
and cash equivalents which consists of short-term investments, are only invested in bank term deposits and bank commercial paper with
primarily an investment grade credit rating. Credit risk is further reduced by limiting the amount which is invested in certain major
financial institutions.
The Company
is also exposed to credit risk from the potential default by any of its counterparties on its foreign exchange forward contracts. The
Company mitigates this credit risk by dealing with counterparties who are major financial institutions that the Company anticipates will
satisfy their obligations under the contracts.
In the
normal course of business, the Company is exposed to credit risk from its customers, substantially all of which are in the automotive
industry and are subject to credit risks associated with the automotive industry. For the three and six months ended June 30, 2023,
sales to the Company's six largest customers represented 76% and 78%, respectively, of the Company's total sales; and substantially all
of its sales are to customers in which the Company has ongoing contractual relationships. The Company continues to develop and conduct
business with newer electric vehicle-focused customers, which poses incremental credit risk due to their relatively short operating histories;
limited financial resources; less mature product development and validation processes; uncertain market acceptance of their products/services;
and untested business models. These factors may elevate our risks in dealing with such customers, particularly with respect to recovery
of: pre-production (including tooling, engineering, and launch) and production receivables; inventory; fixed assets and capitalized preproduction
expenditures; as well as other third party obligations related to such items. As at June 30, 2023, the Company’s balance
sheet exposure related to newer electric vehicle-focused customers was approximately $450 million, the majority of which related to Fisker.
In determining the allowance for expected credit losses, the Company considers changes in customer's credit ratings, liquidity, customer's
historical payments and loss experience, current economic conditions and the Company's expectations of future economic conditions.
The Company
is not exposed to significant interest rate risk due to the short-term maturity of its monetary current assets and current liabilities.
In particular, the amount of interest income earned on cash and cash equivalents is impacted more by investment decisions made and the
demands to have available cash on hand, than by movements in interest rates over a given period.
The Company
is exposed to interest rate risk on its term loan as the interest rate is variable, however the Company is not exposed to interest rate
risk on Senior Notes as the interest rates on these instruments are fixed.
| Magna International Inc. Second Quarter Report 2023 | 45 |
MAGNA INTERNATIONAL INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
[Unaudited]
[All
amounts in U.S. dollars and all tabular amounts in millions unless otherwise noted]
| 14. | Financial
instruments (CONTINUED) |
| [f] | Currency
risk and foreign exchange contracts |
The Company
is exposed to fluctuations in foreign exchange rates when manufacturing facilities have committed to the delivery of products, and/or
the purchase of materials and equipment in currencies other than the facilities' functional currency. In an effort to manage this net
foreign exchange exposure, the Company employs hedging programs, primarily through the use of foreign exchange forward contracts.
At June 30,
2023, the Company had outstanding foreign exchange forward contracts representing commitments to buy and sell various foreign currencies.
Significant commitments are as follows:
| |
For Canadian dollars | | |
For U.S. dollars | | |
For Euros | |
| |
| | |
Weighted | | |
| | |
Weighted | | |
| | |
Weighted | | |
Czech | | |
Weighted | |
| |
U.S. dollar | | |
average | | |
Peso | | |
average | | |
U.S. dollar | | |
average | | |
Koruna | | |
average | |
| |
amount | | |
rate | | |
amount | | |
rate | | |
amount | | |
rate | | |
Amount | | |
rate | |
Buy | |
| 23 | | |
| 0.77560 | | |
| 8,532 | | |
| 0.04336 | | |
| 52 | | |
| 0.86421 | | |
| 3,425 | | |
| 0.03713 | |
(Sell) | |
| (1,053 | ) | |
| 1.28473 | | |
| (8 | ) | |
| 0.00088 | | |
| (102 | ) | |
| 1.13424 | | |
| — | | |
| — | |
Forward
contracts mature at various dates through 2025. Foreign currency exposures are reviewed quarterly.
Public
equity securities and warrants
The Company's
public equity securities and warrants are subject to market price risk due to the risk of loss in value that would result from a decline
in the market price of the common shares or underlying common shares.
From
time to time, the Company may become involved in regulatory proceedings, or become liable for legal, contractual and other claims by
various parties, including customers, suppliers, former employees, class action plaintiffs and others. On an ongoing basis, the Company
attempts to assess the likelihood of any adverse judgments or outcomes to these proceedings or claims, together with potential ranges
of probable costs and losses. A determination of the provision required, if any, for these contingencies is made after analysis of each
individual issue. The required provision may change in the future due to new developments in each matter or changes in approach such
as a change in settlement strategy in dealing with these matters.
