Magna International Inc 6-K, filed Feb 11, 2022
Magna International Inc (MGA)
About this 6-K
Magna International Inc filed this 6-K on February 11, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 under the Securities Exchange Act of 1934
For the month of February 2022
Commission File Number: 001-11444
MAGNA INTERNATIONAL INC.
(Exact Name of Registrant as specified in its Charter)
337 Magna Drive, Aurora, Ontario, CANADA L4G 7K1
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F [ ] Form 40-F [ X ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant's "home country"), or under the rules of the home country exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| MAGNA INTERNATIONAL INC. | ||
| (Registrant) | ||
| Date: February 11, 2022 | By: /s/ "Bassem Shakeel" | |
| Bassem A. Shakeel, | ||
| Vice-President and Corporate Secretary | ||
EXHIBITS
EXHIBIT 99.1
 |
PRESS RELEASE |
Magna Announces Fourth Quarter 2021 Results and Outlook
Fourth Quarter 2021 Highlights
- Sales of $9.1 billion decreased 14%, compared to a 17% decrease in global light vehicle production
- Diluted earnings per share and Adjusted diluted earnings per share of $1.54 and $1.30, respectively, compared to $2.45 and $2.83 last year
- Returned $378 million to shareholders through share repurchases and dividends
- Raised quarterly cash dividend by 5% to $0.45 per share
Full Year 2021 Highlights
- Sales of $36.2 billion increased 11%, compared to global vehicle production which increased 4%
- Diluted earnings per share and Adjusted diluted earnings per share of $5.00 and $5.13, respectively, compared to $2.52 and $3.95 last year
- Returned over $1 billion to shareholders through share repurchases and dividends
AURORA, Ontario, Feb. 11, 2022 (GLOBE NEWSWIRE) -- Magna International Inc. (TSX: MG; NYSE: MGA) today reported financial results for the fourth quarter and year ended December 31, 2021.
| THREE MONTHS ENDED DECEMBER 31, |
YEAR ENDED DECEMBER 31, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Reported | |||||||||||||||
| Sales | $ | 9,110 | $ | 10,568 | $ | 36,242 | $ | 32,647 | |||||||
| Income from operations before income taxes | $ | 576 | $ | 973 | $ | 1,948 | $ | 1,006 | |||||||
| Net income attributable to Magna International Inc. |
$ | 464 | $ | 738 | $ | 1,514 | $ | 757 | |||||||
| Diluted earnings per share | $ | 1.54 | $ | 2.45 | $ | 5.00 | $ | 2.52 | |||||||
| Non-GAAP Financial Measures(1) | |||||||||||||||
| Adjusted EBIT | $ | 508 | $ | 1,095 | $ | 2,064 | $ | 1,676 | |||||||
| Adjusted diluted earnings per share | $ | 1.30 | $ | 2.83 | $ | 5.13 | $ | 3.95 | |||||||
All results are reported in millions of U.S. dollars, except per share figures, which are in U.S. dollars.
(1) Adjusted EBIT and Adjusted diluted earnings per share are Non-GAAP financial measures that have no standardized meaning under U.S. GAAP, and as a result may not be comparable to the calculation of similar measures by other companies. A reconciliation of these Non-GAAP financial measures is included in the back of this press release.
 |
“Although 2021 presented its share of challenges, we delivered above-market sales growth and generated solid free cash flow, as we worked closely with our customers and suppliers to minimize the impacts on vehicle production. Despite significant input cost headwinds, we expect improved operating results in 2022 as the industry recovers and production schedules normalize. In addition, we remain confident in our ability to capitalize on the opportunities in front of us, especially in the areas of electrification, autonomy and new mobility.” - Swamy Kotagiri, Magna’s Chief Executive Officer
|
THREE MONTHS ENDED DECEMBER 31, 2021
Sales and Adjusted EBIT came in ahead of our expectations in the fourth quarter of 2021, as vehicle production was better than forecasted. We also benefitted from lower than anticipated net warranty and engineering costs.
We posted sales of $9.1 billion in the fourth quarter of 2021, a decrease of 14% from the fourth quarter of 2020. By contrast, global light vehicle production decreased 17% in the fourth quarter, reflecting decreases of 20% in North America, 28% in Europe, and 10% in China. The lower light vehicle production was driven by the semiconductor chip shortages the industry has faced throughout 2021.
Adjusted EBIT decreased to $508 million in the fourth quarter of 2021 compared to $1.1 billion in the fourth quarter of 2020. This decrease mainly reflects lower margins earned on reduced sales, labour and other operational inefficiencies at our facilities as a result of unpredictable customer production schedules due to semiconductor chip shortages, higher production costs, including commodity, freight and energy costs, and lower net favourable commercial items. These factors were partially offset by lower profit sharing and incentive compensation costs and decreased net warranty costs.
Income from operations before income taxes was $576 million in the fourth quarter of 2021 compared to $973 million in the fourth quarter of 2020. Included in income from operations before income taxes in the fourth quarter of 2021 was Other income, net of $90 million, comprised of merger agreement termination fee income and net gains on the revaluation of certain public and private equity investments, partially offset by restructuring and impairment costs. In comparison, Other expense, net was $100 million in the fourth quarter of 2020, comprised of restructuring and impairment costs and a loss on the sale of an equity-accounted investment, partially offset by net gains on the revaluation of certain private equity investments. Excluding Other (income) expense, net from both periods, income from operations before income taxes decreased $587 million in the fourth quarter of 2021 compared to the fourth quarter of 2020.
Net income attributable to Magna International Inc. was $464 million in the fourth quarter of 2021 compared to $738 million in the fourth quarter of 2020. Included in net income attributable to Magna International Inc. in the fourth quarter of 2021 was Other income, net of $60 million after tax and Adjustments to Deferred Tax Valuation Allowances of $13 million (see "Non-GAAP Financial Measures" section included in this Press Release), compared to Other expense, net of $113 million in the fourth quarter of 2020. Excluding Other (income) expense, net and Adjustments to Deferred Tax Valuation Allowances from both periods, net income attributable to Magna International Inc. decreased $460 million in the fourth quarter of 2021 compared to the fourth quarter of 2020.
Diluted earnings per share decreased to $1.54 in the fourth quarter of 2021 compared to $2.45 in the comparable period. Adjusted diluted earnings per share decreased to $1.30 compared to $2.83 in the fourth quarter of 2020.
In the fourth quarter of 2021, we generated $1.4 billion in cash from operating activities after changes in operating assets and liabilities. Investment activities in the fourth quarter of 2021 included $549 million in fixed asset additions, $105 million for investments, other assets and intangible assets, $94 million in acquisitions and business combinations, and $45 million in public and private equity investments.
YEAR ENDED DECEMBER 31, 2021
We posted sales of $36.2 billion for the year ended December 31, 2021, an increase of 11% from the year ended December 31, 2020, compared to global light vehicle production which increased 4%. Light vehicle production in 2021 was negatively impacted primarily by semiconductor chip shortages, while 2020 was negatively impacted primarily by the COVID-19 pandemic and related restrictions that resulted in the temporary suspension of production at substantially all OEM and supplier production facilities in the first half of 2020. In 2021, light vehicle production increased 1% in North America and declined 3% in Europe, our two largest markets, and increased 5% in China.
Adjusted EBIT increased to $2.1 billion in 2021 compared to $1.7 billion in 2020. The increase was primarily due to margins earned on higher sales, cost savings as a result of restructuring actions, lower net application engineering costs related to three upcoming ADAS program launches and decreased net warranty costs. These factors were partially offset by labour and other operational inefficiencies at our facilities as a result of unpredictable customer production schedules due to semiconductor chip shortages, higher production costs, including commodity, freight and energy costs, and higher launch costs.
During 2021, income from operations before income taxes was $1.9 billion and net income attributable to Magna International Inc. was $1.5 billion, up $942 million and $757 million, respectively, each compared to 2020.
Diluted earnings per share increased to $5.00 in 2021 compared to $2.52 in 2020. Our adjusted diluted earnings per share increased 30% to $5.13 in 2021 compared to $3.95 in 2020.
During 2021, we generated cash from operations of $2.9 billion including changes in operating assets and liabilities. Investment activities in 2021 included $1.4 billion in fixed asset additions, $403 million in investments, other assets and intangible assets, $530 million in acquisitions and business combinations, and $68 million in public and private equity investments.
RETURN OF CAPITAL TO SHAREHOLDERS
During the three months and year ended December 31, 2021, we repurchased 3.1 million shares for $251 million and 6.0 million shares for $517 million, respectively. In addition, we paid dividends of $127 million and $514 million for the three months and year ended December 31, 2021, respectively.
Our Board of Directors declared a fourth quarter dividend of $0.45 per Common Share. This represents a 5% increase in the dividend. The dividend is payable on March 11, 2022 to shareholders of record as of the close of business on February 25, 2022.
2022 AND 2024 OUTLOOK
Our current year Outlook is provided annually and updated quarterly; our 2024 Outlook is provided below, but not updated quarterly.
2022 and 2024 Outlook Assumptions
| 2022 | 2024 | ||
| Light Vehicle Production (millions of units) | |||
| North America | 15.2 | 17.5 | |
| Europe | 18.5 | 21.2 | |
| China | 24.2 | 29.0 | |
| Average Foreign exchange rates: | |||
| 1 Canadian dollar equals | US$0.800 | US$0.800 | |
| 1 euro equals | US$1.130 | US$1.130 | |
2022 and 2024 Outlook
| 2022 | 2024 | ||
| Segment Sales | |||
| Body Exteriors & Structures | $16.2 - $16.8 billion | $19.6 - $20.6 billion | |
| Power & Vision | $11.9 - $12.3 billion | $14.3 - $14.9 billion | |
| Seating Systems | $5.4 - $5.7 billion | $6.2 - $6.6 billion | |
| Complete Vehicles | $5.8 - $6.1 billion | $5.0 - $5.5 billion | |
| Total Sales | $38.8 - $40.4 billion | $44.6 - $47.1 billion | |
| Adjusted EBIT Margin(1) | 6.0% - 6.4% | 8.1% - 8.6% | |
| Equity Income (included in EBIT) | $70 - $100 million | $170 - $215 million | |
| Interest Expense, net | Approximately $80 million | ||
| Income Tax Rate(2) | Approximately 21% | ||
| Net Income attributable to Magna(3) | $1.7 - $1.9 billion | ||
| Capital Spending | Approximately $1.8 billion | ||
| Notes: | |||
| (1) Adjusted EBIT Margin is the ratio
of Adjusted EBIT to Total Sales (2) The Income Tax Rate has been calculated using Adjusted EBIT and is based on current tax legislation (3) Net Income attributable to Magna represents Net Income excluding Other expense (income), net and Adjustments to Deferred Tax Valuation Allowances | |||
Our Outlook is intended to provide information about management's current expectations and plans and may not be appropriate for other purposes. Although considered reasonable by Magna as of the date of this document, the 2022 and 2024 Outlook above and the underlying assumptions may prove to be inaccurate. Accordingly, our actual results could differ materially from our expectations as set forth herein. The risks identified in the “Forward-Looking Statements” section below represent the primary factors which we believe could cause actual results to differ materially from our expectations.
Key Drivers of Our Business
Our operating results are primarily dependent on the levels of North American, European and Chinese car and light truck production by our customers. While we supply systems and components to every major original equipment manufacturer ["OEM"], we do not supply systems and components for every vehicle, nor is the value of our content consistent from one vehicle to the next. As a result, customer and program mix relative to market trends, as well as the value of our content on specific vehicle production programs, are also important drivers of our results.
Ordinarily OEM production volumes are aligned with vehicle sales levels and thus affected by changes in such levels. Aside from vehicle sales levels, production volumes are typically impacted by a range of factors, including: general economic and political conditions; labour disruptions; free trade arrangements; tariffs; relative currency values; commodities prices; supply chains and infrastructure; availability and relative cost of skilled labour; regulatory considerations, including those related to environmental emissions and safety standards; and other factors. Additionally, COVID-19 can impact vehicle production volumes, including through: mandatory stay-at-home orders which restrict production; elevated employee absenteeism; and supply chain disruptions, such as the semiconductor chip shortage currently impacting global vehicle production volumes.
Overall vehicle sales levels are significantly affected by changes in consumer confidence levels, which may in turn be impacted by consumer perceptions and general trends related to the job, housing and stock markets, as well as other macroeconomic and political factors. Other factors which typically impact vehicle sales levels and thus production volumes include: interest rates and/or availability of credit; fuel and energy prices; relative currency values; regulatory restrictions on use of vehicles in certain megacities; and other factors. Additionally, COVID-19 can impact vehicle sales, including through: mandatory stay-at-home orders which restrict operations of car dealerships, as well as through a deterioration in consumer confidence.
Segment Analysis
[All amounts in U.S. dollars and all tabular amounts in millions unless
otherwise noted]
| Body Exteriors & Structures | ||||||||||||||
| For the three months | ||||||||||||||
| ended December 31, | ||||||||||||||
| 2021 | 2020 | Change | ||||||||||||
| Sales | $ | 3,620 | $ | 4,393 | $ | (773 | ) | - 18 | % | |||||
| Adjusted EBIT | $ | 168 | $ | 543 | $ | (375 | ) | - 69 | % | |||||
| Adjusted EBIT as a percentage of sales (i) | 4.6 | % | 12.4 | % | - | - 7.8 | % | |||||||
(i) Adjusted EBIT as a percentage of sales is calculated as Adjusted EBIT divided by Sales.
Sales for Body Exteriors & Structures decreased 18% or $773 million to $3.62 billion in the fourth quarter of 2021 compared to $4.39 billion in 2020. The decrease in sales was primarily due to lower global light vehicle production, including the negative impact of production disruptions due to semiconductor chip shortages. In addition, sales decreased due to the sale of three operations in Germany during the third quarter of 2021, the end of production of certain programs and net customer price concessions. These factors were partially offset by the launch of new programs during or subsequent to the fourth quarter of 2020, including the Jeep Wagoneer and Grand Wagoneer, Ford Bronco Sport, Ford Maverick and Jeep Grand Cherokee L.
Adjusted EBIT decreased $375 million to $168 million in the fourth quarter of 2021 compared to $543 million in the fourth quarter of 2020 and Adjusted EBIT as a percentage of sales decreased to 4.6% in the fourth quarter of 2021 compared to 12.4% in the fourth quarter of 2020. The decreases mainly reflect lower margins earned on reduced sales, lower net favourable commercial items, labour and other operational inefficiencies at our facilities as a result of unpredictable customer production schedules due to semiconductor chip shortages, higher production costs, including commodity and energy costs, an increase in net warranty costs and higher launch costs.
| Power & Vision | ||||||||||||||
| For the three months | ||||||||||||||
| ended December 31, | ||||||||||||||
| 2021 | 2020 | Change | ||||||||||||
| Sales | $ | 2,804 | $ | 3,179 | $ | (375 | ) | - 12 | % | |||||
| Adjusted EBIT | $ | 171 | $ | 359 | $ | (188 | ) | - 52 | % | |||||
| Adjusted EBIT as a percentage of sales | 6.1 | % | 11.3 | % | - 5.2 | % | ||||||||
Sales for Power & Vision decreased 12% or $375 million to $2.80 billion in the fourth quarter of
2021 compared to $3.18 billion in 2020. The decrease in sales was primarily due to lower global light vehicle production, including
the negative impact of production disruptions due to semiconductor chip shortages, and net customer price concessions. These factors were
partially offset by sales from business combinations during 2021 and the launch of new programs during or subsequent to the fourth quarter
of 2020, including the Ford F-Series pick-up trucks, Dongfeng T5 EVO, Ford Bronco and Jeep Wagoneer and Grand Wagoneer.
Adjusted EBIT decreased $188 million to $171 million in the fourth quarter of 2021 compared to $359 million in the fourth quarter of 2020 and Adjusted EBIT as a percentage of sales decreased to 6.1% in the fourth quarter of 2021 compared to 11.3% in the fourth quarter of 2020. The decreases mainly reflect lower margins earned on reduced sales, labour and other operational inefficiencies at our facilities as a result of unpredictable customer production schedules due to semiconductor chip shortages, higher production costs, including commodity, freight and energy costs, business combinations during 2021 and lower equity income. These were partially offset by a decrease in net warranty costs and lower net application engineering costs related to three upcoming ADAS program launches.
| Seating Systems | ||||||||||||||
| For the three months |
||||||||||||||
| ended
December 31, |
||||||||||||||
| 2021 | 2020 | Change | ||||||||||||
| Sales | $ | 1,299 | $ | 1,390 | $ | (91 | ) | - 7 | % | |||||
| Adjusted EBIT | $ | 49 | $ | 85 | $ | (36 | ) | - 42 | % | |||||
| Adjusted EBIT as a percentage of sales | 3.8 | % | 6.1 | % | - 2.3 | % | ||||||||
Sales for Seating Systems decreased 7% or $91 million to $1.30 billion in the fourth quarter of 2021
compared to $1.39 billion in 2020. The decrease in sales was primarily due to lower global light vehicle production, including
the negative impact of production disruptions due to semiconductor chip shortages, and net customer price concessions. These factors were
partially offset by sales from the acquisition of Hongli during 2021 and the launch of new programs during or subsequent to the fourth
quarter of 2020, including the Jeep Grand Cherokee L, Skoda Enyaq and Enyaq Coupe and Geely Xingyue L.
Adjusted EBIT decreased $36 million to $49 million in the fourth quarter of 2021 compared to $85 million in the fourth quarter of 2020 and Adjusted EBIT as a percentage of sales decreased to 3.8% in the fourth quarter of 2021 compared to 6.1% in the fourth quarter of 2020. The decreases mainly reflect lower margins earned on reduced sales, labour and other operational inefficiencies at our facilities as a result of unpredictable customer production schedules due to semiconductor chip shortages, and higher production costs, including energy costs. These were partially offset by the acquisition of Hongli during 2021 and lower restructuring costs.
| Complete Vehicles | ||||||||||||||
| For the three months | ||||||||||||||
| ended December 31, | ||||||||||||||
| 2021 | 2020 | Change | ||||||||||||
| Complete Vehicle Assembly Volumes (thousands of units) | 32.7 | 34.5 | - 5 | % | ||||||||||
| Sales | $ | 1,511 | $ | 1,759 | $ | (248 | ) | - 14 | % | |||||
| Adjusted EBIT | $ | 98 | $ | 110 | $ | (12 | ) | - 11 | % | |||||
| Adjusted EBIT as a percentage of sales | 6.5 | % | 6.3 | % | + 0.2 | % | ||||||||
Sales for Complete Vehicles decreased 14% or $248 million to $1.51 billion in the fourth quarter of
2021 compared to $1.76 billion in the fourth quarter of 2020 and assembly volumes decreased 5% or 1,800 units. This sales decrease
was primarily due to lower assembly volumes, in particular the Jaguar I-Pace, including the negative impact of production disruptions
due to semiconductor chip shortages, and a $61 million decrease in reported U.S. dollar sales as a result of the weakening of the euro
against the U.S. dollar.
Adjusted EBIT decreased $12 million to $98 million in the fourth quarter of 2021 primarily due to lower earnings on reduced engineering and assembly sales, including labour inefficiencies due to semiconductor chip shortages, and higher production costs, including energy costs. These were partially offset by higher government research and development incentives.
Adjusted EBIT as a percentage of sales improved to 6.5% in the fourth quarter of 2021 compared to 6.3% in the fourth quarter of 2020 primarily due to higher government research and development incentives and favourable program mix. These were partially offset by lower earnings on reduced engineering and assembly sales, including labour inefficiencies due to semiconductor chip shortages, and higher production costs, including energy costs.
| MAGNA INTERNATIONAL INC. | |||||||||||||||
| CONSOLIDATED STATEMENTS
OF INCOME | |||||||||||||||
| [Unaudited] | |||||||||||||||
| [U.S. dollars in millions, except per share figures] | |||||||||||||||
| Three months
ended |
Year ended | ||||||||||||||
| December
31, |
December 31, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Sales | $ | 9,110 | $ | 10,568 | $ | 36,242 | $ | 32,647 | |||||||
| Costs and expenses | |||||||||||||||
| Cost of goods sold | 7,822 | 8,753 | 31,097 | 28,207 | |||||||||||
| Depreciation and amortization | 389 | 362 | 1,512 | 1,366 | |||||||||||
| Selling, general and administrative | 414 | 448 | 1,717 | 1,587 | |||||||||||
| Interest expense, net | 22 | 22 | 78 | 86 | |||||||||||
| Equity income | (23 | ) | (90 | ) | (148 | ) | (189 | ) | |||||||
| Other (income) expense, net [i] | (90 | ) | 100 | 38 | 584 | ||||||||||
| Income from operations before income taxes | 576 | 973 | 1,948 | 1,006 | |||||||||||
| Income taxes | 98 | 223 | 395 | 329 | |||||||||||
| Net income | 478 | 750 | 1,553 | 677 | |||||||||||
| (Income) loss attributable to non-controlling interests | (14 | ) | (12 | ) | (39 | ) | 80 | ||||||||
| Net income attributable to Magna International Inc. | $ | 464 | $ | 738 | $ | 1,514 | $ | 757 | |||||||
| Earnings per Common Share: | |||||||||||||||
| Basic | $ | 1.55 | $ | 2.46 | $ | 5.04 | $ | 2.52 | |||||||
| Diluted | $ | 1.54 | $ | 2.45 | $ | 5.00 | $ | 2.52 | |||||||
| Cash dividends paid per Common Share | $ | 0.43 | $ | 0.40 | $ | 1.72 | $ | 1.60 | |||||||
| Weighted average number of Common Shares outstanding during the period [in millions]: | |||||||||||||||
| Basic | 299.7 | 299.6 | 300.6 | 299.7 | |||||||||||
| Diluted | 301.5 | 300.9 | 302.8 | 300.4 | |||||||||||
[i] See "Other (income) expense, net" information included in this Press Release.
