Mr. Don Walker reports
MAGNA ANNOUNCES OUTLOOK
Magna International Inc. has provided 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, lightweighting, safety and autonomous driving," said Don Walker, Magna's chief executive officer.
New financial reporting segments
The company recently announced a realignment of its management structure along product lines, and a corresponding change to its reporting segments. The company's outlook reflects its new reporting segments.
Change in accounting for tooling and preproduction engineering
As noted in its third quarter 2017 report, the company will adopt the new revenue recognition standard and change the accounting for tooling and preproduction 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. The company's outlook also reflects this change in accounting. For comparative purposes, the company expects the decrease in both sales and cost of goods sold for 2017 to be approximately $2.4-billion.
Outlook
In this outlook the company has assumed no material unannounced acquisitions or divestitures. In addition, the company has assumed that foreign exchange rates for the most common currencies in which the company conducts business relative to its 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 and structures $16.6-billion to $17.4-billion $17.3-billion to $18.3-billion
Power and vision $11.8-billion to $12.4-billion $12.5-billion to $13.3-billion
Seating systems $5.3-billion to $5.7-billion $6.5-billion to $7.0-billion
Complete vehicles $6.0-billion to $6.4-billion $6.8-billion to $7.5-billion
Total sales $39.3-billion to $41.5-billion $42.7-billion to $45.7-billion
EBIT margin 7.9% to 8.2% 8.5% to 8.9%
Equity income (included
in EBIT) $335-million to $375-million $400-million to $450-million
Interest expense approximately $90-million
Tax rate 22% to 23%
Net income attributable to Magna $2.3-billion to $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 per cent of our current market capitalization," said Vince Galifi, Magna's chief financial officer.
The company will be making a presentation at the Deutsche Bank Global Auto Industry Conference on Tuesday, Jan. 16, 2018, at 2 p.m. Eastern Standard Time during which it will review the details of its outlook. The presentation will be webcast and available on the company's website. The slides accompanying the presentation will be available on the company's website Tuesday morning by 7 a.m. EST.
About Magna International Inc.
The company has more than 163,000 entrepreneurial-minded employees dedicated to delivering mobility solutions. Magna is 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.
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