Summary

• Magna International is a leading global automotive supplier dedicated to delivering new mobility solutions and technology that will change the world.
• The company's products can be found on most vehicles today and come from 343 manufacturing operations and 91 product development, engineering and sales centers in 28 countries.
• The company has a team of 158,000 employees.

Company Overview

Magna International (NYSE:MGA, TSX:MG) is a leading global automotive supplier dedicated to delivering new mobility solutions and technology that will change the world. The company's products can be found on most vehicles today and come from 343 manufacturing operations and 91 product development, engineering and sales centers in 28 countries. Magna International has over 158,000 employees focused on delivering superior value to its customers through innovative processes and world-class manufacturing.¹

The company's deep roots in the auto industry go back to 1957, when the company began working with General Motors. Today, the company make everything from seats to powertrains and are the only auto supplier to build complete vehicles.

Magna International is at the forefront of a new technological revolution in the automotive industry, and we’re leading the way in all areas of future mobility, with a keen focus on electrification and autonomy.

The company's mission is to use its expertise to create a better world of mobility, responsibly. The company do that by developing technologies, systems and concepts that make vehicles safer and cleaner for everyone.

Products

Body Exteriors & Structures

1. Body Structures
2. Chassis Structures
3. Exterior Systems & Modules
4. Trim and Engineered Glass
5. Active Aerodynamics
6. Energy Storage Systems

Power & Vision

• Electrified Powertrain Technologies
• Conventional Powertrain Technologies
• Powertrain Subsystems & Components
• ADAS and Automated Driving
• Control Modules
• Mechatronics
• Mirrors and Overhead Consoles
• Lighting

Seating Systems

• Seat Complete
• Structural Products
• Foam and Trim
• BioSciences

Complete Vehicles

• Complete Vehicle Engineering
• Complete Vehicle Manufacturing
• Complete Vehicles Insights

Global Footprint

In the coming years, the majority of growth in auto production and vehicle sales is expected to come from China, South America, Eastern Europe  and India and Magna is present in each region. The company's operations span five continents and 28 countries, giving it a global footprint to support every major automaker in the world. An investment in Magna is an investment in a global network of 343 manufacturing operations and 91 product development, engineering and sales centres.²

Industry Overview

While the company supply systems and components to every major original equipment manufacturer [“OEM”], the company do not supply systems and components for every vehicle, nor is the value of its 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 its content on specific vehicle production programs, are also important drivers of its results.³

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 chain 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 through: mandatory stay-at-home orders which restrict operations of car dealerships, as well as through a deterioration of consumer confidence.

Overall, global light vehicle production increased 4% in 2021, however, both 2020 and 2021 were impacted by significant global events which led to significant variability in production volumes throughout both years. Light vehicle production volumes were severely impacted by COVID-19 pandemic related production shutdowns in the first half of 2020, while the second half of 2020 saw a strong rebound. In each of the first three quarters of 2021 there was sequential weakening of light vehicle production volumes as the semiconductor chip shortage became progressively worse. The fourth quarter of 2021 saw some sequential recovery, however global production volumes were still lower compared to the fourth quarter of 2020.

Financial Highlights

Sales increased 11% or $3.59 billion to $36.24 billion for 2021 compared to $32.65 billion for 2020 primarily as a result of higher global light vehicle production and higher assembly volumes, including the negative impact of the COVID-19 pandemic during 2020 partially offset by the negative impact of production disruptions due to semiconductor chip shortages during 2021.

Cost of goods sold increased $2.89 billion to $31.10 billion for 2021 compared to $28.21 billion for 2020.

Depreciation and amortization increased $146 million to $1.51 billion for 2021 compared to $1.37 billion for 2020.

SG&A expense increased $130 million to $1.72 billion for 2021 compared to $1.59 billion for 2020.

Net interest expense decreased $8 million to $78 million for 2021 compared to $86 million for 2020 primarily as a result of interest income recognized on a favourable value-added tax settlement in Brazil during 2021 and interest earned on higher cash balances, partially offset by an increase in long-term borrowings due to the issuance of $750 million of 2.45% fixed rate Senior notes during the second quarter of 2020.

Equity income decreased $41 million to $148 million for 2021 compared to $189 million for 2020, primarily as a result of the reorganization of certain transmission joint ventures which resulted in these entities no longer being equity-accounted for, and net business combinations during 2021, partially offset by earnings on higher sales at certain other equity-accounted entities.

