FY-2008 RESULTS Thierry Morin – Chairman & CEO February 13, 2009
Agenda 1 Q4’08 financial review 2 FY 2008 financial review 3 Business highlights Outlook 4 February 13, 2009 – FY-2008 Results I 2 I
2008 Market environment Financial crisis / general credit crunch Global automotive production collapse starting in H2 08. � Valeo’s reference market down by 6% for the year Raw material prices decline in H2 High foreign exchange rate volatility February 13, 2009 – FY-2008 Results I 3 I
Valeo’s reference market quarterly evolution 2008 vs 2007 Automotive Production +2.8% +1.7% -4.4% -25.2% Q3 Q4 Q1 Q2 February 13, 2009 – FY-2008 Results I 4 I
Q4’08 financial review
Q4’08 key figures Q4-2008 Q4-2007 Change In euro million 2,438 Total operating revenues 1,789 -26.6% 386 208 -46.1% Gross margin as a % of net sales 11.9% 16.1% - 4.2 pts 96 (38) Operating margin na 3.9 % as a % of total operating revenues -2.1 % - 6.0 pts 50 (313) Net income na as a % of total operating revenues -17.5% 2.1% -19.6 pts February 13, 2009 – FY-2008 Results I 6 I
Operating margin walkdown As % of total operating revenues +0.5% -0.4% 3.9% +8.0% -2.1% -14.1% Raw Pass through / Productivity/Cost Q4’07 Q4’08 material Contract renewal Activity adjustment price February 13, 2009 – FY-2008 Results I 7 I
Q4 Crisis action plan End June End Sept. End Dec. Change 2008 2008 2008 Q4-2008 (7,200) Headcount 59,700 58,400 51,200 -12% 647 664 543 (121) Inventories (m€) -18% 7.3% 7.2% 6.2% -1.0 pt Prices - - - +1.0 pt February 13, 2009 – FY-2008 Results I 8 I
FY 2008 financial review
2008 highlights Continued margin increase until Q3 � Compressors turnaround � Closure of the Rochester Plant � Raw material stabilization Free Cash Flow increase Proactivity demonstrated in Q4 � Headcount adjustment plan Some positives for the year � Raw material tailwinds � Record order intake � Strategic initiatives confirmed (technology, emerging markets) � Liquidity secured; debt under control February 13, 2009 – FY-2008 Results I 10 I
Full Year key figures 2008 2007 Change In euro million 9,689 Total operating revenues 8,815 -9.0% 1,497 1,314 -12.2% Gross margin as a % of net sales 15.2% 15.7% - 0.5 pt 346 230 Operating margin -33.5% as a % of total operating revenues 2.6% 3.6% -1.0 pt 81 (207) Net income na as a % of total operating revenues -3.1 pts -2.3% 0.8% Basic earnings per share from 1.82 (2.73) na continuing operations (€) February 13, 2009 – FY-2008 Results I 11 I
Total operating revenues In euro million FY-2007 FY-2008 -4.3% -9.0% Perimeter -0.7% 9,689 8,815 Forex -1.5% Prices* -2.5% Volumes* -4.3% *at identical functions February 13, 2009 – FY-2008 Results I 12 I
2008 OE light vehicles net sales Geographical trends Market -4% Market -16% -12%* Europe -14%* North America 66% of total Sales 12% of total Sales Market +1% +11%* Asia Market +5% 15% of total Sales +5%* South America 7% of total Sales Valeo sales *At same perimeter & exchange rate February 13, 2009 – FY-2008 Results I 13 I
Sales by customers – OE light vehicles A same perimeter & exchange rates -11% FY-2007 FY-2008 -13% = +3% -13% -4% -7% -40% -12% +11% -9% VW largest customer in Q4 February 13, 2009 – FY-2008 Results I 14 I
Results 2008 2007 Change In euro million 9,689 Total operating revenues 8,815 -9.0% 1,497 1,314 -12.2% Gross margin as a % of net sales 15.7% 15.2% -0.5 pt February 13, 2009 – FY-2008 Results I 15 I
Raw material impact % of sales - cumulative Gross impact Net impact Yearly average 5.1 4.7 4.7 4.6 4.7 4.5 4.5 4.3 4.3 4.2 3.6 1.8 2.0 2.2 2.2 2.2 2.1 1.9 1.8 1.8 1.8 1.7 0.7 1.6 1.1 0.5 2004 2005 2006 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 February 13, 2009 – FY-2008 Results I 16 I
Headcount reduction -10,000 61,200 59,700 58,400 51,200 Dec-2007 June-08 Sept-08 Dec-08 February 13, 2009 – FY-2008 Results I 17 I
Results (cont.) 2008 2007 Change In euro million (534) (488) -8.6% R&D expenses (net) 5.5% % of total operating revenues 5.5% (617) -3.2% (596) SG&A % of total operating revenues 6.8% 6.4% (1,151) (1,084) Total overhead -5.8% % of total operating revenues 12.3% 11.9% (27) (282) na Other income (expenses) % of total operating revenues 3.2% 0.3% 319 na Operating income (52) % of total operating revenues -0.6% 3.3% February 13, 2009 – FY-2008 Results I 18 I
