Earnings Release • Feb 24, 2011
Earnings Release
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Valeo: net income of 365 million euros in 2010, or 3.8% of sales; operational performance ahead of the strategic plan presented in March 2010
PARIS, France, February 24, 2011 – The Valeo Board of Directors, meeting on February 24, 2011, approved the consolidated annual financial statements for the period ending December 31, 2010*:
| 2009 | 2010 | |
|---|---|---|
| Sales (M€) | 7,499 | 9,632 |
| of which OE sales (M€) | 6,029 | 7,952 |
| Operating margin(1) (in % of sales) |
1.8% | 6.4% |
| EBITDA(5) (in % of sales ) |
8.9% | 11.9% |
| Net income Group share (M€) | (153) | 365 |
| Net income Group share (in % of sales ) | -2.0% | 3.8% |
| Net earnings per share (€) | (2.04) | 4.86 |
| Net cash flow(2) (M€) |
99 | 440 |
| Net financial debt(3) (M€) |
722 | 278 |
| ROCE(4) | 7% | 32% |
"Our 2010 results, with an operational performance ahead of the objectives set in the plan presented in early 2010, underline the pertinence of our strategy. Moreover, our medium-term growth prospects, based on a record order intake level, the rising importance of innovative products developed by Valeo, and the Group's ability to regularly outperform its main markets, make us confident in our ability to achieve and sustain one of the best levels of return on capital employed in our sector."
*At the date of this press release, the consolidated financial statements for 2010 had been audited by the Statutory Auditors
Global passenger car production continued to recover in the second half of 2010, achieving 12% growth versus the second half of 2009.
Benefiting from a favorable automotive environment and from the outperformance of its original equipment activity on its main markets, the Group recorded in the second half of 2010 consolidated sales of 4,845 million euros, up by 15% on a like-for-like basis:
| In million euros | H2 2009 | H2 2010 | Change 2010/2009 |
|---|---|---|---|
| Sales Like-for-like |
4,027 | 4,845 | +20% +15%* |
| Original equipment |
3,286 | 3,995 | +16%* |
| Aftermarket | 626 | 723 | +12%* |
| Miscellaneous | 115 | 127 | +5%* |
* like-for-like
In the second half, the gross margin stood at 879 million euros, or 18.1% of sales.
The operating margin(1) amounted to 325 million euros in the second half of 2010, or 6.7% of sales.
EBITDA(5) therefore totaled 586 million euros, or 12.1% of sales.
Net income in the second half showed a profit of 197 million euros, or 4.1% of sales.
In the second half of 2010, the Group generated a net cash flow(2) of 199 million euros.
Net financial debt(3) was brought down to 278 million euros at December 31, 2010 versus 438 million euros at June 30, 2010.
| Million euros | 2009* | 2010* | Change |
|---|---|---|---|
| Sales | 7,499 | 9,632 | +28% |
| Gross margin | 1,138 | 1,735 | +52% |
| % of sales | 15.2% | 18.0% | +2.8 pts |
| Operating margin(1) | 133 | 617 | +364% |
| % of sales | 1.8% | 6.4% | +4.6 pts |
| EBITDA(5) | 670 | 1,150 | +72% |
| % of sales | 8.9% | 11.9% | +3 pts |
| Operating income | 84 | 590 | +602% |
| % of sales | 1.1% | 6.1% | +5.0 pts |
| Income from non-strategic operations | 0 | 0 | na |
| Net income Group share | (153) | 365 | na |
| Net earnings per share (continued operations) (€) |
(2.04) | 4.86 | na |
| Free cash flow | 155 | 527 | +240% |
| Net cash flow(2) | 99 | 440 | +344% |
| Net financial debt(3) | 722 | 278 | -61% |
*Audited
In 2010, the order intake / original equipment sales ratio reached a record level at December 31, 2010 of 1.6 times sales (or 12.5 billion euros, versus 9.2 billion euros at December 31, 2009) with a consistent performance among the different Business Groups.
