AURORA, Ontario, January 16, 2018 /PRNewswire/ --
- Continuing to grow sales faster
than vehicle production through 2020
- Accelerating free cash
flow1 in 2018-2020 period
Magna International Inc. (TSX: MG) (NYSE: MGA) today announced
its financial outlook for 2018 and 2020.
"The pace of change in the automotive industry continues to
accelerate, and we remain at the forefront, investing to further
strengthen our position as an innovator and provider of solutions
for our customers. These investments should drive business awards
in the future and position us to continue building long-term value
for shareholders. We expect to deliver above-market growth through
2020 and beyond driven by our portfolio of products tied to Vehicle
Electrification, Light-Weighting, Safety and Autonomous
Driving."
- Don Walker, Magna's Chief
Executive Officer
NEW FINANCIAL REPORTING SEGMENTS
We recently announced a realignment of our management structure
along product lines, and a corresponding change to our reporting
segments. Our outlook reflects our new reporting segments.
CHANGE IN ACCOUNTING FOR TOOLING AND PRE-PRODUCTION
ENGINEERING
As noted in our third quarter 2017 report, we will adopt the new
revenue recognition standard and change the accounting for tooling
and pre-production engineering beginning in 2018. The primary
result of this change is a decrease in sales, substantially offset
by a similar decrease in cost of goods sold. Our outlook also
reflects this change in accounting. For comparative purposes, we
expect the decrease in both sales and cost of goods sold for 2017
to be approximately $2.4 billion.
OUTLOOK
In this outlook we have assumed no material unannounced
acquisitions or divestitures. In addition, we have assumed that
foreign exchange rates for the most common currencies in which we
conduct business relative to our U.S. dollar reporting currency
will approximate year end 2017 rates.
2018 2020
Light Vehicle Production (Units)
North America 17.4 million 17.4 million
Europe 22.3 million 22.9 million
Segment Sales
Body Exteriors & Structures $16.6 - $17.4 billion $17.3 - $18.3 billion
Power & Vision $11.8 - $12.4 billion $12.5 - $13.3 billion
Seating Systems $5.3 - $5.7 billion $6.5 - $7.0 billion
Complete Vehicles $6.0 - $6.4 billion $6.8 - $7.5 billion
Total Sales $39.3 - $41.5 billion $42.7 - $45.7 billion
EBIT Margin2 7.9% - 8.2% 8.5% - 8.9%
Equity income (included in EBIT) $335 - $375 million $400 - $450 million
Interest Expense Approximately $90 million
Tax Rate 22% - 23%
Net income attributable to Magna $2.3 - $2.5 billion
Capital Spending Approximately $1.8 billion
"We remain focused on striking a balance between investing for
the future and improving both returns on capital and free cash flow
conversion. In the short term, margins will be affected somewhat by
our investments for the future related to electrification and
autonomous driving. In addition, the significant growth of our
Complete Vehicles business will impact margins, as anticipated.
Nevertheless, we expect to generate over $6
billion in free cash flow between 2018 and 2020, which is
more than 25% of our current market capitalization."
- Vince Galifi, Magna's Chief
Financial Officer
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.
We will be making a presentation at the Deutsche Bank Global
Auto Industry Conference on Tuesday, January
16, 2018 at 2:00 p.m. EST
during which we will review the details of our Outlook. The
presentation will be webcast and available on our website at
http://www.magna.com. The slides accompanying the presentation will
be available on our website Tuesday morning by 7:00 a.m. EST.
OUR BUSINESS3
We have more than 163,000 entrepreneurial-minded employees
dedicated to delivering mobility solutions. We are a technology
company and one of the world's largest automotive suppliers with
328 manufacturing operations and 99 product development,
engineering and sales centres in 29 countries. Our competitive
capabilities include body exteriors and structures, power and
vision technologies, seating systems and complete vehicle
solutions. Our common shares trade on the Toronto Stock Exchange
(MG) and the New York Stock Exchange (MGA). For further information
about Magna, visit http://www.magna.com.
