Including EUR70m of other expenses (up from EUR50m in 2005), operating income at Valeo last year was 271m euros (2.7% of total operating revenues) compared to 324m euros (3.3%) in 2005.

Gross margin fell 1.3% to EUR1,539m, or 15.4% of sales, compared to 16.0% in 2005. The rising cost of raw materials reduced the gross margin by 0.7 points.

Net income was EUR161m compared to EUR142m, including a contribution of EUR36m from the sale of the electric motors and actuators business on 27 December, 2006, and EUR38m from the sale of the Logitec logistics business and the financial investment in Parrot.

“Customer diversification, the recovery of the aftermarket business and rigorous management lessened the impact on margins of the decline in automotive production in the group’s key markets and the increase in raw material prices,” Valeo said in a statement.

“The sale of the electric motors and actuators business reflects the rationalisation of Valeo’s portfolio and enhances the group’s financial resources.”

At EUR10,086m, total operating revenues were up 2.6% compared to 2005. On a like-for-like basis, and restated to take into account deflation in sales prices at identical functions, total operating revenues increased by 4.3%.

At 31 December, 2006, Valeo’s net debt totalled EUR968m, down EUR112m compared to 1 January, 2006 and reflecting in particular the sale of the electric motors and actuators business (impact of EUR122m) and payments to shareholders (EUR89m), with free cash flow remaining positive at EUR26m. At the close of 2006, the debt-to-equity ratio was 55%, compared to 63% at the start of the year.

Valeo noted that, following the measures taken during the year, 54% of its production workforce was located in leading competitive-cost countries at the end of 2006 compared to 51% at the end of 2005 and 38% in 2001.

Directors will recommend a dividend of EUR1.10 per share.

Looking ahead to this year’s results, Valeo said: “The expected stabilisation in automotive production in the group’s key markets is not expected to occur before the second half of 2007. In this context, and assuming a stabilisation of raw material prices, Valeo aims to improve its operational profitability by stepping up efforts to increase competitiveness. The group is launching a re-engineering of its principle functions in order to optimise its resources and processes.”