First-quarter net income at diversified supplier Magna International Inc. surged 136 percent as the company increased its 2021 financial outlook, even as the global microchip shortage roils the global auto industry.
Net income on the quarter surged to $615 million, compared with $261 million in the first quarter of 2020, which was impacted by global manufacturing shutdowns due to the COVID-19 pandemic. Revenue rose 18 percent to $10.2 billion, up from $8.7 billion in 2020, Magna said in a statement Thursday.
Magna raised its 2021 net income outlook to between $2.2 billion and $2.4 billion, up slightly from a previous estimate of $2.1 billion to $2.3 billion. It raised its sales outlook to between $40.2 billion and $41.8 billion, up about $200 million from its previous outlook.
Shares in Magna rose 2.1 percent to $95.88 in morning trading on Wall Street.
Magna’s optimistic outlook comes even as the global semiconductor shortage continues to pose a significant challenge for the supplier and its customers. The crisis has forced automakers to shut down or reduce vehicle output at their factories worldwide, causing the industry to lose more than 2.3 million units of production worldwide, according to AutoForecast Solutions LLC.
‘Industry headwinds’
“As we look past the near-term industry headwinds, we see considerable growth opportunities for Magna in the coming years,” Magna CEO Swamy Kotagiri said in a statement.
The company’s rising outlook reflects its growing business in China, where the automaker anticipates light-vehicle production of 24.7 million units in 2021, up from a previous estimate of 24 million. Projected growth in China offsets a decrease in the outlook for North America, the company’s largest market, where Magna expects 15.6 million units to be built, down 300,000 units from its previous assumption.
On a call with investors, Magna CFO Vince Galifi said the reduction in North American assembly estimates is in part the result of the chip shortage. Kotagiri called the situation “very, very fluid.”
“I think the next quarter is going to be a tightwalk as we manage through, but hopefully we see a little relaxation beyond the second quarter,” said Kotagiri, who took over as the company’s CEO at the start of the year.
Regional, segment results
First-quarter sales in North America rose about 2 percent to $4.6 billion on flat year-over-year vehicle production, while European revenue jumped 21 percent to $4.7 billion. Sales in Asia surged to $924 million from $331 million, driven in large part by an 87 percent increase in production in China compared with 2020, when the COVID-19 pandemic forced factories there to shut down.
Revenue from the company’s body exteriors and structures business rose by 9 percent compared with the year-earlier period to $4 billion. Magna attributed the segment’s growth to the launch of new programs and higher global new-vehicle production.
Sales in its power and vision business, which includes powertrains, electronics and mirrors, jumped 25 percent from a year earlier to $3.2 billion on higher global production and new programs, among other factors.
Seating revenue rose 3 percent to $1.3 billion, with an “unfavorable production mix” offsetting the launch of new programs and gains from the company’s September acquisition of Chinese seat supplier Honglizhixin.
Sales from Magna’s complete vehicles business surged 40 percent on higher assembly volumes. Magna built 40,000 vehicles for its customers, up 30 percent from the 30,900 units it assembled in the first quarter of 2020.
Magna, which produces vehicles for brands such as BMW, Mercedes-Benz and Jaguar, expects sales of between $6.7 billion and $7 billion from from the unit in 2021, up $200 million from its previous estimate.
Magna has an assembly plant in Austria, as well as one in China as part of a joint venture. In addition to established automakers, the company has also partnered with newcomers to build electric vehicles, including deals in recent months with Fisker and Israeli startup REE Automotive.
Magna ranks No. 3 on the 2020 Automotive News list of the top 100 global suppliers with worldwide sales to automakers of $39.4 billion in 2019.