Faurecia Suspends Dividend in Bid to Shore Up Finances Amid Ukraine Crisis

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By Joshua Kirby

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Faurecia SA said Tuesday that it is suspending dividend payments and stepping up a disposal program as it looks to boost its financial flexibility in an automotive market hit by Russia’s war in Ukraine.

The French auto supplier said it is now aiming for proceeds of 1 billion euros ($1.07 billion) from asset disposals by the end of 2023, doubling its previous target, and that it won’t pay a previously planned dividend of EUR1 a share this year . The company has also renegotiated its debt covenant with banks, it said.

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The increased financial flexibility will help the company in an uncertain environment caused by the war in Ukraine, Faurecia said. “Visibility on the duration and magnitude of the war’s impacts is currently low, both in terms of volumes and cost inflation,” the company said. The situation is exacerbated by the pandemic situation in China, it added.

In the first quarter of the year, Faurecia’s sales rose organically by 1.1%, the company said.

Forvia, the entity comprising Faurecia and recently-acquired peer Hella GmbH & Co., booked quarterly sales of EUR5.32 billion, up 33% accounting for the first two months of Hella’s consolidation amounting to EUR1.1 billion.

In March, group sales fell 6% organically, largely as a result of a 20% decline in Europe sales following the outbreak of war in Ukraine, Forvia said.

For the full year, Forvia expects sales of EUR23 billion-EUR24 billion and an operating margin of 4%-5%, with net cash flow at break-even, the company said. The guidance includes 11 months of Hella’s consolidation.

Faurecia has meanwhile decided not to go ahead yet with a capital raise as part of the refinancing of the acquisition of Hella, for which it paid a total EUR5.4 billion in a deal closed in January this year. The company will wait for more favorable conditions before launching a capital raise, it said.

Write to Joshua Kirby at [email protected]; @joshualeokirby

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Credit: www.marketwatch.com /

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