Valeo profits suffer following WLTP introduction

25 February 2019

Vehicle parts supplier Valeo has announced its 2018 full-year figures, with WLTP having a big effect on the company’s profits.

The French company described the last 12 months as ′challenging’ with reasons including the introduction of new emissions testing and a slowdown in China. However, the company has said it expects 2019 to see improvements, thanks to new contracts with manufacturers including Volkswagen and Toyota.

For 2018, the parts supplier’s order intake fell 15% to €28.6 billion while net debt rose 22% to €2.3 billion. Operating profits fell 26% to €1.1 billion, with its operating margin at 5.7% of sales, down from 7.9% a year earlier. Net income dropped 38% to €546 million, although revenue increased 4% to €19.3 billion. The company highlighted in its results that global vehicle production fell an estimated 1% in 2018.

Valeo has invested heavily to benefit from tightening emissions standards as the automotive market comes under increasing pressure to reduce CO2 levels. With diesel sales declining, this is leading carmakers to electrification of their fleets. However, Valeo has suffered in other areas while waiting for these new revenue streams to start affecting profits.

′Valeo is strongly positioned in the electric, autonomous and connected vehicle segment on a deeply changing automotive market,’ CEO Jacques Aschenbroich said. ′This is thanks to our capacity for constant innovation grounded in the synergies between our different Business Groups and in our unique portfolio of technologies.’

The business is also investing in research into autonomous driving as it looks to stay relevant in a changing automotive landscape.

WLTP impact

Valeo made two profit warnings in the space of three months during 2018, due to the impact of the implementation of WLTP on 1 September. Some manufacturers were not ready for the new procedure, with vehicles still awaiting approval as the deadline approached. This meant there was a slowdown in vehicle production to avoid bottlenecks.

As most carmakers operate their parts supply on a ′just-in-time’ basis, suppliers such as Valeo were also affected, with sales slowing as a result. However, Valeo said its sales performance would pick up gradually throughout 2019 thanks to new supply contracts for cameras, lighting and electrified transmissions.

′Despite a difficult environment continuing into the first half of 2019, this innovation strategy will allow us to improve our like-for-like growth and our outperformance relative to the automotive market during the year. This will be driven mainly by the start of production on numerous projects in the ADAS segment, with new-generation cameras, and in the electric vehicle segment, for example with new 48V systems’ Aschenbroich concluded.