Canadian auto-parts supplier Magna International (MGA 0.93%) said on Nov. 8 that its adjusted operating income fell 20.2% from a year ago, to $558 million, on a drop in sales due to a strike that idled General Motors' U.S. factories for the last two weeks of the quarter.
Excluding one-time items, Magna earned $1.41 per share, down from $1.56 per share in the year-ago quarter but ahead of Wall Street's consensus $1.33-per-share estimate as reported by Thomson Reuters. Revenue of $9.32 billion was in line with analyst estimates.
Image source: Magna International.
The raw numbers
Magna is a Canadian company, but it reports its results in U.S. dollars.
| Metric | Q3 2019 | Change vs. Q3 2018 |
|---|---|---|
| Revenue | $9.319 billion | (3.1%) |
| Adjusted EBIT | $558 million | (20.2%) |
| Adjusted EBIT margin | 6% | 1.0 pp lower |
| Net income (loss) | ($233 million) | Declined by $787 million |
| Adjusted earnings per share | $1.41 | Declined by $0.15 |
Data source: Magna International. EBIT = is earnings before interest and tax. Adjusted figures exclude the effects of one-time items. Magna took one-time charges of $859 million in the third quarter of 2019, most related to restructuring costs and (noncash) revaluations of investments held by Getrag, a transmission manufacturer that Magna acquired last year. Magna took $2 million in one-time charges in the year-ago period. Pp = percentage points.
What happened at Magna in the third quarter?
- Revenue in the body exteriors and structures segment fell 4.7% from a year ago, to $3.98 billion, on sales lost due to the GM strike. Adjusted EBIT of $306 million was down $20 million from a year ago, on higher launch costs and the GM issue. The segment's adjusted EBIT margin was 7.7%, down 0.1 percentage point from a year ago.
- Revenue in the power and vision segment fell 8.5% to $2.70 billion, on unfavorable exchange-rate movements and lower global vehicle production. Adjusted EBIT of $167 million was down 35.5% from the year-ago period, on higher development costs related to advanced driver-assist systems and electric drivetrains. The adjusted EBIT margin was 6.2%, down from 8.8% a year ago on several new-product launches, offset somewhat by the GM strike and exchange-rate shifts.
- Revenue in the seating segment was $1.27 billion, up from $1.22 billion a year ago. Adjusted EBIT of $56 million was down from $69 million a year ago, on higher launch costs and operational inefficiencies at a new factory. The adjusted EBIT margin was 4.4%, versus 5.7% a year ago.
- Revenue in the complete vehicles segment, Magna's contract manufacturing operation, rose 8.9% to $1.52 billion on a 6% increase in assembly volumes. Adjusted EBIT of $29 million was up 21% from a year ago, and the adjusted EBIT margin of 1.9% was 0.2 percentage points better than the year-ago result.
- Magna returned $451 million to shareholders in the third quarter via quarterly dividends ($109 million) and a share-buyback program ($342 million).
Looking ahead
Magna updated its full-year guidance to account for the effects of the GM strike. For the full year, investors should now expect:
- Revenue between $38.7 billion and $39.8 billion (prior guidance: between $38.9 billion and $41.1 billion. 2018 result: $40.8 billion)
- Adjusted EBIT margin between 6.3% and 6.5% (prior guidance: between 6.6% and 6.9%. 2018: 7.6%)
- Net income between $1.8 billion and $1.9 billion (prior guidance: between $1.9 billion and $2.1 billion. 2018: $3.0 billion)
