Faurecia SA, (EO) Europe’s largest maker of car interiors, reported a 16 percent drop in first-half profit as slowing production in its home region pushed down prices.
Operating profit declined to 256 million euros ($338 million) from 304 million euros a year earlier, the Nanterre, France-based company said in an e-mailed statement. Earnings beat the 248 million-euro average of six analyst estimates compiled by Bloomberg. Revenue gained 5.7 percent to 9.27 billion euros.
Faurecia, 57 percent owned by PSA Peugeot Citroen (UG), is struggling with industrial overcapacity in Europe as the region’s car market declines for the sixth straight year. The parts-maker, working to lower spending, reduced net debt by 100 million euros in the first half to 1.7 billion euros.
“In Europe, measures have been introduced to reduce fixed costs which will positively impact operating income in the second half,” Chief Executive Officer Yann Delabriere said in the statement. “The strategy deployed to reconcile growth and cash flow generation delivered on its promise in the first half.”
The cost-cutting measures put in place will yield savings of 50 million euros this year and 100 million euros in 2014, Faurecia said.
The French manufacturer reiterated its 2013 targets which include targeting positive net cash flow before restructuring charges of 120 million euros for 2013. Faurecia is also forecasting full-year revenue between 17.8 billion euros and 18 billion euros and an “improvement” in operating income.
The French company, which last year bought Ford Motor Co.’s car-interior business in Saline, Michigan, has a goal of becoming one of the top five industry suppliers in North America with $7 billion in yearly sales there by 2016.
Ford and Wolfsburg, Germany-based Volkswagen AG (VOW) are Faurecia’s two biggest customers, while controlling shareholder Peugeot ranks third. The Paris-based carmaker consumed 3 billion euros in cash last year amid falling sales. Peugeot’s turnaround efforts include reducing capacity, cutting jobs and selling assets.
The Faurecia holding, Peugeot’s largest remaining asset that it could easily dispose of, isn’t for sale, Peugeot Chief Financial Officer Jean-Baptiste de Chatillon said in February. The company is reluctant to sell the stock because of Faurecia’s contribution to profit, two people familiar with the situation said in May.
To contact the reporter on this story: Mathieu Rosemain in Paris at firstname.lastname@example.org