Magna International Inc. (TSX: MG; NYSE: MGA) today reported
financial results for the first quarter ended March 31,
2021. Please click HERE for full first quarter Financial
Statements and MD&A.
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THREE MONTHS ENDED |
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March 31, 2021 |
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March 31, 2020 |
Reported |
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Sales |
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$ |
10,179 |
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$ |
8,657 |
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Income from operations before income taxes |
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$ |
805 |
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$ |
386 |
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Net income attributable to Magna International Inc. |
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$ |
615 |
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$ |
261 |
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Diluted earnings per share |
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$ |
2.03 |
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$ |
0.86 |
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Non-GAAP Financial Measures(1) |
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Adjusted EBIT |
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$ |
770 |
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$ |
403 |
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Adjusted diluted earnings per share |
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$ |
1.86 |
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$ |
0.86 |
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All results are reported in millions of U.S. dollars,
except per share figures, which are in U.S. dollars |
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(1) Adjusted EBIT and Adjusted diluted earnings per share are
Non-GAAP financial measures that have no standardized meaning under
U.S. GAAP, and as a result may not be comparable to the calculation
of similar measures by other companies. A reconciliation of these
Non-GAAP financial measures is included in the back of this press
release. |
A photo accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/f278f844-5364-4f27-9108-751a4c0ecd43
THREE MONTHS ENDED MARCH 31, 2021
Our sales came in essentially in line with our
expectations for the first quarter of 2021, despite industry supply
constraints, including a global semiconductor chip shortage, that
negatively impacted global light vehicle production. However,
Adjusted EBIT was above our expectations, mainly reflecting
continued strong operating performance across the company, better
than expected results in China and higher than anticipated equity
income in our Power & Vision segment.
We posted sales of $10.2 billion for the first
quarter of 2021, an increase of 18% from the first quarter of 2020,
as global light vehicle production increased 18%, largely driven by
an 87% increase in China. In our two largest markets of North
America and Europe, production was substantially level and
increased 5%, respectively, compared to the first quarter of
2020.
Adjusted EBIT of $770 million in the first
quarter of 2021 increased 91% from the first quarter of 2020,
driven by higher sales and higher Adjusted EBIT as a percentage of
sales. Adjusted EBIT as a percentage of sales increased to 7.6% in
the first quarter of 2021 compared to 4.7% in the first quarter of
2020.
Income from operations before income taxes was
$805 million for the first quarter of 2021 compared to $386 million
in the first quarter of 2020. Included in Income from
operations before income taxes in the first quarter of 2021 were
Other income, net items totaling $58 million, comprised of gains on
business combinations and unrealized gains on the revaluations of
investments, partially offset by restructuring costs. Excluding
Other income, net from the first quarter of 2021, income from
operations before income taxes increased $361 million in the first
quarter of 2021 compared to the first quarter of 2020.
Net income attributable to Magna International
Inc. was $615 million for the first quarter of 2021 compared to
$261 million in the first quarter of 2020. Included in net
income attributable to Magna International Inc. in the first
quarter of 2021 were Other income, net items totaling $49 million
after tax. Excluding Other income, net from the first quarter of
2021, net income attributable to Magna International Inc. increased
$305 million in the first quarter of 2021 compared to the first
quarter of 2020.
Diluted earnings per share increased to $2.03 in
the first quarter of 2021, compared to $0.86 in the comparable
period and Adjusted diluted earnings per share increased 116% to
$1.86 compared to $0.86.
In the first quarter of 2021, we generated cash
from operations before changes in operating assets and liabilities
of $1.03 billion, and used $372 million in operating assets and
liabilities. Investment activities for the first quarter of 2021
included $212 million in fixed asset additions, a $104 million
increase in investments, other assets and intangible assets, and $3
million in private equity investments. We also assumed net cash of
$39 million related to business combinations.
RETURN OF CAPITAL TO SHAREHOLDERS
During the three months ended March 31, 2021, we
paid dividends of $130 million. In addition, we repurchased for
cancellation 1.7 million shares for $150 million in the first
quarter of 2021.
