- Sales of $10.6 billion decreased 2%, compared to global light vehicle production down 7%
- Excluding foreign currency translation and acquisitions net of divestitures, sales in each segment outpaced global light vehicle production
- Returned $403 million to shareholders through dividends of $119 million and $284 million in share repurchases
- 2019 outlook reduced largely to reflect higher expected costs on certain ADAS programs, lower anticipated equity income in a transmission joint venture in China and lower estimated vehicle production
- 2021 outlook reduced to reflect lower anticipated equity income in a transmission joint venture in China
AURORA, Ontario, May 09, 2019 (GLOBE NEWSWIRE) -- Magna International Inc. (TSX: MG; NYSE: MGA) today reported financial results for the first quarter ended March 31, 2019. Please click HERE for full first quarter Financial Statements and MD&A.
| THREE MONTHS ENDED | |||||||
| March 31, 2019 | March 31, 2018 | ||||||
| Reported | |||||||
Sales | $ | 10,591 | $ | 10,792 | |||
Income from operations before income taxes | $ | 1,368 | $ | 851 | |||
Net income attributable to Magna International Inc. | $ | 1,106 | $ | 660 | |||
Diluted earnings per share | $ | 3.39 | $ | 1.83 | |||
Non-GAAP Financial Measures(1) Adjusted EBIT | $ | 720 | $ | 875 | |||
| Adjusted diluted earnings per share | $ | 1.63 | $ | 1.84 | |||
| 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. | |||||||
A photo accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/37152cad-5c19-498a-b786-14da13f0f13b
SALE OF FLUID PRESSURE & CONTROLS BUSINESS
During the first quarter of 2019, we completed the sale of our Fluid Pressure & Controls business to Hanon Systems for total consideration of $1.23 billion. We reported a gain of $516 million on the transaction and received proceeds, net of transaction costs and income taxes, of $1.1 billion.
THREE MONTHS ENDED MARCH 31, 2019
Our Body Exteriors & Structures segment performed better than we anticipated and Complete Vehicles performed in line with our expectations in the first quarter of 2019. Our seating business is launching new business in a new facility and has incurred higher costs than previously anticipated. Our Power & Vision segment was below our expectations largely as a result of higher program engineering and other costs associated with certain new ADAS programs.
On a consolidated basis, we posted sales of $10.59 billion for the first quarter of 2019, a decrease of 2% over the first quarter of 2018. This compares to global light vehicle production that decreased 7%, led by a 17% decline in China, and a 3% decline in each of North America and Europe. Excluding the impact of foreign currency translation and acquisitions net of divestitures, consolidated sales increased 3%, and by segment: Complete Vehicles and Seating increased 26% and 2% respectively, Power & Vision decreased 1% and Body Exteriors & Structures decreased 3%.
Adjusted EBIT decreased 18% to $720 million in the first quarter of 2019 resulting in an adjusted EBIT as a percentage of sales of 6.8% in the first quarter of 2019 compared to 8.1% in the first quarter of 2018. This margin decline reflects:
- lower margins in our Power & Vision segment, largely driven by higher engineering and other costs in our electronics business, and lower equity income;
- lower margins in our Seating segment as a result of higher costs on the launch of new seating programs and lower production volumes on certain programs; and
- an increase in the proportion of sales generated in our Complete Vehicles segment relative to total sales, which have significantly lower margins than our consolidated average.
These factors were partially offset by higher margins in our Body Exteriors & Structures segment primarily as a result of lower launch costs and productivity and efficiency improvements at certain facilities.
Income from operations before income taxes was $1,368 million for the first quarter of 2019 compared to $851 million in the first quarter of 2018. Included in Income from operations before income taxes in the first quarter of 2019 were Other (income) expense, net items totaling $679 million comprised of a gain on the sale of our Fluid Pressure & Controls business and an unrealized gain on the revaluation of our investment in Lyft, partially offset by restructuring costs. Income from operations before income taxes in the first quarter of 2018 included Other expense of $3 million. Excluding Other (income) expense, net from both periods, income from operations before income taxes decreased $165 million in the first quarter of 2019 compared to the first quarter of 2018.
Net income attributable to Magna International Inc. was $1,106 million for the first quarter of 2019 compared to $660 million in the first quarter of 2018. Included in net income attributable to Magna International Inc. in the first quarter of 2019 were Other (income) expense, net items totaling $575 million after tax. Net income attributable to Magna International Inc. in the first quarter of 2018 included Other expense of $3 million after tax. Excluding Other (income) expense, net from both periods, net income attributable to Magna International Inc. decreased $132 million in the first quarter of 2019 compared to the first quarter of 2018.
