Magna Announces Fourth Quarter 2022 Results and 2023 Outlook

Swamy Kotagiri, Magna’s Chief Executive Officer

Fourth Quarter 2022 Highlights

• Sales increased 5% to $9.6 billion

• Excluding foreign currency translation sales increased 13%, compared to a global light vehicle production increase of 5%

• Diluted earnings per share and Adjusted diluted earnings per share decreased to $0.33 and $0.91, respectively, compared to $1.54 and $1.30 last year

• Returned $131 million to shareholders through dividends and share repurchases

• Raised quarterly cash dividend to $0.46 per share

2023 Outlook Highlights

AURORA, Ontario, Feb. 10, 2023 (GLOBE NEWSWIRE) — Magna International Inc. (TSX: MG; NYSE: MGA) today reported financial results for the fourth quarter and year ended December 31, 2022.

All results are reported in millions of U.S. dollars, except per share figures, which are in U.S. dollars.

_{⁽¹⁾ Adjusted EBIT and Adjusted diluted earnings per share 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.}

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A photo of Swamy Kotagiri, Magna’s Chief Executive Officer is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/70f2a350-5416-4e16-8480-40b245c72513

THREE MONTHS ENDED DECEMBER 31, 2022

We recorded consolidated sales of $9.6 billion in the fourth quarter of 2022, an increase of 5% over the fourth quarter of 2021. Excluding the impact of foreign currency translation, sales increased 13% compared to global light vehicle production that increased 5%.

Adjusted EBIT decreased to $356 million in the fourth quarter of 2022 compared to $508 million in the fourth quarter of 2021. This decrease mainly reflects higher net engineering costs related to our electrification and ADAS businesses, including at certain equity-accounted entities, higher net warranty costs, higher launch costs, operating inefficiencies at a facility in Europe, and provisions against certain accounts receivable and other balances. These factors were partially offset by earnings on higher sales and higher net favourable commercial resolutions.

Income from operations before income taxes was $146 million in the fourth quarter of 2022 compared to $576 million in the fourth quarter of 2021. Included in income from operations before income taxes in the fourth quarter of 2022 was Other expense, net of $193 million, comprised of net losses on the revaluation of certain public and private company warrants and equity investments, a loss on the sale of a business operation, and restructuring and impairment costs (see “Non-GAAP Financial Measures” section included in this Press Release). In comparison, in the fourth quarter of 2021 we recorded, Other income, net of $90 million, comprised of merger agreement termination fee income and net gains on the revaluation of certain public and private company warrants and equity investments, partially offset by restructuring and impairment costs. Excluding Other expense (income), net from both periods, income from operations before income taxes decreased $147 million in the fourth quarter of 2022 compared to the fourth quarter of 2021.

Net income attributable to Magna International Inc. was $95 million in the fourth quarter of 2022 compared to $464 million in the fourth quarter of 2021. Included in net income attributable to Magna International Inc. in the fourth quarter of 2022 was Other expense, net of $166 million after tax, compared to Other income, net of $60 million and Adjustments to Deferred Tax Valuation Allowances of $13 million in the fourth quarter of 2021. Excluding Other expense (income), net and Adjustments to Deferred Tax Valuation Allowances from both periods, net income attributable to Magna International Inc. decreased $130 million in the fourth quarter of 2022 compared to the fourth quarter of 2021.

Diluted earnings per share decreased to $0.33 in the fourth quarter of 2022 compared to $1.54 in the comparable period and Adjusted diluted earnings per share decreased to $0.91 compared to $1.30.

In the fourth quarter of 2022, we generated $1.3 billion in cash from operating activities after changes in operating assets and liabilities. Investment activities in the fourth quarter of 2022 included $750 million in fixed asset additions, and $186 million for investments, other assets and intangible assets.

YEAR ENDED DECEMBER 31, 2022

We recorded consolidated sales of $37.8 billion for the year ended December 31, 2022, an increase of 4% from the year ended December 31, 2021. Excluding the impact of foreign currency translation, sales increased 11% compared to global light vehicle production that increased 6%.

