Auto parts company Magna International lowers guidance amid production slump

TORONTO — Magna International Inc. cut its guidance for its full year after seeing its sales decrease last quarter amid a global production slump of light vehicles.

In its outlook, the Ontario-based auto parts company said Friday it now expects total sales for 2024 between US$42.2 billion and US$43.2 billion, compared with earlier expectations for between US$42.5 billion and US$44.1 billion

The projections came as Magna, which keeps its books in U.S. dollars, reported net income attributable to the company of US$484 million for its third quarter, up from US$394 million a year earlier.

It said the profit amounted to US$1.68 per diluted share for the three months ended Sept. 30, compared with US$1.37 per diluted share a year earlier.

But on an adjusted basis, Magna said it earned US$1.28 per diluted share, down from an adjusted profit of US$1.46 per diluted share a year earlier.

Sales for the quarter totalled US$10.28 billion, down from US$10.69 billion in the same quarter last year.

Magna chief executive Swamy Kotagiri said sales in the quarter were negatively affected by softer than anticipated light vehicle production in North America and Europe, in particular, amid a four per cent decrease globally.

While overall North American production fell six per cent in the quarter, production by Magna’s Detroit-based customers declined 12 per cent.

Light vehicle production in China also fell six per cent, while Europe saw a two per cent decrease.

The company said sales were also hurt by the end of production of certain programs, as well as divestitures, offset in part by the launch of new programs and customer price increases.

The company, which reduced its expectations for light vehicle production around the world, also said it now expects adjusted net income attributable to Magna of US$1.45 billion to US$1.55 billion for 2024, down from earlier guidance for between US$1.5 billion and US$1.7 billion.

“We are responding to the volatile operating environment and are focused on margin expansion, free cash flow generation and increasing return of capital,” Kotagiri told analysts on a conference call Friday to discuss its results.

Chief financial officer Patrick McCann also cautioned that the third quarter “does tend to be a low production period.”

Edward Jones analyst Jeff Windau said that despite constrained production hurting sales, primarily due to supply chain disruptions and labour strikes, Magna’s future growth opportunities look strong.

He highlighted the company’s products supporting the development of electric and autonomous vehicles, such as sensors and software that help Magna typically earn more money per vehicle “given the increased content of technology added.”

“While volatility could remain in the near term, we believe growth will resume as depleted car inventories will take time to be replaced,” Windau said in a note.

“Magna is a supplier to top auto manufacturers and should benefit from increasing production.”

This report by The Canadian Press was first published Nov. 1, 2024.

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