(BFM Bourse) – Faurecia, which is renaming itself Forvia after its takeover of the German Hella, confirms its annual outlook despite a “volatile” environment which weighed on its half-year accounts. The automotive supplier has given itself the priority objective of reducing debt with a program of disposals of “non-strategic” assets in the amount of one billion euros.
The integration of the German Hella into the new Forvia group is on “good track”. The automotive supplier kept up the pace despite a first half penalized by a very volatile market environment due to low volumes and high inflation. The group confirms its 2022 objectives despite an inflationary context. The message is well received on the Paris Stock Exchange, the title accelerated upwards and rose 6.3% to 18.57 euros, around 11:50 a.m.
For the 2022 financial year, which includes 11 months of consolidation of Hella, Forvia still aims to achieve sales of between 23 billion and 24 billion euros, an operating margin of between 4% and 5% and generate net cash flow from ‘balance. These cash flow forecasts take into account the creation of a safety stock of approximately €100 million at the end of the year to secure supplies given the risks of energy shortages in Europe. Forvia is also targeting an adjusted net debt/gross operating surplus (Ebitda) ratio of 3x by the end of 2022.
Forvia’s forecast for this year is based on global automotive production of around 74 million light vehicles in 2022, or around 37 million light vehicles in the second half of 2022.
Price negotiations to mitigate the inflationary environment
Forvia confirms its annual targets as the group announced a net loss group share of 296 million euros, against a profit of 146 million euros a year earlier. The equipment manufacturer’s profits were penalized by a total charge of 113 million euros relating to the integration and financial costs linked to the acquisition of Hella as well as by a charge of 87 million euros relating to non-recurring costs related to operations in Russia.
Operating profit stood at 426 million euros, against 510 million euros in the first half of 2021. The operating margin fell to 3.7%, against 6.6% a year earlier, the group having been penalized by an increased inflationary environment, particularly on raw materials.
The gross impact of inflation in the first half of 2022 amounted to around 500 million euros. It was mitigated in the first half of 2022 for approximately 400 million euros, “mainly through contractual pass-through policies on raw materials at an average of 80% and negotiations with customers which will continue to mitigate inflationary impacts from of the second half,” explains Forvia in its press release. “In the second half of the year, the net impact of inflation should be reduced, as the mitigation measures will continue to be effective without the time lag experienced in the first half of the year,” the company adds.
The new group recorded sales of 11.6 billion euros, up 49.3% year on year in published data, Hella having contributed 2.7 billion euros after its takeover. At constant exchange rates, sales appreciated by 9%, representing an outperformance of +960 basis points (9.6 percentage points) compared to global automotive production which fell by 2.5% in the first half of 2022 , due to shortages.
The group also recalls that its activity in the second quarter of 2022 was strongly affected by the restrictions relating to Covid which were put in place in China from April, in particular in Shanghai and Changchun, and which lasted until June 1st.
Asset disposals to reduce debt
As of June 30, 2022, the group’s net debt amounted to nearly 8.4 billion euros after the takeover of Hella (81.6% of the capital) by Faurecia, which took effect on January 31. 2022
Faurecia carried out a capital increase of 705 million euros at the end of June, in order to repay part of the debt contracted for this operation which made the group one of the ten largest equipment manufacturers in the world. A program of disposals of “non-strategic” assets for an amount of one billion euros by the end of 2023 “is underway” and will contribute to the continuation of debt reduction, said Forvia.
Sabrina Sadgui – ©2022 BFM Bourse
Are you following this action?
Receive all information about FAURECIA in real time: