November 4, 2008 / 11:58 AM / in 10 years

UPDATE 2-Magna cuts forecasts, halves dividend after loss

* Q3 loss $1.93 a share versus year-earlier profit

* Revenue down 9 percent

* Dividend halved

* 2008 consolidated sales outlook cut

(Adds quotes from conference call, details, background. In U.S. dollars unless noted)

By John McCrank

TORONTO, Nov 4 (Reuters) - Auto-parts maker Magna International MGa.TO (MGA.N) reported a quarterly loss on Tuesday, stung by plunging U.S. auto sales and a softening market in Europe that led it to slash production and sales forecasts and cut its dividend in half.

The Aurora, Ontario-based company said its complete vehicle assembly sales fell 20 percent worldwide, and North American auto-parts production was down 18 percent. It warned it did not expect conditions to improve meaningfully in the short term.

“Nobody anticipated this quick a drop in sales and production,” Don Walker, Magna co-chief executive, said on a conference call.

Magna posted a net loss of $215 million in the third quarter, or $1.93 a share, compared with net income of $155 million, or $1.38 a share, in the year-before period.

In the quarter ended Sept. 30, the company said it took a hit of $2.10 a share for unusual items, which included restructuring charges and adjustments in the value of long-lived assets.

Revenue fell 9 percent to $5.5 billion on a drop in North American production sales and complete vehicle assembly sales.

Analysts on average were expecting third-quarter earnings of 83 cents a share, before special items, on revenue of $5.42 billion, according to Reuters Estimates.

For the full year, Magna now expects consolidated sales of $23.2 billion to $24.3 billion, down from an earlier forecast of $24.3 billion to $25.6 billion.

It forecast the auto industry as a whole will build 12.8 million light vehicles in North America in 2008, and about 14.9 million in Europe. That compares to its previous forecast for 13.2 million in North America and 15.6 million in Europe.

The company said it cut its quarterly dividend to 18 cents a share from 36 cents, with an eye to maintaining its strong financial postilion.

“Our board’s decision to adjust our dividend as a result of our reduction in our profitability and uncertainty about the timing of an industry recovery in our traditional markets reflects this view,” said Vincent Galifi, Magna’s chief financial officer.

The company said that keeping a strong balance sheet will allow it to focus on buying up smaller companies unable to weather the economic downturn.

“That’s the big opportunity... whenever this turns around, I think there’s going to be tremendous opportunities for acquisitions to increase our market share and hopefully buy up some good companies that may be extremely undervalued,” Walker said.

Shares of the company were down C$2.73, or 6.7 percent, at C$38.27 around midday on Tuesday on the Toronto Stock Exchange. ($1=$1.15 Canadian) (Reporting by John McCrank, with additional reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Peter Galloway)

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