Valeo SA (FR), France’s second-biggest car-parts maker, said first-half earnings rose 3.8 percent as demand for fuel-saving technology more than offset declining auto production in Europe. The stock rose to a 12-year high.
Earnings before interest, taxes and other expenses, which Valeo calls the operating margin, increased to 384 million euros ($509 million) from 370 million euros a year earlier, the Paris-based company said today in a statement. Earnings beat the 353.5 million-euro average of four analyst estimates compiled by Bloomberg. Revenue rose 2.8 percent to 6.17 billion euros.
“Valeo’s operating margin came to 6.2 percent of sales, demonstrating its resilience in the context of decreased production in Europe,” Chief Executive Officer Jacques Aschenbroich said in the statement. “Given the results of Valeo’s efforts in innovation and expansion in Asia and emerging countries, we are confident that the group will achieve its medium-term financial objectives.”
The company, whose products span windshield wipers, headlights and “stop-start” ignition systems, is tightening its focus to technology promoting vehicle safety, comfort and pollution reduction to increase profitability. Aschenbroich pledged in March 2011 to boost annual revenue to 14 billion euros by 2015, propelled by more than doubling sales of fuel-saving components.
Valeo jumped as much as 3.8 percent to 58.78 euros, the highest intraday price since March 7, 2001, and was trading up 3.7 percent at 9:23 a.m. in Paris. The stock has gained 56 percent this year, valuing the company at 4.67 billion euros.
The company raised full-year targets today, saying it now sees a “slight increase” in the operating margin as a proportion of revenue in 2013, “assuming stabilized market conditions in Europe.” Valeo’s earlier forecast was for the figure to match the level of 2012.
The French manufacturer now expects a 2 percent to 3 percent decline of auto production in Europe this year and an advance of 2 percent globally. It reiterated its full-year target of better sales than average in its main markets. Valeo predicted in April that European car production would fall 4 percent, with global output increasing 1 percent.
The “worst is behind us” in the European car market, Aschenbroich said today at a Paris press conference.
Excluding the effects of acquisitions or disposals and currency shifts, group original-equipment revenue increased 5.7 percent, with a 4 percent gain in Asia, pushed by a 22 percent surge in China, and a 14 percent jump in North America, Valeo said. First-half European and African original-equipment revenue on that basis rose 3 percent.
Exchange-rate effects reduced the operating margin by 0.3 percentage point in the period, Valeo said. Currencies affecting earnings included the yen, Brazilian real, Indian rupee and Argentinian peso, arising from the need to import parts to South America, Chief Financial Officer Robert Charvier said at the press conference.
First-half order intake fell 5 percent from a year earlier to 7.3 billion euros. Free cash flow totaled 113 million euros over the period, down from 148 million euros a year earlier, as Valeo invested in factories and in research and development. Net debt narrowed to 457 million at end of June from 763 million euros at the end of 2012.
To contact the reporter on this story: Mathieu Rosemain in Paris at firstname.lastname@example.org