Magna International Inc. has cut its revenue forecast for 2014 to $33.8 billion US to $35.5 billion US, slightly below analyst estimates, as it continues to restructure in Europe.
Magna CEO Don Walker says the company's European operations are improving, but work still needs to be done, including the closing and consolidation of some of its facilities.
"We're much more disciplined now in our quoting for new business, which has had a negative impact in the short term on our sales, but we believe it is the right direction for the long term to make sure we will be growing profitably," he told an investor conference in Detroit.
Walker said the auto parts company is also continuing its restructuring efforts in Europe where margins remain well below operations elsewhere, but was not specific.
Restructuring over next 2 years
"We're taking further restructuring actions in certain operations, including closures and consolidations of a number of facilities over in Europe," he said. "Most of this will take place over the next two years."
Magna's previous outlook, issued in November with its third-quarter results, estimated its revenue for 2013 would total between $33.9 billion and $34.8 billion US.
Looking to 2016, Magna said it expects its revenue will be about $3.6 billion higher than in 2014.
The outlook for 2014 was based on light vehicle production of 16.7 million in North America and 19.1 million in Europe.
North American sales for Magna are expected to be between $16.8 billion and $17.4 billion, while its European operations should bring in $9.5 billion to $9.9 billion.
Sales in the rest of the world, which includes China and India, are expected to grow to between $2.3 billion and $2.6 billion.
6 new China operations
Complete vehicle assembly sales are forecast in the range of $2.6 billion to $2.9 billion.
Walker said the company is looking to see continued significant growth in China and India where vehicle production is forecast to climb.
Six new facilities will start operations in China by the end of 2016. "We expect to double our sales between 2013 and 2016 there," Walker said.
Capital spending is expected to be about $1.4 billion for 2014.
In reviewing the outlook, chief financial officer Vincent Galifi said the company expects to be able to continue raising its dividend.
"We have settled into a pattern of annual dividend increases ... and you can expect this pattern to continue," Galifi said.
Magna paid a quarterly dividend of 32 cents US per share in 2013, up from 27.5 cents in 2012 and 25 cents in 2011.
Meanwhile, Walker said the company could make an acquisition if the opportunity is right, but that it was not the top priority.
"I don't want to make an acquisition for the sake of making an acquisition," he said.
"Quite frankly, we've looked at a lot and some of them we don't have a willing seller and some of them are just overpriced, in our opinion."