(News Bulletin 247) – The automotive supplier published revenues below expectations, lowered its revenue target for 2024 and withdrew its outlook for 2025 citing “high uncertainty” around its customers’ production volumes.

The publications follow one another and are not alike for automotive equipment manufacturers, a sector pulverized by headwinds in recent years on the stock market.

While Forvia gave the compartment a boost on Monday, thanks to results that were a bit better than expected and the confirmation of its 2024 objectives, the opposite is happening with Valeo.

The equipment manufacturer delivered revenues lower than expectations in the third quarter on Thursday evening. Valeo generated turnover from July to the end of September of 4.97 billion euros, down 5% on a published basis and down 2% on a comparable basis. According to UBS the consensus was 5.095 billion euros.

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Lowered revenue target

The company particularly suffered in China where its revenues fell by 12% like-for-like as well as in its “power” division (thermal and electric propulsion systems) where revenues fell by 4% like-for-like. Valeo explains that, in this division, the electric propulsion activity saw its revenues stand at 189 million euros compared to 220 million euros a year earlier, due to the “decline in activity of certain platforms for electric vehicles in Europe.

Following this publication, Valeo lowered its revenue forecast for 2024 to around 21.3 billion euros compared to around 22 billion, and confirmed all of its other forecasts, including an expected operating margin between 4% and 5% and a cash flow of around 350 million euros. The general director, Christophe Périllat, cited “a deterioration in the economic situation” to justify the adjustment of the revenue target.

A sign that the lack of visibility on the activity is likely to continue, Valeo has withdrawn its objectives for 2025. The company explains that there is currently “a strong uncertainty around the production volumes (of its customers), in particular due to a slowdown in the Chinese economy, the application of decided or potential environmental standards in Europe, China and North America, as well as delays in programs and inventory management at our customers.

The former member of the CAC 40 indicates that it will deliver its new 2025 objectives “adapted to new market conditions, when it publishes its 2024 results”.

Strong uncertainty

“We believe that the 2025 message, even though management currently expects a sequential improvement in margins next year, will be the main disappointment” of the publication, estimates Morgan Stanley, in a note written before the market opened.

On the Paris Stock Exchange, the stock is suffering, with Valeo falling 10.6% at the start of the afternoon, dragging OPMobility (-2.48%) and Forvia (-2.22%) somewhat in its wake.

“The sentiment around automotive equipment manufacturers, very negative since the start of the year, had improved since the start of the results season in the absence of (new) bad news but this publication and the much more cautious message from management should curb the enthusiasm of investors”, judges Oddo BHF.

“Indeed, as the Director General recalled, uncertainty both on a macroeconomic and sectoral level remains high over 2025 (volumes, CO2 regulations, China, political impacts, etc.), which does not “does not encourage, in our opinion, to return to the most cyclical and fragile players in the sector”, continues the broker, “neutral” on the file.