Magna International reported a $156 million net loss in the second quarter as the diversified Canadian auto supplier grappled with higher commodities and energy costs and the impact of the Russian invasion of Ukraine.
The net loss compares with second-quarter 2021 income of $424 million and comes despite a 3.6 percent year-over-year gain in sales to $9.36 billion.
The loss for the quarter ended June 30 includes a one-time impairment charge of $376 million related to Magna's operations in Russia, which remain substantially idled because of the war. Magna operates six plants in the country that employ 2,500 people.
Adjusted income before interest, taxes and other expenses came in at $358 million, Magna said, compared with $557 million in adjusted net income in the second quarter of 2021.
"Continuing challenges have impacted our Q2 earnings," Magna CEO Swamy Kotagiri said in a Friday conference call with analysts. "However, results were in line with our internal expectations."
Higher commodities costs and other inflationary factors have led to "elevated" input costs that have dragged down the company's margins. Kotagiri said the company is "highly focused" on recovering those increased costs and continues to have discussions with automakers to adjust pricing.
As with much of the industry, Magna's second-quarter results were also hit by the microchip shortage and COVID-19 lockdowns in China, which decreased demand for vehicles in the world's largest auto market.
Kotagiri said he expected those constraints to ease in the second half of the year relative to the first as the global supply of semiconductors improves and as the Chinese government implements economic stimulus.
Sales within Magna's body exteriors and structures unit rose 8 percent to $3.9 billion in part because of increased global vehicle production and the launch of new programs.
Likewise, seating unit sales rose 7 percent from a year earlier to $1.3 billion. Revenue from the power and vision unit were flat at $2.9 billion.
Magna's complete vehicle assembly business saw sales revenue decline 6 percent to $1.4 billion in large part because of the euro weakening against the dollar. It produced 1,500 more vehicles for automakers than it did a year earlier.
Adjusted earnings before interest and taxes fell across all business units compared with the second quarter of 2021.
Magna modestly increased its annual sales outlook, expecting revenue of $37.6 billion to $39.2 billion for the year, up about $300 million compared with its previous estimate. Its annual net income forecast remained unchanged, at $1.3 billion to $1.5 billion.
Kotagiri said low dealer inventory levels and resilient demand for new vehicles should help to keep the auto market afloat, even as the industry continues to deal with supply chain challenges and rising interest rates.
As global economic conditions evolve, Magna remains open to acquisitions in the second half of the year, Kotagiri said.
"There might be opportunities that come along, and we're very attentive," he said. "We'll have our ear to the ground a little bit more."
Magna shares fell 1.3 percent to $63.01 in morning trading.
Magna ranks No. 4 on the Automotive News list of the top 100 global suppliers, with worldwide parts sales to automakers of $36.2 billion in 2021.
Reuters contributed to this report.