Magna International Inc. is keeping careful watch on a $2.2-billion (U.S.) cash pile and is hoping to use it to exploit opportunities amid the turmoil in the auto industry, the Canadian auto parts giant said yesterday.
"We expect that our net cash will help us 'weather the storm' in the industry and provide opportunities to continue to grow our business and further enhance shareholder values," the company said in a statement accompanying its year-end and fourth-quarter financial results.
Some of the money comes from the deal last year in which Russian billionaire Oleg Deripaska invested $1.54-billion in Magna in return for 20 million shares, so some cash will be used to buy back shares and reduce the dilution caused by that deal.
But the money also puts Magna in a position to invest in new technologies, grow in new regions and make acquisitions, chief financial officer Vince Galifi told analysts on a conference call. "With our cash position, we think we're in an ideal situation if the right acquisition comes up in the right product area," Mr. Galifi said. "Today versus a year ago, I would be more comfortable with more cash."
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Magna's fourth-quarter profit fell to $28-million, or 24 cents a share, from $29-million, or 26 cents, a year earlier, even though sales jumped 7 per cent to $6.83-billion from $6.37-billion. Impairment and restructuring charges of about $95-million led to the profit slump.
The biggest disappointment was in North American operations, said CIBC World Markets Inc. analyst Michael Willemse, pointing to an 11-per-cent increase in sales, but a 24-per-cent drop in operating profit from third-quarter levels.
There was another indication yesterday that the U.S. new vehicle market hasn't turned around, with Goldman Sachs Inc. analyst Robert Barry forecasting double-digit sales declines for Chrysler LLC, Ford Motor Co. Ltd. and General Motors Corp. in the U.S. market in February.
Mr. Barry expects Chrysler to turn in the worst performance, with sales down 19 per cent. That could be negative for companies that supply Chrysler, including Magna, he said in a note to clients.
Magna revealed yesterday that its payments to founder Frank Stronach and his consulting company rose 48 per cent last year - to $40-million from $27-million. His compensation is based on Magna's pretax profit before profit-sharing, a number the company did not break out.
MAGNA (MG.A)
Close: $78.51, down $1.49
Magna
| Q4 | 2007 | 2006 |
| Profit | $28-million | $29-million |
| EPS | 24¢ | 26¢ |
| Revenue | $6.84-billion | $6.37-billion |
All figures in U.S. dollars
Source: Company reports
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