Magna has recorded third-quarter net income up 8% to US$554m, due to what it says is a "substantially lower income tax rate."

On a consolidated basis, the Canadian supplier posted sales of US$9.62bn for the third quarter, an increase of 9%. The strong growth was achieved in a period in which light vehicle production increased 4% in North America and was essentially unchanged in Europe.

Excluding the impact of foreign currency translation and net divestitures, sales increased 11% on a consolidated basis, and by segment: 6% in both Body Exteriors & Structures and Power & Vision, 5% in Seating Systems, and 50% in Complete Vehicles.

For the nine months ending 30 September, 2018, Magna posted sales of US$30.69bn, an increase of 14%.

North American light vehicle production remained relatively unchanged and European light vehicle production increased 2%, in the first nine months of 2018 compared to the first nine months of 2017.

Net income attributable to Magna International was US$1.84bn, up US$124m.

Show the press release

Record third quarter sales, up 9% year over year to $9.6 billion

Record third quarter diluted earnings per share of $1.62, increased 17%

Record third quarter Adjusted diluted earnings per share of $1.56, up 12% 

Returned $629 million to shareholders through share repurchases and dividends

Reduced top end of outlook ranges for Total Sales, Adjusted Net Income attributable to Magna and revised outlook for Adjusted EBIT margin

AURORA, Ontario, Nov. 08, 2018 (GLOBE NEWSWIRE) -- Magna International Inc. (TSX: MG; NYSE: MGA) today reported financial results for the third quarter ended September 30, 2018.  Please click HERE for full third quarter Financial Statements and MD&A.

"We remain confident in our cash flow expectations, despite somewhat softer global vehicle production. Over the past eight years we have returned over $9.8 billion to shareholders, including through the repurchase of our shares for $7.3 billion. Our new NCIB provides flexibility to repurchase additional shares over the next year." - Vince Galifi, Magna's Chief Financial Officer


 

  THREE MONTHS ENDED 
SEPTEMBER 30,
 NINE MONTHS ENDED 
SEPTEMBER 30,

  2018
 2017(2)
 2018
 2017(2)

Reported

           

Sales $  9,618  $8,864  $  30,690  $26,904 

            

Income from operations before 
  income taxes $  674  $683  $  2,344  $2,220 

            

Net income attributable to 
  Magna International Inc. $  554  $512  $  1,840  $1,637 

            

Diluted earnings per share $  1.62  $1.38  $  5.22  $4.33 

            

Non-GAAP Financial Measures(1)

           

Adjusted EBIT $  699  $705  $  2,377  $2,281 

            

Adjusted diluted earnings per share $  1.56  $1.39  $  5.08  $4.36 

            

All results are reported in millions of U.S. dollars, except per share figures, which are in U.S. dollars.

(1)  Adjusted EBIT, Adjusted diluted earnings per share and Adjusted EBIT as a percentage of sales 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.


(2)  2017 amounts included in this Press Release have been adjusted for our adoption of the new revenue standard (Accounting Standards Codification 606) and recast for our new reportable segments.


THREE MONTHS ENDED SEPTEMBER 30, 2018

We set third quarter records for sales, diluted earnings per share and Adjusted diluted earnings per share, and returned $629 million to shareholders through share repurchases and dividends. All of our operating segments reported sales growth compared to the third quarter of 2017 and, excluding both acquisitions net of divestitures and foreign exchange movements, sales for all segments outgrew global light vehicle production. However, our sales were slightly lower than we had anticipated, mainly due to lower than expected light vehicle production. Adjusted EBIT was below the comparable quarter in 2017 and was less than what we expected.  After taking into account the impact of lower than anticipated volumes, our Power & Vision, Seating Systems and Complete Vehicles segments performed substantially in line with our expectations. However, our Body Exteriors & Structures segment reported results below our expectations, mainly as a result of higher than anticipated launch costs and underperformance at certain facilities, largely offset by a favourable customer pricing resolution. 

On a consolidated basis, we posted sales of $9.62 billion for the third quarter of 2018, an increase of 9% over the third quarter of 2017. The strong growth was achieved in a period in which light vehicle production increased 4% in North America and was essentially unchanged in Europe. Excluding the impact of foreign currency translation and net divestitures, sales increased 11% on a consolidated basis, and by segment: 6% in both Body Exteriors & Structures and Power & Vision, 5% in Seating Systems, and 50% in Complete Vehicles.

Adjusted EBIT of $699 million in the third quarter of 2018 decreased 1.0%, resulting in an adjusted EBIT as a percentage of sales of 7.3% in the third quarter of 2018 compared to 8.0% in the third quarter of 2017.  This margin decline was largely driven by:

an increase in the proportion of sales generated in our Complete Vehicles segment relative to total sales, which have a significantly lower margin than our consolidated average;

lower margins in the third quarter of 2018 in our Seating Systems segment, mainly associated with pre-operating costs incurred at new facilities and favourable customer pricing resolutions in the third quarter of 2017; and

lower margins in our Power & Vision segment, largely reflecting increased spending for electrification and autonomy.

