Car parts maker Valeo target market-beating growth by 2025 as production rebounds, article with image

The logo of Valeo is pictured during the Viva Tech start-up and technology summit in Paris, France, May 25, 2018. REUTERS/Charles Platiau

Feb 25 (Reuters) – French car parts maker Valeo (VLOF.PA) expects to outperform the market in a medium term as car production volumes recover, it said on Friday after posting a 5% rise in 2021 sales despite a hit from the global chip shortage.

“After two years impacted by the Covid-19 crisis and the electronic component shortage, Valeo intends to take full advantage of the recovery in volumes forecast for the 2022-2025 period,” the company said in a statement.

The group, which specialises in the design, production and sale of components and services for the automotive sector, aims to increase its original equipment sales by around 13% to outperform the market by more than 5 percentage points, assuming global car production of around 98.5 million vehicles in 2025.

However, Valeo warned its business continued to be impacted by the chip shortages which have caused disruptions in its customers’ production schedules.

Semiconductor suppliers, car parts producers and carmakers have said they expect to see some improvement in the chip shortages, which have plagued supply chains across the world, in the second half of the year, as chipmakers boost production capacity to meet the demand.

The group’s sales reached 17.26 billion euros ($19.35 billion) in 2021. For this year, it sees sales between 19.2 billion and 20.0 billion euros.

Its core profit margin is expected to come in a range of 11.8% to 12.3%, below last year’s level of 13.4%.

The outlook does not include possible negative impacts from the conflict between Ukraine and Russia, which could drag production volumes and hike energy or raw material prices, Valeo said.

The group also plans to divest 500 million euros worth of non-strategic assets in 2022-2025 to bring its leverage ratio down, and targets a “gradual recovery” in its dividend.

It proposed a dividend of 35 cents per share for 2021, up 17% from a year earlier.

($1 = 0.8918 euros)

Reporting by Olivier Cherfan and Dagmarah Mackos; editing by Milla Nissi

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