Adjusted EBIT decreased to $1.66 billion in 2022 compared to $2.06 billion in 2021. This decrease mainly reflects higher net production input costs, including energy, commodity, labour and freight costs, inefficiencies and other costs at certain underperforming facilities, higher net engineering costs related to our electrification and ADAS businesses, including at certain equity-accounted entities, the net weakening of foreign currencies against the U.S. dollar, reduced earnings as a result of the substantial idling of our Russian operations, and lower equity income. These factors were partially offset by earnings on higher sales, higher net favourable commercial resolutions and a $45 million provision on engineering service contracts with the automotive unit of Evergrande in 2021.

During 2022, income from operations before income taxes was $878 million and net income attributable to Magna International Inc. was $592 million, down $1.07 billion and $922 million compared to 2021, respectively.

Diluted earnings per share decreased to $2.03 in 2022 compared to $5.00 in 2021 and adjusted diluted earnings per share decreased to $4.10 compared to $5.13.

During 2022, we generated cash from operations of $2.1 billion including changes in operating assets and liabilities. Investment activities in 2022 included $1.7 billion in fixed asset additions, $455 million in investments, other assets and intangible assets, and $29 million in public and private equity investments.

RETURN OF CAPITAL TO SHAREHOLDERS

During the year ended December 31, 2022, we repurchased 12.6 million shares for $780 million. In addition, we paid dividends of $126 million and $514 million for the three months and year ended December 31, 2022, respectively.

Our Board of Directors declared a fourth quarter dividend of $0.46 per Common Share. The dividend is payable on March 10, 2023 to shareholders of record as of the close of business on February 24, 2023.

2023 AND 2025 OUTLOOK

Our current year Outlook is provided annually and updated quarterly; our 2025 Outlook is provided below, but not updated quarterly. Our outlook does not incorporate material unannounced acquisitions or divestitures. It also excludes the pending acquisition of Veoneer Active Safety announced on December 20, 2022.

2023 and 2025 Outlook Assumptions

2023 and 2025 Outlook

Our Outlook is intended to provide information about management’s current expectations and plans and may not be appropriate for other purposes. Although considered reasonable by Magna as of the date of this document, the 2023 and 2025 Outlook above and the underlying assumptions may prove to be inaccurate. Accordingly, our actual results could differ materially from our expectations as set forth herein. The risks identified in the “Forward-Looking Statements” section below represent the primary factors which we believe could cause actual results to differ materially from our expectations.

Key Drivers of Our Business

Our operating results are primarily dependent on the levels of North American, European and Chinese car and light truck production by our customers. While we supply systems and components to every major original equipment manufacturer [“OEM”], we do not supply systems and components for every vehicle, nor is the value of our content consistent from one vehicle to the next. As a result, customer and program mix relative to market trends, as well as the value of our content on specific vehicle production programs, are also important drivers of our results.

Ordinarily OEM production volumes are aligned with vehicle sales levels and thus affected by changes in such levels. Aside from vehicle sales levels, production volumes are typically impacted by a range of factors, including: general economic and political conditions; labour disruptions; free trade arrangements; tariffs; relative currency values; commodities prices; supply chains and infrastructure; availability and relative cost of skilled labour; regulatory considerations, including those related to environmental emissions and safety standards; and other factors. Additionally, COVID-19 can impact vehicle production volumes, including through: mandatory stay-at-home orders which restrict production; elevated employee absenteeism; and supply chain disruptions, such as the semiconductor chip shortage currently impacting global vehicle production volumes.

Overall vehicle sales levels are significantly affected by changes in consumer confidence levels, which may in turn be impacted by consumer perceptions and general trends related to the job, housing and stock markets, as well as other macroeconomic and political factors. Other factors which typically impact vehicle sales levels and thus production volumes include: interest rates and/or availability of credit; fuel and energy prices; relative currency values; regulatory restrictions on use of vehicles in certain megacities; and other factors. Additionally, COVID-19 can impact vehicle sales, including through: mandatory stay-at-home orders which restrict operations of car dealerships, as well as through a deterioration in consumer confidence.

Segment Analysis
[All amounts in U.S. dollars and all tabular amounts in millions unless otherwise noted]

Body Exteriors & Structures

(i)   Adjusted EBIT as a percentage of sales is calculated as Adjusted EBIT divided by Sales.

Sales for Body Exteriors & Structures increased 11% or $384 million to $4.00 billion in the fourth quarter of 2022 compared to $3.62 billion in 2021. The increase in sales was primarily due to higher global light vehicle production, the launch of new programs during or subsequent to the fourth quarter of 2021, including the Rivian R1T and R1S, Honda CR-V, Ford F-150 Lightning and Jeep Grand Cherokee, and customer input cost recoveries.  These factors were partially offset by a $224 million decrease in reported U.S. dollar sales as a result of the weakening of foreign currencies against the U.S. dollar and net customer price concessions.

