- Record third quarter sales, up 9% year over year to $9.6 billion
- Record third quarter diluted earnings per share of $1.62, increased 17%
- Record third quarter Adjusted diluted earnings per share of $1.56, up 12%
- Returned $629 million to shareholders through share repurchases and dividends
- Reduced top end of outlook ranges for Total Sales, Adjusted Net Income attributable to Magna and revised outlook for Adjusted EBIT margin
Magna International Inc. (TSX: MG; NYSE: MGA) reported financial results for the third quarter ended September 30, 2018.
| THREE MONTHS ENDED SEPTEMBER 30, |
NINE MONTHS ENDED SEPTEMBER 30, |
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| 2018 |
2017(2) |
2018 |
2017(2) |
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| Reported | ||||||||||||||||
| Sales | $ | 9,618 | $ | 8,864 | $ | 30,690 | $ | 26,904 | ||||||||
| Income from operations before income taxes |
$ | 674 | $ | 683 | $ | 2,344 | $ | 2,220 | ||||||||
| Net income attributable to Magna International Inc. |
$ | 554 | $ | 512 | $ | 1,840 | $ | 1,637 | ||||||||
| Diluted earnings per share | $ | 1.62 | $ | 1.38 | $ | 5.22 | $ | 4.33 | ||||||||
| Non-GAAP Financial Measures(1) | ||||||||||||||||
| Adjusted EBIT | $ | 699 | $ | 705 | $ | 2,377 | $ | 2,281 | ||||||||
| Adjusted diluted earnings per share | $ | 1.56 | $ | 1.39 | $ | 5.08 | $ | 4.36 | ||||||||
| 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. |
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(2) 2017 amounts included in this Press Release have been adjusted for our adoption of the new revenue standard (Accounting Standards Codification 606) and recast for our new reportable segments. |
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THREE MONTHS ENDED SEPTEMBER 30, 2018
We set third quarter records for sales, diluted earnings per share and Adjusted diluted earnings per share, and returned $629 million to shareholders through share repurchases and dividends. All of our operating segments reported sales growth compared to the third quarter of 2017 and, excluding both acquisitions net of divestitures and foreign exchange movements, sales for all segments outgrew global light vehicle production. However, our sales were slightly lower than we had anticipated, mainly due to lower than expected light vehicle production. Adjusted EBIT was below the comparable quarter in 2017 and was less than what we expected. After taking into account the impact of lower than anticipated volumes, our Power & Vision, Seating Systems and Complete Vehicles segments performed substantially in line with our expectations. However, our Body Exteriors & Structures segment reported results below our expectations, mainly as a result of higher than anticipated launch costs and underperformance at certain facilities, largely offset by a favourable customer pricing resolution.
On a consolidated basis, we posted sales of $9.62 billion for the third quarter of 2018, an increase of 9% over the third quarter of 2017. The strong growth was achieved in a period in which light vehicle production increased 4% in North America and was essentially unchanged in Europe. Excluding the impact of foreign currency translation and net divestitures, sales increased 11% on a consolidated basis, and by segment: 6% in both Body Exteriors & Structures and Power & Vision, 5% in Seating Systems, and 50% in Complete Vehicles.
Adjusted EBIT of $699 million in the third quarter of 2018 decreased 1.0%, resulting in an adjusted EBIT as a percentage of sales of 7.3% in the third quarter of 2018 compared to 8.0% in the third quarter of 2017. This margin decline was largely driven by:
- an increase in the proportion of sales generated in our Complete Vehicles segment relative to total sales, which have a significantly lower margin than our consolidated average;
- lower margins in the third quarter of 2018 in our Seating Systems segment, mainly associated with pre-operating costs incurred at new facilities and favourable customer pricing resolutions in the third quarter of 2017; and
- lower margins in our Power & Vision segment, largely reflecting increased spending for electrification and autonomy.
Income from operations before income taxes of $674 million decreased 1.0% in the third quarter of 2018.
Net income attributable to Magna International Inc. increased 8% to $554 million for the third quarter of 2018, substantially reflecting a lower income tax rate.
Diluted earnings per share increased 17% to $1.62 in the third quarter of 2018, reflecting higher net income attributable to Magna International Inc., and the favourable impact of a reduced share count. Adjusted diluted earnings per share increased 12% to $1.56 compared to $1.39 for the third quarter of 2017.
In the third quarter of 2018, we generated cash from operations before changes in operating assets and liabilities of $899 million, and $177 million in operating assets and liabilities. Investment activities for the third quarter of 2018 included $381 million in fixed asset additions, and a $114 million increase in investments, other assets and intangible assets.
NINE MONTHS ENDED SEPTEMBER 30, 2018
We posted sales of $30.69 billion for the nine months ended September 30, 2018, an increase of 14% from the nine months ended September 30, 2017. North American light vehicle production remained relatively unchanged and European light vehicle production increased 2%, in the first nine months of 2018 compared to the first nine months of 2017.
During the nine months ended September 30, 2018, income from operations before income taxes was $2.34 billion, net income attributable to Magna International Inc. was $1.84 billion and diluted earnings per share was $5.22, increases of $124 million, $203 million and $0.89, respectively, each compared to the first nine months of 2017.
During the nine months ended September 30, 2018, Adjusted EBIT increased 4% to $2.38 billion, compared to $2.28 billion for the nine months ended September 30, 2017. Our Body Exteriors & Structures, Power & Vision, and Complete Vehicles segments each posted higher Adjusted EBIT compared to the first nine months of 2017.
During the nine months ended September 30, 2018, we generated cash from operations before changes in operating assets and liabilities of $2.87 billion, and invested $750 million in operating assets and liabilities. Investment activities for the nine months of 2018 included $1.00 billion in fixed asset additions, and $331 million in investments, other assets and intangible assets.
RETURN OF CAPITAL TO SHAREHOLDERS
During the three and nine months ended September 30, 2018, we paid dividends of $109 million and $342 million, respectively. In addition, we repurchased 9.2 million shares for $520 million and 22.7 million shares for $1.35 billion, respectively, for the three and nine months ended September 30, 2018.
Our Board of Directors declared a quarterly dividend of $0.33 with respect to our outstanding Common Shares for the quarter ended September 30, 2018. This dividend is payable on December 7, 2018 to shareholders of record on November 23, 2018.
OTHER MATTERS
Subject to the approval by the Toronto Stock Exchange and the New York Stock Exchange, our Board of Directors approved a new Normal Course Issuer Bid („NCIB“) to purchase up to 33.2 million of our Common Shares, representing approximately 10% of our public float of Common Shares. This NCIB is expected to commence on or about November 15, 2018 and will terminate one year later.
UPDATED 2018 OUTLOOK
We have updated our 2018 outlook largely to reflect our third quarter 2018 results, as well as fourth quarter 2018 expectations for lower light vehicle production, lower equity earnings in our European transmission joint venture and higher costs in our Body Exteriors & Structures segment.
Quelle: Magna
