* Q1 EPS $1.46 vs consensus estimate of $1.30
* Company raises full year revenue forecast
* Strikes assembly agreement with Nissan
* Shares climb as much as 7.6 percent on TSX
By Susan Taylor
TORONTO, May 10 (Reuters) - Magna International Inc posted market-beating quarterly results on Thursday and boosted its sales and margin forecasts, fueled by rebounding vehicle production in its key North American market and improving European operations.
Shares in Magna, one of the world’s biggest auto parts manufacturers, jumped as much as 7.5 percent after the results were announced before slipping back to a gain of 2.2 percent.
Magna raised its total sales outlook for 2012 to between $29.0 billion and $30.5 billion, up from its previous forecast of $28.0 billion to $29.5 billion.
The company, which had sales of $28.7 billion last year, also announced surprisingly healthy results from its European operations, where inefficient plants had produced a string of quarterly losses on a regional basis.
BMO Capital Markets analyst Peter Sklar had expected the European segment to break even, but operating income rose to $63 million in the quarter ended March 31, from $29 million last year, even as industry-wide vehicle production fell 7 percent in Western Europe.
Vehicle production in North American jumped 17 percent.
“North American results moderately exceeded our estimate, but Europe finally climbed solidly into the black following a number of quarters of losses,” Sklar said in a note to clients.
Chief Executive Don Walker said Magna’s European operations have “turned the corner”, but still have “a ways to go”.
Aurora, Ontario-based Magna also announced on Thursday a new vehicle assembly agreement with Nissan Motor Co Ltd for Nissan’s luxury Infiniti cars.
Starting in 2014, Magna’s European unit, Magna Steyr, will assemble an entry-level Infiniti compact vehicle based on Daimler’s Mercedes A-class cars.
Industry paper Automotive News reported in December that Magna Steyr would likely produce the car at its factory in Graz, Austria. Financial details of the agreement were not released because both companies were finalizing manufacturing and supply deals.
Magna’s net income rose to $343 million, or $1.46 a share, in the first quarter, up from $322 million, or $1.30 a share, a year earlier. Revenue increased 6.6 percent to $7.67 billion.
Analysts, on average, forecast earnings of $1.30 a share and revenue of $7.5 billion, according to Thomson Reuters I/B/E/S.
The company also revised its 2012 operating margin to the “low 5 percent range” for 2012 from “approximately 5 percent”, which Canacord Genuity analyst David Tyerman said suggests an improvement of a few tenths of a percent.
At Thursday’s annual meeting, shareholders re-elected Magna’s controversial founder, Frank Stronach, as a director of the company despite a proxy firm’s recommendation that shareholders shut him out due to corporate governance concerns.
Magna paid Stronach roughly $900 million in 2010 to cede control of the company he started. The buyout was approved by an independent committee that examined the deal, but there was no independent evaluation to determine if the deal was fair to minority shareholders.
Stronach did not attend the meeting, which featured a version of show-and-tell as six engineers displayed newly developed parts such as pop-up car seats, advanced camera systems and new mirror designs.
Walker said Magna has worked diligently to introduce a long list of new corporate governance improvements and is ready to focus on building the business.
Magna, which competes against such suppliers as Johnson Controls Inc and TRW Automotive Holding Corp, is trying to expand its market beyond North America and Europe into fast-growth areas such as Brazil, China and Eastern Europe.
It has grown dramatically in China and Brazil, but continues to consider acquisition opportunities in those regions, Walker said. India and Russia are also of interest.
Canada’s auto parts manufacturers have fallen from the ranks of global top 10 exporters because they have failed to branch out, according to a recent Scotiabank report. The country was the world’s sixth-biggest auto-parts exporter until 2007, and last year lost its top 10 exporter spot to the Czech Republic.
The company isn’t likely to add further manufacturing capacity domestically, Walker said, because the strong Canadian dollar is a concern.
Magna said it agreed in April to repurchase a carpet business in Germany that it had sold in the third quarter of 2011, recording a loss on disposal of $129 million.
After the sale, the facility continued to incur losses, running into severe liquidity problems. In part to preserve customer relationships, Magna said it had agreed to buy back the business for “a nominal amount”.
Despite pricing concessions from customers, Magna said the facility is still budgeted for “significant losses” over the next three years.
Magna shares were 2.2 percent higher at C$43.63 on Thursday afternoon on the Toronto Stock Exchange.