Valeo says its operating margin for this year “might be slightly below” that of 2017 (7.8% of sales) as emissions tests become stricter and as the French supplier posted first-half profit down 10% to EUR543m.

During the first six months, sales were up 9% to EUR9.9bn (US$11.6bn), while EBITDA rose 11% to EUR1.3bn or 13.6% of sales and operating margin increased 4% to EUR755m.

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“Following growth of 15% in first-half 2017, we recorded growth at constant exchange rates of 9% over the first six months of 2018, in line with the medium-term growth plan presented in London in February, 2017,” said Valeo chairman and CEO, Jacques Aschenbroich.

“Over the period, the order intake reached EUR18.7bn, including EUR4.7bn for our joint venture, Valeo Siemens eAutomotive. Our order intake once again confirms our excellent positioning on the fast-growing hybrid, electric and autonomous vehicle markets and justifies our sustained investment in R&D and production capacity.

“Despite limited growth in the first three months of the year and a substantial rise in raw material prices, we maintained our margins at the same level as in 2017. In a more complex economic and geopolitical environment, our results demonstrate the solidity of our growth model.

“On this basis and in view of our current order book, we expect double-digit growth in sales in 2019.”

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Outlook:

Based on the following assumptions:  An increase in global automotive production of 1.5% in 2018; Raw material prices and exchange rates in line with current levels, the Valeo Group has set the following objectives:

  • In view of uncertainties relating to the rise in raw material prices (in particular, steel and resins) and disruptions to the production of certain vehicles in Europe (mainly during the third quarter) due to the new Worldwide Harmonised Light Vehicle Test (WLTP): Growth of 9% at constant exchange rates in 2018
  • Like-for-like growth in original equipment sales of around 5% in second-half 2018, ahead of expected double-digit growth in 2019 based on our order book 
  • 2018 operating margin excluding share in net earnings of equity-accounted companies (as a % of sales), which might be slightly below that of 2017 (7.8% of sales)
  • Free cash flow generation in line with that of 2017 (EUR278m)