Tuesday Ticker: August 11, 2020

Toronto, Ontario ⁠— In this week’s Tuesday Ticker, Magna International reinstates its 2020 outlook alongside better-than-expected second-quarter results; Axalta initiates job cuts amid its pandemic losses and J.D. Power adds ALG to its roster, prompting “augmented offerings” from its data and analytics division.

Outlooks and outcomes

On August 7, Magna International reinstated its company outlook for 2020 alongside its financial results for the second quarter of 2020.

Magna’s reinstated 2020 outlook predicts total sales between $30.0 billion and $32.0 billion, with an adjusted EBIT margin between 2.9 percent and 3.3 percent. 

In its original 2020 outlook, the company expected total sales between $38 billion and $40 billion.

The company said it will not be reinstating any further outlooks beyond 2020 at this time. The company had previously unveiled its predictions through 2022, but withdrew the outlook on March 26, 2020.

The Aurora, Ont.-based supplier also posted sales of $4.3 billion for the second quarter of 2020  during its Aug. 7 call. The results marked a 58 percent from the second quarter of 2019 against global light vehicle production that decreased 42 percent, reflecting declines of 70 percent and 59 percent in North America and Europe, respectively, and an increase of three percent in China.

The company estimates COVID-19 impacts of approximately $5.5 billion on sales, $1.2 billion on both income from operations before income taxes and adjusted EBIT.

“While our second quarter results were impacted by a precipitous decline in global vehicle production caused by the COVID-19 pandemic, I am pleased we have been able to successfully and safely restart operations at our plants around the world,” Don Walker, Magna’s Chief Executive Officer commented. “We expect our second half 2020 results to begin to reflect these actions. I am confident that Magna will emerge from the recent economic upheaval as strong as ever.”

COVID cuts

Axalta is initiating 550 job cuts over the next two years as part of a global restructuring plan to generate US$50 million in savings amid economic pressures. 

The reductions will impact five percent of Axalta’s Philadelphia, U.S.-based employees, while further cuts will be made in Europe. The North American location employed approximately 14,000 in February 2018.

The announcement came amid Axalta’s second quarter results call, where the company reported second-quarter losses of US$82.8 million, or 35 cents per share, compared to a profit of US$98.4 million, or 42 cents per share, in the same period last year. Second-quarter net sales decreased 44 percent year-over-year to $152.7 million.

“We continue to be impacted by the coronavirus pandemic across our business, and we remain focused on operating safely while protecting the health and well-being of our employees, customers, and communities where we live and work,” the company said in an online release. 

The company also noted improved results in each month since April.

ALG to ‘augment’ offerings

Last week, analytics firm J.D. Power announced it has entered into an agreement to purchase ALG, Inc., from TrueCar, Inc., for US $135 million. 

ALG is an industry authority on automotive residual value projections in both the United States and Canada, and the acquisition is expected to augment offerings from the data & analytics division of J.D. Power.

“We believe ALG will bring complementary strengths and value to J.D. Power and its clients,” said Dave Habiger, president and CEO of J.D. Power. “For more than 50 years, ALG has been a trusted data provider to the automotive industry delivering accurate and reliable residual value forecasts. Adding that component to our extensive data assets, valuation expertise and analytic tools will enable us to provide even more value to our clients. We are excited to welcome the ALG team to J.D. Power.”

The transaction is expected to close by the end of 2020 and is subject to customary closing conditions as well as regulatory review and approval. 

Upon approval and close, all 40 ALG employees will join J.D. Power.

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