For the year ended December 31, 2021, the company recorded restructuring and impairment charges of $67 million [$52 million after tax] in its Power & Vision segment, $18 million [$17 million after tax] in its Seating Systems segment and $16 million [$14 million after tax] in its Body Exteriors & Structures segment.

For the year ended December 31, 2021, the company recorded unrealized losses of $6 million [$12 million after tax] on the revaluation of public and private equity investments and unrealized gains of $4 million [$3 million after tax] related to the revaluation of public company warrants.

During 2020, the company recorded unrealized gains of $34 million [$29 million after tax] on the revaluation of its private equity investments and a non-cash impairment charge of $2 million [$2 million after tax] related to a private equity investment, which was included in its Corporate segment.

During 2021, the company acquired a 65% equity interest and a controlling financial interest in Chongqing Hongli Zhixin Scientific Technology Development Group LLC. [“Hongli”]. The acquisition included an additional 15% equity interest in two entities that the company previously equity accounted for. On the change in basis of accounting the company recognized a $22 million gain [$22 million after tax].

During 2021, substantially all of the assets of its European joint venture with Ford Motor Company [“Ford”], Getrag Ford Transmission GmbH [“GFT”], were distributed to either Ford or it, which resulted in it recording a gain of $18 million [$18 million after tax]. As part of the distribution, the company received GFT’s non-controlling interest in a Chinese joint venture, a facility in Europe and cash.

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].

Net income attributable to Magna International Inc. increased $757 million to $1.514 billion for 2021 compared to $757 million for 2020 as a result of an increase in income from operations before income taxes of $942 million, partially offset by an increase of $119 million in income attributable to non-controlling interests and an increase in income taxes of $66 million.

Diluted earnings per share was $5.00 for 2021 compared to $2.52 for 2020. The $2.48 increase was substantially a result of higher net income attributable to Magna International Inc

Adjusted diluted earnings per share, as reconciled in the “Non-GAAP Financial Measures Reconciliation” section, was $5.13 for 2021 compared to $3.95 for 2020, an increase of $1.18.

Recent developments

Magna Celebrates Grand Opening of State-of-the-Art South Carolina Facility⁴

April 7, 2022 – Magna officially opened the doors on its new facility in Duncan, South Carolina. Magna CEO, Swamy Kotagiri, and company officials were joined today by South Carolina Governor, Henry McMaster and other members of local government to celebrate the grand opening. The new 170,000 square foot facility produces exterior mirror systems for customers including BMW, Mercedes, and Volvo. Production has started with roughly 255 employees but is expected to grow to approximately 400 jobs by over the next few years.

The launch of this facility shows its commitment to providing its employees with modern amenities and its customers with world class manufacturing,” said John O’Hara, President of Magna Mechatronics, Mirrors and Lighting. "With its highly qualified workforce, Magna International is dedicated to supplying feature-rich exterior mirror systems to its global customers.”

The plant’s current production volume is approximately 1.6 million mirrors per year and will add the launch of the Exfinity™ Mirror to its production portfolio by early 2023 which will be a first-to-market technology in North America.

“Magna continues to grow their footprint in South Carolina, and today’s grand opening of their newest facility is further proof that South Carolina is an ideal location for companies to find sustained success,” said Governor Henry McMaster. “Magna is an exemplary partner to its state and its workforce, and the company congratulate them on this new state-of-the-art operation.”

Sustainability was a key focus when designing the facility. Energy optimization and control systems were implemented to minimize overall consumption and help reduce carbon footprint. The facility also boasts several employee-centric features and modern amenities including a wellness room, fitness center, canteen with adjacent patio and gaming area, vegetable garden and a solar-lit walking trail. A dedicated truck entrance also exists for increased safety, and clerestory windows to maximize natural light in the work environment.

This new facility marks the 6th facility in South Carolina for Magna. Those interested in joining a world-class team and company, please

References

1. ^ https://www.magna.com/company/company-information/facts-history
2. ^ https://www.magna.com/company/company-information/global-reach
3. ^ https://www.magna.com/docs/default-source/financial-reports-public-filings/annual-reports/sedar_magna-annual-reportf5ada94159894cf993c6ef2b37b3dd7c.pdf?sfvrsn=4324e5c4_8
4. ^ https://www.magna.com/company/newsroom/releases/release/2022/04/07/news-release---magna-celebrates-grand-opening-of-state-of-the-art-south-carolina-facility