(Reuters) - Paris-based automotive supplier Valeo (VLOF.PA) said on Thursday it expects to outperform a tough auto market in 2020 as strict cost controls help it boost free cash flow and operating margin.

Valeo, which specialises in the design, production and sale of components and services for the automotive sector, also said its 32 plants located outside Hubei province in China, which account for 90% of nominal sales in the country, had resumed production following the coronavirus outbreak.

It said that it was too early to evaluate the impact of the virus on the company's 2020 results and the wider auto industry but added that the supply chain was progressively getting back to normal, without providing a schedule for full recovery.


"We respect all the rules implemented by the Chinese authorities", Jacques Aschenbroich, Valeo’s Chairman and Chief Executive Officer, said on a call with journalists.

To date, most coronavirus cases have been in Wuhan, the capital of Hubei province, where Valeo operates three sites, including a technology centre which develops parts and components for intelligent vehicles.

The company, one of the world’s largest makers of car parts, said 2019 sales came to 19.48 billion euros ($21.02 billion), in line with the average estimate of 19.47 billion euros in a Refinitiv poll, and free cash flow increased more than three times to 519 million euros.

Carmakers are struggling with an auto industry downturn, particularly in key market China, and the need to increase investment in electric vehicles as several countries move to eventually ban conventional combustion engines.

Valeo said it expected automotive production to fall 2% this year.

(Reporting by Maria Trybus; Editing by Kirsten Donovan, Christina Fincher)