Our Board of Directors declared a first quarter
dividend of $0.43 per Common Share, payable on June 4, 2021 to
shareholders of record as of the close of business on May 21,
2021.
A photo accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/f24d55f6-90c7-44c7-9c77-5b9babd4caa3
(2) Free cash flow represents Cash from
Operating Activities plus proceeds from normal course dispositions
of fixed and other assets, plus settlement of long-term receivable
from a non-consolidated joint venture, minus capital spending and
investments in other assets.
SEGMENT SUMMARY
($Millions unless otherwise noted) |
For the three months ended March 31, |
Sales |
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Adjusted EBIT |
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2021 |
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2020 |
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Change |
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2021 |
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2020 |
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Change |
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Body Exteriors & Structures |
$ |
4,025 |
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$ |
3,676 |
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$ |
349 |
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$ |
327 |
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$ |
199 |
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$ |
128 |
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Power & Vision |
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3,156 |
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2,523 |
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633 |
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297 |
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135 |
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162 |
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Seating Systems |
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1,303 |
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1,261 |
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42 |
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55 |
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40 |
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15 |
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Complete Vehicles |
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1,850 |
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1,321 |
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529 |
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80 |
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50 |
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30 |
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Corporate and Other |
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(155 |
) |
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(124 |
) |
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(31 |
) |
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11 |
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(21 |
) |
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32 |
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Total Reportable Segments |
$ |
10,179 |
|
$ |
8,657 |
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$ |
1,522 |
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$ |
770 |
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$ |
403 |
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$ |
367 |
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For the three months ended March 31, |
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Adjusted EBIT as a percentage of
sales |
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2021 |
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2020 |
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Change |
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Body Exteriors & Structures |
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8.1% |
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5.4% |
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2.7% |
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Power & Vision |
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9.4% |
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5.4% |
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4.0% |
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Seating Systems |
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4.2% |
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3.2% |
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1.0% |
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Complete Vehicles |
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4.3% |
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3.8% |
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0.5% |
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Consolidated Average |
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7.6% |
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4.7% |
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2.9% |
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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.
2021 OUTLOOK
We disclose a full-year Outlook annually in
February with quarterly updates. The following Outlook is an update
to our previous Outlook in February 2021.
Updated 2021 Outlook
Assumptions
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Current |
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Previous |
Light Vehicle Production (millions of
units) North
America Europe China |
15.618.524.7 |
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15.918.524.0 |
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Average Foreign exchange rates:1 Canadian dollar equals1 euro
equals |
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U.S. $0.797U.S. $1.201 |
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U.S. $0.770U.S. $1.210 |
Updated 2021 Outlook
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Current |
|
Previous |
Segment Sales Body
Exteriors & Structures
Power &
Vision Seating Systems
Complete
Vehicles |
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$16.5 - $17.1 billion$12.0 - $12.4 billion$5.6 - $5.9 billion$6.7 -
$7.0 billion |
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$16.5 - $17.1 billion$11.6 - $12.0 billion$5.8 - $6.1 billion$6.5 -
$6.8 billion |
Total Sales |
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$40.2 - $41.8 billion |
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$40.0 - $41.6 billion |
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Adjusted EBIT Margin(3) |
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7.2% - 7.6% |
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7.1% - 7.5% |
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Equity Income (included in EBIT) |
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$120 - $150 million |
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$85 - $115 million |
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Interest Expense, net |
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Approximately $100 million |
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Approximately $110 million |
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Income Tax Rate(4) |
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Approximately 23% |
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Approximately 23% |
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Net Income attributable to Magna(5) |
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$2.2 - $2.4 billion |
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$2.1 - $2.3 billion |
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Capital Spending |
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Approximately $1.6 billion |
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Approximately $1.6 billion |
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Notes:(3) Adjusted EBIT Margin is the ratio of Adjusted EBIT to
Total Sales(4) The Income Tax Rate has been calculated using
Adjusted EBIT and is based on current tax legislation(5) Net Income
attributable to Magna represents Net Income excluding Other expense
(income), net |
Our Outlook is intended to provide information
about management's current expectations and plans and may not be
appropriate for other purposes. Although considered reasonable by
Magna as of the date of this document, the 2021 Outlook above and
the underlying assumptions may prove to be inaccurate. Accordingly,
our actual results could differ materially from our expectations as
set forth herein. The risks identified in the “Forward-Looking
Statements” section below represent the primary factors which we
believe could cause actual results to differ materially from our
expectations.
