Valeo Se · EURONEXT:FR
Valeo — FY2006 Earnings Presentation
44 slides from Valeo's earnings presentation, Feb 13, 2007
Slide 1: 2006 Results and Outlook
2006 Results and Outlook Thierry Morin February 13, 2007 Chairman & CEO Property of Valeo – Duplication prohibited 1 2006 Results and Outlook – February 2007
Slide 2: Agenda
Agenda Highlights and key figures Sales and automotive markets Results Cash flow and balance sheet Business and strategic highlights Outlook Property of Valeo – Duplication prohibited 2 2006 Results and Outlook – February 2007
Slide 3: Highlights & Key Figures
Highlights & Key Figures
Slide 4: 2006 Highlights
2006 Highlights Customer diversification protects from French OEMs and D3 weakness; noticeable aftermarket recovery Margin resilience to additional strong raw material headwinds Competitiveness further strengthened Portfolio rationalization on its way Dramatic order intake recovery Propert
Slide 5: 2006 Key Figures
2006 Key Figures In euro million 2006 2005 Change Total operating revenues 10,086 9,834 +2.6% Operating margin 341 374 -8.8% as a % of total op. revenues 3.4% 3.8% -0.4 pt Net income 161 142 +13.4% as a % of total op. revenues 1.6% 1.4% +0.2 pt Basic earnings per share (€) 2.10* 1.80* +16.7%
Slide 6: Q4-06 Key Figures
Q4-06 Key Figures In euro million Q4-2006 Q4-2005 Change Total operating revenues 2,514 2,511 +0.1% Operating margin 74 94 -21.3% as % of total op. revenues 2.9% 3.7% -0.8pt Net income 60 41 +46.3% as % of total op. revenues 2.4% 1.6% +0.8 pt Property of Valeo – Duplication prohibited 6 2006 R
Slide 7: Sales & Automotive Markets
Sales & Automotive Markets
Slide 8: Total operating revenues
Total operating revenues In euro million +2.6% 10,086 9,834 Perimeter: +1.5% Currencies: +0.6% Prices* -3.8% Volume/mix +4.3% *at identical functions 2005* 2006 *restated to account for non strategic activities Property of Valeo – Duplication prohibited 8 2006 Results and Outlook – February 2007
Slide 9: 2006 net sales
2006 net sales Geographical trends Light vehicle production Europe North America +2% -3% 69% of total Sales 13% of total Sales +3% -3% Incl. Big 3: -9% Asia +11% / +4%* South America 11% of total Sales +9% / =* +9% 5% of total Sales +8% *at same perimeter & exchange rate Property of Valeo – Duplicat
Slide 10: Customer diversification proves beneficial
Customer diversification proves beneficial 2005 +1% 2006 LV production change +1% +14% -5% -4% -3% +3% +6% -4% +30% -5% = +9% -6% = -1% +3% +15% +7% +11% Property of Valeo – Duplication prohibited 10 2006 Results and Outlook – February 2007
Slide 11: Order intake/ OE sales ratio at a 5 year high
Order intake/ OE sales ratio at a 5 year high Order intake / OE Sales 1.3 1.3 1.2 1.2 1.1 1.0 2001 2002 2003 2004 2005 2006 Property of Valeo – Duplication prohibited 11 2006 Results and Outlook – February 2007
Slide 12: Order intake- Commodities vs. Innovations
Order intake- Commodities vs. Innovations Commodities Innovations 73% 27% Including Reversible Motor EGR Module StARS Blind Spot Detection New Clutch Range Property of Valeo – Duplication prohibited 12 2006 Results and Outlook – February 2007
Slide 13: Aftermarket recovery
Aftermarket recovery Change in aftermarket sales In % 8 6 Sales growth acceleration 4 in 2006- well distributed 2 between OES and IAM 0 Provides Valeo business 2004 2005 2006 model with robust -2 defensive characteristics -4 -6 OES IAM TOTAL Property of Valeo – Duplication prohibited 13 2006 Res
