Mr. Swamy Kotagiri reports

MAGNA ANNOUNCES FOURTH QUARTER 2023 RESULTS AND 2024 OUTLOOK

Magna International Inc. has released financial results for the fourth quarter and year ended Dec. 31, 2023.

Fourth quarter 2023 highlights:

• Sales increased 9 per cent to $10.5-billion, compared with 7-per-cent increase in global light vehicle production;
• Sales increased 4 per cent, excluding foreign currency translation and acquisitions net of divestitures;
• Diluted earnings per share and adjusted diluted earnings per share increased to 94 cents and $1.33, respectively, compared with 33 cents and 94 cents last year;
• Paid $133-million in dividends;
• Raised quarterly cash dividend to 47.5 cents per share.

2024 outlook highlights:

• Sales expected to continue to outgrow global light vehicle production through outlook period;
• Expect adjusted EBIT (earnings before interest and taxes) margin to expand by 180 basis points or more by 2026 to range of 7 per cent to 7.7 per cent.

Swamy Kotagiri, Magna's chief executive officer, stated: "I am pleased with our 2023 operating performance, highlighted by strong execution on higher sales, success in offsetting inflationary pressures and the benefits from operational excellence activities across the company. We completed the acquisition of Veoneer Active Safety and are on track to deliver meaningful synergies to our combined active safety business. As we begin 2024, we remain focused on delivering on our short- and long-term growth while emphasizing margin expansion, increasing free cash flow and driving returns on investment."

Three months ended Dec. 31, 2023

Magna posted sales of $10.5-billion for the fourth quarter of 2023, an increase of 9 per cent over the fourth quarter of 2022, which compares with global light vehicle production that increased 7 per cent, including 5 per cent, 7 per cent and 12 per cent higher production in North America, Europe and China, respectively. In addition to higher global vehicle production, Magna's sales benefited from the launch of new programs and acquisitions net of divestitures, partially offset by the negative impact of lost vehicle production as a result of the UAW (United Auto Workers) labour strikes at certain customers during the fourth quarter of 2023, which negatively impacted sales by approximately $275-million. Excluding the impact of foreign currency translation and acquisitions net of divestitures, sales increased 4 per cent.

Adjusted EBIT increased to $558-million in the fourth quarter of 2023, compared with $367-million in the fourth quarter of 2022. Magna's continuing focus on operational excellence and cost initiatives helped drive strong earnings on higher sales. In addition, the adjusted EBIT increase mainly reflected productivity and efficiency improvements, including lower costs at certain previously underperforming facilities, higher tooling contribution, higher customer recoveries net of higher production input costs, lower net warranty costs, and lower provisions against certain accounts receivable and other balances, partially offset by the negative impact of the UAW labour strikes during the fourth quarter of 2023, higher launch, engineering and other costs associated with new assembly business, and higher restructuring costs.

Income from operations before income taxes increased to $310-million for the fourth quarter of 2023, compared with $146-million in the fourth quarter of 2022. Included in income from operations before income taxes were other expense, net, and amortization of acquired intangibles totalling $195-million and $204-million in the fourth quarters of 2023 and 2022, respectively. Excluding other expense, net and amortization of acquired intangibles from both periods, income from operations before income taxes increased $155-million in the fourth quarter of 2023, compared with the fourth quarter of 2022.

Net income attributable to Magna International was $271-million for the fourth quarter of 2023, compared with $95-million in the fourth quarter of 2022. Included in net income attributable to Magna International were other expense, net, amortization of acquired intangibles and adjustments to deferred tax valuation allowances totalling $112-million after tax in the fourth quarter of 2023, compared with $175-million after tax in the fourth quarter of 2022. Excluding these amounts from both periods, net income attributable to Magna International increased $113-million in the fourth quarter of 2023 compared with the fourth quarter of 2022.

Diluted earnings per share were 94 cents in the fourth quarter of 2023, compared with 33 cents in the comparable period. Adjusted diluted earnings per share were $1.33, compared with 94 cents for the fourth quarter of 2022.

In the fourth quarter of 2023, Magna generated cash from operations before changes in operating assets and liabilities of $660-million and used $918-million in operating assets and liabilities. Investment activities for the fourth quarter of 2023 included $944-million in fixed asset additions, $189-million in investments, other assets and intangible assets, and $1-million in private equity investments.

