Magna Q2 Earnings: Canadian Supplier Reports $156 Million Q2 Loss on Impact of Russo-Ukraine War, Higher Costs

Magna International Inc. reported a net loss of $156 million in the second quarter as diversified Canadian auto suppliers grapple with higher commodity and energy costs and the impact of the Russian invasion of Ukraine.

The net loss compares with earnings of $424 million in the second quarter of 2021 and comes in at $9.36 billion despite a 3.6 percent year-over-year increase in sales.

The loss for the quarter ended June 30 included a one-time impairment charge of $376 million related to Magna’s operations in Russia, which remain largely dormant due to the war. Magna operates six plants in the country employing 2,500 people.

Magna said adjusted income before interest, taxes and other expenses was $358 million, compared to $557 million in adjusted net income in the second quarter of 2021.

“Continuing challenges have impacted our second quarter earnings,” Magna CEO Swami Kotagiri said in a conference call with analysts on Friday. “However, the results were in line with our internal expectations.”

Higher commodity costs and other inflationary factors have led to “advanced” input costs that dragged down the company’s margins. Kotagiri said the company is “highly focused” on recovering those increased costs and is continuing discussions with automakers to adjust pricing.

As with most of the industry, Magna’s second-quarter results were also impacted by microchip shortages and the COVID-19 lockdown in China, which dented demand for vehicles in the world’s largest auto market.

Kotagiri said he expects global semiconductor supplies to improve in the second half of the year and the Chinese government will implement economic stimulus.

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Sales within Magna’s exterior and construction unit grew 8 percent to $3.9 billion due to increased global vehicle production and the launch of new programs.

Similarly, seating unit sales rose 7 percent to $1.3 billion from a year ago. Revenue from the power and vision unit was flat at $2.9 billion.

Sales revenue of Magna’s complete vehicle assembly business declined 6 percent to $1.4 billion due to the weakening of the euro against the dollar. This produced 1,500 more vehicles for automakers than a year earlier.

Adjusted earnings before interest and taxes fell across all business units compared to the second quarter of 2021.

Outlook, Acquisitions

Magna marginally increased its annual sales outlook, with revenue for the year expected to be $37.6 billion to $39.2 billion, nearly $300 million higher than its previous estimate. Its annual net income forecast remained unchanged, from $1.3 billion to $1.5 billion.

Kotagiri said low dealer inventory levels and resilient demand for new vehicles should help keep the auto market afloat even as the industry continues to deal with supply chain challenges and rising interest rates.

Kotagiri said Magna is ready for acquisition in the second half of the year as global economic conditions develop.

“There may be opportunities that come along, and we are very circumspect,” he said. “We’ll put our ears on the ground a little bit more.”

magna share It fell 0.1 percent to $63.73 in afternoon trading on Friday.

is number 4 on Magna Automotive News list of top 100 global suppliers, With worldwide parts sales to automakers worth $36.2 billion in 2021.

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Reuters contributed to this report.