Buoyed by stout demand, Magna tops estimates

Canadian auto parts maker Magna International Inc. on Thursday beat estimates for quarterly profit and revenue driven by strong demand for car structures in China, which is leading the sector’s recovery from the COVID-19 crisis.

While light vehicle production surged 87 per cent in China, it was flat in North America and increased 5 per cent in Europe, the company’s two largest markets.

Automotive production slowed in early 2020 because of hard lockdowns caused by the pandemic but has come roaring back, especially in China, as consumers look to travel in private vehicles rather than take public transport.

But the recovery is being threatened by a global chip shortage that has hit auto production in North America and Europe, forcing car makers to shut factories.

The company cautioned it could face issues while accessing some critical materials such as chemicals for seating foam and resins for plastic components, besides saying the semiconductor crunch would continue to have an impact through the remainder of 2021.

Semiconductors are used extensively in cars, for everything from engine performance monitoring to parking sensors.

Magna, which makes parts such as body structures, chassis and powertrain for customers including Ford Motor and Volkswagen, slightly lowered its full-year estimates for light vehicle production in North America that is grappling with material shortages as the region eases out of the health crisis and economic recovery picks pace.

Also, auto parts maker Dana Inc. last week warned it was seeing a more meaningful impact from the chip constraint during the second quarter in its light vehicle business.

CFRA Research analyst Garrett Nelson, however, remained optimistic about Magna’s prospects as the global markets electrify.

“Partnerships with upstart EV manufacturers such as Fisker and demand for its new electrification-focused products represent a source of potential upside,” Nelson wrote in a note.

Magna’s shares were up about 1.3 per cent at $116.53 in late-afternoon trading on the Toronto Stock Exchange.