Press Release - Magna Announces Second Quarter 2022 Results

  • Sales of $9.4 billion increased 4%, compared to global light vehicle production increase of 2%
  • Diluted loss per share of $0.54 includes $1.24 of non-cash impairment charges related to our investment in Russia
  • Adjusted diluted earnings per share decreased 41%
  • Increased sales outlook     

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AURORA, Ontario, July 29, 2022 (GLOBE NEWSWIRE) -- Magna International Inc. (TSX: MG; NYSE: MGA) today reported financial results for the second quarter ended June 30, 2022.

 
  THREE MONTHS ENDED
JUNE 30,		   SIX MONTHS ENDED
JUNE 30,
  2022   2021   2022   2021
Reported              
               
Sales $ 9,362     $ 9,034   $ 19,004   $ 19,213
               
(Loss) income from operations before income taxes $ (88 )   $ 540   $ 332   $ 1,345
               
Net (loss) income attributable to
Magna International Inc.		 $ (156 )   $ 424   $ 208   $ 1,039
               
Diluted (loss) earnings per share $ (0.54 )   $ 1.40   $ 0.70   $ 3.42
               
Non-GAAP Financial Measures(1)              
               
Adjusted EBIT $ 358     $ 557   $ 865   $ 1,327
               
Adjusted diluted earnings per share $ 0.83     $ 1.40   $ 2.11   $ 3.27
               
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.
 
Swamy Kotagiri, Magna’s Chief Executive Officer

“Our second quarter results were largely in line with our expectations, excluding the impairment of our investment in Russia. While we anticipate ongoing industry disruption through at least the remainder of 2022, we expect light vehicle production and our earnings to increase in the second half of the year, compared to the first half. We continue to focus on our go-forward strategy and investing for the future.”- Swamy Kotagiri, Magna’s Chief Executive Officer

THREE MONTHS ENDED JUNE 30, 2022

Sales were $9.4 billion, an increase of 4% over the second quarter of 2021, as global light vehicle production increased 2%, largely driven by a 14% increase in North America.

Adjusted EBIT of $358 million in the second quarter of 2022 decreased 36% from the second quarter of 2021, and Adjusted EBIT as a percentage of sales decreased to 3.8% compared to 6.2%, both largely as a result of higher net production input costs, as well as operating inefficiencies and other costs at a facility in Europe.  

(Loss) income from operations before income taxes was $(88) million for the second quarter of 2022 compared to $540 million in the second quarter of 2021.  Included in loss from operations before income taxes in the second quarter of 2022 were Other expense, net items totaling $426 million, primarily comprised of impairment charges and net unrealized losses related to the revaluation of certain public and private equity securities. Included in income from operations before income taxes in the second quarter of 2021 were Other expense, net items totaling $6 million, comprised of net restructuring costs, partially offset by unrealized gains related to the revaluation of certain public and private equity securities. Excluding Other expense, net from both periods, income from operations before income taxes decreased $208 million in the second quarter of 2022 compared to the second quarter of 2021.   

Net (loss) income attributable to Magna International Inc. was $(156) million for the second quarter of 2022 compared to $424 million for the second quarter of 2021.  Included in net (loss) income attributable to Magna International Inc. in the second quarters of 2022 and 2021 were Other expense, net items totaling $399 million and $2 million after tax, respectively. Excluding Other expense, net from both periods, net income attributable to Magna International Inc. decreased $183 million in the second quarter of 2022 compared to the second quarter of 2021.

Diluted (loss) earnings per share decreased to $(0.54) in the second quarter of 2022 compared to $1.40 in the second quarter of 2021 and Adjusted diluted earnings per share decreased 41% to $0.83 compared to $1.40.  

In the second quarter of 2022, we generated cash from operations before changes in operating assets and liabilities of $560 million and used $139 million in operating assets and liabilities. Investment activities for the second quarter of 2022 included $329 million in fixed asset additions, an $80 million increase in investments, other assets and intangible assets, and $2 million in public and private equity investments.

SIX MONTHS ENDED JUNE 30, 2022

We posted sales of $19.0 billion for the six months ended June 30, 2022, a decrease of 1% from the six months ended June 30, 2021, as global light vehicle production decreased 2%.

Adjusted EBIT decreased to $865 million for the six months ended June 30, 2022 compared to $1.3 billion for the six months ended June 30, 2021, largely due to higher net production input costs.  

