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Valeo

Growth momentum
90 years of innovation
Jacques Aschenbroich
Chief Executive Officer
1

Valeo
Growth momentum

In a deeply changing world


and an accelerating automotive industry

Serving our customers

On the cutting edge of innovation

A solid financial performance

Valeo
Growth momentum

In a deeply changing world


and an accelerating automotive industry

Serving our customers

On the cutting edge of innovation

A solid financial performance

Robust expansion
in Asia and emerging markets
30%

Contribution of BRICS to global domestic product (GDP)

BRICS
28% of global GDP

25%
20%

China
17% of global GDP

15%
10%
5%
0%
1980

1985

1990

1995

Source: IMF World Economic Outlook, Goldman Sachs (current USD GDP)

2000

2005

2010

2015

2020

Uneven economic growth

North America: a return to growth

Europe: toward protracted stagnation?

Japan: a transitory renewal?

South America: chaotic expansion

The war for talent and skills


Number of engineering graduates per year

~200,000a

~550,000a

~ 2.2mb
~800,000c

a Source: BCG, Eurostat (includes engineering, manufacturing and construction)


b Source: BCG, National Bureau of Statistics of China
c Source: Engineering UK

A more volatile world


Crude oil WTI ($/b)

US natural gas ($/MMBTU)

140

14

120

12

100

10

8000

80

6000

60

40

20

Oil and gas


Market source

10000

75%

2,5

Copper ($/MT)

2,4
2,3
2,2
2,1
2

4000

1,9

2000

1,7

1,8

1 USD => INR

75%

Copper

1,6
1,5

25%
Dollar/Brazilian real
7

Valeo
Growth momentum

In a deeply changing world


and an accelerating automotive industry

Serving our customers

On the cutting edge of innovation

A solid financial performance

An accelerating automotive industry


World automotive production (in millions of units)
+3.4%/year
+4.5%/year

110

100

90

80

70

60

50

Source: LMC

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

From mature markets to emerging markets and Asia


Eastern
Europe

Japan

Eastern
Europe
China
Other
Asia
Other

5%
29%

3%
10%

South
America
Mexico

Japan

Western
Europe

17%

9%

74%

China

Western
Europe

26%
14%

2000

2017

37%

4%
3%
27%
USA + Canada

Source: Valeo automotive production

9%

Mature
Markets

17%

14%
USA + Canada

Other Asia

3% 5%
Mexico

South
America

Other
10

World automotive production in 2000

11

World automotive production in 2012

12

World automotive production in 2017

13

World automotive production in 2030

14

Vision 2030

15

Increase
in number of models by brand

Number of passenger car models

1992

2012

14 models

22 models

8 models

20 models

16

Priority focus on reducing CO2 emissions


while enhancing the pleasure of driving

Increasingly tough emissions standards


g CO2e/km

270
250
230
210

USA
China

190
170

Europe

150
130

Japan
117
105
95

110
90

2000

2005

2010

2015

A priority for carmakers as well as consumers

Simultaneously improving the driving experience

Source: International Council for Clean Transportation

2020

109

2025

17

2012, a pivotal year

Strong growth and margins


for global players
US auto industry comeback
Europe challenged by shrinking
demand and excess capacity

Global carmakers

15%
10%

Operating margin (%)

North American
divisions of US
carmakers

5%
0%
-40%

-20%

0%

20%

40%

60%

-5%
-10%

European carmakers*
and European divisions

Growth (%)

Source: financial data


* Mainly European carmakers

18

Valeo
Growth momentum

In a deeply changing world


and an accelerating automotive market

Serving our customerson growth drivers

On the cutting edge of innovation

A solid financial performance

19

A growth strategy built around two priorities


CO2 Emissions reduction and innovation
Asia and emerging countries

With the goal of outperforming the market


in each region

20

Serving our customers


on growth drivers
Hans-Peter Kunze

Group Senior Executive Vice-President, Sales & Business


Development
21

Growth in order intake far outpaces market


Automotive production
(millions of units)

Order intake
(bn)
14.9

16

12

9.7

10.0

10.1

100

9.2
80

7.7

+12%
per year

140
120

12.5

14

10

15.8

Order
intake

Automotive
production
+3.6%
per year

60

6
40
4
2

20

0
2005

2006

2007

2008

2009

2010

2011

2012

22

Growth in Valeo sales


led by German and Asian carmakers
Other

Asian
14%

U.S.

Other
7%

20%

U.S.