| MAGNA INTERNATIONAL INC. | |||||||
| CONSOLIDATED BALANCE SHEETS | |||||||
| [Unaudited] | |||||||
| [U.S. dollars in millions] | |||||||
| As at | As at | ||||||
| December 31, | December 31, | ||||||
| 2021 | 2020 | ||||||
| ASSETS | |||||||
| Current assets | |||||||
| Cash and cash equivalents | $ | 2,948 | $ | 3,268 | |||
| Accounts receivable | 6,307 | 6,394 | |||||
| Inventories | 3,969 | 3,444 | |||||
| Prepaid expenses and other | 278 | 260 | |||||
| 13,502 | 13,366 | ||||||
| Investments | 1,593 | 947 | |||||
| Fixed assets, net | 8,293 | 8,475 | |||||
| Operating lease right-of-use assets | 1,700 | 1,906 | |||||
| Intangible assets, net | 493 | 481 | |||||
| Goodwill | 2,122 | 2,095 | |||||
| Deferred tax assets | 421 | 372 | |||||
| Other assets | 962 | 963 | |||||
| $ | 29,086 | $ | 28,605 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
| Current liabilities | |||||||
| Accounts payable | $ | 6,465 | $ | 6,266 | |||
| Other accrued liabilities | 2,156 | 2,254 | |||||
| Accrued salaries and wages | 851 | 815 | |||||
| Income taxes payable | 200 | 38 | |||||
| Long‑term debt due within one year | 455 | 129 | |||||
| Current portion of operating lease liabilities | 274 | 241 | |||||
| 10,401 | 9,743 | ||||||
| Long‑term debt | 3,538 | 3,973 | |||||
| Operating lease liabilities | 1,406 | 1,656 | |||||
| Long-term employee benefit liabilities | 700 | 729 | |||||
| Other long‑term liabilities | 376 | 332 | |||||
| Deferred tax liabilities | 440 | 452 | |||||
| 16,861 | 16,885 | ||||||
| Shareholders' equity | |||||||
| Capital stock | |||||||
| Common Shares | |||||||
| [issued: 297,871,776; December 31, 2020 – 300,527,416] | 3,403 | 3,271 | |||||
| Contributed surplus | 102 | 128 | |||||
| Retained earnings | 9,231 | 8,704 | |||||
| Accumulated other comprehensive loss | (900 | ) | (733 | ) | |||
| 11,836 | 11,370 | ||||||
| Non-controlling interests | 389 | 350 | |||||
| 12,225 | 11,720 | ||||||
| $ | 29,086 | $ | 28,605 | ||||
| MAGNA INTERNATIONAL INC. | |||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||
| [Unaudited] | |||||||||||||||
| [U.S. dollars in millions] | |||||||||||||||
| Three months ended |
Year ended | ||||||||||||||
| December
31, |
December 31, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Cash provided from (used for): | |||||||||||||||
| OPERATING ACTIVITIES | |||||||||||||||
| Net income | $ | 478 | $ | 750 | $ | 1,553 | $ | 677 | |||||||
| Items not involving current cash flows | 371 | 548 | 1,576 | 1,976 | |||||||||||
| 849 | 1,298 | 3,129 | 2,653 | ||||||||||||
| Changes in operating assets and liabilities | 502 | 961 | (189 | ) | 625 | ||||||||||
| Cash provided from operating activities | 1,351 | 2,259 | 2,940 | 3,278 | |||||||||||
| INVESTING ACTIVITIES | |||||||||||||||
| Fixed asset additions | (549 | ) | (560 | ) | (1,372 | ) | (1,145 | ) | |||||||
| Increase in equity method investments | (63 | ) | — | (517 | ) | — | |||||||||
| Increase in investments, other assets and intangible assets | (105 | ) | (98 | ) | (403 | ) | (331 | ) | |||||||
| Increase in public and private equity investments | (45 | ) | (18 | ) | (68 | ) | (132 | ) | |||||||
| Proceeds from dispositions | 32 | 69 | 81 | 117 | |||||||||||
| Business combinations | (31 | ) | 98 | (13 | ) | 91 | |||||||||
| Funding provided on sale of business | — | — | (41 | ) | — | ||||||||||
| Settlement of long-term receivable from non-consolidated JV | — | — | 50 | — | |||||||||||
| Cash used for investing activities | (761 | ) | (509 | ) | (2,283 | ) | (1,400 | ) | |||||||
| FINANCING ACTIVITIES | |||||||||||||||
| Issues of debt | 21 | (2 | ) | 55 | 854 | ||||||||||
| Decrease in short-term borrowings | — | (13 | ) | (101 | ) | (31 | ) | ||||||||
| Repayments of debt | (16 | ) | (12 | ) | (121 | ) | (140 | ) | |||||||
| Issue of Common Shares on exercise of stock options | 10 | 64 | 146 | 81 | |||||||||||
| Tax withholdings on vesting of equity awards | (1 | ) | (3 | ) | (13 | ) | (13 | ) | |||||||
| Repurchase of Common Shares | (251 | ) | — | (517 | ) | (203 | ) | ||||||||
| Contributions to subsidiaries by non-controlling interests | 8 | 18 | 8 | 18 | |||||||||||
| Dividends paid to non-controlling interests | (39 | ) | (12 | ) | (49 | ) | (18 | ) | |||||||
| Dividends paid | (127 | ) | (115 | ) | (514 | ) | (467 | ) | |||||||
| Cash (used for) provided from financing activities | (395 | ) | (75 | ) | (1,106 | ) | 81 | ||||||||
| Effect of exchange rate changes on cash, cash equivalents and | |||||||||||||||
| restricted cash equivalents | 5 | 81 | 23 | 23 | |||||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash equivalents during the period | 200 | 1,756 | (426 | ) | 1,982 | ||||||||||
| Cash, cash equivalents and restricted cash equivalents, beginning of period | 2,748 | 1,618 | 3,374 | 1,392 | |||||||||||
| Cash, cash equivalents and restricted cash equivalents, end of period | $ | 2,948 | $ | 3,374 | $ | 2,948 | $ | 3,374 | |||||||
MAGNA INTERNATIONAL INC.
SUPPLEMENTAL DATA
[Unaudited]
[All amounts in U.S. dollars and all tabular amounts in millions unless otherwise noted]
| OTHER (INCOME) EXPENSE, NET | |||||||||||||||||
| Three months ended |
Year ended |
||||||||||||||||
| December
31, |
December
31, |
||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||
| Restructuring and impairments | [a] | $ | 18 | $ | 101 | $ | 101 | $ | 269 | ||||||||
| Net (gains) losses on investments | [b] | (8 | ) | (11 | ) | 2 | (32 | ) | |||||||||
| Merger agreement termination fee | [c] | (100 | ) | — | (100 | ) | — | ||||||||||
| Gain on business combinations | [d] | — | — | (40 | ) | — | |||||||||||
| Loss on sale of business | [e] | — | — | 75 | — | ||||||||||||
| Impairment of equity-accounted investments | [f] | — | 10 | — | 347 | ||||||||||||
| $ | (90 | ) | $ | 100 | $ | 38 | $ | 584 | |||||||||
| [a] | Restructuring and impairments |
| For the three months ended December 31, 2021, the company recorded restructuring and impairment charges of $14 million [$14 million after tax] for its Seating Systems segment and $4 million [$3 million after tax] for its Power & Vision segment. During 2021, the company recorded restructuring and impairment charges of $16 million [$14 million after tax] for its Body Exteriors & Structures segment, $18 million [$17 million after tax] for its Seating Systems segment and $67 million [$52 million after tax], for its Power & Vision segment. | |
| For the three months ended December 31, 2020, the Company recorded restructuring and impairment charges of $86 million [$86 million after tax] for its Body Exteriors & Structures segment, and $15 million [$15 million after tax] for its Seating Systems segment. During 2020, the Company recorded restructuring and impairment charges of $123 million [$118 million after tax] for its Body Exteriors & Structures segment, $115 million [$90 million after tax] for its Power & Vision segment and $31 million [$29 million after tax] for its Seating Systems segment. | |
| [b] | Net (gains) losses on investments |
| During the fourth quarter of 2021, the Company recorded net unrealized losses of $6 million [$8 million after tax] on the revaluation of certain public and private equity investments. For the three and twelve months ended December 31, 2021, the Company also recorded unrealized gains of $14 million and $4 million [$10 million and $3 million after tax] respectively, related to the revaluation of certain public company warrants. | |
| For the three and twelve months ended December 31, 2020, the Company recorded realized and unrealized gains of $11 million [$7 million after tax] and $32 million [$27 million after tax], respectively on the revaluation of its private equity investments. | |
| [c] | Merger agreement termination fee |
| In the fourth quarter of 2021, Veoneer, Inc. (“Veoneer”) terminated its merger agreement with Magna. In connection with the termination of the merger agreement, Veoneer paid the Company a termination fee which, net of the Company’s associated transaction costs, amounted to $100 million [ $75 million after tax]. | |
| [d] | Gain on business combinations |
| During 2021, the Company acquired a 65% equity interest and a controlling financial interest in Chongqing Hongli Zhixin Scientific Technology Development Group LLC. The acquisition included an additional 15% equity interest in two entities that were previously equity accounted for by the Company. On the change in basis of accounting, the Company recognized a $22 million gain [$22 million after tax]. | |
| The Company also recorded a gain of $18 million [$18 million after tax] in connection with the distribution of substantially all of the assets of the Company's European joint venture, Getrag Ford Transmission GmbH. | |
| [e] | Loss on sale of business |
| During 2021, the Company sold three Body Exteriors & Structures operations in Germany. Under the terms of the arrangement, the Company provided the buyer with $41 million of funding, resulting in a loss on disposal of $75 million [$75 million after tax]. | |
| [f] | Impairment of equity-accounted investments |
| For the three and twelve months ended December 31, 2020, the Company recorded impairment charges of $10 million [$10 million after tax] related to Dongfeng Getrag Transmission Co. Ltd. For the twelve months ended December 31, 2020, the Company also recorded impairment charges of $347 million [$219 million after tax], related to Getrag (Jiangxi) Transmission Co., Ltd. Both equity-accounted investments were included in the Power & Vision segment. | |
SEGMENTED INFORMATION
Magna is a global automotive supplier which has complete vehicle engineering and contract manufacturing expertise, as well as product capabilities which include body, chassis, exterior, seating, powertrain, active driver assistance, electronics, mirrors & lighting, mechatronics and roof systems. Magna also has electronic and software capabilities across many of these areas.
The Company is organized under four operating segments: Body Exteriors & Structures, Power & Vision, Seating Systems and Complete Vehicles. These segments have been determined on the basis of technological opportunities, product similarities, and market and operating factors, and are also the Company's reportable segments.
The Company's chief operating decision maker uses Adjusted Earnings before Interest and Income Taxes ["Adjusted EBIT"] as the measure of segment profit or loss, since management believes Adjusted EBIT is the most appropriate measure of operational profitability or loss for its reporting segments. Adjusted EBIT is calculated by taking Net income and adding back Income taxes, Interest expense, net, and Other expense (income), net.
The following tables show segment information for the Company's reporting segments: See Non-GAAP Financial Measures section for a reconciliation of Adjusted EBIT to the Company’s consolidated Net Income.
| Three months ended December 31, 2021 | |||||||||||||||||||||
| Depreciation | Equity | Fixed | |||||||||||||||||||
| Total | External | Adjusted | and | loss | asset | ||||||||||||||||
| sales | sales | EBIT [ii] | amortization | (income) | additions | ||||||||||||||||
| Body Exteriors & Structures | $ | 3,620 | $ | 3,558 | $ | 168 | $ | 189 | $ | 5 | $ | 311 | |||||||||
| Power & Vision | 2,804 | 2,757 | 171 | 145 | (18 | ) | 181 | ||||||||||||||
| Seating Systems | 1,299 | 1,294 | 49 | 23 | (2 | ) | 34 | ||||||||||||||
| Complete Vehicles | 1,511 | 1,500 | 98 | 27 | (7 | ) | 20 | ||||||||||||||
| Corporate & Other [i] | (124 | ) | 1 | 22 | 5 | (1 | ) | 3 | |||||||||||||
| Total Reportable Segments | $ | 9,110 | $ | 9,110 | $ | 508 | $ | 389 | $ | (23 | ) | $ | 549 | ||||||||
| Three months ended December 31, 2020 | |||||||||||||||||||||
| Depreciation | Fixed | ||||||||||||||||||||
| Total | External | Adjusted | and | Equity | asset | ||||||||||||||||
| sales | sales | EBIT [ii] | amortization | income | additions | ||||||||||||||||
| Body Exteriors & Structures | $ | 4,393 | $ | 4,314 | $ | 543 | $ | 190 | $ | (1 | ) | $ | 296 | ||||||||
| Power & Vision | 3,179 | 3,126 | 359 | 124 | (80 | ) | 198 | ||||||||||||||
| Seating Systems | 1,390 | 1,383 | 85 | 20 | (5 | ) | 38 | ||||||||||||||
| Complete Vehicles | 1,759 | 1,743 | 110 | 23 | (3 | ) | 15 | ||||||||||||||
| Corporate & Other [i] | (153 | ) | 2 | (2 | ) | 5 | (1 | ) | 13 | ||||||||||||
| Total Reportable Segments | $ | 10,568 | $ | 10,568 | $ | 1,095 | $ | 362 | $ | (90 | ) | $ | 560 | ||||||||
| Year ended December 31, 2021 | |||||||||||||||||||||
| Depreciation | Equity | Fixed | |||||||||||||||||||
| Total | External | Adjusted | and | loss | asset | ||||||||||||||||
| sales | sales | EBIT [ii] | amortization | (income) | additions | ||||||||||||||||
| Body Exteriors & Structures | $ | 14,477 | $ | 14,196 | $ | 820 | $ | 743 | $ | 13 | $ | 711 | |||||||||
| Power & Vision | 11,342 | 11,129 | 738 | 554 | (134 | ) | 522 | ||||||||||||||
| Seating Systems | 4,891 | 4,851 | 152 | 92 | (9 | ) | 73 | ||||||||||||||
| Complete Vehicles | 6,106 | 6,057 | 287 | 103 | (10 | ) | 54 | ||||||||||||||
| Corporate & Other [i] | (574 | ) | 9 | 67 | 20 | (8 | ) | 12 | |||||||||||||
| Total Reportable Segments | $ | 36,242 | $ | 36,242 | $ | 2,064 | $ | 1,512 | $ | (148 | ) | $ | 1,372 | ||||||||
| Year ended December 31, 2020 | |||||||||||||||||||||
| Depreciation | Fixed | ||||||||||||||||||||
| Total | External | Adjusted | and | Equity | asset | ||||||||||||||||
| sales | sales | EBIT [ii] | amortization | income | additions | ||||||||||||||||
| Body Exteriors & Structures | $ | 13,550 | $ | 13,292 | $ | 817 | $ | 727 | $ | — | $ | 581 | |||||||||
| Power & Vision | 9,722 | 9,553 | 495 | 464 | (179 | ) | 440 | ||||||||||||||
| Seating Systems | 4,455 | 4,433 | 107 | 73 | (6 | ) | 70 | ||||||||||||||
| Complete Vehicles | 5,415 | 5,363 | 274 | 84 | (3 | ) | 34 | ||||||||||||||
| Corporate & Other [i] | (495 | ) | 6 | (17 | ) | 18 | (1 | ) | 20 | ||||||||||||
| Total Reportable Segments | $ | 32,647 | $ | 32,647 | $ | 1,676 | $ | 1,366 | $ | (189 | ) | $ | 1,145 | ||||||||
| [i] Included in Corporate and Other
Adjusted EBIT are intercompany fees charged to the automotive segments. | |||||||||||||||||||||
| [ii] For a definition and reconciliation of Adjusted EBIT, refer to our Non-GAAP financial measures reconciliation included in the “Supplemental Data” section of this Press Release. | |||||||||||||||||||||
MAGNA INTERNATIONAL INC.
SUPPLEMENTAL DATA
[Unaudited]
[All
amounts in U.S. dollars and all tabular amounts in millions unless otherwise noted]
NON-GAAP FINANCIAL MEASURES
In addition to the financial results reported in accordance with U.S. GAAP, this press release contains references to the Non-GAAP financial measures reconciled below. We believe the Non-GAAP financial measures used in this press release are useful to both management and investors in their analysis of the Company’s financial position and results of operations, and to improve comparability between fiscal periods. In particular, management believes that Adjusted EBIT and Adjusted diluted earnings per share, are useful measures in assessing the Company’s financial performance by excluding certain items that are not indicative of the Company's core operating performance. The presentation of Non-GAAP financial measures should not be considered in isolation, or as a substitute for the Company’s related financial results prepared in accordance with U.S. GAAP.
The following table reconciles Net income to Adjusted EBIT:
| Three months ended |
Year
ended | |||||||||||||
| December
31, |
December
31, | |||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||
| Net income | $ | 478 | $ | 750 | $ | 1,553 | $ | 677 | ||||||
| Add: | ||||||||||||||
| Interest expense, net | 22 | 22 | 78 | 86 | ||||||||||
| Other (income) expense, net | (90 | ) | 100 | 38 | 584 | |||||||||
| Income taxes | 98 | 223 | 395 | 329 | ||||||||||
| Adjusted EBIT | $ | 508 | $ | 1,095 | $ | 2,064 | $ | 1,676 | ||||||
| The following table reconciles Net income attributable
to Magna International Inc. to Adjusted diluted earnings per share: | ||||||||||||||
| Three months ended |
Year
ended | |||||||||||||
| December
31, |
December
31, | |||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||
| Net income attributable to Magna International Inc. | $ | 464 | $ | 738 | $ | 1,514 | $ | 757 | ||||||
| Add: | ||||||||||||||
| Other (income) expense, net | (90 | ) | 100 | 38 | 584 | |||||||||
| Tax effect on Other (income) expense, net | 30 | 13 | 14 | (80 | ) | |||||||||
| Adjustments to Deferred Tax Valuation Allowances [i] | (13 | ) | — | (13 | ) | — | ||||||||
| Loss attributable to non-controlling interests related to Other (income) expense, net | — | — | — | (75 | ) | |||||||||
| Adjusted net income attributable to Magna International Inc. | $ | 391 | $ | 851 | $ | 1,553 | $ | 1,186 | ||||||
| Diluted weighted average number of Common Shares outstanding during the period (millions): | 301.5 | 300.9 | 302.8 | 300.4 | ||||||||||
| Adjusted diluted earnings per share | $ | 1.30 | $ | 2.83 | $ | 5.13 | $ | 3.95 | ||||||
| [i] In the fourth quarter of 2021 the Company recorded adjustments to the valuation allowance against its deferred tax assets in certain European and North America countries. The net effect of these adjustments was a reduction in income tax expense of $13 million [‘‘Adjustments to Deferred Tax Valuation Allowances’’]. | ||||||||||||||
Certain of the forward-looking financial measures above are provided on a Non-GAAP basis. We do not provide a reconciliation of such forward-looking measures to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP. To do so would be potentially misleading and not practical given the difficulty of projecting items that are not reflective of on-going operations in any future period. The magnitude of these items, however, may be significant.
This press release together with our Management’s Discussion and Analysis of Results of Operations and Financial Position and our Interim Financial Statements are available in the Investor Relations section of our website at www.magna.com/company/investors and filed electronically through the System for Electronic Document Analysis and Retrieval (SEDAR) which can be accessed at www.sedar.com as well as on the United States Securities and Exchange Commission’s Electronic Data Gathering, Analysis and Retrieval System (EDGAR), which can be accessed at www.sec.gov.
We will hold a conference call for interested analysts and shareholders to discuss our fourth quarter and year ended December 31, 2021 results on Friday, February 11, 2022 at 8:00 a.m. ET. The conference call will be chaired by Swamy Kotagiri, Chief Executive Officer. The number to use for this call from North America is [1-800-909-4145]. International callers should use [1-416-981-9023]. Please call in at least 10 minutes prior to the call start time. We will also webcast the conference call at www.magna.com. The slide presentation accompanying the conference call as well as our financial review summary will be available on our website Friday prior to the call.
TAGS
[Quarterly earnings, financial results, vehicle production]
INVESTOR CONTACT
Louis Tonelli, Vice-President, Investor Relations
louis.tonelli@magna.com
│ 905.726.7035
MEDIA CONTACT
Tracy Fuerst, Vice-President, Corporate Communications & PR
tracy.fuerst@magna.com
│ 248.631.5396
WEBCAST CONTACT
Nancy Hansford, Executive Assistant, Investor Relations
nancy.hansford@magna.com
│ 905.726.7108
OUR BUSINESS (1)
Magna is more than one of the world's largest suppliers in the automotive
space. We are a mobility technology company with a global, entrepreneurial-minded team of over 158,000 employees and an organizational
structure designed to innovate like a startup. With 60+ years of expertise, and a systems approach to design, engineering and manufacturing
that touches nearly every aspect of the vehicle, we are positioned to support advancing mobility in a transforming industry. Our global
network includes 343 manufacturing operations and 91 product development, engineering and sales centres spanning 28 countries. Our common
shares trade on the Toronto Stock Exchange (MG) and the New York Stock Exchange (MGA).
(1) Manufacturing operations, product development, engineering and sales centres and employee figures include certain operations accounted for under the equity method.
FORWARD-LOOKING STATEMENTS
Certain statements in this press release constitute "forward-looking
information" or "forward-looking statements" (collectively, "forward-looking statements"). Any such forward-looking statements are intended
to provide information about management's current expectations and plans and may not be appropriate for other purposes. Forward-looking
statements may include financial and other projections, as well as statements regarding our future plans, strategic objectives or economic
performance, or the assumptions underlying any of the foregoing, and other statements that are not recitations of historical fact. We
use words such as "may", "would", "could", "should", "will", "likely", "expect", "anticipate", "believe", "intend", "plan", "aim", "forecast",
"outlook", "project", "estimate", "target" and similar expressions suggesting future outcomes or events to identify forward-looking statements.
The following table identifies the material forward-looking statements contained in this document, together with the material potential
risks that we currently believe could cause actual results to differ materially from such forward-looking statements. Readers should also
consider all of the risk factors which follow below the table:
| Material
Forward-Looking Statement |
Material Potential Risks Related to Applicable Forward-Looking Statement |
| Light Vehicle Production |
|
| Total
Sales Segment Sales |
|
| Adjusted
EBIT Margin Net Income Attributable to Magna |
|
| Equity Income |
|
Forward-looking statements are based on information currently available to us and are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances. While we believe we have a reasonable basis for making any such forward-looking statements, they are not a guarantee of future performance or outcomes. In addition to the factors in the table above, whether actual results and developments conform to our expectations and predictions is subject to a number of risks, assumptions and uncertainties, many of which are beyond our control, and the effects of which can be difficult to predict, including, without limitation:
Risks
Related to the Automotive Industry
|
Pricing
Risks
| |
In evaluating forward-looking statements or forward-looking information, we caution readers not to place undue
reliance on any forward-looking statement. Additionally, readers should specifically consider the various factors which could cause actual
events or results to differ materially from those indicated by such forward-looking statements, including the risks, assumptions and uncertainties
above which are:
- discussed under the “Industry Trends and Risks” heading of our Management’s Discussion and Analysis; and
- set out in our Annual Information Form filed with securities commissions in Canada, our annual report on Form 40-F filed with the United States Securities and Exchange Commission, and subsequent filings.
Readers should also consider discussion of our risk mitigation activities with respect to certain risk factors, which can be also found in our Annual Information Form.
