March 12, 2008 2007 Results and Outlook Thierry Morin - Chairman & CEO
Agenda Q4 07 and FY 07 review Valeo strategic positioning Value creation 2 March 2008-2007 Results and Outlook
Q4'07 and FY 07 Review
Q4-07 Key Figures In euro million Q4-2007 Q4-2006 Change Total operating revenues* 2,438 2,376 + 2.6% Operating income* as % of total op. revenues 88 3.6% 51 2.1% + 72.5% + 1.5 pt Non strategic activities (3) 42 nm Net income as % of total op. revenues 50 2.1% 60 2.5% - 16.7% - 0.4 pt * Excluding the wiring business, sold on December 31, 07, as required by IFRS 5 4 March 2008-2007 Results and Outlook
Q4 operating margin walkdown % of Total operating revenues +0.8 3.9% 2.8% +0.1 +0.2 Q4-06 Raw materials Selling price Activity / Q4-07 adjustments Productivity 5 March 2008-2007 Results and Outlook
2007 Highlights Sales & margin recovery acceleration Operational excellence demonstrated further Innovation gains market traction Portfolio alignment on its way 6 March 2008-2007 Results and Outlook
2007 Key Figures In euro million 2007 2006 Change Total operating revenues* 9,689 9,550 + 1.5% Operating income* as a % of total op. revenues 319 3.3% 271 2.8% + 17.7% + 0.5 pt Net income as a % of total op. revenues 81 0.8% 161 1.7% - 49.7% - 0.9 pt Net income excl. impact from divestitures** 132 120 + 10.0% EPS from contd. operations ( )*** 1.82 1.81 + 0.6% Net financial debt 799 968-17.5% * Excluding the wiring business, sold on December 31, 07, as required by IFRS 5 ** Excluding capital gains and losses from the sale of non strategic activities *** Basic 7 March 2008-2007 Results and Outlook
Total operating revenues In euro million +3.2% Like-for-Like 10000 9,550 +1.5% 9,689 9000 Perimeter Currencies Prices* Volume/mix * at identical functions -0.2% -1.5% -3.0% +6.2% 8000 2006 2007 8 March 2008-2007 Results and Outlook
Revenue growth acceleration in H2 TOTAL OPERATING REVENUE - YOY CHANGES at same perimeter & exchange rate (2007) 5% 4% +4.8% +4.3% +3.8% 3% 2% 1% +2.3% +2.0% +1.6% Q1 Q2 Q3 Q4 H1 H2 9 March 2008-2007 Results and Outlook
2007 net sales Geographical trends Market -2% Incl. D3: -5% +6%* North America 14% of total Sales Market +4% +1% Europe 67% of total Sales Market +7% Asia +12%* Market +18% +18%* South America 12% of total Sales 6% of total Sales *At same perimeter & exchange rate Valeo sales 10 March 2008-2007 Results and Outlook
Original Equipment Touring Cars +15% SALES by customers 2006 2007 +3% -1% +x% Customer performance +13% -3% +14% +1% -11% = +3% +5% +4% +3% +5% = -2% +14% +6% -1% +17% +6% +5% YOY changes at same perimeter & exchange rate 11 March 2008-2007 Results and Outlook
Rebalancing customer exposure OE SALES (2001-2007)* Automaker Asians Big 3 German 2001 5.7 % 31.7 % 22.5 % 2007 14.7 % 21.8 % 24.5 % Mercedes & BMW PSA & Renault Fiat 7.5 % 28.1 % 5.0 % 10.6 % 26.7 % 4.4 % * Excluding VMA & VCS in 2001 12 March 2008-2007 Results and Outlook
Results In euro million 2007 2006 Change Total operating revenues 9,689 9,550 + 1.5% Gross margin 1,497 1,463 + 2.3% as % of sales 15.7% 15.5% + 0.2 pt 13 March 2008-2007 Results and Outlook
LME Average Price (Spot) Euro / ton 2800 LME Average: CU + AL + AA + ZN* 2700 Q4 2600 2500 2400 Q3 H1 Q3 Q4 Average 2007 2,440 2300 2200 Average 2006 2,262 2100 2000 H1 1900 1800 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 2006 2007 * CU: Copper Cuivre, AL: Primary Aluminium, AA: Aluminium Alloy, ZN: Zinc 14 March 2008-2007 Results and Outlook
