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

PARIS, February 24, 2010 /PRNewswire/ --

    
    - Sales Growth of 21%
    - Gross Margin at 17.7% of Sales and Operating Margin at 5.5% of Sales:
      Highest Levels Recorded in the Past Five Years
    - Positive Net Income of 56 Million Euros, Bringing 2009 Full-Year Net
      Income Group Share to a Loss of 153 Million Euros
    - Strengthened Free Cash Flow[1] in the Fourth Quarter, at 153 Million
      Euros
    - Decrease in Net Financial Debt of 95 Million Euros in the
      Fourth Quarter, to 722 Million Euros at December 31, 2009

Following the meeting of its Board of Directors today, Valeo presented its results for the fourth quarter 2009.

Jacques Aschenbroich, Valeo Chief Executive Officer, declared: "I would like to thank Valeo employees for their mobilization throughout 2009, which enabled the Group to achieve a significant cost reduction and, in the fourth quarter, an encouraging level of profitability. Moreover, in this difficult period, we have prepared for the future by increasing our Research and Development expenses and our investments in Asia and in emerging countries during the year."

    
    In million euros                   Quarterly evolution
                                        2009             2008  2009/2008
                               Q1*   Q2*   Q3*   Q4*     Q4*      D
    Sales                    1,624 1,848 1,913 2,114    1,750   +21%
    Gross margin[2]            185   268   310   375      212   +77%
             % of sales       11.4% 14.5% 16.2% 17.7%    12.1%  +5.6pts
    Operating margin[3]        (66)   15    68    116    (38)    na
             % of sales       -4.1% 0.8%  3.6%  5.5%     -2.2%  +7.7pts
    EBITDA[4]                   73   156   192   249       99  +151%
             % of sales        4.5% 8.4% 10.0% 11.8%      5.7%   na
                              (159) (54)     4    56    (313)    na
    Net income
    Group share
    Free cash flow1            (88)   84     6   153       14    na
    Net financial debt         933   841   817   722      821   -12%

* Unaudited

Fourth quarter consolidated results

The turnaround of automotive production that began in the second quarter 2009 continued throughout the year and particularly in the fourth quarter (+21% versus the fourth quarter 2008). The positive impact of vehicle scrapping schemes and other incentives enabled sustained production in Europe and the acceleration of growth in emerging countries, particularly in Asia (+103% in China) and in Brazil (+52%). Automotive output in North America also improved in the fourth quarter.

Original equipment order intake totaled 1.52 times sales for the quarter, the highest ratio ever (with a similar level of performance among all Business Groups). Supporting its customers' interest in the Group's technologies, Valeo pursued its R&D efforts with a net expenditure of 125 million euros in the fourth quarter (5.9% of sales).

Benefiting from a more favorable automotive environment and the outperformance of the original equipment activity on its main markets, the Group generated 2,114 million euros in sales in the fourth quarter 2009, up by 21% versus the fourth quarter 2008 (+10.5% versus the third quarter 2009).

Sales in Europe totaled 1,329 million euros (63% of consolidated sales), up by 21% versus the fourth quarter 2008 (+10% versus the third quarter 2009). In Asia, the Group's second largest contributing region, sales reached 364 million euros (17% of consolidated sales), up by 31% versus the fourth quarter 2008 (+16% versus the third quarter 2009). Valeo's performance was particularly notable in China (the leading contributing country in Asia) and in Brazil where sales growth was 84% and 71%, respectively, versus the fourth quarter 2008 (+16% and +3% versus the third quarter 2009).

Thanks to improved sales and the implementation of the cost reduction and productivity enhancement plan, gross margin rose to 375 million euros in the fourth quarter 2009, or 17.7% of sales, the highest level recorded in the past five years (up by 1.5 point versus the third quarter 2009).

Operating margin (less other income and expenses) was 116 million euros in the fourth quarter 2009, or 5.5% of sales, also the highest level recorded in the past five years (up by 1.9 point versus the third quarter 2009).

Net income in the fourth quarter showed a profit of 56 million euros, following a profit of 4 million euros in the third quarter 2009.

Improved operating performance, combined with the strict management of investments (down by 26 million euros versus the fourth quarter 2008) and working capital, enabled the Group to generate a positive free cash flow of 153 million euros, versus 6 million euros in the third quarter 2009.

Net financial debt stood at 722 million euros at December 31, 2009, down by 95 million euros versus the third quarter 2009 (817 million euros).

Simplified accounts for 2009

    
    In million euros                   2008*      2009*      Change
    Sales                              8,677      7,499        -14%
    Gross margin                       1,327      1,138        -14%
    % of sales                          15.3%      15.2%     -0.1pts
    Operating margin[5]                  230        133        -42%
    % of sales                           2.7%       1.8%      -0.9pt
    Operating income                    (52)         84         na
    % of sales                          -0.6%       1.1%      +1.7pt
    Cost of financial debt              (45)       (60)        +33%

    Other financial income and          (59)       (57)         -3%
    expenses
    Equity in net earnings/losses of       9       (34)         na
    associates
    Net income Group share             (207)      (153)        -26%
    Basic earnings per share           -2.73      -2.04        +25%
    (continued operations) (EUR)
    Free cash flow[6]                    118        155        +31%
    Net financial debt                   821        722        -12%

* audited

For the year 2009, sales were down by 14% versus 2008. Following a difficult first quarter 2009, during which Valeo recorded a 33% drop in sales, the Group benefited from a turnaround in automotive production starting in the second quarter, thanks to the implementation of vehicle scrapping schemes in Europe and accelerated growth in emerging countries, particularly in Asia.

The cost reduction and productivity enhancement plan amounting to 480 million euros (144 million euros in savings achieved during the fourth quarter 2008 and 336 million euros achieved in 2009 despite the turnaround of business starting in the second quarter), enabled the Group to adjust its cost structure to the current level of activity and therefore lower its break-even point (at the level of operating margin) by 13%, corresponding to around 7 billion euros in sales.

Despite the continuous rise of raw material prices, at end 2009 their average cost remained lower than in 2008, contributing to a 1 point improvement in margins for the year.

Despite the negative impact of the decrease in sales, gross margin amounted to 15.2% of sales (1,138 million euros) versus 15.3% of sales (1,327 million euros) in 2008, thanks in particular to the savings measures implemented since the start of the crisis and which took effect in 2009. Operating margin was 1.8% of sales (133 million euros) versus 2.7% of sales (230 million euros) in 2008.

(CONTINUA)