The
Company's policy is to comply with all applicable laws, including antitrust and competition laws. Based on a previously completed global
review of legacy antitrust risks which led to a September 2020 settlement with the European Commission and a June 2022 settlement
with Brazil’s federal competition authority involving in both cases the supply of closure systems, Magna does not currently anticipate
any material liabilities. However, we could be subject to restitution settlements, civil proceedings, reputational damage and other consequences,
including as a result of the matters specifically referred to above.
Magna
is a global automotive supplier which has complete vehicle engineering and contract manufacturing expertise, as well as product capabilities
which include body, chassis, exterior, seating, powertrain, active driver assistance, electronics, mirrors & lighting, mechatronics,
and roof systems. Magna also has electronic and software capabilities across many of these areas.
The
Company is organized under four operating segments: Body Exteriors & Structures, Power & Vision, Seating Systems, and
Complete Vehicles. These segments have been determined on the basis of technological opportunities, product similarities, and market
and operating factors, and are also the Company's reportable segments.
The
Company's chief operating decision maker uses Adjusted Earnings before Interest and Income Taxes ["Adjusted EBIT"] as the measure
of segment profit or loss, since management believes Adjusted EBIT is the most appropriate measure of operational profitability or loss
for its reporting segments. Adjusted EBIT is calculated by taking Net income and adding back Income taxes, Interest expense, net,
and Other expense, net.
46 | Magna International Inc. Second Quarter Report 2023 | |
MAGNA INTERNATIONAL INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
[Unaudited]
[All amounts in U.S. dollars and
all tabular amounts in millions unless otherwise noted]
| 16. | Segmented
Information (CONTINUED) |
| [a] | The
following tables show segment information for the Company's reporting segments and a reconciliation
of Adjusted EBIT to the Company's consolidated net income (loss): |
| |
Three months ended June 30, 2023 | |
| |
| | |
| | |
| | |
Depreciation | | |
Equity | | |
Fixed | |
| |
Total | | |
External | | |
Adjusted | | |
and | | |
loss | | |
asset | |
| |
sales | | |
sales | | |
EBIT [ii] | | |
amortization | | |
(income) | | |
additions | |
Body Exteriors & Structures | |
$ | 4,540 | | |
$ | 4,468 | | |
$ | 392 | | |
$ | 177 | | |
$ | 1 | | |
$ | 310 | |
Power & Vision | |
| 3,462 | | |
| 3,396 | | |
| 116 | | |
| 135 | | |
| (28 | ) | |
| 153 | |
Seating Systems | |
| 1,603 | | |
| 1,598 | | |
| 66 | | |
| 22 | | |
| (4 | ) | |
| 20 | |
Complete Vehicles | |
| 1,526 | | |
| 1,517 | | |
| 34 | | |
| 26 | | |
| (1 | ) | |
| 13 | |
Corporate & Other [i] | |
| (149 | ) | |
| 3 | | |
| (5 | ) | |
| 6 | | |
| (4 | ) | |
| 6 | |
Total Reportable Segments | |
$ | 10,982 | | |
$ | 10,982 | | |
$ | 603 | | |
$ | 366 | | |
$ | (36 | ) | |
$ | 502 | |
| |
Three months ended June 30, 2022 | |
| |
| | |
| | |
| | |
Depreciation | | |
Equity | | |
Fixed | |
| |
Total | | |
External | | |
Adjusted | | |
and | | |
loss | | |
asset | |
| |
sales | | |
sales | | |
EBIT
[ii] | | |
amortization | | |
(income) | | |
additions | |
Body Exteriors & Structures | |
$ | 3,947 | | |
$ | 3,886 | | |
$ | 191 | | |
$ | 181 | | |
$ | 4 | | |
$ | 185 | |
Power & Vision | |
| 2,888 | | |
| 2,834 | | |
| 91 | | |
| 126 | | |
| (25 | ) | |
| 111 | |
Seating Systems | |
| 1,253 | | |
| 1,246 | | |
| 2 | | |
| 22 | | |
| (2 | ) | |
| 17 | |
Complete Vehicles | |
| 1,403 | | |
| 1,393 | | |
| 63 | | |
| 27 | | |
| (1 | ) | |
| 14 | |
Corporate & Other [i] | |
| (129 | ) | |
| 3 | | |
| 11 | | |
| 4 | | |
| (1 | ) | |
| 2 | |
Total Reportable Segments | |
$ | 9,362 | | |
$ | 9,362 | | |
$ | 358 | | |
$ | 360 | | |
$ | (25 | ) | |
$ | 329 | |
| |
Six months ended June 30, 2023 | |
| |
| | |
| | |
| | |
Depreciation | | |
Equity | | |
Fixed | |
| |
Total | | |
External | | |
Adjusted | | |
and | | |
loss | | |
asset | |
| |
sales | | |
sales | | |
EBIT [ii] | | |
amortization | | |
(income) | | |
additions | |
Body Exteriors & Structures | |
