(BFM Bourse) – In a context of rising production costs and logistical disruptions, the automotive supplier has just published degraded half-year results. Delfingen confirms, however, that it should outperform the growth of the automotive market this year. The company’s activity will benefit from the development of hybrid and electric engines, which consume a lot of wiring.
Like its counterparts Valeo or Faurecia, the automotive supplier located in Anteuil in the Doubs must deal with an adverse context marked by geopolitical uncertainties and the rise in raw materials. This difficult context put the entire market to the test with a 1.8% drop in global automotive production in the first half, recalls Delfingen in its semi-annual update. Tensions over electronic components, the Russian-Ukrainian crisis or health restrictions in China (two months of confinement in April and May), complicated the activity of the entire automotive supplier sector.
Under these conditions, the company listed since 1996 on the Paris Stock Exchange anticipates a performance in the second half of 2022 lower than that of the first half. Over the current year as a whole, the operating margin is expected to decline compared to 2021 (6.6%), around 5%, “subject to a more unfavorable market context”, continues the band. The turnover is however expected to exceed 380 million euros, an increase compared to the 363 million euros displayed on the counter at the end of the 2021 financial year.
Leadership in the protection of on-board electrical networks
Already published at the end of July, the group recorded revenue of 203.9 million euros for the 1st half of 2022, up 3.2% compared to the 1st half of 2021 at constant exchange rates and perimeter. In published data, the increase was 5.3% over one year. The business of the specialist in automotive electrical wiring protection solutions is holding up in a highly disrupted market context.
The nearly 70-year-old company stands out for its status as a leader in solutions for the protection of on-board electrical and fluid networks. The electrical wiring is indeed the true nervous system of the vehicle. The solutions developed by Delfingen protect the electrical networks of a vehicle which can represent a total length of 5 meters.
In 2020, Delfingen strengthened itself in this area after taking over the Europe-Africa activities of the German Schlemmer, one of its main competitors which had been placed in compulsory liquidation by the Munich Commercial Court in December 2019. It is quite simply the biggest external growth operation in the history of Delfingen. It allows the group to push its pawns on the European market and to strengthen its proximity with German manufacturers, in particular for heavy vehicles.
The doubien group thus intends to hold its own in a market of hybrid and electric vehicles whose sales are set to grow significantly, supported by the many public electromobility support schemes set up in a large number of countries. Above all, these electric and hybrid vehicles contain 33% more wiring than a thermal car. A size difference that should fuel demand for the protection products developed by Delfingen. This leading position in this segment thus allows the French equipment manufacturer to anticipate a “market outperformance of 2 to 3 points” in 2022, whose growth is expected to be 5% compared to 2021 according to estimates by S&P Global Mobility.
Margins squeezed by cost inflation
A little further down in the accounts, the market environment weighed on the group’s other indicators. Current operating income amounted to 11 million euros in the first half of 2022, i.e. a margin of 5.4% of revenue, where it peaked at 9.8% in the first half of 2021. This erosion of the operating margin is mainly explained by a drop in the gross margin of 5.3 points, due to the continuous rise in the price of raw materials, and an increase in the weight of other purchases and external expenses of 0.9 point ( energy and transport). This decline was partially offset by good absorption of fixed costs, including payroll costs, which fell by 1.9 points.
The net income group share plunged to 3.3 million euros as of June 30, 2022 compared to the 12.7 million euros achieved in the 1st half of 2021. Over the half-year, Delfingen incurred an exceptional charge of 2.7 million euros, corresponding to the disposal of the Russian subsidiary RU-Volga.
Delfingen publishes H1 2022 results slightly below EuroLand Corporate expectations but which are “completely consistent with the worsening of the macroeconomic environment and the persistence of geopolitical tensions in recent weeks”, underlines Pierre Laurent, l analyst in charge of monitoring the file. Despite an unabated inflationary environment, the EuroLand Corporate specialist remains fully confident “in the group’s ability to strengthen its dominant position in a market brimming with opportunities.” This optimism leads the analyst to maintain his opinion on the purchase of Delfingen with a price target slightly adjusted to 62 euros, after this half-yearly publication.
In a Parisian market down sharply by nearly 2% against a backdrop of the energy crisis in Europe, the title of the equipment manufacturer follows the trend and falls back by more than 5.6% to 46.80 euros, around 2:30 p.m.
The equipment manufacturers sector is also under pressure, they have many production sites in Germany and are particularly exposed to the risk of gas rationing which could possibly be imposed on manufacturers in Germany. The deterioration of the health situation in China drives the point home, in particular in Shenzen affected by the latest containment measures decreed by Beijing. Valeo and Faurecia have their research and development center in this Chinese city affected by these new measures. The titles of the two equipment manufacturers thus show the largest declines in the Paris market, with declines of more than 8% to start this week.
Sabrina Sadgui – ©2022 BFM Bourse
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