EARNINGS PREVIEW: European Auto Suppliers Earnings Seen Weak
European automotive suppliers are feeling the full force of the
worst crisis to hit the automobile industry in 70 years, as car
makers slash production to prevent inventories building up.
The slump in vehicle sales was most acute in the last quarter of
2008, and parts suppliers have been forced to halt production
temporarily for weeks at a time. Incompressible fixed costs mean
that profitability has been sharply eroded.
The outlook is bleak for 2009, with vast overcapacity in the
industry and European automobile production expected to drop
between 15% and 20% from 2008 levels.
COMPANIES TO WATCH:
Autoliv Inc. (ALV) -- Jan. 29 (4Q)
MARKET EXPECTATIONS: Analyst consensus is for a fourth-quarter
net loss of $17 million compared to net profit of $94 million in
the same period a year ago. Revenue is expected to take a heavy hit
with demand for Autoliv's seat belts and airbags falling sharply.
The weak dollar is an aggravating factor that could push revenue
down 4% to 5%. Earnings will also suffer from an anticipated $45
million charge related to its restructuring program.
MAIN FOCUS: Analysts will be looking to the Swedish company for
new cost-saving measures and guidance on 2009 production
Faurecia SA (12114.FR) -- Feb. 10 (4Q)
MARKET EXPECTATIONS: Revenue is estimated to have dropped by
more than 10% in the last quarter of 2008 due to production cuts at
parent company Peugeot-Citroen and other car makers. Faurecia's
production of seats and cockpit modules is likely to have fallen by
at least 25% in the period.
MAIN FOCUS: For the full year, with free cash flow turning
negative, analysts expect the company to be loss-making at both the
net and operating level, and don't anticipate a return to
profitability before 2011. As with other suppliers, the focus will
be on comments on restructuring and future production levels.
Cie Generale des Etablissements Michelin (12126.FR) -- Feb. 13 (FY)
MARKET EXPECTATIONS: Like other automotive suppliers, Michelin
has been hurt by falling tire sale volumes to car manufacturers,
although sales of replacement tires - accounting for more than half
total tire sales - have been affected to a lesser degree. Rising
raw material prices have also eroded earnings. Analyst consensus is
for full-year net profit of EUR504 million compared to EUR774
million in 2007.
MAIN FOCUS: Michelin expects to reap the full benefit of last
year's falling raw material prices starting in March or April and
analysts will be looking for an update. They are also looking for
signals that the company is beating its cost-saving target.
Valeo SA (13033.FR) -- Feb. 13 (4Q)
MARKET EXPECTATIONS: With revenue expected to have plunged 25%
year-on-year in the last quarter, Valeo is estimated to have
incurred an operating loss in the period. In a profit warning in
mid-December, Valeo said it expects a full-year operating margin of
about 2.6% for all of 2008 compared to an initial projection of
around 3.6%, and announced plans to slash some 5,000 jobs
MAIN FOCUS: Analysts will be looking for estimates of
restructuring costs in 2009, as well as for broader indications of
weakening profitability and cash generation.
Continental AG (CON.XE) -- Feb. 19 (4Q)
MARKET EXPECTATIONS: Continental's earnings are expected to be
hurt by significant production cutbacks at global automakers as
well as an impairment charge of around EUR1 billion related to the
company's acquisition of Siemens AG's (SI) VDO automotive
electronics unit in 2007. The Hannover-based company's outlook for
2009 is expected to be dire as the timeframe for recovery of auto
markets remains uncertain.
MAIN FOCUS: Details on a possible capital hike are expected to
be in spotlight, along with plans for future cooperation with
Schaeffler Group and a combination of the two companies automotive
operations. Talks about possible state aid for Schaeffler and
Continental are set to grab investors' attention.
-By David Pearson, Dow Jones Newswires; +33140171740, email@example.com
(Christoph Rauwald and Ola Kinnander contributed to this report.)
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