Magna International Inc. (TSX: MG; NYSE: MGA) today reported financial results for the first quarter ended March 31, 2020. Please click HERE for full first quarter Financial Statements and MD&A.
Don Walker, Magna’s Chief Executive Officer commented: “As we face the COVID-19 pandemic, the health and safety of employees has been our number one priority. We have a strong, experienced management team that has faced challenging times in the past, and I am very pleased with the coordinated global response of the entire team to this significant disruption in our business. In coordination with our customers, suppliers, and health experts, we are now highly focused on the safe restart of production at a number of our facilities. I am confident the industry will recover from this crisis and that Magna is in a strong position going forward.”
THREE MONTHS ENDED MARCH 31, 2020
Our first quarter results were below our expectations reflecting the impact of COVID-19 related customer shutdowns which started in China in late January and spread to Europe and North America in mid-March. Prior to the shutdowns, each of our operating segments was performing in-line or ahead of our expectations. Based on our expectations prior to the production suspensions compared to final production levels for the first quarter, we estimate such lost sales to have been approximately $1.1 billion and that Adjusted EBIT was negatively impacted by approximately $250 million. Income from operations before income taxes, net income attributable to Magna International Inc. and diluted earnings per share for the first quarter of 2020 were also negatively impacted by the COVID-19 related customer shutdowns.
On a consolidated basis, we posted sales of $8.66 billion for the first quarter of 2020, a decrease of 18% from the first quarter of 2019. This compares to global light vehicle production that decreased 27%, reflecting declines of 44% in China, 19% in Europe and 13% in North America. Excluding the impact of foreign currency translation and divestitures net of acquisitions, consolidated sales decreased 14%, and by segment: Power & Vision decreased 5%, Seating decreased 13%, Body Exteriors & Structures decreased 14%, and Complete Vehicles decreased 29%.
Adjusted EBIT of $403 million in the first quarter of 2020 decreased 44% from the first quarter of 2019, driven by lower sales and lower adjusted EBIT as a percentage of sales. Adjusted EBIT as a percentage of sales declined to 4.7% in the first quarter of 2020 compared to 6.8% in the first quarter of 2019. This was substantially attributable to our estimated impact of COVID-19.
Income from operations before income taxes was $386 million for the first quarter of 2020 compared to $1.37 billion in the first quarter of 2019. Included in Income from operations before income taxes in the first quarter of 2019 were Other income, net items totaling $679 million, comprised substantially of a gain on the sale of our Fluid Pressure & Controls business and an unrealized gain on the revaluation of our investment in Lyft, partially offset by restructuring costs. Excluding Other income, net from the first quarter of 2019, income from operations before income taxes decreased $303 million in the first quarter of 2020 compared to the first quarter of 2019.
Net income attributable to Magna International Inc. was $261 million for the first quarter of 2020 compared to $1.11 billion in the first quarter of 2019. Included in net income attributable to Magna International Inc. in the first quarter of 2019 were Other income, net items totaling $575 million after tax. Excluding Other income, net from the first quarter of 2019, net income attributable to Magna International Inc. decreased $270 million in the first quarter of 2020 compared to the first quarter of 2019.
Diluted earnings per share decreased to $0.86 in the first quarter of 2020, compared to $3.39 in the comparable period. Adjusted diluted earnings per share decreased 47% to $0.86 compared to $1.63 for the first quarter of 2019.
In the first quarter of 2020, we generated cash from operations before changes in operating assets and liabilities of $615 million, and $24 million in operating assets and liabilities. Investment activities for the first quarter of 2020 included $203 million in fixed asset additions, a $100 million investment in Waymo, a private equity investment, a $93 million increase in investments, other assets and intangible assets, and $7 million to purchase subsidiaries.
RETURN OF CAPITAL TO SHAREHOLDERS
During the three months ended March 31, 2020, we paid dividends of $121 million. In addition, we repurchased for cancellation 4.8 million shares for $192 million in the first quarter of 2020.
Our Board of Directors declared a first quarter dividend of $0.40 per Common Share, payable on June 5, 2020 to shareholders of record as of the close of business on May 22, 2020.
THE IMPACT OF COVID-19
The COVID-19 pandemic and related restrictions have resulted in the temporary suspension of production at substantially all OEM and supplier production facilities in China, Europe and North America. While OEM and supplier final production facilities in China have generally resumed production, facilities in Europe are beginning to return to production and facilities in North America are expected to return to production in stages over the next few weeks.
We continue to actively monitor the situation in each of the markets in which we operate and adjust our plans in accordance with governmental orders and legal requirements and the best interests of our employees, customers, suppliers or other stakeholders.
The health and safety of our employees is our number one priority. As the COVID-19 virus spread, we developed protocols, assessment tools and guidance documents to assist all of our manufacturing facilities and offices to establish health screening tools and isolation guides for our employees, provide personal protection equipment, institute contact tracing for any known cases of the virus within our employee population, and institute decontamination procedures where needed. Throughout, our medical and health and safety staff have worked in cooperation with public health authorities and in coordination with the medical directors of other businesses to share best practices, as well as to promote employee safety and confidence for return to work.
We are presently unable to assess the impact of the pandemic on our financial results for the remainder fiscal 2020 and remain unable at this time to resume providing an Outlook for the year.
Vince Galifi, Magna’s Chief Financial Officer commented: “Given the magnitude of the expected declines in, and uncertainty regarding, future vehicle production, we have been taking prudent actions across the company to reduce costs and conserve cash, including stopping share repurchases. Having said this, our strong balance sheet allows us to continue to invest for new programs and in new technologies to ensure our long-term success. We believe our liquidity position, which is currently about $5 billion, should allow us to withstand a COVID-19 related downturn and positions us to take advantage of value-creating opportunities.”
SOURCE: Magna