During the six months ended June 30, 2022, income from operations before income taxes was $332 million, net income attributable to Magna International Inc. was $208 million and diluted earnings per share was $0.70, decreases of $1.0 billion, $831 million, and $2.72, respectively, each compared to the first six months of 2021.

During the first six months ended June 30, 2022, Adjusted diluted earnings per share decreased 35% to $2.11 compared to the first six months of 2021.

For the six months ended June 30, 2022, we generated cash from operations before changes in operating assets and liabilities of $1.3 billion and used $708 million in operating assets and liabilities. Investment activities for the six months ended June 30, 2022 included $567 million in fixed asset additions, a $144 million increase in investments, other assets and intangible assets, and $4 million in public and private equity investments.  

RETURN OF CAPITAL AND OTHER MATTERS

During the three months ended June 30, 2022, we paid $130 million in dividends and $212 million to repurchase 3.5 million shares, substantially for cancellation.

Our Board of Directors declared a second quarter dividend of $0.45 per Common Share, payable on August 26, 2022 to shareholders of record as of the close of business on August 12, 2022.

The Board also announced the appointment of Jan Hauser, a corporate director with global leadership and accounting expertise.

SEGMENT SUMMARY

($Millions unless otherwise noted) For the three months ended June 30,
Sales   Adjusted EBIT
    2022     2021   Change       2022   2021 Change 
Body Exteriors & Structures $ 3,947   $ 3,647   $ 300     $ 191 $ 227 $ (36 )
Power & Vision   2,888     2,881     7       91   203   (112 )
Seating Systems   1,253     1,166     87       2   26   (24 )
Complete Vehicles   1,403     1,490     (87 )     63   79   (16 )
Corporate and Other   (129 )   (150 )   21       11   22   (11 )
Total Reportable Segments $ 9,362   $ 9,034   $ 328     $ 358 $ 557 $ (199 )

 

  For the three months ended June 30,
    Adjusted EBIT as a
percentage of sales
            2022     2021   Change
Body Exteriors & Structures           4.8%     6.2%     (1.4 %)
Power & Vision           3.2%     7.0%     (3.8 %)
Seating Systems           0.2%     2.2%     (2.0 %)
Complete Vehicles           4.5%     5.3%     (0.8 %)
Consolidated Average           3.8%     6.2%     (2.4 %)
   
($Millions unless otherwise noted) For the six months ended June 30,
Sales   Adjusted EBIT
            2022             2021   Change             2022             2021   Change
Body Exteriors & Structures $         8,024   $         7,672   $         352     $         420   $         554   $         (134 )
Power & Vision           5,934             6,037             (103 )             245             500             (255 )
Seating Systems           2,629             2,469             160               51             81             (30 )
Complete Vehicles           2,678             3,340             (662 )             113             159             (46 )
Corporate and Other           (261 )           (305 )           44               36             33             3  
Total Reportable Segments $         19,004   $         19,213   $         (209 )   $         865   $         1,327   $         (462 )

 

  For the six months ended June 30,
    Adjusted EBIT as a
percentage of sales
          2022   2021   Change
Body Exteriors & Structures         5.2%   7.2%   (2.0%)  
Power & Vision         4.1%   8.3%   (4.2%)  
Seating Systems         1.9%   3.3%   (1.4%)  
Complete Vehicles         4.2%   4.8%   (0.6%)  
Consolidated Average         4.6%   6.9%   (2.3%)  
 

For further details on our segment results, please see our Management’s Discussion and Analysis of Results of Operations and Financial Position and our Interim Financial Statements.

2022 OUTLOOK

We first disclose a full-year Outlook annually in February, with quarterly updates. The following Outlook is an update to our previous Outlook in April 2022.

