Magna International Inc. said Friday that COVID-19 lockdowns in China and a stronger U.S. dollar relative to other currencies, particularly the euro, negatively impacted the company’s second-quarter results.
“The China COVID lockdowns in the quarter created further supply chain bottlenecks that are still being felt in the industry,” CEO Seetarama Kotagiri said on a conference call with analysts.
He expects the constraints to continue throughout 2022, but the company lifted its full-year sales forecast as it anticipates an improvement leading to greater production levels in the back half of the year.
There is also some risk moving forward that high inflation and rising interest rates will impact auto consumers, he noted.
The Aurora, Ont. auto parts manufacturer posted a loss in its most recent quarter as it recorded a non-cash impairment charge related to its investment in Russia.
The Ontario-based auto parts maker, which keeps its books in U.S. dollars, said it lost US$156 million or 54 cents per diluted share in the second quarter, which includes $1.24 of non-cash impairment charges related to the company’s investment in Russia.
The results compared with earnings of US$424 million or US$1.40 per diluted share in the same quarter of 2021.
Adjusted net income fell to US$243 million or 83 cents per share, compared with US$426 million or US$1.40 per share a year earlier.
However, sales were up compared to the same period in 2021.
Magna said sales for the three months ended June 30 were US$9.36 billion, a 3.6 per cent increase from US$9.03 billion last year.
The company said higher sales were mainly due to a two per cent increase in global light vehicle production, largely driven by a 14 per cent increase in North America.
“Our second quarter results were largely in line with our expectations, excluding the impairment of our investment in Russia,” Kotagiri said in a statement as part of the earnings release Friday.
On the call, Magna’s CEO also addressed the energy crunch in Europe. Earlier this week, European Union energy ministers agreed to a plan to ration gas use from August through March 2023 to avoid the potential effects of further supply cuts by Russia amid the ongoing war in Ukraine.
“I wish we could have a say in the policy implementation of energy rationing,” Kotagiri said.
“We’re all looking to see how we can stay resilient and function through all of it. It’s just not a company solution. I think it’s got to be an industry-wide solution for this one.”
He added that the company is looking at how to protect production.
Shares of Magna were down 87 cents, or 1.06 per cent, to $80.86 in late-morning trading.