Magna projects record year of sales on improved North American production
Magna International Inc. is so optimistic about an improving trend in the global auto industry that it has boosted its 2012 outlook to project a record year of sales for its auto parts business.
Canada’s largest auto parts maker, which keeps its books in U.S. dollars, said Thursday that it now expects to book between US$29 billion and $30.5 billion in sales this year.
“At the low end of this range, this would represent a record year for sales for Magna,” chief financial officer Vincent Galifi told analysts on a conference call after the company’s annual meeting.
Magna, based in Aurora, Ont., also increased its outlook for North American vehicle production after strong growth in car and truck production helped buoy first-quarter sales and profits that soared past analysts’ expectations.
The new guidance range is up from February’s sales projection of between $28 billion and $29.5 billion. Magna’s new outlook foresees North American vehicle production growing to 14.4 million units from 13.8 million in the February outlook, but it also believes European sales will be lower, around 12.7 million, down from 13 million in its February outlook.
Many automakers have been reporting rising sales of cars and trucks in the opening months of 2012 and it is expected that Detroit’s big three could face a supply deficit as demand returns. The companies closed factories and scaled back production to deal with a global downturn in demand during the financial crisis.
Ford recently added extra weeks of production to keep pace with demand and others could soon follow. That’s good news for auto parts makers like Magna, which provides automakers with everything from engines to upholstery.
Magna’s optimistic guidance was accompanied by the announcement of an ambitious global growth plan that includes building 30 new plants over the next three years in North America, South America, Europe and Asia.
“We are investing in these start ups to drive future growth and to continue to strengthen our global footprint,” said CEO Don Walker.
Magna further announced that is has a new deal that will see its Magna Steyr subsidiary assemble a new entry-level Infiniti compact vehicle for Nissan starting in 2014.
“We are very delighted to sign this first vehicle assembly agreement with Infiniti,” said Gunther Apfalter, president of Magna Europe and Magna Steyr.
“It is an important milestone to further diversify Magna Steyr’s customer portfolio as a supplier of engineering services and complete vehicle assembly.”
Magna posted a first-quarter profit of $343 million, or $1.46 per share, up from $322 million or $1.30 per share in the first quarter of 2011.
The average analyst estimate had been for a profit of $1.29 per share, according to Thomson Reuters.
Sales in the quarter totalled US$7.7 billion for the period ended March 31, compared to $7.2 billion in the same period last year. Growth in North American, European, and rest of world production sales were partially offset by decreases in its complete vehicle assembly sales and tooling, engineering and other sales.
In its most recent quarter, Magna said North American light vehicle production increased 17 per cent in the first quarter, year over year, while light vehicle production declined seven per cent in Western Europe.
However Magna said it saw its production sales in North America, Europe and the rest of the world all increase in the first quarter relative to a year ago.
Steve Arthur, an analyst at RBC Capital Markets, said investors should react positively to Magna’s results and guidance revision, especially given that the European numbers were better than expected, showing continued improvement in the region.
“As anticipated, Magna increased (North American) production guidance and decreased volume expectations in Europe. These are now closer to our model assumptions,” he noted.
“In addition, there are favourable revisions to margin and tax outlooks.”
Shares in Magna closed up 2.25 per cent or 96 cents to $43.64 Thursday on the Toronto Stock Exchange.
Magna is Canada’s largest auto parts manufacturer and one of the largest in the world. It primarily supplies auto makers in North America and Europe.