BUSINESS

Magna consolidates ownership of E-Car partnership, reports Q2 profit up

08/09/2012 06:46 EDT | Updated 10/09/2012 05:12 EDT
AURORA, Ont. - Magna International Inc. (TSX:MG) announced a deal Thursday to buy the 27 per cent stake in the E-Car partnership it does not already own for US$74.7 million as it reported a nearly 25-per-cent increase in quarterly earnings.

The auto parts giant said it has reached a deal with a company affiliated with the Stronach Group to buy the stake in the Magna E-Car Systems LP partnership.

"We are pleased to regain control of Magna E-Car's assets and business, which will be absorbed within our existing operating units," Magna chief executive Don Walker said in a statement.

"We expect hybrid and electric vehicle production to continue to grow globally in the future, and we believe that Magna stands to benefit from this trend by supplying H/EV components, systems and engineering services to our customers."

Magna founder Frank Stronach, whose family long controlled the company, gave up that control in 2010 in exchange for about $1 billion in cash and shares, as well as control over joint venture Magna E-Car Systems.

The deal came as the company reported a second-quarter profit of $349 million or $1.48 per share, up from $282 million or $1.15 per share a year ago.

Sales in the quarter amounted to $7.73 billion, up from $7.34 billion.

The company said the increase in revenue came as vehicle production grew 28 per cent in North America and declined seven per cent in Western Europe relative to the second quarter of 2011.

Complete vehicle assembly sales at Magna decreased 11 per cent to $645 million for the quarter compared with $728 million a year ago, while volumes fell six per cent to about 33,000 units.

In its outlook for the year, Magna raised its expectations for North American vehicle production to 14.8 million units, from 14.4 million, and nudged down its forecast for Europe to 12.6 million from 12.7 million.

The forecast for production sales was increased slightly to between $24.6 billion and $25.7 million from between $24.5 billion and $25.6 billion.

The outlook for complete vehicle assembly sales was cut to between $2.3 billion and $2.6 billion from between $2.4 billion and $2.7 billion.

Magna is Canada's largest auto parts manufacturer and one of the largest in the world. It primarily supplies auto makers in North America and Europe.

Last August, Magna announced it was is spending $430 million to research and develop electric-vehicle technology in Ontario.

Shares in the company, which reported its results after the close of markets, were up 29 cents at $41.79 on the Toronto Stock Exchange.