THREE MONTHS ENDED SEPTEMBER 30, All results are reported in millions of U.S. dollars, except per share figures, which are in U.S. dollars.

Transcription

1 PRESS RELEASE MAGNA ANNOUNCES THIRD QUARTER RESULTS Third quarter record sales, up 7% to $9.50 billion Third quarter diluted earnings per share of $1.36, increased 5% Returned $521 million to shareholders through share repurchases and dividends AURORA, Ontario, November 9, 2017 Magna International Inc. (TSX: MG; NYSE: MGA) today reported financial results for the third quarter ended September 30, THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, Sales $ 9,499 $ 8,849 $ 28,555 $ 27,192 Income from operations before income taxes $ 670 $ 692 $ 2,238 $ 2,134 Net income attributable to Magna International Inc. $ 503 $ 503 $ 1,650 $ 1,553 Adjusted EBIT (1) $ 692 $ 715 $ 2,299 $ 2,202 Diluted earnings per share $ 1.36 $ 1.29 $ 4.37 $ 3.92 All results are reported in millions of U.S. dollars, except per share figures, which are in U.S. dollars. (1) Adjusted EBIT is a Non-GAAP financial measure that has no standardized meaning under U.S. GAAP and as a result may not be comparable to the calculation of similar measures by other companies. Adjusted EBIT represents net income before income taxes; interest expense, net; and other expense, net. For a reconciliation of this Non-GAAP financial measure, see our Management s Discussion and Analysis of Results of Operations and Financial Position for the three and nine months ended September 30, 2017 available in the Investor Relations section of our website at I m pleased with our overall performance as we posted record third quarter results. Magna remains well-positioned to benefit from the shift toward electrification, autonomy, and vehicle light-weighting. In China, our recently announced joint-venture with HASCO was awarded a highly integrated e-drive system for a German OEM. At the Frankfurt Auto Show, we unveiled our MAX4 autonomous driving platform, which enables up to Level 4 autonomous driving capabilities. Our product breadth combined with complete vehicle design and engineering capabilities uniquely positions Magna to be a supplier of solutions. - Don Walker, Magna s Chief Executive Officer MAGNA ANNOUNCES THIRD QUARTER 2017 FINANCIAL RESULTS CONNECT WITH MAGNA

2 THREE MONTHS ENDED SEPTEMBER 30, 2017 We posted third quarter record sales of $9.50 billion for the quarter ended September 30, 2017, an increase of 7% over the third quarter of The sales increase was achieved in a period in which European light vehicle production increased 8% and North American light vehicle production decreased 7%, each relative to the third quarter of Our complete vehicle assembly sales increased 55% in the third quarter of 2017 largely reflecting the launch of the BMW 5-Series at our assembly facility in Graz, Austria, following the end of production of the MINI Countryman and Paceman in During the third quarter of 2017, income from operations before income taxes was $670 million, compared to $692 million in the third quarter of Net income attributable to Magna International Inc. was $503 million for the third quarters of both 2017 and Diluted earnings per share were $1.36 in the third quarter of 2017 compared to $1.29 in the third quarter of 2016, reflecting the favourable impact of a reduced share count. During the third quarter of 2017, Adjusted EBIT decreased 3% to $692 million, compared to $715 million for the third quarter of Our Asia and Rest of World segments posted higher Adjusted EBIT and Adjusted EBIT percentage of sales, compared to the third quarter of During the third quarter ended September 30, 2017, we generated cash from operations of $859 million before changes in operating assets and liabilities, and $22 million in operating assets and liabilities. Investment activities for the third quarter of 2017 were $537 million, including $379 million in fixed asset additions and $158 million in investments, other assets and intangible assets. NINE MONTHS ENDED SEPTEMBER 30, 2017 We posted sales of $28.56 billion for the nine months ended September 30, 2017, an increase of 5% from the nine months ended September 30, North American light vehicle production decreased 3% and European light vehicle production increased 3% in the first nine months of 2017 compared to the first nine months of During the nine months ended September 30, 2017, income from operations before income taxes was $2.24 billion, net income attributable to Magna International Inc. was $1.65 billion and diluted earnings per share were $4.37, increases of $104 million, $97 million and $0.45, respectively, each compared to the first nine months of During the nine months ended September 30, 2017, Adjusted EBIT increased 4% to $2.30 billion, compared to $2.20 billion for the nine months ended September 30, Our Asia and Rest of World segments each posted higher Adjusted EBIT and Adjusted EBIT percentage of Sales, compared to the first nine months of During the nine months ended September 30, 2017, we generated cash from operations before changes in operating assets and liabilities of $2.68 billion, and invested $796 million in operating assets and liabilities. Investment activities for the first nine months of 2017 were $1.49 billion, including $1.11 billion in fixed asset additions and $384 million in investments, other assets and intangible assets. RETURN OF CAPITAL TO SHAREHOLDERS During the three months ended September 30, 2017, Magna repurchased 8.7 million shares for $422 million. In addition, we paid dividends of $99 million in the third quarter of Our Board of Directors declared a quarterly dividend of $0.275 with respect to our outstanding Common Shares for the quarter ended September 30, This dividend is payable on December 8, 2017 to shareholders of record on November 24, MAGNA ANNOUNCES THIRD QUARTER 2017 FINANCIAL RESULTS CONNECT WITH MAGNA