Updated 2022 Outlook Assumptions

    Current   Previous
Light Vehicle Production (millions of units)        
North America
Europe
China		   14.7
16.4
24.4		   14.7
16.4
24.4
         
Average Foreign exchange rates:
1 Canadian dollar equals
1 euro equals		  
U.S. $0.783
U.S. $1.052		  
U.S. $0.790
U.S. $1.091
         

Updated 2022 Outlook

    Current   Previous
Segment Sales        
Body Exteriors & Structures
Power & Vision
Seating Systems
Complete Vehicles		   $16.0 - $16.6 billion
$11.7 - $12.1 billion
$5.3 - $5.6 billion
$5.1 - $5.4 billion		   $15.8 - $16.4 billion
$11.6 - $12.0 billion
$5.2 - $5.5 billion
$5.2 - $5.5 billion
Total Sales   $37.6 - $39.2 billion   $37.3 - $38.9 billion
         
Adjusted EBIT Margin(2)   5.0% - 5.4%   5.0% - 5.4%
         
Equity Income (included in EBIT)   $70 - $100 million   $70 - $100 million
         
Interest Expense, net   Approximately $80 million   Approximately $90 million
         
Income Tax Rate(3)   Approximately 21%   Approximately 21%
         
Net Income attributable to Magna(4)   $1.3 - $1.5 billion   $1.3 - $1.5 billion
         
Capital Spending   Approximately $1.8 billion   Approximately $1.8 billion
         
Notes:
(2) Adjusted EBIT Margin is the ratio of Adjusted EBIT to Total Sales
(3) The Income Tax Rate has been calculated using Adjusted EBIT and is based on current tax legislation
(4) Net Income attributable to Magna represents Net Income excluding Other expense (income), net

Our Outlook is intended to provide information about management's current expectations and plans and may not be appropriate for other purposes. Although considered reasonable by Magna as of the date of this document, the 2022 Outlook above and the underlying assumptions may prove to be inaccurate. Accordingly, our actual results could differ materially from our expectations as set forth herein. The risks identified in the “Forward-Looking Statements” section below represent the primary factors which we believe could cause actual results to differ materially from our expectations.

Key Drivers of Our Business

Our operating results are primarily dependent on the levels of North American, European, and Chinese car and light truck production by our customers. While we supply systems and components to every major original equipment manufacturer (“OEM”), we do not supply systems and components for every vehicle, nor is the value of our content consistent from one vehicle to the next. As a result, customer and program mix relative to market trends, as well as the value of our content on specific vehicle production programs, are also important drivers of our results.

OEM production volumes are generally aligned with vehicle sales levels and thus affected by changes in such levels. Aside from vehicle sales levels, production volumes are typically impacted by a range of factors, including: general economic and political conditions; labour disruptions; free trade arrangements; tariffs; relative currency values; commodities prices; supply chains; infrastructure; availability and relative cost of skilled labour; regulatory considerations, including those related to environmental emissions and safety standards; and other factors. Additionally, COVID-19 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 deterioration in consumer confidence.
 

NON-GAAP FINANCIAL MEASURES RECONCILIATION
 
Adjusted EBIT
 
The following table reconciles net income to Adjusted EBIT:
   
  For the three months ended June 30,
    2022       2021  
       
Net (loss) income $ (145 )   $ 436  
Add:      
Interest expense, net   20       11  
Other expense, net   426       6  
Income taxes   57       104  
Adjusted EBIT $ 358     $ 557  
       
       
Adjusted EBIT as a percentage of sales (“Adjusted EBIT margin”)      
       
Adjusted EBIT as a percentage of sales is calculated in the table below:
   
  For the three months ended June 30,
    2022       2021  
       
Sales $ 9,362     $ 9,034  
Adjusted EBIT $ 358     $ 557  
Adjusted EBIT as a percentage of sales   3.8 %     6.2 %
       
       
Adjusted diluted earnings per share      
       
The following table reconciles net income attributable to Magna International Inc. to Adjusted diluted earnings per share:
   
  For the three months ended June 30,
    2022       2021  
       
Net (loss) income attributable to Magna International Inc. $ (156 )   $ 424  
Add (deduct):      
Other expense, net   426       6  
Tax effect on Other expense, net   (27 )     (4 )
Adjusted net income attributable to Magna International Inc. $ 243     $ 426  
Diluted weighted average number of Common Shares outstanding during the period (millions):   291.1       303.6  
Adjusted diluted earnings per share $ 0.83     $ 1.40  

 

NON-GAAP FINANCIAL MEASURES RECONCILIATION
Adjusted EBIT
 
The following table reconciles net income to Adjusted EBIT:
   
  For the six months ended June 30,
    2022       2021  
       
Net income $ 234     $ 1,058  
Add (deduct):      
Interest expense, net   46       34  
Other expense (income), net   487       (52 )
Income taxes   98       287  
Adjusted EBIT $ 865     $ 1,327  
       
       
Adjusted EBIT as a percentage of sales (“Adjusted EBIT margin”)    
       
