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Magna stock soars above $100 on TSX after earnings surprise, dividend hike

AURORA, Ont. - Magna International Inc. jumped higher Monday after the Canadian auto parts giant announced a dividend increase and better financial results than analysts were expecting.

Magna shares (TSX:MG) traded as high as $104.48, up six per cent from Friday's close of $98.57 before closing up $5.18 at $103.75 on the Toronto Stock Exchange.

The stock has been trending upward since March 2009, when the auto industry was in the midst of its worst downturn in decades, and is up from $57.02 a year ago.

The Aurora, Ont.-based company, which reports in U.S. dollars, earned US$458 million in its fourth quarter as sales jumped 14 per cent from a year earlier to US$9.174 billion.

Magna also said it will raise its quarterly dividend by 19 per cent to 38 cents per share, starting with the March 28 payment.

"Overall, we're pleased with Magna's performance in the fourth quarter," Magna chief executive Don Walker told analysts in conference call Monday.

Magna has been benefiting from strong auto sales by its customers and says its North American production in the quarter was up six per cent from last year while European production rose five per cent.

The fourth-quarter profit equalled $2.03 per share on a diluted basis under standard accounting rules, up from $351 million or $1.49 per share a year earlier. Adjusted earnings was $607 million, up from $387 million.

For the full year, Magna earned $1.56 billion or $6.76 per share of net income on $34.8 billion in sales, up from a profit of $1.43 billion or $6.09 in net income on $30.8 billion in sales in 2012.

Starting with the fourth quarter, Magna is separating out sales from five countries — China, Japan, Korea, India, and Thailand — into an Asian division, which is small but growing rapidly.

Following the new reporting method, Magna's rest of world sales are concentrated in South America — particularly Brazil and Argentina, which were money-losing operations last year.

Walker said Magna's customers — vehicle manufacturers — have been unable to raise prices fast enough to keep up with the region's inflation and, as a result, their suppliers are also feeling the impact.

He suggested its relatively small operations in Argentina may have additional problems but said Magna sees potential for Brazil if the company can work out reasonable contract renewals.

"We're having some very difficult discussions down there with almost every customer we've got (and) they're probably hearing the exact same thing from every other major Tier 1 supplier," Walker said.

He said that Magna doesn't plan to invest any more money in Argentina and described it as "an area we would prefer not to be working in, quite frankly, unless something changes.'

"Brazil, long-term, I think will be a good place to do business. . . . Right now it's a pretty difficult environment. However, longer-term, we'd still be looking to grow if we have the proper terms in our contract."

The Canadian Press

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