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Valeo — Shareholder Meeting (June 2008)
80 slides from Valeo's shareholder meeting presentation, Jun 20, 2008
Slide 1: Combined Annual General Shareholders' Meeting
Combined Annual General Shareholders’ Meeting June 20, 2008
Slide 2: Agenda: Annual Ordinary Meeting
Agenda Annual Ordinary Meeting
Slide 3: Agenda: Extraordinary Meeting
Agenda Extraordinary Meeting
Slide 4: Combined Annual General Shareholders' Meeting
Combined Annual General Shareholders’ Meeting June 20, 2008
Slide 5: 2007 Results
2007 Results Robert Charvier – Financial Control Director
Slide 6: 2007 – Economic environment
2007 – Economic environment Worldwide growth: +4.9% Automotive production: +5% Pressure on raw materials / record oil prices Euro: significant rise versus Dollar and Yen Continued increase in European interest rates June 20, 2008 I 6
Slide 7: Aluminum: Evolution of cost in $ US / Ton
Aluminum Evolution of cost in $ US / Ton 2900 Monthly cost 2700 Average 2,812 2500 2,574 2300 2100 1900 1700 1,825 2007: 2,743 +15% 1500 1,400 2006: 2,389 1300 11002003 2004 2005 2006 2007 June 20, 2008 I 7
Slide 8: Copper: Evolution of cost in $ US / Ton
Copper Evolution of cost in $ US / Ton 8300 Monthly cost 7,454 Average 7300 7,031 6300 5300 4300 2007: 6,556 3300 3,303 +20% 2300 1,640 2006: 5,473 1300 2003 2004 2005 2006 2007 June 20, 2008 I 8
Slide 9: Brent: Evolution of price in $ US/Ton
Brent Evolution of price in $ US/Ton 95.9 95 85 75 65 55 45 35 26.5 25 15 2001 2002 2003 2004 2007 2007 2007 June 20, 2008 I 9
Slide 10: 2007 highlights
2007 highlights Accelerated growth and improved margins Successful innovations Divestiture of non-strategic activities Targeted reinforcement of certain functions June 20, 2008 I 10
Slide 11: 2007 Key Figures
2007 Key Figures In euro million 2007 2006 Change Total operating revenues 9,689 9,550 + 1.5% Operating income 319 271 + 17.7% as a % of total op. revenues 3.3% 2.8% + 0.5 pt Net income 81 161 - 49.7% as a % of total op. revenues 0.8% 1.7% - 0.9 pt Net income excl. impact from divestitures 132 120 +
Slide 12: Total operating revenues
Total operating revenues In million euros +6.2% en volume 10 000 9,689 9,550 +1.5% Perimeter -0.2% Currencies -1.5% 9 000 Prices* -3.0% Volume/Mix +6.2% * At identical functions 8 000 2006 2007 June 20, 2008 I 12
Slide 13: Strategic rebalancing of the customer portfolio
Strategic rebalancing of the customer portfolio ORIGINAL EQUIPMENT SALES (2001- 2007)* Automakers 2001 2007 Asian 5.7% 14.7% Big 3 31.7% 21.8% German 22.5% 24.5% Mercedes & BMW 7.5% 10.6% PSA & Renault 28.1% 26.7% Fiat 5.0% 4.4% * excluding VMA & VCS in 2001 June 20, 2008 I 13
Slide 14: Gross Margin
Gross Margin % of sales +0.2 pt 15.7% 15.5% 1,497 M€ 1,463 M€ 2006 2007 June 20, 2008 I 14
Slide 15: Impact of the increase in raw material prices
Impact of the increase in raw material prices (Point of sales) Cumulative impact basis 2003 Gross impact 4.5 +0.9 pt Net impact 3.6 • More rebilling to customers +0.2 pt • Contract 2.0 renewals 1.8 2006 2007 June 20, 2008 I 15
Slide 16: Operating income
Operating income U 2007/2006 Gross Margin +0.2 pt • R&D* - • SG&A +0.1 pt • Other income and charges +0.2 pt Operating income +0.5 pt* * % of total operating revenues June 20, 2008 I 16
Slide 17: Accelerated margin improvement
Accelerated margin improvement Annual change in the operating margin by quarter (2007) 2 pt + 1.1 1 pt + 0.3 0 0 pt - 0.4 -1 pt Q1 Q2 Q3 Q4 June 20, 2008 I 17
Slide 18: Results (cont'd)
Results (cont’d) In euro million 2007 2006 Change Operating income 319 271 + 17.7% Cost of net debt (51) (51) Other financial inc./(expenses) (46) (8) Associates 8 (1) Income before taxes 230 211 + 9.0% Taxes (83) (67) Effective tax rate 37.4% 31.6% Non strategic activities (59) 22 Minorities (7) (5
