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Investing.com -- Forvia’s (EPA:FRVIA) stock crashed more than 19% on Friday after the automotive supplier’s full-year 2024 results revealed a weaker-than-expected outlook for 2025, raising concerns over profitability and execution risks despite ongoing de-leveraging efforts.
While the company met expectations for the past year, its cautious guidance, decision to withhold a dividend, and broader macroeconomic pressures triggered a sharp sell-off.
Forvia reported 2024 revenues of €27 billion and an operating income of €1.4 billion, representing a 5.2% margin—a slight dip from 5.3% in 2023 but still within the company’s target range.
However, its 2025 guidance failed to reassure investors. The company projected an operating margin of 5.2% to 6%, but the lower end of that range fell 14% below consensus estimates, fueling worries that earnings may struggle to grow in the coming year.
Adding to investor unease was Forvia’s announcement that it would not pay a dividend in 2025, prioritizing further debt reduction instead.
The company managed to lower its net debt to €6.6 billion by the end of 2024 and aims to reduce its net debt-to-EBITDA ratio to below 1.5x by 2026, largely through asset disposals and cash flow improvements.
While these moves align with Forvia’s long-term financial strategy, the lack of immediate shareholder returns contributed to the stock’s sharp decline.
Forvia also faces cost-cutting challenges in a weakening European market. The company is accelerating its EU-FORWARD restructuring initiative, which will result in the elimination of 5,700 jobs by 2025, generating an estimated €300 million in annual savings.
While necessary to improve efficiency, investors remain concerned about execution risks and potential disruptions to operations.
Currency volatility added further pressure, with negative exchange rate effects of €302 million, primarily due to the depreciation of the Chinese yuan, Brazilian real, and Turkish lira.
China remains a crucial market for Forvia, and any slowdown there could pose additional risks, particularly as local competition intensifies.