April 29, 2019 / 3:30 PM / 3 months ago

Sweden's Veoneer to raise cash as driverless car progress slows

STOCKHOLM (Reuters) - Sweden’s Veoneer said on Monday it would seek up to $500 million in new capital to help the maker of electronic car products cope with a downturn in the vehicle market and fund new product development.

FILE PHOTO: Jan Carlson, CEO of Veoneer, Inc., watches as his company's stock begins trading on the floor of the New York Stock Exchange (NYSE) in New York, U.S., July 2, 2018. REUTERS/Brendan McDermid/File Photo

Shares in the company, which makes radars, visions systems, advanced driver assistance software and autonomous drive software that will benefit from driverless vehicle development, had fallen by 14 percent in Stockholm and New York by 1423 GMT.

Veoneer has suffered as carmakers have extended their timeline for the mass adoption of self-driving vehicles and robotaxis due to regulatory and technological challenges and due to a slide in conventional car sales needed to fund development.

The company’s fund raising would dilute holdings of existing shareholders by up to 17.6 percent, based on its U.S.-listed market capitalisation of $2.34 billion at Friday’s close.

Analysts had expected Veoneer to seek more cash after the loss-making firm pushed back 2020 sales and margin targets in October, partly blaming production delays at car manufacturers.

Veoneer was reviewing its targets, CEO Jan Carlson said after the company said it needed fresh capital to meet research and development costs and deliver against a big order book.

“We have a strong base for the future, with possibly one of the largest order books in the industry,” Carlson told Reuters. “But we are a small company when it comes to sales, and therefore very sensitive to a declining car production.”

Veoneer said the decline in car production in the first quarter had been worse than expected, meaning it now expected 2019 organic sales to decline by mid-single digits compared to 2018. It had previously guided for flat to slightly lower sales.

Analysts said the only positive in the results was a growth in order intake of about $1.2 billion on average over the last 12 months, in line with the intake reported for 2018, due to continued demand for safety-related car products.

The company, which reported quarterly operating loss of $128 million, said its order book at the beginning of 2019 was more than $19 billion, compared to about $16 billion a year earlier.

“But costs are pulling away here as they keep on building a very large order book,” Handelsbanken analyst Hampus Engellau said.

The firm, whose shares have lost 41 percent of their value since it was spun out of Autoliv last year, said in February it expected order deliveries, an efficiency drive and stronger car output in the second half to cover funding needs.

Investor enthusiasm for auto stocks has been tempered in the past year due to concerns about trade tensions, ongoing emission headaches and slowing demand in China and Europe, delaying several initial public offerings in the sector.

The company said it was conducting a review and seeking new efficiency measures at Zenuity, it autonomous software joint venture with Volvo Cars. But it said it did not expect benefits from the initiatives to kick in before the second half.

Volvo, one of two Zenuity customers, is relying on the venture to meet its goal of delivering a driverless car to the market by 2021 and to help it hit its target of making a third of sales from self-driving cars by 2025. Volvo said it had not changed its delivery goalS despite the rethink at Zenuity.

Reporting by Esha Vaish and Johannes Hellstrom in Stockholm; Editing by Niklas Pollard and Edmund Blair

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