EXHIBIT 99.2
| FINANCIAL REVIEW OF MAGNA INTERNATIONAL INC. | |||||||||||||||||||||||
| (United States dollars in millions, except per share figures) (Unaudited) | |||||||||||||||||||||||
| Prepared in accordance with U.S. GAAP | |||||||||||||||||||||||
| 2019 | 2020 | 2021 | |||||||||||||||||||||
| Note | 1st Q | 2nd Q | 3rd Q | 4th Q | TOTAL | 1st Q | 2nd Q | 3rd Q | 4th Q | TOTAL | 1st Q | 2nd Q | 3rd Q | 4th Q | TOTAL | ||||||||
| VEHICLE VOLUME STATISTICS (in millions) | |||||||||||||||||||||||
| North American vehicle volumes (including Mexico) | 4.227 | 4.249 | 3.909 | 3.912 | 16.297 | 3.777 | 1.241 | 3.945 | 4.040 | 13.003 | 3.753 | 3.212 | 2.931 | 3.249 | 13.145 | ||||||||
| European vehicle volumes: | |||||||||||||||||||||||
| Western Europe | 3.719 | 3.614 | 2.999 | 3.285 | 13.617 | 2.905 | 1.171 | 2.613 | 3.407 | 10.096 | 3.048 | 2.454 | 1.819 | 2.363 | 9.684 | ||||||||
| Eastern Europe | 2.012 | 2.061 | 1.671 | 1.987 | 7.731 | 1.794 | 0.912 | 1.663 | 1.989 | 6.358 | 1.854 | 1.657 | 1.232 | 1.531 | 6.274 | ||||||||
| Total Europe | 5.731 | 5.675 | 4.670 | 5.272 | 21.348 | 4.699 | 2.083 | 4.276 | 5.396 | 16.454 | 4.902 | 4.111 | 3.051 | 3.894 | 15.958 | ||||||||
| Asia volumes | 11.819 | 11.073 | 10.945 | 12.993 | 46.830 | 8.244 | 8.393 | 10.832 | 13.735 | 41.204 | 11.563 | 10.405 | 9.684 | 11.904 | 43.556 | ||||||||
| China volumes | 6.019 | 5.474 | 5.613 | 7.391 | 24.497 | 3.222 | 5.839 | 6.265 | 8.101 | 23.427 | 6.048 | 5.715 | 5.467 | 7.272 | 24.502 | ||||||||
| Magna Steyr vehicle assembly volumes | 0.046 | 0.043 | 0.035 | 0.034 | 0.158 | 0.031 | 0.017 | 0.027 | 0.035 | 0.110 | 0.040 | 0.030 | 0.023 | 0.033 | 0.126 | ||||||||
| AVERAGE FOREIGN EXCHANGE RATES | |||||||||||||||||||||||
| 1 Canadian dollar equals U.S. dollars | 0.752 | 0.748 | 0.757 | 0.758 | 0.754 | 0.745 | 0.722 | 0.751 | 0.767 | 0.746 | 0.790 | 0.814 | 0.794 | 0.794 | 0.798 | ||||||||
| 1 Euro equals U.S. dollars | 1.135 | 1.124 | 1.112 | 1.107 | 1.119 | 1.102 | 1.101 | 1.170 | 1.192 | 1.141 | 1.205 | 1.206 | 1.178 | 1.144 | 1.183 | ||||||||
| 1 Chinese renminbi equals U.S. dollars | 0.148 | 0.147 | 0.142 | 0.142 | 0.145 | 0.143 | 0.141 | 0.145 | 0.151 | 0.145 | 0.154 | 0.155 | 0.155 | 0.156 | 0.155 | ||||||||
| CONSOLIDATED STATEMENTS OF INCOME (LOSS) | |||||||||||||||||||||||
| Sales: | |||||||||||||||||||||||
| Body Exteriors & Structures | 4,308 | 4,243 | 3,984 | 3,923 | 16,458 | 3,676 | 1,623 | 3,858 | 4,393 | 13,550 | 4,025 | 3,647 | 3,185 | 3,620 | 14,477 | ||||||||
| Power & Vision | 3,083 | 2,808 | 2,696 | 2,725 | 11,312 | 2,523 | 1,298 | 2,722 | 3,179 | 9,722 | 3,156 | 2,881 | 2,501 | 2,804 | 11,342 | ||||||||
| Seating Systems | 1,433 | 1,452 | 1,266 | 1,426 | 5,577 | 1,261 | 524 | 1,280 | 1,390 | 4,455 | 1,303 | 1,166 | 1,123 | 1,299 | 4,891 | ||||||||
| Complete Vehicles | 1,928 | 1,802 | 1,516 | 1,461 | 6,707 | 1,321 | 933 | 1,402 | 1,759 | 5,415 | 1,850 | 1,490 | 1,255 | 1,511 | 6,106 | ||||||||
| Corporate & Other | (161) | (179) | (143) | (140) | (623) | (124) | (85) | (133) | (153) | (495) | (155) | (150) | (145) | (124) | (574) | ||||||||
| Sales | 10,591 | 10,126 | 9,319 | 9,395 | 39,431 | 8,657 | 4,293 | 9,129 | 10,568 | 32,647 | 10,179 | 9,034 | 7,919 | 9,110 | 36,242 | ||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of goods sold | 9,164 | 8,710 | 8,063 | 8,085 | 34,022 | 7,567 | 4,206 | 7,681 | 8,753 | 28,207 | 8,662 | 7,728 | 6,885 | 7,822 | 31,097 | ||||||||
| Selling, general and administrative | 421 | 453 | 400 | 423 | 1,697 | 381 | 378 | 380 | 448 | 1,587 | 430 | 419 | 454 | 414 | 1,717 | ||||||||
| Equity income | (35) | (48) | (37) | (58) | (178) | (30) | (25) | (44) | (90) | (189) | (47) | (44) | (34) | (23) | (148) | ||||||||
| EBITDA | 1 | 1,041 | 1,011 | 893 | 945 | 3,890 | 739 | (266) | 1,112 | 1,457 | 3,042 | 1,134 | 931 | 614 | 897 | 3,576 | |||||||
| Depreciation and amortization | 321 | 334 | 335 | 355 | 1,345 | 336 | 334 | 334 | 362 | 1,366 | 364 | 374 | 385 | 389 | 1,512 | ||||||||
| EBIT | 2 | 720 | 677 | 558 | 590 | 2,545 | 403 | (600) | 778 | 1,095 | 1,676 | 770 | 557 | 229 | 508 | 2,064 | |||||||
| Interest expense, net | 31 | 14 | 18 | 19 | 82 | 17 | 21 | 26 | 22 | 86 | 23 | 11 | 22 | 22 | 78 | ||||||||
| Operating income (loss) | 1 | 689 | 663 | 540 | 571 | 2,463 | 386 | (621) | 752 | 1,073 | 1,590 | 747 | 546 | 207 | 486 | 1,986 | |||||||
| Impairment charges | - | - | 700 | - | 700 | - | - | 337 | - | 337 | - | - | - | - | - | ||||||||
| Other expense (income) | (679) | 68 | 159 | (8) | (460) | - | 168 | (21) | 100 | 247 | (58) | 6 | 180 | (90) | 38 | ||||||||
| Other expense (income), net | 1 | (679) | 68 | 859 | (8) | 240 | - | 168 | 316 | 100 | 584 | (58) | 6 | 180 | (90) | 38 | |||||||
| Income (loss) from operations before income taxes | 1,368 | 595 | (319) | 579 | 2,223 | 386 | (789) | 436 | 973 | 1,006 | 805 | 540 | 27 | 576 | 1,948 | ||||||||
| Income tax expense (benefit) | 267 | 145 | 45 | 134 | 591 | 134 | (137) | 109 | 223 | 329 | 183 | 104 | 10 | 98 | 395 | ||||||||
| Net income (loss) | 1,101 | 450 | (364) | 445 | 1,632 | 252 | (652) | 327 | 750 | 677 | 622 | 436 | 17 | 478 | 1,553 | ||||||||
| (Income) loss attributable to non-controlling interests | 1 | 5 | 2 | 131 | (5) | 133 | 9 | 5 | 78 | (12) | 80 | (7) | (12) | (6) | (14) | (39) | |||||||
| Net income (loss) attributable to Magna International Inc. | 1,106 | 452 | (233) | 440 | 1,765 | 261 | (647) | 405 | 738 | 757 | 615 | 424 | 11 | 464 | 1,514 | ||||||||
| Adjusted net income (loss) attributable to Magna International Inc. | 1 | 531 | 509 | 438 | 433 | 1,911 | 261 | (511) | 585 | 851 | 1,186 | 566 | 426 | 170 | 391 | 1,553 | |||||||
| Diluted earnings (loss) per share: | |||||||||||||||||||||||
| Diluted | $ 3.39 | $ 1.42 | $ (0.75) | $ 1.43 | $ 5.59 | $ 0.86 | $ (2.17) | $ 1.35 | $ 2.45 | $ 2.52 | $ 2.03 | $ 1.40 | $ 0.04 | $ 1.54 | $ 5.00 | ||||||||
| Adjusted Diluted | $ 1.63 | $ 1.59 | $ 1.41 | $ 1.41 | $ 6.05 | $ 0.86 | $ (1.71) | $ 1.95 | $ 2.83 | $ 3.95 | $ 1.86 | $ 1.40 | $ 0.56 | $ 1.30 | $ 5.13 | ||||||||
| Weighted average number of Common Shares outstanding | |||||||||||||||||||||||
| during the year (in millions): | 326.3 | 319.5 | 310.7 | 306.3 | 315.8 | 302.7 | 298.4 | 299.4 | 300.9 | 300.4 | 303.6 | 303.6 | 302.6 | 301.5 | 302.8 | ||||||||
| PROFITABILITY RATIOS | |||||||||||||||||||||||
| Selling, general and administrative /Sales | 4.0% | 4.5% | 4.3% | 4.5% | 4.3% | 4.4% | 8.8% | 4.2% | 4.2% | 4.9% | 4.2% | 4.6% | 5.7% | 4.5% | 4.7% | ||||||||
| EBITDA /Sales | 9.8% | 10.0% | 9.6% | 10.1% | 9.9% | 8.5% | -6.2% | 12.2% | 13.8% | 9.3% | 11.1% | 10.3% | 7.8% | 9.8% | 9.9% | ||||||||
| EBIT /Sales | 6.8% | 6.7% | 6.0% | 6.3% | 6.5% | 4.7% | -14.0% | 8.5% | 10.4% | 5.1% | 7.6% | 6.2% | 2.9% | 5.6% | 5.7% | ||||||||
| Operating income(loss) /Sales | 6.5% | 6.5% | 5.8% | 6.1% | 6.2% | 4.5% | -14.5% | 8.2% | 10.2% | 4.9% | 7.3% | 6.0% | 2.6% | 5.3% | 5.5% | ||||||||
| Effective tax rate | |||||||||||||||||||||||
| Reported | 19.5% | 24.4% | -14.1% | 23.1% | 26.6% | 34.7% | 17.4% | 25.0% | 22.9% | 32.7% | 22.7% | 19.3% | 37.0% | 17.0% | 20.3% | ||||||||
| Excluding Other expense (income), net of taxes | 23.7% | 23.5% | 19.6% | 23.3% | 22.7% | 34.7% | 16.9% | 22.6% | 19.6% | 25.7% | 23.3% | 19.8% | 15.0% | 16.7% | 19.8% | ||||||||
| Page 1 of 6 |
| FINANCIAL REVIEW OF MAGNA INTERNATIONAL INC. | ||||||||||||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||||||||||||||
| (United States dollars in millions) (Unaudited) | ||||||||||||||||||||||
| 2019 | 2020 | 2021 | ||||||||||||||||||||
| 1st Q | 2nd Q | 3rd Q | 4th Q | 1st Q | 2nd Q | 3rd Q | 4th Q | 1st Q | 2nd Q | 3rd Q | 4th Q | |||||||||||
| FUNDS EMPLOYED | [Note 1] | |||||||||||||||||||||
| Current assets: | ||||||||||||||||||||||
| Accounts receivable | 7,446 | 7,204 | 7,068 | 5,927 | 5,684 | 5,253 | 6,618 | 6,394 | 7,176 | 6,531 | 6,082 | 6,307 | ||||||||||
| Inventories | 3,501 | 3,521 | 3,457 | 3,304 | 3,531 | 3,503 | 3,509 | 3,444 | 3,645 | 3,999 | 4,150 | 3,969 | ||||||||||
| Prepaid expenses and other | 222 | 244 | 189 | 238 | 234 | 216 | 196 | 260 | 290 | 294 | 247 | 278 | ||||||||||
| 11,169 | 10,969 | 10,714 | 9,469 | 9,449 | 8,972 | 10,323 | 10,098 | 11,111 | 10,824 | 10,479 | 10,554 | |||||||||||
| Current liabilities: | ||||||||||||||||||||||
| Accounts payable | 6,484 | 6,272 | 5,966 | 5,628 | 5,635 | 4,243 | 5,808 | 6,266 | 6,787 | 6,248 | 5,914 | 6,465 | ||||||||||
| Accrued salaries and wages | 860 | 757 | 797 | 753 | 807 | 691 | 851 | 815 | 897 | 912 | 893 | 851 | ||||||||||
| Other accrued liabilities | 2,003 | 2,019 | 1,994 | 1,800 | 1,921 | 2,058 | 2,246 | 2,254 | 2,298 | 2,186 | 2,070 | 2,156 | ||||||||||
| Income taxes payable (receivable) | (53) | (34) | (22) | 17 | 18 | (87) | (69) | 38 | 109 | 123 | 125 | 200 | ||||||||||
| 9,294 | 9,014 | 8,735 | 8,198 | 8,381 | 6,905 | 8,836 | 9,373 | 10,091 | 9,469 | 9,002 | 9,672 | |||||||||||
| Working capital | 1,875 | 1,955 | 1,979 | 1,271 | 1,068 | 2,067 | 1,487 | 725 | 1,020 | 1,355 | 1,477 | 882 | ||||||||||
| Investments | 2,408 | 2,334 | 1,430 | 1,210 | 1,336 | 1,336 | 1,143 | 947 | 960 | 1,124 | 1,455 | 1,593 | ||||||||||
| Fixed assets, net | 7,958 | 8,109 | 7,943 | 8,260 | 7,948 | 7,860 | 7,898 | 8,475 | 8,305 | 8,297 | 8,166 | 8,293 | ||||||||||
| Goodwill, other assets and intangible assets | 3,487 | 3,593 | 3,461 | 3,456 | 3,340 | 3,362 | 3,423 | 3,539 | 3,614 | 3,632 | 3,530 | 3,577 | ||||||||||
| Operating lease right-of-use assets | 1,716 | 1,744 | 1,702 | 1,811 | 1,788 | 1,777 | 1,787 | 1,906 | 1,869 | 1,854 | 1,731 | 1,700 | ||||||||||
| Funds employed | 17,444 | 17,735 | 16,515 | 16,008 | 15,480 | 16,402 | 15,738 | 15,592 | 15,768 | 16,262 | 16,359 | 16,045 | ||||||||||
| FINANCING | ||||||||||||||||||||||
| Straight debt: | ||||||||||||||||||||||
| Cash and cash equivalents | (925) | (563) | (769) | (1,276) | (1,146) | (533) | (1,498) | (3,268) | (3,464) | (3,426) | (2,748) | (2,948) | ||||||||||
| Short-term borrowings | 335 | 199 | 436 | - | - | 188 | - | - | - | - | - | - | ||||||||||
| Long-term debt due within one year | 122 | 112 | 104 | 106 | 93 | 150 | 98 | 129 | 137 | 117 | 101 | 455 | ||||||||||
| Long-term debt | 3,062 | 3,071 | 3,021 | 3,062 | 3,021 | 3,771 | 3,832 | 3,973 | 3,935 | 3,941 | 3,908 | 3,538 | ||||||||||
| Current portion of operating lease liabilities | 176 | 214 | 218 | 225 | 218 | 221 | 226 | 241 | 244 | 278 | 269 | 274 | ||||||||||
| Operating lease liabilities | 1,566 | 1,544 | 1,527 | 1,601 | 1,586 | 1,577 | 1,582 | 1,656 | 1,613 | 1,563 | 1,438 | 1,406 | ||||||||||
| 4,336 | 4,577 | 4,537 | 3,718 | 3,772 | 5,374 | 4,240 | 2,731 | 2,465 | 2,473 | 2,968 | 2,725 | |||||||||||
| Long-term employee benefit liabilities | 598 | 606 | 584 | 677 | 659 | 675 | 696 | 729 | 733 | 743 | 716 | 700 | ||||||||||
| Other long-term liabilities | 396 | 404 | 388 | 371 | 420 | 390 | 305 | 332 | 414 | 482 | 466 | 376 | ||||||||||
| Deferred tax liabilities, net | 167 | 196 | 133 | 111 | 87 | 10 | 87 | 80 | 104 | 124 | 40 | 19 | ||||||||||
| 1,161 | 1,206 | 1,105 | 1,159 | 1,166 | 1,075 | 1,088 | 1,141 | 1,251 | 1,349 | 1,222 | 1,095 | |||||||||||
| Shareholders' equity | 11,947 | 11,952 | 10,873 | 11,131 | 10,542 | 9,953 | 10,410 | 11,720 | 12,052 | 12,440 | 12,169 | 12,225 | ||||||||||
| 17,444 | 17,735 | 16,515 | 16,008 | 15,480 | 16,402 | 15,738 | 15,592 | 15,768 | 16,262 | 16,359 | 16,045 | |||||||||||
| ASSET UTILIZATION RATIOS | ||||||||||||||||||||||
| Days in accounts receivable | 63.3 | 64.0 | 68.3 | 56.8 | 59.1 | 110.1 | 65.2 | 54.5 | 63.4 | 65.1 | 69.1 | 62.3 | ||||||||||
| Days in accounts payable | 63.7 | 64.8 | 66.6 | 62.6 | 67.0 | 90.8 | 68.1 | 64.4 | 70.5 | 72.8 | 77.3 | 74.4 | ||||||||||
| Inventory turnover - cost of sales | 10.5 | 9.9 | 9.3 | 9.8 | 8.6 | 4.8 | 8.8 | 10.2 | 9.5 | 7.7 | 6.6 | 7.9 | ||||||||||
| Working capital turnover | 22.6 | 20.7 | 18.8 | 29.6 | 32.4 | 8.3 | 24.6 | 58.3 | 39.9 | 26.7 | 21.4 | 41.3 | ||||||||||
| Total asset turnover | 2.4 | 2.3 | 2.3 | 2.3 | 2.2 | 1.0 | 2.3 | 2.7 | 2.6 | 2.2 | 1.9 | 2.3 | ||||||||||
| CAPITAL STRUCTURE | ||||||||||||||||||||||
| Straight debt | 24.9% | 25.8% | 27.5% | 23.2% | 24.4% | 32.8% | 26.9% | 17.5% | 15.6% | 15.2% | 18.1% | 17.0% | ||||||||||
| Long-term employee benefit liabilities, other long-term | ||||||||||||||||||||||
| liabilities & deferred tax liabilities, net | 6.6% | 6.8% | 6.7% | 7.2% | 7.5% | 6.6% | 6.9% | 7.3% | 7.9% | 8.3% | 7.5% | 6.8% | ||||||||||
| Shareholders' equity | 68.5% | 67.4% | 65.8% | 69.5% | 68.1% | 60.7% | 66.1% | 75.2% | 76.4% | 76.5% | 74.4% | 76.2% | ||||||||||
| 100.0% | 100.0% | 100.0% | 100.0% | 100.1% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | |||||||||||
| Debt to total capitalization | 30.6% | 30.1% | 32.8% | 31.0% | 31.8% | 37.2% | 35.5% | 33.9% | 33.0% | 32.2% | 32.0% | 31.7% | ||||||||||
| ANNUALIZED RETURNS | ||||||||||||||||||||||
| Return on assets (EBIT/assets employed) | 16.5% | 15.3% | 13.5% | 14.7% | 10.4% | -14.6% | 19.8% | 28.1% | 19.5% | 13.7% | 5.6% | 12.7% | ||||||||||
| Return on equity (Net income attributable to Magna | ||||||||||||||||||||||
| International Inc. / Average shareholders' equity) | 38.3% | 15.1% | -8.2% | 16.0% | 9.6% | -25.3% | 15.9% | 26.7% | 20.7% | 13.8% | 0.4% | 15.2% | ||||||||||
| Adjusted Return on equity (Adjusted Net income attributable | ||||||||||||||||||||||
| to Magna International Inc. / Average shareholders' equity) | 18.4% | 17.0% | 15.4% | 15.7% | 9.6% | -19.9% | 23.0% | 30.8% | 19.0% | 13.9% | 5.5% | 12.8% | ||||||||||
| Page 2 of 6 |
| FINANCIAL REVIEW OF MAGNA INTERNATIONAL INC. | |||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||||||||||
| (United States dollars in millions) (Unaudited) | |||||||||||||||||||||||
| 2019 | 2020 | 2021 | |||||||||||||||||||||
| Cash provided from (used for): | Note | 1st Q | 2nd Q | 3rd Q | 4th Q | TOTAL | 1st Q | 2nd Q | 3rd Q | 4th Q | TOTAL | 1st Q | 2nd Q | 3rd Q | 4th Q | TOTAL | |||||||
| Operating activities | |||||||||||||||||||||||
| Net income (loss) | 1,101 | 450 | (364) | 445 | 1,632 | 252 | (652) | 327 | 750 | 677 | 622 | 436 | 17 | 478 | 1,553 | ||||||||
| Items not involving current cash flows | (i) | (235) | 431 | 1,188 | 486 | 1,870 | 344 | 335 | 749 | 548 | 1,976 | 349 | 341 | 515 | 371 | 1,576 | |||||||
| (i) | 866 | 881 | 824 | 931 | 3,502 | 596 | (317) | 1,076 | 1,298 | 2,653 | 971 | 777 | 532 | 849 | 3,129 | ||||||||
| Changes in operating assets and liabilities | (i) | (272) | 39 | (74) | 765 | 458 | 43 | (915) | 536 | 961 | 625 | (310) | (249) | (132) | 502 | (189) | |||||||
| Cash provided from (used for) operating activities | 594 | 920 | 750 | 1,696 | 3,960 | 639 | (1,232) | 1,612 | 2,259 | 3,278 | 661 | 528 | 400 | 1,351 | 2,940 | ||||||||
| Investment activities | |||||||||||||||||||||||
| Fixed asset additions | (251) | (328) | (349) | (513) | (1,441) | (203) | (169) | (213) | (560) | (1,145) | (212) | (277) | (334) | (549) | (1,372) | ||||||||
| Increase in equity method investment | - | - | - | - | - | - | - | - | - | - | - | - | (454) | (63) | (517) | ||||||||
| Increase in investments, other assets and intangible assets | (77) | (102) | (83) | (122) | (384) | (93) | (72) | (68) | (98) | (331) | (104) | (93) | (101) | (105) | (403) | ||||||||
| Funding provided on sale of business | 1 (e) | - | - | - | - | - | - | - | - | - | - | - | - | (41) | - | (41) | |||||||
| Increase in public and private equity investments | (5) | (5) | - | - | (10) | (100) | (2) | (12) | (18) | (132) | (3) | (17) | (3) | (45) | (68) | ||||||||
| Settlement of long-term receivable from non-consolidated joint venture | - | - | - | - | - | - | - | - | - | - | 50 | - | - | - | 50 | ||||||||
| Proceeds from disposition | 86 | 26 | 57 | 16 | 185 | 23 | 11 | 14 | 69 | 117 | 19 | 20 | 10 | 32 | 81 | ||||||||
| Business combinations | - | (152) | - | 5 | (147) | (7) | - | - | 98 | 91 | 39 | (21) | - | (31) | (13) | ||||||||
| Proceeds from sale of (Investment in) Lyft, Inc. | - | - | 10 | 221 | 231 | - | - | - | - | - | - | - | - | - | - | ||||||||
| Sale of Fluid Pressure & Controls Business ["FP&C"] | 1,129 | - | 3 | - | 1,132 | - | - | - | - | - | - | - | - | - | - | ||||||||
| Cash (used for) provided from investment activities | 882 | (561) | (362) | (393) | (434) | (380) | (232) | (279) | (509) | (1,400) | (211) | (388) | (923) | (761) | (2,283) | ||||||||
| Financing activities | |||||||||||||||||||||||
| Net issues (repayments) of debt | (855) | (187) | 251 | (435) | (1,226) | (6) | 962 | (246) | (27) | 683 | (126) | (33) | (13) | 5 | (167) | ||||||||
| Common Shares issued on exercise of stock options | 8 | 6 | 19 | 11 | 44 | 1 | 1 | 15 | 64 | 81 | 83 | 50 | 3 | 10 | 146 | ||||||||
| Repurchase of Common Shares | (284) | (409) | (342) | (254) | (1,289) | (201) | - | (2) | - | (203) | (162) | (99) | (5) | (251) | (517) | ||||||||
| Tax withholdings on vesting of equity awards | (3) | (2) | - | (4) | (9) | (10) | - | - | (3) | (13) | (12) | - | - | (1) | (13) | ||||||||
| Contributions to subsidiaries by non-controlling interests | 2 | - | 2 | - | 4 | - | - | - | 18 | 18 | - | - | - | 8 | 8 | ||||||||
| Dividends paid to non-controlling interests | - | (13) | - | (9) | (22) | (3) | (3) | - | (12) | (18) | - | (8) | (2) | (39) | (49) | ||||||||
| Dividends paid | (119) | (110) | (109) | (111) | (449) | (121) | (116) | (115) | (115) | (467) | (130) | (127) | (130) | (127) | (514) | ||||||||
| Cash provided from (used for) financing activities | (1,251) | (715) | (179) | (802) | (2,947) | (340) | 844 | (348) | (75) | 81 | (347) | (217) | (147) | (395) | (1,106) | ||||||||
| Effect of exchange rate changes on cash, cash equivalents | |||||||||||||||||||||||
| and restricted cash equivalents | 14 | (4) | (9) | 10 | 11 | (52) | 9 | (15) | 81 | 23 | (13) | 39 | (8) | 5 | 23 | ||||||||
| Net increase (decrease) in cash, cash equivalents | |||||||||||||||||||||||
| and restricted cash equivalents during the period | 239 | (360) | 200 | 511 | 590 | (133) | (611) | 970 | 1,756 | 1,982 | 90 | (38) | (678) | 200 | (426) | ||||||||
| Cash, cash equivalents and restricted cash equivalents, | |||||||||||||||||||||||
| beginning of period | 3 | 802 | 1,041 | 681 | 881 | 802 | 1,392 | 1,259 | 648 | 1,618 | 1,392 | 3,374 | 3,464 | 3,426 | 2,748 | 3,374 | |||||||
| Cash, cash equivalents and restricted cash equivalents, | |||||||||||||||||||||||
| end of period | 1,041 | 681 | 881 | 1,392 | 1,392 | 1,259 | 648 | 1,618 | 3,374 | 3,374 | 3,464 | 3,426 | 2,748 | 2,948 | 2,948 | ||||||||
| (i) Certain amounts in prior periods have been reclassified to conform with current period presentation. | |||||||||||||||||||||||
| Page 3 of 6 |
| FINANCIAL REVIEW OF MAGNA INTERNATIONAL INC. | |||||||||||||||||||||||
| (United States dollars in millions, except per share figures) (Unaudited) | |||||||||||||||||||||||
| This Analyst should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2021. | |||||||||||||||||||||||
| Note 1: | NON-GAAP MEASURES | ||||||||||||||||||||||
| The Company presents Operating income,
EBIT (Earnings before interest and taxes) and EBITDA (Earnings before interest, taxes and depreciation and amortization) before Other
expense (income),net. The Company also presents Adjusted Net Income (Net Income before Other expense (income),net , net
of tax and excluding significant income tax valuation allowance adjustments), Adjusted Diluted Earnings per Share, Adjusted EBIT
and Adjusted EBIT as a percentage of sales, Return on Invested Capital and Return on Equity. The Company calculates Adjusted Debt
as total debt adjusted to include pension and lease liabilities and Adjusted EBITDA as earnings before, interest, net, taxes, depreciation
and amortization adjusted to add back interest income, certain pension costs and operating lease expense. The Company presents these
financial figures because such measures are widely used by analysts and investors in evaluating the operating performance of the
Company. However, such measures do not have any standardized meaning under U.S. generally accepted accounting principles
and may not be comparable to the calculation of similar measures by other companies. Other expense (income), net consists of: | |||||||||||||||||||||||
| 2019 | 2020 | 2021 | |||||||||||||||||||||
| 1st Q | 2nd Q | 3rd Q | 4th Q | TOTAL | 1st Q | 2nd Q | 3rd Q | 4th Q | TOTAL | 1st Q | 2nd Q | 3rd Q | 4th Q | TOTAL | |||||||||
| Impairments and loss on sale of equity-accounted investments | [a] | - | - | 700 | - | 700 | - | - | 337 | 10 | 347 | - | - | - | - | - | |||||||
| Restructuring and impairments | [b] | 14 | 7 | 34 | 3 | 58 | - | 168 | - | 101 | 269 | 15 | 44 | 24 | 18 | 101 | |||||||
| Net (gains) losses on investments | [c] | (177) | 67 | 127 | (11) | 6 | - | - | (21) | (11) | (32) | (33) | (38) | 81 | (8) | 2 | |||||||
| Gain on business combinations | [d] | - | - | - | - | - | - | - | - | - | - | (40) | - | - | - | (40) | |||||||
| Net (gains) losses on the sale of business | [e] | (516) | (6) | (2) | - | (524) | - | - | - | - | - | - | - | 75 | - | 75 | |||||||
| Merger Agreement Termination Fee | [f] | - | - | - | - | - | - | - | - | - | - | - | - | - | (100) | (100) | |||||||
| (679) | 68 | 859 | (8) | 240 | - | 168 | 316 | 100 | 584 | (58) | 6 | 180 | (90) | 38 | |||||||||
| [a] | Impairments and loss on sale of equity-accounted investments | ||||||||||||||||||||||
