Forvia sales beat estimates, profit falls short, in unsettled market

  • Confirms FY guidance
  • H1 operating profit at 426 mln euros vs 436 mln euros in consensus
  • H1 sales at 11.62 bln euros vs 11.02 bln euros in consensus
  • H1 cash flow of 102 mln euros 'clearly above expectations' - JPM
  • Faurecia rises 7%, Hella up 0.6%

July 25 (Reuters) - Forvia, the European car parts maker born from Faurecia's (EPED.PA) takeover of German rival Hella (HLE.DE), on Monday fell short of earnings expectations but beat sales estimates in the first half of the year.

"All in all, a good performance in a market unsettled by rising inflation, production stoppages and continued chip shortages affecting overall volumes," analysts at J.P. Morgan said.

Faurecia sealed its takeover of German automotive lighting group Hella in January.

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The combined entity sells seats, dashboards and fuel systems to carmakers which, after two years of disruptions from the coronavirus pandemic, are facing fresh supply jags due to Chinese lockdowns and Russia's invasion of Ukraine.

Chief Financial Officer Olivier Durand said Forvia had stopped activities at most of its Russian sites, booking 87 million euros ($89 million) of related one-off costs in the first six months of 2022.

The group also recorded a 100-million-euro net impact from inflation, partly mitigated by contractual pass-through policies on raw materials, and maintained its full-year guidance.

"We suspect macro uncertainty is a culprit, especially given potential impacts from nat gas (natural gas) rationing in Europe," RBC Capital Markets analyst Tom Narayan said on the outlook, adding that could suggest the current consensus is too high for the second half.

Faurecia shares rose around 7% at 1050 GMT, while Hella stock inched up 0.6%.

Asked about whether Faurecia intended to take over the minority shares of Hella, Durand said the company was focused on its integration.

"The priority is the group's debt reduction," he said after Forvia posted a positive net cash flow of 102 million euros in the first half of the year, which JPM said it was "clearly above expectations".

"Given the now completed rights offering and 1 billion euros in proposed divestitures, it should now be easier to meet the debt covenants," RBC's Narayan said.

Forvia reported half-year operating profit of 426 million euros, against analysts' 436-million-euro estimate in a Visible Alpha consensus, while its sales of 11.62 billion euros beat the 11.02 billion seen by analysts.

($1 = 0.9790 euros)

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Reporting by Elena Vardon and Juliette Portala, editing by Milla Nissi and Bernadette Baum

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