Valeo Reports Double-Digit Sales Growth in China

PARIS—French auto-parts supplier Valeo SA Monday reported double-digit sales growth in China during the first half of the year, bucking the downward trend in the world's largest car market as it benefited from Chinese car makers seeking to upgrade their vehicles with premium car parts.

Valeo said net profit rose 34% to 344 million euros ($378 million) in the first half of this year, up from €256 million in the same period last year, while sales increased 15% to €7.3 billion. A rebounding European market and the low euro also helped boost sales.

Sales in China, an increasingly important region for Valeo, rose 10% in the first half from the same period a year ago.

While China has propelled the global automotive industry in recent years, sales of new cars have declined, paralleling the weakness of the economy. Valeo, which makes a large suite of car components including lighting systems and dashboard displays, said it has outpaced the market by selling more high-tech products to domestic Chinese brands who are seeking to upgrade their vehicles to remain competitive with foreign brands.

This doesn't make them immune to the China slowdown: Sales in that country grew 6% in the second quarter, down from 15% in the first quarter. But that is still above the 4.8% rise in passenger-car sales in China during the first six months of 2015 compared with the same period in 2014, a rate far below the gains seen over several years.

During the first six months of this year, Ford Motor Co. saw its China sales largely unchanged from a year earlier. Other big car makers, including General Motors Co. and BMW AG, recently reported losses in sales. In June, car sales in China declined 3.4% from the same month one year ago.

Valeo said its exposure to local manufacturers means it can continue to outpace overall Chinese demand in the second half of the year.

"Chinese clients are becoming more important. We see a very strong rise among them," said Valeo Chief Executive Jacques Aschenbroich. Sales to local car producers constituted 44% of Valeo's revenue in China.

Mr. Aschenbroich said Valeo is selling more products like CO2-reducing filters, and driving and parking assistance systems in China. Valeo has been pouring its research funds in recent years into developing products in emissions control and autonomous driving technologies. Globally, these high-tech parts now account for 30% of Valeo's current global order intake, the company said.

In a note, Credit Suisse analyst Alexander Haissl applauded the results but was skeptical of the company's rosy forecast, saying Valeo's "outlook on China seems optimistic to us."

Valeo's European business is booming thanks to the rebound in car manufacturing on the continent. European sales were up 10% during the first half of 2015.

Write to Matthias Verbergt at [e-mail]

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