3 We continue to return capital to our shareholders while maintaining a strong balance sheet. With the expiration of our current Normal Course Issuer Bid ( NCIB ), we have returned over $900 million through share repurchases and more than $300 million in dividends as of the end of the third quarter. Since 2012, we have returned approximately $6.7 billion to our shareholders, $5.1 billion through the repurchase of more than 20% of our outstanding shares and $1.6 billion in dividends. Our new NCIB provides flexibility to continue repurchasing up to 10% of our shares over the next year. - Vince Galifi, Magna s Chief Financial Officer OTHER MATTERS Subject to the approval by the Toronto Stock Exchange and the New York Stock Exchange, our Board of Directors approved a new Normal Course Issuer Bid ("NCIB") to purchase up to 35.8 million of our Common Shares, representing approximately 10% of our public float of Common Shares. This NCIB is expected to commence on or about November 15, 2017 and will terminate one year later. UPDATED 2017 OUTLOOK Light Vehicle Production (Units) North America Europe Production Sales North America Europe Asia Rest of World Total Production Sales Complete Vehicle Assembly Sales Total Sales 17.2 million 22.2 million $ $19.6 billion $9.9 - $10.2 billion $2.3 - $2.4 billion $0.5 - $0.6 billion $ $32.8 billion $ $3.2 billion $ $39.5 billion Adjusted EBIT Margin (2) 8.0% - 8.1% Interest Expense, net Approximately $70 million Income Tax Rate (3) Approximately 25% Capital Spending Approximately $1.9 billion (2) Adjusted EBIT Margin is the ratio of Adjusted EBIT to Total Sales. (3) The Income Tax Rate has been calculated using adjusted EBIT and is based on current tax legislation. In this 2017 outlook, we have assumed: 2017 light vehicle production volumes (as set out above); no material unannounced acquisitions or divestitures; and foreign exchange rates for the most common currencies in which we conduct business relative to our U.S. dollar reporting currency will approximate current rates. MAGNA ANNOUNCES THIRD QUARTER 2017 FINANCIAL RESULTS CONNECT WITH MAGNA

4 Certain of the forward-looking financial measures above are provided on a Non-GAAP basis. We do not provide a reconciliation of such forward-looking measures to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP. To do so would be potentially misleading and not practical given the difficulty of projecting items that are not reflective of on-going operations in any future period. The magnitude of these items, however, may be significant. This press release together with our Management s Discussion and Analysis of Results of Operations and Financial Position and our Interim Financial Statements are available in the Investor Relations section of our website at and filed electronically through the System for Electronic Document Analysis and Retrieval (SEDAR) which can be accessed at as well as on the United States Securities and Exchange Commission s Electronic Data Gathering, Analysis and Retrieval System (EDGAR), which can be accessed at We will hold a conference call for interested analysts and shareholders to discuss our third quarter ended September 30, 2017 results on Thursday, November 9, 2017 at 8:00 a.m. EST. The conference call will be chaired by Don Walker, Chief Executive Officer. The number to use for this call from North America is International callers should use Please call in at least 10 minutes prior to the call start time. We will also webcast the conference call at The slide presentation accompanying the conference call as well as our financial review summary will be available on our website on the morning of the call. TAGS Quarterly earnings, record quarter, financial results, sales growth INVESTOR CONTACT Louis Tonelli, Vice-President, Investor Relations louis.tonelli@magna.com MEDIA CONTACT Tracy Fuerst, Director of Corporate Communications & PR tracy.fuerst@magna.com OUR BUSINESS (4) We are a leading global automotive supplier with 328 manufacturing operations and 99 product development, engineering and sales centres in 29 countries. We have over 163,000 employees focused on delivering superior value to our customers through innovative products and processes, and world class manufacturing. We have complete vehicle engineering and contract manufacturing expertise, as well as product capabilities which include body, chassis, exterior, seating, powertrain, active driver assistance, vision, closure and roof systems and have electronic and software capabilities across many of these areas. Our common shares trade on the Toronto Stock Exchange (MG) and the New York Stock Exchange (MGA). For further information about Magna, visit our website at (4) Manufacturing operations, product development, engineering and sales centres and employee figures include certain equity-accounted operations. MAGNA ANNOUNCES THIRD QUARTER 2017 FINANCIAL RESULTS CONNECT WITH MAGNA