R & D Costs In euro millions and % of total operating revenues 668 639 -4% (6.9%) (7.2%) 134 Customer funding 151 +13% Net costs Valeo -9% Net costs Valeo 534 488 5,5% 5,5% 2007 2008 February 13, 2009 – FY-2008 Results I 19 I
Operating margin walkdown % of total operating revenues +0.4 Pt 3.4% 3.8% +0.3 -0.1 +2.8 9 months 9 months 2007 2008 3.6 2.6 -4.0 Pass 3.9% Raw through / Productivity/ -6 Pts 2007 2008 material Contract Volume / Cost price renewal Activity adjustment -2.1% Q4-2007 Q4-2008 February 13, 2009 – FY-2008 Results I 20 I
Results (cont.) 2008 2007 Change In euro million 319 (52) Operating income na Cost of net debt (45) (51) -11.8% Other financial expenses (59) (46) +28.3% Associates 9 8 +12.5% 230 (147) na Income before taxes Taxes (51) (83) -38.6% Effective tax rate 37.4% Non strategic activities (59) -98.3% (1) Minorities (7) +14.3% (8) 81 Net income (207) na February 13, 2009 – FY-2008 Results I 21 I
Cash flow / Balance sheet
Net financial debt walkdown 2008 2007 In euro million • Gross operating cash flow 623 765 • Cash Tax -71 -85 • Change in working capital 178 -42 • Operating cash flow 730 638 • Interest paid -34 -47 • Acquisitions of intangible assets -160 -138 • Acquisition of tangible assets (net) -453 -388 +19 +39 • Free cash flow 83 65 +99 -83 -52 799 821 Free Buy Forex/ cash flow M&A Dividends back Others Net debt @ Net debt @ Jan. 1, 2008 Dec. 31, 2008 February 13, 2009 - FY-2008 results I 23
Working Capital Evolution In euro million +27 Evolution between 2007 and 2008 Working Capital -224 M€ -178 M€ at same perimeter & exchange rate -197 Working capital = inventories + accounts and notes receivable + other current assets + taxes recoverable – accounts and notes payable – taxes payable – other current liabilities February 13, 2009 - FY-2008 results I 24
Inventories In Euro million and in % of annualized revenues +38 M€ 647 -104 M€ 609 543 6.4% 6.4% 6.2% end-2007 H1-2008 end-2008 February 13, 2009 - FY-2008 results I 25
Capex In euro million and in % of total operating revenues 638 +10% 7.2% 582 6.0% 147 122 Capitalized R&D 460 491 Industrial investments 2008 2007 February 13, 2009 - FY-2008 results I 26
Shareholders equity and net debt In euro million 1,782 1,752 Shareholders Equity 1,362 incl. minority interests Net Debt 968 821 799 Gearing Gearing Gearing 55%* 45%* 60%* 1,263 968 31/12/2007 31/12/2006 31/12/2008 *Excluding minority interest : 2006 - 56% 2007 - 46% 2008 - 63% February 13, 2009 - FY-2008 results I 27
Debt structure (Dec. 2008) € 1,482m In euro million EMTN LT debt 596 Océane 24/06/2013 € 1,290m 444 Syndicated Net debt Short loan € 821m 01/01/2011 Term debt 222 Others 166 29/07/2012 6 2009 2010 2011 2012 2013 ● Average maturity: 3.5 years Cash. ● 83% fixed € 661m ST debt ● Average cost: 4.9% € 192m Covenants ● - Change of control clause (€600m EMTN 2013) - Net debt/ equity <120% (syndicated loan)* - No rating trigger * excluding minority interest February 13, 2009 - FY-2008 results I 28
Liquidity Situation No debt reimbursement before January 2011 €661m cash available at YE 2008 Short term debt � Commercial paper amount reduced to 34m€ � Short term loans and overdrafts: 132m€ €1.2bn confirmed credit lines � With 10 banks (Aa2 rated on average) � Debt/ equity <120% covenant � No draw down as of December 31, 2008 February 13, 2009 - FY-2008 results I 29
Business highlights
Business and corporate development Incremental business line expansion in India/ Russia Portfolio adjustments: � Disposal of the truck engine cooling business to EQT – ~50% of the €2bn disposal program now completed – Further divestitures to come, market permitting February 13, 2009 - FY-2008 results I 31
Technology Breakthroughs Public funding opportunities � OSEO: 55m€ funding for powertrain advanced technologies Innovation � Park4U™: 18 contracts � Several major contracts for micro-hybrid technology February 13, 2009 - FY-2008 results I 32
Quality 65% of sites 69% of sites single digit ppm single digit ppm Including Including 25 % of sites 15 % of sites at 0 ppm at 0 ppm 2007 2008 VALEO has been awarded for the first time Toyota “Excellence Quality Performance Award” February 13, 2009 - FY-2008 results I 33
Solid order intake In billion euros ORDER INTAKE/ X OE SALES 1.3x 1.4x 1.3x 10.1 10.1 9.9 45% with German Others OEMs 32% Innovative products 2006 2007 2008 February 13, 2009 - FY-2008 results I 34
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