By GREG KEENAN
Friday, February 23, 2018
Magna International Inc. is boosting its dividend by 20 per cent after posting record annual sales and share profit in a buoyant year for the auto industry.
"We continue to outgrow vehicle production," Magna chief executive Don Walker said on Thursday as the company reported sales of US$38.95-billion in 2017, up 7 per cent from US$36.45billion in 2016.
Share profit rose to US$5.90 for the year from US$5.16 in 2016. The record performance, driven by strong vehicle production in the company's two largest markets of North America and Western Europe and new business awarded to the auto-parts giant, led the company to raise its quarterly dividend to 33 US cents a share from 27.5 US cents.
Magna also reiterated a favourable outlook for sales this year and increased its forecast for European vehicle production amid a recovery in that market.
While much of Magna's strength derives from its traditional businesses of metal stamping, seating and internal-combustion engine parts and components, it is focusing heavily on new technologies.
Sales of advanced driver assistance systems - components necessary for self-driving vehicles - were US$450-million in 2016, but are expected to grow to about US$1-billion annually for the company by 2020 or 2021, Magna officials said on a conference call on the 2017 and fourth-quarter results Thursday.
Magna is working on 20 projects that are at the stage of proof of concept, chief technology officer Swamy Kotagiri said.
"The pace has accelerated over the last three or four years significantly," Mr. Kotagiri said.
Industry analyst Brian Morrison, who follows the company for Toronto Dominion Bank, said in a research note that "Magna is positioned to grow in excess of the industry average and is well positioned for the evolution of the car of the future."
The 2017 results, which included profit of US$2.21-billion, compared with US$2.03-billion a year earlier, are a "modest positive," Bank of Montreal analyst Peter Sklar wrote in a note to clients.
Mr. Sklar, however, lowered his estimate for 2018 profit to US$6.69 a share from US$6.76 after reviewing revised industry production forecasts for North America and Europe and assessing the impact on Magna of the redesign of General Motors Co.'s pickup trucks, one of Magna's largest vehicle programs and one of the largest in the industry.
Production of trucks and the sport utility vehicles that are based on the same platform is expected to be down 10 per cent this year from year-earlier levels, he said. "It's a huge launch," affecting about 36 Magna plants, Mr. Walker acknowledged on the conference call. From all reports, the launch of the new vehicle is going smoothly, he said.
MAGNA INTERNATIONAL (MG) CLOSE: $71.31, UP $1.70
A worker is seen in a Magna plant in Mexico in 2015. While much of the auto-parts supplier's strength comes from its traditional businesses, it's focusing heavily on new technologies.
BRETT GUNDLOCK/THE GLOBE AND MAIL