Canadian auto parts maker Magna International Inc., on Thursday reported an increase in first-quarter net income but warned of trying times ahead in the remainder of 2019.
Magna said net income rose to $1.11 billion in the first quarter ended March 31, up from $660 million a year earlier, as it included a one-time gain of $516 million due to the sale of its fluid pressure and controls unit. An unrealized gain on a revaluation on its investment in the ride-hailing company Lyft also helped boost the company’s profits.
However, total sales fell nearly 2 percent to $10.59 billion, down from $10.79 billion a year earlier. Magna said global auto production fell 7 percent during the same quarter.
Adjusted earnings fell 18 percent to $720 million.
The company's shares plunged 10 percent to $47.85 on Wall Street as most stock indexes fell sharply in early trading.
The ongoing tariff war between the United States and China has hurt Magna, one of North America’s largest auto suppliers. The industry had to cope with higher metal prices after the Trump administration imposed tariffs on steel and aluminum imports last year, triggering retaliation.
The company also sees 2019 light vehicle production of 16.7 million units in North America, lower than its earlier forecast of 17 million units. It expects Europe to produce 21.5 million vehicles, down from the 22.3 million it previously forecasted.
We have revised our outlook for 2019 to reflect lower vehicle production globally,” CEO Don Walker said in a statement. “In addition, we are seeing margin pressure in our Power & Vision segment related to higher program engineering and other costs for certain new ADAS [advanced driver-assistance systems] programs and at a Getrag joint-venture in China due to lower than previously anticipated sales.
The company did see an increase in the proportion of sales generated in its complete vehicles segment relative to total sales, but contract assembly has significantly lower margins, Magna said. Magna also said it saw lower margins in its seating segment as a result of higher costs on the launch of new seating programs and lower production volumes on certain programs, although it didn’t identify provide details.
Reuters and Automotive News Canada contributed to this report.