Income from operations before income taxes of $674 million decreased 1.0% in the third quarter of 2018.

Net income attributable to Magna International Inc. increased 8% to $554 million for the third quarter of 2018, substantially reflecting a lower income tax rate.

Diluted earnings per share increased 17% to $1.62 in the third quarter of 2018, reflecting higher net income attributable to Magna International Inc., and the favourable impact of a reduced share count.  Adjusted diluted earnings per share increased 12% to $1.56 compared to $1.39 for the third quarter of 2017.

In the third quarter of 2018, we generated cash from operations before changes in operating assets and liabilities of $899 million, and $177 million in operating assets and liabilities. Investment activities for the third quarter of 2018 included $381 million in fixed asset additions, and a $114 million increase in investments, other assets and intangible assets.

NINE MONTHS ENDED SEPTEMBER 30, 2018

We posted sales of $30.69 billion for the nine months ended September 30, 2018, an increase of 14% from the nine months ended September 30, 2017. North American light vehicle production remained relatively unchanged and European light vehicle production increased 2%, in the first nine months of 2018 compared to the first nine months of 2017.

During the nine months ended September 30, 2018, income from operations before income taxes was $2.34 billion, net income attributable to Magna International Inc. was $1.84 billion and diluted earnings per share was $5.22, increases of $124 million, $203 million and $0.89, respectively, each compared to the first nine months of 2017.

During the nine months ended September 30, 2018, Adjusted EBIT increased 4% to $2.38 billion, compared to $2.28 billion for the nine months ended September 30, 2017.  Our Body Exteriors & Structures, Power & Vision, and Complete Vehicles segments each posted higher Adjusted EBIT compared to the first nine months of 2017.

During the nine months ended September 30, 2018, we generated cash from operations before changes in operating assets and liabilities of $2.87 billion, and invested $750 million in operating assets and liabilities. Investment activities for the nine months of 2018 included $1.00 billion in fixed asset additions, and $331 millionin investments, other assets and intangible assets.

RETURN OF CAPITAL TO SHAREHOLDERS

During the three and nine months ended September 30, 2018, we paid dividends of $109 million and $342 million, respectively.  In addition, we repurchased 9.2 million shares for $520 million and 22.7 million shares for $1.35 billion, respectively, for the three and nine months ended September 30, 2018.

Our Board of Directors declared a quarterly dividend of $0.33 with respect to our outstanding Common Shares for the quarter ended September 30, 2018. This dividend is payable on December 7, 2018 to shareholders of record on November 23, 2018.

OTHER MATTERS

Subject to the approval by the Toronto Stock Exchange and the New York Stock Exchange, our Board of Directors approved a new Normal Course Issuer Bid ("NCIB") to purchase up to 33.2 million of our Common Shares, representing approximately 10% of our public float of Common Shares. This NCIB is expected to commence on or about November 15, 2018 and will terminate one year later.

A photo accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/6dd59a22-822f-444c-b864-78e2f6a7068f

SEGMENT SUMMARY(2)

($Millions unless otherwise noted)For the three months ended September 30,

Sales Adjusted EBIT

    2018  2017 Change    2018 2017Change 

Body Exteriors & Structures$  4,180 $4,004 $176 $  322$306$16 

Power & Vision   2,947  2,830  117    258 267 (9)

Seating Systems   1,219  1,217  2    69 95 (26)

Complete Vehicles   1,391  938  453    24 17 7 

Corporate and Other   (119) (125) 6    26 20 6 

Total Reportable Segments$  9,618 $8,864 $754 $  699$705$(6)

 For the three months ended September 30,

  Adjusted EBIT as a
 percentage of sales

        2018  2017 Change 

Body Exteriors & Structures       7.7% 7.6% 0.1%

Power & Vision       8.8% 9.4% (0.6)%

Seating Systems       5.7% 7.8% (2.1)%

Complete Vehicles       1.7% 1.8% (0.1)%

        

Consolidated Average       7.3% 8.0% (0.7)%

  

($Millions unless otherwise noted)For the nine months ended September 30,

Sales Adjusted EBIT

    2018  2017 Change     2018  2017 Change 

Body Exteriors & Structures$  13,350 $12,280 $1,070  $  1,047 $992 $55 

Power & Vision   9,334  8,685  649     915  861  54 

Seating Systems   4,113  3,919  194     315  328  (13)

Complete Vehicles   4,331  2,334  1,997     44  38  6 

Corporate and Other   (438) (314) (124)    56  62  (6)

Total Reportable Segments$  30,690 $26,904 $3,786  $  2,377 $2,281 $96 

 For the nine months ended September 30,

   Adjusted EBIT as a
 percentage of sales

       2018 2017 Change 

Body Exteriors & Structures      7.8%8.1%(0.3)%

Power & Vision      9.8%9.9%(0.1)%

Seating Systems      7.7%8.4%(0.7)%

Complete Vehicles      1.0%1.6%(0.6)%

        

Consolidated Average      7.7%8.5%(0.8)%


 (2)  2017 amounts included in this Press Release have been adjusted for our adoption of the new revenue standard (Accounting Standards Codification 606) and recast for our new reportable segments.