Slide 19: Debt level & financial statements
Debt level & financial statements
Slide 20: Return on capital employed
Return on capital employed* 3,4 3,2 3 4.0 2,8 3.9 Bn € 3.7 2,6 2,4 2.5 2.4 2.4 2,2 2 31.12.05 31.12.06 31.12.07 Industrial assets Return on capital employed * Excluding VCS & VMA June 20, 2008 I 20
Slide 21: Consolidated shareholders' equity / Net financial debt
Consolidated shareholders’ equity / Net financial debt (M€) 1,752 1,782 Gearing 55% 45% 968 799 31/12/2006 31/12/2007 Shareholders' equity Debt June 20, 2008 I 21
Slide 22: Q1-2008
Q1-2008
Slide 23: Q1-08 highlights
Q1-08 highlights Economic environment Î Slowdown in auto production versus H2 2007 Î Inflationary pressure on raw materials Î Further depréciation of the Dollar vs the Euro Î Rise in interest rates Valeo Î Improved operating margin for third consecutive quarter Î Earnings per share of continued oper
Slide 24: Key figures – Q1-2008
Key figures – Q1-2008 In euro million Q1-2008 Q1-2007 Variation Total operating revenues 2,473 2,499 - 1.0% Gross margin 392 377 + 4.0% in % of sales 16.1% 15.3% + 0.8 pt Operating margin 90 74 + 21.6% in % of total operating revenues 3.6% 3.0% + 0.6 pt Earnings per share* 0.57 0.42 + 35.7% Net fina
Slide 25: Strategy and Objectives
Strategy and Objectives Thierry Morin – Chairman & CEO
Slide 26: Strategy
Strategy Operational Excellence COST QUALITY Î Quality Î Cost Î Industrial footprint TECHNOLOGY Innovation GLOBAL PRESENCE Î 3 Domains for safer, cleaner and more comfortable vehicles June 20, 2008 I 26 I
Slide 27: Valeo's 3 Domains
Valeo’s 3 Domains Powertrain Efficiency Reconciling automobiles and the environment by contributing to the creation of cleaner, more fuel-efficient vehicles Driving Sales* Assistance €9.6bn Comfort Reconciling automobiles Enhancement and safety by reinforcing Reconciling automobiles the active aspec
Slide 28: Valeo n°1 or n°2 in the world
Valeo n°1 or n°2 in the world Driving Assistance − Wiper systems − Front and rear lighting − Ultrasonic sensors Powertrain Efficiency − Alternators − Starter motors − Clutches − Engine cooling − Condensers Comfort Enhancement − HVAC systems − Top Column Modules 75% of Valeo sales: N°1 or n° 2 in the
Slide 29: Refocusing the perimeter on the Domains
Refocusing the perimeter on the Domains Identified divestitures worth 2 billion euros Î Activities – Little technological synergy – Low added value – With insufficient competitive positions Î Program 50% completed in mid-2008: electric motors, wiring harnesses, truck engine cooling Î Competitive val
Slide 30: Operational excellence
Operational excellence Luc Blériot – Chief Operating Officer
Slide 31: Automaker requirements
Automaker requirements Cost, cycles, quality Emerging countries Low-cost vehicles June 20, 2008 I 31
Slide 32: Purchasing
Purchasing Supplier base Î Reduction (-154) Î VIP strategic suppliers (79) Î Low-cost countries (37% of purchasing) Tools (Bidding On Line: 1.5 billion euros) June 20, 2008 I 32
Slide 33: Industrial productivity
Industrial productivity Cost reduction Greater flexibility Return on assets June 20, 2008 I 33
Slide 34: Optimization of the production footprint
Optimization of the production footprint Supporting customers in emerging countries Rationalization 72% 70% 68% 66% 62% 56% 52% Other countries Productive headcount* (%) 48% Leading 44% competitive-cost 38% countries 30% 32% 34% 28% 2001 2002 2003 2004 2005 2006 2007 * Continued operations June 20,
Slide 35: R&D efficiency
