Magna chief executive looks for further improvements in European operations

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AURORA, Ont. – Magna International Inc. (TSX:MG) chief executive Don Walker says the company’s European operations are improving, but work still needs to be done, including the closing and consolidation of some of its facilities.

“We’re much more disciplined now in our quoting for new business, which has had a negative impact in the short term on our sales, but we believe it is the right direction for the long term to make sure we will be growing profitably,” he told an investor conference in Detroit.

Walker said the auto parts company is also continuing its restructuring efforts in Europe where margins remain well below operations elsewhere, but was not specific.

“We’re taking further restructuring actions in certain operations, including closures and consolidations of a number of facilities over in Europe,” he said.

“Most of this will take place over the next two years.”

Walker made the comments as the company said it expected revenue for 2014 in the range of US$33.8 billion to US$35.5 billion, below analyst estimates of US$35.8 billion.

Magna’s previous outlook, issued in November with its third-quarter results, estimated its revenue for 2013 would total between US$33.9 billion and US$34.8 billion.

Looking to 2016, Magna said it expects its revenue will be about US$3.6 billion higher than in 2014.

The outlook for 2014 was based on light vehicle production of 16.7 million in North America and 19.1 million in Europe.

North American sales for Magna are expected to be between $16.8 billion and $17.4 billion, while its European operations should bring in $9.5 billion to $9.9 billion.

Sales in the rest of the world, which includes China and India, are expected to grow to between $2.3 billion and $2.6 billion.

Complete vehicle assembly sales are forecast in the range of $2.6 billion to $2.9 billion.

Walker said the company is looking to see continued significant growth in China and India where vehicle production is forecast to climb.

Six new facilities will start operations in China by the end of 2016. “We expect to double our sales between 2013 and 2016 there,” Walker said.

Capital spending is expected to be about $1.4 billion for 2014.

In reviewing the outlook, chief financial officer Vincent Galifi said the company expects to be able to continue raising its dividend.

“We have settled into a pattern of annual dividend increases … and you can expect this pattern to continue,” Galifi said.

Magna paid a quarterly dividend of 32 cents U.S. per share in 2013, up from 27.5 cents U.S. in 2012 and 25 cents U.S. in 2011.

Meanwhile, Walker said the company could make an acquisition if the opportunity is right, but that it was not the top priority.

“I don’t want to make an acquisition for the sake of making an acquisition,” he said.

“Quite frankly, we’ve looked at a lot and some of them we don’t have a willing seller and some of them are just overpriced, in our opinion.”

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