Slide 14: Results
Results* * As required by IFRS, all 2005 figures are restated mainly to account for non strategic activities
Slide 15: Results
Results In euro million 2006 2005 Change Total operating revenues 10,086 9,834 +2.6% Gross margin 1,539 1,559 - 1.3% as % of sales 15.4% 16.0% -0.6 pt Property of Valeo – Duplication prohibited 15 2006 Results and Outlook – February 2007
Slide 16: Some relief in commodity prices at year-end
Some relief in commodity prices at year-end Aluminum price ($/T) Copper price ($/T) 3000 8500 2006: $2,561 2,814 Average Spot price 2006: $6,715 Average Spot price +35% 7000 +83% 2696 2500 2005: $1,899 2005: $3,679 2,247 5500 5,771 . 4,577 2000 . 4000 1,417 1500 2500 1,525 1000 1000 2001 2002 2003 2
Slide 17: Compensated 60%+ of raw material headwinds in 2006
Compensated 60%+ of raw material headwinds in 2006 Cumulative impact as a % of sales 2006 vs. 2005 Gross: (1.9pt) 6 Net: (0.7pt) Net impact Gross impact 5 4.9 4 3 2.2 2 2.1 1 1.3 0 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 (Index 100: 2003 average) Property of Valeo – D
Slide 18: Raw material headwinds hide margin consolidation
Raw material headwinds hide margin consolidation Operating margin adjusted for cumulative raw material impact (2004-2006) 6,0% 5,0% 4,0% 3,0% 2,0% 2004 2005 2006 Reported operating margin Operating margin adjusted for cumulative raw material impact Property of Valeo – Duplication prohibited 18 2006
Slide 19: Footprint rationalisation in 2006
Footprint rationalisation in 2006 December 2005 134 sites (44% in LCC) Czechowice (VECS) Poland Zielonki (VMA)* Germany Bietigheim (VMA*) USA France Lacanche (VECS) Bond Street (VEC) Spain Santa Perpetua (VMA*) China Mexico Tunisia Wuxi (VEMS) Juarez (VMA*) Iran Nari (Telma) (VES) Consolidation of S
Slide 20: Footprint realignment in perspective
Footprint realignment in perspective 31/03/2001 – 31/12/2006 ; perimeter changes included Industrial sites walkdown LCC/ HCC breakdown 170 +12 60 129 +23 -47 58 -29 170 129 110 71 31/03/2001 Closures Disposals Openings Acquis. 31/12/2006 31/03/2001 31/12/2006 LCC HCC Property of Valeo – Duplication
Slide 21: Purchasing progressively aligned with industrial footprint
Purchasing progressively aligned with industrial footprint LCC footprint and production purchasing- 2001- 2006 50% 50% 45% 45% 40% 40% 35% 35% Value chain 30% 30% Î More competitive 25% 25% 20% 20% (manufacturing labor 15% 15% costs, LCC sourcing, 10% 10% logistics) 5% 5% Î Less complex 0% 0% Marc
Slide 22: Quality levels: significantly better and more consistent
Quality levels: significantly better and more consistent across the organization Including 11 sites at 0 ppm Customer returns in parts per million Q4-2005 47 sites (39%) 185 Including 15 sites at 0 ppm Q4-2006 63 sites (47%) 53 32 15 Q4-03 Q4-04 Q4-05 Q4-06 Single digit PPM sites Property of Valeo –
Slide 23: Results (cont.)
Results (cont.) In euro million 2006 2005 Change R&D expenses (net) (545) (542) +0.6% As % of total op. revenues 5.4% 5.5% (0.1 pt) SG&A (653) (643) +1.7% As % of total op. revenues 6.5% 6.5% = Total overhead (1,198) (1,185) +1.1% As % of total op. revenues 11.9% 12.1% (0.2 pt) Other income
Slide 24: Operating margin walkdown
Operating margin walkdown In euro million +17 +20 +115 374 (185) 341 Raw Offsetting Factory Overhead Materials actions Productivity 2005 2006 Property of Valeo – Duplication prohibited 24 2006 Results and Outlook – February 2007
Slide 25: Results (cont.)