Adjusted EBIT as a percentage of sales is calculated in the table below:
   
  For the six months ended June 30,
    2022       2021  
       
Sales $ 19,004     $ 19,213  
Adjusted EBIT $ 865     $ 1,327  
Adjusted EBIT as a percentage of sales   4.6 %     6.9 %
       
       
Adjusted diluted earnings per share      
       
The following table reconciles net income attributable to Magna International Inc. to Adjusted diluted earnings per share:
   
  For the six months ended June 30,
    2022       2021  
       
Net income attributable to Magna International Inc. $ 208     $ 1,039  
Add (deduct):      
Other expense (income), net   487       (52 )
Tax effect on Other expense (income), net   (40 )     5  
Adjustments to Deferred Tax Valuation Allowances   (29 )     -  
Adjusted net income attributable to Magna International Inc. $ 626     $ 992  
Diluted weighted average number of Common Shares outstanding during the period (millions):   295.0       303.6  
Adjusted diluted earnings per share $ 2.11     $ 3.27  
               

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, 2022 results on Friday, July 29, 2022 at 8:00 a.m. ET. The conference call will be chaired by Swamy Kotagiri, Chief Executive Officer. The number to use for this call from North America is 1-877-412-4946. International callers should use 1-416-620-9188. 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 (5)
Magna is more than one of the world’s largest suppliers in the automotive space. We are a mobility technology company with a global, entrepreneurial-minded team of over 161,000(6) 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 341 manufacturing operations and 89 product development, engineering and sales centres spanning 28 countries.

For further information about Magna (NYSE:MGA; TSX:MG), please visit www.magna.com or follow us on Twitter @MagnaInt. 

(5)  Manufacturing operations, product development, engineering and sales centres include certain operations accounted for under the equity method.
(6)  Number of employees includes over 152,000 employees at our wholly owned or controlled entities and over 9,000 employees at certain operations accounted for under the equity method.

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 Sales
Segment Sales
  • Supply disruptions, including as a result of the semiconductor chip shortage currently being experienced in the industry; and Russia’s invasion of Ukraine;
  • The impact of the Russian invasion of Ukraine on global economic growth, and industry production volumes, as well as potential disruption of energy supply to Western European operations
  • The impact of rising interest rates and availability of credit on consumer confidence 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
Net Income Attributable to Magna
  • Same risks as for Total Sales and Segment Sales above
  • Operational underperformance
  • Higher costs incurred to mitigate the risk of supply disruptions, including: materials price increases; higher-priced substitute supplies; premium freight costs to expedite shipments; production inefficiencies due to production lines being stopped/restarted unexpectedly based on customers’ production schedules; price increases from sub-suppliers that have been negatively impacted by production inefficiencies; and potential claims against us if customer production is disrupted
  • Inability to offset inflationary price increases
  • Price concessions
  • Commodity cost volatility
  • Higher labour costs
  • Tax risks
Equity Income
  • Same risks as Adjusted EBIT Margin and Net Income Attributable to Magna
  • Risks related to conducting business through joint ventures
Free Cash Flow
  • Same risks as for Total Sales/Segment Sales, and Adjusted EBIT Margin and Net Income Attributable to Magna above

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, including with respect to semiconductor chips;
  • higher costs to mitigate supply disruptions;
  • climate change risks;
  • attraction/retention of skilled labour and leadership succession;

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
  • competition for strategic acquisition targets;
  • inherent merger and acquisition risks;
  • acquisition integration risk;

Other Business Risks
  • risks related to conducting business through joint ventures;
  • our ability to consistently develop and commercialize innovative products or processes;
  • 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 or made as a result of the COVID-19 pandemic.

In evaluating forward-looking statements or forward-looking information, we caution readers not to place undue reliance on any forward-looking statement. Additionally, readers should specifically consider the various factors which could cause actual events or results to differ materially from those indicated by such forward-looking statements, including the risks, assumptions and uncertainties above which are:

  • discussed under the “Industry Trends and Risks” heading of our Management’s Discussion and Analysis; and
  • set out in our Annual Information Form filed with securities commissions in Canada, our annual report on Form 40-F filed with the United States Securities and Exchange commission, and subsequent filings.

Readers should also consider discussion of our risk mitigation activities with respect to certain risk factors, which can be also found in our Annual Information Form.

Source: Magna International Inc.