| In the fourth quarter of 2020, the Company
recorded a $10 million loss in Power & Vision on the sale of its 50% interest in Dongfeng Getrag Transmission Co. Ltd. In Power & Vision, during the third quarters of 2020 and 2019, the Company recorded impairment charges of $337 million and $700 million, respectively on equity accounted investments. | |||||||||||||||||||||||
| [b] | Restructuring and impairments | ||||||||||||||||||||||
| COVID-19 Restructuring and Impairments: | |||||||||||||||||||||||
| In response to the impact that COVID-19 was expected to have on vehicle production volumes over the short to medium term, the Company initiated and/or accelerated the timing of restructuring plans to right-size its business. These restructuring actions included plant closures and workforce reductions. As a result, in the second quarter of 2020, the Company recorded COVID-19 related restructuring and impairment charges of $115 million in Power & Vision, $37 million in Body Exteriors & Structures, and $16 million in Seating, respectively. | |||||||||||||||||||||||
| Impairments: | |||||||||||||||||||||||
| The Company recorded impairments in the fourth quarter of 2020 in the amount of $57 million in Body Exteriors & Structures as well as the second quarter of 2019 in the amount of $27 million in Power & Vision. | |||||||||||||||||||||||
| Brazil Closures: | |||||||||||||||||||||||
| In the fourth quarter of 2020, in connection with the announced plant closures by Ford Motor Co. in Brazil, the Company made the decision to accelerate the closure and/or restructuring of two facilities in Brazil that supply these plants by recording restructuring and impairments in the amount of $8 million in Body Exteriors & Structures, and $15 million in Seating, respectively. | |||||||||||||||||||||||
| India Closures: | |||||||||||||||||||||||
| In the third quarter of 2021,the Company recorded restructuring and impairment charges of $8 million in our Body Exteriors & Structures segment, and $4 million in our Seating Systems segment, primarily related to Ford Motor Company's recently announced plan to exit India. | |||||||||||||||||||||||
| Other Restructuring: | 2019 | 2020 | 2021 | ||||||||||||||||||||
| 1st Q | 2nd Q | 3rd Q | 4th Q | TOTAL | 1st Q | 2nd Q | 3rd Q | 4th Q | TOTAL | 1st Q | 2nd Q | 3rd Q | 4th Q | TOTAL | |||||||||
| Power & Vision | - | - | - | - | - | - | - | - | - | - | 15 | 44 | 4 | 4 | 67 | ||||||||
| Body Exteriors & Structures | 14 | 7 | 7 | 3 | 31 | - | - | - | 21 | 21 | - | - | 8 | - | 8 | ||||||||
| Seating Systems | - | - | - | - | - | - | - | - | - | - | - | - | - | 14 | 14 | ||||||||
| 14 | 7 | 7 | 3 | 31 | - | - | - | 21 | 21 | 15 | 44 | 12 | 18 | 89 | |||||||||
| Page 4 of 6 |
| [c] | Net (gains) losses on investments | ||||||||||||||||||||||
| In Corporate, during the first, second,
third, and fourth quarters of 2021, the Company recorded gains and losses related to the revaluation of its public and private equity
investments and certain public company warrants. In Corporate, during the third and fourth quarters of 2020, the Company recorded gains related to the revaluation of its private equity investments. In addition, the Company recorded a non-cash impairment charge of $2 million on its private equity investment in Corporate. In Corporate, during the first, second, third and fourth quarters of 2019, the Company recorded gains and losses related substantially to the revaluation of its investment in Lyft, Inc. | |||||||||||||||||||||||
| [d] | Gain on business combinations | ||||||||||||||||||||||
| In Seating Systems, during the first quarter of 2021, the Company recognized a $22 million gain on the change in basis of accounting for its previously held equity method investments. In Power & Vision, substantially all of the assets of the Company's European joint venture with Ford Motor Company, Getrag Ford Transmission GmbH, were distributed to either Ford or the Company, which resulted in the Company recording a gain of $18 million. | |||||||||||||||||||||||
| [e] | Net (gains) losses on the sale of business | ||||||||||||||||||||||
| During the third quarter of 2021,
the Company sold three Body Exteriors & Structures operations in Germany. Under the terms of the arrangement, the
Company provided the buyer with $41 million of funding, subject to working capital adjustments, resulting in a loss on disposal of
$75 million [$75 million after tax]. In Power & Vision, during the first quarter of 2019, the Company recorded a gain on the sale of its FP&C business of $516 million. In the second and third quarters of 2019, the Company recorded an increase in the gain on sale of $6 million and $2 million, respectively, as a result of finalizing the proceeds relating to working capital. | |||||||||||||||||||||||
| [f] | Merger Agreement Termination Fee | ||||||||||||||||||||||
| In the fourth quarter of 2021, Veoneer, Inc. (“Veoneer”) terminated its merger agreement with Magna. In connection with the termination of the merger agreement, Veoneer paid the Company a termination fee which, net of the Company’s associated transaction costs, amounted to $100 million. | |||||||||||||||||||||||
| The following table reconciles Net (loss) income attributable to Magna International Inc. to Adjusted net income attributable to Magna International Inc.: | |||||||||||||||||||||||
| 2019 | 2020 | 2021 | |||||||||||||||||||||
| 1st Q | 2nd Q | 3rd Q | 4th Q | TOTAL | 1st Q | 2nd Q | 3rd Q | 4th Q | TOTAL | 1st Q | 2nd Q | 3rd Q | 4th Q | TOTAL | |||||||||
| Net income (loss) attributable to Magna International Inc. | 1,106 | 452 | (233) | 440 | 1,765 | 261 | (647) | 405 | 738 | 757 | 615 | 424 | 11 | 464 | 1,514 | ||||||||
| Exclude: | |||||||||||||||||||||||
| Impairments and loss on sale of equity-accounted investments | [i] | - | - | 537 | - | 537 | - | - | 200 | 19 | 219 | - | - | - | - | - | |||||||
| Restructuring and impairments | 14 | 7 | 27 | 3 | 51 | - | 136 | - | 101 | 237 | 15 | 31 | 20 | 17 | 83 | ||||||||
| Net (gains) losses on investments | (151) | 57 | 109 | (10) | 5 | - | - | (20) | (7) | (27) | (24) | (29) | 64 | (2) | 9 | ||||||||
| Gain on business combinations | - | - | - | - | - | - | - | - | - | - | (40) | - | - | - | (40) | ||||||||
| Net (gains) losses on the sale of business | (438) | (7) | (2) | - | (447) | - | - | - | - | - | - | - | 75 | - | 75 | ||||||||
| Merger Agreement Termination Fee | - | - | - | - | - | - | - | - | - | - | - | - | - | (75) | (75) | ||||||||
| Adjustments to Deferred Tax Valuation Allowance | [ii] | - | - | - | - | - | - | - | - | - | - | - | - | - | (13) | (13) | |||||||
| - | - | ||||||||||||||||||||||
| Adjusted net income (loss) attributable to Magna International Inc. | 531 | 509 | 438 | 433 | 1,911 | 261 | (511) | 585 | 851 | 1,186 | 566 | 426 | 170 | 391 | 1,553 | ||||||||
| Diluted earnings (loss) per share | $ 3.39 | $ 1.42 | $ (0.75) | $ 1.43 | $ 5.59 | $ 0.86 | $ (2.17) | $ 1.35 | $ 2.45 | $ 2.52 | $ 2.03 | 1.40 | 0.04 | $ 1.54 | $ 5.00 | ||||||||
| Exclude: | |||||||||||||||||||||||
| Impairments and loss on sale of equity-accounted investments | [i] | - | - | 1.74 | - | 1.70 | - | - | 0.67 | 0.06 | 0.73 | - | - | - | - | - | |||||||
| Restructuring and impairments | 0.04 | 0.02 | 0.08 | 0.01 | 0.16 | - | 0.46 | - | 0.34 | 0.79 | 0.05 | 0.10 | 0.06 | 0.06 | 0.27 | ||||||||
| Net (gains) losses on investments | (0.46) | 0.17 | 0.35 | (0.03) | 0.02 | - | - | (0.07) | (0.02) | (0.09) | (0.08) | (0.10) | 0.21 | (0.01) | 0.03 | ||||||||
| Gain on business combinations | - | - | - | - | - | - | - | - | - | - | (0.14) | - | - | - | (0.13) | ||||||||
| Net (gains) losses on the sale of business | (1.34) | (0.02) | (0.01) | - | (1.42) | - | - | - | - | - | - | - | 0.25 | - | 0.25 | ||||||||
| Merger Agreement Termination Fee | - | - | - | - | - | - | - | - | - | - | - | - | - | (0.25) | (0.25) | ||||||||
| Adjustments to Deferred Tax Valuation Allowance | [ii] | - | - | - | - | - | - | - | - | - | - | - | - | - | (0.04) | (0.04) | |||||||
| Adjusted diluted earnings (loss) per share | $ 1.63 | $ 1.59 | $ 1.41 | $ 1.41 | $ 6.05 | $ 0.86 | $ (1.71) | $ 1.95 | $ 2.83 | $ 3.95 | $ 1.86 | $ 1.40 | $ 0.56 | $ 1.30 | $ 5.13 | ||||||||
| [i] Impairment charges | |||||||||||||||||||||||
| Impairment charges relating to the Company's equity accounted investment for 2019 and 2020, include $127 million and $ 75 million, respectively, attributable to non-controlling interest. | |||||||||||||||||||||||
| [ii] Adjustments to Deferred Tax Valuation Allowance | |||||||||||||||||||||||
| In the fourth quarter of 2021 the Company recorded adjustments to the valuation allowance against our deferred tax assets in certain European countries and North America. The net effect of these adjustments is a reduction in income tax expense of $13 million. | |||||||||||||||||||||||
| Page 5 of 6 |
| Note 2: | SEGMENTED INFORMATION | ||||||||||||||||||||||
| 2019 | 2020 | 2021 | |||||||||||||||||||||
| 1st Q | 2nd Q | 3rd Q | 4th Q | TOTAL | 1st Q | 2nd Q | 3rd Q | 4th Q | TOTAL | 1st Q | 2nd Q | 3rd Q | 4th Q | TOTAL | |||||||||
| Body Exteriors & Structures | |||||||||||||||||||||||
| Sales | 4,308 | 4,243 | 3,984 | 3,923 | 16,458 | 3,676 | 1,623 | 3,858 | 4,393 | 13,550 | 4,025 | 3,647 | 3,185 | 3,620 | 14,477 | ||||||||
| Adjusted EBIT | 363 | 341 | 306 | 289 | 1,299 | 199 | (315) | 390 | 543 | 817 | 327 | 227 | 98 | 168 | 820 | ||||||||
| Adjusted EBIT as a percentage of sales | 8.4% | 8.0% | 7.7% | 7.4% | 7.9% | 5.4% | -19.4% | 10.1% | 12.4% | 6.0% | 8.1% | 6.2% | 3.1% | 4.6% | 5.7% | ||||||||
| Power & Vision | |||||||||||||||||||||||
| Sales | 3,083 | 2,808 | 2,696 | 2,725 | 11,312 | 2,523 | 1,298 | 2,722 | 3,179 | 9,722 | 3,156 | 2,881 | 2,501 | 2,804 | 11,342 | ||||||||
| Adjusted EBIT | 216 | 201 | 167 | 163 | 747 | 135 | (226) | 227 | 359 | 495 | 297 | 203 | 67 | 171 | 738 | ||||||||
| Adjusted EBIT as a percentage of sales | 7.0% | 7.2% | 6.2% | 6.0% | 6.6% | 5.4% | -17.4% | 8.3% | 11.3% | 5.1% | 9.4% | 7.0% | 2.7% | 6.1% | 6.5% | ||||||||
| Seating Systems | |||||||||||||||||||||||
| Sales | 1,433 | 1,452 | 1,266 | 1,426 | 5,577 | 1,261 | 524 | 1,280 | 1,390 | 4,455 | 1,303 | 1,166 | 1,123 | 1,299 | 4,891 | ||||||||
| Adjusted EBIT | 94 | 83 | 56 | 79 | 312 | 40 | (84) | 66 | 85 | 107 | 55 | 26 | 22 | 49 | 152 | ||||||||
| Adjusted EBIT as a percentage of sales | 6.6% | 5.7% | 4.4% | 5.5% | 5.6% | 3.2% | -16.0% | 5.2% | 6.1% | 2.4% | 4.2% | 2.2% | 2.0% | 3.8% | 3.1% | ||||||||
| Complete Vehicles | |||||||||||||||||||||||
| Sales | 1,928 | 1,802 | 1,516 | 1,461 | 6,707 | 1,321 | 933 | 1,402 | 1,759 | 5,415 | 1,850 | 1,490 | 1,255 | 1,511 | 6,106 | ||||||||
| Adjusted EBIT | 28 | 43 | 29 | 44 | 144 | 50 | 44 | 70 | 110 | 274 | 80 | 79 | 30 | 98 | 287 | ||||||||
| Adjusted EBIT as a percentage of sales | 1.5% | 2.4% | 1.9% | 3.0% | 2.1% | 3.8% | 4.7% | 5.0% | 6.3% | 5.1% | 4.3% | 5.3% | 2.4% | 6.5% | 4.7% | ||||||||
| Corporate and other | |||||||||||||||||||||||
| Intercompany fees | (161) | (179) | (143) | (140) | (623) | (124) | (85) | (133) | (153) | (495) | (155) | (150) | (145) | (124) | (574) | ||||||||
| Adjusted EBIT | 19 | 9 | 0 | 15 | 43 | (21) | (19) | 25 | (2) | (17) | 11 | 22 | 12 | 22 | 67 | ||||||||
| Total | |||||||||||||||||||||||
| Sales | 10,591 | 10,126 | 9,319 | 9,395 | 39,431 | 8,657 | 4,293 | 9,129 | 10,568 | 32,647 | 10,179 | 9,034 | 7,919 | 9,110 | 36,242 | ||||||||
| Adjusted EBIT | 720 | 677 | 558 | 590 | 2,545 | 403 | (600) | 778 | 1,095 | 1,676 | 770 | 557 | 229 | 508 | 2,064 | ||||||||
| Adjusted EBIT as a percentage of sales | 6.8% | 6.7% | 6.0% | 6.3% | 6.5% | 4.7% | -14.0% | 8.5% | 10.4% | 5.1% | 7.6% | 6.2% | 2.9% | 5.6% | 5.7% | ||||||||
| Note 3: | CASH, CASH EQUIVALENTS AND RESTRICTED CASH EQUIVALENTS | ||||||||||||||||||||||
| A reconciliation of Cash and cash equivalents and Restricted cash equivalents (included in prepaid expenses) to Total cash, cash equivalents and restricted cash equivalents is as follows: | |||||||||||||||||||||||
| 2019 | 2020 | 2021 | |||||||||||||||||||||
| 1st Q | 2nd Q | 3rd Q | 4th Q | 1st Q | 2nd Q | 3rd Q | 4th Q | 1st Q | 2nd Q | 3rd Q | 4th Q | ||||||||||||
| Cash and cash equivalents | (925) | (563) | (769) | (1,276) | (1,146) | (533) | (1,498) | (3,268) | (3,464) | (3,426) | (2,748) | (2,948) | |||||||||||
| Restricted cash equivalents included in prepaid expenses | (116) | (118) | (112) | (116) | (113) | (115) | (120) | (106) | - | - | - | - | |||||||||||
| Total cash, cash equivalents and restricted cash equivalents | (1,041) | (681) | (881) | (1,392) | (1,259) | (648) | (1,618) | (3,374) | (3,464) | (3,426) | (2,748) | (2,948) | |||||||||||
Page 6 of 6
Exhibit 99.3
Q4 & Year End 2021 Results & 2022 Outlook February 11, 2022
Forward Looking Statements Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 2 Certain statements in this presentation constitute "forward - looking information" or "forward - looking statements" (collectively, "forward - looking statements"). Any such forward - looking statements are intended to provide information about management's current expectations and plans and may not be appropriate for other purposes. Forward - looking statements may include financial a nd other projections, as well as statements regarding our future plans, strategic objectives or economic performance, or the assumptions underlying any of the foregoing, and other statements that are not recitations of historical fact. We use words s uch as "may", "would", "could", "should", "will", "likely", "expect", "anticipate", "believe", "intend", "plan", "aim", "forecast ", "outlook", "project", "estimate", "target" and similar expressions suggesting future outcomes or events to identify forward - looking stateme nts. The following table identifies the material forward - looking statements contained in this document, together with the materi al potential risks that we currently believe could cause actual results to differ materially from such forward - looking statements. Readers should also consider all of the risk factors which follow below the table: Material Forward - Looking Statement Material Potential Risks Related to Applicable Forward - Looking Statement Impact of the global semiconductor shortage Risks related to OEM actions in response to the semiconductor chip shortage such as unplanned shutdowns of production lines a nd/ or plants; reductions in OEM vehicle production plans; and changes to OEM product mix. These risks include: lower sales; production inefficiencies due to production lines being stopped/restarted unexpe ctedly based on OEMs' production schedules; premium freight costs to expedite shipments; and/or other unrecoverable costs; skilled labour attraction/retention; price increases from sub - suppliers that have been negatively impacted by production inefficiencies, premi um freight costs and/or other costs related to the semiconductor chip shortage Impact of inflation Commodity cost volatility Increase in our cost structure as a result of our inability to offset inflationary price increases through continuous improveme nt actions, price increases, adjustments to our own operations or otherwise Price increases or surcharges from sub - suppliers in connection with inflationary pressures they face Skilled labour attraction/retention Light Vehicle Production Light vehicle sales levels Supply disruptions, including as a result of the current semiconductor chip shortage Production allocation decisions by OEMs Total Sales Segment Sales Economic impact of COVID - 19 on consumer confidence Supply disruptions, including as a result of a semiconductor chip shortage currently being experienced in the industry; and C OVI D - 19 related lockdowns of large port hubs in China Elevated level of inflation Global energy shortages Concentration of sales with six customers Shifts in market shares among vehicles or vehicle segments Shifts in consumer "take rates" for products we sell Unconsolidated Sales Same risks as for Total Sales and Segment Sales above Risks related to conducting business through joint ventures Adjusted EBIT Margin Segment Adjusted EBIT Margin Net Income Attributable to Magna Same risks as for Total Sales and Segment Sales above Operational underperformance Higher costs incurred to mitigate the risk of supply disruptions, including: materials price increases; higher - priced substitut e supplies; premium freight costs to expedite shipments; production inefficiencies due to production lines being stopped/restarted unexpectedly based on customers' production schedules; other unrecoverable costs; an d p rice increases from sub - suppliers that have been negatively impacted by production inefficiencies Price concessions Commodity cost volatility Higher labour costs Tax risks Equity Income Same risks as Adjusted EBIT Margin/Segment Adjusted EBIT Margin/Net Income Attributable to Magna above Risks related to conducting business through joint ventures Free Cash Flow Same risks as for Total Sales/Segment Sales, and Adjusted EBIT Margin/Segment Adjusted EBIT Margin/Net Income Attributable to Ma gna above
Forward Looking Statements (cont.) Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 3 Forward - looking statements are based on information currently available to us and are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances. While we believe we have a reasonable basis for mak ing any such forward - looking statements, they are not a guarantee of future performance or outcomes. In addition to the factors in the table above, whether actual results and developments conform to our expectations and predictions is subject to a number o f r isks, assumptions and uncertainties, many of which are beyond our control, and the effects of which can be difficult to predi ct, including, without limitation: Risks Related to the Automotive Industry economic cyclicality; regional production volume declines, including as a result of the COVID - 19 pandemic, the semiconductor shortage; intense competition; potential restrictions on free trade; trade disputes/tariffs; Customer and Supplier Related Risks concentration of sales with six customers; emergence of potentially disruptive EV OEMs, including risks related to limited revenues/operating history of new OEM entrants; OEM consolidation and cooperation; shifts in market shares among vehicles or vehicle segments; shifts in consumer "take rates" for products we sell; quarterly sales fluctuations; potential loss of any material purchase orders; a deterioration in the financial condition of our supply base, including as a result of the COVID - 19 pandemic; Manufacturing Operational Risks product and new facility launch risks; operational underperformance; restructuring costs; impairment charges; labour disruptions; COVID - 19 shutdowns; supply disruptions, including with respect to semiconductor chips; higher costs to mitigate supply disruptions; climate change risks; attraction/retention of skilled labour leadership succession; IT Security/Cybersecurity Risk IT/Cybersecurity breach; Product Cybersecurity breach; Pricing Risks pricing risk following time of quote; price concessions; commodity cost volatility; declines in scrap steel/aluminum prices; Warranty / Recall Risks costs related to repair or replacement of defective products, including due to a recall; warranty or recall costs that exceed warranty provision or insurance coverage limits; product liability claims; Acquisition Risks competition for strategic acquisition targets; inherent merger and acquisition risks; acquisition integration risk; Other Business Risks risks related to conducting business through joint ventures; our ability to consistently develop and commercialize innovative products or processes; our changing business risk profile as a result of increased investment in electrification and autonomous driving, including: higher R&D and engineering costs, and challenges in quoting for profitable returns on products for which we may not have significant quoting experience; risks of conducting business in foreign markets; fluctuations in relative currency values; tax risks; reduced financial flexibility as a result of an economic shock; changes in credit ratings assigned to us; Legal, Regulatory and Other Risks antitrust risk; legal claims and/or regulatory actions against us; and changes in laws and regulations, including those related to vehicle emissions or made as a result of the COVID - 19 pandemic. In evaluating forward - looking statements or forward - looking information, we caution readers not to place undue reliance on any f orward - looking statement. Additionally, readers should specifically consider the various factors which could cause actual events or results to differ materially from those indicated by such forward - looking statements, including the risks, assumptions and un certainties above which are: discussed under the "Industry Trends and Risks" heading of our Management's Discussion and Analysis; and set out in our Annual Information Form filed with securities commissions in Canada, our annual report on Form 40 - F filed with th e United States Securities and Exchange Commission, and subsequent filings. Readers should also consider discussion of our risk mitigation activities with respect to certain risk factors, which can be als o found in our Annual Information Form.
