January 14, 2015 / 12:27 PM / 5 years ago

Auto parts maker Magna's forecasts disappoint, shares drop

(Reuters) - Canadian auto parts maker Magna International Inc (MG.TO) (MGA.N) forecast a surprise fall in fiscal 2015 revenue on Wednesday, due to lagging sales at its production and contract manufacturing businesses, sending its shares lower.

Chief Executive Don Walker said that despite the expected revenue drop, the company is interested in making acquisitions, both large and small.

“We have the ability to do a very large transaction,” he said. “But if we’re going to do a transformational acquisition, first of all I want to make sure we’re not doing something just to do it.”

Magna had $1.44 billion in cash and equivalents on its balance sheet as of Sept. 30, 2014. Walker was speaking at the Deutsche Bank 2015 Global Auto Industry Conference in Detroit.

The company said it expects total revenue of $34.4-$36.1 billion for the year. Analysts, on average, were expecting sales to rise to $37.7 billion from the company’s estimated 2014 sales of $35.8-$37.0 billion, according to Thomson Reuters I/B/E/S.

Magna forecast total production sales, its core business of manufacturing vehicle parts, to slip to $29.2-$30.5 billion in 2015 from expected sales of $29.8-$30.7 billion last year.

Sales in its contract manufacturing business is expected to fall to $2.4-$2.7 billion in 2015 from $3.1-$3.3 billion forecast for fiscal 2014.

Magna, which has been pushing to improve efficiency in its European operations, counts the world’s top automakers such as General Motors Co (GM.N), Volkswagen AG (VOWG_p.DE), BMW (BMWG.DE) and Ford Motor Co (F.N) among its customers.

The company said it expects operating margin to be in the low 7 percent range next year, higher than estimated margins of about 6.9 percent for 2014.

Magna expects capital spending of $1.5-$1.7 billion in 2015, more than the estimated 2014 capital budget of about $1.4 billion.

Aurora, Ontario-based Magna’s shares dropped 6.8 percent to C$114.92 on the Toronto Stock Exchange.

Reporting by Allison Martell in Toronto and Shubhankar Chakravorty in Bengaluru; Editing by Savio D'Souza and Alan Crosby

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