July 25, 2018 / 5:00 PM / 9 months ago

Valeo cuts 2018 profit outlook, blaming new emissions tests

PARIS (Reuters) - French auto parts maker Valeo (VLOF.PA) cut its 2018 profitability goal on Wednesday, citing the introduction of new emissions test standards that are expected to disrupt production by some of its carmaker clients.

Valeo, the maker of automotive lighting, self-driving sensors and electrified transmission parts, said its full-year operating profit “might be slightly below” the 7.8 percent of sales recorded last year, having previously pledged to match it.

The company, which also reported a 10 percent decline in first-half net income to 463 million euros ($541 million), blamed the target cut on “disruptions to the production of certain vehicles in Europe” resulting from the new Worldwide Harmonised Light Vehicle Test (WLTP) that becomes mandatory in September.

Earnings before interest, tax, depreciation and amortization rose 11 percent to 1.341 billion euros or 13.6 percent of sales, from 12.9 percent a year earlier, Valeo said.

Revenue advanced 5 percent to 9.863 billion euros, short of the 9.93 billion expected by analysts, based on the median estimate in an Inquiry Financial poll for Reuters.

Order intake came to 14 billion euros for the first half, down 6 percent year-on-year. New orders at Valeo’s electric-car parts venture with Siemens, however, jumped 57 percent to 4.7 billion euros.

Valeo did not identify the carmakers or vehicles affected by the emissions-testing hiccups.

However Volkswagen (VOWG_p.DE) has acknowledged renting parking spaces to accommodate many of the 250,000 vehicles that may be caught up in testing delays.

Mercedes maker Daimler (DAIGn.DE) also cited the new tests among factors that led to a June profit warning.

Peugeot maker PSA Group (PEUP.PA), by contrast, insisted it was largely unaffected by the testing change, as Chief Executive Carlos Tavares unveiled record earnings on Tuesday.

The new global test regime, designed to correspond more closely to actual driving habits, was already under discussion before the 2015 dieselgate scandal that led to closer scrutiny of widespread emissions test-rigging by carmakers.

But European Union authorities say there are signs that some carmakers are already manipulating the new tests.

Reporting by Laurence Frost; Editing by Adrian Croft

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