5 FORWARD-LOOKING STATEMENTS This press release contains statements that constitute "forward-looking statements" or "forward-looking information" within the meaning of applicable securities legislation, including, but not limited to, statements relating to: Magna's forecasts of light vehicle production in North America and Europe; expected consolidated sales, based on such light vehicle production volumes; production sales, including expected split by segment, in its North America, Europe, Asia and Rest of World segments for 2017; complete vehicle assembly sales; consolidated EBIT margin; net interest expense; effective income tax rate; fixed asset expenditures; Magna s ability to capitalize on the growth in vehicle electrification, autonomous driving and vehicle light-weighting; and future returns of capital to our shareholders, including through dividends or share repurchases. The forward-looking statements or forward-looking information in this press release is presented for the purpose of providing information about management's current expectations and plans and such information may not be appropriate for other purposes. Forward-looking statements or forwardlooking information may include financial and other projections, as well as statements regarding our future plans, objectives or economic performance, or the assumptions underlying any of the foregoing, and other statements that are not recitations of historical fact. We use words such as "may", "would", "could", "should", "will", "likely", "expect", "anticipate", "believe", "intend", "plan", "forecast", "outlook", "project", "estimate" and similar expressions suggesting future outcomes or events to identify forward-looking statements or forward-looking information. Any such forwardlooking statements or forward-looking information are based on information currently available to us, and are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances. However, whether actual results and developments will conform with our expectations and predictions is subject to a number of risks, assumptions and uncertainties, many of which are beyond our control, and the effects of which can be difficult to predict, including, without limitation: the potential for a deterioration of economic conditions or an extended period of economic uncertainty; a decline in consumer confidence, which would typically result in lower production volume levels; the growth of protectionism and the implementation of measures that impede the free movement of goods, services, people and capital; planning risks created by rapidly changing economic or political conditions; fluctuations in relative currency values; legal claims and/or regulatory actions against us; our ability to successfully launch material new or takeover business; underperformance of one or more of our operating divisions; ongoing pricing pressures, including our ability to offset price concessions demanded by our customers; warranty and recall costs; our ability to successfully identify, complete and integrate acquisitions or achieve anticipated synergies; our ability to conduct appropriate due diligence on acquisition targets; an increase in our risk profile as a result of completed acquisitions; shifts in market share away from our top customers; shifts in market shares among vehicles or vehicle segments, or shifts away from vehicles on which we have significant content; inability to sustain or grow our business; risks of conducting business in foreign markets, including China, India, Eastern Europe, Brazil and other non-traditional markets for us; our ability to successfully compete with other automotive suppliers, including disruptive technology innovators which are entering or expanding in the automotive industry; our ability to consistently develop innovative products or processes; our changing risk profile due to the increasing importance to us of product areas such as powertrain and electronics; restructuring, downsizing and/or other significant non-recurring costs; a reduction in outsourcing by our customers or the loss of a material production or assembly program; a prolonged disruption in the supply of components to us from our suppliers; shutdown of our or our customers' or sub-suppliers' production facilities due to a labour disruption; scheduled shutdowns of our customers' production facilities (typically in the third and fourth quarters of each calendar year); the termination or non-renewal by our customers of any material production purchase order; exposure to, and ability to offset, commodities price increases; restructuring actions by OEMs, including plant closures; work stoppages and labour relations disputes; risk of production disruptions due to natural disasters or catastrophic event; the security and reliability of our information technology systems; pension liabilities; changes in our mix of earnings between jurisdictions with lower tax rates and those with higher tax rates, as well as our ability to fully benefit tax losses; impairment charges related to goodwill, long-lived assets and deferred tax assets; other potential tax exposures; changes in credit ratings assigned to us; changes in laws and governmental regulations, including tax and transfer pricing laws; costs associated with compliance with environmental laws and regulations; liquidity risks; inability to achieve future investment returns that equal or exceed past returns; the unpredictability of, and fluctuation in, the trading price of our Common Shares; and other factors set out in our Annual Information Form filed with securities commissions in Canada and our annual report on Form 40-F filed with the United States Securities and Exchange Commission, and subsequent filings. In evaluating forwardlooking statements or forward-looking information, we caution readers not to place undue reliance on any forwardlooking statements or forward-looking information, and readers should specifically consider the various factors which could cause actual events or results to differ materially from those indicated by such forward-looking statements or forward-looking information. MAGNA ANNOUNCES THIRD QUARTER 2017 FINANCIAL RESULTS CONNECT WITH MAGNA

