Press Release - Magna Announces Second Quarter 2022 Results

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

, (GLOBE NEWSWIRE) -- (TSX: MG; NYSE: MGA) today reported financial results for the second quarter ended .

 
 THREE MONTHS ENDED
, 		 SIX MONTHS ENDED
,
 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
$(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 dollars, except per share figures, which are in dollars
 
(1) Adjusted EBIT and Adjusted diluted earnings per share are Non-GAAP financial measures that have no standardized meaning under 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.
 
Download image of 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 . 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.”- , Magna’s Chief Executive Officer

 

THREE MONTHS ENDED

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

Adjusted EBIT of 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 for the second quarter of 2022 compared to 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 , 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 , 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 in the second quarter of 2022 compared to the second quarter of 2021.   

Net (loss) income attributable to was for the second quarter of 2022 compared to for the second quarter of 2021.  Included in net (loss) income attributable to in the second quarters of 2022 and 2021 were Other expense, net items totaling and after tax, respectively. Excluding Other expense, net from both periods, net income attributable to decreased in the second quarter of 2022 compared to the second quarter of 2021.

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

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

SIX MONTHS ENDED

We posted sales of for the six months ended , a decrease of 1% from the six months ended , as global light vehicle production decreased 2%.

Adjusted EBIT decreased to for the six months ended compared to for the six months ended , largely due to higher net production input costs.  

During the six months ended , income from operations before income taxes was , net income attributable to was and diluted earnings per share was , decreases of , , and , respectively, each compared to the first six months of 2021.

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

For the six months ended , we generated cash from operations before changes in operating assets and liabilities of and used in operating assets and liabilities. Investment activities for the six months ended included in fixed asset additions, a increase in investments, other assets and intangible assets, and in public and private equity investments.  

RETURN OF CAPITAL AND OTHER MATTERS

During the three months ended , we paid in dividends and to repurchase 3.5 million shares, substantially for cancellation.

Our Board of Directors declared a second quarter dividend of per Common Share, payable on to shareholders of record as of the close of business on .

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

SEGMENT SUMMARY

($Millions unless otherwise noted)For the three months ended ,
Sales Adjusted EBIT
  2022  2021 Change   2022 2021Change 
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 ,
  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%)
  
($Millions unless otherwise noted)For the six months ended ,
Sales Adjusted EBIT
          2022          2021 Change          2022          2021 Change
Body Exteriors & Structures$        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 ,
  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 .

Updated 2022 Outlook Assumptions

  Current Previous
Light Vehicle Production (millions of units)    


 14.7
16.4
24.4		 14.7
16.4
24.4
     
Average Foreign exchange rates:
equals
equals 		 
 
  		 
 
 
     

Updated 2022 Outlook

  Current Previous
Segment Sales    
Body Exteriors & Structures
Power & Vision
Seating Systems
Complete Vehicles		 -
-
-
- 		 -
-
-
-
Total Sales -  -
     
Adjusted EBIT Margin(2) 5.0% - 5.4% 5.0% - 5.4%
     
Equity Income (included in EBIT) -  -
     
Interest Expense, net Approximately  Approximately
     
Income Tax Rate(3) Approximately 21% Approximately 21%
     
Net Income attributable to Magna(4) -  -
     
Capital Spending Approximately  Approximately
     
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.

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 ,
  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 ,
  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 to Adjusted diluted earnings per share:
  
 For the three months ended ,
  2022   2021 
    
Net (loss) income attributable to $(156) $424 
Add (deduct):   
Other expense, net 426   6 
Tax effect on Other expense, net (27)  (4)
Adjusted net income attributable to $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 ,
  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 ,
  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 to Adjusted diluted earnings per share:
  
 For the six months ended ,
  2022   2021 
    
Net income attributable to $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 $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 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 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 results on at . The conference call will be chaired by , Chief Executive Officer. The number to use for this call from 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
, Vice-President, Investor Relations
louis.tonelli@magna.com │ 905.726.7035

MEDIA CONTACT
, Vice-President,
tracy.fuerst@magna.com │ 248.761.7004

TELECONFERENCE CONTACT
, 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 StatementMaterial 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 ;
  • The impact of the Russian invasion of 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 , our annual report on Form 40-F filed with the 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.