Valeo SE

Valeo reported H1 '26 sales of EUR 10.4 billion, up 0.7% like-for-like, with operating margin at 5.0%, 50 basis points higher year over year. Gross margin was 20.7% of sales, matching the 2017 peak, and free cash flow after net financial interest came in at EUR 242 million, more than double H1 '25. Net income was EUR 105 million, essentially in line with last year. For the segments, POWER sales were EUR 5.1 billion with operating margin at 4.8%; BRAIN sales were EUR 2.5 billion with operating margin at 5.6%; and LIGHT sales were EUR 2.7 billion with operating margin at 4.7%. Full-year guidance was reaffirmed, and management said H2 operating margin and free cash flow should be at least in line with H1 assuming stable conditions. Net debt fell to EUR 3.8 billion from EUR 4.0 billion at end-2025, and leverage improved to 1.2x adjusted EBITDA.

Christophe Perillat-Piratoine framed H1 as proof that the company’s Elevate '28 plan is working, saying the profit and cash 'engines' are now running and the return to growth from '27 is next. He emphasized pricing discipline, cost reduction, and lower breakeven as the drivers of margin improvement, while highlighting historic H1 debt reduction without asset sales. He was also upbeat on long-term opportunities in China, India, North America, and adjacent markets like data centers and humanoids, describing these as low-capex upside areas built on existing technologies.

Edouard de Pirey focused on the mechanics behind the quarter: gross margin of 20.7%, SG&A down 3% year over year, net R&D spending up 2% to 11% of sales, and a 0.3-point IFRS impact in H1 from an EUR 85 million impairment tied to contract cancellations. He said tangible CapEx fell 12% to 3.6% of sales and capitalized R&D was down 5%, reinforcing the view that low CapEx is structural and should stay below the long-term 4.5% to 5% target. He also noted net debt declined by EUR 194 million in six months to EUR 3.8 billion, liquidity was strong with EUR 3.0 billion in cash and EUR 1.6 billion in undrawn credit lines, and the EUR 600 million bond raised last June gives flexibility to redeem the May '27 bond early.

Analysts pressed on why H2 margins should hold up or improve after the strong H1, given R&D accounting effects and the implication of a lower underlying margin in the second half. Management pointed to stable customer call-offs, step-by-step efficiency gains through the year, and inflation being managed, while also saying H2 could still be better than H1 if conditions allow. Questions on China focused on whether the recent wording meant a softer outlook; Christophe clarified that Valeo is now explicitly saying it expects growth in H2 with Chinese OEMs, while being cautious on international OEM demand because of market volatility. Analysts also probed compensation timing for canceled programs and whether there could be one-quarter/one-half mismatches; Edouard said impairments and compensation commitments were recognized in the same period in H1, though cash timing can differ.