Key Drivers of Our Business
Our operating results are primarily dependent on
the levels of North American, European and Chinese car and light
truck production by our customers. While we supply systems and
components to every major original equipment manufacturer (“OEM”),
we do not supply systems and components for every vehicle, nor is
the value of our content consistent from one vehicle to the next.
As a result, customer and program mix relative to market trends, as
well as the value of our content on specific vehicle production
programs, are also important drivers of our results.
OEM production volumes are generally aligned
with vehicle sales levels and thus affected by changes in such
levels. Aside from vehicle sales levels, production volumes are
typically impacted by a range of factors, including: general
economic and political conditions; labour disruptions; free trade
arrangements; tariffs; relative currency values; commodities
prices; supply chains; infrastructure; availability and relative
cost of skilled labour; regulatory considerations, including those
related to environmental emissions and safety standards; and other
factors. Additionally, COVID-19 has been impacting vehicle
production volumes, including through: mandatory stay-at-home
orders which restrict production; elevated employee absenteeism;
and supply chain disruptions.
Overall vehicle sales levels are significantly
affected by changes in consumer confidence levels, which may in
turn be impacted by consumer perceptions and general trends related
to the job, housing and stock markets, as well as other
macroeconomic and political factors. Other factors which typically
impact vehicle sales levels and thus production volumes include:
interest rates and/or availability of credit; fuel and energy
prices; relative currency values; regulatory restrictions on use of
vehicles in certain megacities; and other factors. Additionally,
COVID-19 has been impacting vehicle sales, including through
mandatory stay-at-home orders which restrict operations of car
dealerships, and could impact vehicle sales if consumer confidence
declines due to deterioration in household incomes.
NON-GAAP FINANCIAL MEASURES
RECONCILIATION
Adjusted EBIT |
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The following table reconciles net income to Adjusted EBIT: |
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For the three months ended March 31, |
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|
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2021 |
|
|
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2020 |
|
|
|
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|
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Net Income |
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$ |
622 |
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$ |
252 |
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Add: |
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Interest expense, net |
|
|
23 |
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|
|
17 |
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Other income, net |
|
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(58 |
) |
|
|
— |
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Income taxes |
|
|
183 |
|
|
|
134 |
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Adjusted EBIT |
|
$ |
770 |
|
|
$ |
403 |
|
|
|
|
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Adjusted EBIT as a percentage of sales (“Adjusted EBIT
margin”) |
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Adjusted EBIT as a percentage of sales is calculated in the table
below: |
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For the three months ended March 31, |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
Sales |
|
$ |
10,179 |
|
|
$ |
8,657 |
|
Adjusted EBIT |
|
$ |
770 |
|
|
$ |
403 |
|
Adjusted EBIT as a percentage of sales |
|
|
7.6 |
% |
|
|
4.7 |
% |
|
|
|
|
|
|
|
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|
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Adjusted diluted earnings per share |
|
|
|
|
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The following table reconciles net income attributable to Magna
International Inc. to adjusted diluted earnings per share: |
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For the three months ended March 31, |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
Net income attributable to Magna International Inc. |
|
$ |
615 |
|
|
$ |
261 |
|
Add (deduct): |
|
|
|
|
Other income, net |
|
|
(58 |
) |
|
|
— |
|
Tax effect on Other income, net |
|
|
9 |
|
|
|
— |
|
Adjusted net income attributable to Magna International Inc. |
|
$ |
566 |
|
|
$ |
261 |
|
Diluted weighted average number of Common Shares outstanding during
the period (millions): |
|
|
303.6 |
|
|
|
302.7 |
|
Adjusted diluted earnings per share |
|
$ |
1.86 |
|
|
$ |
0.86 |
|
Certain of the forward-looking financial
measures above are provided on a Non-GAAP basis. We do not provide
a reconciliation of such forward-looking measures to the most
directly comparable financial measures calculated and presented in
accordance with U.S. GAAP. To do so would be potentially misleading
and not practical given the difficulty of projecting items that are
not reflective of on-going operations in any future period. The
magnitude of these items, however, may be significant.