Year ended Dec. 31, 2023

Magna posted sales of $42.8-billion for the year ended Dec. 31, 2023, an increase of 13 per cent over the year ended Dec. 31, 2022, which compares with global light vehicle production that increased 8 per cent, including 9 per cent, 11 per cent and 8 per cent higher production in North America, Europe and China, respectively. In addition to higher global vehicle production, Magna's sales benefited from the launch of new programs and acquisitions net of divestitures, partially offset by the negative impact of lost vehicle production as a result of the UAW labour strikes at certain customers during the third and fourth quarters of 2023, which negatively impacted sales by approximately $325-million. Excluding the impact of foreign currency translation and acquisitions net of divestitures, sales increased 11 per cent.

Adjusted EBIT increased to $2.2-billion for the year ended Dec. 31, 2023, compared with $1.7-billion for year ended Dec. 31, 2022, primarily due to earnings on higher sales, including higher margins due to the impact of operational excellence and cost initiatives, and productivity and efficiency improvements, including lower costs at previously underperforming facilities, partially offset by higher launch, engineering and other costs associated with new assembly business, the negative impact of the UAW labour strikes during the third and fourth quarters of 2023, the net unfavourable impact of commercial items, lower amortization related to the initial value of public company securities, higher launch costs associated with new manufacturing business, and the impact of acquisitions, net of divestitures.

During the year ended Dec. 31, 2023, income from operations before income taxes was $1.6-billion, net income attributable to Magna International was $1.2-billion and diluted earnings per share were $4.23 -- increases of $728-million, $621-million and $2.20, respectively, each compared with the year ended Dec. 31, 2022.

During the year ended Dec. 31, 2023, adjusted diluted earnings per share increased 29 per cent to $5.49, compared with the year ended Dec. 31, 2022.

During the year ended Dec. 31, 2023, Magna generated cash from operations before changes in operating assets and liabilities of $2.9-billion and invested $221-million in operating assets and liabilities. Investment activities for the year ended Dec. 31, 2023, included $1.5-billion to purchase Veoneer Active Safety, $2.5-billion in fixed-asset additions, a $562-million increase in investments, other assets and intangible assets, and $11-million in public and private equity investments.

Return of capital to shareholders

Magna paid dividends of $133-million and $522-million for the three months and year ended Dec. 31, 2023, respectively. Magna's board of directors declared a fourth quarter dividend of 47.5 cents per common share. This represents a 3-per-cent increase in Magna's dividend, representing the company's 14th consecutive year of fourth quarter dividend increases. The dividend is payable on March 8, 2024, to shareholders of record as of the close of business on Feb. 23, 2024.

Subject to approval by the Toronto Stock Exchange and New York Stock Exchange, Magna's board of directors approved a new normal course issuer bid (NCIB) to purchase up to 300,000 of the company's common shares, representing approximately 0.11 per cent of Magna's public float of common shares. This NCIB is expected to commence on Feb. 15, 2024, and will terminate one year later.

2024 and 2026 outlook

Magna's current-year outlook is provided annually, with quarterly updates; Magna's 2026 outlook is provided in an attached table but not updated quarterly. Magna's outlook does not incorporate material unannounced acquisitions or divestitures.

Key drivers of Magna's business

Magna's operating results are primarily dependent on the levels of North American, European and Chinese car and light truck production by the company's customers. While Magna supplies systems and components to every major original equipment manufacturer (OEM), Magna does not supply systems and components for every vehicle, nor is the value of Magna's 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 Magna's content on specific vehicle production programs are also important drivers of Magna's results.

OEM production volumes are generally 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.

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; government subsidies to consumers for the purchase of low-emission and zero-emission vehicles; and other factors.

About Magna International Inc.

Magna is more than one of the world's largest suppliers in the automotive space. Magna is a mobility technology company built to innovate, with a global, entrepreneurial-minded team of over 179,000 employees across 342 manufacturing operations and 104 product development, engineering and sales centres spanning 28 countries. With more than 65 years of expertise, Magna's ecosystem of interconnected products, combined with its complete vehicle expertise, uniquely positions the company to advance mobility in an expanded transportation landscape.

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