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Valeo Q3 results seen falling around eight percent

PARIS -French car parts maker Valeo is expected to announce a fall in third-quarter earnings on Thursday, hit by difficult market conditions and a vast cost-cutting programme which has yet to bear fruit.

Europe's largest publicly traded car parts supplier is expected to post an operating profit of 98 million euros ($88.4 million), down 8.4 percent from 107 million ($96.5 million) in year-ago period, according to the median estimate of five analysts polled by Reuters.

Net profit is seen at 33 million euros ($29.7 million), a steep decline from 120 million euros ($108 million)a year ago . Analysts are predicting sales of 2.44 billion euros ($2.2 billion), up from 2.01 billion ($1.8 billion).

Valeo has not given any guidance for the second half of 2001, after catching the market off guard in April by announcing a surprise loss in the first quarter and after failing to meet two self-imposed profit targets.

When it published its first half results, the company would not go further than to say it was committed to keeping its second half profitability at the same level as in the first half, where it stood at 3.3 percent.

Analysts' forecasts pointed to a 4.0 percent operating margin in the third quarter, up from that 3.3 percent figure but well below the 5.3 percent registered a year ago.

Valeo, which makes clutches, headlights and cooling systems, is facing an economic downturn worsened by the crisis sparked by attacks in the United States and rising raw material prices.

In July, the company warned the market would remain depressed into 2002 and has pledged to shed less profitable businesses that account for 10 percent of its turnover.

On Monday, Valeo announced plans to close a German factory employing 470 staff. It said production at the parking systems and top column modules plant in Baumenheim, Bavaria would be switched to its site at Wemding, 30 km (20 miles) away, and workers would be given the option of being transferred there.

"That's what investors want to hear, that the restructuring is going on," said a London-based analyst. "Given current market conditions, addressing the cost base is a necessity."

Analysts will be looking for an update on the situation at Valeo's troubled plant at Rochester, New York, which makes electrical plants for General Motors.

Chairman Thierry Morin said in July he plans to cut about 1,200 staff at Rochester, about half the total work force, within three years.

Valeo, once a darling of the Paris Bourse, was removed from the blue chip CAC 40 index earlier this year and has lost close to two thirds of its value since touching a record 103.65 euros in July 1998. The stock closed at 39.00 euros on Tuesday.

Valeo will report earnings on Thursday after the close of the stock market. A news conference is planned Friday morning.

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