4 Reminders All amounts are in U.S. Dollars Today's discussion excludes the impact of other expense (income), net ("Unusual Items") "Organic", in the context of sales movements, means "excluding the impact of foreign exchange, acquisitions and divestitures" Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK
5 Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK Agenda 2021 Highlights and Q4 2021 Operating Results 2022 Outlook Financial Strategy
2021 HIGHLIGHTS Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 6
CONSOLIDATED SALES $9.1B Q4 2021 Performance Highlights Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 7 Continued Challenging Operating Environment in Q4 2021 ADJUSTED EBIT MARGIN % 5.6% ADJUSTED DILUTED EPS $1.30 FREE CASH FLOW 2 $729M 1 W eighted Growth over Market ( GoM ) compares organic sales growth (%) to vehicle production change (%) after applying Magna geographic sales weighting, excludi ng Complete Vehicles, to regional production 2 Free Cash Flow (FCF) is Cash from Operating Activities plus proceeds from normal course dispositions of fixed and other asset s p lus settlement of long - term receivable from a non - consolidated joint venture minus capital spending minus investment in other assets 3 Versus Q4 2020 WEIGHTED GoM 1 +6% $36.2B FY 2021 - 14% 3 5.7% FY 2021 - 480 bps 3 $5.13 FY 2021 - 54% 3 $1.3B FY 2021 - 56% 3
2021 Accomplishments Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 8 Continuing to keep our employees safe during pandemic Increased focus on Diversity & Inclusion Launched a number of new education programs 5th Straight Year Named to Forbes "World's Best Employers" Focus People
2021 Accomplishments Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 9 Committed to carbon neutrality targets - aligned with Paris Climate Accord Launched many Factory of the Future projects globally Managed through year - long supply chain challenges while minimizing disruption to OEM production Received 122 customer recognition awards Excellence Operational
2021 Accomplishments Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 10 Continued weighted sales Growth over Market 1 in 2021: 4% Achieved above market sales growth 1 across all key regions Initial launches of new technologies in significant, growing addressable markets: • e - Drives • advanced driver assist systems • EV battery enclosures Growth Sales 1 Weighted Growth over Market ( GoM ) compares organic sales growth (%) to vehicle production change (%) after applying Magna geographic sales weighting, excluding Complete Vehicles, to regional production
2021 Accomplishments Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 11 Successful commercialization • New business: ̶ Complete ADAS system ̶ Primary and secondary e - Drives ̶ Driver Monitoring system ̶ Front Integration Panel ̶ FREEFORM Œ on four new vehicle programs • CES Best of Innovation Award for Icon RADAR Œ Continued to build on collaboration ecosystem • Ongoing activities with companies, universities and research institutions Increased investments aligned with mobility megatrends Innovation Driving
2021 Financial Results Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 12 Significant Impacts from COVID - 19 in '20, Semi Shortages in '21 Adjusted EBIT Margin (%) 5.1% 5.7% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 2020 2021 Consolidated Sales ($Billions) $32.6 $36.2 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 $40.0 2020 2021 Adjusted EPS ($) $3.95 $5.13 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 2020 2021 1 Weighted Growth over Market ( GoM ) compares organic sales growth (%) to vehicle production change (%) after applying Magna geographic sales weighting, excluding Complete Vehicles, to regional production WEIGHTED GoM 1 +4%
Q4 2021 Financial Results Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 13 Reflect Industry Environment Q4 2021, Exceptional Q4 2020 Adjusted EBIT ($Millions) $1,095 $508 $0 $200 $400 $600 $800 $1,000 Q4'20 Q4'21 Consolidated Sales ($Billions) $10.6 $9.1 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 Q4'20 Q4'21 Adjusted EPS ($) $2.83 $1.30 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 Q4'20 Q4'21 Q4'21 vs Q4'20 Prod'n Global - 17% Magna Weighted - 21% WEIGHTED GoM 1 +6% 1 Weighted Growth over Market ( GoM ) compares organic sales growth (%) to vehicle production change (%) after applying Magna geographic sales weighting, excluding Complete Vehicles, to regional production
Q4 2021 vs Q3 2021 (Sequential) Financial Results Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 14 Key Factors • Higher global light vehicle production (+) • Launch of new programs (+) • Program mix ( - ) • Foreign currency translation: $119M ( - ) Q4'21 vs Q3'21 Production Global +21% North America +11% Europe +28% China +33% Magna Weighted 18% Consolidated Sales ($Billions) +15% $7.9 $9.1 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0 $10.0 Q3'21 Q4'21
Q4 2021 vs Q3 2021 (Sequential) Financial Results Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 15 Key Factors • Increased earnings on $1.2B increase in sales (+) • Provision on engineering service contracts with automotive unit of Evergrande in Q3 '21 (+) • Government R&D incentives (+) • Higher commercial settlements (+) • Higher input costs ( - ) • Transaction foreign exchange gains in Q3 vs. losses in Q4 ( - ) Adjusted EBIT & Margin ($Millions) +122% $229 $508 2.9% 5.6% 0.0 0.0 0.1 0.1 0.2 $0 $100 $200 $300 $400 $500 $600 Q3'21 Q4'21
Q4 2021 Cash Flow and Investment Activities Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 16 Free Cash Flow 1 ($Millions) $1,670 - $25 $729 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 -$250 -$50 $150 $350 $550 $750 $950 $1,150 $1,350 $1,550 Q4'20 Q3'21 Q4'21 OTHER USES OF CASH Acquisition of Interest in LG - Magna JV $63M Purchase of Subsidiaries $31M Public and Private Equity Investments $45M Repurchase of Common Shares $251M Dividends ($0.43/share) $127M Cash from Operations Before Changes in Operating Assets & Liabilities $849M Changes in Operating Assets & Liabilities $502M Cash from Operations $1,351M Fixed Asset Additions ($549M) Increase in Investments, Other Assets and Intangible Assets ($105M) Proceeds from Dispositions $32M Free Cash Flow 1 $729M 1 Free Cash Flow (FCF) is Cash from Operating Activities plus proceeds from normal course dispositions of fixed and other asset s p lus settlement of long - term receivable from a non - consolidated joint venture minus capital spending minus investment in other assets
Annualized Dividend 1 Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 17 Increased Q4 Dividend for 12 th Straight Year 1 Based on Q4 run rate 0.50 0.55 0.64 0.76 0.88 1.00 1.12 1.32 1.46 1.60 1.72 1.80 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00 Q4'10 Q4'11 Q4'12 Q4'13 Q4'14 Q4'15 Q4'16 Q4'17 Q4'18 Q4'19 Q4'20 Q4'21 ($ per share) 12% CAGR
2022 OUTLOOK Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 18
Outlook Reflects Our Go Forward Strategy Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 19 Accelerate Deployment of Capital towards High - Growth Areas Drive Operational Excellence Unlock New Business Models and Markets
Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 20 Overview of 2022 Outlook Headwinds Continued semiconductor chip supply constraints Inflationary input costs • Commodity • Labour • Energy, logistics and other Tailwinds Launching content on exciting new programs Increased business and opportunities in megatrend areas • Driving additional engineering and capital investment Favourable auto production environment Operational Excellence initiatives drive continued margin improvements through outlook period
SALES GROWTH Overview of 2022 Outlook – Financial Metrics Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 21 MARGIN EXPANSION INVESTING FOR GROWTH STRONG FREE CASH FLOW 1 1 Free Cash Flow (FCF) is Cash from Operating Activities plus proceeds from normal course dispositions of fixed and other asset s p lus settlement of long - term receivable from a non - consolidated joint venture minus capital spending minus investment in other assets Continued strong sales growth over outlook period ~90% sales in 2024 already booked Generate $5.75 - 6.25B over '22 - '24 Allows us to further invest in the business and return capital to shareholders Average annual engineering grows to ~$900M in megatrend areas Capital spending increase reflects growth and additional opportunities 2022 impacted by inflationary cost pressures and increased engineering activities Driving EBIT margins to 8+% by 2024
22 Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK Ford F - 150 Lightning Mercedes - Benz GLS SUV Cadillac Lyriq GMC Hummer BMW iX Mercedes - Benz EQE Significant Content on BEV Launches Globally Rivian R1S Volkswagen ID Buzz Fisker Ocean NIO ES7 Xpeng G9 Smart B - SUV Coming Soon North America Europe China Coming Soon
Financial Outlook – Key Assumptions Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 23 Automotive Light Vehicle Production (millions of units) 2021 2022 2024 North America 13.1 15.2 17.5 Europe 16.0 18.5 21.2 China 24.5 24.2 29.0 U.S. Foreign Exchange Rates 2021 2022 2024 Cdn 0.798 0.800 0.800 Euro 1.183 1.130 1.130 RMB 0.155 0.157 0.157 Acquisitions/Divestitures No material unannounced acquisitions/divestitures
CONSOLIDATED OUTLOOK Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 24
Consolidated Sales Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 25 2020 2021 2022F 2024F • Higher light vehicle production (+) • Content growth (+) ̶ New technologies ̶ New facilities ̶ Launches • Impact of stronger U.S. dollar ( - ) • End of production on certain programs ( - ) • Dispositions, net of acquisitions ( - ) • Organic 1 CAGR of 8 - 10% from '21 to ‘24 ̶ ~10 - 12% excluding Complete Vehicles 32.6 Unweighted Global LV Production CAGR = 7% (Weighted Global LV Production CAGR = 9%) ($Billions) '21 - '24 7 - 9% CAGR 36.2 38.8 - 40.4 44.6 - 47.1 1 Organic Sales represents sales excluding acquisitions net of divestitures and FX movements
Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 26 2020 2021 2022F 2024F • Significant growth primarily driven by: ̶ E - mobility components (LG JV) ̶ Integrated e - Drives (HASCO JV) ̶ Seating systems 1 Sales at 100% for our unconsolidated entities 2 2020 excludes $1. 4 billion from Getrag JVs 1.5 Unweighted Global LV Production CAGR = 7% (Weighted Global LV Production CAGR = 9%) ($Billions) 2.4 2.8 - 3.0 4.5 - 4.7 2 '21 - '24 24 - 26% CAGR Unconsolidated Sales 1
Consolidated Adjusted EBIT Margin % 1 Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 27 2020 2021 2022F 2024F 2021 - 2022 • Contribution on higher sales (+) • Lower production inefficiencies from unpredictable OEM production schedules (+) • Operational Excellence initiatives (+) • Higher input costs ( - ) • Higher engineering investment in megatrend areas ( - ) 2022 - 2024 • Contribution on higher sales (+) • Operational Excellence initiatives (+) • Lower engineering investment in megatrend areas relative to ‘22 (+) 1 Excluding other expense (income), net 5.1 Equity Income ($M) 189 148 170 - 215 70 - 100 5.7 6.0 - 6.4 8.1 - 8.6 (%)
SEGMENT OUTLOOK Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 28
Segment Sales & Adjusted EBIT Margin % 1 Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 29 1 Excluding other expense (income), net 2 Organic Sales represents sales excluding acquisitions net of divestitures and FX movements BODY EXTERIORS & STRUCTURES 2020 2021 2022F 2024F 6.0 5.7 8.1 - 8.6 8.9 - 9.5 POWER & VISION 2020 2021 2022F 2024F 9.7 11.3 11.9 - 12.3 14.3 - 14.9 '21 - '24 8 - 10% CAGR SEATING SYSTEMS 2020 2021 2022F 2024F 4.5 4.9 5.4 - 5.7 6.2 - 6.6 '21 - '24 8 - 11% CAGR 2020 2021 2022F 2024F 2.4 3.1 3.9 - 4.4 5.5 - 6.0 2020 2021 2022F 2024F 5.1 6.5 5.0 - 5.5 9.9 - 10.5 COMPLETE VEHICLES 2020 2021 2022F 2024F 5.4 6.1 5.8 - 6.1 5.0 - 5.5 '21 - '24 (6) - (3)% CAGR 2020 2021 2022F 2024F 5.1 4.7 3.4 - 3.9 2.3 - 2.8 2020 2021 2022F 2024F 13.6 14.5 16.2 - 16.8 19.6 - 20.6 '21 - '24 11 - 12% CAGR SALES ($B) ADJUSTED EBIT MARGIN % Organic 2 Sales CAGR 11 - 13% Organic 2 Sales CAGR 9 - 10% Organic 2 Sales CAGR 9 - 11% Organic 2 Sales CAGR (5) - (2)%
FINANCIAL STRATEGY Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 30
MAINTAIN STRONG BALANCE SHEET • Preserve liquidity and high investment grade credit ratings - Adj. debt to Adj. EBITDA ratio between 1.0 - 1.5x • Maintain flexibility to invest for growth INVEST FOR GROWTH • Organic and inorganic opportunities • Innovation RETURN CAPITAL TO SHAREHOLDERS Capital Allocation Principles • Continued dividend growth over time • Repurchase shares with excess liquidity Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 31
Capital Spending Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 32 Increased Spending Reflects Investments for Growth 1 2022 to 2024 are based on the level of business reflected in our sales outlook ($Billions) 2017 2018 2019 2020 2021 2022F 2023F 2024F 1.9 1.4 % of Sales 1 5.1 3.7 1.1 1.4 3.5 ~1.8 3.5 1.7 4.0 3.8
Free Cash Flow 1 Generation Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 33 1 Free Cash Flow (FCF) is Cash from Operating Activities plus proceeds from normal course dispositions of fixed and other asset s p lus settlement of a long - term receivable from a non - consolidated joint venture minus capital spending minus investment in other assets 2017 2018 2019 2020 2021 2022F 2023F 2024F 2.3 ($Billions) $5.75B - $6.25B (2022 - 2024) 1.1 - 1.3 1.9 1.2 1.6 1.3
In Summary Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 34 Continued strong sales growth Margin expansion through outlook period Solid free cash flow generation Accelerating investments to support growth in megatrend areas % $ Executing Our Go Forward Strategy
Appendix - Q4 - 2021 Results Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 35
Q4 2021 Reconciliation of Reported Results 36 REPORTED OTHER INCOME, NET EXCL. OTHER INCOME, NET Income Before Income Taxes $ 576 $ (90) $ 486 % of Sales 6.3% 5.3% Income Tax Expense $ 98 $ (17) $ 81 % of Pretax 17.0% 16.7% Income Attributable to Non - Controlling Interests $ (14) $ - $ (14) Net Income Attributable to Magna $ 464 $ (73) $ 391 Earnings Per Share $ 1.54 $ (0.24) $ 1.30 Excluding Other Expense (Income), Net $Millions – except for share figures Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK
Q4 2020 Reconciliation of Reported Results 37 REPORTED OTHER EXPENSE, NET EXCL. OTHER EXPENSE, NET Income Before Income Taxes $ 973 $ 100 $ 1,073 % of Sales 9.2% 10.2% Income Tax Expense $ 223 $ (13) $ 210 % of Pretax 22.9% 19.6% Income Attributable to Non - Controlling Interests $ (12) $ - $ (12) Net Income Attributable to Magna $ 738 $ 113 $ 851 Earnings Per Share $ 2.45 $ 0.38 $ 2.83 Excluding Other Expense (Income), Net $Millions – except for share figures Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK
Sales Performance vs Market 38 REPORTED ORGANIC 1 PERFORMANCE VS WEIGHTED GLOBAL PRODUCTION (Weighted GoM) Body Exteriors & Structures (18%) (15%) 6% Power & Vision (12%) (18%) 3% Seating Systems (7%) (17%) 4% Complete Vehicles (14%) (11%) 10% TOTAL SALES (14%) (15%) 6% Unweighted Production Growth (17%) Weighted Production Growth 2 (21%) 1 Organic Sales represents sales excluding acquisitions net of divestitures and FX movements 2 Calculated by applying Magna geographic sales weighting, excluding Complete Vehicles, to regional production Q4 2021 vs Q4 2020 Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK
Sales Performance vs Market 39 REPORTED ORGANIC 1 PERFORMANCE VS WEIGHTED GLOBAL PRODUCTION (Weighted GoM) Body Exteriors & Structures 7% 6% 5% Power & Vision 17% 5% 4% Seating Systems 10% (1%) (2%) Complete Vehicles 13% 8% 7% TOTAL SALES 11% 5% 4% Unweighted Production Growth 4% Weighted Production Growth 2 1% 1 Organic Sales represents sales excluding acquisitions net of divestitures and FX movements 2 Calculated by applying Magna geographic sales weighting, excluding Complete Vehicles, to regional production 2021 vs 2020 Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK
Segment Impact on Adjusted EBIT % of Sales 40 ($Millions) SALES ADJUSTED EBIT ADJUSTED EBIT AS A PERCERTANGE OF SALES 4 th Quarter of 2020 $ 10,568 $ 1,095 10.4% Increase (Decrease) Related to: Body Exteriors & Structures $ (773) $ (375) (3.2%) Power & Vision $ (375) $ (188) (1.6%) Seating Systems $ (91) $ (36) (0.3%) Complete Vehicles $ (248) $ (12) 0.1% Corporate and Other $ 29 $ 24 0.2% 4 th Quarter of 2021 $ 9,110 $ 508 5.6% Q4 2021 vs Q4 2020 Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK
Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 41 Geographic Sales Q4 2020 Q4 2021 NORTH AMERICA $5.0B $4.2B PRODUCTION (20%) EUROPE $4.8B $3.7B PRODUCTION (28%) ASIA $767M $1,169M PRODUCTION (13%) (China (10%)) REST OF WORLD $128M $100M S.A. PRODUCTION (14%) Q4 2021 vs Q4 2020
($Millions) Leverage Ratio 42 LTM EBITDA $ 3,576 Lease Adjustment $ 320 Other $ (83) Adjusted EBITDA $ 3,813 Debt per Balance Sheet $ 3,993 Lease Liability per Balance Sheet $ 1,680 Other $ 218 Adjusted Debt $ 5,891 Adjusted Debt / Adjusted EBITDA (Q4 2021) 1.54x Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK
Capital Allocation Principles Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 43 Disciplined, Profitable Approach to Growth Remains a Foundational Principle Q4 2021 Maintain Strong Balance Sheet • Preserve liquidity and high investment grade credit ratings - Adj. debt / Adj. EBITDA ratio between 1.0 - 1.5x LTM 12/31/21 1.54x • Maintain flexibility to invest for growth Invest for Growth • Organic and inorganic opportunities Fixed asset additions Other investments Acquisition of JV interest Public + Private Equity Inv. Business Combinations $ 549M $ 105M $ 63M $ 45M $ 31M • Innovation Return Capital to Shareholders • Continued dividend growth over time $ 127M • Increase Q4 dividend/share to $ 0.45 +5% • Repurchase shares with excess liquidity $ 251M
Segment Sales and Adjusted EBIT Margin Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 44 Q4 2020 Q4 2021 BODY EXTERIORS & STRUCTURES $4.39B $3.62B SALES ADJUSTED EBIT $543M $168M 12.4% 4.6% SEATING $1.39B $1.30B SALES ADJUSTED EBIT $85M $49M 6.1% 3.8% POWER & VISION $3.18B $2.80B SALES ADJUSTED EBIT $359M $171M 11.3% 6.1% COMPLETE VEHICLES $1.76B $1.51B SALES ADJUSTED EBIT $110M $98M 6.3% 6.5%
Appendix - Outlook Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 45
Financial Outlook 46 2022 2024 Sales: • Body Exteriors & Structures 16.2 – 16.8 19.6 – 20.6 • Power & Vision 11.9 – 12.3 14.3 – 14.9 • Seating Systems 5.4 – 5.7 6.2 – 6.6 • Complete Vehicles 5.8 – 6.1 5.0 – 5.5 Total Sales 38.8 – 40.4 44.6 – 47.1 Adjusted EBIT Margin % 1 6.0% – 6.4% 8.1% – 8.6% Equity Income 70M – 100M 170M – 215M Interest Expense ~80M Income Tax Rate 2 ~21% Net Income Attributable to Magna 3 1.7 – 1.9 Capital Spending ~1.8 1 Adjusted EBIT Margin is the ratio of Adjusted EBIT to Total Sales 2 The Income Tax Rate has been calculated using Adjusted EBIT and is based on current tax legislation 3 Net Income Attributable to Magna represents Net Income excluding Other expense (income), net ($Billions, unless otherwise noted) Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK
Segment Sales Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 47 • Higher light vehicle production • Composite liftgate technology continues to outgrow market • Battery enclosures business begins to ramp up '22 • Continued strong growth in China • Negative impact of stronger U.S. dollar 2020 2021 2022F 2024F BODY EXTERIORS & STRUCTURES N.A. Eur Asia ROW 2022 Sales By Region 1% 8% 25% 66% ($Billions) Unweighted Global LV Production CAGR = 7% (Weighted Global LV Production CAGR = 9%) Organic 1 Sales CAGR 11 - 13% 13.6 14.5 16.2 - 16.8 19.6 - 20.6 '21 - '24 11 - 12% CAGR 1 Organic Sales represents sales excluding acquisitions net of divestitures and FX movements
Segment Adjusted EBIT Margin % 1 Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 48 2020 2021 2022F 2024F 2021 to 2022 • Contribution on higher sales (+) • Lower production inefficiencies from unpredictable OEM production schedules (+) • Operational Excellence initiatives (+) • Disposition of loss - making Exteriors facilities (+) • Higher input costs ( - ) • Higher engineering costs ( - ) 2022 to 2024 • Contribution on higher sales (+) • Operational Excellence initiatives (+) • Higher input costs ( - ) • Higher launch and new facility costs ( - ) BODY EXTERIORS & STRUCTURES 1 Excluding other expense (income), net 6.0 Equity Income ($M) 0 (13) 5 - 10 0 - 5 (%) 5.7 8.1 - 8.6 8.9 - 9.5
Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 49 POWER AND VISION Segment Sales 1 Sales at 100% for our unconsolidated entities 2 Organic Sales represents sales excluding acquisitions net of divestitures and FX movements • Higher light vehicle production • Content growth: ̶ ADAS sales CAGR of 30%+ ‘21 to ‘24 ̶ Clearview launches ’22, OMS/DMS launches ‘24 ̶ Hybrid DCT business launching ’21 – ‘22 ̶ Consolidated e - Drive business launches late ’22 • Negative impact of stronger U.S. dollar 2020 2021 2022F 2024F Consolidated ($Billions) 9.7 11.3 11.9 - 12.3 14.3 - 14.9 N.A. Eur Asia ROW 2022 Sales By Region 15% 44% 41% '21 - '24 8 - 10% CAGR Organic 2 Sales CAGR 9 - 10% 2020 2021 2022F 2024F Unconsolidated 1 ($Billions) 0.9 1.4 1.7 - 1.9 3.4 - 3.6 • Significant growth driven by: ̶ eMobility components (LG JV) ̶ Integrated e - Drives (HASCO JV) • Higher light vehicle production '21 - '24 33 - 36% CAGR Unweighted Global LV Production CAGR = 7% (Weighted Global LV Production CAGR = 9%)
Segment Adjusted EBIT Margin % 1 Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 50 2020 2021 2022F 2024F 2021 to 2022 • Contribution on higher sales (+) • Lower production inefficiencies from unpredictable OEM production schedules (+) • Operational Excellence initiatives (+) • Higher input costs ( - ) • Higher engineering costs for electrification and autonomy ( - ) • Lower favourable commercial settlements ( - ) 2022 to 2024 • Contribution on higher sales (+) • Lower engineering costs for electrification and autonomy (+) • Operational Excellence initiatives (+) • Lower input costs(+) POWER AND VISION 1 Excluding other expense (income), net 5.1 Equity Income ($M) 179 134 155 - 185 55 - 70 (%) 6.5 5.0 - 5.5 9.9 - 10.5
Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 51 SEATING SYSTEMS Segment Sales 1 Sales at 100% for our unconsolidated entities 2 Organic Sales represents sales excluding acquisitions net of divestitures and FX movements • Higher light vehicle production • Content growth ̶ New programs and technologies • End of production of certain programs • Negative impact of stronger U.S. dollar 2020 2021 2022F 2024F Consolidated ($Billions) 2022 Sales By Region N.A. Eur Asia ROW 2% 25% 61% 12% 4.5 4.9 5.4 - 5.7 6.2 - 6.6 '21 - '24 8 - 11% CAGR Organic 2 Sales CAGR 9 - 11% 2020 2021 2022F 2024F Unconsolidated 1 ($Billions) • Launch of new JV in North America 0.3 0.4 0.4 - 0.5 0.6 - 0.7 '21 - '24 16 - 22% CAGR Unweighted Global LV Production CAGR = 7% (Weighted Global LV Production CAGR = 9%)
Segment Adjusted EBIT Margin % 1 Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 52 2020 2021 2022F 2024F 2021 to 2022 • Contribution on higher sales (+) • Lower production inefficiencies from unpredictable OEM production schedules (+) • Operational Excellence initiatives (+) • Higher input costs ( - ) • Lower commercial settlements ( - ) • Higher launch and new facility costs ( - ) 2022 to 2024 • Contribution on higher sales (+) • Lower input costs (+) • Operational Excellence initiatives (+) • Higher engineering ( - ) • End of production of certain programs ( - ) 1 Excluding other expense (income), net 2.4 Equity Income ($M) 6 9 5 - 10 5 - 10 (%) 3.1 3.9 - 4.4 5.5 - 6.0 SEATING SYSTEMS
2020 2021 2022F 2024F Segment Sales Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 53 • Overall vehicle assembly volumes relatively level • Launching Fisker Ocean in late ‘22 with value - added basis of accounting • End of production of BMW 5 Series (Graz) in '23 • Negative impact of stronger U.S. dollar • By '24, expect ~50% of vehicles assembled by Magna Steyr to be EV ̶ Includes JV volumes in China COMPLETE VEHICLES NA Eur Asia ROW 2022 Sales By Region 2% 98% 2020 2021 2022F 2024F Graz Volumes (000's of units) 110 126 ($Billions) 5.4 6.1 5.8 - 6.1 5.0 - 5.5 '21 - '24 (6) - (3)% CAGR Organic 1 Sales CAGR (5) - (2)% 1 Organic Sales represents sales excluding acquisitions net of divestitures and FX movements
