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Valeo shares sink after Q3 revenue miss, outlook reduction

Valeo shares are sharply lower Friday, a day after the French auto parts supplier reported a disappointing third-quarter earnings report. The stock slump comes even though Valeo had previously warned that its Q3 would be affected by some external developments.

By 1255 BST, Valeo shares were 20.19% lower at €23.84. The stock has been trending lower for much of the year-to-date.

Valeo Q3 earnings

Valeo’s third quarter earnings report showed some disappointing results for investors and the impact of that is being felt even more strongly, Friday.

The French auto parts maker said total revenues were €4.5 billion in the third-quarter, up 5% from the same period in 2017 at a constant exchange rate. However, on a like-for-like basis, revenues slipped 1%.

Aftermarket sales proved a brighter point for the business, rising 11% on a constant exchange rate basis and by 3% in like-for-like terms, the French auto parts business said.

“On July 25, we made it clear that Valeo’s sales would be impacted in the third quarter, temporarily by WLTP in Europe and by the market slowdown in China,” said Valeo’s chairman and CEO, Jacques Achenbroich.

“In this complex environment, Valeo outperformed the market by 2 percentage points during the period. The impact of WLTP in Europe is set to continue into the fourth quarter, and market conditions in China will remain challenging,” he added.

Lower outlook

Bearing in mind that backdrop, Valeo has cut its forward outlook for activity and sales.

The auto parts maker said its forecasts are based on flat growth in its automotive production output and is expecting the following:

  • Total sales growth of around 6% at constant exchange rates;
  • Original equipment sales outperformance of around 2 percentage points across the entire second half of this financial year.
  • Operating margin between 6.2% and 6.5%.
  • Free cash flow generation of between €120-150 million.

“We remain very confident in the relevance of our strategy and the solidity of our growth model, driven by our unique portfolio of technologies and products designed to meet the automotive industry’s major challenges, namely powertrain electrification and the rise of the autonomous and connected vehicle,” Achenbroich said.

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