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.

UPDATED 2018 OUTLOOK

We have updated our 2018 outlook largely to reflect our third quarter 2018 results, as well as fourth quarter 2018 expectations for lower light vehicle production, lower equity earnings in our European transmission joint venture and higher costs in our Body Exteriors & Structures segment.

   Current Previous

Light Vehicle Production (Units)
  North America
  Europe  17.0 million
22.5 million 17.2 million
22.6 million

      

Segment Sales
  Body Exteriors & Structures
  Power & Vision
  Seating Systems
  Complete Vehicles  $17.3 - $17.7 billion
$12.3 - $12.6 billion
$5.4 - $5.6 billion
$5.9 - $6.1 billion $17.1 - $17.9 billion
$12.2 - $12.8 billion
$5.5 - $5.9 billion
$6.1 - $6.5 billion

      

Total Sales  $40.3 - $41.4 billion $40.3 - $42.5 billion

      

Adjusted EBIT Margin(3)  Approximately 7.7% 7.7% - 7.9%

      

Equity Income (included in EBIT)  $255 - $280 million $270 - $305 million

      

Interest Expense, net  Approximately $95 million Approximately $90 million

      

Income Tax Rate(4)  Approximately 22% 22% - 23%

      

Adjusted Net Income attributable to Magna(5)  $2.3 - $2.4 billion $2.3 - $2.5 billion

      

Capital Spending  Approximately $1.7 billion Approximately $1.9 billion

      

(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)  Adjusted Net Income attributable to Magna is Net Income attributable to Magna after excluding Other expense (income), net after-tax and Reassessment of deferred tax balances

In this 2018 outlook, we have assumed:

2018 light vehicle production volumes (as set out above);

no material unannounced acquisitions or divestitures; and

foreign exchange rates for the most common currencies in which we conduct business relative to our U.S.dollar reporting currency as follows:
  º   1 Canadian dollar equals U.S. dollars     0.772
  º   1 euro equals U.S. dollars                     1.184

NON-GAAP FINANCIAL MEASURES RECONCILIATION

Adjusted EBIT

The following table reconciles net income to Adjusted EBIT:

  

 For the three months ended September 30,

 2018
 2017

    

Net Income$  560  $521 

Add:   

Interest expense, net   23   20 

Other expense (income), net   2   2 

Income taxes   114   162 

Adjusted EBIT$  699  $705 

    

    

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 September  30,

 2018
 2017

    

Sales$  9,618  $8,864 

Adjusted EBIT$  699  $705 

Adjusted EBIT as a percentage of sales   7.3%  8.0%

    

    

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 September 30,

 2018
 2017

    

Net income attributable to Magna International Inc.$  554  $512 

Add:   

    

Other expense (income), net 2   2 

Reassessment of deferred tax balances (21)  — 

Adjusted net income attributable to Magna International Inc.$  535  $514 

Diluted weighted average number of Common Shares outstanding during the period (millions):   343.0   370.4 

Adjusted diluted earnings per share$  1.56  $1.39 


NON-GAAP FINANCIAL MEASURES RECONCILIATION

Adjusted EBIT

The following table reconciles net income to Adjusted EBIT:

  

 For the nine months ended September 30,

 2018
 2017

    

Net Income$  1,865  $1,669 

Add:   

Interest expense, net   67   50 

Other expense (income), net   (34)  11 

Income taxes   479   551 

Adjusted EBIT$  2,377  $2,281 

    

    

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 nine months ended September 30,

 2018
 2017

    

Sales$  30,690  $26,904 

Adjusted EBIT$  2,377  $2,281 

Adjusted EBIT as a percentage of sales   7.7%  8.5%

    

    

Adjusted diluted earnings per share   

    

The following table reconciles net income attributable to Magna International Inc. to Adjusted diluted earnings per share:

  

 For the nine months ended September 30,

 2018
 2017

    

Net income attributable to Magna International Inc.$  1,840  $1,637 

Add:   

Other expense (income), net (34)  11 

Tax effect on Other expense (income), net 3   — 

Reassessment of deferred tax balances (21)  — 

Adjusted net income attributable to Magna International Inc.$  1,788  $1,648 

Diluted weighted average number of Common Shares outstanding during the period (millions):   352.3   377.7 

Adjusted diluted earnings per share$  5.08  $4.36 

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.

Original source: https://www.magna.com/company/newsroom/releases/release/2018/11/08/press-release---magna-reports-record-third-quarter-results

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