Segment Adjusted EBIT Margin % 1 Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK 54 2020 2021 2022F 2024F 2021 to 2022 • Government R&D incentives received ‘21 ( - ) • Lower commercial settlements ( - ) • Higher launch costs ( - ) • Increased input costs ( - ) • Lower margins on lower engineering sales ( - ) • Impact of program mix ( - ) • Provision on engineering service contract with Evergrande in ‘21 (+) 2022 to 2024 • Impact of program mix ( - ) • Lower license income ( - ) • Increased input costs ( - ) • Lower launch costs (+) COMPLETE VEHICLES 1 Excluding other expense (income), net 5.1 Equity Income ($M) 5 - 10 10 5 - 10 (%) 4.7 3.4 - 3.9 2.3 - 2.8 3
55 Q4 & FULL YEAR 2021 RESULTS + 2022 OUTLOOK Chevrolet Silverado (Oshawa) Jeep Wagoneer Honda CR - V Toyota Tundra Ford Maverick Alpha Romero Tonale Key 2022 Non - EV Launches BMW X1 Mercedes - Benz GLC BMW X5 North America Europe China
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Exhibit 99.4
REFINITIV STREETEVENTS EDITED TRANSCRIPT MG.TO - Q4 2021 Magna International Inc Earnings Call EVENT DATE/TIME: FEBRUARY 11, 2022 / 1:00PM GMT REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2022 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
FEBRUARY 11, 2022 / 1:00PM, MG.TO - Q4 2021 Magna International Inc Earnings Call CORPORATE PARTICIPANTS Louis Tonelli Magna International Inc. - VP of IR Patrick W. D. McCann Magna International Inc. - Executive VP & CFO Seetarama Swamy Kotagiri Magna International Inc. - CEO & Director Vincent Joseph Galifi Magna International Inc. - President CONFERENCE CALL PARTICIPANTS Adam Michael Jonas Morgan Stanley, Research Division - MD Brian Arthur Johnson Barclays Bank PLC, Research Division - MD & Senior Equity Analyst Christopher Patrick McNally Evercore ISI Institutional Equities, Research Division - MD Colin M. Langan Wells Fargo Securities, LLC, Research Division - Senior Equity Analyst Dan Meir Levy Crédit Suisse AG, Research Division - Director & Senior Equity Research Analyst Itay Michaeli Citigroup Inc., Research Division - Director & Global Head of Autos Sector John Joseph Murphy BofA Securities, Research Division - MD and Lead United States Auto Analyst Mark Neville Scotiabank Global Banking and Markets, Research Division - Analyst Mark Trevor Delaney Goldman Sachs Group, Inc., Research Division - Equity Analyst Michael W. Glen Raymond James Ltd., Research Division - Equity Research Analyst Peter Sklar BMO Capital Markets Equity Research - Analyst Shreyas Patil Wolfe Research, LLC - Research Analyst PRESENTATION Operator Greetings, and welcome to the Q 4 and year - end 2021 results and 2022 outlook . (Operator Instructions) As a reminder, today's call is being recorded, Friday, February 11 , 2022 . Now I would like to turn the conference over to Louis Tonelli, VP of Investor Relations . Please go ahead . Louis Tonelli - Magna International Inc . - VP of IR Thank you . Hello, everyone, and welcome to our conference call covering our ' 21 results and our 2022 outlook . Joining me today are Swamy Kotagiri, Vince Galifi and Pat McCann . Yesterday, our Board of Directors met and approved our financial results for 2021 as well as our financial outlook . We issued a press release this morning outlining each of these . You'll find the press release, today's conference call webcast, the slides presentation go along with the call and our updated quarterly financial review all in the Investor Relations section of our website at magna . com . Just before we get started, this is a reminder, the discussion today may contain forward - looking information or forward - looking statements within the meaning of applicable securities legislation . Such statements involve certain risks, assumptions and uncertainties which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements . Please refer to today's press release for a complete description of our safe harbor disclaimer . Please also refer to the reminder slide included in our deck today related to our commentary . 2 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2022 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
This morning, we will cover our ' 21 highlights as well as our Q 4 results . We'll then provide our ' 22 outlook and lastly run through our financial strategy . And with that, I'll pass it over to Swamy . Seetarama Swamy Kotagiri - Magna International Inc . - CEO & Director Thank you, Louis . Good morning, everyone . We've been busy over the last few days, taking our Board through our annual results and our business plans . Today, I'll recap 2021 , comment on our results and address our outlook . 2020 was a very challenging year that was dominated by the global turmoil caused by COVID . In 2021 , the auto industry was severely impacted by supply chain disruptions, most notably the lack of availability of semiconductor chips . Once again, we found ourselves working closely with our customers to manage through the challenges to mitigate the impact on production . While I'm not happy with our financial results in 2021 , when I sit back and think about the efforts and performance of our team, whether it be winning new businesses, launches or other operational excellence activities, I was extremely pleased with the results we achieved . It is a testament to our people that we manage through yet another difficult operating environment . Our culture of collaboration and execution comes through once again in ' 21 . In 2020 , the first half of the year was severely impacted by COVID - related production shutdowns globally, while the second half saw a strong vehicle production rebound . In each of the first 3 quarters of 2021 , we experienced sequential weakening of vehicle production as the semi chip availability became progressively worse . In addition to the lower production, inefficiencies driven by the unpredictable production schedules of our customers drove higher - than - typical decremental margins . The fourth quarter saw some sequential recovery in production but global volumes were still down 17 % from the fourth quarter of 2020 . As a result of this cadence, our sales of $ 9 . 1 billion in the fourth quarter of 2021 were down 14 % year - over - year . However, organic sales outperformed our underlying markets by 6 % in the quarter . EBIT margin declined year - over - year to 5 . 6 % , while increasing from 2 . 9 % in Q 3 . Our adjusted EPS was $ 1 . 30 for the quarter . And free cash flow in Q 4 was $ 729 million, ending the year at $ 1 . 3 billion . Now let us look at some highlights for 2021 . Keeping our employees safe throughout the pandemic has been and will continue to be our top priority . We have been evolving and updating our protocols and facilitating testing and vaccination programs globally to help protect the health and safety of our employees . We remain focused on three key priorities : Building awareness ; creating an inclusive workforce, including through training and leveraging tools and recruiting to help remove any bias during screening . To continue to cultivate a culture of learning, we have launched several new education programs for employees facilitating further development . And among the many awards we received, Magna has been recognized for the fifth consecutive year being named Forbes World's Best Employer for 2021 . We never lost sight of the importance of operational excellence . Last year, we committed to being carbon neutral in our European operations by 2025 and globally by 2030 . This should place us among industry leaders in Europe and North America . We managed through the year - long supply chain challenges while working diligently with our customers to minimize production disruptions . And our focus on operational excellence and innovation led to customer recognition . Last year, we received our highest ever customer recognition awards, 122 in total . Now let me comment on growth . We outgrew our market in 2021 by 4 % . This exceeded the outgrowth we anticipated in our initial outlook last year . In fact, we achieved that outgrowth in each of our major regions : North America, Europe and Asia . And we launched new technologies that have significant growing addressable markets, namely e - drives, advanced driver assist systems and EV battery enclosures . We expect these product areas to keep driving our growth for many years to come . FEBRUARY 11, 2022 / 1:00PM, MG.TO - Q4 2021 Magna International Inc Earnings Call 3 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2022 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
Finally, I would like to touch on our innovation . We demonstrated the successful commercialization of our innovation activities over the past few years . We were awarded new business in a number of core areas . This includes a recently announced driver monitoring system for a German - based OEM . We won the CES Best Innovation Award for our icon digital RADAR, which is going into production this year . We also continued to expand our collaboration with a growing ecosystem of entities to help accelerate time to market for our innovative products . And lastly our commitment to innovation continues . Over the past year, we increased investments in megatrend areas to position us for the future . Normally, I will be passing off to Vince, and I've heard this statement over many years, Don did it and I did it for the last quarter . He is here with us . Instead, I'll pass the call to Pat McCann, our new CFO, who will first take us through the financials . But before I do, I would like to thank Vince for continuing to be a mentor to both Pat and I . Pat? Patrick W . D . McCann - Magna International Inc . - Executive VP & CFO Thanks, Swamy, and good morning, everyone . I hope everyone is staying safe and healthy . I'm happy to be speaking with all of you as CFO . I would like to start by thanking Vince, who has helped me immensely over the years and have supported me while I have prepared for my new role . It will be evident that Swamy, Vince and I are fully aligned on Magna's disciplined returns - based approach to capital allocation . Today, I will cover our financial results for the fourth quarter and full year 2021 . I'll do a shorter - than - usual version of our quarterly review to allow more time to cover our outlook and financial strategy . More detail on our financials is included in the appendix . As Swamy said, both 2020 and 2021 were impacted by significant global events . ' 20 was affected by COVID - related production shutdowns, particularly in the first half of the year . 2021 was impacted by semi chip shortages . Overall, global light vehicle production only increased 4 % in ' 21 . Our consolidated sales rose 11 % year - over - year . On an organic basis, our sales increased 5 % compared to a weighted global production increase of 1 % , driving a 4 % weighted growth over market for the year . Mainly as a result of the higher year - over - year sales, our adjusted EBIT margin and EPS also rose . For the fourth quarter, global light vehicle production declined 17 % as a result of year - over - year reductions of 20 % , 28 % and 10 % in North America, Europe and China, respectively . On a Magna - weighted basis, production declined 20 % in the fourth quarter compared to Q 4 2020 . Consolidated sales were $ 9 . 1 billion compared to $ 10 . 6 billion in Q 4 2020 . We had strong relative sales performance in the quarter with organic sales outperforming weighted production by 6 % , largely as a result of the lower year - over - year sales, adjusted EBIT and EPS declined from the fourth quarter of 2020 . As with the past couple of quarters, a more informative comparison is reviewing sequential results . Comparing Q 4 to Q 3 of 2021 , global light vehicle production was up 21 % , driven principally by China and Europe as chip - related production shutdown subsided to some degree . Our sales were up 15 % due to higher production and the launch of new programs, partially offset by negative program mix and foreign currency translation . All of our segments experienced sequential increases in sales . Comparing the third quarter to the fourth quarter of 2021 , our adjusted EBIT increased from $ 229 million to $ 508 million, and EBIT margin rose from 2 . 9 % in Q 3 to 5 . 6 % in Q 4 . The adjusted EBIT increase reflected a number of factors : Higher earnings on increased sales, the $ 45 million provision on engineering contracts with Evergrande recorded last quarter, government R&D incentives received this past quarter and higher commercial settlements . These were partially offset by higher input costs and increased transactional foreign exchange losses . I will now review our cash flows and investment activities . During the fourth quarter of 2021 , we generated $ 849 million in cash from operations before changes in working capital and an additional $ 502 million in working capital . Investment activities in the quarter included $ 549 million in fixed assets ; a $ 105 million increase in investments, other assets and intangibles ; $ 63 million to finalize the LG Magna joint venture ; $ 31 million for a small acquisition ; and $ 45 million in public and private equity investments . Free cash flow was $ 729 million in Q 4 . We also repurchased $ 251 million of our common shares and paid $ 127 million in dividends . Growing our dividend as part of our stated financial strategy . And yesterday, our Board approved a 5 % increase in our quarterly dividend to $ 0 . 45 per share, reflecting the Board and management's FEBRUARY 11, 2022 / 1:00PM, MG.TO - Q4 2021 Magna International Inc Earnings Call 4 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2022 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
collective confidence in the outlook for our business . We have increased our dividend per share at an average growth rate of 12 % going back to 2020 . And now, I will pass it to Swamy for a few introductory comments before getting into the specifics of our outlook . Seetarama Swamy Kotagiri - Magna International Inc . - CEO & Director At our investor event last April, I articulated our go - forward strategy for growth . We are on track with our strategy to further strengthen our position in megatrend areas, drive operational excellence, and look to leverage our unique position in the industry to unlock new opportunities . I look forward to giving you the details of our progress at our investor event in May . But today, I'm going to focus on our 3 - year outlook, which I'm really excited about . It reflects our go - forward strategy to remain a leader in mobility . You're going to see that we continue to increase our investments in megatrend areas, and that much of the growth associated with these investments will be realized beyond our outlook period . Specifically in the outlook, we see both tailwinds and headwinds . In terms of tailwinds, we are launching content on a number of new programs, which is contributing to sales growth . I will come back to that shortly . Related to last year's outlook, we have an increase in business awards and are seeing opportunities in megatrend areas, particularly electrification and autonomy . With the current robust auto demand and low dealer inventory levels, we expect a favorable production environment extending into 2024 . And our operational excellence initiatives are expected to contribute to margin improvement through our outlook period . In terms of headwinds in our outlook, we expect continued semiconductor supply constraints to impact production in ' 22 . The supply chain in general remains relatively vulnerable, which could also impact vehicle production . And our business is facing inflationary input cost impacts in areas such as commodities, labor, energy, logistics and other areas, some of which are expected to be short term in nature and others being more enduring . We expect weaker operating results in the first half of the year relative to the second primarily as a result of semiconductor availability, which negatively impact production more significantly in the first half . So how does all of this translate in our key financial metrics? We expect to continue strong sales growth through our outlook period and we have confidence in our outlook . About 90 % of our 2024 sales are already booked . In spite of inflationary input cost pressures and increased engineering activities in megatrend areas, margins are expected to expand in each year of our outlook . Our engineering investments in megatrend areas should increase to an average of about $ 900 million annually before customer recoveries . Capital spending is also expected to increase largely as a result of investments to support the growth in our outlook . Lastly, free cash flow generation from our business is expected to remain strong, reflecting our operating performance and our disciplined approach to investment . This should allow us to further invest for growth and return capital to shareholders . The industry is undergoing a significant shift towards electrified powertrains . In particular, OEMs are bringing an increased number of [BES] to market . We have been communicating for some time now that the vast majority of our product portfolio is powertrain agnostic and the electrification is, in fact, an opportunity for us . And Magna has significant content on electric vehicles that are launching this year across the globe . Just to name a few, we have over $ 3 , 500 in content on the Cadillac Lyriq, about $ 2 , 000 on the F - 150 Lightning, about $ 1 , 000 on BMW iX, about $ 500 each on Xpeng and Smart SUVs and around $ 900 on the NIO ES 7 . These vehicles shown are well above our average content in the respective markets . These are just some of the many vehicle launches around the world that are contributing to the sales growth in our outlook . With that, I will pass it back to Pat . FEBRUARY 11, 2022 / 1:00PM, MG.TO - Q4 2021 Magna International Inc Earnings Call 5 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2022 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
Patrick W . D . McCann - Magna International Inc . - Executive VP & CFO Thanks, Swamy . Let me start with the key assumptions on our outlook . Our outlook reflects increased vehicle production in each of our key regions relative to 2021 . In North America and Europe, our two largest markets, volumes in 2022 remained well below levels experienced in 2019 , pre - COVID . And China production is also slightly lower . However, we expect increased production through 2024 . We assume exchange rates in our outlook will approximate recent rates . This reflects a weaker euro relative to ' 21 , which negatively impacts our reported sales going forward . I will start with our consolidated outlook . We expect consolidated sales to grow by 7 % to 9 % on average per year out to 2024 , reaching $ 44 . 6 billion and potentially as high as $ 47 . 1 billion . The growth is driven by higher vehicle production and content growth, including as a result of many new technologies across our portfolio . These are partially offset by foreign exchange, the end of production on certain programs and net dispositions . On an organic basis, we expect consolidated sales to grow between 8 % and 10 % on average per year out to 2024 . Excluding complete vehicles, we expect our organic sales to grow between 10 % and 12 % on average . In addition, we are expecting significant sales growth from unconsolidated joint ventures over the next few years including from our LG e - powertrain joint venture, our integrated e - Drive JV in China and a new seating joint venture in North America . We expect our consolidated margin to expand in 2022 and then again out to ' 24 . Relative to ' 21 , our 2022 margin benefits from contribution on higher sales, lower production inefficiencies from unpredictable OEM production schedules and operational excellence initiatives . These are expected to be partially offset by higher input costs and engineering investments to support new program awards and to capitalize on growing opportunities in megatrend areas . We also expect a meaningful step up in margins in ' 23 . This is largely driven by contribution on higher anticipated sales, operational excellence initiatives and lower application engineering in megatrend areas . And we expect additional margin expansion in ' 24 primarily driven by higher sales and operational excellence initiatives . Many of the same factors that are impacting consolidated sales and margins out to 2024 are also impacting our segments . In the interest of time, we will not run through the segment detail . However, they are included in the appendix and we're happy to discuss any questions on them . Next, I would like to cover some of the highlights of our financial strategy . We have been consistent in communicating our capital allocation principles over the years, and I would like to reiterate these now . We want to maintain a strong balance sheet, ample liquidity and high investment - grade ratings, invest for growth through organic and inorganic opportunities along with innovation spending and return capital to shareholders . Over the last couple of years, our capital spending has been below normal levels as a result of the environment . As we get into our outlook period, spending reflects the capital required to support the growth in sales . We expect capital spending to be approximately $ 1 . 8 billion for 2022 and remain relatively level out to ' 24 . We expect further strong free cash flow totaling about $ 6 billion over the next 3 years . In summary, we are executing our go - forward strategy . We plan to further grow our business with particular sales acceleration in megatrend areas, execute on our plans to expand margins, including through operational excellence, generate solid free cash flow to further fuel growth and return capital to shareholders and accelerate investments to support growth on the car of the future . We hope to see many of you in May at our investor invest where we will elaborate on our go - forward strategy . Thanks for your attention . We'll be happy to answer your questions . FEBRUARY 11, 2022 / 1:00PM, MG.TO - Q4 2021 Magna International Inc Earnings Call 6 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2022 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
FEBRUARY 11, 2022 / 1:00PM, MG.TO - Q4 2021 Magna International Inc Earnings Call QUESTIONS AND ANSWERS Operator (Operator Instructions) And we'll proceed with our first question on the line with Mr . John Murphy of Bank of America Merrill Lynch . John Joseph Murphy - BofA Securities, Research Division - MD and Lead United States Auto Analyst Pat, welcome to the call . Just -- a first question, if I look at Slide 23 , which is your light vehicle production assumptions and Slide 25 , your 2024 sales, it looks like your sales through -- - from ' 21 to ' 24 growing largely or essentially right in line at the midpoint with production . So I'm just curious, it seems like the growth above market that you had kind of fades away in your outlook . And it looks like it's complete vehicle assembly largely . But I just -- what's the key driver? Is it there just the mix? Or what's going on there? Patrick W . D . McCann - Magna International Inc . - Executive VP & CFO Yes . If you go back, John, to where we were -- what we were expecting in 2021 , we are sort of flat relative to production . Our organic growth at the end of the year is plus 4 . So starting point is higher for one thing . We also said that our expectation for the ' 21 to ' 24 time frame is like 1 % to 3 % on average per year . If you look at excluding the impact of complete vehicles, which has had an impact on our overall growth, we're back at the kind of 1 % to 3 % per year in the ' 21 to ' 24 time frame . So certainly, complete vehicles is negatively impacting our overall growth rate . And we're not talking about here is unconsolidated sales, which is growing significantly over our time period . John Joseph Murphy - BofA Securities, Research Division - MD and Lead United States Auto Analyst Yes . Yes . That helps quite a bit . And just a second question . I mean, as the automakers are focusing more and more on AV and EV investments . There's this idea, and I think this makes a lot of sense that they are going to outsource more and more parts of the vehicle, even outside those systems, which really lays in the sweet spot of Magna and your business . I'm just curious if you're seeing any incremental quoting on class A stampings, if you will, or other parts where there might be greater opportunity for you to take on more and more of the vehicle as they focus their investment dollar and even capital on AVs and EVs? Seetarama Swamy Kotagiri - Magna International Inc . - CEO & Director John, this is Swamy . As we see today, definitely, from a perspective of capabilities and capacity, we are well positioned if that comes through . But as we sit here today and look at the cadence of the sourcing activity, we don't see a significant shift as of yet, but that is to be seen . But like you said, if you look at what we have in terms of footprint and capabilities, we should be well positioned to address that piece . John Joseph Murphy - BofA Securities, Research Division - MD and Lead United States Auto Analyst Got it . And then just lastly, I apologize on the outlook, one more question on the 8 . 1 % , 8 . 6 % range . It's the same as what you're expecting in ' 23 , we're looking at a little bit higher revenue base . I mean, is this the ultimate margin as sort of this 8 . 1 % , 8 . 6 % range? You think that Magna tops out at? Or is there potential over time as you grow in the business mix maybe shifts to potentially even get higher on margins? 7 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2022 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
