(Reuters) - Canadian auto parts maker Magna International Inc (MG.TO) on Thursday reported a better-than-expected fourth-quarter profit, driven by higher sales in Europe and the launch of new cars for BMW and Jaguar.
Magna also assembles cars under contract from motor vehicle manufacturers and counts General Motors Co (GM.N), Volkswagen AG (VOWG_p.DE), BMW (BMWG.DE) and Ford Motor Co (F.N) among its top customers.
Magna expects to grow sales faster than vehicle production through 2020 as it launches new programs, even as demand is expected to soften in the key North American market this year.
One option would be to grow through acquisitions. Chief Executive Officer Don Walker told analysts the company is weighing possible targets and leaning toward new technologies.
“We’re still looking at what the opportunities are,” Walker told analysts on a call. “We have the ability to do a sizeable acquisition if it makes sense.”
Walker said he does not expect a slowdown in the North American and Chinese consumer appetite for the larger, high-margin SUVs and crossovers that make up the lion’s share of auto sales.
“We don’t see it dramatically changing and you can see where our customers are putting their focus,” he said.
U.S. auto industry sales fell 2 percent in 2017 to 17.23 million vehicles after hitting a record high in 2016 and are expected to drop further in 2018 despite a solid economy, as interest rates rise.
Magna’s light vehicle production in North America decreased 4 percent for the full year of 2017. The company raised its quarterly cash dividend by 20 percent to 33 cents per share.
Magna’s total fourth quarter sales rose 12 percent to a $10.39 billion, its highest ever, beating analysts’ estimates of $10.12, according to Thomson Reuters I/B/E/S.
During the fourth quarter, light vehicle production increased 7 percent in Europe but declined 5 percent in North America on an annual basis.
Magna still expects in 2018 to grow total sales to a range of $39 million and $41.5 billion and achieve earnings before interest and taxes (EBIT) of 7.9 percent to 8.2 percent.
In 2017, Magna reported annual sales of $38.95 billion, up 7 percent from 2016.
Net income attributable to Magna rose to $556 million, or $1.53 per share, in the fourth quarter ended Dec. 31, from $478 million, or $1.24 per share, a year earlier.
Excluding items, the company earned $1.57 per share, beating analysts’ estimate by 2 cents.
Reporting By Allison Lampert in Montreal; Additional reporting by Yashaswini Swamynathan in Bengaluru; Editing by David Gregorio