Raw material tailwinds in Q4 Ppt of sales - cumulative Gross impact 4.4 4.3 4.7 4.7 4.3 Net impact 3.5 3.8 2.7 2.1 0.7 0.5 1.1 1.6 1.6 1.9 2.1 1.9 2.2 2.2 1.8 2004 2005 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2006 2007 15 March 2008-2007 Results and Outlook
Results (cont.) In euro million 2007 2006 Change R&D expenses (net)* as % of total op. revenues (534) 5.5% (526) 5.5% + 1.5% = SG&A as % of total op. revenues (617) 6.4% (617) 6.5% = (0.1 pt) Total overhead as % of total op. revenues (1,151) 11.9% (1,143) 12.0% + 0.7% (0.1 pt) Other income (expenses) as % of total op. revenues (27) 0.3% (49) 0.5% - 44.9% (0.2 pt) Operating income as % of total op. revenues 319 3.3% 271 2.8% + 17.7% + 0.5 pt * net of other operating revenues 16 March 2008-2007 Results and Outlook
Margin improvement accelerates in Q4 Quarterly YOY change in operating margin (2007) 2 pt + 1.1 1 pt 0 pt -0.4 0 + 0.3-1 pt Q1 Q2 Q3 Q4 17 March 2008-2007 Results and Outlook
Results (cont.) In euro million 2007 2006 Change Operating income 319 271 + 17.7% Cost of net debt Other financial inc./(expenses) Associates (51) (46) 8 (51) (8) (1) = nm nm Income before taxes 230 211 + 9.0% Taxes Effective tax rate Non strategic activities (83) 37.4% (59) (67) 31.6% 22 + 23.9% nm Minorities (7) (5) + 40% Net income 81 161-49.7% 18 March 2008-2007 Results and Outlook
Valeo weathered the raw material shock OPERATING MARGIN adjusted for cumulative raw material headwinds (2004-2007*) OPERATING MARGIN % of total operating revenues (2003-2007) 6,0% 5,0% 5.0% +2,5% +15,8% 3.6% 4,0% 3,0% Operating margin 2003 +4.5% Customer contributions Operating margin 2007 2,0% 2004 2005 2006 2007 Operating margin (reported) -9.0% Supplier productivity Raw & product material reengineering price increases -15.2% Valeo productivity Price deflation** Operating margin (adjusted) * Excluding non strategic activities for the 2005-2007 period ** Identical function 19 March 2008-2007 Results and Outlook
Net financial debt walkdown In euro million -66 +29 +89 +16-237 968 799 Net debt @ Jan. 1, 2007 Free cash flow VCS disposal Other M&A Dividends Others Net debt @ Dec.31, 2007 20 March 2008-2007 Results and Outlook
10 pt gearing reduction in 2007 In euro million 1,752 1,782 1,551 1,263 968 799 Shareholder s Equity incl. minority interests Net Debt Gearing 1,263 81% Gearing 55% 968 Gearing 45% 30/06/2005 31/12/2006 31/12/2007 21 March 2008-2007 Results and Outlook
Return on capital employed analysis* 2007 2006 2005 Asset turn (x) 4.0 3.9 3.7 Operating margin (%) 3.6 3.4 3.7 ROCE (%) 14.3 13.2 13.4 * Continued operations, before tax 22 March 2008-2007 Results and Outlook
Valeo Strategic Positioning
Success factors QUALITY COST GLOBAL PRESENCE TECHNOLO GY Technology as differentiating factor 24 March 2008-2007 Results and Outlook
Valeo Domains address industry opportunities Powertrain Efficiency Reconciling automobiles and the environment by contributing to the creation of cleaner, more fuel-efficient vehicles Driving Assistance Reconciling automobiles and safety by reinforcing the active aspects of accident prevention and avoidance Other Sales* 9.6bn Comfort Enhancement Reconciling automobiles and well-being by making vehicles easier to use and enhancing driver and passenger comfort * 2007 25 March 2008-2007 Results and Outlook
CO 2 Regulation Europe: 120g CO 2 /km by 2012 95g CO 2 /km by 2020 European Commission Japan: 16.8 km/l by 2015 Council for transport Policy February 2007 USA: 35 MPG by 2020 CAFE 26 March 2008-2007 Results and Outlook