6 MAGNA INTERNATIONAL INC. Management's Discussion and Analysis of Results of Operations and Financial Position Unless otherwise noted, all amounts in this Management's Discussion and Analysis of Results of Operations and Financial Position ("MD&A") are in U.S. dollars and all tabular amounts are in millions of U.S. dollars, except per share figures, which are in U.S. dollars. When we use the terms "we", "us", "our" or "Magna", we are referring to Magna International Inc. and its subsidiaries and jointly controlled entities, unless the context otherwise requires. This MD&A should be read in conjunction with the unaudited interim consolidated financial statements for the three months and nine months ended September 30, 2017 included in this Quarterly Report, and the audited consolidated financial statements and MD&A for the year ended December 31, 2016 included in our 2016 Annual Report to Shareholders. This MD&A contains statements that are forward looking. Refer to the "Forward-Looking Statements" section in this MD&A for a more detailed discussion of our use of forward-looking statements. This MD&A has been prepared as at November 8, Non-GAAP Financial Measures This MD&A includes the use of Gross margin, Gross margin as a percentage of sales, Adjusted EBIT, Adjusted EBIT as a percentage of sales, Return on Invested Capital and Return on Equity (collectively, the "Non-GAAP Measures"), calculated as follows: Gross margin is calculated by subtracting Cost of goods sold from Sales. Gross margin as a percentage of sales is calculated as Gross margin divided by Sales. Adjusted EBIT is calculated by taking net income and adding back income taxes, interest expense, net, and other expense, net, as presented on the Consolidated Statements of Income. Adjusted EBIT as a percentage of sales is calculated as Adjusted EBIT divided by Sales. Return on Invested Capital is calculated as After-tax operating profits divided by average Invested Capital for the period. After-tax operating profits is calculated as Income from operations before income taxes and Interest expense, net less income taxes calculated by applying Magna's effective income tax rate for the period. Invested Capital is calculated as the difference between (a) Total Assets excluding Cash and cash equivalents and Deferred tax assets and (b) Current Liabilities excluding Short-term borrowings and Long-term debt due within one year. Return on Equity is calculated as Net income attributable to Magna divided by average Shareholders' Equity for the period. The Non-GAAP Measures have no standardized meaning under U.S. GAAP and accordingly may not be comparable to the calculation of similar measures by other companies. We believe that Gross margin, Gross margin as a percentage of sales, Return on Invested Capital and Return on Equity facilitate a comparison of our performance with prior periods, and provide investors with a more relevant basis for comparing our results from period to period. Similarly, we believe that Adjusted EBIT and Adjusted EBIT as a percentage of sales provide useful information to our investors for measuring our operational performance as they exclude certain items that are not reflective of ongoing operating profit or loss. The presentation of the Non- GAAP Measures should not be considered in isolation or as a substitute for the Company's related financial results prepared in accordance with U.S. GAAP. HIGHLIGHTS For the quarter ended September 30, 2017, we posted third quarter records for sales. Total sales increased 7% to $9.50 billion in the third quarter of 2017, compared to $8.85 billion in the third quarter of Net income attributable to Magna was $503 million in the third quarters of both 2017 and Diluted earnings per share increased 5% to $1.36, compared to $1.29 for the third quarter of We returned $521 million to shareholders in the third quarter of 2017, through a combination of dividends and share repurchases. For the nine months ended September 30, 2017, we have returned more than $1.2 billion to shareholders. Magna International Inc. Third Quarter Report

7 OVERVIEW Our Business (1) We are a leading global automotive supplier with 328 manufacturing operations and 99 product development, engineering and sales centres in 29 countries. We have over 163,000 employees focused on delivering superior value to our customers through innovative products and processes, and world class manufacturing. We have complete vehicle engineering and contract manufacturing expertise, as well as product capabilities which include body, chassis, exterior, seating, powertrain, active driver assistance, vision, closure and roof systems, and we have electronic and software capabilities across many of these areas. Our common shares trade on the Toronto Stock Exchange (MG) and the New York Stock Exchange (MGA). For further information about Magna, visit our website at INDUSTRY TRENDS AND RISKS Our operating results are primarily dependent upon the levels of North American and European car and light truck production by our customers and the level of content we have on various programs. Original equipment manufacturers' ("OEMs") production volumes in different regions may be impacted by factors which may vary from one region to the next, including but not limited to: general economic and political conditions; consumer confidence levels; interest rates; credit availability; energy and fuel prices; relative currency values; commodities prices; international conflicts; labour relations issues; regulatory requirements; trade agreements; infrastructure; legislative changes; and environmental emissions and safety standards. These factors together with other factors affecting our performance such as: operational inefficiencies; costs incurred to launch new or takeover business; price reduction pressures from our customers; warranty and recall costs; commodities and scrap prices; restructuring, downsizing and other significant non-recurring costs; and the financial condition of our supply base, are discussed in our Annual Information Form and Annual Report on Form 40-F, each in respect of the year ended December 31, 2016, as well as our Management s Discussion and Analysis of Results of Operations and Financial Position for the three and six months ended June 30, 2017, and remain substantially unchanged in respect of the nine months ended September 30, RESULTS OF OPERATIONS Average Foreign Exchange For the three months For the nine months ended September 30, ended September 30, Change Change 1 Canadian dollar equals U.S. dollars % % 1 euro equals U.S. dollars % British pound equals U.S. dollars % 1 Chinese renminbi equals U.S. dollars % 1 Brazilian real equals U.S. dollars % % The preceding table reflects the average foreign exchange rates between the most common currencies in which we conduct business and our U.S. dollar reporting currency. The changes in these foreign exchange rates for the three months and nine months ended September 30, 2017 impacted the reported U.S. dollar amounts of our sales, expenses and income. The results of operations for which the functional currency is not the U.S. dollar are translated into U.S. dollars using the average exchange rates in the table above for the relevant period. Throughout this MD&A, reference is made to the impact of translation of foreign operations on reported U.S. dollar amounts where relevant. 1 Manufacturing operations, product development, engineering and sales centres and employee figures include certain equity-accounted operations. 2 Magna International Inc. Third Quarter Report 2017

