File photo of a worker assembling a car engine at a Magna Steyr factory site.Herwig Prammer/Reuters
Magna International Inc. has so far focused on small targets when it has been making acquisitions, but it has the ability to make a transaction in the range of $3-billion (U.S.) to $5-billion, chief executive officer Don Walker says.
Whether it makes such a purchase would depend on the target company's footprint, competitive position and technology, Mr. Walker said, adding that the Canadian auto parts company won't make an acquisition – big or small – just for the sake of making an acquisition.
And while the company is "quite actively looking" at targets, it is also assessing its own portfolio of products to make sure it makes sense to stay in those businesses.
Mr. Walker has talked for several years about examining all the components the company makes and divesting or otherwise exiting product areas where it is not among the leaders. That internal review appears to be reaching some conclusions.
He made his comments Wednesday as the auto parts company discussed its annual outlook at an investor conference in Detroit in conjunction with the North American International Auto Show.
Currency fluctuations, a 90-day shutdown of the Fiat Chrysler Automobiles NV minivan plant in Windsor, Ont., reduced production at its Magna Steyr assembly plant in Austria and lower output in Europe of some vehicles in which Magna has a high value of parts caused the company to reduce its outlook for revenue this year from what it forecast in the third quarter of last year for 2014 results.
Total sales are forecast to be between $34.4-billion and $36.1-billion this year. Magna's third-quarter forecast issued last November projected 2014 sales of between $35.8-billion and $37.0-billion.
Magna's shares fell $7.57 (Canadian) to $115.67 – more than 6 per cent – on the Toronto Stock Exchange on Wednesday after the forecast was issued amid a general rout among Canadian equities.
That guidance implies that share profit will range between $9.22 (U.S.) and $9.68 in 2015, said industry analyst Peter Sklar of BMO Nesbitt Burns. Mr. Sklar said in a note that his view of the outlook is negative. Those share profit projections are less than his estimate of $10.18 a share and an overall analyst estimate of $10.27.
Magna is, however, expecting sales to increase $5-billion by 2017, with China and India leading the way in both growth and capital spending, chief financial officer Vince Galifi told analysts.
Sales in China should rise to $2.6-billion in 2017 from a forecast of about $1.5-billion in 2014, Mr. Galifi said. The number of Magna factories in that country is slated to grow to 37 from 31 last year. Growth in India is expected to be even stronger, although from a smaller base.
Sales should hit $350-million compared with a projection of $75-million in 2014. The number of factories should grow by 50 per cent to 12.
Mr. Galifi said 21 per cent of Magna's capital spending of more than $4-billion between 2012 and 2017 will occur in Asia, Central and Eastern Europe and South America.