Valeo posts profit beat amid ‘improving’ chip shortage, EV adoption accelerates

French car parts maker Valeo (VLOF.PA) on Tuesday posted slightly better-than-expected half-year core profit and reiterated its full-year guidance, citing a projected increase in global car output.

Valeo’s half-year earnings before interest, tax, depreciation and amortisation fell nearly 8% year-on-year to 1.11 billion euros ($1.12 billion), but beat a company-supplied analyst consensus forecast of 1.07 billion euros.

“The context has been difficult,” CEO Christophe Perillat told reporters, referring to microchip shortages that have dogged the automotive sector. However, he said the chip situation “is improving”.

Additional pressures have come from rising costs in tight supply chains on which auto parts manufacturers rely to produce components.

Valeo said in February that it expected a 2022 core profit margin in a range of 11.8-12.3%, down from 13.4% last year.

IHS Markit, which tracks data and predicts automotive production, this month forecast global production of light vehicles would hit 81 million this year, up from about 77 million in 2021.

Valeo added in a statement it was “particularly pleased” with its order intake, especially in vehicle electrification and advanced driving assistance systems.

The European Union is pushing ahead with plans for net-zero emissions by 2050, prompting automakers and suppliers alike to ramp up investments in electric vehicles (EVs).

Valeo in recent months signed multiple deals and partnerships in the field of EVs, including a major contract with BMW (BMWG.DE) to equip the German carmaker’s upcoming EV platform with its advanced driving assistance systems (ADAS).

In February it announced jointly with Renault (RENA.PA) its plans to develop a new-generation electric-motor vehicle in France.

Valeo’s “Move Up” plan which it unveiled in February bets on the accelerated adoption of vehicle electrification and ADAS systems.

The order intake for Valeo in the first six months of 2022 was 13.1 billion euros, and 2.9 billion for Valeo Siemens eAutomotive, the group said, adding this “puts us perfectly in line” with the Move Up plan.

($1 = 0.9872 euros)