The auto supplier Vitesco is cautious for the new year because of the lack of chips and rising costs. The shortage of semiconductors is likely to normalize slowly in the second half of the year, the drive specialist from Regensburg said on Friday. Nevertheless, the situation will initially affect production. The management also expects massive increases in costs, including for materials and wages. The Vitesco share initially went down clearly in the morning, but then the paper caught up again.
Overall, the company, which is listed in the SDax, wants to benefit significantly from increasing production volumes in the automotive industry and the trend towards electric drives. Vitesco has not yet taken into account the effects of the Ukraine war in its outlook. The development cannot be conclusively estimated, said CEO Andreas Wolf.
“So far, we have been expecting a moderate recovery in the production of passenger cars and commercial vehicles both in our core markets and globally for the 2022 financial year,” said the company director. In Europe and North America, Vitesco calculates an increase in the production volume of passenger cars and light commercial vehicles of between 15 and 19 percent. In China, on the other hand, according to the company’s expectations, production should only increase by up to two percent or, in the worst case, stagnate. Overall, the assumptions are too optimistic, says industry expert David Lesne from the major Swiss bank UBS.
Burden from special effects
The analyst also assumes that market expectations for operating profit could now drop noticeably by up to a fifth. Because CFO Werner Volz expects a profit margin before interest and taxes of 2.2 to 2.7 percent for this year, adjusted for special effects. That is less than experts had on average on the slip.
At the same time, Volz estimates the increase in gross costs to be in the mid three-digit million range. However, Vitesco plans to pass on as much of it to carmakers as possible, he said.
The Vitesco share was one of the biggest losers in the SDax small-cap index in the morning. Most recently, the paper was back up one percent at EUR 35.70. The automotive supplier Continental spun off the company in September via a spin-off. The first course was 59.80 euros at the time. After a temporary lull, the share was again above the 50 euro mark in mid-January. With the stock market crash as a result of the Russian attack on Ukraine, the course dropped significantly. Vitesco is currently valued at a good 1.4 billion euros on the stock exchange.
Important electrical components
Vitesco intends to increase sales from 8.35 billion euros last year to 8.6 to 9.1 billion, also thanks to further growth in business with electrification products. Of the 11.2 billion euros in incoming orders, almost 5.1 billion were for e-parts. In the order backlog, the electrical components account for a third of all orders to be processed. In March, a major order worth two billion euros was added.
Of the two billion euros in sales that the management in the Electrification Technology division expects for 2025, 90 percent are already sealed with orders, said Wolf. In the narrower sense, the division focuses on high-voltage electronics, electric drives and battery technology.
It is important for investors how quickly Vitesco can make a profit with the electronics business. Wolf wants to break even here in 2024. The division grew in 2021 under its own steam – i.e. without exchange rate fluctuations and takeovers – by almost 45 percent. The adjusted operating margin improved noticeably, but the company is still making an operating loss of almost half of sales.
High special costs
The company had already presented key data for the past year. Sales increased by four percent. After a loss of 94.5 million euros, the adjusted operating result turned to an operating profit of 148.6 million euros, the corresponding margin was 1.8 percent. The bottom line, however, was a net loss of 122 million euros. In the previous year, the minus of 376.7 million euros was significantly higher. There shouldn’t be a dividend.
Vitesco had reported a positive book effect from write-ups of EUR 120 million for the fourth quarter. However, the company also had to make a provision of 80 million euros in connection with investigations into the former parent company in the diesel scandal – Vitesco is obliged to compensate Conti for this. In addition, there were high special costs for the spin-off and the IPO.
CFO Volz also remained reluctant to promise a net profit in an interview with the financial news agency dpa-AFX. This year there would still be charges from the separation from Conti, and conversions could also have an impact on restructuring costs, he admitted. Overall, the management expects a burden from special effects in the amount of 100 to 150 million euros. (dpa/swi/mer)
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