Global automotive production rose by 25% (annualized) to reach 74.0 million vehicles, exceeding the pre-crisis level (70.2 million vehicles in 2007). This performance is mainly the result of a dynamic Asian market, in particular the Chinese market, as automotive production in Europe and North America remained below pre-crisis levels.
Group consolidated sales in 2010 totaled 9,632 million euros, up by 28% (+24% on a like-forlike basis):
| Passenger car OE sales In million euros |
2009 | 2010 | Change 2010 / 2009 |
Change (like-for-like) |
Automotive production |
|---|---|---|---|---|---|
| Europe & Africa | 3,713 | 4,472 | +20% | +20% | +15% |
| Asia and others | 985 | 1,461 | +48% | +36% | +28% |
| North America | 589 | 995 | +69% | +60% | +39% |
| South America | 474 | 601 | +27% | +8% | +12% |
In 2010, Valeo's original equipment sales outperformed automotive production in its main regions of production:
Aftermarket sales amounted to 1,445 million euros, up by 14% on a like-for-like basis.
| In million euros | 2009 | 2010 | Change 2010/2009 |
|---|---|---|---|
| Sales | 7,499 | 9,632 | +28% |
| Like-for-like | +24% | ||
| Original equipment | 6,029 | 7,952 | +27%* |
| Aftermarket | 1,242 | 1,445 | +14%* |
| Miscellaneous | 228 | 235 | -4%* |
*like-for-like
Thanks to Valeo's dynamic sales in the Asian region (+36% for the full-year), the Group's geographical mix continued its rebalancing trend: in 2010, Asia accounted for 19% of the Group's passenger car original equipment sales versus 13% before the crisis. At the same time, sales in Europe and Africa accounted for 60% versus 67% before the crisis.
The Group also recorded outstanding performance with its German and Asian customers, which now account for 28% and 22% of Valeo's original equipment sales, respectively (versus 24% and 18%, respectively, before the crisis).
| Sales In million euros |
2009 | 2010 | Change 2010 / 2009 |
Change OE sales* |
|---|---|---|---|---|
| Comfort and Driving Assistance Systems |
1,344 | 1,704 | +27% | +27% |
| Powertrain Systems | 2,011 | 2,683 | +33% | +31% |
| Thermal Systems | 2,258 | 2,933 | +30% | +23% |
| Visibility Systems | 1,938 | 2,354 | +21% | +24% |
*Like-for-like
Thanks to higher sales, improved productivity and optimized investments, the Group recorded an improvement in its gross margin level, at 18% of sales (or 1,735 million euros) versus 15.2% in 2009, despite the 100 bp negative impact of raw material costs.
Research and development expenses, particularly in the area of CO2 emissions reduction, totaled 537 million euros, or 5.6% of sales.
Thanks in particular to the implementation of the new organization, administrative and selling expenses amounted to 581 million euros, or 6% of sales (versus 7.1% during the same period in 2009).
The Group's operating margin(1) therefore totaled 617 million euros, or 6.4% of sales.
EBITDA(5) amounted to 1,150 million euros, or 11.9% of sales.
All Business Groups contributed to improving the Group's operational performance in 2010.
| EBITDA(5) % of sales |
2009 | 2010 | Change 2010 / 2009 |
|---|---|---|---|
| Comfort and Driving Assistance Systems |
7.9 | 11.5 | +3.6 pts |
| Powertrain Systems | 10.3 | 11.1 | +0.8 pt |
| Thermal Systems | 8.0 | 12.5 | +4.5 pts |
| Visibility Systems | 7.5 | 11.2 | +3.7 pts |
Other income and expenses totaled -27 million euros, or -0.3% of sales, including, among others, provisions for social costs related to the implementation of the new organization announced in March 2010. The Group's operating income amounted to 590 million euros, or 6.1% of sales.
The cost of net financial debt was 67 million euros, up by 12% versus the same period in 2009. Other income and expenses showed a net expense of 32 million euros.
Income before taxes showed a profit of 490 million euros versus a loss of 67 million euros during the same period in 2009.
The effective tax rate was 21% thanks to a favorable impact in certain countries.
After taking into account the minority interests' share of 19 million euros during the period, the net income Group share stood at 365 million euros, or 3.8% of sales, versus a loss of 153 million euros during the same period in 2009.
