Magna International Inc. (TSX: MG; NYSE: MGA) today reported financial results for the second quarter ended June 30, 2019. Please click HERE for full second quarter Financial Statements and MD&A.
THREE MONTHS ENDED JUNE 30, |
SIX MONTHS ENDED JUNE 30, |
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2019 | 2018 | 2019 | 2018 | |||||||||
Reported | ||||||||||||
Sales | $ | 10,126 | $ | 10,280 | $ | 20,717 | $ | 21,072 | ||||
Income from operations before income taxes | $ | 595 | $ | 819 | $ | 1,963 | $ | 1,670 | ||||
Net income attributable to Magna International Inc. | $ | 452 | $ | 626 | $ | 1,558 | $ | 1,286 | ||||
Diluted earnings per share | $ | 1.42 | $ | 1.77 | $ | 4.83 | $ | 3.60 | ||||
Non-GAAP Financial Measures(1) | ||||||||||||
Adjusted EBIT | $ | 677 | $ | 803 | $ | 1,397 | $ | 1,678 | ||||
Adjusted diluted earnings per share | $ | 1.59 | $ | 1.67 | $ | 3.22 | $ | 3.51 | ||||
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. |
THREE MONTHS ENDED JUNE 30, 2019
Overall, our results came in slightly ahead of our expectations in the second quarter of 2019, driven by our Body Exteriors & Structures, Power & Vision and Complete Vehicles segments. Our Seating segment was below our expectations mainly due to continued launch costs and inefficiencies at a new facility.
On a consolidated basis, we posted sales of $10.13 billion for the second quarter of 2019, a decrease of 1% from the second quarter of 2018, which compares favourably to global light vehicle production that decreased 6%. Excluding the impact of foreign currency translation and divestitures net of acquisitions, sales increased 5%, and by segment: Complete Vehicles, Seating and Power & Vision increased 49%, 3% and 1%, respectively, while Body Exteriors & Structures decreased 4%.
Adjusted EBIT decreased 16% to $677 million in the second quarter of 2019 resulting in an adjusted EBIT as a percentage of sales of 6.7% in the second quarter of 2019 compared to 7.8% in the second quarter of 2018. This is mainly due to lower margins in our:
- Power & Vision segment, largely driven by higher engineering and other costs in our ADAS business, and lower equity income;
- Seating segment primarily as a result of higher launch costs and inefficiencies at a new facility, lower equity income, and higher commodity costs; and
- Body Exteriors & Structures segment primarily as a result of reduced earnings due to lower sales.
Income from operations before income taxes was $595 million for the second quarter of 2019 compared to $819 million in the second quarter of 2018. Included in income from operations before income taxes in the second quarter of 2019 were Other expense, net items totaling $68 million comprised of net unrealized losses on the revaluation of our investments and restructuring costs partially offset by an adjustment to the gain on the sale of our Fluid Pressure & Controls business. Income from operations before income taxes in the second quarter of 2018 included Other income, net items totaling $39 million. Excluding Other expense (income), net from both periods, income from operations before income taxes decreased $117 million in the second quarter of 2019 compared to the second quarter of 2018.
Net income attributable to Magna International Inc. was $452 million for the second quarter of 2019 compared to $626 million in the second quarter of 2018. Included in net income attributable to Magna International Inc. in the second quarter of 2019 were Other expense, net items totaling $57 million after tax. Net income attributable to Magna International Inc. in the second quarter of 2018 included Other income, net items totaling $36 million after tax. Excluding Other expense (income), net from both periods, net income attributable to Magna International Inc. decreased $81 million in the second quarter of 2019 compared to the second quarter of 2018.
Diluted earnings per share decreased to $1.42 in the second quarter of 2019, compared to $1.77 in the comparable period. Adjusted diluted earnings per share decreased 5% to $1.59 compared to $1.67 for the second quarter of 2018.
In the second quarter of 2019, we generated cash from operations of $920 million. Investment activities for the second quarter of 2019 were $587 million, including $328 million in fixed asset additions, $152 million in acquisitions, and a $107 million increase in investments, other assets and intangible assets.
A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/58bfcd6f-4356-4ce7-8e9c-8550b448769d
SIX MONTHS ENDED JUNE 30, 2019
We posted sales of $20.72 billion for the six months ended June 30, 2019, a decrease of 2% from the six months ended June 30, 2018, which compares favourably with global light vehicle production which decreased 5% in the first six months of 2019 compared to the first six months of 2018. Excluding the impact of foreign currency translation and divestitures net of acquisitions, sales increased 4% and by segment: Complete Vehicles increased 36%, Seating increased 3%, Power & Vision was unchanged and Body Exteriors & Structures decreased 4%; in each case compared to the six months ended June 30, 2018.
