Magna cuts dividend as earnings tumble
Magna International Inc. cut its quarterly dividend Tuesday as the auto parts company’s profits tumbled in the fourth quarter.
But company executives wouldn’t comment on reports that Magna has been actively meeting with Chryslerofficials with a view to possibly acquiring an ownership stake.
“The future of all of our major customers is of concern to us and we would consider any alternatives to help them out any way we can to ensure their success,” Vince Galifi, Magna’s chief financial officer, said in a conferencecall with analysts.
“We are following what’s going on with Chrysler with interest, since we have a lot at stake,” he said. But he would not go further than that.
Magna shares fell 5.5 per cent, dropping $5.10 to close at $87.42 on the TSX.
The Aurora, Ont.-headquartered company reported net income of $29 million US in Q4, or 26 cents a share, on revenue of $6.37 billion US. In the same quarter last year, the company made $83 million US, or 75 cents a share, on sales of $5.85 billion US.
Magna took net charges for one-time items, including restructuring,of $91 million US in the quarter. In the same quarter of 2005, the company took charges of $157 million US.
The company told investors it had cut its quarterly dividend to 19 cents US per share from the 38 cents US per share it paid out in the third quarter.
“The difficult automotive environment during 2006, particularly in North America, took its toll on our 2006 financial results,” Galifi said.
“We believe it is prudent to review all uses of cash with an eye to maintaining our strong financial position in light of continuing industry challenges. Our board’s decision to adjust our dividend as a result of our reduction in profitability reflects this view,” he said in a statement.
Magna’s operating income slipped to $42 million USfrom $125 million US.
For all of 2006, the company made $528 million US on sales of $24.18 billion US. In 2005, Magna made $639 million US on sales of $22.81 billion US.
Looking ahead to its 2007 financial year, Magna expects consolidated sales to come in between $22.9 billion and $24.2 billion, based on light vehicle production volumes of approximately 15.4 million units in North America and approximately 15.5 million units in Europe. (With files from Canadian Press)