Forvia drives cautiously into 2022 as China, Ukraine cloud auto outlook

By Sarah Morland and Elena Vardon

(Reuters) -Forvia, the European car parts maker created by Faurecia's takeover of German rival Hella, is cautious about the outlook for 2022, based on lower global automotive production estimates linked to China lockdowns and the Ukraine conflict.

In its first financial guidance for the combined group since its sealed the deal in January, Forvia predicted sales of around 23 billion to 24 billion euros ($25 billion-$26 billion) this year with a profit margin of 4%-5%.

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

"We are very cautious on both Europe and China, which are two major markets for us," Michel Favre, Faurecia's finance chief and Hella's incoming chief executive, told analysts.

Faurecia said it had protectively renegotiated its debt covenant, suspended this year's dividend payment and doubled its divestments target to proceeds of 1 billion euros.

"We are building a very powerful group, so we need to focus on the key business," Favre said, ruling out any plans to sell the group's clean mobility business.

Faurecia has paid 5.4 billion euros for an 81.5% stake in Hella, he said, but stopped buying shares at the end of February.

Forvia, set to become the world's seventh-biggest automotive supplier, is facing fluctuating customer demand related to new supply chain disruptions.

The Ukraine conflict has caused shortages in Ukrainian-made wire harnesses, while Western sanctions on Russia have led to sharp raw material price rises and in China, the world's largest auto market, COVID lockdowns have shut factories and cut demand.

Favre said it would be watching moves by partner Renault regarding its operations in Russia.

Faurecia's stock was down around 1% at 0845 GMT, after shooting up nearly 8% in early trading.

Stifel analyst Pierre-Yves Quemener attributed the early jump to short covering, while Oddo BHF analyst Michael Foundoukidis said the cautious guidance and greater financial flexibility brought a welcome visibility in uncertain times.

($1 = 0.9320 euros)

(Reporting by Sarah Morland and Elena Vardon; Editing by Tom Hogue, Jan Harvey and Jane Merriman)