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Donnelly's Transformation Proceeds
While the full integration of Donnelly with Magna’s mirror systems unit “takes some time,” and the acquisition has pushed the parent company’s margins lower, Magna International CEO Belinda Stronach told brokerage analysts this month that she’s pleased with the pace of integration.
“They’re making great progress,” Stronach said during a May 9 conference call to discuss the company’s record first-quarter financial results.
The Donnelly Corp. acquisition, completed during the fourth quarter of 2002, is cited as a key factor behind solid growth in Magna International’s average product content per vehicle produced. That average grew from $423 to $480 in North America in the past year.
Magna’s average content in Europe has grown from $207 to $276 per vehicle since the first quarter of 2002.
Strong growth is expected to continue at Magna, which produces a wide range of auto parts, from seats and mirrors to interior and exterior trim and vehicle frames.
Magna expects its average content per vehicle to reach $495 to $510 in North America during the second quarter and grow to $580 to $620 by the first quarter of 2005.
European content is projected to reach $265 to $280 this quarter and $370 to $410 in 2005.
The continued integration of Donnelly into Magna, Stronach said, is progressing both internally and through growing sales for Magna Donnelly. The Holland-based subsidiary produces automotive mirrors, electronic components and window systems.
Stronach said Donnelly Corp. operated at margins lower than Magna International’s, so work continues during the integration process to lower the operating costs of Magna Donnelly.
Magna Donnelly has closed two plants — one in Kentwood and another in Mexico — and shifted their production to other facilities.
The firm also has consolidated some production programs. Much of the work at Kentwood was moved to Magna Donnelly’s Grand Haven and Lowell plants.
As a contributor to the corporation’s bottom line, Magna International continues to expect the acquisition “to be fairly neutral” during 2003. The firm’s chief financial officer, Vince Galifi, said that improvements are expected in the financial performance.
“We expect the impact of Donnelly on Magna’s results to get progressively better throughout 2003 as synergies are realized and the Magna-Donnelly integration is completed,” Galifi added.
Magna International — based in Aurora, Ontario — is one of the largest auto suppliers in the world.
The company recorded first-quarter sales of $3.76 billion, up 20.5 percent from the $3.12 billion during the same period a year earlier.
Quarterly net income totaled $162 million, or $1.65 per share, up 5.8 percent from the $153 million, also $1.65 per share, during the first quarter of 2002.
Per-share earnings for the first quarter of 2003 reflect the issuance of 5.2 million shares of stock in connection with the Donnelly acquisition.
Magna expects second automotive quarter revenues of $3.4 billion to $3.6 billion. Full-year automotive revenues are projected to reach $13.4 billion to $14.3 billion. Automotive sales account for more than 92 percent of Magna’s total revenues.
1Q 2003: $3.76 billion
1Q 2002: $3.12 billion
1Q 2003: $162 million, $1.65 EPS
1Q 2002: $153 million, $1.65 EPS*