H1-2012 Results Jacques ASCHENBROICH CEO July 26, 2012
Highlights H1-2012 results demonstrate the strength of Valeo s growth model High quality order intake at a record 8 bn Sales at 6 bn, up 12.5% (+4% organic growth), in challenging markets in Europe and in South America OE Sales, up 13.5% (+5% organic growth) Overperformance in Europe and Asia (excl. Japan) Asia now at 24% of OE sales (18% in H1-2011) Aftermarket sales weaker in South Europe Operating margin* of 370 M, up 7.2% 6.2% of sales Net income down 9% at 198 M mainly due to higher interest expenses * Adjusted EBIT July 26, 2012 I 2
Highlights H1-2012 results demonstrate the strength of Valeo s growth model Free cash flow up 10%, at 148 M After CAPEX increase of 117 M to sustain order intake (1) FY-2012 operating margin* level (in M ) in the same magnitude of FY-2011 * Adjusted EBIT July 26, 2012 I 3
Key figures H1-2011 H1-2012 Total sales (M ) 5,334 5,999 +12.5% +4%* OE Sales (M ) 4,510 5,118 +13.5% +5%* Gross margin (M ) % of sales Operating margin(2) (Adj. EBIT) (M ) % of sales Operating income (EBIT)(3) (M ) % of sales Net income (M ) % of sales 916 17.2% 345 6.5% 344 6.4% 218 4.1% 1,006 16.8% 370 6.2% 348 5.8% 198 3.3% +10% -0.4pt +7% -0.3pt +1% -0.6pt -9% -0.8pt Total earning per share ( ) 2.89 2.63-9% Capital turnover 5.5 5.0 na ROCE(3) 36% 31% -5pts ROA (4) 22% 19% -3pts EBITDA (5) % of sales 602 11.3% 655 10.9% +9% -0.4pt Free cash flow(6) (M ) 134 148 +10% Net cash flow(7) (M ) (183) 31 na Net financial debt(8) (M ) 452 485 +7.3% Gearing ratio 25% 25% na *At same perimeter and exchange rates July 26, 2012 I 4
Outlook 2012 Based on the following market scenario for FY 2012: Automotive production: World: +5 to 6% Europe: -6 to -7% Raw materials prices at current levels Guidance FY-2012 operating margin* level(in M ) in the same magnitude of FY-2011 * Adjusted EBIT July 26, 2012 I 5
Sales at 6 bn, up 12.5% +4% organic growth OE sales growth higher than the market in Asia & Europe July 26, 2012 I 6
Record order intake(1) out of which 2.9 bn in Asia at 8.0 bn % of order intake In bn Innovation 30% CAGR +11.6% 14.9 12.5 7.7 3.4 9.7 10.0 10.1 4.9 5.0 5.1 9.2 6.1 6.0 7.2 4.3 4.8 5.0 5.0 3.1 6.5 7.7 8.0 2005 2006 2007 2008 2009 2010 2011 2012 H2 H1 July 26, 2012 I 7
36% of order intake in Asia 19% of total order intake in China North America 16% Europe 40% Asia 36% South America 8% Other Asian countries 47% China 53% World: 8 bn Asia: 2.9 bn July 26, 2012 I 8
Sales of 6 bn, up 12.5% (+4% like-for-like) OE sales up 13.5% (+5% like-for-like) In M +12.5% 5,999 316 OE sales In M 4,510 +13.5% Perimeter +6.0% Currencies +2.8% Like-for-like +4,7% 5,118 275 4,846 H1-11 H1-12 5,334 5,683 Aftermarket In M 732 +1.8% 34 Perimeter +5.9% Currencies +2.6% 719 698 Sales* +4.0% H1-11 H1-12 Perimeter +4.7% Currencies +1.4% Like-for-like -4.3% H1-11 H1-12 * At same perimeter & exchange rates July 26, 2012 I 9
Performance higher than the market in Asia and Europe World performance higher than the market excluding Japanese OEMs North America Valeo OE sales** +18% Production +22% Of which Detroit 3 +9% 17% of Valeo sales Underperf. -4pts* Europe Valeo OE sales** -1% Production -5% 53% of Valeo sales Outperf. +4pts* Underperf. -4pts* World OE sales +5% Production +9% World (w/o Japanese) OE sales +2% Production +1% Outperf. +1pt* South America Valeo OE sales** -11% Production -8% 6% of Valeo sales Underperf. -3pts* Outperf. +5pts* Asia Valeo OE sales** +20% Production +15% 24% of Valeo sales *At same perimeter and exchange rates ** Valeo sales by destination July 26, 2012 I 10