During the six months ended June 30, 2019, income from operations before income taxes was $1.96 billion, net income attributable to Magna International Inc. was $1.56 billion and diluted earnings per share was $4.83, increases of $293 million, $272 million and $1.23, respectively, each compared to the first six months of 2018.
During the six months ended June 30, 2019, Adjusted EBIT decreased 17% to $1.40 billion, and Adjusted diluted earnings per share decreased 8% to $3.22, each compared to the six months ended June 30, 2018.
During the six months ended June 30, 2019, we generated cash from operations before changes in operating assets and liabilities of $1.81 billion, and invested $294 million in operating assets and liabilities. Total investment activities for the first six months of 2019 were $920 million, including $579 million in fixed asset additions, $152 million in acquisitions, and $189 million in investments, other assets and intangible assets.
RETURN OF CAPITAL TO SHAREHOLDERS
During the three and six months ended June 30, 2019, we paid dividends of $110 million and $229 million, respectively. In addition, we repurchased 8.6 million shares for $409 million and 14.2 million shares for $693 million, respectively, for the three and six months ended June 30, 2019.
Our Board of Directors declared a quarterly dividend of $0.365 with respect to our outstanding Common Shares for the quarter ended June 30, 2019. This dividend is payable on September 6, 2019 to shareholders of record on August 23, 2019.
SEGMENT SUMMARY
($Millions unless otherwise noted) | For the three months ended June 30, | ||||||||||||||||||
Sales | Adjusted EBIT | ||||||||||||||||||
2019 | 2018 | Change | 2019 | 2018 | Change | ||||||||||||||
Body Exteriors & Structures | $ | 4,243 | $ | 4,551 | $ | (308 | ) | $ | 341 | $ | 388 | $ | (47 | ) | |||||
Power & Vision | 2,808 | 3,197 | (389 | ) | 201 | 299 | (98 | ) | |||||||||||
Seating Systems | 1,452 | 1,424 | 28 | 83 | 117 | (34 | ) | ||||||||||||
Complete Vehicles | 1,802 | 1,280 | 522 | 43 | 1 | 42 | |||||||||||||
Corporate and Other | (179 | ) | (172 | ) | (7 | ) | 9 | (2 | ) | 11 | |||||||||
Total Reportable Segments | $ | 10,126 | $ | 10,280 | $ | (154 | ) | $ | 677 | $ | 803 | $ | (126 | ) |
For the three months ended June 30, | |||||||||||||||||||
Adjusted EBIT as a | |||||||||||||||||||
percentage of sales | |||||||||||||||||||
2019 | 2018 | Change | |||||||||||||||||
Body Exteriors & Structures | 8.0 | % | 8.5 | % | (0.5 | )% | |||||||||||||
Power & Vision | 7.2 | % | 9.4 | % | (2.2 | )% | |||||||||||||
Seating Systems | 5.7 | % | 8.2 | % | (2.5 | )% | |||||||||||||
Complete Vehicles | 2.4 | % | 0.1 | % | 2.3 | % | |||||||||||||
Consolidated Average | 6.7 | % | 7.8 | % | (1.1 | )% | |||||||||||||
($Millions unless otherwise noted) | For the six months ended June 30, | ||||||||||||||||||
Sales | Adjusted EBIT | ||||||||||||||||||
2019 | 2018 | Change | 2019 | 2018 | Change | ||||||||||||||
Body Exteriors & Structures | $ | 8,551 | $ | 9,170 | $ | (619 | ) | $ | 704 | $ | 731 | $ | (27 | ) | |||||
Power & Vision | 5,891 | 6,387 | (496 | ) | 417 | 658 | (241 | ) | |||||||||||
Seating Systems | 2,885 | 2,894 | (9 | ) | 177 | 247 | (70 | ) | |||||||||||
Complete Vehicles | 3,730 | 2,940 | 790 | 71 | 20 | 51 | |||||||||||||
Corporate and Other | (340 | ) | (319 | ) | (21 | ) | 28 | 22 | 6 | ||||||||||
Total Reportable Segments | $ | 20,717 | $ | 21,072 | $ | (355 | ) | $ | 1,397 | $ | 1,678 | $ | (281 | ) |
For the six months ended June 30, | ||||||||||
Adjusted EBIT as a percentage of sales |
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2019 | 2018 | Change | ||||||||
Body Exteriors & Structures | 8.2 | % | 8.0 | % | 0.2 | % | ||||
Power & Vision | 7.1 | % | 10.3 | % | (3.2 | )% | ||||
Seating Systems | 6.1 | % | 8.5 | % | (2.4 | )% | ||||
Complete Vehicles | 1.9 | % | 0.7 | % | 1.2 | % | ||||
Consolidated Average | 6.7 | % | 8.0 | % | (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 Europe |