This press release together with our
Management’s Discussion and Analysis of Results of Operations and
Financial Position and our Interim Financial Statements are
available in the Investor Relations section of our website at
www.magna.com/company/investors and filed electronically through
the System for Electronic Document Analysis and Retrieval (SEDAR)
which can be accessed at www.sedar.com as well as on the United
States Securities and Exchange Commission’s Electronic Data
Gathering, Analysis and Retrieval System (EDGAR), which can be
accessed at www.sec.gov.
We will hold a conference call for interested
analysts and shareholders to discuss our first quarter ended March
31, 2021 results on Thursday, May 6, 2021 at 7:00 a.m. EST. The
conference call will be chaired by Swamy Kotagiri, Chief Executive
Officer. The number to use for this call from North America is
1-800-954-0686. International callers should use 1-416-981-9017.
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 Thursday
prior to the call.
TAGSQuarterly earnings, financial results,
vehicle production
INVESTOR CONTACTLouis Tonelli, Vice-President,
Investor Relations louis.tonelli@magna.com │ 905.726.7035
MEDIA CONTACT Tracy Fuerst, Vice-President,
Corporate Communications & PR tracy.fuerst@magna.com │
248.631.5396
WEBCAST CONTACTNancy 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 158,000 employees and an organizational structure designed
to innovate like a startup. With 60+ years of expertise, and a
systems approach to design, engineering and manufacturing that
touches nearly every aspect of the vehicle, we are positioned to
support advancing mobility in a transforming industry. Our global
network includes 347 manufacturing operations and 84 product
development, engineering and sales centres spanning 28
countries.
For further information about Magna (NYSE:MGA;
TSX:MG), please visit www.magna.com or follow us on Twitter
@MagnaInt.
(6) Manufacturing operations, product development,
engineering and sales centres and employee figures include certain
equity-accounted operations.FORWARD-LOOKING STATEMENTS
Certain statements in this press release
constitute “forward-looking information” or “forward-looking
statements” (collectively, “forward-looking statements”). Any such
forward-looking statements are intended to provide information
about management's current expectations and plans and may not be
appropriate for other purposes. Forward-looking statements may
include financial and other projections, as well as statements
regarding our future plans, strategic objectives or economic
performance, or the assumptions underlying any of the foregoing,
and other statements that are not recitations of historical fact.