8 RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED September 30, 2017 Sales Sales $10,000 $8, % $9,499 $7,000 For the three months ended September 30, Change Sales External Production North America $ 4,601 $ 4,837-5% Europe 2,495 2, % Asia % Rest of World % Complete Vehicle Assembly % Tooling, Engineering and Other % Total Sales $ 9,499 $ 8, % External Production Sales and Complete Vehicle Assembly Sales The changes in external production sales and complete vehicle assembly sales are discussed in the "Segment Analysis" section below. Tooling, Engineering and Other Sales Tooling, engineering and other sales increased 35% or $232 million to $890 million for the third quarter of 2017 compared to $658 million for the third quarter of In the third quarter of 2017, the major programs for which we recorded tooling, engineering and other sales were the: Jaguar E-Pace and I-Pace; Chevrolet Silverado and GMC Sierra; Audi A8; BMW X3; Ford Expedition; Ford Ranger; GMC Acadia, Buick Enclave and Chevrolet Traverse; and Mercedes-Benz GLE. In the third quarter of 2016, the major programs for which we recorded tooling, engineering and other sales were the: Mercedes-Benz E-Class; Chevrolet Malibu; BMW 5-Series; Ford F-Series SuperDuty; Jeep Grand Cherokee; Porsche Panamera; Ford Transit; and Chevrolet Cruze. The strengthening of the euro and Canadian dollar each against the U.S. dollar had a net favourable impact of $31 million on our reported tooling, engineering and other sales. Magna International Inc. Third Quarter Report

9 Cost of Goods Sold and Gross Margin For the three months ended September 30, Change Sales $ 9,499 $ 8,849 $ 650 Cost of goods sold Material 5,922 5, Direct labour Overhead 1,540 1, ,140 7, Gross margin $ 1,359 $ 1,291 $ 68 Gross margin as a percentage of sales 14.3% 14.6% - 0.3% Cost of goods sold increased $582 million to $8.14 billion for the third quarter of 2017 compared to $7.56 billion for the third quarter of 2016 primarily as a result of: higher material, overhead and direct labour costs associated with the increase in sales; a $206 million net increase in reported U.S. dollar cost of goods sold primarily due to the strengthening of the euro and Canadian dollar each against the U.S. dollar; acquisitions subsequent to the third quarter of 2016 which increased cost of goods sold by $31 million; higher launch costs; higher commodity costs; and higher pre-operating costs incurred at new facilities. These factors were partially offset by: higher recoveries associated with scrap steel; and divestitures subsequent to the third quarter of 2016 which decreased cost of goods sold by $9 million. Gross margin as a percentage of sales 16.0% 14.6% - 0.3% 14.3% 12.0% Gross margin increased $68 million to $1.36 billion for the third quarter of 2017 compared to $1.29 billion for the third quarter of 2016 while gross margin as a percentage of sales decreased to 14.3% for the third quarter of 2017 compared to 14.6% for the third quarter of The decrease in gross margin as a percentage of sales was primarily due to: reduced margins on our complete vehicle assembly sales primarily due to: launch costs relating to the Jaguar E-Pace; and lower margins earned on programs during the third quarter of 2017 compared to programs during the third quarter of 2016; an increase in tooling sales as a proportion of total sales, which have a higher material and labour content than our consolidated average; a decrease in the proportion of production sales generated in North America relative to total production sales which have a higher margin than our consolidated average and an increase in the proportion of production sales generated in Europe relative to total production sales, which have a lower margin than our consolidated average; higher launch costs; operational inefficiencies incurred at a body and chassis facility in Europe; higher commodity costs; and higher pre-operating costs incurred at new facilities. These factors were partially offset by: generally higher margins at certain manufacturing facilities including through net productivity and efficiency improvements; and higher recoveries associated with scrap steel. 4 Magna International Inc. Third Quarter Report 2017

10 Depreciation and Amortization Depreciation and amortization costs increased $36 million to $306 million for the third quarter of 2017 compared to $270 million for the third quarter of The higher depreciation and amortization was primarily as a result of increased capital deployed at existing facilities and a $9 million net increase in reported U.S. dollar depreciation and amortization due to the strengthening of the euro and Canadian dollar each against the U.S. dollar. Selling, General and Administrative ("SG&A") SG&A expense as a percentage of sales was 4.3% for the third quarter of 2017 compared to 4.2% for the third quarter of SG&A expense increased $35 million to $406 million for the third quarter of 2017 compared to $371 million for the third quarter of 2016 primarily as a result of: a general increase in SG&A expense to support the growth in sales; an insurance recovery in the third quarter of 2016, net of costs incurred, related to a fire at a body and chassis facility in Europe; and a $9 million net increase in the reported U.S. dollar SG&A expense due to the strengthening of the euro and Canadian dollar each against the U.S. dollar. Interest Expense, net During the third quarter of 2017, we recorded net interest expense of $20 million compared to $23 million for the third quarter of The $3 million decrease is primarily as a result of decreased interest expense due to lower average debt balances in Asia and Rest of World and increased interest income earned on higher average cash balances. Equity Income Equity income decreased $20 million to $45 million for the third quarter of 2017 compared to $65 million for the third quarter of 2016 primarily due to: higher launch and related costs incurred at certain facilities in Europe and China; and higher income taxes resulting from losses not being benefitted at a certain facility in Europe. These factors were partially offset by earnings on higher sales in China. Other Expense, net Our powertrain systems operations recorded charges of $2 million ($2 million after tax) during the third quarter of 2017, relating to continuing restructuring activities at a division in Germany. For three months ended September 30, 2016, there were no amounts included in Other Expense, net. Income from Operations before Income Taxes Income from operations before income taxes decreased $22 million to $670 million for the third quarter of 2017 compared to $692 million for the third quarter of The decrease in income from operations before income taxes is the result of: reduced earnings on our complete vehicle assembly sales primarily due to: launch costs relating to the Jaguar E-Pace; and lower margins earned on programs during the third quarter of 2017 compared to programs during the third quarter of 2016; a $36 million increase in depreciation and amortization, as discussed above; a decrease in the proportion of production sales generated in North America relative to total production sales which have a higher margin than our consolidated average and an increase in the proportion of production sales generated in Europe relative to total production sales, which have a lower margin than our consolidated average; a $20 million decrease in equity income, as discussed above; an insurance recovery in the third quarter of 2016, net of costs incurred, related to a fire at a body and chassis facility in Europe; higher launch costs; higher commodity costs; operational inefficiencies incurred at a body and chassis facility in Europe; higher pre-operating costs incurred at new facilities; and net customer price concessions subsequent to the third quarter of Magna International Inc. Third Quarter Report

