Canadian auto supplier Magna International Inc. said Friday that fourth-quarter net income and revenue fell as lower vehicle production caused by the microchip shortage hampered results. Still, the company raised its quarterly cash dividend by 5 percent to 45 cents a share as it generated solid free cash flow for 2021.
North America's largest auto supplier also said Board Chair William L. Young, 66, will retire at the end of the current term. The board has selected Robert F. MacLellan, 66, currently audit committee chair, to succeed Young following Magna’s annual meeting on May 3.
For the quarter Magna's net income fell 37 percent to $464 million, while adjusted earnings before interest and taxes fell 54 percent to $508 million. Revenue dropped 14 percent to $9.1 billion as global vehicle production was down 17 percent.
For the full year net income doubled to $1.5 billion on revenue of $36.2 billion, an increase of 11 percent. Full-year adjusted EBIT rose 23 percent to $2.1 billion.
“Although 2021 presented its share of challenges, we delivered above-market sales growth and generated solid free cash flow, as we worked closely with our customers and suppliers to minimize the impacts on vehicle production," CEO Swamy Kotagiri said in a statement.
In 2021, Magna generated cash from operations of $2.9 billion
The company, which lost a bid to bolster its advanced driver assistance systems business through an acquisition of Sweden's Veoneer Inc., is now looking to capitalize on soaring demand in the areas of electrification and autonomous cars.
"We expect improved operating results in 2022 as the industry recovers and production schedules normalize," Kotagiri said in the statement.
The Ontario-based company estimates 2022 net income of $1.7 billion $1.9 billion and revenue of $38.8 billion to $40.4 billion.
On a call with investors, Kotagiri said Magna expects weaker financial results in the first half of the year relative to the second “primarily as a result of semiconductor availability.”
Magna expects North American vehicle production to rise from 13.1 million units to 15.2 million. It also anticipates European production to jump from 16 million to 18.5 million units. Annual production is expected to fall slightly in China, from 24.5 million to 24.2 million units.
Meanwhile, North American automakers and suppliers are wrestling with Canadian demonstrators protesting anti-coronavirus mandates and other issues shutting the Ambassador Bridge between Windsor, Ontario, and Detroit, which serves as a supply route for Detroit's carmakers, from Monday night.
Magna spokeswoman Tracy Fuerst said a "handful" of the supplier's plants in the U.S. and Canada have started to adjust or reduce shifts to match automakers' schedules. As an example, she pointed to a just-in-time seating facility in the U.S. that is idled today because the assembly plant it supplies is shut down.
On an earnings call with analysts Friday, Kotagiri said the company was "starting to see some initial impact" from the blockade as its automaker customers scale back production plans.
"We're watching it closely, and we hope it gets resolved quickly," he said.
Business unit results
During the fourth quarter of 2021, Magna generated sales of $3.6 billion from its body exteriors and structures business, down 18 percent from a year earlier, as the impact of the microchip shortage more than offset the launch of new programs.
Likewise, the semiconductor shortage led to a 12-percent decline in revenue from its power and vision unit to $2.8 billion. Sales from Magna’s seating business dipped 6.5 percent to about $1.3 billion.
Revenue from the company’s complete vehicles business fell 14 percent to $1.5 billion as the number of units the company built on the quarter fell 5 percent to 32,700 units. The company pinned reduced volume on the impact of the microchip shortage and the fall in revenue in part on the weakening of the euro against the U.S. dollar.
N.A. contract assembly?
Magna owns a contract-assembly plant in Austria, where it builds vehicles for automakers including Mercedes-Benz, BMW and Jaguar. It also has a deal to build vehicles for EV startup Fisker.
Kotagiri reiterated today that the supplier remains open to expanding its contract vehicle manufacturing business into North America if it can build a viable business case.
“We’re very open to the idea of having the footprint here,” he said on the earnings call. “As I’ve always said, I think it’s important to have a little bit visibility on product plans. Even though it starts off at a lower volume, if there’s enough visibility in the long-term, I think we’ll be looking forward to having that footprint in North America.”
In addition to MacLellan succeeding Young as board chair, the company announced other changes to the board:
- Peter G. Bowie, 74, will succeed MacLellan as audit committee chair.
- Thomas Weber, 67, formerly a member of Magna’s Technology Advisory Council and a highly-respected former Daimler executive, has been appointed to the board as a non-independent, non-executive director.
- Cindy Niekamp 61, has also communicated her intention to retire at the end of her current term in May.
Reuters contributed to this report.