Company News

UPDATE 2-Magna International profit beats, reaffirms lower 2020 sales outlook

(Adds Magna statement on coronavirus, background)

Feb 21 (Reuters) - Canadian auto parts Magna International Inc reported a better-than-expected quarterly profit on Friday, partly helped by lower costs, and reaffirmed its expectations of lower 2020 sales.

The company last year closed some underperforming plants in North America, as production fell due to lower demand.

Magna also warned that coronavirus outbreak in China, which generates about 5% of its annual sales, could further hit its 2020 sales, as the full impact of the epidemic is yet to be ascertained.

“We have not included any adjustment to our outlook related to coronavirus, as it is difficult to forecast when our customers’ facilities in China will be fully operational,” Magna said in a statement.

The company said it continues to expect full-year sales of about $39 billion, the mid-point of its forecast range of $38 billion to $40 billion, compared with $39.43 billion in 2019.

Other North American peers including BorgWarner Inc and Visteon Corp have been struggling due to weak automotive demand in a slowing Chinese economy, where the coronavirus spread has aggravated a downtrend in the industry.

Magna, which makes parts such as body structures, chassis and powertrain for customers including Ford Motor and Volkswagen, said its cost of goods sold fell 7.2% to $8.09 billion in the fourth quarter ended Dec. 31.

The company last month scrapped its partnership with U.S. ride hailing company Lyft to co-develop self-driving technology in a bid to boost its operating margins in 2020, even as overall sales fall.

Net income attributable to Magna fell to $440 million in the quarter, from $456 million a year earlier.

The company earned $1.41 per share in the quarter, above average analysts’ estimate of $1.33 per share, according to IBES data from Refinitiv.

Total sales fell 7.3% to $9.40 billion. (Reporting by Ankit Ajmera in Bengaluru; Editing by Arun Koyyur, Ramakrishnan M. and Vinay Dwivedi)