$ | 8,979 | | |
$ | 8,786 | | |
$ | 662 | | |
$ | 364 | | |
$ | 1 | | |
$ | 581 | |
Power & Vision | |
| 6,785 | | |
| 6,651 | | |
| 200 | | |
| 261 | | |
| (62 | ) | |
| 266 | |
Seating Systems | |
| 3,089 | | |
| 3,077 | | |
| 102 | | |
| 45 | | |
| (8 | ) | |
| 40 | |
Complete Vehicles | |
| 3,152 | | |
| 3,134 | | |
| 86 | | |
| 51 | | |
| (2 | ) | |
| 24 | |
Corporate & Other [i] | |
| (350 | ) | |
| 7 | | |
| (10 | ) | |
| 10 | | |
| 2 | | |
| 15 | |
Total Reportable Segments | |
$ | 21,655 | | |
$ | 21,655 | | |
$ | 1,040 | | |
$ | 731 | | |
$ | (69 | ) | |
$ | 926 | |
| |
Six months ended June 30, 2022 | |
| |
| | |
| | |
| | |
Depreciation | | |
Equity | | |
Fixed | |
| |
Total | | |
External | | |
Adjusted | | |
and | | |
loss | | |
asset | |
| |
sales | | |
sales | | |
EBIT [ii] | | |
amortization | | |
(income) | | |
additions | |
Body
Exteriors & Structures | |
$ | 8,024 | | |
$ | 7,900 | | |
$ | 420 | | |
$ | 364 | | |
$ | 5 | | |
$ | 303 | |
Power &
Vision | |
| 5,934 | | |
| 5,823 | | |
| 245 | | |
| 258 | | |
| (41 | ) | |
| 201 | |
Seating Systems | |
| 2,629 | | |
| 2,616 | | |
| 51 | | |
| 44 | | |
| (4 | ) | |
| 35 | |
Complete Vehicles | |
| 2,678 | | |
| 2,659 | | |
| 113 | | |
| 54 | | |
| (2 | ) | |
| 25 | |
Corporate &
Other [i] | |
| (261 | ) | |
| 6 | | |
| 36 | | |
| 9 | | |
| (3 | ) | |
| 3 | |
Total
Reportable Segments | |
$ | 19,004 | | |
$ | 19,004 | | |
$ | 865 | | |
$ | 729 | | |
$ | (45 | ) | |
$ | 567 | |
[i]
Included in Corporate and Other Adjusted EBIT are intercompany fees charged to the automotive segments.
| Magna International Inc. Second Quarter Report 2023 | 47 |
MAGNA INTERNATIONAL INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
[Unaudited]
[All amounts in U.S. dollars and
all tabular amounts in millions unless otherwise noted]
| 16. | Segmented
Information (CONTINUED) |
[ii] The following table reconciles Net income (loss) to Adjusted EBIT:
| |
Three months ended | | |
Six months ended | |
| |
June 30, | | |
June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Net income (loss) | |
$ | 354 | | |
$ | (145 | ) | |
$ | 571 | | |
$ | 234 | |
Add: | |
| | | |
| | | |
| | | |
| | |
Interest expense, net | |
| 34 | | |
| 20 | | |
| 54 | | |
| 46 | |
Other expense, net | |
| 86 | | |
| 426 | | |
| 228 | | |
| 487 | |
Income taxes | |
| 129 | | |
| 57 | | |
| 187 | | |
| 98 | |
Adjusted EBIT | |
$ | 603 | | |
$ | 358 | | |
$ | 1,040 | | |
$ | 865 | |
| [b] | The following table shows Goodwill for the Company's reporting
segments: |
| |
June 30, | | |
December 31, | |
| |
2023 | | |
2022 | |
Body Exteriors & Structures | |
$ | 447 | | |
$ | 448 | |
Power & Vision | |
| 1,943 | | |
| 1,198 | |
Seating Systems | |
| 254 | | |
| 260 | |
Complete Vehicles | |
| 107 | | |
| 105 | |
Corporate & Other | |
| 20 | | |
| 20 | |
Total Reportable Segments | |
$ | 2,771 | | |
$ | 2,031 | |
| [c] | The following table shows Net Assets for the Company's reporting segments: |
| |
June 30, | | |
December 31, | |
| |
2023 | | |
2022 | |
Body Exteriors & Structures | |
$ | 7,825 | | |
$ | 7,168 | |
Power & Vision | |
| 7,770 | | |
| 6,104 | |
Seating Systems | |
| 1,375 | | |
| 1,377 | |
Complete Vehicles | |
| 590 | | |
| 632 | |
Corporate & Other | |
| 955 | | |
| 802 | |
Total Reportable Segments | |
$ | 18,515 | | |
$ | 16,083 | |
The following
table reconciles Total Assets to Net Assets:
| |
June 30, | | |
December 31, | |
| |
2023 | | |
2022 | |
Total Assets | |
$ | 31,838 | | |
$ | 27,789 | |
Deduct assets not included in segment net assets: | |
| | | |
| | |
Cash and cash equivalents | |
| (1,281 | ) | |
| (1,234 | ) |
Deferred tax assets | |
| (535 | ) | |
| (491 | ) |
Income taxes receivable | |
| (14 | ) | |
| — | |
Long-term receivables from joint venture partners | |
| (14 | ) | |
| (14 | ) |
Deduct liabilities included in segment net assets: | |
| | | |
| | |
Accounts payable | |
| (7,984 | ) | |
| (6,999 | ) |
Accrued salaries and wages | |
| (858 | ) | |
| (850 | ) |
Other accrued liabilities | |
| (2,637 | ) | |
| (2,118 | ) |
Segment Net Assets | |
$ | 18,515 | | |
$ | 16,083 | |
On August 1, 2023, the Company completed the sale of all its investments in Russia for approximately $15 million, resulting in a loss
of approximately $15 million.
