February 24, 2011 / 1:21 AM / 7 years ago

UPDATE 3-Magna back in profit but below expectations

* Q4 EPS $0.88 vs Reuters I/B/E/S forecast $0.94

* Forecasts flat 5 pct operating margin for 2011

* Revenue 22 pct higher at $6.6 billion

* Repeats January sales forecast for 2011 (Recasts with executive comment from conference call)

VANCOUVER, Feb 23 (Reuters) - Magna International Inc (MG.TO) MGA.N returned to a quarterly profit and hiked its dividend but earnings fell short of expectations on higher input costs and as losses deepened at its electric car unit.

The world’s No.3 auto parts maker forecast a flat operating margin of about 5 percent in 2011 as expected steeper prices for steel and resin, used in automotive finishes, and the costs of launching new facilities take the shine off higher anticipated sales.

“Given what’s happening in the world today, and depending on what happens to oil prices, the headwinds on resins may increase as the year progresses,” Magna Chief Financial Officer Vince Galifi said on a conference call.

Earlier Aurora, Ontario-based Magna reported net income of $216 million, or 88 cents a share in the quarter ended Dec. 31.

That was a turnaround from a loss of $139 million, or 62 cents a share, in the year-earlier period but below the 94 cents that analysts, on average, were expecting, according to Thomson Reuters I/B/E/S.

Sales were 22 percent higher at $6.6 billion as global vehicle production and sales continued to recover from a devastating auto sector downturn in 2009.

But losses at Magna’s new E-Car Systems electric vehicle operations, which it owns together with Magna founder Frank Stronach, deepened to $37 million from $16 million as the venture invested in new technology and engineering.

“It is a tough business because volumes are not huge yet,” Magna Chief Executive Don Walker said.

The company generated cash from operations of $415 million in the fourth quarter, lifting its cash on hand to $2 billion at year-end.

Its average dollar content per vehicle rose 17 percent in North America and 6 percent in Europe from a year earlier. Both North American and European vehicle production increased 7 percent.

Magna company hiked its dividend by 39 percent to 25 cents a share, the third consecutive quarter it has lifted its dividend since reinstating it last May.

It repeated the sales forecast it made last month for 2011 and also said it expects to spend between $1 billion and $1.1 billion on fixed assets in 2011.

Magna’s main business is the production of parts and components for major auto companies, but it also assembles complete vehicles in Europe.

Magna competes against suppliers such as TRW Automotive Hldg Corp TRW.N, Johnson Controls Inc (JCI.N), Lear Corp (LEA.N), American Axle (AXL.N), and BorgWarner Inc (BWA.N).

Shares of Magna, which did a two-for-one stock split last November, closed down C$1.38 at C$54.97 on the Toronto Stock Exchange on Wednesday. The results were released after the market had closed.

$1=$0.99 Canadian Reporting by Nicole Mordant; editing by Rob Wilson

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