Magna cuts 2021 revenue forecast as chip shortages expected to reduce vehicle output
TORONTO (CP) – Magna International Inc. has cut its revenue forecast for the year due to an expected reduction in global light vehicle production caused by ongoing semiconductor chip shortages.
“It is clear that the global semiconductor chip shortage has been, and will be, more impactful to 2021 than most in the industry anticipated earlier this year,” said Magna chief executive Swamy Kotagiri on an earnings call Friday.
The global shortage of chips for the numerous electronic components in vehicles has forced automakers to slow production for some models and cut features in others as supplies remain unpredictable.
“As a result of much lower production than we had anticipated back in early May, particularly in North America and Europe, our sales came in well below our expectations for the quarter,” said Kotagiri.
Sales for the quarter ending June 30 totalled US$9.03 billion, more than double the US$4.29 billion the same quarter last year when there were unprecedented industry-wide production suspensions due to the COVID-19 pandemic.
Global light vehicle production in the quarter was up 58 per cent from last year, but down about 10 per cent in the first quarter this year largely due to the chip shortage, said Magna.
The Ontario-based auto parts company, which keeps its books in U.S. dollars, says it earned US$424 million or US$1.40 per diluted share in the second quarter, compared with a net loss of US$647 million or US$2.17 per share a year earlier.
Adjusted net income swung to US$426 million or US$1.40 per share, compared with a loss of US$511 million or US$1.71 per share in the second quarter of 2020.
Analysts on average expected Magna to report US$1.38 per share in adjusted profits on US$9.29 billion of revenues, according to financial data firm Refinitiv.
Kotagiri said that rising commodity costs, as well as wage pressures in some markets and new labour laws in Mexico, have also put pressure on margins.
Magna is forecasting that 14.4 million North American light vehicles will be built this year, down 7.7 per cent from its previous forecast for 15.6 million vehicles. European production is expected to decrease 2.2 per cent to 18.1 million units while Chinese production should remain steady at 24.7 million.
As a result, it has reduced its forecast for net income by US$200 million to between US$2 billion and US$2.2 billion. It expects total sales to come in between US$38 billion and US$40 billion, down about US$2.2 billion.
In July, Magna announced it had reached a US$3.8-billion deal to buy Swedish tech company Veoneer, a Swedish tech company focused on automotive safety, but on Thursday Qualcomm Inc. said it had submitted a US$4.6-billion bid for the company.