FORWARD-LOOKING STATEMENTS
This press release contains statements that constitute
forward-looking statements or forward-looking information within
the meaning of applicable securities legislation, including, but
not limited to, statements relating to: Magna's forecasts of light
vehicle production in North
America and Europe;
expected consolidated sales, based on such light vehicle production
volumes; expected sales in each of our Body Exteriors &
Structures, Power & Vision, Seating Systems and Complete
Vehicles segments; consolidated EBIT margin, consolidated Equity
income; net interest expense; effective income tax rate; fixed
asset expenditures; net income; sales and margin growth; free cash
flow generation; Magna's ability to capitalize on the growth in
vehicle electrification, vehicle light-weighting, and safety and
autonomous driving; and future returns of capital to our
shareholders, including through dividends or share repurchases. The
forward-looking information in this document is presented for the
purpose of providing information about management's current
expectations and plans and such information may not be appropriate
for other purposes. Forward-looking statements may include
financial and other projections, as well as statements regarding
our future plans, 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, forecast, outlook, project, estimate and
similar expressions suggesting future outcomes or events to
identify forward-looking statements. Any such 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. However,
whether actual results and developments will conform with 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: the potential for a deterioration of
economic conditions or an extended period of economic uncertainty;
a decline in consumer confidence, which would typically result in
lower production volume levels; the growth of protectionism and the
implementation of measures that impede the free movement of goods,
services, people and capital; planning risks created by rapidly
changing economic or political conditions; fluctuations in relative
currency values; legal claims and/or regulatory actions against us;
our ability to successfully launch material new or takeover
business; underperformance of one or more of our operating
divisions; ongoing pricing pressures, including our ability to
offset price concessions demanded by our customers; warranty and
recall costs; our ability to successfully identify, complete and
integrate acquisitions or achieve anticipated synergies; our
ability to conduct appropriate due diligence on acquisition
targets; an increase in our risk profile as a result of completed
acquisitions; shifts in market share away from our top customers;
shifts in market shares among vehicles or vehicle segments, or
shifts away from vehicles on which we have significant content;
inability to sustain or grow our business; risks of conducting
business in foreign markets; our ability to successfully compete
with other automotive suppliers, including disruptive technology
innovators which are entering or expanding in the automotive
industry; our ability to consistently develop innovative products
or processes; our changing risk profile due to the increasing
importance to us of product areas such as powertrain and
electronics; restructuring, downsizing and/or other significant
non-recurring costs; a reduction in outsourcing by our customers or
the loss of a material production or assembly program; a prolonged
disruption in the supply of components to us from our suppliers;
shutdown of our or our customers' or sub-suppliers' production
facilities due to a labour disruption; scheduled shutdowns of our
customers' production facilities (typically in the third and fourth
quarters of each calendar year); the termination or non-renewal by
our customers of any material production purchase order; exposure
to, and ability to offset, commodities price increases;
restructuring actions by OEMs, including plant closures; work
stoppages and labour relations disputes; risk of production
disruptions due to natural disasters or catastrophic event; the
security and reliability of our information technology systems;
pension liabilities; changes in our mix of earnings between
jurisdictions with lower tax rates and those with higher tax rates,
as well as our ability to fully benefit tax losses; impairment
charges related to goodwill, long-lived assets and deferred tax
assets; other potential tax exposures; changes in credit ratings
assigned to us; changes in laws and governmental regulations,
including tax and transfer pricing laws; costs associated with
compliance with environmental laws and regulations; liquidity
risks; inability to achieve future investment returns that equal or
exceed past returns; the unpredictability of, and fluctuation in,
the trading price of our Common Shares; and other factors set out
in our Annual Information Form filed with securities commissions in
Canada and our annual report on
Form 40-F filed with the United States Securities and Exchange
Commission, and subsequent filings. In evaluating forward-looking
statements or forward-looking information, we caution readers not
to place undue reliance on any forward-looking statements or
forward-looking information, and 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 or forward-looking information.
1 Free cash flow represents Cash from Operating Activities plus proceeds from normal course dispositions of fixed and other assets minus capital spending minus investments in other assets.
2 Earnings Before Interest and Taxes ("EBIT") represents Net Income before income taxes and interest expense, net. EBIT Margin is the ratio of EBIT to Total Sales.
3 Manufacturing operations, product development, engineering and sales centres and employee figures include certain equity-accounted operations.
INVESTOR CONTACT
Louis Tonelli
Vice-President
Investor Relations
louis.tonelli@magna.com
+1-905-726-7035
MEDIA CONTACT
Tracy Fuerst
Director of Corporate Communications & PR
tracy.fuerst@magna.com
+1-248-631-5396
WEBCAST CONTACT
Nancy Hansford
Executive Assistant
Investor Relations
nancy.hansford@magna.com
+1-905-726-7108