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Magna profit beats expectations, auto parts maker stock up

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(New throughout, adds tariff impact, comments from conference call and analyst, updates stock price)

By Susan Taylor and Shanti S Nair

Feb 22 TORONTO (Reuters) - Canada's Magna International Inc said on Friday profits beat market forecasts as a big spike in vehicle assembly work more than offset declining global auto production in the fourth quarter.

Shares of Magna popped 3.8 percent higher after the world's third-biggest auto supplier said profits fell less than analysts had feared in the latest quarter, partly reflecting a lower share count from its buyback program.

The Aurora, Ontario-based company said it expects its performance to strengthen in the second half of 2019 from the first six months, reflecting its forecast for global vehicle output.

But trade wars will pinch that performance, with Magna's 2019 tariff hit estimated at $45 million to $50 million.

"Tariffs continue to hurt us," Chief Executive Don Walker said on a conference call with analysts. "Tariffs within the NAFTA region...(are) bad for all three countries, including the States, because their input costs become higher, and obviously, it's less competitive."

Magna also boosted its dividend by 11 percent, its tenth consecutive annual increase, and recorded $951 million in free cash flow in the quarter, while it spent $479 million to repurchase 9.9 million shares.

Total sales grew nearly 5 percent from a year earlier, to $10.14 billion, as complete vehicle assembly sales soared 39 percent to $1.7 million. Demand at the lower-profit unit was lifted by new launches for such automakers as Daimler and Jaguar.

Excluding one-time items, Magna earned $1.63 per share, down from $1.58 in the same period last year, but ahead of the consensus expectation of $1.59 per share, according to IBES data from Refinitiv.

Net income attributable to Magna fell to $456 million, or $1.37 per share, in the fourth quarter ended Dec. 31 from $559 million, or $1.54 per share, a year earlier.

Sales at Magna's biggest unit, which makes vehicle structures, fell 4 percent to $4.18 million.

The company's power and vision division, which also provides parts for electric and self-driving vehicles, recorded a 1 percent increase in sales to $2.9 billion.

Magna said it will invest $70 million in next-generation vehicles in 2019, down from $100 million in 2018, which will continue to erode margins in the power and vision unit.

Quarterly adjusted earnings of $1.63 per share bettered a consensus estimate of $1.59 per share, according to IBES data from Refinitiv. Net income attributable to Magna declined to $456 million from $559 million.

The results include a $60 million impairment charge, on a joint venture in Europe with Ford, reflecting declining demand for manual transmissions. (Reporting by Susan Taylor and Shanti S Nair; Editing by James Emmanuel and Arun Koyyur; Editing by David Gregorio)