48 | Magna International Inc. Second Quarter Report 2023 | |
CORPORATE
OFFICE
Magna International Inc.
337 Magna Drive
Aurora, Ontario
Canada L4G 7K1
Telephone: (905) 726-2462
www.magna.com
TRANSFER
AGENT AND REGISTRAR
Canada – Common Shares
Computershare Trust Company of Canada
100 University Avenue, 8th
Floor
Toronto, Ontario, Canada M5J 2Y1
Telephone: 1 (800) 564-6253
United States – Common Shares
Computershare Trust Company, N.A.
462 S. 4th Street
Louisville, Kentucky, USA 40202
Telephone: 1 (800) 962-4284
From all other countries
Telephone: 1 (514) 982-7555
www.computershare.com
EXCHANGE
LISTINGS
Common Shares
Toronto Stock Exchange | |
MG |
The New York Stock Exchange | |
MGA |
Shareholders wishing
to communicate with the non-management members of the Magna Board of Directors may do so by contacting the Chairman of Board through
the office of Magna’s Corporate Secretary at 337 Magna Drive, Aurora, Ontario, Canada L4G 7K1 (905) 726-7070.
Annual Report
Copies of the Annual
Report may be obtained from: The Corporate Secretary, Magna International Inc., 337 Magna Drive, Aurora, Ontario, Canada L4G 7K1 or www.magna.com.
Copies of financial data and other publicly filed documents are available through the internet on the Canadian Securities Administrators’
System for Electronic Document Analysis and Retrieval (SEDAR) which can be accessed at www.sedar.com, and 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.
Exhibit 99.3
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Seetarama (Swamy) Kotagiri, Chief Executive
Officer of Magna International Inc., certify the following:
1. Review: I have reviewed the interim
financial report and interim MD&A (together, the “interim filings”) of Magna International Inc. (the “issuer”)
for the interim period ended June 30, 2023.
2. No misrepresentations: Based
on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances
under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my
knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included
in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer,
as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer’s
other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P)
and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure
in Issuer’s Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations,
if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period
covered by the interim filings
(a) designed DC&P, or caused
it to be designed under our supervision, to provide reasonable assurance that
(i) material information relating
to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii) information required to be disclosed
by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded,
processed, summarized and reported within the time periods specified in securities legislation; and
(b) designed ICFR, or caused it
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with the issuer’s GAAP.
5.1 Control framework: The control
framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
5.2 N/A
5.3 N/A
6. Reporting changes in ICFR: The
issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on April 1,
2023 and ended on June 30, 2023 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
Date: August 4, 2023.
Seetarama (Swamy) Kotagiri
Chief Executive Officer
Exhibit 99.4
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Patrick W.D. McCann, Executive Vice-President
and Chief Financial Officer of Magna International Inc., certify the following:
1. Review: I have reviewed the interim
financial report and interim MD&A (together, the “interim filings”) of Magna International Inc. (the “issuer”)
for the interim period ended June 30, 2023.
2. No misrepresentations: Based
on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances
under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my
knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included
in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer,
as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer’s
other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P)
and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure
in Issuer’s Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations,
if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period
covered by the interim filings
(a) designed DC&P, or caused
it to be designed under our supervision, to provide reasonable assurance that
(i) material information relating
to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii) information required to be disclosed
by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded,
processed, summarized and reported within the time periods specified in securities legislation; and
(b) designed ICFR, or caused it
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with the issuer’s GAAP.
5.1 Control framework: The control
framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
5.2 N/A
5.3 N/A
6. Reporting changes in ICFR: The
issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on April 1,
2023 and ended on June 30, 2023 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
Date: August 4, 2023.
Patrick W.D. McCann
Executive Vice-President and Chief Financial Officer
Magna (NYSE:MGA)
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