R&D efficiency High technology products / Cost reduction Standardization, simulation R&D in competitive-cost countries Î 21% of total headcount, 9 R&D Centers June 20, 2008 I 35
Slide 36: Re-engineering
Re-engineering Quality and Logistics: 20 pilots in 2007 Î Headcount reduction of 15% Î Reduction of non-quality and inventory costs Î Deployment in all sites Extension of the process to other functions June 20, 2008 I 36
Slide 37: Quality
Quality Delivery quality Î 65% of sites at less than 10 ppm* Î 18 sites at 0 ppm 185 CUSTOMER RETURNS 53 in ppm 32 15 10 2003 2004 2005 2006 2007 * Defective parts per million delivered Lower warranty costs June 20, 2008 I 37
Slide 38: Quality recognized by customers
Quality recognized by customers Excellent Quality Performance Award from Toyota Group 3 quality awards from Toyota Peugeot Citroën Automobile Achievement Award and 3 certificates from Toyota North America and Toyota Europe Supplier Quality Award from Renault June 20, 2008 I 38
Slide 39: Teams, tools, a culture
Teams, tools, a culture Skilled teams Organization and Methodologies Culture: ethics, respect, demanding, progress, rigor June 20, 2008 I 39
Slide 40: Powertrain Efficiency
Powertrain Efficiency Michel Forissier – Director of the Domain
Slide 41: Climate change
Climate change Concentration of CO2 in the atmosphere (ppm) 600 500 400 300 200 1000 1200 1400 1600 1800 2000 Year Year Source: GIEC June 20, 2008 I 41
Slide 42: Skyrocketing oil prices
Skyrocketing oil prices 140 USD May 2008 Price of crude in $/barrel 80 70 60 50 40 30 20 10 0 Jan 86 Jan 88 Jan 90 Jan 92 Jan 94 Jan 96 Jan 98 Jan 00 Jan 02 Jan 04 Jan 06 Source: International Energy Agency,Valeo June 20, 2008 I 42
Slide 43: Impact on household budgets
Impact on household budgets The price of super-grade gasoline rose by 62% in 10 years A household spends 150€ per month on fuel Transportation is now the second largest expense after lodging June 20, 2008 I 43
Slide 44: CO2 regulations
CO2 regulations Europe: 120g CO2/km Japan: in 2012 16.8 km/l USA: 95g CO2/km in 2015 35 MPG in 2020 Council for Transport Policy Feb. 2007 in 2020 European Commission Jan. 10, 2007 Senate Bill June 21, 2007 Equivalent (for gasoline engine): 5 l/100km 6 l/100km 6.7 l/100km then 4 l/100km June 20, 200
Slide 45: Consumption (g CO2/km)
Consumption - situation 190 GASOLINE Consumption (g CO2/km) 170 150 Divided by 3 DIESEL - 30% -20% 130 DIESEL MUST FIRST BECOME CLEAN 120 - 20% 2012- BUT THE RACE TO REDUCE EMISSIONS 110 WILL BE DRIVEN BY GASOLINE ENGINES 2020 >2020 90 0.08 0.10 0.15 0.20 0.25 GASOLINE Emissions (g NOx/km) DIESEL Ju
Slide 46: Valeo consumption reduction solutions
Valeo consumption reduction solutions Energy management - 3% Automated transmissions -4-6% Engine intake systems -5-7% - 40% feasible Thermal management - 8% Hybridization -6-15% Engine management -15-20% June 20, 2008 I 46
Slide 47: Valeo - 40% consumption project
Valeo - 40% consumption project Water-cooled charge air cooler Electromagnetic valve actuation Cooled EGR Thermal Stop-Start + management Regenerative braking Dual clutch Optimized A/C Objective = - 40%, from 200 to 120 g/km on a gasoline Laguna GT 2.0 turbo Estimated extra cost: less than 1,500 €,
Slide 48: Commercial success for the micro-hybrid
Commercial success for the micro-hybrid Citröen C2/C3 Smart mhd Mercedes Class A and B PSA Peugeot Citroën Î 1 million vehicles June 20, 2008 I 48
Slide 49: Innovations subsidized by public authorities
Innovations subsidized by public authorities StARS Electromagnetic StARS Electromagnetic micro-hybrid valveactuation actuation micro-hybrid valve LOwCO2MOTION™ LOwCO2MOTION to receive funding from OSEO Innovation worth 61 million euros (including 55 M€ for Valeo) over 3 years June 20, 2008 I 49