16.6 million 21.4 million |
16.7 million 21.5 million |
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Segment Sales Body Exteriors & Structures Power & Vision Seating Systems Complete Vehicles |
$16.3 – $17.1 billion $11.0 – $11.6 billion $5.4 – $5.8 billion $6.8 – $7.2 billion |
$16.3 – $17.1 billion $11.0 – $11.6 billion $5.5 – $5.9 billion $6.9 – $7.3 billion |
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Total Sales | $38.9 – $41.1 billion | $39.1 – $41.3 billion | ||
Adjusted EBIT Margin(2) | 6.6% – 6.9% | 6.7% – 7.0% | ||
Equity Income (included in EBIT) | $150 – $195 million | $150 – $195 million | ||
Interest Expense, net | Approximately $90 million | Approximately $100 million | ||
Income Tax Rate(3) | Approximately 24% | Approximately 24% | ||
Net Income attributable to Magna | $1.9 – $2.1 billion | $1.9 – $2.1 billion | ||
Capital Spending | Approximately $1.6 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 0.745
- 1 euro equals U.S. dollars 1.125
NON-GAAP FINANCIAL MEASURES RECONCILIATION
Adjusted EBIT | |||||||
The following table reconciles net income to Adjusted EBIT: | |||||||
For the three months ended June 30, | |||||||
2019 | 2018 | ||||||
Net Income | $ | 450 | $ | 636 | |||
Add: | |||||||
Interest expense, net | 14 | 23 | |||||
Other expense (income), net | 68 | (39 | ) | ||||
Income taxes | 145 | 183 | |||||
Adjusted EBIT | $ | 677 | $ | 803 | |||
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 June 30, | |||||||
2019 | 2018 | ||||||
Sales | $ | 10,126 | $ | 10,280 | |||
Adjusted EBIT | $ | 677 | $ | 803 | |||
Adjusted EBIT as a percentage of sales | 6.7 | % | 7.8 | % | |||
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 June 30, | |||||||
2019 | 2018 | ||||||
Net income attributable to Magna International Inc. | $ | 452 | $ | 626 | |||
Add: | |||||||
Other expense (income), net | 68 | (39 | ) | ||||
Tax effect on Other expense (income), net | (11 | ) | 3 | ||||
Adjusted net income attributable to Magna International Inc. | $ | 509 | $ | 590 | |||
Diluted weighted average number of Common Shares outstanding during the year (millions): | 319.5 | 354.1 | |||||
Adjusted diluted earnings per share | $ | 1.59 | $ | 1.67 |
NON-GAAP FINANCIAL MEASURES RECONCILIATION
Adjusted EBIT | |||||||
The following table reconciles net income to Adjusted EBIT: | |||||||
For the six months ended June 30, | |||||||
2019 | 2018 | ||||||
Net Income | $ | 1,551 | $ | 1,305 | |||
Add: | |||||||
Interest expense, net | 45 | 44 | |||||
Other income, net | (611 | ) | (36 | ) | |||
Income taxes | 412 | 365 | |||||
Adjusted EBIT | $ | 1,397 | $ | 1,678 | |||
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 June 30, | |||||||
2019 | 2018 | ||||||
Sales | $ | 20,717 | $ | 21,072 | |||
Adjusted EBIT | $ | 1,397 | $ | 1,678 | |||
Adjusted EBIT as a percentage of sales | 6.7 | % | 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 six months ended June 30, | |||||||
2019 | 2018 | ||||||
Net income attributable to Magna International Inc. | $ | 1,558 | $ | 1,286 | |||
Add: | |||||||
Other income, net | (611 | ) | (36 | ) | |||
Tax effect on Other income, net | 93 | 3 | |||||
Adjusted net income attributable to Magna International Inc. | $ | 1,040 | $ | 1,253 | |||
Diluted weighted average number of Common Shares outstanding during the year (millions): | 322.9 | 357.0 | |||||
Adjusted diluted earnings per share | $ | 3.22 | $ | 3.51 |
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.
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 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 second quarter ended June 30, 2019 results on Thursday, August 8, 2019 at 8:00 a.m. ET. The conference call will be chaired by Vince Galifi, Chief Financial Officer. The number to use for this call from North America is 1-877-291-0442. International callers should use 1-212-231-2924. 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 Wednesday prior to the call.
SOURCE: Magna