Performance higher than production in Asia Above-market growth in China, India & Korea, more than offsetting below market growth in Japan Asia Valeo OE sales** +20% Production +15% 24% of Valeo sales India OE sales** +15% Production +9% Outperf. +6pts* 4% of Asian sales Outperf. +5pts* China OE sales** +25% Production +7% Outperf. +18pts* 39% of Asian sales Korea OE sales** +15% Production +3% Outperf. +12pts* 20% of Asian sales Underperf. -28pts* Japan OE sales** +26% Production +54% 31% of Asian sales *At same perimeter and exchange rates ** Valeo sales by destination July 26, 2012 I 11
OE sales performance impacted by strong Japanese recovery A temporary consequence of 2011 earthquake +7 Japanese OEMs downturn +10 +13 +8 +7 +1 +2 +5 0 Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 -2-3 -3-4 -4-4 0-11 -10 Japanese OEMs recovery Valeo OE sales on a like-for-like basis vs light vehicle production (in pts) July 26, 2012 I 12
Strong development in Asia through organic & external growth Geographical contribution to sales evolution (in M) Perimeter +56 +100 Perimeter +4-35 +144 Perimeter +227 Perimeter +20-41 +190 5,999 5,334 H1-11 Europe Asia NA SA Currencies H1-12 Perimeter Organic July 26, 2012 I 13
Positioning in Asia & emerging countries at 53% of OE sales Strong improvement in Asia OE sales by production region 47% in Asia & emerging countries Mexico 7% Eastern Europe & Africa 15% Asia 18% SA 7% US 6% Western Europe 47% 53% in Asia & emerging countries Mexico 8% Asia 26% Eastern Europe & Africa 14% SA 5% US 8% Western Europe 39% H1-2011 H1-2012 July 26, 2012 I 14
Asian & German customers at 29% & 28% respectively vs 21% & 29% in H1-2011 (in % of OE sales) Others 9% Others 6% American 18% German 29% American 18% German 28% French* 23% Asian** 21% French* 19% Asian** 29% H1-2011 H1-2012 * Excluding Nissan ** Including Nissan July 26, 2012 I 15
Operating margin(2) (adj. EBIT) up 7.2%, at 370 M or 6.2% of sales July 26, 2012 I 16
Gross margin at 1,006 M or 16.8% of sales mainly impacted by aftermarket, exchange rates & new production sites startup costs +0,4pt -0,3pt -0.2pt -0,1pt -0,2pt 17.2% 16.8% H1-2011 Volume OEM/ Currencies Startup of Others H1-2012 Aftermarket mix (Real+Rupee) new production sites July 26, 2012 I 17
2700 2500 2300 2100 Stable raw material prices Rare earth action plan on track 2900 Aluminum Copper /T 11000 /T 10000 9000 8000 7000 1900 1700 1500 H1-2011 H1-2012 H1-2011 H1-2012 6000 5000 4000 H1-2012 % of consumption Impact % H1-2012 / H1-2011 39% LME* -6% 35% Steel +3% 23% Plastic +6% 3% Rare earth +10%** 100% Total 0% *of which copper 51%, aluminum 43% and zinc 6% ** Rare earth rates increase by +100% mitigated by consumption reduction July 26, 2012 I 18
EBITDA by Business Group Powertrain action plan on track, Visibility impacted by aftermarket 14% H1-2012 12% 10% 8% 6% Powertrain as % of sales 9.2 % Thermal as % of sales 12.0% Visibility as % of sales 9.3% Comfort & Driving Assistance as % of sales 11.9 % 4% H1-08 H2-08 H1-09 H2-09 H1-10 H2-10 H1-11 H2-11 H1-12 TOTAL 10.9 % Comfort and Driving Assistance Systems Thermal Systems Group Powertrain Systems Visibility Systems July 26, 2012 I 19
Operating margin (Adj. EBIT ) up 7.2% at 370M or 6.2% of sales -0.4pt +0.1pt 0.0pt +0.6pt 6.5% 6.2% H1-11 Gross margin R&D SG&A H1-12 July 26, 2012 I 20
Net R&D at 313 M, up 10% to sustain order intake growth Order intake In bn 12.5 14.9 9.2 6.0 7.2 In M & % of sales 285 +10% 313 6.1 6.5 7.7 8.0 3.1 2009 2010 2011 2012 S1 S2 5.3% 5.2% H1-11 H1-12 July 26, 2012 I 21
SG&A under strict control Stable at 5.4% of sales In M +13% 323 286 Selling Expenses 88 Selling Expenses 98 % of sales Admin. Expenses 198 Admin. Expenses 225 H1-11 H1-12 5.4% 5.4% 1.7% 1.6% 3.7% 3.8% H1-11 H1-12 July 26, 2012 I 22