The Group's improved operational performance combined with the optimization of investments and the strict management of working capital, enabled Valeo to generate a net cash flow(2) of 440 million euros in 2010.
This strong generation of cash enabled the Group to significantly lower the level of its net financial debt(3) to 278 million euros at December 31, 2010.
The leverage ratio (net financial debt(3) / EBITDA(5)) was down, to 0.2 times EBITDA(5). The gearing ratio (net financial debt(3) / net shareholders' equity excluding minority interests) stood at 16% of equity (59% at December 31, 2009).
Acquisition of Niles: Valeo signs agreement to purchase the Japanese company Niles
Valeo announced on February 23, 2011 the signing of an agreement with RHJ International SA and Nissan to acquire Niles, a Japanese automotive supplier which would reinforce Valeo's Comfort and Driving Assistance Systems Business Group. The transaction amounts to 320 million euros (enterprise value). With this acquisition, Valeo would strengthen its position in Asia (Japan, China, Thailand) and with Japanese automakers, particularly Nissan. The Group would thus become world leader in the automotive Human-Machine Interface market. This external growth project, with accretive effect from the first year, is within the framework of the strategy presented to the Group's shareholders in 2010, aiming to reinforce Valeo's presence in Asia.
The agreement is subject to various preconditions, such as approval of the anti-trust authorities, before it enters into effect.
The company Pardus Investments Sarl declared that it had crossed on January 12, 2011 under the threshold of 5% of Valeo's share capital, holding 4.96% of the capital and 4.82% of the voting rights.
In 2011, Valeo forecasts an increase in global automotive production automobile of 5%, broken down by region as follows:
Based on the above market hypotheses, indexation clauses and raw material hedging in place, Valeo sets as its objectives for 2011:
An Investor Day will be held on March 9, 2011 in Paris.
It will be proposed to the Annual General Shareholders' Meeting to be held on June 8, 2011 to pay a dividend of 1.20 euros per share for the year 2010.
It will also be proposed to renew as Board Members Jacques Aschenbroich, Gérard Blanc, Pascal Colombani, Michel de Fabiani, Michael Jay, Helle Kristoffersen and Georges Pauget, whose terms of office are set to expire.
Finally, it will be proposed to appoint Ulrike Steinhorst as a new Board Member. Mrs Steinhorst is Director of the Cabinet of the Chief Executive Officer of EADS.
Valeo is an independent industrial Group fully focused on the design, production and sale of components, integrated systems and modules for the automotive industry, mainly for CO2 emissions reduction. Valeo ranks among the world's top automotive suppliers. The Group has 109 plants, 20 Research centers, 38 Development centers, 10 distribution platforms and employs 58,000 people in 27 countries worldwide.
Fabienne de Brébisson Thierry Lacorre Group Communications Vice-President Investor Relations Director Tel.: +33 1.40.55.20.65 Tel.: +33 1.40.55.20.39
For more information about the Valeo Group and its activities, please visit our website www.valeo.com
(1) Operating income less other income and expenses
(2) Net cash flow corresponds to free cash flow less financial expenses and after taking into account the payment of dividends and financial flows relating to mergers and acquisitions.
(3) Net financial debt includes all long-term financial debts, short-term credits and bank overdrafts, less loans and other long-term financial assets, cash and cash equivalents
(4) Operating margin/capital employed less goodwill calculated over the last 12 months
(5) EBITDA corresponds to operating income before amortization of tangible and intangible assets and depreciation.
Statements contained in this report, which are not historical fact, constitute "Forward-Looking Statements". Actual results may differ materially due to numerous important factors. Such factors include, among others, the cost and timing of implementing restructuring actions, the company's ability to generate cost savings or manufacturing efficiencies to offset or exceed contractually or competitively required price reductions, conditions in the automotive industry, and certain global and regional economic conditions. The company assumes no responsibility for any analysts' estimates and any other information prepared by third parties which we may reference in this report. Valeo does not intend or assume any obligation to review or confirm analysts' estimates or to update any forward-looking statement to reflect events or circumstances after the date of this report.
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