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Updated February 10th, 2024 at 14:34 IST

Magna International projects lower 2024 profit due to softening EV demand

Magna, headquartered in Aurora, Ontario, foresees its full-year profit to range between $1.60 billion and $1.80 billion.

Business Desk
Magna International profit forecast
Magna International profit forecast | Image:Magna International
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Magna International: Canada-based auto parts supplier, Magna International anticipates its 2024 profit to fall below expectations, citing weakened demand for electric vehicles (EV) and inflationary pressures. As a result, the company's U.S.-listed shares plummeted by 6 per cent during morning trading.

The auto industry has witnessed challenges, with suppliers like Magna and its competitor BorgWarner grappling with increased labor and raw material costs, coupled with a slowdown in EV parts demand. Automakers are redirecting their focus towards higher-margin hybrid and gas-powered vehicles, contributing to the EV market's sluggishness.

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During a conference call with analysts, Magna's CEO Swamy Kotagiri remarked that the expected penetration rates for EVs have been delayed, negatively impacting the company's anticipated sales growth in the short and medium terms.

Magna, headquartered in Aurora, Ontario, foresees its full-year profit to range between $1.60 billion and $1.80 billion, falling short of analysts' average projection of $1.90 billion based on LSEG data. Kotagiri highlighted, "The industry appears to be moving from a supply constraint to a demand constraint as macro challenges persist."

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For the fourth quarter ending December 31, the company reported an adjusted profit of $1.33 per share, missing analysts' expectations of $1.48. Despite a 9.2 per cent increase in fourth-quarter sales to $10.45 billion, aligning with Wall Street consensus, the subdued profit outlook has prompted CFRA senior equity analyst Garrett Nelson to maintain a "Hold" rating on Magna's stock.

BorgWarner, a peer company, also forecasted its 2024 profit and revenue below street expectations on Thursday, indicating broader industry challenges.

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(With Reuters inputs.)

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Published February 10th, 2024 at 14:34 IST

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