Asian
28%

18%

17%
24%
25%

German

French

18%
29%

French

2007
Original equipment sales by customer base

German

2012
23

Growth in Valeo sales


surging in Asia and emerging markets
~60%
+4 pts

50%

54%

14%

2012

Eastern
Europe

27%

+13 pts

2017
vision

Asia
2011

37%
2007

Asia
&
Emerging
markets

South
America
Mexico

5%

38%
Western
Europe

8%
8%
United
States

Original equipment sales by manufacturing region

2012

24

Growth in Valeo sales


surging in Asia and emerging markets
Asia will account for 50% of Valeos
growth by 2015
In 2014, China will be the leading market
alongside France
25

Growth in Valeo sales


driven by our capacity for innovation

30% of order intake over the


last three years coming from
innovative products

26

Capacity for innovation


recognized by our customers and by the market
Example: orders for CO2 emissions reduction solutions up 70% since 2009
Air Intake Module

2005

2009

2010

2012

Product
Innovation

Pre-Development
Demonstrator
vehicle

Design & development,


Customer financial contribution
(prototypes, R&D)
Product
naming

Innovation
Partnership
with

Series
production
27

Capacity for innovation


recognized by our customers
Example: orders for intuitive driving solutions up 130% since 2009
Whats next?
2011
IAA Frankfurt

2015

2012
Pre-development
contract

Product
naming

Application
development

2015

Sept 2013

Launch of series
production
a world first

28

Valeo
Growth momentum

In a deeply changing world


and an accelerating automotive industry

Serving our customerswith a strong brand

On the cutting edge of innovation

A solid financial performance

29

Valeo is a strong brand


Brand value is built on:

Innovation

Customer service

Quality

Operating performance

Valeo is an innovative business


- R&D effort up 50% from 2009 to 2012
- R&D > 10% OE sales

and is perceived as such


- Valeo ranks among the Top 100 most innovative

companies in the world

30

Valeo is a strong brand


Brand value is built on:

Our surging order intake attests


to customer confidence

Innovation
Customer service

H1

x2

Quality
Operating performance

15.8

12.5

H2
9.7

10.0

4.9

5.0

7.7

14.9

10.1

9.2

7.2

7.8

6.0

5.1
6.1

3.4

4.3

4.8

5.0

5.0

2005

2006

2007

2008

6.5

7.7

8.0

2011

2012

3.1
2009

2010

31

Valeo is a strong brand


Brand value is built on:

Innovation

Customer service

Quality

Operating performance

Continuous quality improvement

0 km quality
(parts per million)
32
15

11

14
7

12

DEC 2005 DEC 2006 DEC 2007 DEC 2008 DEC 2009 DEC 2010 DEC 2011 DEC 2012

2
Objective

The parts quality rate was 99.9993% at end-2012

32

Valeo is a strong brand


Brand value is built on:

Innovation

Customer service

Quality

Operating performance

A production system built on


operating excellence
THE 5 AXES

FOR CUSTOMER SATISFACTION


33

An ambitious ethics and compliance program

Training on antitrust and anticorruption provided to 13,000


employees, including all managers

Procedures and resources deployed across the organization

34

A steadfast commitment to social and


environmental responsibility
Safety

Environment

Reduction in
lost-time accidents

Reduction in direct CO2


emissions

(Number of accidents with lost-time


per million hours worked)

(t C02e/sales in m)

Top Employer

Diversity
Percentage of women among
new hires on permanent
contracts

+40%
5,5

- 52%

16

- 31%
11

2,64

2007

2012

2007

2012

32%
23%

1,120,000 training hours


in 2012

2009

2012

35

Embracing individual diversity

36

Valeo
Growth momentum

In a deeply changing world


and an accelerating automotive industry

Serving our customers

On the cutting edge of innovation: 90 years of innovation

A solid financial performance

37

Innovative products that reduce CO2 emissions


Since 2009, order intake for CO2 emissions reduction solutions has increased by over 70%
Main drivers
Hybrid/electric

Stop-Start
Combustion engine
improvement
Transmission improvement

Energy efficiency

Examples of innovations
Power
electronics
i-StARS

Range
extenders
Restarter

Air intake module


Dual clutch
transmission
Full LED
headlamps

Recent order intake

Orders from American and OEMs European

New order for i-StARS from a Japanese OEM

Launch with a European OEM

Only supplier mastering all technologies

First Full LED headlamps for the Ford Mondeo


and the Seat Leon
38

Intuitive solutions for uncompromised driving pleasure


Since 2009, order intake for intuitive driving solutions has increased by around 130%

