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Continuing to grow sales faster than vehicle production through 2020
Accelerating free cash flow1 in 2018-2020 period
AURORA, ON, Jan. 16, 2018 /CNW/ – Magna International Inc. (TSX: MG; NYSE: MGA) today announced its financial outlook for 2018 and 2020.
“The pace of change in the automotive industry continues to accelerate, and we remain at the forefront, investing to further strengthen our position as an innovator and provider of solutions for our customers. These investments should drive business awards in the future and position us to continue building long-term value for shareholders. We expect to deliver above-market growth through 2020 and beyond driven by our portfolio of products tied to Vehicle Electrification, Light-Weighting, Safety and Autonomous Driving”- Don Walker, Magna’s Chief Executive Officer
NEW FINANCIAL REPORTING SEGMENTSWe recently announced a realignment of our management structure along product lines, and a corresponding change to our reporting segments. Our outlook reflects our new reporting segments.
CHANGE IN ACCOUNTING FOR TOOLING AND PRE-PRODUCTION ENGINEERINGAs noted in our third quarter 2017 report, we will adopt the new revenue recognition standard and change the accounting for tooling and pre-production engineering beginning in 2018. The primary result of this change is a decrease in sales, substantially offset by a similar decrease in cost of goods sold. Our outlook also reflects this change in accounting. For comparative purposes, we expect the decrease in both sales and cost of goods sold for 2017 to be approximately $2.4 billion.
OUTLOOKIn this outlook we have assumed no material unannounced acquisitions or divestitures. In addition, we have assumed that foreign exchange rates for the most common currencies in which we conduct business relative to our U.S. dollar reporting currency will approximate year end 2017 rates.
2018
2020
Light Vehicle Production (Units)
North America
17.4 million
17.4 million
Europe
22.3 million
22.9 million
Segment Sales
Body Exteriors & Structures
$16.6 – $17.4 billion
$17.3 – $18.3 billion
Power & Vision
$11.8 – $12.4 billion
$12.5 – $13.3 billion
Seating Systems
$5.3 – $5.7 billion
$6.5 – $7.0 billion
Complete Vehicles
$6.0 – $6.4 billion
$6.8 – $7.5 billion
Total Sales
$39.3 – $41.5 billion
$42.7 – $45.7 billion
EBIT Margin2
7.9% – 8.2%
8.5% – 8.9%
Equity income (included in EBIT)
$335 – $375 million
$400 – $450 million
Interest Expense
Approximately $90 million
Tax Rate
22% – 23%
Net income attributable to Magna
$2.3 – $2.5 billion
Capital Spending
Approximately $1.8 billion
“We remain focused on striking a balance between investing for the future and improving both returns on capital and free cash flow conversion. In the short term, margins will be affected somewhat by our investments for the future related to electrification and autonomous driving. In addition, the significant growth of our Complete Vehicles business will impact margins, as anticipated. Nevertheless, we expect to generate over $6 billion in free cash flow between 2018 and 2020, which is more than 25% of our current market capitalization.”- Vince Galifi, Magna’s Chief Financial Officer
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.
We will be making a presentation at the Deutsche Bank Global Auto Industry Conference on Tuesday, January 16, 2018 at 2:00 p.m. EST during which we will review the details of our Outlook. The presentation will be webcast and available on our website at www.magna.com. The slides accompanying the presentation will be available on our website Tuesday morning by 7:00 a.m. EST.
TAGS2018 Outlook, sales growth, free cash flow
INVESTOR CONTACTLouis Tonelli, Vice-President, Investor Relationslouis.tonelli@magna.com, 905.726.7035
MEDIA CONTACTTracy Fuerst, Director of Corporate Communications & PRtracy.fuerst@magna.com, 248.631.5396
WEBCAST CONTACTNancy Hansford, Executive Assistant, Investor Relationsnancy.hansford@magna.com, 905.726.7108
OUR BUSINESS3We have more than 163,000 entrepreneurial-minded employees dedicated to delivering mobility solutions. We are a technology company and one of the world’s largest automotive suppliers with 328 manufacturing operations and 99 product development, engineering and sales centres in 29 countries. Our competitive capabilities include body exteriors and structures, power and vision technologies, seating systems and complete vehicle solutions. Our common shares trade on the Toronto Stock Exchange (MG) and the New York Stock Exchange (MGA). For further information about Magna, visit www.magna.com.
__________________________________1 Free cash flow represents Cash from Operating Activities plus proceeds from normal course dispositions of fixed and other assets minus capital spending minus investments in other assets.
2 Earnings Before Interest and Taxes (“EBIT”) represents Net Income before income taxes and interest expense, net. EBIT Margin is the ratio of EBIT to Total Sales.
3 Manufacturing operations, product development, engineering and sales centres and employee figures include certain equity-accounted operations.
SOURCE Magna International Inc.