Magna International, Inc.

Greetings and welcome to the second quarter 2022 results for Magna International. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, this conference is being recorded Friday, July 29th, 2022. I would now like to turn the conference over to Louis Tonelli, VP Investor Relations. Please go ahead.

Thanks, Sylvana. Hello, everyone, and welcome to our conference call covering our Q2 2022 results. Joining me today are Swami Kodagiri, Vince Galissi, and Pat McCann. Yesterday, our Board of Directors met and approved our financial results for Q2 2022. We issued a press release this morning outlining our results. You'll find the press release, today's conference call webcast, the slide presentation to go along with the call, and our updated financial review all in the investor relations section of our website at magna.com. Before we get started, just as a reminder, the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation. Such statements involve certain risks, assumptions, and uncertainties, which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements. Please refer to today's press release for a complete description of our safe harbor disclaimer. Please also refer to the reminder slide included in today's deck related to our commentary today. And with that, I'll pass it over to Swami.

Thank you, Luis. Good morning, everyone. Happy to be here to provide a general update on Magna as well as our Q2 results. Key takeaways from today's call, continuing challenges have impacted our Q2 earnings. However, results vary in line with our internal expectations. Once again, we generated organic sales outgrowth of weighted light vehicle production in the quarter, a trend we expect to continue in the second half of the year. We modestly increased our outlook for 2022 sales, despite the recent strengthening of the U.S. dollar, and we continue to make progress in our go-forward strategy, which will drive our business for years to come. I will briefly cover the current dynamics impacting the industry. We continue to experience supply constraints, including semiconductors. The China COVID lockdowns in the quarter created further supply chain bottlenecks that are still being felt in the industry. We do expect constraints to continue at least throughout 22, but expect improvement in the second half of the year relative to the first. Input costs remain at elevated levels. We remain highly focused on obtaining cost recoveries, have had some success, and we continue to have discussions with customers at various stages at various levels. The stronger US dollar relative to other currencies in which we operate, particularly the Euro, is negatively impacting our reported results. And there is some risk going forward that high inflation and rising rates will impact auto consumers. In terms of tailwinds, dealer vehicle inventories remain low and underlying auto demand is relatively strong and constrained by the tight supply. These factors support improving production levels in the second half of 2022, particularly as semiconductor availability improves, and the China government recently announced economic stimulus that should help drive auto demand. Our second quarter earnings were in line with our expectations. Relative to the second quarter of 2021, consolidated sales were $9.4 billion up 4% compared to a 2% increase in global light vehicle production. On an organic basis, sales were up 12%, representing 4% growth over market. In fact, our organic sales grew faster than production in each of North America, Europe, Asia, and South America. EBIT margin declined 240 basis points to 3.8%, substantially as a result of higher net input costs. We also had operating inefficiencies at a best facility in Europe. The inefficiencies negatively impacted the second quarter by about 25 basis points. Our adjusted EPS fell to 83 cents for the quarter. On a US GAAP reported basis, EPS declined to a loss of 54 cents reflecting a non-cash impairment charge on our investment in Russia that amounted to $1.24. And free cash flow was $52 million in Q2, down year over year, but up $151 million sequentially from the first quarter of 2022. During the quarter, we repurchased 3.5 million shares using $212 million in cash, and paid out another $130 million to shareholders in the form of dividends. While we are keeping our focus squarely on the short-term challenges we are facing, we continue to invest and prepare for the future. Back in May, we held an investor day in Pontiac, Michigan, where many of you had the opportunity to experience firsthand some of our leading-edge technologies. At that event, we also provided an update on our progress with our go-forward strategy, which focuses on accelerating deployment of capital towards high-growth areas, driving operational excellence, and unlocking new business models and markets. We rolled this strategy out a year ago, and I'm pleased to report that we are executing on that strategy and in many areas performing even beyond our previous expectations. We highlighted that as we accelerate deployment of capital towards high growth areas, we are on track to meaningfully shift our portfolio in these areas as our business continues to grow from 18% to 24% of our business by 2027 based on our plan. We also highlighted how we continue to drive operational excellence through digitization and factory of the future tools. We believe these actions will ultimately allow us to continue to win business, manage ongoing price pressures, cost inflation, and contribute to margin expansion. Lastly, as we examine the broader market for mobility, we see an expanding ecosystem for us to go beyond the traditional supply and manufacture of vehicles, and we see a lot of opportunity to participate in this growing market. The current operating environment is challenging. However, we are managing through it, and I'm excited about what the future holds for Magna and our shareholders. With that, I'll hand it over to Pat to take you through the financials.