Faurecia will review lower-value assets as it ramps up divestment plan

PARIS – Faurecia will review all its business activities under 1 billion euros ($1.1 billion), finance chief Michel Favre said, as the supplier ramps up its divestment plan following its acquisition of German lighting supplier Hella.

"We are building a very powerful group, so we need to focus on the key business," Favre said in Faurecia’s first-quarter revenue call with analysts, where he ruled out plans to sell the group's clean mobility business.

"All activities which are below 1 billion euros are under scrutiny," he said, without saying how this would be calculated.

The group on Tuesday doubled its divestment target to 1 billion euros in proceeds by the end of next year, as it suspended this year's dividend payment and said it had protectively renegotiated its debt covenant.
 
Faurecia said it has bought 81.5 percent of Hella for a total price of 5.4 billion euros, but stopped buying shares at the end of February. Following the takeover, Faurecia is in the process of changing its name to Forvia.

Based on 2020 sales at Faurecia and Hella, the combined company would have ranked eighth on Automotive News Europe's list of the top 100 global automotive suppliers, with combined sales of about $24 billion, just behind Hyundai Mobis, with sales of $25.1 billion. 

Also on Tuesday, Favre and CEO Patrick Koller issued  annual targets at the low end of forecasts, citing caution linked to Chinese lockdowns and the war in Ukraine.
The combined group should generate sales of about 23 billion to 24 billion euros this year with a profit margin of 4 to 5 percent, Faurecia said in its first financial guidance since the Hella deal was sealed in January.

Analysts had on average predicted combined sales of 24 billion euros for 2022 -- a 54 percent jump from Faurecia's revenues last year -- with a profit margin of 6 percent.

The supplier said its guidance was based on cautious estimates on worldwide automotive production, which have been revised down due to global supply disruptions linked to the war in Ukraine and new COVID lockdowns in China.

"Components are not the problem," Favre, who will be chief executive at the Hella division, told journalists in a call.

"The problem is knowing what the final demand will be, and the situation in China, which is both a production and a demand problem," Favre said.

Lockdowns to manage growing COVID-19 flare-ups in the world's largest auto market are stranding workers, shutting factories and clogging up ports, disrupting supply chains already shaken by two years of pandemic and Russia's war on Ukraine.

Favre also noted inflation and continued risks to semiconductor chips supplies, but said shortages in Ukrainian-made wire harnesses, which had hampered production for customers such as Volkswagen and BMW, were being mitigated by back-up production in Romania and North Africa.