Canadian supplier Magna International Inc. returned to profit in the third quarter as key customers ramped up production to meet recovering demand for new cars in Europe, China and the United States.
Magna on Friday reported net income of $405 million for the third quarter ended Sept. 30, compared with a loss of $233 million during the same quarter in 2019. Last year’s quarter was affected by the UAW’s strike against General Motors, a Magna customer.
Revenue slipped 2 percent to $9.1 billion.
Shares of Magna were up 2.9 percent to $57 in premarket trading Friday in New York.
In a statement, Magna said it benefited this year from “cost savings and efficiencies,” including some “restructuring actions” taken during the third quarter. It also cited “the benefit of COVID-19 related government employee support programs” as reasons for profitability during the pandemic.
Magna said it has weathered the pandemic to date.
“While many of our manufacturing facilities had temporarily suspended operations in the first and second quarters of 2020, all of our facilities had resumed production and were operating in the third quarter,” the company said. ”While we have not experienced further COVID-related shutdowns since the resumption of production, we are closely monitoring rising global COVID-19 infection rates, which could create the risk of production and supply disruptions during or after the fourth quarter. If necessary, we will adjust our own production plans in-line with our customers' production plans, governmental orders and legal requirements in each of the markets in which we operate.”
Still, the supplier warned that the “full effect and longer-term impacts may not be reflected in our results of operations and overall financial performance until future periods.”
But, so far, auto sales in North America have gradually recovered since lockdown measures were eased, prompting major automakers to ramp up production and rebuild inventories for high-margin sport utility vehicles and pickup trucks.
That has lifted results at several auto suppliers including Magna, which makes parts such as body structures, chassis and powertrain for customers including GM, Ford Motor and Volkswagen.
As a result, Magna raised its 2020 North American light vehicle production outlook to 12.7 million units from 12.5 million. In Europe, it now expects full-year production to be about 16.1 million units, compared with 15.9 million before.
The Ontario-based company also raised its 2020 sales outlook to $31.5 billion-$32.5 billion from $30 billion-$32 billion. It forecast full-year net income of $850 million to $975 million. Magna withdrew its 2020 financial outlook in March.
Magna announced on Oct. 20 that CEO Don Walker will retire and be succeeded by now-president Swamy Kotagiri on Jan. 1.
Kotagiri will lead the company as it fulfills its plans to supply the electric vehicle platform for Fisker's Ocean SUV, for which initial production is planned for the fourth quarter 2022. Magna is in early talks to do form a similar deal with Canoo Holdings.
The third quarter results come after challenges in the first and second quarters this year. Magna said revenue for the first quarter fell 18 percent to $8.7 billion, and that the coronavirus crisis had an estimated $1.1 billion impact on first-quarter sales.
The supplier said it swung to a net loss of $647 million in the second quarter from a gain of $452 million during the same quarter last year.
In a call with investors Friday, Walker said the resurgence of COVID remains a risk, but that the company is confident in its actions it has taken to reduce cost structure and adjust spending.
Magna ranks No. 3 on the 2020 Automotive News list of the top 100 global suppliers with worldwide sales to automakers of $39.43 billion in 2019.
Reuters contributed to this report.