The head of Magna International Inc. says the Canadian automotive parts giant has successfully mitigated many of the challenges currently facing the auto industry by making marginal improvements across its business.
“We’ve been really focused on margins, and we have focused on free cash flow,” Magna CEO Seetarama Kotagiri told BNN Bloomberg in a Friday interview.
“All the operational initiatives in terms of cost reductions, discipline and capital prioritization of engineering and research and development, with all the things that are happening in the industry, really show how Magna as an organization works.”
Magna stock was up more than six per cent in afternoon trading in Toronto on Friday after the company released third quarters earnings earlier in the day.
The company, which keeps its books in U.S. dollars, reported net income of US$484 million for its third quarter, up from $394 million a year earlier, amounting to $1.68 per diluted share for the period ended Sept. 30, compared with $1.37 per share a year earlier.
Magna also cut its full-year sales guidance amid a slowdown in global light vehicle production, but the reduction was by less than analysts had feared.
The results demonstrated the company’s ability to “be resilient and react very quickly,” Kotagiri said, adding that cost-cutting and prioritization efforts have paid off in recent quarters.
“All these initiatives put together is what has helped us to address all the headwinds and challenges that seem to be pretty common in the industry right now,” he explained.
Auto industry outlook
Kotagiri said that despite the uncertainty that exists in the auto sector, the industry is cyclical, and headwinds could shift to tailwinds at any time, especially as global interest rates fall and inflation concerns wane.
But he added that Magna remains focused on making improvements within its own operational control, “rather than getting into the business of predictions of where the market is at its lowest.”
On Friday, Magna also announced its plan to move up the start date of its share buyback plan to the fourth quarter of 2024, which was welcome news to investors.
“Looking into 2025, all the operational initiatives that we have… give us the confidence to get back to the normal cadence of returning capital to shareholders,” Kotagiri said, adding that Magna has retuned roughly $15 billion in the form of buybacks and dividends over the last decade.
EVs ‘here to stay’
Kotagiri said that like the broader auto industry, the fast-evolving electric vehicle (EV) sector is a cyclical one, and current EV demand woes may be a natural blip as the technology penetrates a growing number of global markets.
“In the long term, EVs are here to stay… just like any technology and any transformation that happens, we are going through a little bit of a swing, but if you look at the mean of the wave, it’s still pointing upwards,” he said.
“So, in the next five to 10 years I think… EV (will have) a tailwind, I think we’re just going through the normal damping of any transformation that happens in any industry.”
With files from The Canadian Press