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Valeo Second-Half Earnings Rise 16% on Chinese Car Parts

Valeo SA Rises on Chinese Auto Demand
Europe’s car market, which is starting to revive from a six-year contraction to a two-decade low in 2013, will increase 1 percent to 2 percent this year, the Paris-based company predicted. Photographer: Chris Ratcliffe/Bloomberg

Feb. 21 (Bloomberg) -- Valeo SA, France’s second-biggest auto-parts maker, rose the most in five years after saying it will build more factories and employ thousands more workers to meet increasing demand in China and North America.

The maker of windshield wipers, headlights and ignition systems said today it will build six new plants, including four in China, and increase its workforce by one-third within four years. Valeo reported yesterday that second-half earnings gained 16 percent to 411 million euros ($563 million), exceeding the 375 million-euro average analyst estimate compiled by Bloomberg.

“Our strong cash generation and financial position will help us prepare for the expected sharp growth in sales, particularly in 2015 and 2016,” Chief Executive Officer Jacques Aschenbroich said in a statement.

Valeo is focusing on technology that promotes safety, comfort and pollution reduction to increase profitability. It matched a goal to improve 2013 earnings as a proportion of sales, with growth accelerating in the second half. Europe’s car market, which is starting to revive from a six-year contraction to a two-decade low in 2013, will increase 1 percent to 2 percent this year, the Paris-based company predicted.

Valeo shares rose almost 13 percent, the biggest gain since October 2008, to 99.07 euros at the close of trading in Paris. That’s the highest price since 1998. The stock has more than doubled in 12 months, valuing the company at 7.87 billion euros.

100,000 Workers

Valeo said it plans to build the six new plants by 2014-2015. “We have about 75,000 employees today and we expect to have about 100,000 employees by 2016-2017,” Aschenbroich said at a press conference in Paris.

Valeo is “one of the fastest growing suppliers globally” and is outperforming industry gains in light-vehicle production, Philip Watkins, an analyst at Citigroup, said in a note. Valeo is “still a clear growth stock” said Watkins, who raised earnings estimates and boosted his share-price prediction 11 percent to 99 euros.

The manufacturer’s prediction of 1 percent to 2 percent growth in Europe’s car market compares with regional auto-industry growth forecasts for 2014 of 2 percent by the European Automobile Manufacturers’ Association and 1 percent by French carmaker Renault SA.

Margin Improvement

“I am confident that our strategy focused on innovation and on developing our businesses in fast-growing production regions will enable us to continue delivering margin growth in line with our medium-term financial objectives,” CEO Aschenbroich said.

Michelin & Cie., Europe’s largest tiremaker, is also adding factories in emerging markets such as Brazil, China and India, as well as in the U.S. The French company predicts that volume will increase this year and is reducing costs in Europe, including job cuts in France, amid the region’s tepid growth, it said Feb. 11.

Faurecia SA, Europe’s largest maker of car interiors, said Feb. 12 that second-half earnings rose 34 percent on Asian demand and the beginnings of a European recovery. The company, majority owned by carmaker PSA Peugeot Citroen, rose 3.2 percent today in Paris trading, while Michelin added 1.6 percent.

Valeo’s like-for-like sales in China advanced 31 percent in 2013, outperforming the market by 16 percentage points, Valeo said. North American sales rose 17 percent, beating the market by 12 points. The figures exclude structural changes and currency fluctuations. Revenue rose 3 percent in the second half from a year earlier, to 5.94 billion euros.

“Valeo continues to report impressive outperformance,” Gaetan Toulemonde, an analyst at Deutsche Bank, said in a note today. “Strong growth should remain during the next quarters,” said the Paris-based analyst, who has a buy recommendation on the shares.

To contact the reporter on this story: Mathieu Rosemain in Paris at

To contact the editor responsible for this story: Chad Thomas at

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