Magna said the first quarter results were below expectations and reflected 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, the company said that each of its operating segments was performing in line or ahead of 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 US$1.1 billion and that Adjusted EBIT was negatively impacted by approximately US$250 million”, said Magna. On a consolidated basis, sales totalled US$8.66 billion for the first quarter of 2020, down 18% year-on-year. This compares to global light vehicle production that decreased 27%, reflecting declines of 44% in China, 19% in Europe and 13% in North America. Consolidated sales in Seating decreased 13% in the period.
Adjusted EBIT of US$403 million in the first quarter decreased 44% from the same quarter in 2019, driven by lower sales and lower adjusted EBIT as a percentage of sales. Income from operations before income taxes was US$386 million compared with US$1.37 billion in the first quarter of 2019. Net income totalled US$261 million in the quarter, significantly down from US$1.11 billion a year earlier, while diluted earnings per share decreased to US$0.86 compared with US$3.39 in the first quarter of 2019.
“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”, said Vince Galifi, Chief Financial Officer, Magna. “Having said this, our strong balance sheet allows us to continue to invest in new programmes and in new technologies to ensure our long-term success. We believe our liquidity position, which is currently about US$5 billion, should allow us to withstand a Covid-19 related downturn and positions us to take advantage of value-creating opportunities”, he added.
Regarding the supply chain, Magna said that none of its material suppliers has become bankrupt or insolvent as a result of the Covid-19 suspension of production, and that the company has heightened its focus on the financial health of its supply base. In addition to providing suppliers with work restart protocols through its Smart Start Playbook, Magna said it is supporting suppliers with respect to potential government support programmes and exploring potential industry solutions for suppliers’ liquidity and working capital challenges.
Magna’s product portfolio includes body, chassis, exterior, seating, powertrain, active driver assistance, electronics, mechatronics, mirrors, lighting and roof systems.
