Valeo first-half sales fall, but beat market expectations

July 22 (Reuters) - French car parts supplier Valeo reported a 2.6% fall in first-half sales on Thursday, but outperformed a weakening automotive market, improved profitability and reaffirmed its full-year guidance.

Sales totalled 10.38 billion euros ($11.85 billion) in the first six months of the year, above the 10.33 billion euros expected by analysts in a company-provided consensus.

Excluding currency effects, revenue rose 0.7%, outperforming a 1% decline in global automotive production forecast by S&P Global Mobility.

Valeo said adverse currency movements, mainly linked to the U.S. dollar and Asian currencies, weighed on reported sales.

The group's operating margin rose to 5.0% from 4.5% a year earlier, while free cash flow increased to 242 million euros from 100 million euros.

Margin improvement was driven chiefly by Valeo's Brain division, which includes advanced driver-assistance systems, thermal management and powertrain activities.

"That's very significant. It enables us to reduce our debt by nearly 200 million euros over six months, down to 3.8 billion euros," Chief Executive Christophe Périllat told journalists.Valeo confirmed its 2026 guidance.

($1 = 0.8763 euros)

(Reporting by Mathias de Rozario in Gdansk; Editing by Matt Scuffham)