Valeo: Results for First Nine Months 2004

PARIS, October 18, 2004;

- Second Consecutive Quarter of Organic Sales Growth

- Impact of Raw Material Prices Contained

- Debt Down by 215 Million Euros

Following today's meeting of the Board of Directors, Valeo presented its consolidated accounts for the third quarter 2004.

    
    In euro millions               9 months                3rd quarter
                           2004    2003   change      2004    2003     change
    Sales                  7,107   6,932  + 2.5%      2,179   2,086    + 4.5%
    Gross margin           1,259   1,227  + 2.6%        376     364    + 3.3%
            % Sales        17.7%   17.7%    0.0 pt    17.3%   17.4%   -0.1 pt
    Operating income         341     331  + 3.0%         90      90      0.0%
            % Sales         4.8%    4.8%    0.0 pt     4.1%    4.3%    -0.2pt
    Operating income less    320     302  + 6.0%         82      79    + 3.8%
    financial expense
           % Sales.         4.5%    4.4%  + 0.1 pt     3.8%    3.8%     0.0pt
    Net income from          218     201  + 8.5%         42      50   - 16.0%
    consolidated companies
            % Sales         3.1%    2.9%   + 0.2pt     1.9%    2.4%   -0.5 pt
    Net income               134     127   + 5.5%        14      25   - 44.0%
           % Sales.         1.9%    1.8%   + 0.1 pt    0.6%    1.2%   -0.6 pt

NB: non audited quarterly figures

For the second consecutive quarter, the Group's organic growth was positive in the third quarter. For the first nine months, net income improved by 5.5% and net operating cash flow by 32.8%, despite weak sales and very strong pressure on raw material procurement costs.

Group results for the third quarter 2004

In the third quarter 2004, Valeo's sales stood at 2,179 million euros, an increase of 4.5% as compared with the third quarter 2003. The impact of the changes in reporting entity was 5.4%. At constant reporting entity and exchange rates the Group's sales increased 0.9% during the quarter. It is estimated that light vehicle production increased slightly in Western Europe and fell slightly in North America. In South America volumes increased by more than 30%. The increase of production in Asia remained at around 6% thanks to the rebound in Korea, but this trend hides a strong slowdown in growth in China.

Gross margin for the quarter rose 3.3% over the previous year to 376 million euros to reach 17.3% of sales. This was achieved despite the negative impact of the pressure on raw material prices that the Group estimates at 1 point of margin for the period. Offsetting measures enabled the net impact on the margin to be reduced to 0.5 point during the period.

The Group's operating income remained stable at 90 million euros or 4.1% of sales versus 4.3% in the comparable period for 2003. A slight increase in R&D expenditure as a percentage of sales was offset by a reduction in sales and administrative expenses.

Operating income less financial charges progressed by 3.8% in the quarter and by 6% for the first nine months. In this same period net income increased by 5.5%.

For the first nine months of the year net operating cash flow amounted to 220 million euros, an increase of 32.8% over the equivalent period in 2003. Net operating cash flow includes net capital expenditure of 324 million euros as compared with 358 million euros for the same period in 2003.

At end September 2004, Valeo's financial indebtedness was 353 million euros, an improvement of 215 million euros as compared with end 2003 and of 37 million euros as compared with 30 June 2004. The net debt to equity ratio of the consolidated entity stood at 17%, a decrease of 10 percentage points as compared with end December 2003.

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 130 plants, 65 R&D centres, 9 distribution centres and employs 70,200 people in 26 countries worldwide.