Adjusted EBIT increased $30 million to $198 million for the fourth quarter of 2022 compared to $168 million in the fourth quarter of 2021 and Adjusted EBIT as a percentage of sales increased to 4.9% from 4.6%. The increase is primarily due to earnings on higher sales, lower net warranty costs and higher net favourable commercial settlements. These were partially offset by higher net production input costs, including labour, commodity, freight and energy costs, inefficiencies and other costs at certain underperforming facilities, provisions against certain accounts receivable and other balances, and higher launch costs.

Power & Vision

Sales for Power & Vision increased 8% or $212 million to $3.02 billion in the fourth quarter of 2022 compared to $2.80 billion in 2021. The increase in sales was primarily due to higher global light vehicle production, the launch of new programs during or subsequent to the fourth quarter of 2021, including the Chery Arrizo 8, BMW X5 and Nio ES7, and customer input cost recoveries.  These factors were partially offset by a $235 million decrease in reported U.S. dollar sales as a result of the weakening of foreign currencies against the U.S. dollar and net customer price concessions.

Adjusted EBIT decreased $62 million to $109 million for the fourth quarter of 2022 compared to $171 million for the fourth quarter of 2021 and Adjusted EBIT as a percentage of sales decreased to 3.6% from 6.1%.  These decreases are primarily due to higher net warranty costs, higher net engineering costs related to our electrification and ADAS businesses, including at certain equity-accounted entities, lower equity income and higher launch costs.  These were partially offset by earnings on higher sales, customer recoveries in excess of increased net production input costs, including commodity, energy, freight and labour costs and higher net favourable commercial settlements.

Seating Systems

Sales for Seating Systems increased 4% or $46 million to $1.35 billion in the fourth quarter of 2022 compared to $1.30 billion in 2021. The increase in sales was primarily due to higher global light vehicle production, and the launch of new programs during or subsequent to the fourth quarter of 2021, including the BYD Qin Plus, BYD Atto 3 and Changan Shenlan SL03.  These factors were partially offset by a $97 million decrease in reported U.S. dollar sales as a result of the weakening of foreign currencies against the U.S. dollar and net customer price concessions.

Adjusted EBIT decreased $36 million to $13 million for the fourth quarter of 2022 compared to $49 million for the fourth quarter of 2021 and Adjusted EBIT as a percentage of sales decreased to 1.0% from 3.8%. These decreases are primarily due to inefficiencies and other costs at an underperforming facility, higher net production input costs, including freight, labour, energy and commodity costs, higher launch costs and provisions against certain accounts receivable and other balances, partially offset by higher net favourable commercial settlements.

Complete Vehicles

Sales for Complete Vehicles decreased 12% or $181 million to $1.33 billion in the fourth quarter of 2022 compared to $1.51 billion in the fourth quarter of 2021 and assembly volumes decreased 17% or 5,700 units. This sales decline was primarily due to a $164 million decrease in reported U.S. dollar sales as a result of the weakening of the euro against the U.S. dollar and the impact of lower assembly volumes, partially offset by favourable program mix.

Adjusted EBIT decreased $41 million to $57 million for the fourth quarter of 2022 compared to $98 million for the fourth quarter of 2021 and Adjusted EBIT as a percentage of sales decreased to 4.3% from 6.5% primarily due to lower government research and development incentives, higher net production input costs, including energy and labour costs, and lower net favourable commercial settlements.

Corporate and Other

Adjusted EBIT decreased $43 million to a loss of $21 million for the fourth quarter of 2022 compared to income of $22 million for the fourth quarter of 2021 primarily due to higher incentive compensation and labour costs, higher costs to accelerate our operational excellence initiatives and a decrease in fees received from our divisions, partially offset by transactional foreign exchange gains in the fourth quarter of 2022 compared to losses in the fourth quarter of 2021.

MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF INCOME
[Unaudited]
[U.S. dollars in millions, except per share figures]

[i]     See “Other (income) expense, net” information included in this Press Release.

MAGNA INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
[Unaudited]
[U.S. dollars in millions]

MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
[Unaudited]
[U.S. dollars in millions]

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