PARIS -- Valeo reported an 11 percent increase in sales for the third quarter of 2005, compared to the same period last year. Also, the company boosted a healthy increase of cashflow and debt reduction.

Valeo's total operating revenues were $2,864 million, up 11.3 percent as compared with the third quarter 2004. Automobile production is estimated to have fallen by 4 percent in Europe and increased by 3 percent in North America , 9 percent in South America and 8 percent in Asia.

The gross margin for the quarter rose by 3.1 percent to $445 million, or 15.7 percent, of sales despite the negative impact of the extreme tension in raw materials prices, which Valeo estimates to have had a gross impact of 1 margin point in the quarter. Actions undertaken enabled this negative margin impact to be reduced to 0.6 points.

In the first nine months of the year, the free cash flow reached $267 million, an increase of 6.7 percent compared to the equivalent period in 2004, despite industrial investments of $409 million as compared to $383 million in the equivalent period of 2004.

At the end of September, Valeo's net debt was $1,373 million, down $146 million as compared with the level at the end of June, which reflected the implementation of the share buy back program and the acquisitions made by the group during the first half. The debt-to-equity ratio was 67 percent, down 6 points as compared with the end of June.

For the fourth quarter, Valeo anticipates a slight increase in automobile production in Europe, driven by production ramp-up in Eastern Europe, and a fall in production levels of the Big 3 in North America of around 2 percent. Valeo aims to strengthen its market share in an environment of ongoing raw material price inflation.

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