Results (cont.) In euro million 2006 2005 Change Operating income 271 324 -16.4% Cost of net debt (57) (52) +9.6% Other financial inc./(expenses) (9) (52) nm Income before taxes 205 220 -6.8% Taxes (75) (66) +13.6% Effective tax rate 36.6% 30.0% +6.6pt Associates and minority interests (
Slide 26: Cash Flow & Balance sheet
Cash Flow & Balance sheet
Slide 27: Net financial debt walkdown
Net financial debt walkdown in euro million -26 +89 -122 -22 -31 1,080 968 Free VMA Other Dividends Others cash flow disposal disposals Net debt Net debt @ Jan. 1, 2006 @ Dec.31, 2006 Property of Valeo – Duplication prohibited 27 2006 Results and Outlook – February 2007
Slide 28: Inventory management
Inventory management In euro million and % of total operating revenues 654 647 6.1% 6.4% 6.4% 2005* 2006 * Including VMA Property of Valeo – Duplication prohibited 28 2006 Results and Outlook – February 2007
Slide 29: Negative working capital at year end
Negative working capital at year end In euro million and % of total operating revenues 101 69 2.2% 0.7% (12) (0.1)% 2004 2005 2006 Property of Valeo – Duplication prohibited 29 2006 Results and Outlook – February 2007
Slide 30: Gearing down 5 ppt in H2-06
Gearing down 5 ppt in H2-06 in euro million 1,717 1,742 1,752 1,551 Gearing: 81% Gearing: 63% Gearing: 60% Gearing: 55% 1,263 1,080 1,053 968 30/06/2005 31/12/2005 30/06/2006 31/12/2006 Property of Valeo – Duplication prohibited 30 2006 Results and Outlook – February 2007
Slide 31: Higher asset turn
Higher asset turn In euro billion 3,2 6 3,1 5,5 3 5 2,9 4,5 2,8 3.8 4.0 2,7 4 2,6 3,5 2,5 3 2,4 2,5 2,3 2.7 2.5 2,2 2 2005 2006 Capital Employed* Asset turn (X) * Excluding goodwill Property of Valeo – Duplication prohibited 31 2006 Results and Outlook – February 2007
Slide 32: Business & Strategic Initiatives
Business & Strategic Initiatives
Slide 33: Rewarded innovations
Rewarded innovations First Park4U contract 2006 Nissan Global Supplier for Volkswagen award for Innovation (Valeo Climate Control Japan) Automechanika Innovation award for Power Line Communication StARS winner of the 2006 PACE Award (European products category) Blind Spot Detection System
Slide 34: Valeo adds value in Powertrain Efficiency
Valeo adds value in Powertrain Efficiency Low consumption - 3% A/C compressor Power on Demand BELTLESS engine - 5% - 40% Feasible! Thermal Management THEMIS™ - 4% Transmission DUAL CLUTCH - 6% Automation transmission MICRO-HYBRID StARS System - 10-15% Hybridization MICRO HYBRID with - 15-20% Regener
Slide 35: Motors & Actuators business disposal
Motors & Actuators business disposal Effective on December 27, 2006 Rationale for the disposal Î Lack of critical mass Î Low value added to our Domain strategy Î Attractive offer Financial impact Î €36m positive contribution to P&L (ow. capital gain €41m net) Property of Valeo – Duplication pr
Slide 36: Projected acquisition of Ford Thermal Systems facility
Projected acquisition of Ford Thermal Systems facility Consistent with Valeo’s strategy to be a global leader in its core product lines Acquisition conditional upon reaching a competitive agreement with UAW concerning a new Collective Bargaining Agreement Transaction designed to eventually pro
Slide 37: Outlook and Objectives
Outlook and Objectives
Slide 38: 2007 trading conditions
2007 trading conditions Car production in core markets not stabilizing before H2-2007 Reduction in raw material headwinds Property of Valeo – Duplication prohibited 38 2006 Results and Outlook – February 2007
Slide 39: Group re-engineering
Group re-engineering Optimization of resources and processes of principle functions: Î Starting with Quality and Logistics Contribute to 2010 margin objective of 6%+ Property of Valeo – Duplication prohibited 39 2006 Results and Outlook – February 2007
Slide 40: Contact Investor Relations
Contact Investor Relations Rémy Dumoulin 43, rue Bayen F-75848 Paris Cedex 17 France Tel.: +33 (0) 1.40.55.29.30 Fax: +33 (0) 1.40.55.20.40 E-mail: remy.dumoulin@valeo.com Web site: www.valeo.com Property of Valeo – Duplication prohibited 40 2006 Results and Outlook – February 2007
Slide 41: Back-up
Back-up
Slide 42: Quarterly P&L (2005 – 2006)
Quarterly P&L (2005 – 2006) 2006 2005* Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 NET SALES 2,478 2,235 2,627 2,630 2,485 2,307 2,670 2,274 Other operating revenues 36 28 28 24 26 25 28 19 TOTAL OPERATING REVENUES 2,514 2,263 2,655 2,654 2,511 2,332 2,698 2,293 GROSS MARGIN 369 335 420 415 390 365 437 367 as % o
Slide 43: Share Information
Share Information Share Data / ADR Data Share Data Bloomberg Ticker FR FP Reuters Ticker VLOF.PA ISIN Number FR 000130338 Shares outstanding as per 31.12.2006 77,580,617 ADR Data Ratio (ordinary share: ADR) 1:2 Bloomberg Ticker VLEEY US Reuters Ticker VLEEY PK ISIN Number US 91913430
Slide 44: valeo added
valeo added