11 These factors were partially offset by: generally higher margins at certain manufacturing facilities including through net productivity and efficiency improvements; higher recoveries associated with scrap steel; net customer price increases in our Rest of World segment; and an $11 million net increase in reported U.S. dollar income from operations before income taxes primarily due to the strengthening of the Canadian dollar and euro each against the U.S. dollar. Income Taxes The effective income tax rate on income from operations before income taxes decreased to 23.6% for the third quarter of 2017 compared to 25.7% for the third quarter of In the third quarter of 2017, the income tax rate was impacted by the restructuring charges discussed in the "Other Expense, net" section. Excluding Other Expense, net, after tax, the effective income tax rate decreased to 23.5% for the third quarter of 2017 compared to 25.7% for the third quarter of 2016 primarily as a result of utilization of losses previously not benefited in Canada and South America and a change in our reserves for uncertain tax positions partially offset by a decrease in equity income. Income Attributable to Non-Controlling Interests Income attributable to non-controlling interests decreased $2 million to $9 million for the third quarter of 2017 compared to $11 million for the third quarter of 2016 primarily due to decreased profits, as anticipated, at a powertrain operation in North America in which we have a non-controlling interest. Net Income Attributable to Magna International Inc. Net income attributable to Magna International Inc. of $503 million for the third quarter of 2017 was unchanged compared to $503 million in the third quarter of 2016, as a result of a decrease in income from operations before income taxes of $22 million offset by lower income taxes of $20 million and a decrease in income attributable to non-controlling interests of $2 million, each as discussed above. Earnings per Share Diluted earnings per share $1.60 $ % $1.36 $0.80 For the three months ended September 30, Change Earnings per Common Share Basic $ 1.37 $ % Diluted $ 1.36 $ % Weighted average number of Common Shares outstanding (millions) Basic % Diluted % Diluted earnings per share increased $0.07 to $1.36 compared to $1.29 for the third quarter of Other Expense, net, after tax, negatively impacted diluted earnings per share by $0.01 in the third quarter of 2017 as discussed in the "Other Expense, net" section. Excluding this impact, diluted earnings per share increased $0.08, as a result of a decrease in the weighted average number of diluted shares outstanding during the third quarter of The decrease in the weighted average number of diluted shares outstanding was primarily due to the purchase and cancellation of Common Shares, during or subsequent to the third quarter of 2016, pursuant to our normal course issuer bids. 6 Magna International Inc. Third Quarter Report 2017

12 SEGMENT ANALYSIS Given the differences between the regions in which we operate, our operations are segmented on a geographic basis. Consistent with the above, our internal financial reporting separately segments key internal operating performance measures between North America, Europe, Asia and Rest of World for purposes of presentation to the chief operating decision maker to assist in the assessment of operating performance, the allocation of resources, and our long-term strategic direction and future global growth. Our chief operating decision maker uses Adjusted EBIT as the measure of segment profit or loss, since we believe Adjusted EBIT is the most appropriate measure of operational profitability or loss for our reporting segments. For the three months ended September 30, Total Sales Adjusted EBIT Change Change North America $ 4,892 $ 5,109 $ (217) $ 463 $ 512 $ (49) Europe 3,900 3, (2) Asia Rest of World (5) 19 Corporate and Other (130) (145) (4) Total reportable segments $ 9,499 $ 8,849 $ 650 $ 692 $ 715 $ (23) The following table reconciles net income to Adjusted EBIT: For the three months ended September 30, Net income $ 512 $ 514 Add: Interest expense, net Other expense, net 2 Income taxes Adjusted EBIT $ 692 $ 715 Magna International Inc. Third Quarter Report

