PARIS -- French car part maker Faurecia posted its first full-year net profit in four years on Friday due to cost cuts and stronger auto seat sales but said a dip in European car production meant revenues would stall in 2004.
Faurecia, 71.5 percent owned by PSA Peugeot Citroen, ruled out sales growth in 2004 due to a 2.6 percent dip in European car production and dollar weakness but said it would keep boosting its operating margin each half year.
The stock, which had risen sharply in recent weeks amid speculation it could become a takeover target if PSA decided to cut its stake, fell nearly four percent, as analysts deemed the outlook for itself and the industry disappointing.
"Most people had been expecting some revenue growth this year, plus it's the first company to say clearly that European production will fall this year," said one Paris-based analyst. "Faurecia makes around 80 percent of their sales in Europe so this is bad news, and could also hit other suppliers."
Europe's third biggest auto part supplier by sales said in a statement 2003 net profit totalled 10.1 million euros ($12.75 million) compared with a loss of 59.1 million euros in 2002.
Operating profit rose to 303 million euros from 256 million while sales rose 2.6 percent to 10.12 billion euros, yielding an operating margin of three percent -- broadly in line with analyst forecasts.
Suppliers like Faurecia have felt the pinch in recent years as carmakers, struggling to maintain profits amid stagnating sales and a rising euro, demand lower prices for parts.
Faurecia, which scrambled back to profit after a three-year revamp, has also been hit by unprofitable contracts made between 2000 and 2002, although Chairman Pierre Levi said the company had halved the number of deals making no money to five.
He said a further dip in European car production, which fell 2.2 percent last year, meant the firm's underlying sales growth would be slower than in previous years.
"In 2004 we will see weak underlying growth, at least weaker than in previous years and no growth in terms of revenue," Levi told a news conference.
But the company, which said that an operating margin of five percent in 2005-2006 was a reasonable aim, said expansion into North America and Asia should kickstart growth from late 2004.
Faurecia said it would open nine new factories in North America this year and two new sites in China, boosting turnover in Asia by four or five times in the next three to four years.