Slide 50: Objectives
Objectives Thierry Morin – Chairman & CEO
Slide 51: 2008 objectives
2008 objectives Tougher operating conditions Another year of improved results Levers Î New model launches Î Proven ability to recover a significant share of raw material charges Î Identified operational levers Î Controlled launch and non-quality costs June 20, 2008 I 51 I
Slide 52: 2010 objectives
2010 objectives Doubling of return on capital employed to 27% Î Operating margin 6% Î Asset turn 4.5x Levers Î Growth Î Absorption of raw material costs Î Operational excellence and re-engineering June 20, 2008 I 52 I
Slide 53: 32% of order intake from innovative products
32% of order intake from innovative products In billion euros Order intake / X OEM sales 1.3x 1.3x 1.1x 9.9 10.1 8.6 Others 32% Innovative products 15% 22% 2005 2006 2007 June 20, 2008 I 53 I
Slide 54: Valeo technology start-ups
Valeo technology start-ups Torque converters for Radar Camera Micro-hybrids automatic applications applications transmissions 2007 Sales: 70 M€ 400 M€ in 2010 June 20, 2008 I 54 I
Slide 55: Geographical expansion
Geographical expansion Eastern Europe Western Europe North America 13 Production sites 55 Production sites 1 R&D center 14 Production sites 37 R&D centers 10,480 employees 12 R&D centers 29,420 employees 6,830 employees Asia Africa 30 Production sites South America 11 R&D centers 3 Production sites
Slide 56: Expansion in India
Expansion in India Valeo Electrical Systems (JV with AK Minda) Valeo Friction Materials (JV with Anand Group) Pune Valeo Clutches Chennai Production site Valeo Security Systems (JV with NK Minda) (JV with Amalgamations) R&D center Market: 1.5 million vehicles June 20, 2008 I 56 I
Slide 57: Russian automobile market – Key figures
Russian automobile market – Key figures 2007 2013 Production 1.8 M 3.4 M Sales 1.7 M 3.0 M Number of automakers 16 19 Î Russian 7 3 Î Foreign 9 16 Market share Î Russian (VAZ, GAZ, LADA, TAGAZ) 50% 25% Î Non Russian 50% 75% June 20, 2008 I 57 I
Slide 58: Valeo's strategy in Russia
Valeo’s strategy in Russia Presence of all product lines Partnerships under discussion Î HVAC systems in the Moscow area Î Transmissions and Security Systems in the Nijni Novgorod area Î Lighting Systems in the Vladimir area Achieve significant market shares 500 million euros of sales in 2013 June 2
Slide 59: Value creation potential
Value creation potential Strong involvement in the promising domains of environment annd safety Valid business model and solid financial structure High potential for creating value Policy of regular growth in dividends; proposing €1.20 for 2007 (+9%) June 20, 2008 I 59 I
Slide 60: Evolution of shares since 31/12/2007
Evolution of shares since 31/12/2007 31/12/07 19/06/08 Δ VALEO 28.20 21.67 -23.2% CAC 40 5614.10 4591.39 -18.2% PEUGEOT 51.85 35.55 -31.4% RENAULT 97.01 56.14 -42.1% MICHELIN 78.50 48.59 -38.1% 28 FAURECIA 46.60 27.41 -41.2% 25 22 19 16 /1 /1 /1 /2 /2 /2 /3 /3 /3 /3 /4 /4 /4 /5 /5 /5 /6 /6 /6 1 2 3
Slide 61: Valuation history (since 01/01/2005)
Valuation history (since 01/01/2005) maxi Enterprise value / EBITDA 8x mini average current 7x 6x 5x 4x 3x 2x 1x 0x Valeo Continental Faurecia Autoliv Magna TRW PER 30x 25x 20x 15x 10x 5x 0x Valeo Continental Faurecia Autoliv Magna TRW Source: data from the companies and from research analysts June
Slide 62: Corporate governance
Corporate governance
Slide 63: An active, assiduous Board of Directors
An active, assiduous Board of Directors Sixteen Board meetings in 2007 Nomination and Remunerations Committee Î 4 meetings Audit Committee Î 4 meetings Strategic discussions June 20, 2008 I 63
Slide 64: Agreement with Pardus
