PARIS (Agefi-Dow Jones)–Forvia, the automotive supplier born at the beginning of the year from the merger between Faurecia and the German group Hella, confirmed its annual outlook on Monday while its half-year results suffered from the inflationary environment. .
For the 2022 financial year, which includes the consolidation of Hella over 11 months, Forvia still expects to achieve sales of between 23 billion and 24 billion euros. The equipment manufacturer also intends to generate an operating margin of between 4% and 5% and generate a net cash flow at equilibrium. This cash target includes approximately €100 million for the creation of security stocks to deal with the risk of energy shortages in Europe.
Forvia has built these forecasts based on an assumption of global production of approximately 74 million light vehicles this year. The equipment manufacturer is also targeting a ratio of net debt to adjusted gross operating surplus (EBITDA) of 3 at the end of the year.
Exceptional charge related to Russia
The group confirmed its forecasts while its results fell in the first half. Forvia posted a net loss group share of 296 million euros, against a profit of 146 million euros a year earlier. The profit was notably penalized by an exceptional charge of 87 million euros linked to non-recurring costs in Russia, a country which historically represents less than 1% of the group’s turnover, underlined the financial director, Olivier Durand, during a conference call with reporters. The leader indicated that Forvia continued an “extremely limited” activity in Russia, respecting international sanctions.
Operating profit came to 426 million euros, compared to 510 million euros in the first half of 2021, for a corresponding margin of 3.7%, compared to 6.6% a year earlier. The group suffered from the inflationary environment, Forvia estimating the total gross impact of inflation at 500 million euros in the first half. The company mitigated this impact for approximately 400 million euros mainly through “contractual pass-through policies on raw materials at an average of 80% and negotiations with customers”.
“Nevertheless, this pass-through of inflation to zero-margin customers had a dilutive effect on operating margin of approximately 100 basis points in the first half of 2022,” Forvia said. The equipment manufacturer estimates that this net impact should be lower in the second part of 2022 “because the mitigation measures will continue to be effective without the time lag experienced in the first half”.
Strong outperformance versus automotive production
First-half sales amounted to 11.6 billion euros, up 49.3% year-on-year as reported thanks to the integration of Hella’s results from February to June. At constant scope and exchange rates, sales increased by 9%, which represents a performance 960 basis points higher than the evolution of global automotive production, down 0.6% over the first six months of 2022.
Net free cash flow stood at 102 million euros, compared with a positive flow of 290 million euros in the first half of 2021.
The net debt to Ebitda ratio stood at 3.1 as of June 30.
The group also indicated that its asset disposal program of one billion euros by the end of 2023 was underway and would contribute to its continued debt reduction. “The first operation will be carried out this year”, indicated Olivier Durand.
Asked about a potential takeover of some 18% of Hella’s capital that Forvia does not own, Olivier Durand replied that the group’s priority was to get out of debt.
-Julien Marion, Agefi-Dow Jones; +33 (0)1 41 27 47 94; [email protected] ed: VLV
FAURECIA FINANCIAL RELEASES:
http://www.faurecia.com/fr/finance
Agefi-Dow Jones The financial newswire
Dow Jones Newswires
July 25, 2022 02:17 ET (06:17 GMT)