Diluted earnings per share increased to $3.39 in the first quarter of 2019, compared to $1.83 in the comparable period. Adjusted diluted earnings per share decreased 11% to $1.63 compared to $1.84 for the first quarter of 2018.
In the first quarter of 2019, we generated cash from operations before changes in operating assets and liabilities of $888 million, and invested $294 million in operating assets and liabilities. Investment activities for the first quarter of 2019 were $333 million, including $251 million in fixed asset additions and an $82 million increase in investments, other assets and intangible assets.
RETURN OF CAPITAL TO SHAREHOLDERS
During the three months ended March 31, 2019, we paid dividends of $119 million. In addition, we repurchased 5.6 million shares for $284 million in the first quarter of 2019.
Yesterday, our Board of Directors declared a quarterly dividend of $0.365 with respect to our outstanding Common Shares for the quarter ended March 31, 2019. This dividend is payable on June 7, 2019 to shareholders of record on May 24, 2019.
A photo accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/c78a2f11-25da-4786-8139-3a93159c9a80
SEGMENT SUMMARY
| ($Millions unless otherwise noted) | For the three months ended March 31, | ||||||||||||||||
| Sales | Adjusted EBIT | ||||||||||||||||
| 2019 | 2018 | Change | 2019 | 2018 | Change | ||||||||||||
| Body Exteriors & Structures | $ | 4,308 | $ | 4,619 | $ | (311 | ) | $ | 363 | $ | 343 | $ | 20 | ||||
| Power & Vision | 3,083 | 3,190 | (107 | ) | 216 | 359 | (143 | ) | |||||||||
| Seating Systems | 1,433 | 1,470 | (37 | ) | 94 | 130 | (36 | ) | |||||||||
| Complete Vehicles | 1,928 | 1,660 | 268 | 28 | 19 | 9 | |||||||||||
| Corporate and Other | (161 | ) | (147 | ) | (14 | ) | 19 | 24 | (5 | ) | |||||||
| Total Reportable Segments | $ | 10,591 | $ | 10,792 | $ | (201 | ) | $ | 720 | $ | 875 | $ | (155 | ) | |||
| For the three months ended March 31, | ||||||||||
| Adjusted EBIT as a percentage of sales | ||||||||||
| 2019 | 2018 | Change | ||||||||
| Body Exteriors & Structures | 8.4 | % | 7.4 | % | 1.0 | % | ||||
| Power & Vision | 7.0 | % | 11.3 | % | (4.3 | )% | ||||
| Seating Systems | 6.6 | % | 8.8 | % | (2.2 | )% | ||||
| Complete Vehicles | 1.5 | % | 1.1 | % | 0.4 | % | ||||
| Consolidated Average | 6.8 | % | 8.1 | % | (1.3 | )% | ||||
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.
UPDATED 2019 OUTLOOK
| Current | Previous | ||||
| Light Vehicle Production (Units) | |||||
| North America | 16.7 million | 17.0 million | |||
| Europe | 21.5 million | 22.3 million | |||
| Segment Sales | |||||
| Body Exteriors & Structures | $16.3 - $17.1 billion | $16.8 - $17.6 billion | |||
| Power & Vision | $11.0 - $11.6 billion | $11.2 - $11.8 billion | |||
| Seating Systems | $5.5 - $5.9 billion | $5.8 - $6.2 billion | |||
| Complete Vehicles | $6.9 - $7.3 billion | $6.9 - $7.3 billion | |||
| Total Sales | $39.1 - $41.3 billion | $40.2 - $42.4 billion | |||
| Adjusted EBIT Margin(2) | 6.7% - 7.0% | 7.3% - 7.6% | |||
| Equity Income (included in EBIT) | $150 – $195 million | $195 – $240 million | |||
| Interest Expense, net | Approximately $100 million | Approximately $100 million | |||
| Income Tax Rate(3) | Approximately 24% | Approximately 24% | |||
| Net Income attributable to Magna | $1.9 - $2.1 billion | $2.1 - $2.3 billion | |||
| Capital Spending | Approximately $1.7 billion | Approximately $1.7 billion | |||
| (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. | |||||
In this 2019 outlook, we have assumed:
- 2019 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:
° 1 Canadian dollar equals U.S. dollars 0.743
° 1 euro equals U.S. dollars 1.124
UPDATED 2021 OUTLOOK FOR EQUITY INCOME AND ADJUSTED EBIT MARGIN PERCENTAGE
We have updated our 2021 outlook for one of our transmission joint ventures in China. Equity income has been reduced by $70 million as a result of lower than expected production volumes on programs to supply transmissions. We now expect equity income in 2021 to be between $220 million and $275 million, compared to a range of between $290 million and $345 million previously, as set out in our outlook dated January 15, 2019.
As a result of our reduced equity income outlook we now expect our 2021 Adjusted EBIT margin percentage to be in the 7.9% to 8.3% range, compared to a previous range of 8.1% to 8.5%, as provided in January.
We have made no other updates to our 2021 outlook from January, including updates in assumptions with respect to total light vehicle production volumes, material unannounced acquisitions and divestitures and foreign exchange rates. To the extent that these assumptions change, our outlook may be further impacted.
NON-GAAP FINANCIAL MEASURES RECONCILIATION
| Adjusted EBIT | |||||||
| The following table reconciles net income to Adjusted EBIT: | |||||||
| For the three months ended March 31, | |||||||
| 2019 | 2018 | ||||||
| Net Income | $ | 1,101 | $ | 669 | |||
| Add: | |||||||
| Interest expense, net | 31 | 21 | |||||
| Other (income) expense, net | (679 | ) | 3 | ||||
| Income taxes | 267 | 182 | |||||
| Adjusted EBIT | $ | 720 | $ | 875 | |||
| 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 March 31, | |||||||
| 2019 | 2018 | ||||||
| Sales | $ | 10,591 | $ | 10,792 | |||
| Adjusted EBIT | $ | 720 | $ | 875 | |||
| Adjusted EBIT as a percentage of sales | 6.8 | % | 8.1 | % | |||
| 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 March 31, | |||||||
| 2019 | 2018 | ||||||
| Net income attributable to Magna International Inc. | $ | 1,106 | $ | 660 | |||
| Add (less): | |||||||
| Other (income) expense, net | (679 | ) | 3 | ||||
| Tax effect on Other (income) expense, net | 104 | — | |||||
| Adjusted net income attributable to Magna International Inc. | $ | 531 | $ | 663 | |||
| Diluted weighted average number of Common Shares outstanding during the year (millions): | 326.3 | 359.9 | |||||
| Adjusted diluted earnings per share | $ | 1.63 | $ | 1.84 | |||
Certain of the forward-looking financial measures in this press release are provided on a Non-GAAP basis. In addition to Adjusted EBIT and Adjusted EBIT Margin (as defined in the Updated 2019 Outlook above), free cash flow has also been discussed. 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. 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/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 first quarter ended March 31, 2019 results on Thursday, May 9, 2019 at 8:30 a.m. EST. The conference call will be chaired by Don Walker, Chief Executive Officer. The number to use for this call from North America is 1-800-954-0587. International callers should use 1-312-281-2942. 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 will be available on our website prior to the call.
TAGS
Quarterly earnings, record quarter, financial results, sales growth
INVESTOR CONTACT
Louis Tonelli, Vice-President, Investor Relations
louis.tonelli@magna.com │ 905.726.7035
MEDIA CONTACT
Tracy Fuerst, Director of Corporate Communications & PR
tracy.fuerst@magna.com │ 248.631.5396
OUR BUSINESS (4)
We are a mobility technology company. We have more than 169,000 entrepreneurial-minded employees and 338 manufacturing operations and 89 product development, engineering and sales centres in 28 countries. We have complete vehicle engineering and contract manufacturing expertise, as well as product capabilities which include body, chassis, exterior, seating, powertrain, active driver assistance, electronics, mirrors & lighting, mechatronics and roof systems. Magna also has electronic and software capabilities across many of these areas. Our common shares trade on the Toronto Stock Exchange (MG) and the New York Stock Exchange (MGA).
(4) Manufacturing operations, product development, engineering and sales centres and employee figures include certain equity-accounted operations.
FORWARD-LOOKING STATEMENTS
Certain statements in this press release constitute "forward-looking information" or "forward-looking statements" (collectively, "forward-looking statements") and are intended to provide information about management's current expectations and plans. Such forward-looking statements 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. Forward-looking statements in this press release include, but are not limited to, statements relating to:
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Our 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 such forward-looking statements, they are not a guarantee of future performance or outcomes. 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
| Warranty / Recall Risks
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In evaluating forward-looking statements or forward-looking information, we caution readers not to place undue reliance on any forward-looking statement, 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, including the risks, assumptions and uncertainties above which are discussed in greater detail in this document under the section titled "Industry Trends and Risks" and 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.