Main drivers
Automated/connected
car

Examples of innovations

Recent order intake

Park4U
Remote

Order from a European OEM

Low-speed maneuvering

360Vue
/mega pixel

Launch from a European OEM

Safe & intuitive HMI

Multifunction
Touchscreen

Orders from European OEMs

39

A 1bn total R&D effort


Innovation at Valeo:

A 1bn total R&D effort

More than 10% of OE sales

8,800 employees

1,300 engineers hired each year, of which 300-400 in France thanks


to the research tax credit

This is what makes Valeo


a top global innovator
40

Cutting edge innovation:


The electric supercharger
Francine Laisney

Research Project Manager

41

A world first

Superchargers go electric

A revolution compared with the


conventional turbocharger:
Instant boost response 300 milliseconds
Reduces engine size and lowers engine RPM
without sacrificing performance
Cuts fuel consumption by 10% to 20%

Currently being tested by our main customers


42

Increased performance with equivalent fuel consumption

Acceleration improved by 27%*


(*at equivalent consumption)

43

Valeo
Growth momentum

In a deeply changing world


and an accelerating automotive industry

Serving our customers

On the cutting edge of innovation

A solid financial performance

44

Valeo has returned to growth


Sales (bn)
+8.2%

14

+12.8%

12

+28.4%

-3.8%/year

10

10.9

11.8

9.6

8
6
4
2
0
2005

2006

2007

2008

2009

2010

2011

2012

45

Performance excluding Japanese OEMs in line


with market
North America

Outperf.
+9pts*

Outperf.
+2pts*

(Detroit 3)
OE sales** +17%
Production +8%

South America

Europe

World (excl. Japan)

Perf.
0pt*

OE sales +2%
Production +2%

OE sales** -3%
Production -5%

Asia

-7pts*

OE sales** +14%
Production +4%

OE sales** -8%
Production -1%
* Like-for-like
** Valeo sales by destination
Note: Japanese car production heavily impacted by the 2011 earthquake

Outperf.
+10pts*

Detroit 3 (excluding Japanese OEMs)

Excluding Japanese OEMs

46

Valeo outperformed the market in all Asian


countries but Japan
-21pts*
-1pt*

Asia

Outperf.
+9pts*

China

OE sales +8%
Production +9%

Japan
OE sales** -1%
Production +20%

OE sales** +16%
Production +7%

26% of total sales

29% of Asian sales

40% of Asian sales

India
OE sales** +17%
Production +10%

Outperf.
+7pts*

South Korea

Outperf.
+10pts*

OE sales** +8%
Production -2%

20% of Asian sales

4% of Asian sales
* Like-for-like
** Valeo sales by destination

47

Net income of 380m with EPS of 5.03


Excl. non-recurring items, net income came to 420m
with EPS to 5.56
2011

2012

10 868

11 759

+8.2%

704
6.5%

725
6.2%

+3.0%
-0.3pt

0
0.0%

-0.5%

(53)

na
-0.5pt

704
6.5%

672
5.7%

-4.5%
-0.8pt

(71)
(35)
2

(103)
(30)
14

+45.1%
-14.0%
na

Income before tax (m)

600

553

-7.8%

Income tax (m)

(148)

(146)

-1.4%

Effective tax rate

25%

27%

+2pts

(1)
(24)

(2)
(25)

na
na

Net income for the year (m)


% of sales

427
3.9%

380
3.2%

-11.0%
-0.7pt

Net income excl. non-recurring items (m)

% of sales

427
3.9%

420
3.6%

-0.3pt

Earnings per share ()

5.68

5.03

-11.4%

Earnings per share excl. non-recurring items ()

5.68

5.56

-2.1%

Sales (m)
Operating margin (m)
% of sales
Other income and expenses (m)
% of sales
Operating income (m)
% of sales
Cost of net debt (m)
Other financial expenses (m)
Share of net earnings of associates (m)

Loss from discontinued operations (m)


Non-controlling interests and other (m)

Out of which
Access Mecanism
capital loss and
carve out costs of 49m &
restructuring of 11m