Fuel Economy solutions portfolio Power on Demand Low consumption A/C compressor -3% Thermal Management Transmission Automation UltimateCooling THEMIS DUAL CLUTCH transmission -3-5% -4% -4-6% - 40% Feasible! Air Systems Cooled EGR system -5-7% Hybridization MICRO HYBRID (from Stop-Start to Regenerative braking) -6-15% Engine Operation CAMLESS System -15-20% 27 March 2008-2007 Results and Outlook
Powertrain Efficiency growth drivers CO 2 AND POLLUTANT REDUCTION % fitment rate 50 45 40 35 30 25 20 15 10 5 0 2006 2010 2015 2020 Turbo gasoline EGR gasoline Micro hybrid Source Valeo 28 March 2008-2007 Results and Outlook
Successful innovations StARS micro hybrid Offered on Citroën C2/C3 Development contracts with 5 other customers StARS Now standards on SMART fortwo mhd 29 March 2008-2007 Results and Outlook
Accident Statistics ROAD SAFETY EVOLUTION in Europe Evolution 1990-2010 EU road fatalities More than 100 people do not come back home everyday Source: July 2006 EU Commission 30 March 2008-2007 Results and Outlook
Driving assistance growth drivers DRIVING ASSISTANCE (pct fitment rates) 45 30 LED rear lighting Park Assist (including Park4U) 15 All around Cameras 0 2006 2010 2015 Source Valeo 31 March 2008-2007 Results and Outlook
Successful innovations Blind spot detection system 2007 PACE Award winner 28 cars equipped by 2010 Best-in-class multi-beam radar system Significant new orders booked in H2 07 32 March 2008-2007 Results and Outlook
Successful innovations Park4U Ultrasonic technology-based driving assistance system World premiere on the VW Touran. Now on VW Tiguan and Cross Touran 12 models to be equipped New generation introduced at the Frankfurt auto show 33 March 2008-2007 Results and Outlook
Significant increase in potential content per vehicle through the Domain approach MAXIMUM CONTENT per vehicle 2005 2010 Powertrain Efficiency 680 1,480 +118% Driving Assistance 710 1,230 Comfort Enhancement 940 1,250 2,430 3,960 Total +73% +63% +62% 34 March 2008-2007 Results and Outlook
3.2bn or a third of new orders related to innovative products ORDER INTAKE/ X OE SALES (excluding VMA & VCS in 2006 & 2007) 1.1x 1.3x 1.3x 8.6bn 9.9bn 10.1bn Others +50% Innovative products 2005 2006 2007 35 March 2008-2007 Results and Outlook
Focusing on Domains Disposal of the wiring harness business Achieved 255m in enterprise value (0.47X 2007 sales) 237m Group net financial debt reduction 213m Group goodwill reduction Rationale of the disposal Low value added Lack of customer diversification No value added to our Domain approach 36 March 2008-2007 Results and Outlook
Focusing on Domains Acquisition of Connaught Electronics Expert in camera - based vision solutions for low speed maneuvering Strengthens the Driving Assistance Domain 37 March 2008-2007 Results and Outlook
Quality levels - now a 10 ppm* organization 185 CUSTOMER RETURNS in parts per million 2006 63 sites 47% Including 15 sites at 0 ppm 86 sites 65% 53 32 15 10 2007 Including 18 sites at 0 ppm 2003 2004 2005 2006 2007 * Defective parts per million Single digit PPM sites 38 March 2008-2007 Results and Outlook
Rationalized industrial footprint 31/03/2001 31/12/2007 perimeter changes included LCC/ HCC BREAKDOWN* 170-47 -41 +29 +14 125 72% 70% 68% % Productive workers 32% 28% 30% 66% 34% 62% 38% 56% 44% 52% 48% 31/03/2001 Closures Disposals Openings Acquis. 31/12/2007 2001 2002 2003 2004 2005 2006 2007 HCC LCC * Continued operations 39 March 2008-2007 Results and Outlook
