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Valeo announces H1 2018 results

Financial Results

Sales climb 9% at constant exchange rates to reach 9.9 billion euros over the first six months of 2018, with an as-projected upturn in the second quarter.

  • EBITDA accelerates 11% to 1,341 million euros, or 13.6% of sales
  • Operating margin widens 4% to 755 million euros, or 7.7% of sales, despite the rise in raw material prices
  • Net income amounts to 453 million euros, or 4.6% of sales
  • Order intake increases to 18.7 billion euros (including 100% of Valeo Siemens eAutomotive’s order intake in an amount of 4.7 billion euros)
Jacques Aschenbroich
CEO and Chairman of the Board
Following growth of 15% in first-half 2017, we recorded growth at constant exchange rates of 9% over the first six months of 2018, in line with the medium-term growth plan presented in London in February 2017. Over the period, the order intake reached 18.7 billion euros, including 4.7 billion euros for our joint venture Valeo Siemens eAutomotive. Our order intake once again confirms our excellent positioning on the fast-growing hybrid, electric and autonomous vehicle markets and justifies our sustained investment in R&D and production capacity. Despite limited growth in the first three months of the year and a substantial rise in raw material prices, we maintained our margins at the same level as in 2017. In a more complex economic and geopolitical environment, our results demonstrate the solidity of our growth model. On this basis and in view of our current order book, we expect double-digit growth in sales in 2019.
Order intake supported by technological innovation
In view of the very strong growth in order intake over the past five years (14% CAGR), Valeo has decided to be more selective in 2018 to focus on optimizing the development and industrialization of its numerous ongoing projects, which are deeply transforming its product portfolio.
In first-half 2018, total order intake increased to 18.7 billion euros, of which:
  • 14.0 billion euros for Valeo;
  • 4.7 billion euros for Valeo Siemens eAutomotive.
Innovative products accounted for 48% of all order intake (56% including Valeo Siemens eAutomotive).
Sales
For the sake of consistency in our financial communications, the sales figures presented below have been determined using the same accounting principles as in 2017 (i.e., before the application of IFRS 15). The impact of IFRS 15 is presented on pages 16, 17 and 18 of this document.
Second-quarter 2018
  • Consolidated sales of 5,022 million euros:
– up 10% at constant exchange rates;
– up 5% like for like;
  • Original equipment sales of 4,353 million euros:
– up 10% at constant exchange rates;
– up 5% like for like;
  • Aftermarket sales expanded 13% at constant exchange rates and 8% like for like.
First-half 2018 
  • Consolidated sales of 9,939 million euros:
– up 9% at constant exchange rates;
– up 3% like for like;
  • Original equipment sales of 8,628 million euros:
– up 9% at constant exchange rates;
– up 3% like for like;
  • Aftermarket sales expanded 13% at constant exchange rates and 5% like for like.
Under IFRS 15, consolidated sales totaled 9,863 million euros in first-half 2018.
Earnings, cash and net debt 
The financial data relating to earnings, cash and net debt are presented in accordance with IFRS (including new standards IFRS 15 and IFRS 9, with restatement of the comparative 2017 periods):
  • R&D expenditure up 2% to 774 million euros, or 7.8% of sales;
  • operating margin (excluding share in net earnings of equity-accounted companies) up 4% to 755 million euros, or 7.7% of sales;
  • share in net earnings of equity-accounted companies representing a loss of 28 million euros, or a negative 0.3% of sales;
  • net attributable income of 453 million euros, or 4.6% of sales;
  • EBITDA up 11% to 1,341 million euros, or 13.6% of sales;
  • 141 million euro negative impact on free cash flow generation from the change in working capital;
  • strict control of investments (excluding capitalized R&D) in an amount of 641 million euros;
  • free cash flow generation of 36 million euros, or 3% of EBITDA;
  • return on capital employed ROCE of 26%;
  • net debt of 2,291 million euros.

 

Outlook
Based on the following assumptions:
  • an increase in global automotive production of 1.5% in 2018;
  • raw material prices and exchange rates in line with current levels.
The Valeo Group has set the following objectives: 
In view of uncertainties relating to the rise in raw material prices (in particular, steel and resins) and disruptions to the production of certain vehicles in Europe (mainly during the third quarter) due to the new Worldwide Harmonised Light Vehicle Test (WLTP):
  • growth of 9% at constant exchange rates in 2018;
  • like-for-like growth in original equipment sales of around 5% in second-half 2018, ahead of expected double-digit growth in 2019 based on our order book;
  • 2018 operating margin excluding share in net earnings of equity-accounted companies (as a % of sales), which might be slightly below that of 2017 (7.8% of sales);
  • free cash flow generation in line with that of 2017 (278 million euros).
Valeo Siemens eAutomotive:
  • Valeo Siemens eAutomotive had a strong order intake of 4.7 billion euros in first-half 2018 and a cumulative 10.8 billion euros at end June 2018;
  • to accommodate its fast-paced expansion going forward, Valeo Siemens eAutomotive will bear the costs required to push ahead with ongoing projects and structure its organization. Accordingly, the “Share in net earnings of equity-accounted companies” caption will have an impact of around 0.3 points on Valeo’s statement of income in 2018;
  • by 2022, Valeo Siemens eAutomotive should be delivering sales of more than 2 billion euros and a similar EBITDA margin (as a % of sales) to that of Valeo.