13 North America For the three months ended September 30, Change Vehicle Production Volumes (thousands of units) 3,994 4,309 (315) - 7% Sales External Production $ 4,601 $ 4,837 $ (236) - 5% Tooling, Engineering and Other % Total Sales 4,892 5,109 (217) - 4% Adjusted EBIT $ 463 $ 512 $ (49) - 10% Adjusted EBIT as a percentage of sales 9.5% 10.0% - 0.5% External Production Sales North America $5,500 External Production Sales $4,837-5% $4,601 4,600 Vehicle Production Volumes - North America (thousands of units) 4,309-7% 3,994 $4,000 External production sales in North America decreased 5% or $236 million to $4.60 billion for the third quarter of 2017 compared to $4.84 billion for the third quarter of 2016, primarily as a result of: lower production volumes on certain existing programs; the end of production of certain programs including the Mercedes-Benz R-Class and Chrysler 200; and customer price concessions subsequent to the third quarter of These factors were partially offset by: 3,000 the launch of new programs during or subsequent to the third quarter of 2016, including the: Jeep Compass; Ford F-Series SuperDuty; Volkswagen Atlas; Audi Q5; and Chevrolet Bolt; and a $54 million increase in reported U.S. dollar sales as a result of the strengthening of the Canadian dollar against the U.S. dollar. 8 Magna International Inc. Third Quarter Report 2017

14 Adjusted EBIT North America Adjusted EBIT Adjusted EBIT as a percentage of sales $600 $512-10% $ % 10.0% - 0.5% 9.5% $300 Adjusted EBIT in North America decreased $49 million to $463 million for the third quarter of 2017 compared to $512 million for the third quarter of 2016 primarily as a result of: reduced earnings due to lower production sales; lower equity income of $10 million as a result of lower sales within a certain equity accounted investment; net customer price concessions subsequent to the third quarter of These factors were partially offset by: 5.0% higher recoveries associated with scrap steel; lower warranty costs of $10 million; a $7 million increase in reported U.S. dollar Adjusted EBIT primarily due to the strengthening of the Canadian dollar against the U.S. dollar partially offset by the weakening of the Mexican peso against the U.S. dollar; a lower amount of employee profit sharing; lower foreign exchange losses; and productivity and efficiency improvements. Adjusted EBIT as a percentage of sales in North America decreased 0.5% to 9.5% for the third quarter of 2017 compared to 10.0% for the third quarter of 2016 primarily as a result of: lower margins earned as a result of lower production volumes on certain existing programs; and lower equity income. These factors were partially offset by: higher recoveries associated with scrap steel; lower warranty costs; a lower amount of employee profit sharing; and lower foreign exchange losses. Magna International Inc. Third Quarter Report

15 Europe For the three months ended September 30, Change Volumes (thousands of units) (i) Vehicle Production 5, , % Magna Complete Vehicle Assembly % Sales External Production $ 2,495 $ 2,184 $ % Complete Vehicle Assembly % Tooling, Engineering and Other % Total Sales 3,900 3, % Adjusted EBIT $ 113 $ 115 $ (2) - 2% Adjusted EBIT as a percentage of sales 2.9% 3.7% - 0.8% (i) Vehicles produced at our Complete Vehicle Assembly operations are included in Vehicle Production volumes. External Production Sales Europe $2,500 External Production Sales - Europe $2,495 $2, % 5,000 Vehicle Production Volumes - Europe (thousands of units) 4, % 5,005 $1,500 External production sales in Europe increased 14% or $311 million to $2.50 billion for the third quarter of 2017 compared to $2.18 billion for the third quarter of 2016, primarily as a result of: 3,000 the launch of new programs during or subsequent to the third quarter of 2016, including the; BMW 5-Series; Audi Q2; Alfa Romeo Stelvio; Land Rover Range Rover Velar; and Ford Fiesta; and a $111 million increase in reported U.S. dollar sales as a result of the strengthening of foreign currencies against the U.S. dollar, including the euro; Polish zloty; Czech koruna; and Russian ruble partially offset by the weakening of the Turkish lira against the U.S. dollar; and acquisitions during or subsequent to the third quarter of 2016, which positively impacted production sales by $33 million. These factors were partially offset by: lower production sales on the MINI Countryman and Paceman as a result of substantially lower production content on the current generation of these programs; and customer price concessions subsequent to the third quarter of Magna International Inc. Third Quarter Report 2017

16 Complete Vehicle Assembly Sales - Europe $800 Complete Vehicle Assembly Sales $781 $ % 30.0 Complete Vehicle Assembly Volumes (thousands of units) % $- - Complete vehicle assembly sales increased 55% or $278 million to $781 million for the third quarter of 2017 compared to $503 million for the third quarter of 2016 and assembly volumes increased 13% or 2.4 thousand units. The increase in complete vehicle assembly sales is primarily due to the launch of the BMW 5-Series which started production during the first quarter of 2017 and which has a relatively higher average unit price compared to the MINI Countryman and Paceman, which ended production during the fourth quarter of In addition, strengthening of the euro against the U.S. dollar resulted in a $40 million increase in reported U.S. dollar sales. Adjusted EBIT Europe Adjusted EBIT Europe Adjusted EBIT as a percentage of sales $200 $115 $113-2% 5.0% 3.7% - 0.8% 2.9% $- 2.0% Adjusted EBIT in Europe decreased $2 million to $113 million for the third quarter of 2017 compared to $115 million for the third quarter of 2016 primarily as a result of: reduced earnings on our complete vehicle assembly sales primarily due to: launch costs relating to the Jaguar E-Pace; and lower margins earned on programs during the third quarter of 2017 compared to programs during the third quarter of 2016; lower equity income of $17 million as a result of higher launch and related costs and higher income taxes resulting from losses not benefitted at a certain facility; an insurance recovery in the third quarter of 2016, net of costs incurred, related to a fire at a body and chassis facility in Europe; operational inefficiencies incurred at a body and chassis facility in Europe; higher costs to launch new programs; higher commodity costs; higher pre-operating costs incurred at new facilities; and net customer price concessions subsequent to the third quarter of These factors were partially offset by: margins earned on higher production sales; generally higher margins at certain manufacturing facilities including through net productivity and efficiency improvements; and a $5 million increase in reported U.S. dollar sales primarily as a result of the strengthening the euro against the U.S. dollar. Magna International Inc. Third Quarter Report