Patrick W . D . McCann - Magna International Inc . - Executive VP & CFO John, when we think about the margin here, I think there's so many components we have to consider mix . I think the one thing that's changed year - over - year is some of the input costs have increased . When we do go out, we see significant input cost increases in ' 22 . Some of those costs will stabilize, I would say, as we go through the outlook period . Some of them won't . When we think about labor, I think there's been a reset to some degree on the labor cost, whereas others will come off . We've also seen a step - up in our investments for megatrend areas, which is going to impact our margins in the short term, but going to drive growth in the longer term . John Joseph Murphy - BofA Securities, Research Division - MD and Lead United States Auto Analyst Got it . And I'm sorry, if I could sneak in one more, just on the Ambassador Bridge . It's not because you guys are Canadians, although you probably have a better perspective than I do as a New Yorker, what's going on up there . But I mean, are you running into any issues with, I mean, it's not shipping -- it's trucking, and any kind of disruption around that? Or is that just a hiccup that you guys will be able to work through and the industry you think will work through? Seetarama Swamy Kotagiri - Magna International Inc . - CEO & Director I think in the long term, I'm sure we'll work through . But as of right now, there is -- we're constantly monitoring it, John . And there is -- some of the OEM customers have had to idle or cut production requirements . They're adjusting, I should say, the production schedules . And we're kind of starting to see some initial impact in some areas versus the other, for example, (inaudible) facilities and so on . So we're watching it closely . I definitely hope that it will get resolved quickly . Operator We'll get to our next question on the line from the line of Adam Jonas with Morgan Stanley . Adam Michael Jonas - Morgan Stanley, Research Division - MD It's so interesting your outlook is so balanced compared to many of your OEM customers that are guiding for really significant increases in margin over the next few years . So it's a nice dose of reality . Swamy, where are you most concerned? You highlighted commodities . I mean, amongst the commodities, and particularly metals, what's giving you the most concern right now? Seetarama Swamy Kotagiri - Magna International Inc . - CEO & Director I think it's a mix a little bit, Adam, as you look at the stuff . Some of the commodities like steel, we are on resell, a significant portion of it . Some of it we have in the free market . A large part of resin also on resell . Some of it is not, especially the polyethylene - based specialty resins and so on and so forth . A little bit on aluminum and copper . But most of the times, we are indexed on resale program . And the rest, we have to manage through as the market is fluctuating . But I wouldn't say one is significantly different than the other . There's a bunch of commodities that we are closely monitoring . And the supply is going to be one of the key things that we have to look at and how our tiered suppliers are managing that is going to be also an important thing to closely monitor . FEBRUARY 11, 2022 / 1:00PM, MG.TO - Q4 2021 Magna International Inc Earnings Call 8 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2022 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
Adam Michael Jonas - Morgan Stanley, Research Division - MD And then just a follow - up on Steyr . You have -- and Graz, very highly anticipated launch for this November . Was curious if there was -- if that looked on track from your perspective or anything you wanted to call out there? And what are -- any update on plans or timing or milestones regarding your decision of a North American contract manufacturing location? Seetarama Swamy Kotagiri - Magna International Inc . - CEO & Director For the anticipated launch, we are -- both the teams are working together well and progressing well, I should say, Adam, right? But more specifics, I would leave for the OEM to comment . In terms of looking just at various opportunities in Graz, they continue . In the North American footprint, like I've said before, very open to the idea of having the footprint here . As I've always said, I think it's important to have a little bit of visibility on the product plan, even though it starts off at a lower volume if there is enough visibility in the long term . I think we'll be looking forward to have their footprint in North America . Operator We'll get to our next question on the line from Itay Michaeli from Citigroup. Itay Michaeli - Citigroup Inc., Research Division - Director & Global Head of Autos Sector First question, just wanted to go into the -- some of the incremental investments you're making this year on the megatrends . I was hoping you could quantify kind of the year - over - year impact there . It sounds like that's mostly in power solution -- power and vision . Maybe, Swamy, talk about some of the opportunities for revenue from these investments coming beyond, I think, 2024 . I hope you could maybe quantify or talk about kind of where specifically you are investing on the EV and autonomy side? Seetarama Swamy Kotagiri - Magna International Inc. - CEO & Director Yes, Itay. I think, as you said, a lot of the investment that we're talking about is in that region from an engineering investment perspective. If you look at the electrification side of things, between the -- I think if you look at the overall managed sales, by 2024 , we are going to be in the $ 2 billion range . And in our LG joint venture that we talked about, we continue to see a 50 % CAGR over the next -- or during the planned period, I should say . In the ADAS area, last we talked about, 20 - plus percent CAGR . And as we look at the plan period now from ' 21 to ' 24 , we are even seeing a 30 % CAGR . So I would say the investments that we have made and the platform technologies are starting to yield results, and we continue to see that going forward . Specific areas, e - drives, larger addressable market for us, like we said before, not just the all - wheel drive, 4 - wheel drive . Now, we are looking at all drives . So that is an expanded addressable market . On the ADAS side, we have, as we said, the building blocks in terms of the sensor suite, the compute and the software infusion capabilities . I briefly mentioned about our RADAR going into production and also a program with a German OEM on the driver monitoring system, and we also continue to see further traction in that product line . FEBRUARY 11, 2022 / 1:00PM, MG.TO - Q4 2021 Magna International Inc Earnings Call 9 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2022 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
Patrick W . D . McCann - Magna International Inc . - Executive VP & CFO And Itay, I think the other thing we should consider when we talk about investments in megatrend areas, there's the portion that flows through P&L as gross engineering expense . The other part that's -- and that's primarily in our P&V segment, as you pointed out . The other large investment we're making is in our BES segment, and that's primarily in the form of capital as we launch battery enclosures . So we're investing now for battery enclosures that are going to be launching throughout the outlook period . We recently started the launch of the Hummer here in Michigan . Itay Michaeli - Citigroup Inc . , Research Division - Director & Global Head of Autos Sector That's all very helpful . And just a quick follow - up, and I apologize if I did miss it before, but I was hoping we can go through the bridge and complete vehicle assembly between kind of the prior outlook for 2023 that you had versus the updated outlook today for kind of the top line and margins as well? Louis Tonelli - Magna International Inc . - VP of IR Yes . If you look at 2023 , we had -- we would have had the BMW 5 Series in there for most of the year, and that continues to be the case for 2024 and I would drag another year . So that program if it ends in ' 23 , if -- it's not into ' 24 . Now we do have the Fisker program that launches, but there's different accounting . So you have always had kind of a full cost accounting and value - added accounting . Well, that's the 5 Series, a full cost basis . So a much higher unit -- price per unit and the Fisker program is on a value - added basis, so much lower unit price . So even though the volumes in the plant are not that significantly different, but the revenues are quite different . Operator We'll get to our next question on the line from Peter Sklar with BMO Capital Markets . Peter Sklar - BMO Capital Markets Equity Research - Analyst Just looking at your initial 2024 guidance, you're showing a lot of equity income growth over the plan period . I take if that's coming from some of these joint ventures, the partnership with LG, the partnership with HASCO . So I'm not surprised that the revenue is ramping up, but I was surprised at the growth of equity income, given that there would be initial ramp periods as those joint ventures begin to build . So just wondering if you could add a little flavor on what's driving the equity income growth? Patrick W . D . McCann - Magna International Inc . - Executive VP & CFO Peter, it's Pat . I think when you look at the equity income, what I would consider, you're right, a lot of the growth is coming from those joint ventures . And what you have to consider is in the early -- where we are today is we're investing heavily, the engineering spend to launch a lot of these programs in the EV markets . When we get out to 2024 , a large portion of these programs will be launched generating revenues . So it's a combination of lower application engineering in the future, combined with margin on sales that are going to be generated . FEBRUARY 11, 2022 / 1:00PM, MG.TO - Q4 2021 Magna International Inc Earnings Call 10 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2022 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
Louis Tonelli - Magna International Inc . - VP of IR I mean, the LG joint venture already has sales and it's ramping up pretty significantly . So there's investment there . HASCO launched the Volkswagen program last year, continues to ramp up and there's another program that launches next year . So it's going to start having more higher sales . And so there's a change in the results as a result of the drive, the sale being much higher . Peter Sklar - BMO Capital Markets Equity Research - Analyst Okay . Another question I had is, I'm a little lost on how many e - drive awards you've received and have announced . Like just I forget when it was, I think it was last week or recently, you issued the press release on the Volkswagen platform where you're providing the secondary drive . So as I recall last time you spoke up three major e - drive awards and it's the Volkswagen program you talked about last week, is that part of that? Or is that a fourth program? Maybe you could just review where you are on e - drive awards? Louis Tonelli - Magna International Inc . - VP of IR Yes . Peter, happy to do that . You're right . The Volkswagen program is the first e - drive program, and we have talked about that before . We have another program, as I just said, that's launching in HASCO next year, that will be the second . And then last year, we were awarded two additional e - drive programs that include both the primary and secondary drives . So we have four currently . Lots of conversations . In fact, there's an acceleration in conversations with customers over the last 12 months, and that's mainly due to all the focus on EVs . And certainly, the LG partnership is a driver there . And we're looking at a bunch of additional quotes for this business . Peter Sklar - BMO Capital Markets Equity Research - Analyst Okay . And the LG partnership, is that for components for the e - drive system? Or will the joint venture do the entire e - drive system? Or a bit of both? Louis Tonelli - Magna International Inc . - VP of IR It's both, Peter, if you recall, it's for components, but also with any Japanese or Korean customers, they're responsible -- LG joint venture is responsible as the Tier 1 on the e - drive side . Peter Sklar - BMO Capital Markets Equity Research - Analyst Okay . And then just lastly, on the complete vehicle assembly where results were pretty strong in terms of operating income . You attributed that partially to government research and development incentives . I'm just wondering what they're related to and what was the magnitude -- those incentives must have been pretty significant if you called them out? Patrick W . D . McCann - Magna International Inc . - Executive VP & CFO Yes, Peter, they're basically R&D credits, similar to what you would see here in Canada . The way that program is structured in Austria, they do run through EBIT . The number is in the range of about $ 20 million, and it's a little bit more significant than we're used to because it covers out - of - period amounts as well . Operator We'll get to our next question on the line, from the line of Chris McNally with Evercore ISI . FEBRUARY 11, 2022 / 1:00PM, MG.TO - Q4 2021 Magna International Inc Earnings Call 11 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2022 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
Christopher Patrick McNally - Evercore ISI Institutional Equities, Research Division - MD Just a follow - up on the margin question for Power & Vision and Body . On Power & Vision, you talked about the engineering up spend in ' 22 . Can you just talk about -- is that the majority of the margin hit year - over - year? Or is it equally shared with things like component costs? Louis Tonelli - Magna International Inc . - VP of IR So if you repeat the question, Peter -- sorry, Chris? Christopher Patrick McNally - Evercore ISI Institutional Equities, Research Division - MD Yes . The down margin year - over - year in Power & Vision, you talked about the increased spending for R&D, ADAS programs, is that the majority of the hit? Or is if we were to rank order components, higher to prices and things like that are also a headwind? Seetarama Swamy Kotagiri - Magna International Inc . - CEO & Director Just trying to find the right page, Chris, to get to what you're referring . Just give us a ... Louis Tonelli - Magna International Inc . - VP of IR If you look at Power & Vision, I think what you're seeing terms of the big impacts to the margin are going to be the inflationary input costs . And a big chunk of the engineering spend is coming through in 2022 . So that those are the two biggest drivers of the decrease in margin in ' 22 . Christopher Patrick McNally - Evercore ISI Institutional Equities, Research Division - MD Okay . Perfect . And then Body where obviously things normalize pretty quickly next year? Could you just talk about how raw materials are flowing through? Obviously, you have steel recovery and you also have steel scrap . Just talk about some of the tailwinds there that get back your margin to sort of this 8 % plus typical range . Patrick W . D . McCann - Magna International Inc . - Executive VP & CFO Chris, it's Pat . When I think about the BES segment, you're right, it's primarily a steel story with some resin on the exterior side . Specifically on the steel, we are primarily covered via resale or indexing programs, and we do have a benefit of being able to resell scrap steel in the market . Those markets tend to go together . So as we see steel coming off in the future, scrap recoveries will probably move in tandem, maybe a little bit quarterly delay or whatnot . I think the biggest driver when you look at the margin increasing from the 5 . 7 % in ' 21 , it's really driven by higher sales . And the other factor is we're expecting some stability to come back into the production schedules from our OEM customers . So if you recall, in ' 21 , we did have some fairly high decrementals when you have these big capital - intensive plans . And when we return back, I think that's driving the majority of that improvement . Christopher Patrick McNally - Evercore ISI Institutional Equities, Research Division - MD Okay . That's great . So lower risk on raws . And then my final question, just on Steyr . I think it's been asked a couple of times, but I just wanted to clarify . In your slides, I think on Slide 53 , you have the volumes basically in like a 130 , 000 to 140 , 000 unit range for 2024 . As far as I know, I think the capacity is around 200 , 000 . Is the Fisker number in there because we're -- I guess what I'm trying to wonder is with the BMW rolling off and all the FEBRUARY 11, 2022 / 1:00PM, MG.TO - Q4 2021 Magna International Inc Earnings Call 12 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2022 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
opportunities you have, could you fill that capacity over the next couple of years? Or are we getting close to the point where you'd make a go, no - go decision on a new North American facility? Seetarama Swamy Kotagiri - Magna International Inc. - CEO & Director So Chris, I think I would say, again, depending upon the mix and what the requirements are in the assembly and the paint and so on, I would take the capacity roughly to be around 170 , 000 to 180 , 000 in Graz and similar number in our joint venture in China . So I think as the BMW rolls off, we talked about the Fisker just starting at the end of this year and slowly ramping into ' 23 and ' 24 . So there is a little bit of a transitionary time as BMW comes off, right, and Fisker ramps up and we continue to have many discussions on different variants and OEMs . So it's a lumpy business . It goes through the cycle, and we're having a whole bunch of conversations to utilize the capacity appropriately . Louis Tonelli - Magna International Inc. - VP of IR And Fisker is in -- Fisker is in there . So you don't have -- there's only maybe 30 , 000 capacity there . If another big program came, you would need a significantly more capacity . Operator Your next question on the line from Dan Levy from Credit Suisse. Dan Meir Levy - Crédit Suisse AG, Research Division - Director & Senior Equity Research Analyst First, I wanted to go back on one of the earlier questions of the fact that the margin guide for ' 24 is flat versus ' 23 despite the higher revenue . I think you mentioned increased commodities and I assume that, that's just a broader [capture] for input cost . So maybe you can just elaborate a bit more on that . So if we're just thinking about input cost or cost inflation, what's in that bucket? How much cost inflation did you see in 2021 ? What are you assuming for 2022 ? What are you assuming beyond? And then what's the mitigation? What are you assuming on mitigation of those costs? Or are those costs all sticky? Patrick W . D . McCann - Magna International Inc . - Executive VP & CFO So -- sorry, Dan, it's Pat again . So if we think about the -- I think your statement is correct . I would view it primarily as just higher input costs . And when we think about those higher input costs, it's going to cover items such as commodities, whether it's steel or resins . And when I talk about steel, obviously, that's on a net basis . We have resin, we would have copper, aluminum . But we also have areas such as freight, energy costs . We're seeing an uptick, primarily in Europe . And outside of third - party costs, we're also seeing an uptick in labor costs . And the labor cost in ' 21 were primarily more in the form of retentions or whatnot . What we're seeing as we go into ' 22 is we are experiencing higher than historical wage increases in various parts of the world . So coming back to the numbers, if you think about 2021 , from that -- if we go back compared to 2020 , our uptick of input cost is probably in the range of about $ 80 million, of about $ 80 million $ 50 million related primarily to its commodities and third party costs and $ 30 million would be primarily labor . As we roll forward into 2022 , the additional uptick is in the range of about $ 275 million, and that split would be $ 190 million on commodities and the balance on labor primarily . FEBRUARY 11, 2022 / 1:00PM, MG.TO - Q4 2021 Magna International Inc Earnings Call 13 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2022 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
Dan Meir Levy - Crédit Suisse AG, Research Division - Director & Senior Equity Research Analyst And then on ... Patrick W . D . McCann - Magna International Inc . - Executive VP & CFO Sorry, Dan, just to want to catch off . But sort of the first part of your question, when you're looking at the margin being flat from ' 23 to ' 24 , when you start thinking about commodities, they tend -- they -- we're expecting them to come off . Labor's stickier . And when you look at ' 23 to ' 24 , I think we do have an uptick on our labor cost that is going to stick . Louis Tonelli - Magna International Inc . - VP of IR But we do a higher uptick in engineering through that period, I mean that's impacting the business in the short term. Dan Meir Levy - Crédit Suisse AG, Research Division - Director & Senior Equity Research Analyst Okay. So you're assuming full mitigation of the commodities or some of the commodities to come off, correct? . Patrick W. D. McCann - Magna International Inc. - Executive VP & CFO Yes. Yes, we have -- we've assumed in our plan that we have some recoveries. But the numbers I pointed out are on a net basis. Dan Meir Levy - Crédit Suisse AG, Research Division - Director & Senior Equity Research Analyst Okay . And then next question is just on the LG JV, and I see the Power & Vision equity income and it's coming up . Maybe you could just provide some comments on the underlying profit because I think, Swamy, you mentioned earlier that it's 50 % CAGR . But if I just compare the equity income from ' 21 to ' 24 , it appears like it's a slight uptick . So is that just a reflection that you're getting the revenue, but it's still not a steady - state margin by 2024 ? Louis Tonelli - Magna International Inc . - VP of IR I think it's fair to say that we're still investing in -- like we get to 2024 . Unfortunately, we don't control the joint venture, and we're not able to get into what the profitability is . We clearly, we're in heavy investment mode and over time, with the sales growth, we'll get contribution, but we can't comment on the impact . We also have, in our equity income, one of our joint ventures, which is planning pretty conservatively, it's conservative on the amount of recoveries that they intend to get or expect to get from customers . So that's impacting equity income in the short term . Dan Meir Levy - Crédit Suisse AG, Research Division - Director & Senior Equity Research Analyst Okay . And then just lastly, maybe you could just provide a quick comment on the free cash . You're guiding to something flat to slightly below ' 21 . I realize a big part of that is higher CapEx . But it seems like the EBIT increase should more than offset that . So maybe you could just provide some comments on the free cash dynamics? FEBRUARY 11, 2022 / 1:00PM, MG.TO - Q4 2021 Magna International Inc Earnings Call 14 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2022 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