Higher break even point due to investment in Asia Break even point % sales 88% 91% 95% 79% 76% 78% 75% 2007 2008 2009 2010 2011 H1-2012 2015 In line with strategic plan Flexibility assured thanks to high level of temporary contracts July 26 th, 2012 I 23
Net income of 198 M, mainly impacted by cost of debt H1-11 H1-12 Total sales (M ) 5,334 5,999 +12.5% Operating margin (adj. EBIT) (M ) % of sales 345 6.5% 370 6.2% +7% -0.3pt Other income & expenses (M ) % of sales (1) 0.0% (22) 0.4% na +0.4pt Operating income (EBIT) (M ) % of sales 344 6.4% 348 5.8% +1% +0.6pt Cost of net debt (M ) (29) (50) +72% Other financial expenses (M ) (17) (16) -6% Associates (M ) 4 11 Na Income before taxes (M ) 302 293-3% Taxes (M ) Effective tax rate Non strategic activities (M ) Minority interest and others(m ) (77) 26% 0 (7) (78) 28% (2) (15) +1% +2pts na na Net income (M ) % of sales 218 4.1% 198 3.3% -9% -0.8pt Earning per share ( ) 2.89 2.63-9% July 26, 2012 I 24
Free cash flow up 10%, at 148 M after CAPEX increase of 117 M July 26, 2012 I 25
Capex increase to sustain order intake Capex excl. capitalized R&D (% of sales) M +39% 426 4.2% 5.2% 307 224 Capex excl. capitalized R&D 310 H1-11 H1-12 83 Capitalized R&D 116 Increase of capitalized R&D driven by higher profitability of order intake H1-11 H1-12 Capitalized R&D (% of sales) 1.6% 1.9% H1-11 H1-12 July 26, 2012 I 26
Free cash flow up 10%, at 148 M Due to strong EBITDA and favourable working capital H1-11 H1-12 EBITDA(M ) 602 655 Operating working capital (M ) (11) 59 Restructuring & social costs (M ) (27) (22) Other operational items (inc. taxes) (M ) (123) (120) Capex (inc. capitalized R&D) (M ) (307) (424) Taxes: (93) m Pensions: (13) m Free cash flow (M ) (before interest payments) 134 148 Interest (M ) (42) (56) Other financial items (M ) (275) (61) Net cash flow (M ) (183) 31 Net financial debt(m ) 452 485 July 26, 2012 I 27
Strong financial structure July 26, 2012 I 28
Strong financial structure Keeping our investment grade status as a high priority Net financial debt over EBITDA Net debt (M ) EBITDA 12 months rolling according to bank definition(m ) Shareholders equity and net debt Net debt (M ) 1,784 Shareholders equity (M ) excluding minority interests 1,936 1,956 1,172 1,216 1,265 452 523 485 452 523 485 Gearing 25% June 30, 2011 Gearing 27% December 30, 2011 Gearing 25% June 30, 2012 Leverage 0.4x Leverage 0.4x Leverage 0.4x Covenant net financial debt / EBITDA of 3.25 June 30, 2011 December, 31 2011 June 30, 2012 July 26, 2012 I 29
Strong cash position to cope with challenging environment Debt profile as of June 30, 2012 Liquidity secured by Cash and cash equivalents: 1,4 Bn Undrawn credit lines: 1,2 bn Weighted Average Maturity: 3,8years Long term debt management New bond issue 500 M - January 2017 Weighted average Financing Rate: 4.9% Repurchase EMTN 2013: 89 M Reimbursement syndicated loan: 225M 2750 in M 2500 2250 2000 1750 1500 1250 1000 750 500 250 0 cash and cash equivalents (30/06/2012) Undrawn credit lines (30/06/2012) 311 M June 2013 56 M /year 2013 / 2014 76M 2015 / 2016 20M 2017 / 2018 250M June 2016 Swap in JPY 500M Jan. 2017 500M May 2018 short term debt 2013 2014 2015 2016 2017 2018 EMTN BEI financing Syndicated loan July 26, 2012 I 30
Valeo Access Mechanisms planned disposal July 26, 2012 I 31
Valeo Access Mechanisms Planned disposal Key figures Part of Comfort & Driving Assistance Business Group Sales: 620 m in 2011 90% of sales in Europe and South America Main exposure to European customers Operating margin (Adj. EBIT) slightly lower than the Group Employees: 4,400 (end of June 2012) Industrial footprint: 12 manufacturing sites out of which 10 sites located in Europe and Latin America Product portfolio, primarily mechanical based Latches Locksets Handles Closure systems Steering column locks July 26, 2012 I 32
