Magna International Inc. MG-T rode a rebound in global auto production to reverse a loss in the second quarter, posting a US$339-million profit as sales rose by 17 per cent.
The auto parts maker, based in Aurora, Ont., raised its 2023 profit and sales forecast amid strong demand for SUVs and trucks as supply chains recover from pandemic-related slowdowns.
For the three months ending on June 30, Magna made US$339-million or US$1.18 a share, compared with a loss of US$156-million (54 US cents) in the second quarter of 2022. Sales rose to US$11-billion as consumers drove up auto sales by 15 per cent, compared with the year-ago period.
Magna said the results were lifted by new programs and better sales of its completed vehicles, weighed down by a stronger U.S. dollar and higher costs. In the second quarter of 2022, Magna lost its six Russian plants and recorded a charge of US$376-million, a result of the war on Ukraine.
Magna this week sold all its Russian investments for US$15-million, recording a loss for the same amount.
On Friday, Magna hiked its 2023 revenue forecast to between US$41.9-billion and US$43.5-billion, from US$40.2-billion to US$41.8-billion.
The parts maker raised its 2023 adjusted profit outlook to between US$1.4-billion and US$1.6-billion, from US$1.3-billion to US$1.5-billion.
Citigroup analyst Itay Michaeli called Magna’s quarterly results “solid,” noting that the profit beat estimates, although he expects better from the second half than Magna’s revised forecast.
Swamy Kotagiri, Magna’s chief executive officer, said Magna’s increase in sales surpassed that of the broader industry. “We continue to win business across all product areas,” he said on a conference call with analysts on Friday, highlighting the recently announced deal to make battery boxes, frames and seats for Ford’s electric F-150 in Tennessee. Magna in June completed the US$1.5-billion purchase of Avoneer Active Safety business, which makes radar and camera systems for vehicles.
Mr. Kotagiri cautioned that headwinds that could affect sales include inflation, slowing economic growth and geopolitical risks. Adding to the uncertainty are the labour talks between the Detroit Three automakers and unions in the United States and Canada. Strikes or labour disruptions at any of the Magna customers would affect production, Mr. Kotagiri said.
Tom Narayan, a stock analyst at Royal Bank of Canada, said in a note to clients that Magna’s revised profit guidance is conservative for the second half of 2023, reflecting uncertainty over a possible strike at General Motors, Ford Motor Co. or Stellantis NV.
All four of Magna’s components divisions posted sales gains, led by body exteriors sales, which are up by 15 per cent to US$4.5-billion, and power and vision sales, up by 20 per cent to US$3.4-billion. Seating sales rose by 28 per cent to US$1.6-billion, and complete-vehicles sales climbed by 9 per cent to US$1.5-billion.
Magna does not break out sales of parts built for electric and autonomous vehicles.
To meet rising demand and government sales quotas aimed at slowing climate change, automakers in Ontario and elsewhere are retooling factories to make battery-powered vehicles. However, electric-car sales in the United States have slowed recently, spurring manufacturers to cut prices as inventories rise.
Despite the volatility, Mr. Kotagiri said sales of electrification and driver-assistance technology are expected to reach previously announced targets of about US$4-billion in 2025.
Magna this week said it would begin making a drive-train component for electric vehicles that improves range by as much as 9 per cent by decoupling the motor from the driveshaft when power is not needed. The part, sold as a complete unit, will be made at Magna’s factory in Lannach, Austria, for an unnamed German automaker.
“It’s the very early days of electrification. I think we all know that it’s a secular trend, for sure, and it’s here to stay,” he said. “But the real trick is in predicting that trajectory.”
Magna’s share price on the Toronto Stock Exchange fell by as much as 3 per cent after the results were reported, and are up about 4 per cent for the year.
Tamy Chen, a stock analyst with Bank of Montreal, said investors are reacting to the stronger first-half performance, the recent rally in car stocks, and a possible autoworkers’ strike in September.