We use words such as “may”, “would”, “could”, “should", “will”,
“likely”, “expect”, “anticipate”, “believe”, “intend”, “plan”,
“aim”, “forecast”, “outlook”, “project”, “estimate”, “target” and
similar expressions suggesting future outcomes or events to
identify forward-looking statements. The following table identifies
the material forward-looking statements contained in this document,
together with the material potential risks that we currently
believe could cause actual results to differ materially from such
forward-looking statements. Readers should also consider all of the
risk factors which follow below the table:
Material Forward-Looking Statement |
|
Material Potential Risks Related to Applicable
Forward-Looking Statement |
Total SalesSegment Sales |
|
- Mandatory stay-at-home orders and
other restrictions to help contain COVID-19 spread could impact
vehicle sales, vehicle production and our own production
- Economic impact of COVID-19 on
consumer confidence
- Supply disruptions, including as a
result of a semiconductor chip shortage currently being experienced
in the industry and shortages of, or supply constraints on, certain
critical materials such as chemicals for seating foam, resins for
plastic components, rubber as well as certain types of steel
- Concentration of sales with six
customers
- Shifts in market shares among
vehicles or vehicle segments
- Shifts in consumer “take rates” for
products we sell
|
Adjusted EBIT MarginNet Income Attributable to Magna |
|
- Same risks as for Total Sales and
Segment Sales above
- Operational underperformance
- Higher costs incurred to mitigate
the risk of supply disruptions, including: materials price
increases; higher-priced substitute supplies; premium freight costs
to expedite supply of materials; production inefficiencies due to
production lines being stopped/restarted unexpectedly based on
customers’ production schedules; and, potential fines/penalties if
customer production is disrupted
- Price concessions
- Tax risks
|
Equity Income |
|
- Same risks as Adjusted EBIT Margin
and Net Income Attributable to Magna
- Risks related to conducting
business through joint ventures
|
Forward-looking statements are based on
information currently available to us and are based on assumptions
and analyses made by us in light of our experience and our
perception of historical trends, current conditions and expected
future developments, as well as other factors we believe are
appropriate in the circumstances. While we believe we have a
reasonable basis for making any such forward-looking statements,
they are not a guarantee of future performance or outcomes. In
addition to the factors in the table above, whether actual results
and developments conform to our expectations and predictions is
subject to a number of risks, assumptions and uncertainties, many
of which are beyond our control, and the effects of which can be
difficult to predict, including, without limitation:
Risks Related to the Automotive Industry
- economic cyclicality;
- regional production volume declines, including as a result of
the COVID-19 pandemic;
- intense competition;
- potential restrictions on free trade;
- trade disputes/tariffs;
Customer and Supplier Related Risks
- concentration of sales with six customers;
- emergence of potentially disruptive Electric Vehicle OEMs;
- 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;
- a deterioration in the financial condition of our supply base,
including as a result of the COVID-19 pandemic;
Manufacturing Operational Risks
- product and new facility launch risks;
- operational underperformance;
- restructuring costs;
- impairment charges;
- labour disruptions;
- COVID-19 shutdowns;
- supply disruptions and applicable costs related to supply
disruption mitigation initiatives, including as a result of the
COVID-19 pandemic;
- climate change risks;
- attraction/retention of skilled labour;
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 cost volatility;
- declines in scrap steel/aluminum prices;
|
|
Warranty / Recall Risks
- costs related to repair or replacement of defective products,
including due to a recall;
- warranty or recall costs that exceed warranty provision or
insurance coverage limits;
- product liability claims;
Acquisition Risks
- inherent merger and acquisition risks;
- acquisition integration risk;
Other Business Risks
- risks related to conducting business through joint
ventures;
- our ability to consistently develop and commercialize
innovative products or processes;
- our changing business risk profile as a result of increased
investment in electrification and autonomous driving, including:
higher R&D and engineering costs, and challenges in quoting for
profitable returns on products for which we may not have
significant quoting experience;
- risks of conducting business in foreign markets;
- fluctuations in relative currency values;
- tax risks;
- reduced financial flexibility as a result of an economic
shock;
- changes in credit ratings assigned to us;
Legal, Regulatory and Other Risks
- antitrust risk;
- legal claims and/or regulatory actions against us; and
- changes in laws and regulations, including those related to
vehicle emissions.
|
In evaluating forward-looking statements or
forward-looking information, we caution readers not to place undue
reliance on any forward-looking statement. Additionally, readers
should specifically consider the various factors which could cause
actual events or results to differ materially from those indicated
by such forward-looking statements, including the risks,
assumptions and uncertainties above which are:
- discussed under the “Industry Trends and Risks” heading of our
Management’s Discussion and Analysis; and
- set out in our Annual Information Form filed with securities
commissions in Canada, our annual report on Form 40-F filed with
the United States Securities and Exchange Commission, and
subsequent filings.
Readers should also consider discussion of our
risk mitigation activities with respect to certain risk factors,
which can be also found in our Annual Information Form.
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