Valeo: Fourth Quarter 2009: Operating Margin of 5.5%, Free Cash Flow of 153 Million Euros and Positive Net Income of 56

The cost of net financial debt was 60 million euros, up by 15 million euros versus 2008. This change reflects the renegotiation and renewal of confirmed bank lines within a degraded credit market environment, as well as the setting up of European Investment Bank funding of 225 million euros reinvested in a context of particularly low short-term interest rates.

Other financial income and expenses showed a net expense of 57 million euros versus a net expense of 59 million euros in 2008, following the booking of a 17 million euro expense in 2008 and a 5 million euro expense in 2009 relating to raw material hedges which turned out to be overhedged in the context of an unfavorable evolution of prices.

Valeo's share of the results of associated companies is a loss of 34 million euros, including -36.5 million euros from the share in the negative result of the Japanese group Ichikoh (in which Valeo holds a 31.6% stake). Therefore the income before taxes showed a loss of 67 million euros (versus a loss of 147 million euros in 2008).

Net income Group share showed a loss of 153 million euros versus a loss of 207 million euros in 2008.

Improved operating performance following the implementation of the cost reduction plan, combined with controlled restructuring expenses and the strict management of investments and working capital, enabled the Group to generate a free cash flow of 155 million euros in 2009.

Thanks to the generation of cash and the setting up of 225 million euros in funding from the European Investment Bank, at December 31, 2009 the Group had a cash balance of 860 million euros. The Group also benefits from confirmed bilateral lines of credit worth 1 billion euros which remained undrawn at end December.

Net financial debt totaled 722 million euros at December 31, 2009, down by 99 million euros versus December 31, 2008 (821 million euros).

The leverage ratio remained stable at 1.1 times EBITDA (calculated over 12 months). The gearing ratio (net financial debt to shareholders' equity excluding minority interests) was 59%, down versus December 31, 2008 (63%).

Highlights

As part of its development strategy in high growth potential countries, Valeo increased its stake to 100% (up from 60%) in the Changchun, China-based entity Valeo Compressor (Changchun) Co., Ltd, which develops and produces compressors.

This operation confirms Valeo's interest in the Chinese market, where it has facilities in the five automotive industry hubs (Shanghai, Wuhan, Nanjing, Guangzhou and Changchun). The Group employs 4,400 people in China in 8 development centers, 15 production plants, and a distribution center.

Valeo's 2009 consolidated sales in China totaled 448 million euros, up by 46% versus 2008.

Annual General Shareholders' Meeting notice

It will be proposed to the Annual General Shareholders' Meeting to be held on June 3, 2010 not to pay a dividend for 2009. It will also be proposed to renew as Board Members Daniel Camus and Jérôme Contamine whose terms of office are set to expire, to ratify the cooptation of Michel de Fabiani as a Board Member and to appoint Noëlle Lenoir as a new Board Member. Mrs Lenoir is a lawyer, a Member of the French Council of State, a former Member of the French Constitutional Council, and a former Deputy Minister in charge of European Affairs.

Outlook

For 2010, Valeo expects, as compared with 2009, a continued turnaround of global automotive production with a more sustained growth in the first half and situations that vary according to the region:

    
    - In a still uncertain environment, a slight decrease in
      production in Europe
    - A further improvement in Asia
    - A recovery in North America

Based on this scenario, Valeo has set as its objective for 2010 an operating margin level around double that of 2009.

Valeo Investor Day

An Investor Day will be held on March 10, 2010 in Paris.

Valeo is an independent industrial Group fully focused on the design, production and sale of components, integrated systems and modules for cars and trucks. Valeo ranks among the world's top automotive suppliers. The Group has 120 plants, 21 Research centers, 40 Development centers, 10 distribution platforms and employs 52,200 people in 27 countries worldwide.

[1] Free cash flow corresponds to net operating cash flow less net disbursements on tangible/intangible assets. This indicator is therefore calculated before payment of financial expenses

[2] As of January 1, 2009, the presentation of the financial statements has been modified, with other operating revenues now being mainly reclassified as deductible research and development expenses

[3] Operating income less other income and expenses

[4] Operating margin less amortization

[5] Operating income less other income and expenses

[6] Free cash flow corresponds to net operating cash flow less net disbursements on tangible/intangible assets. This indicator is therefore calculated before payment of financial expenses

For more information about the Valeo Group and its activities, please visit our web site http://www.valeo.com.

For additional information, please contact: Kate Philipps, Valeo Group Communications Director, Tel.: +33-1-40-55-20-65, Thierry Lacorre, Valeo Group Investor Relations Director, Tel.: +33-1-40-20-39