Faurecia, Europe’s biggest maker of car interiors, canceled its dividend for 2012 to conserve cash with auto demand in its home region set to decline.
Operating profit is targeted to rise this year on lower costs in Europe and higher sales in North America, the Nanterre, France-based manufacturer said in an e-mailed statement today. Faurecia forecast “neutral” cash flow in 2013 before accounting for restructuring expenses of 120 million euros ($161 million) to 140 million euros.
“The action plan we have under way to offset the ongoing drop in European vehicle production and focus on cash generation will enable us to see an improvement in our performance,” Chief Executive Officer Yann Delabriere said in the statement.
Faurecia, 57 percent-owned by PSA Peugeot Citroen, plans to cut about 3,000 jobs in its home region, or 7.5 percent of the workforce, by the end of this year. Like its struggling parent company, the parts maker is retrenching with European auto demand poised to fall for the sixth straight year in 2013. Faurecia today said vehicle sales in the region may decline by 4 percent to 5 percent this year.
The parts maker’s shares fell as much as 34 cents, or 2.5 percent, to 13.48 euros and were down 0.6 percent as of 9:21 a.m. in Paris. The stock has climbed 17 percent this year, valuing the manufacturer at 1.52 billion euros.
Faurecia’s parent company, which is scheduled to report 2012 financial results tomorrow, has sold several assets to shore up its balance sheet as cash reserves dwindle, adding uncertainty over Peugeot’s continued interest in the company.
Faurecia is “ready for any outcome” of Peugeot’s deliberations, Delabriere said today on BFW Radio. The company has been diversifying its business away from Peugeot and now counts Volkswagen AG and Ford Motor Co. as its two biggest customers. Sales in North America last year grew 41 percent to 3.65 billion euros.
Europe’s car market is forecast to drop to 12.3 million vehicles in 2013, 23 percent below the pre-2008 financial crisis peak, IHS Automotive estimates. General Motors Co. is closing a German factory and Ford is shutting three plants across Europe in response. Peugeot, which is closing a factory in the outskirts of Paris, last week announced second-half writedowns of 4.13 billion euros because of the weak market.
Faurecia’s operating income in the second half tumbled 32 percent to 211 million euros. Sales rose 7 percent to 8.6 billion euros, as growth in North America and Asia offset a decline in Europe.
To help offset weaker demand in the region, Faurecia plans to cut fixed costs by 50 million euros this year and is targeting savings of 100 million by 2014, Delabriere said today. The company forecast European light vehicle production to drop 8 percent to 10 percent in the first half.
Driven by growth in North America and Asia, Faurecia expects 2013 sales to rise to between 17.5 billion euros and 17.9 billion euros, after climbing 7.3 percent last year to 17.4 billion euros. Faurecia said it booked a record 17.8 billion euros in new contracts last year.
Net income for 2012 plunged 62 percent to 140 million euros, burdened by 84 million euros in restructuring charges. Faurecia won’t pay a dividend for 2012 after distributing 35 cents per share to Peugeot and other shareholders the previous year.
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