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Don Walker, CEO of Magna International Inc. (Fernando Morales/The Globe and Mail)
Don Walker, CEO of Magna International Inc. (Fernando Morales/The Globe and Mail)

Magna boosts dividend after results beat Street Add to ...

Auto parts giant Magna International Inc. is raising its dividend again after posting a record annual profit and fourth-quarter results that surpassed analysts’ expectations, and revealing that the outlook for revenue in 2012 has improved in just one month.

The 10-per-cent dividend increase to 27.5 cents per share a quarter came as the company posted a profit of $1.32 (U.S.) a share in the fourth quarter, up from 89 cents a year earlier. Full-year profit rose to $1.018-billion or $4.20 a share. The results were released after markets closed.

The improved revenue picture comes from an expected increase in vehicle production in the United States.

Full-year revenue should be between $28-billion and $29.5-billion, the company said Thursday. The previous outlook called for sales ranging between $27.8-billion and $29.3-billion.

The outlook for European vehicle production remains at 13 million units.

“Improving our operating results in Europe remains a key focus point for us in 2012,” Magna president Don Walker said in a statement.

“We also currently have many new facilities planned or under construction around the world. Ensuring that these new facilities launch successfully is another key area of focus for us this year.”

Magna’s dividend now stands at a record high of $1.10 annually. Its cash pile was reduced to $1.3-billion at the end of 2011, compared with $1.9-billion a year earlier.

The company renewed a share buyback program, under which is bought back eight million common shares last year.

This year it plans to buy back another 12 million shares under a program scheduled to end in November.

Among the priorities for 2012 is turning around divisions in Europe that are losing money, Mr. Walker said.

“We are highly focused on continued improvement of our underperforming operations,” he said during a late-afternoon conference call with analysts and investors.

The company is also focusing on diversifying beyond its major markets of North America and Europe to areas where vehicle production is growing rapidly, such as Brazil, China and Eastern Europe.

It is also determined to expand its customer base to make it less dependent on the Detroit Three and Germany-based auto makers.

The dividend increase and share buyback reflect the more shareholder-friendly stance the company has adopted since founder Frank Stronach sold his controlling stake in the company in the fall of 2010 and stepped down as chairman of the company last May.

“Our solid balance sheet and strong cash flow generation position us well to further invest in our business through a combination of capital spending, acquisitions and when prudent, repurchasing our common shares,” chief financial officer Vince Galifi said in a statement. “We intend to utilize our balance sheet in these areas.”

While the overall outlook improved, Magna is still determining whether it will continue to finance the money-losing E-car electronic vehicle joint venture it shares with Mr. Stronach, but which he controls as a result of the deal to buy back his multiple vote controlling shares in 2010.

“It is unlikely that the initial capital contributions made by us and the Stronach group to E-car will be sufficient to fund its ongoing operations,” the company said. “We may or may not choose to make further investments in E-car. That determination will be based on what will best serve Magna’s long-term business.”

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