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UPDATE 1-Faurecia says cheaper euro, raw materials will boost profit this year
February 12, 2015 / 7:51 AM / 3 years ago

UPDATE 1-Faurecia says cheaper euro, raw materials will boost profit this year

(Updates with analyst comment)

By Laurence Frost

PARIS, Feb 12 (Reuters) - French auto parts maker Faurecia said a lower euro and cheaper raw materials would lift profit in 2015 as it posted solid second-half earnings growth on Thursday, buoyed by Asian demand.

Net income rose to 78 million euros ($88 million) in the second half of 2014, from 53 million, a 47 percent gain, the company said in a statement. Revenue advanced 8.4 percent to 9.5 billion euros, above analysts’ forecasts of 9.3 billion, with weaker sales in the Americas more than offset by gains elsewhere.

“Faurecia achieved a solid sales increase mainly driven by outstanding growth in China,” Chief Executive Yann Delabriere said in the statement.

Operating income jumped 29 percent to 363 million euros, lifting the operating margin to 3.8 percent of sales from 3.2 percent. The full-year margin also rose by 0.6 points -- the upper end of the company’s own forecast growth range.

“A strong set of FY14 earnings, in our view, and positive guidance,” said analysts at Citi in a morning research note.

“We typically judge auto suppliers on how much faster they grow and, in this regard, Faurecia has performed better than we anticipated.”

In common with other European vehicle and parts makers, Faurecia stands to benefit from the euro’s recent weakening, which helps it to price its dashboards, interiors, door panels and exhausts more competitively overseas while boosting the value of repatriated earnings.

For 2015, the company predicted global auto production growth of 3 percent and said it would be helped by “a significant drop in raw material prices and the realignment of the euro versus the U.S. dollar and the Chinese renminbi”.

Against that backdrop it targeted 5 percent full-year revenue growth, with an operating margin above 4 percent and net cash flow in excess of 100 million euros.

Sales and profitability improved in all regions except the Americas last year. A slowdown in emerging markets led to a 49 million euro loss in South America, while U.S. margins suffered from a surge in launch costs for new vehicle programmes.

Group revenue beat the company’s own 2-4 percent growth forecast for 2014. Net income in the second half had been expected at 111 million euros, according to a Reuters SmartEstimate based on predictions by more than a dozen institutions.

French carmaker Renault said on Thursday it was targeting further sales and earnings improvement this year after strong European deliveries of no-frills cars and mini-SUVs more than tripled full-year profit. (Reporting by Laurence Frost; Editing by Susan Fenton and Andrew Callus)

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