Patrick W. D. McCann - Magna International Inc. - Executive VP & CFO So yes, just on the free cash flow, again, I think when you put in perspective of the range we're talking for CapEx, I think that investment is pretty significant compared to the delta in profitability . Yes, and (inaudible) passed it over to me here . So when you think about our capital spending, the other piece we have to consider is -- we talked about capital, and this would be capital where if you go to a plant and the (inaudible) say Magna on it, there's another significant increase and it's primarily when we get into the megatrend areas . When you talk about battery enclosures, there's a significant amount of investment of customer - owned [tool] . And when we're guiding that number out, we're seeing a $ 50 million to $ 75 million increase in that number as well . Louis Tonelli - Magna International Inc. - VP of IR That's the other -- you see that in other assets. Operator We will get to our next question on the line from Mark Neville with Scotia Capital. Mark Neville - Scotiabank Global Banking and Markets, Research Division - Analyst I just want to make sure I understand and sort of to go back on this, what's happening in complete vehicles? So volumes will be flat . Sales are down, but that's Fisker accounting but you also have the BMW rolling off in 2024 . Is that correct? Louis Tonelli - Magna International Inc. - VP of IR BMW rolls off late in '23, the second half of 2023. Mark Neville - Scotiabank Global Banking and Markets, Research Division - Analyst Okay. And is there a different accounting for Fisker, is that right too? Louis Tonelli - Magna International Inc . - VP of IR Yes, we talked about even last year, we're accounting for it on a value - added basis . That said, a lot lower unit -- price per unit than we are with the rest of our programs, including BMW 5 Series . Engineering is also down a little bit than we are [expecting] . We've been generating a lot of engineering revenues, and we're expecting that to come off a little bit from the high levels we've seen over the last couple of years . Mark Neville - Scotiabank Global Banking and Markets, Research Division - Analyst Okay. Given the Fisker accounting, if it's just value - add, wouldn't sort of -- shouldn't we assume or wouldn't normally the margin be higher? Louis Tonelli - Magna International Inc . - VP of IR Yes, it's (inaudible) higher . There are still some elements in there of goods that are included in the unit price, which keeps the margin down a little bit, but it is higher . It's just a lot of factors that are going through that line . And we actually highlighted a few of them in the appendix there, but it's more than just that Fisker that's going in there . (inaudible) there's some input costs that are impacting the margin, et cetera . FEBRUARY 11, 2022 / 1:00PM, MG.TO - Q4 2021 Magna International Inc Earnings Call 15 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2022 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
Mark Neville - Scotiabank Global Banking and Markets, Research Division - Analyst Okay . Pat, you mentioned some -- just -- you throwed some numbers in terms of inflationary pressures, I think you said $ 275 million for 2022 . I missed the split . Patrick W . D . McCann - Magna International Inc . - Executive VP & CFO Yes, so -- just to be clear, so it's $ 275 million incremental versus ' 21 on a net basis and the split is $ 190 million on commodities or third - party costs . And then $ 85 million would be primarily labor . Mark Neville - Scotiabank Global Banking and Markets, Research Division - Analyst Okay . I'm just curious what -- sort of what steps you can take, if any, surrounding the labor and energy? Again, I appreciate commodities move around, but I guess labor feels a little more structural . So what are some of the things you can do to sort of push that through or deal with that? Seetarama Swamy Kotagiri - Magna International Inc . - CEO & Director It's a mix, I would say, right? Some of it is continuing discussions with the customers, looking at productivity improvements within the -- within our operations . It's not one answer . We look at continuous improvements in (inaudible) and that's an ongoing exercise going forward to it . And some of it will be recovered in the new quotes as we go forward . Mark Neville - Scotiabank Global Banking and Markets, Research Division - Analyst Okay . One last question . Just in the 2024 outlook, I understand there's no comments around M&A, but just curious to get your updated thoughts there? Seetarama Swamy Kotagiri - Magna International Inc . - CEO & Director Yes . I think like I always said, we look at the geography, the customer and the product strategy overall and try to look at what is the right way to go at either organic or inorganic . And the answer happens to be inorganic . Then, we look at what's the right approach to do that . Vincent Joseph Galifi - Magna International Inc . - President Mark, it's Vince . First time I'm going to say something on this call, kind of more of my area looking at overall strategic initiatives with Swamy . On the M&A front, we typically do not build anything into our outlook, right? We only built in M&A that has happened or we've got a contract in place . So certainly, with the strength of our cash flow, our balance sheet strength and what's happening in the industry and the evolution of how well we're positioned, we obviously, as you can imagine, look at a whole bunch of things, and we have an overall strategic approach to our business . And with the right opportunities, you shouldn't be surprised if we do use our balance sheet . We've used in the past . I expect we're going to continue to use it in the future to strengthen our overall product portfolio to support our customers . Operator We'll get to our next question on the line from Mark Delaney with Goldman Sachs . FEBRUARY 11, 2022 / 1:00PM, MG.TO - Q4 2021 Magna International Inc Earnings Call 16 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2022 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
Mark Trevor Delaney - Goldman Sachs Group, Inc . , Research Division - Equity Analyst The company's outlook for global auto production looks pretty consistent with IHS . It is above some of the other auto Tier 1 supplier guidance . And so I'm hoping you can elaborate a bit more on how you're driving your outlook for production? How closely does it align with the OEM forecast that you're being given? And are you trying to factor in any conservatism given all of the supply chain issues? Louis Tonelli - Magna International Inc . - VP of IR I think if you look at ' 22 , our outlook on a global basis is about 6 % growth versus ' 21 . In North America and Europe, I think we're a little bit more aligned . If you look at the ' 24 , my reflection is that we're still a little bit conservative relative to IHS, at least in North America and Europe . So I mean, if you look at external forecasters, we definitely have our ear to the ground, at least in the short term, of what we're hearing from our groups and what they're hearing from their customers . So I mean, it's a combination . We have to put a stake in the ground at a point in time, and we don't know, of course, what others are doing . We'll look at the analyst roll in there where you guys are right, what you guys are expecting, when we come up with a collective view on outlook and then we finish our plans . That's kind of how we do it . Mark Trevor Delaney - Goldman Sachs Group, Inc . , Research Division - Equity Analyst Got it . That's helpful . And then my second question was on Optimus Ride, an acquisition the company did relatively recently . Maybe you can talk a bit more on the assets and [IP] that, that acquisition is bringing into Magna and how you plan to incorporate it into the development of the company overall? Seetarama Swamy Kotagiri - Magna International Inc . - CEO & Director Mark, we've talked about continuing to look at different areas based on product strategy, and we have done a few things to continue to strengthen our foundation in ADAS and software in general . And with this acquisition, we welcomed about 130 employees there, had -- we thought the capabilities and the knowledge they had would add to what we're doing in the future function development and so on . Not commenting specifically on the [IP], but it really adds to the depth of the software in general and the ADAS piece in specific . And we will maintain the office in Boston . It's a rich area in terms of the ecosystem of economic institutions and just the software talent, so we'll continue to grow that as a region . Operator We'll get to our next question on the line from Colin Langan from Wells Fargo . Colin M . Langan - Wells Fargo Securities, LLC, Research Division - Senior Equity Analyst I'm a little surprised by the commodity cost increase going from $ 50 million to $ 190 million, particularly if steel is heading in a downward direction or it has been . What are the big components of that $ 190 million increase if it's not steel? FEBRUARY 11, 2022 / 1:00PM, MG.TO - Q4 2021 Magna International Inc Earnings Call 17 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2022 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
Patrick W . D . McCann - Magna International Inc . - Executive VP & CFO Colin, it's Pat again . So when you think about the commodity increase, I think I've covered off a few of the major items . Obviously, resins, we have much less resin on a resale program or indexing program . Just given the nature of the product, it's a harder -- it's a harder product to hedge against . So resin is obviously a big part of it . The other big part is energy that's flowing through . We're seeing that in Europe on a lot of the -- like a lot of the input costs . What we're seeing as well is when we look at energy and some of the input costs, they're coming through the supply base as well in the form of surcharges, which are a little bit harder to control . Specifically regarding steel, if you think about steel, and I understand steel prices have been coming off pretty steadily since towards the end of Q 3 of last year, really, the timing of your contract and when you lock in, it's going to drive a lot of that value . So it's a bit of a three - party negotiation when you're dealing with your customers and the mills and we're in the middle . And when you lock in those contracts it really drives the steel pricing on a year - over - year basis . Louis Tonelli - Magna International Inc . - VP of IR The prices coming down in the scrap sales are a little as well, and that's kind of baked into there as well . Colin M . Langan - Wells Fargo Securities, LLC, Research Division - Senior Equity Analyst Okay . And when I look at growth over market and if you look at ' 21 to ' 22 and I take out assembly, I'm coming up with something like an 11 % growth . With your outlook for North America and Europe, up 16 % . It seems like you're underperforming this year . Is that right? And is that just assuming some sort of platform mix drag relative to geographic benefit? What sort of -- one, are you actually underperforming the market this year? And then two, is that add any color on what platforms maybe you're dragging that growth over the market down? Louis Tonelli - Magna International Inc . - VP of IR Well, I don't think there's any particular classic, we give a range for our growth rates . And last year, we were kind of thinking the same thing . So we started the year kind of close to flat and we ended up at plus 4 % , so the base is higher . But it's just the mix of programs that we have in the business that's driving the position . We still think excluding Steyr, we had growth in the entire period . We've also got a crystal that, sorry -- we've also got a disposition that we did in 2021 , which is impacting overall sales . Colin M . Langan - Wells Fargo Securities, LLC, Research Division - Senior Equity Analyst Okay . And anything in particular in Power & Vision? That one seems to have the lowest growth year - over - year . Louis Tonelli - Magna International Inc . - VP of IR Power & Vision, in particular, has really strong growth over market over the last couple of years . We are 9 % over the market in 2020 and 4 % last year . So the base is certainly high there . And we have businesses in Power & Vision that are pretty established and so it isn't always going to grow fast in the market . And it just depends on the year, just the mix of programs and business . Operator We'll get to our next question on the line from Rod Lache from Wolfe Research . FEBRUARY 11, 2022 / 1:00PM, MG.TO - Q4 2021 Magna International Inc Earnings Call 18 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2022 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
Shreyas Patil - Wolfe Research, LLC - Research Analyst This is Shreyas on for Rod . Just following up on that Power & Vision question . So it obviously has a lot of the secular growth elements in the business and like ADAS and e - Drive . And you talked about consolidated revenues up 9 % to 10 % through 2024 . The market is up 9 % . So a little bit of outgrowth . And I realize the JV part of the business is growing rapidly . But are there parts of the Power & Vision business that you expect will grow a lot slower over these next few years and maybe even shrink that you can talk about? Seetarama Swamy Kotagiri - Magna International Inc . - CEO & Director The Power & Vision has -- we have the mechatronics mirrors, lighting, ADAS . And in the powertrain, it's a combination of our transmission business and all - wheel drive, 4 - wheel drive and the e - Drives . So there's kind of some of the areas which are growing fast, as we talk about with the rest of the market . Some of them are stable and have a very long runway for the next 10 years, which gives the stability, but those things are not growing as much as the other areas . We cannot look specifically at each of the product lines . For example, the mirrors, that continue to grow with the market . Every vehicle has that . But we are looking at the combination of the mirrors and electronics in the driver monitoring system . So that's turning out to be a new product line . So you can't really put a specific number on each one of these things . It's a mix . And I think as time goes on, it evolves, right? Some product lines will evolve faster than the other . Louis Tonelli - Magna International Inc . - VP of IR And the second, they're seeing the fastest growth in unconsolidated sales and it's Power & Vision group right, due to the LG joint venture and HASCO joint venture in particular . Shreyas Patil - Wolfe Research, LLC - Research Analyst Okay . And then you mentioned engineering spending is growing to $ 900 million -- megatrend engineering spending is growing $ 900 million in 2022 . What was that spending in ' 21 ? And what are you assuming for 2024 ? Seetarama Swamy Kotagiri - Magna International Inc . - CEO & Director We're talking about average annual numbers for the planned period. So if you look at just these average annual numbers, I would say it's about a $300 million increase as an average from the last plan period to now. Louis Tonelli - Magna International Inc. - VP of IR Right. And that's gross spend. That's before recoveries and mark up. Seetarama Swamy Kotagiri - Magna International Inc. - CEO & Director Yes. FEBRUARY 11, 2022 / 1:00PM, MG.TO - Q4 2021 Magna International Inc Earnings Call 19 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2022 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
Shreyas Patil - Wolfe Research, LLC - Research Analyst Okay . So basically, you're saying that it would be up to $ 1 . 2 billion by 2024 versus the $ 900 million in ' 22 ? I just want to make sure . Seetarama Swamy Kotagiri - Magna International Inc . - CEO & Director No, we're just saying that we're expecting about $ 600 million on average overall in the last -- in our last outlook over the 3 - year period . And now there's an uptick to about $ 900 million on average over the last year on the growth side -- growth spend . Operator We'll get to our next question on the line from the line of Brian Johnson with Barclays . Brian Arthur Johnson - Barclays Bank PLC, Research Division - MD & Senior Equity Analyst A lot of my questions have been grained already . So I want to ask kind of a bigger picture one . One of your large competitors that is considered role - model of the industry, Aptiv, recently made a large and fickly expensive software acquisitions . So -- and maybe there's a chance for Vince to talk a bit . How are you thinking about the role of software overall at Magna and potentially the need for acquisitions, which, of course, have been very common in multi - industry space to help you get there? Seetarama Swamy Kotagiri - Magna International Inc . - CEO & Director Yes . I think Brian, software is such a wide topic, and it is put under a broad umbrella . And if you look at the software capabilities and application, it's different in different product areas . But for sure, what you said is true that software will define a large part of the vehicle going forward . Given that overall statement, we continue to look at what software and what role does it play, whether it's ADAS or whether it's mechatronics, whether it's powertrain and so on . So we continue to look at each of the specific areas of what the application software capabilities are . And therefore, the investments, whether organic or inorganic to complement that . At a base level, there are some of the electrical architecture like we did with Fisker or with our Steyr business . We continue to look at the holistic view of what the vehicle is going to be, and we continue to add to that capability, right? So I think one of the unique things in Magna, which I think should be considered a role model is how we can actually integrate and think holistically of a whole vehicle and what each system means, right? So that's how we look at it . Brian Arthur Johnson - Barclays Bank PLC, Research Division - MD & Senior Equity Analyst And does that mean you would want to be active across the software stack? Or are you thinking about specific domains or applications where you really want to focus your software expertise? Seetarama Swamy Kotagiri - Magna International Inc . - CEO & Director We believe that we have to have a system viewpoint given our engineering -- full vehicle engineering and full vehicle manufacturing . And given the domains that we have, we look at domain specificity also, right? So given our portfolio, we continue to look at all of them . And how the stack develops and what OEMs will take on versus what the suppliers will take on is evolving, and we continue to track that . FEBRUARY 11, 2022 / 1:00PM, MG.TO - Q4 2021 Magna International Inc Earnings Call 20 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2022 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
[Tell me] one more question . Operator Certainly . And we'll proceed with our final question from the line of Michael Glen from Raymond James . Michael W . Glen - Raymond James Ltd . , Research Division - Equity Research Analyst You made the comment on the 2022 guidance regarding the 1 H, 2 H dynamic . Can you just provide a little bit more clarity on like how different will the two periods be as we're modeling this up? Louis Tonelli - Magna International Inc . - VP of IR Sorry . We don't provide quarterly, that's how to look at the overall numbers, we don't provide quarterly guidance, but definitely the impact of the chips is going to have -- is going to skew what you normally see as a stronger first half versus the second half . Michael W . Glen - Raymond James Ltd . , Research Division - Equity Research Analyst Okay . Because coming at like Q 4 , at the end of the day was you came out at $ 1 . 30 in EPS, and that was kind of well ahead of what consensus was forecasting . So are you expecting something different in Q 1 versus what you saw in Q 4 ? Does it get a little -- is there a little more pressure in Q 1 that starts to take place? Louis Tonelli - Magna International Inc . - VP of IR Yes . We're not going to get into the details of just trying to walk from, let's say, the earnings, sort of margins in Q 4 versus Q 1 . We don't provide that outlook . So like I said, it's more -- the direction is more related to the volumes in the first half versus the second half . We can't get into the details of what we expect in the first quarter or the first half on margins . Michael W . Glen - Raymond James Ltd . , Research Division - Equity Research Analyst Okay . And just some thoughts on given where the free cash flow outlook is? Some thoughts on how you would proceed with the buyback in 2022 ? Patrick W . D . McCann - Magna International Inc . - Executive VP & CFO Mike, we do have an open NCIB where we're able to buy up the 10 % of our shares at any point in time . We have been active in the market . In the quarter just past, we did purchase $ 250 million . I think it's going to be consistent with our liquidity or our financial strategy, which is -- our # 1 priority is to grow the business organically, inorganically . And if opportunities are not there, we're going to continue with the share buyback . When I think about the share buyback, what's nice about the buyback is we could turn it off . So if we do have an opportunity that comes up that is significant, we can turn it off and we have turned it off in the past . When we have looked at acquisitions, I think we're not going to change that strategy going forward . FEBRUARY 11, 2022 / 1:00PM, MG.TO - Q4 2021 Magna International Inc Earnings Call 21 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2022 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
Vincent Joseph Galifi - Magna International Inc . - President Yes, Michael, it's Vince, just to add to that . I mean I've been part of this capital strategy kind of and how we evolve it over the years, it's been pretty consistent kind of -- we look at the leverage ratio . We look at the macroeconomic environment . We look at the opportunities that we see, and we've got to make sure we have enough liquidity . And to the extent that there's excess liquidity, we've demonstrated over time that we'll return that to shareholders by way of buybacks . But as Pat talked about, I think with the buyback you've got flexibility turned on and off depending on the situation and our strategy in that area hasn't changed . Operator Mr . Kotagiri, there are no further questions . I'll turn it back to you . Seetarama Swamy Kotagiri - Magna International Inc . - CEO & Director Thank you . Thanks, everyone, for listening in . I know we have had 2 straight years with difficult production environment and industry challenges still continue to persist . However, we remain confident in the strength of our business model and our ability to grow and generate earnings and free cash flow to create significant long - term value for our shareholders . We stay focused on executing our go - forward strategy and look forward to seeing many or all of you in Detroit at our investor event in May . Stay safe, stay healthy and enjoy the rest of your day . Operator Thanks very much, and thank you, everyone . That does conclude the conference today . We thank you for your participation . You may disconnect your lines . Have a good day everyone . DISCLAIMER Refinitiv reserves the right to make changes to documents, content, or other information on this web site without obligation to notify any person of such changes . In the conference calls upon which Event Transcripts are based, companies may make projections or other forward - looking statements regarding a variety of items . Such forward - looking statements are based upon current expectations and involve risks and uncertainties . Actual results may differ materially from those stated in any forward - looking statement based on a number of important factors and risks, which are more specifically identified in the companies' most recent SEC filings . Although the companies may indicate and believe that the assumptions underlying the forward - looking statements are reasonable, any of the assumptions could prove inaccurate or incorrect and, therefore, there can be no assurance that the results contemplated in the forward - looking statements will be realized . THE INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS . IN NO WAY DOES REFINITIV OR THE APPLICABLE COMPANY ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY EVENT TRANSCRIPT . USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS . © 2022 , Refinitiv . All Rights Reserved . FEBRUARY 11, 2022 / 1:00PM, MG.TO - Q4 2021 Magna International Inc Earnings Call 22 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2022 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.