17 Adjusted EBIT as a percentage of sales in Europe decreased 0.8% to 2.9% for the third quarter of 2017 compared to 3.7% for the third quarter of 2016 primarily as a result of: reduced earnings on our complete vehicle assembly sales primarily due to: launch costs relating to the Jaguar E-Pace; and lower margins earned on programs during the third quarter of 2017 compared to programs during the third quarter of 2016; lower equity income as a result of higher launch and related costs and higher income taxes resulting from losses not benefitted at a certain facility; an insurance recovery in the third quarter of 2016, net of costs incurred, related to a fire at a body and chassis facility in Europe; higher costs to launch new programs; higher commodity costs; operational inefficiencies incurred at a body and chassis facility in Europe; and higher pre-operating costs incurred at new facilities. These factors were partially offset by: higher production sales at margins higher than our European average; and generally higher margins as a percentage of sales at certain manufacturing facilities including through net productivity and efficiency improvements. Asia For the three months ended September 30, Change Sales External Production $ 576 $ 548 $ % Tooling, Engineering and Other (6) - 6% Total Sales % Adjusted EBIT $ 77 $ 64 $ % Adjusted EBIT as a percentage of sales 11.4% 9.8% + 1.6% External Production Sales Asia $600 External Production Sales - Asia $576 $ % $300 External production sales in Asia increased 5% or $28 million to $576 million for the third quarter of 2017 compared to $548 million for the third quarter of 2016, primarily as a result of the launch of new programs during or subsequent to the third quarter of 2016 in China and higher production volumes on certain existing programs. 12 Magna International Inc. Third Quarter Report 2017

18 Adjusted EBIT Asia $80 $64 Adjusted EBIT Asia + 20% $ % Adjusted EBIT as a percentage of sales 11.4% 9.8% + 1.6% $- Adjusted EBIT in Asia increased $13 million to $77 million for the third quarter of 2017 compared to $64 million for the third quarter of 2016 primarily as a result of: 4.0% higher equity income of $8 million primarily related to higher net income at a certain equity investment as a result of an increase in sales; and generally higher margins at certain manufacturing facilities including through net productivity and efficiency improvements. Adjusted EBIT as a percentage of sales in Asia increased 1.6% to 11.4% for the third quarter of 2017 compared to 9.8% for the third quarter of 2016 primarily as a result of higher equity income and generally higher margins as a percentage of sales at certain manufacturing facilities including through net productivity and efficiency improvements. Rest of World For the three months ended September 30, Change Sales External Production $ 156 $ 119 $ % Tooling, Engineering and Other 5 10 (5) - 50% Total Sales % Adjusted EBIT $ 14 $ (5) $ 19 External Production Sales Rest of World External production sales in Rest of World increased 31% or $37 million to $156 million for the third quarter of 2017 compared to $119 million for the third quarter of 2016, primarily as a result of: higher production volumes on certain existing programs; the launch of new programs; and net customer price increases subsequent to the third quarter of These factors were partially offset by divestitures subsequent to the third quarter of 2016 which negatively impacted production sales by $9 million. Adjusted EBIT Rest of World Adjusted EBIT in Rest of World increased $19 million to $14 million for the third quarter of 2017 compared to a loss of $5 million for the third quarter of 2016, primarily as a result of net customer price increases subsequent to the third quarter of 2016 and margins earned on higher sales. Corporate and Other Adjusted EBIT in Corporate and Other decreased $4 million to $25 million for the third quarter of 2017 compared to $29 million for the third quarter of 2016, primarily as a result of higher net foreign exchange losses. Magna International Inc. Third Quarter Report

19 FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Cash Flow from Operations $900 Cash provided from operating activities $881 $ % $100 For the three months ended September 30, Change Net income $ 512 $ 514 Items not involving current cash flows $ 63 Changes in operating assets and liabilities 22 (139) 161 Cash provided from operating activities $ 881 $ 657 $ 224 Cash provided from operating activities increased $224 million for the third quarter of 2017 compared to the third quarter of 2016 primarily as a result of: a $695 million increase in cash received from customers; and a $39 million decrease in cash paid for taxes. These factors were partially offset by: a $375 million increase in cash paid for material and overhead; and a $136 million increase in cash paid for labour. 14 Magna International Inc. Third Quarter Report 2017