Valeo Access Mechanisms Planned disposal Rationale In line with Valeo strategy focused on CO 2 emission reduction, Asia & emerging countries Expected to be accretive to earnings EBITDA multiple in line with the average of multiples observed in similar transactions in the industry in 2011 Status Submitted to employee representatives for consultation Subject to approval by the competition authorities July 26, 2012 I 33
U-Shin + Valeo Access Mechanisms a leader with diversified geography and customer base Customer fit Valeo Access Mechanisms: strong position with European customers U-Shin: strong position with Asian customers Geographical fit 90% of Valeo Access Mechanisms sales in Europe and South America 90% of U-Shin sales in Asia Valeo Access Mechanisms + U-Shin would become : leader in Asia, Europe and South America a strong player in North America with huge growth opportunities July 26, 2012 I 34
2012 outlook July 26, 2012 I 35
Outlook 2012 Based on the following market scenario for FY 2012: Automotive production: World: +5 to 6% Europe: -6 to -7% Raw materials prices at current levels Guidance FY-2012 operating margin* level(in M ) in the same magnitude of FY-2011 * Adjusted EBIT July 26, 2012 I 36
Contact Investor Relations Thierry Lacorre 43, rue Bayen F-75848 Paris Cedex 17 France Tel.: +33 (0) 1.40.55.37.93 Fax: +33 (0) 1.40.55.20.40 E-mail: thierry.lacorre@valeo.com Web site: www.valeo.com July 26, 2012 I 37
Share Information Share Data Bloomberg Ticker Reuters Ticker ISIN Number Shares outstanding as per 30.06.2012 FR FP VLOF.PA FR 000130338 79,311,067 ADR Data Ticker/trading symbol CUSIP Number Exchange Ratio (ADR: ord) Depositary Bank Contact at J.P. Morgan ADR broker relationship desk VLEEY 919134304 OTC 1:2 J.P. Morgan Jim Reeves +1 212-622-2710 July 26, 2012 I 38
Glossary (1) Order intake: Order intake corresponds to business awarded by automakers (less any cancellations) during the period, based on Valeo's best and reasonable estimates in terms of volumes, sale prices and project lifespans. (2) Operating margin (adj. EBIT) corresponds to operating income (EBIT) less other income and expenses (3) ROCE corresponds to operating margin (adj. EBIT) /capital employed less goodwill calculated over the last 12 months (4) ROA corresponds to operating margin (adj. EBIT) / committed capital plus goodwill (5) EBITDA corresponds to operating income (EBIT) before amortization of tangible and intangible assets and depreciation. (6) Free cash flow corresponds to net operating cash flow less net disbursements on tangible/intangible assets. (7) 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. (8) 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 July 26, 2012 I 39
Back-up July 26, 2012 I 40
Quarterly information in M Sales by segments Comfort & Driving Assistance Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 408 440 418 438 481 489 567 620 657 634 Powertrain Systems 636 708 625 714 767 782 743 834 855 826 Thermal Systems 693 754 735 751 783 776 777 804 864 855 Visibility Systems 591 595 547 621 664 640 597 648 685 672 Total sales 2,309 2,478 2,342 2,503 2,669 2,665 2,662 2,872 3,033 2,966 OE & aftermarket sales Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 OE Sales 1,898 2,059 1,929 2,066 2,263 2,247 2,262 2,435 2,602 2,516 Aftermarket 351 371 360 363 361 358 336 357 369 363 Miscellaneous 60 48 53 74 45 60 64 80 62 87 Total sales 2,309 2,478 2,342 2,503 2,669 2,665 2,662 2,872 3,033 2,966 July 26, 2012 I 41
