Valeo 2003 Results
Increase in Margins in a Difficult Environment
Increase in Order Intake
PARIS, Feb. 10 -- Following a meeting of the Board of Directors, Valeo announced its audited results for 2003.
In millions of euros First nine 4th 2003 2002 Change
months Quarter
2003* 2003*
Sales 6,932 2,302 9,234 9,803 - 6 %
Gross Margin 1,227 426 1,653 1,702
% sales 17.7 % 18.5 % 17.9 % 17.4 % + 0.5 pt
Operating income 331 134 465 487
% sales 4.8 % 5.8 % 5.0 % 5.0 % =
Operating income 302 122 424 425
less financial
charges
% sales 4.4 % 5.3 % 4.6 % 4.3 % + 0.3 pt
Net income 127 54 181 135
% sales 1.8 % 2.3 % 2.0 % 1.4 % + 0.6 pt
* unaudited quarterly figures
Sales evolution
Consolidated sales fell by 6% compared with 2002, primarily due to the drop in the dollar: exchange rate variations led to a 5% fall in sales in euros. At constant reporting entity and exchange rates, sales fell by 1%. In Europe, Valeo sales were stable at constant reporting entity and exchange rate, in line with automobile production. In North America, sales fell by 13% at constant reporting entity and exchange rates, while production was down by 3%. This evolution is the consequence of the deteriorated situation of the Valeo Electrical Systems Inc. subsidiary prior to the restructuring which began at the end of 2001. In Asia, sales grew by 9% at constant reporting entity and exchange rates, while automobile production increased by 7%. In South America, while production grew by 2%, Valeo sales increased by 25% at constant reporting entity and exchange rates.
The Aftermarket activity's sales grew by 3% at constant reporting entity and exchange rates, to represent 18% of the Group's total sales.
The changes in reporting entity correspond to disposals of peripheral non-strategic activities (sale of wiring business in India and heavy vehicle signal lighting in France) and to the strengthening of the Group's Asian activities (see Presence in Asia section below).
2003 Highlights
In 2003, Valeo continued to implement its rationalisation plan which aims to adapt the production base to customer needs in terms of both competitiveness and geographical presence:
* At 31 December 2003, the Group had 122 production plants, excluding the
consolidation of Zexel Valeo Climate Control, compared with 170 at the
beginning of 2001;
* The proportion of plants in low-cost production areas rose at the same
time from 25% to 41%;
* The optimisation of the supply base continued: at end 2003, Valeo had
2,475 suppliers, excluding the consolidation of Zexel Valeo Climate
Control, compared with 4,500 at the beginning of 2001. At the same
time, the Group selected 110 "Valeo Integrated Partners".
During the second half of 2003, several operations took place which strengthened the Group's presence in Asia:
* Valeo signed a letter of intent with Furukawa Electric in Japan to
jointly develop automotive wiring harness systems;
* Valeo acquired an additional 10% of the capital of Zexel Valeo Climate
Control, which designs and develops air-conditioning systems for
customers in Asia and compressors for the worldwide market. Valeo's
shareholding is now 50%;
* Valeo increased its stake in two joint ventures in China: Shanghai
Valeo Automotive Electrical Systems, from 30 to 50%, and Valeo Shanghai
Automotive Electrical Motors and Wiper Systems, from 50 to 55%;
* In the area of R&D, Valeo launched the construction of its first
technical center in China which will develop advanced lighting systems
for Asian and Western vehicle manufacturers.
As a result of these actions, Valeo recorded major orders in all of its markets, with all of its customers and for all of its product lines. These commercial successes during the renewal of vehicle models and the successful commercialisation of numerous innovative products with a high technology content led to an increase in order intake to 1.3 times OEM sales, compared with 1.2 times sales in 2002.
Improvement in results
The rationalisation of the industrial base contributed significantly to the increase in the gross margin rate, which improved by 0.5 points to reach 17.9% of sales.
The Group's operating margin reached 5.0% of sales, the same level as in 2002. The increase in the gross margin rate allowed the technological and sales efforts to be enhanced: research and development and sales expenses accounted for 6.1% and 2.0% of sales respectively (compared with 5.9% and 1.9% in 2002).
Millions of euros 2003 2002 Operating income 465 487 Financial result (41) (62) Other income and expenses (89) (74) Taxes (55) (106) Net income before amortisation of goodwill 271 230 Amortisation of goodwill (90) (95) Net income 181 135
The tax charge in 2003 includes in particular a tax break corresponding to a fraction of the tax paid in 2001 on the capital gain from the sale of the 50% shareholding in LuK.
Net income totaled 181 million euros, up by 34% compared with 2002, representing 2.0% of sales.
Financial soundness
The improvement in results and the efficient management of working capital requirements enabled the Group to reduce its net indebtedness before proceeding to acquire the additional 10% of the capital of Zexel Valeo Climate Control Corporation. After consolidation by integration of the debt of this entity, the Group had a net debt level stable at 568 million euros at the end of 2003 (compared with 564 million euros at the end of 2002), while having distributed 81 million euros in dividends. At 31 December 2003 the Group's net debt-to-equity ratio was 29%.
Annual General Meeting of Shareholders and Dividend
The combined Annual General Meeting of Shareholders is called for 26 March 2003 (first notice) and, failing a quorum, will be held on second notice on 5 April 2003.
Noting the improved results of the Group, the Board of Directors will propose to the next Annual General Meeting of Shareholders the payment of a net dividend of 1.05 euros per share, an increase of 5% compared with the dividend paid in 2003. The implied yield of this dividend, including a tax credit of 50%, is over 4.5% (on the basis of the share price at the beginning of February 2004).
Outlook
In 2003 Valeo strengthened its competitive position through the improved competitiveness of its global production base and its innovative technological product offering. The Group is once again among the world's leading automotive suppliers. At the beginning of 2004, the Group formulated its strategic ambitions with an action plan based on three business development drivers:
* In terms of geography, Valeo will play a significant role in the growth
of the Asian market, and in particular in China. The Group has a
strong presence in the region, with 28 industrial sites. Valeo also
intends to now benefit from its favorable competitive position in the
United States;
* Strengthening the aftermarket business of Valeo will also be a key
growth factor. Following its reorganisation in 2003, the Group now has
an organisation designed to grow market share by increasing its product
range and its geographical presence.
* The Group's technology offering and commercial innovation will be a
powerful driver for growth. Their efficiency will be strengthened by a
focus on three Domains: Driving Assistance, Powertrain Efficiency and
Comfort Enhancement. The Industrial Branches will benefit from
enhanced synergies in the research, development and marketing of their
innovations.
This positioning will enable Valeo to demonstrate its growth potential in the medium term while continuing to improve its profitability.
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 129 plants, 65 R&D centers, 9 distribution centers and employs 68,200 people in 26 countries worldwide.
For more information on the Group and its activities place consult the website: www.valeo.com