-1.6%

48

A top automotive equipment industry performer


Above average growth
over the past five years
130

Above average ROCE for 2012

50%

Growth in sales base of 100 in 2008

120

ROCE

40%

110

30%

100

20%

90

10%

80
70

0%

60

-10%

50
2008

-20%
2008

2009

Panel of 22 direct competitors


7 European 14 US 1 Japanese

2010

2011

2012
Valeo

Average

2009

2010

2011

Second and third quartiles

2012

49

Four business groups with balanced


performance
Change in EBITDA margin per business group
% of sales

2012

Comfort & Driving Assistance

11.9%

Powertrain

10.1%

Thermal

11.5%

Visibility

8.0%

14%
12%
10%
8%
6%
2008

2009

2010

2011

2012

Consolidated EBITDA: 1,260m (10.7% of sales)

50

Investment increased to 879m


to support growth
Tangible Capex

(% of sales)

+23%

879

5.4%

717

5%
2011

635
540

Tangible
Capex

2012

Increase in capitalized R&D driven by


improving profitability of order book
(% of sales)

177
2011

Capitalized R&D

244
2012

1.6%
2011

2.1%
2012

51

Free cash flow of 81m

After investment and the impact of the European downturn on working capital
(m)

2011

2012

EBITDA

1,212

1,260

(29)

(49)

Operating working capital


o/w impact of European downturn

(66)

(52)

(37)

(233)

(236)

(169)
(70)

(186)
(60)

898

938

(666)

(857)

232

81

Net interest expense

(57)

(66)

Other financial items

(402)

(195)

(227)

(180)

523

763

Restructuring costs

Other operating expenses (incl. taxes)

o/w:
Taxes
Pensions

Net cash from operating activities


Investment outlays (incl. capitalized R&D)

Free cash flow

(before interest payments)

Net cash flow


Net debt

Out of which tangible


Capex of (613)m &
capitalized R&D of
(244)m
Out of which dividend
payment to stockholders
of 106m & acquisition of
minority interests in China
JV of 52m

52

A solid financial structure


to support growth
Investment Grade rating affirmed by
Moodys and Standard & Poors

2,052
1,260
763

763
Dette
nette
Net debt

Ebitda
EBITDA

Leverage: 0.6x
In m at December 31, 2012
* Excluding non-controlling interests

Dette
nette
Net debt

Capitaux
propres
Equity

Gearing: 37%
53

Strong liquidity position

To cope with an uncertain European financial environment


m

Cash and cash equivalents

2 750
2 500
2 250
2 000
1 750

Undrawn credit lines


Liquidity:

EMTNs

Cash and cash equivalents: 1.3bn


Undrawn credit lines: 1.2bn
Average maturity: 3.3 years

EIB financing
Syndicated loan

1 500
1 250
1 000
750
500
250
0
2013

2014

2015

2016

2017

2018

54

2013 outlook
Based on the following market assumptions for FY 2013:

Automotive production:
Europe: - 4%
World: + 1%

Raw material prices in line with 2012 levels

Valeo has set the following objectives for 2013:

Performance higher than the market in each of the main production regions

Assuming an upturn in the European market in the second half of 2013, operating
margin in line with 2012 (in m), despite a decline in the first half of the year
as a result of market conditions
55

Valeos medium-term objectives


A strategy that is paying off
Reflecting the record order intake of the past few years driven by:

a portfolio of innovative products

expansion in Asia and emerging countries

2010-2012 profitability objectives achieved despite economic slowdown in Europe

Valeo is less dependent on the European market to meet its objectives:


Annual sales growth 3 percentage points above the market rate on average
Medium-term operating margin above 7%
Return on capital employed in the region of 30%
Taking into account the additional investments required to support the increase in order
intake, the Group has set as its priorities to generate positive free cash flow and maintain a
solid financial position

56

The Valeo share has outperformed


all the indices since January 1, 2013

Compared with the major indices


since December 31, 2012

VALEO

+38%

DJ US AUTOPARTS

+22%

DJ Industrials

+16%

DJ STOXX AUTO

+11%

DAX

+9%

SBF 120

+8%

CAC 40

+8%

* Closing share price on June 04, 2013

57

The Valeo share has outperformed


all the indices since before the crisis

Compared with the major indices


since December 31, 2007

VALEO

+84%

DJ US AUTOPARTS

+27%

DJ Industrials

+14%

DJ STOXX AUTO

+9%

DAX

+3%

SBF 120

-25%

CAC 40

-30%

* Closing share price on June 04, 2013

Valeo share price at highest level since 2001

58

Valeo to increase the dividend

2011
1.40
per share
Payout ratio

25%

2012

+7%

1.50
per share

+5 points

Payout ratio

30%

59