Half year P&L 2009 2010 2011 2012 (in million) H1 H2 H1 H2 H1 H2 H1 Total sales 3,472 4,027 4,787 4,845 5,334 5,534 5,999 Gross margin 453 685 856 879 916 927 1,006 as % of sales 13.0% 17.0% 17.9% 18.1% 17.2% 16.8% 16.8% R&D expenditures (234) (239) (267) (270) (285) (276) (313) Selling & administrative expenses (270) (262) (297) (284) (286) (292) (323) Other income & expenses (37) (12) (31) 4 (1) 1 (22) Operating income (EBIT) (88) 172 261 329 344 360 348 as % of sales -2.5% 4.3% 5.5% 6.8% 6.4% 6.5% 5.8% Cost of net debt (21) (39) (32) (35) (29) (42) (50) Other financial income and expenses (37) (20) (14) (18) (17) (18) (16) Equity in net earnings of associates (40) 6 11 (12) 4 (2) 11 Income before income taxes (186) 119 226 264 302 298 293 Income taxes (26) (53) (47) (57) (77) (71) (78) Income from continuing operations (212) 66 179 207 225 227 215 Non-strategic activities 1 (1) (2) 0 0 (1) (2) Net income for the period (211) 65 177 207 225 226 213 Minority interest (2) (5) (9) (10) (7) (17) (15) Net income (213) 60 168 197 218 209 198 July 26, 2012 I 42
Half year segment information H1-11 and H1-12 (in m) First-half 2011 Comfort and Driving Assistance Systems Powertrain Systems Thermal Systems Visibility Systems Others TOTAL Net sales segment (excluding Group) 956 1 537 1 545 1 284 12 5 334 intersegment (Group) 14 12 14 20 (60) - EBITDA 107 164 173 140 18 602 Research & Development expenditure, net (72) (71) (79) (65) 2 (285) Investments in property, plant and equipment and intangible assets 88 97 56 66 1 308 Segment assets 897 1 186 997 907 22 4 009 First-half 2012 (in m) Comfort and Driving Assistance Systems Powertrain Systems Thermal Systems Visibility Systems Others TOTAL Net sales segment (excluding Group) 1,278 1,667 1,704 1,337 13 5,999 intersegment (Group) 13 14 15 20 (62) - EBITDA 154 155 206 126 14 655 Research & Development expenditure, net (88) (82) (78) (65) - (313) Investments in property, plant and equipment and intangible assets 107 125 67 113 14 426 Segment assets 1,402 1,427 1,094 1,079 36 5,038 July 26, 2012 I 43
Safe Harbor Statement Statements contained in this report, which are not historical fact, constitute «Forward-Looking Statements.» Even though Valeo s management feels that the Forward-Looking Statements are reasonable, investors are put on notice that actual results may differ materially due to numerous important factors, risks and uncertainties to which Valeo is exposed. Such factors include, among others, the company s ability to generate cost savings or manufacturing efficiencies to offset or exceed contractually or competitively required price reductions. The risks and uncertainties to which Valeo is exposed are mainly comprised of the risks resulting from the investigations currently being carried out by the antitrust authorities as they have been identified in the Registration Document, operational risks which relate to being a supplier in the automotive industry, to the marketing and sales of the types of vehicles produced and to the development of new products and risks due to certain global and regional economic conditions. Also included are environmental and industrial risks as well as risks and uncertainties described or identified in the public documents submitted by Valeo to the French Autorité des Marchés Financiers (AMF), including those set out in the Risk Factors section of Valeo s Registration Document registered at the AMF on March 29, 2012 (ref. no. D.12-0237). The company assumes no responsibility for any estimates made by analysts and any other information prepared by third parties which may be used in this report. Valeo does not intend or assume any obligation to review or to confirm the estimates of analysts or to update any Forward-Looking Statements to reflect events or circumstances which occur after the date of this report. July 26, 2012 I 44