At the Investor Day on December 10, 2019, Valeo’s management team explains the Group’s successful transformation and present the 12 new key technological platforms that are cementing its leadership in the fields of vehicle electrification and ADAS. They will also describe the growth opportunities derived from the sharp increase in Valeo’s average content per vehicle, the Group’s organization and operational efficiency, as well as setting financial objectives through 2022. Lastly, the Powertrain Systems and Comfort & Driving Assistance Systems Business Groups will present their new technological platforms, positioning with regards to the competition and in the value chain and key commercial achievements.
Jacques Aschenbroich, Valeo’s Chairman and Chief Executive Officer, declares:
“In 2017, we clearly announced our innovation strategy and intention to invest heavily in new technological platforms. We maintained these investments despite the downturn in the automotive market, and they have now been realized, enabling us to profoundly transform our product portfolio and to reinforce our leadership in vehicle electrification and ADAS, the two automotive market segments that are set to witness the fastest growth over the coming years.
These technological platforms provide us with a competitive edge by creating high barriers to entry, allowing us to sharply increase our average content per vehicle and deepen our resilience in the face of an uncertain market environment, while at the same time reducing our R&D and capital expenditure as a proportion of sales.
Between now and 2022, we are aiming to outperform the automotive market by 5 percentage points, widen our margins and double our free cash flow generation.”
Ambitions and objectives
The automotive industry is facing three major revolutions:
- powertrain electrification;
- advanced driving assistance systems (ADAS) and autonomous vehicles;
- digital mobility
These revolutions, which require massive investments, will secure strong growth for market players having made the right strategic choices and having the capacity to develop technologies and product ranges that are adapted to the market evolution.
Valeo’s strategy initiated several years ago and presented in 2017 consists in positioning the Group as the leader on these market segments, which will undergo strong growth over the coming years.
That is why Valeo:
– has gradually withdrawn from the diesel market, which now accounts for only around 1% of sales;
– is positioned as the leader in powertrain electrification, both for 48 V systems and high-voltage electric solutions through its Valeo Siemens eAutomotive joint venture;
– is reinforcing its leadership position on the driving assistance market by expanding the product range.
To achieve this, Valeo has developed 12 new key technological platforms that are already operational, and allow the Group to support certain customers in launching flagship models while sharply increasing its average content per vehicle.
Thanks to the competitive edge they provide, these platforms are double-digit growth drivers for each of the technologies concerned, as well as being operational levers – thanks to our standardized product offering and the economies of scale achieved – enabling Valeo to boost cash generation by increasing profitability and reducing R&D costs and capital expenditure.
In a more challenging market environment than anticipated, especially in 2019, with automotive production 11.4% lower than the assumptions used to prepare its previous plan, Valeo intends to combine growth and resilience with a focus on improving profitability and free cash flow generation in the period through 2022.
Over the 2020-2022 period, the Group is targeting organic sales growth to outperform global automotive production by around 5 percentage points.
The Group also intends to reap the benefits of organic growth and optimization of its R&D costs and investments, resulting from the use of its new technological platforms. Valeo thus anticipates improving its profitability and increasing its EBITDA to more than 15% of sales in 2022, versus an EBITDA margin of 12.6% in 2018.
Thanks to the expected increase in EBITDA combined with a tight rein over investments, Valeo is targeting an increase in its free cash flow generation over 2020-2022 to a level between 1.3 billion euros and 1.5 billion euros, equal to twice the level recorded in the 2017-2019 period. This increase will enable the Group to maintain its dividend policy, support the growth of Valeo Siemens eAutomotive and reduce net debt.
Valeo will also present new financial objectives for the Valeo Siemens eAutomotive (VSeA) joint venture, which is positioned as a major player in the high-voltage powertrain electrification segment:
- sales of 1.4 billion euros in 2022, and of more than 2 billion euros in 2024;
- EBITDA at 8% of sales in 2022, and of more than 12% in 2024; and
- breakeven free cash flow in 2022
These objectives were prepared based on IHS automotive production estimates released on November 16, 2019. Valeo will also present the impacts of a more pessimistic automotive production scenario.
Valeo reaffirms its growth and value creation ambition in line with the ongoing transformations in mobility and its commitment to sustainable development. The Group is recognized by the key ESG rating agencies (MSCI, RobecoSAM and CDP) as a world leader in the automotive supplier segment.