Valeo: 2005 First Quarter Results
PARIS, France, April 25 --
- Margins affected by strong pressure on raw material prices (net impact of 1.1 points)
- Net income comparison impacted by 83 million euro non-recurrent tax gain in 2004
Following today's meeting of its Board of Directors, Valeo presented its consolidated accounts for the first quarter 2005. These accounts and the comparison with 2004 were prepared using International Financial Reporting Standards (IFRS), apart from IAS 32 and 39 which were only applicable from 1 January 2005.
In millions of euros 1 January-31 March (IFRS)
(unaudited)
2005 2004 change
Net sales 2,324 2,362 -1.6%
Total operating revenues 2,344 2,379 -1.5%
Gross margin 377 408 -7.6%
% of sales 16.2% 17.3% -1.1 pt
Operating margin(1) 72 108 -33.3%
% of total revenues 3.1% 4.5% -1.4 pt
Operating income 55 88 -37.5%
% of total revenues 2.3% 3.7% -1.4 pt
Income before tax 36 70 -48.6%
% of total revenues 1.5% 2.9% -1.4 pt
Net income from 26 106(2) -75.5%
consolidated companies
% of total revenues 1.1% 4.5% -3.4pt
Net income 25 105* -76.2%
% of total revenues 1.1% 4.4% -3.3 pt
1) operating income before other income/expense
2) of which a non-recurrent tax gain of 83 million euros
The first quarter accounts reflect the drop in automobile production in the main Valeo markets as well as the marked increase in raw material prices over the period. The year on year net income comparison is impacted by a non-recurrent tax gain in 2004 and the application from 1 January 2005 of accounting standards for financial instruments and own-held shares.
Group results for the first quarter 2005
In the first quarter 2005, Valeo's sales totaled 2,324 million euros, a drop of 1.6% as compared to the first quarter 2004. Excluding exchange rate effects (+0.4%) and reporting entity changes (+1.7% due primarily to the acquisition of the engine control division of Johnson Controls), sales fell by 3.7% over the period. The Group estimates that automobile production in its reference markets fell by around 3%.
The gross margin for the quarter was down 7.6% to 377 million euros representing 16.2% of sales as compared to 408 million euros (17.3% of sales) in 2004. The Group estimates that the gross negative impact from higher raw material prices on the gross margin was 1.7 points. Corrective actions undertaken led to a net negative impact on the margin of 1.1 point.
The Group's operating income was 55 million euros or 2.3% of total operating revenues (defined as the sum of sales and other revenues - primarily the contribution of customers to research and development) as compared with 88 million euros and 3.7% of total revenues in the corresponding period of 2004. The operating income includes a 17 million euro charge under "other income/expense", as compared with a 20 million euro charge in 2004. This decrease in the operating income reflects the higher cost of raw materials, lower sales and, to a lesser extent, the increase in net research and development costs.
The tax charge was negative 10 million euros as compared with a positive net tax income of 36 million euros for the comparable year earlier period. The first quarter 2004 tax charge included a rebate of 83 million euros corresponding to the outstanding balance for the tax paid in 2001 on the gain from the sale of the Group's 50% shareholding in LuK.
The net income was 25 million euros for the quarter as compared with 105 million euros in the first quarter 2004, which included the tax rebate of 83 million euros. The first quarter 2004 had also registered a 5 million euro gain from the sale of own-held shares, while the application of IAS standards 32 and 39 at 1 January 2005 led to the booking of additional interest of 2 million euros on OCEANE bonds.
At 31 March 2005, the net debt of Valeo was 808 million euros as compared with 500 million euros proforma at 31 December 2004 (including the application of IAS standards 32 and 39). This change reflects in particular the acquisition of the engine control division of Johnson Controls for 324 million euros. The debt-to-equity ratio is 41% as compared to 26% proforma at 31 December 2004.
Recent developments and outlook
On 7 March Valeo announced a public tender offer for its own shares. This 250 million euro program will be submitted to the French stock market authority (AMF) for approval and the related reduction in capital will be submitted to the approval of the mixed annual general shareholders' meeting to be held on second call on 3 May 2005.
Valeo has also continued consolidating its strategic holdings in Asia. On 1 April 2005, the Group acquired from Bosch its shareholding in the air conditioning subsidiaries ZVCC and VZCCC for 103.5 million euros. On 21 April the Group announced a majority shareholding in a joint venture with the Chinese automaker FAW, also in the air conditioning domain, as well as development plans including the establishment of production facilities and several joint ventures in China in the thermal systems, access and security systems, wiring harnesses and engine control domains.
The operating environment continues to be subject to adjustments in the level of automobile production, particularly in North America and Western Europe, and high raw material costs. Valeo maintains its objective of achieving a higher sales level than the benchmark automobile production and of offsetting as much as possible the impact of raw material prices.
Impact of IFRS restatements and reclassifications on first quarter 2004 results (non audited)
Summary of the impact of IFRS on first quarter 2004 net income
In millions of euros At 31 March 2004
Net income French GAAP standards 74
Impairment of assets 22
Development expenses 15
Other restatements -6
Total IFRS restatements 31
Net income IFRS standards 105
Summary of the impact of IFRS on first quarter 2004 operating income
Taking restatements and reclassifications into account, the first quarter 2004 operating income under IFRS standards totaled 88 million euros after a net charge of 20 million euros from other revenues and charges, as compared with an operating income of 111 million euros under the old accounting standards.
In millions of euros At 31 March 2004
Operating income French GAAP standards 111
Main restatements including 6
- R&D (net) 15
- Change in consolidation methods -7
- Others -2
Reclassifications (1) -29
Operating income IFRS standards 88
(1) of charges and revenuse previously classified as operating or other income/expense - net
The transition to IFRS standards document is available in French on www.valeo.com.
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 132 plants, 66 R&D centers, 9 distribution centers and employs 69,500 people in 27 countries worldwide.
For further information please contact: Kate Philipps, Group Communications Director, Kate.philipps@valeo.com Tel.:+33-1-40-55-20-65 Rémy Dumoulin, Financial Relations Director, Remy.dumoulin@valeo.com Tel.: +33-1-40-55-29-30