Agreement with Pardus A Pardus representative on the Board Loyalty commitment Avoidance of conflicts of interest Limitation of Pardus shareholding in Valeo to 20% June 20, 2008 I 64 I
Slide 65: Nomination and Remuneration Committee
Nomination and Remuneration Committee Composition: 3 independent members Î Jérôme Contamine (Chairman) Î Georges Pauget Î Philippe Guédon Mission Î Prepare the deliberations of the Board relating to the remuneration of corporate officers and the stock options policy Î Prepare the composition of the
Slide 66: Candidacy of Behdad Alizadeh
Candidacy of Behdad Alizadeh Current function Î Partner, Pardus Capital Management L.P. Previous functions Î Managing Director of the Bank of New York Î Head of Merchant Banking, Bank of New York Î Member of the Board of Directors of Caliber Collision Centers Î Member of the Board of Directors of Mi
Slide 67: Indemnities in the event of termination of duties of the Chairman & CEO
Indemnities in the event of termination of duties of the Chairman & CEO In accordance with the TEPA law Amount Î 3 years of fixed remuneration, unchanged since appointment in 2001 Î Complementary retirement via pension fund accrued by Valeo (UK) Conditions Î Dismissal (except for gross misconduct) Î
Slide 68: Share purchase options
Share purchase options Authorization covering 1 million shares, or 1.3% of the capital Validity: 2009 AGM No discount for beneficiaries Valeo undertakes to limit the potential dilution resulting from option plans and the allocation of free shares to the current level of 9.6% of the capital June 20,
Slide 69: Statutory auditors' report
Statutory auditors’ report
Slide 70: Resolutions: Ordinary General Meeting
Resolutions Ordinary General Meeting
Slide 71: Resolutions 1 & 2: Approval of the annual financial statements
Annual Ordinary General Meeting Resolutions 1 & 2 Approval of the annual non-consolidated and consolidated financial statements June 20, 2008 I 71
Slide 72: Resolution 3: Approval of an agreement for Mr. Thierry Morin
Annual Ordinary General Meeting Resolution 3 Approval of an agreement including undertakings made for the benefit of Mr. Thierry Morin in accordance with article L. 225-42-1 of the French Commercial Code June 20, 2008 I 72
Slide 73: Resolution 4: Approval of regulatory agreements
Annual Ordinary General Meeting Resolution 4 Approval of regulatory agreements and undertakings June 20, 2008 I 73
Slide 74: Resolution 5: Allocation of profits and distribution of dividends
Annual Ordinary General Meeting Resolution 5 Allocation of profits and distribution of dividends June 20, 2008 I 74
Slide 75: Resolution 6: Authorization to repurchase the Company's shares
Annual Ordinary General Meeting Résolution 6 Authorization granted to the Board of Directors to repurchase the Company’s shares June 20, 2008 I 75
Slide 76: Resolution 7: Determination of annual amount of directors' fees
Annual Ordinary General Meeting Resolution 7 Determination of the annual amount of directors’ fees June 20, 2008 I 76
Slide 77: Resolution 8: Appointment of Mr. Behdad Alizadeh as director
Annual Ordinary General Meeting Resolution 8 Appointment of Mr. Behdad Alizadeh as director June 20, 2008 I 77
Slide 78: Resolutions: Extraordinary General Meeting
Resolutions Extraordinary General Meeting
Slide 79: Resolution 9: Authority to grant options to purchase shares
Extraordinary General Meeting Resolution 9 Delegation to the Board of Directors of authority to grant options to purchase shares of the Company June 20, 2008 I 79
Slide 80: Resolution 10: Delegation of powers for corporate formalities
Extraordinary General Meeting Resolution 10 Delegation of powers to carry out corporate formalities June 20, 2008 I 80