Rebalancing new business to Asia ORDER INTAKE 2007 SALES Asia 20% Rest of World 2% Asia 12% Rest of World 2% South America 4% South America 6% North America 14% Europe 60% North America 14% Europe 66% 40 March 2008-2007 Results and Outlook
Value Creation
2008 objectives Trading conditions Valeo Global car production growth: +2.5%, down from 5% in 2007 Raw material prices stabilize at a high level Customer mix improvement Moderate raw material tailwinds Short term operational levers: Rochester closure, Compressors Reengineering plan deployment Target operating margin improvement 42 March 2008-2007 Results and Outlook
6% operating margin objective in 2010 Updated identified levers OPERATING MARGIN (2006-2010) ppt IMPROVEMENT LEVERS 8% % 6% 4% 2% 2006A 2007A 2008 2009 2010 2007 2008 2009 2010 Structure productivity Raw material costs Growth Total 43 March 2008-2007 Results and Outlook
Contract renewal will support raw material headwind absorption Copper ($/T) 9 000 8 000 7 000 Signature SOP Contract H2-07/ SOP H1-09 Delta:$0 6 000 5 000 Delta: $3,458 Contract H1-05/ SOP H1-07 4 000 3 000 Delta: $1,305 Contract H1-04/ SOP H1-06 2 000 1 000 0 H1-1 3 H2-1 2 H1-1 2 H2-1 1 H1-1 1 H2-1 0 H1-1 0 H2-0 9 H1-0 9 H2-0 8 H1-0 8 H2-0 7 H1-0 7 H2-0 6 H1-0 6 H2-0 5 H1-0 5 H2-0 4 H1-0 4 H2-0 3 H1-0 3 H2-0 2 H1-0 2 H2-01 44 March 2008-2007 Results and Outlook
Investment case Upside potential from the Green and Safe drivers Resilient operational model and financial structure Value creation potential Steady dividend growth policy; 2007 proposal of 1.20/share 2010 financial targets 1.3 Bn EBITDA 27% ROCE 45 March 2008-2007 Results and Outlook
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 46 March 2008-2007 Results and Outlook
Back-up
Quarterly P&L 2007 2006 (in euro million) 4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q NET SALES 2,397 Other operating revenues 41 TOTAL OPERATING REVENUES 2,438 GROSS MARGIN 386 as % of net sales 16.1% Research & Development expenditure (171) Selling expenses (51) Administrative expenses (109) Other income & expenses (8) OPERATING INCOME 88 as % of operating revenues 3.6% Cost of net debt (12) Other financial income and expense (11) Equity in net earnings of associates 2 INCOME BEFORE INCOME TAXES 67 Income taxes (13) INCOME FROM CONTINUING OPERATIONS54 Non-strategic activities (3) NET INCOME FOR THE PERIOD 51 Minority interests (1) NET INCOME ATTRIBUTABLE TO EQUITY 50 HOLDERS OF THE COMPANY 2,214 31 2,245 340 15.4% (156) (45) (97) (9) 64 2.9% (14) (15) 1 36 (23) 13 (52) (39) (1) (40) 2,472 35 2,507 394 15.9% (173) (48) (105) (13) 90 3.6% (13) (10) 5 72 (26) 46 (4) 42 (4) 38 2,472 27 2,499 377 15.3% (168) (49) (113) 3 77 3.1% (12) (10) 0 55 (21) 34 (0) 34 (1) 33 2,341 35 2,376 351 15.0% (163) (47) (110) (15) 51 2.1% (11) (11) (6) 23 (4) 19 42 61 (1) 60 2,125 28 2,153 322 15.2% (146) (45) (94) (15) 50 2.3% (12) (6) 0 32 (22) 10 (2) 8 (1) 7 2,483 28 2,511 396 15.9% (161) (49) (110) 1 105 4.2% (14) 17 3 111 (31) 80 (7) 73 (1) 72 2,487 23 2,510 394 15.8% (170) (49) (113) (20) 65 2.6% (14) (8) 2 45 (10) 35 (11) 24 (2) 22 48 March 2008-2007 Results and Outlook
Share Information Share Data Bloomberg Ticker Reuters Ticker ISIN Number Shares outstanding as per 31.12.2007 FR FP VLOF.PA FR 000130338 78 209 617 ADR Data Ratio (ordinary share: ADR) Bloomberg Ticker Reuters Ticker ISIN Number Type Exchange Sponsor 1:2 VLEEY US VLEEY PK US 9191343048 Level 1 OTC JP Morgan Chase 49 March 2008-2007 Results and Outlook
Enabling a better automotive world