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Magna profit walloped

Globe and Mail Update

Magna International Inc. said fourth-quarter profit more than halved as Canada's largest auto-parts maker took a restructuring charge.

Profit fell to $83-million (U.S.) or 75 cents a share from a year-earlier $177-million or $1.81 a share. While overall sales rose 4 per cent to $5.9-billion, complete vehicle assembly sales dropped 12 per cent on lower volume.

The Aurora, Ont.-based company took a restructuring charges of about $176-million or $1.13 a share. It said it expects to take additional charges this year in the range of between $30-million and $40-million “related to activities that were initiated in 2005.”

The shares fell $2.06 or 2.4 per cent to $83.04 in Toronto.

“Looking back at 2005, despite difficult industry conditions, including significantly higher commodity costs, lower production volumes on key Magna programs, and increased pressure for price concessions from our customers, we reported solid operating results,” said Don Walker, Magna's co-chief executive, in a statement.

The company said its outlook is unchanged from the previous forecast it gave on Jan. 12. It still expects sales of between $22-billion and $23.3-billion this year and earnings growth this year compared with 2005, excluding unusual items from both years.

The company expects steel prices to remain high. “Over the last year we have experienced significant price increases for key commodities used in our parts production, particularly steel and resin,” it said. “We expect steel prices will remain at elevated levels in 2006 compared to levels earlier this decade.”

© The Globe and Mail

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