By Kannaki Deka
Feb 10 (Reuters) – Canada’s Magna International Inc (MG.TO) on Friday reported an 80% fall in quarterly profit and warned of more pressure on its margins from volatile production schedules at automakers and elevated costs.
The auto parts maker’s U.S.-listed shares were down 13.7% and on track for their worst day in nearly three years.
Chip shortages, lost production and rising raw material costs have weighed on auto suppliers and auto executives say some of the pressures are expected to persist this year amid a looming recession.
“We expect continued input cost pressures in 2023,” Patrick McCann, Magna’s finance chief, said on a call with analysts.
The company said it expects its EBIT (earnings before income tax) margin for full-year 2023 to be between 4.1% and 5.1%, below analysts’ expectations of 5.6%, according to Refinitiv.
“We think margins are going to remain an issue for MGA for some time,” CFRA analyst Garrett Nelson said.
The company, which counts Ford Motor Co (F.N) and Volkswagen (VOWG_p.DE) as its customers, added it expects global light vehicle to be up about 2% in 2023, with volumes in North America and Europe – its two largest markets – to remain well below 2019 levels.
For the quarter through Dec. 31, Magna reported adjusted net income of 91 cents per share, missing analysts’ expectations of $1.06, in part due to due to engineering costs.
Companies such as Magna are jostling to supply parts to automakers, which are investing billions of dollars in developing electric vehicles. Magna in December agreed to buy Veoneer Active Safety for $1.53 billion to bolster its portfolio of self-driving technology.
Magna said it does not expect share buybacks in 2023 in part due to the deal.
Revenue increased 5% to $9.57 billion for the quarter, compared with analysts’ expectations of $9.51 billion.
