The Canadian Press (Aurora, Ontario) - Auto parts giant Magna International Inc. (TSX:MG) announced another increase in its quarterly dividend Wednesday after reporting a big improvement in fourth-quarter earnings to cap what CEO Don Walker called a "momentous year."
"2010 was a year of significant change for both the automotive industry and Magna," Walker said in a conference call with analysts, citing improvements in North America and Europe and record sales in the rest of the world.
"After a deep drop in 2009, North American vehicle production rose 39 per cent in 2010, U.S. auto sales improved throughout the year and dealer inventories largely remained below long-term averages," he said.
In western Europe, light vehicle production increased 12 per cent over 2009, reflecting relatively strong vehicle sales in certain European countries as well as increased exports of European-built vehicles to other markets, particularly China.
"Our 2010 total sales increased 39 per cent over 2009, with production sales in each of our geographical segments as well as complete vehicle assembly sales and tooling and other sales all posting increases over 2009."
The company's rest-of-the-world production sales exceeded the $1-billion mark for the first time, increasing 53 per cent to $1.03 billion from $676 million in 2009.
It was the company's ninth consecutive year of increasing sales in the rest-of-world segment.
"Our strong 2010 financial results reflect the improved level of production in North America and western Europe, but also the benefits of our efforts over the last two years to restructure, right-size and reduce costs across Magna and the benefit of our efforts to improve underperforming operations around the world," Walker said.
In announcing Q4 results, Magna said it earned net income of $216 million compared with a loss of $139 million in the comparable 2009 quarter.
The auto parts maker said it would increase its quarterly dividend to 25 cents US per share, up from 18 cents.
"Our strong earnings and cash flow generation over the past year has enabled our board to increase our dividend for the third time since we re-established our quarterly dividend last May," chief financial officer Vince Galifi said.
Meanwhile, Walker called 2010 "a momentous year for Magna on a number of other fronts," citing among other things the elimination of the company's dual-class voting share structure in a deal with company founder Frank Stronach in August.
Since then, "we have implemented a number of significant corporate governance initiatives, including adoption of majority voting policy, reconstitution of a nominating committee of our board and the fully independent committee and the initiation of a search for independent directors. ..."
Magna, which keeps its books in U.S. dollars, said its profit amounted to 88 cents per share on $6.6 billion in sales. That compared with a loss of 62 cents per share on $5.4 billion in sales a year ago.
The average analyst estimate according to Thomson Reuters had been for a profit of $1.02 per share.
For the full year, Magna profits were $973 million or $4.18 per share on sales of $24 billion, compared with a loss of $493 million, or $2.21 per share on sales of $17.4 billion in 2009.
The company said North American and European average dollar content per vehicle increased by 17 per cent and six per cent respectively compared with a year ago.
North American and European vehicle production increased seven per cent in the same period.
Operating income, including unusual items, increase to a record $1.2 billion, compared with an operating loss of $320 million for 2009.
Cash flow from operations were also "extremely strong," Walker added, increasing $1.3 billion to $1.9 billion for the year.
"Going forward, following a strong rebound in 2010, we expect global light vehicle production to grow further in 2011 provided the overall economic conditions continue to improve," he said.
In its outlook, Magna said it expected sales for 2011 to total between $25.6 billion and $27.1 billion, based on light vehicle production volumes of about 12.9 million units in North America and approximately 13.3 million in western Europe.
Magna said it expects to spend between $1 billion and $1.1 billion on fixed assets and has a large number of facilities planned or under construction in many regions. "These facilities will be a drag on earnings in the short term but will be drivers of future growth in the medium- to long-term," Walker said.
Magna has over 96,000 employees at 256 plants and 82 product development, engineering and sales centres around the world.
Shares in the company, which reported its results after the close of markets, were down $1.38 at C$54.97 Wednesday on the Toronto Stock Exchange.
