Valeo First Quarter 2006 Results

PARIS, April 20 --

- Sales up 15.4%

- Raw Material Costs Continue to Rise

- Operating Income Resists Well

Following today's meeting of its Board of Directors, Valeo (OTC: VLEEY) presented its consolidated accounts for the first quarter 2006.

    
    In millions of euros               1 January - 31 March (non audited)
 
                                          2006          2005      change
    Total operating revenues              2,704         2,344     +15.4%
     
    Gross margin                            423           377     +12.2%
    % of sales                             15.8%         16.2%     -0.4 pt
    Operating margin (1)                     90            72      +25.0%
    % of total revenues                     3.3%          3.1%     +0.2 pt
    Operating income                         59            59 (2)   0.0%
    % of total revenues                     2.2%          2.5%     -0.3 pt
    Income before tax                        35            36      -2.8%
    % of total revenues                     1.3%          1.5%     -0.2 pt
    Net income (attributable to              23            25      -8.0%
    shareholders)
    % of total revenues                     0.9%          1.1%     -0.2 pt
    Net earnings per share (in euros)       0.30          0.30      0.0%

(1) Operating income before other income and expenses

(2) The amount published in the results for the first quarter 2005 (EUR55 million) has been restated to account for a provision reclassified as "other financial income and expenses"

Valeo registered organic sales growth of 5% during the quarter, demonstrating an increase in the average content per vehicle, in line with its objectives. Its robust business activity combined with rigorous cost management is reflected in the level of the operating margin, which rose by 0.2 points despite a negative raw materials impact of 0.6 points.

First quarter 2006 Group results

In the first quarter 2006, Valeo's total operating revenues were EUR2,704 million, up 15.4% versus the first quarter 2005. Excluding the impact of exchange rates (+3.4%), growth was 12%, broken down into 5% internal growth and 7% external growth. The Group estimates that, over the same period, the reference automotive production (i) increased by 1.7%. Strong growth in Germany, Central Europe and Asia more than offset stagnating Sales in France.

The gross margin for the quarter rose by 12.2% to EUR423 million (15.8% of sales), versus EUR377 million (16.2% of sales) in 2005. The gross negative impact of the rise in raw material prices was 0.9 margin points. The net negative impact, taking into account corrective measures, amounted to 0.6 margin points.

The operating margin increased by 25%, to EUR90 million (3.3% of total operating revenues) compared to EUR72 million (3.1%) for the first quarter 2005. R&D expenses and Selling & Administrative expenses as a percentage of total operating revenues fell by 0.2 points and 0.5 points, respectively, thanks to sustained business activity and rigorous management.

The Group's operating income amounted to EUR59 million (2.2% of total operating revenues), unchanged versus the first quarter 2005 (2.5% of total operating revenues). Committed to its strategy of continuously improving productivity, the Group registered charges for future restructuring, bringing the total of other net expenses to EUR31 million, compared to EUR13 million for the same period in 2005.

Income before tax was down 2.8% to EUR35 million, due to the rise in financial expenses relating to the acquisitions and share buyback program implemented in the first half of 2005.

Net income (attributable to shareholders) for the period amounted to EUR23 million, compared to EUR25 million for the first quarter 2005.

Net earnings per share were stable at EUR0.30.

At 31 March 2006, Valeo's net debt stood at EUR1,072 million, compared to EUR1,080 million at year-end 2005. The debt-to-equity ratio was 59%, down 3 points compared to 31 December 2005.

Highlights of the quarter

- Valeo received Toyota Motor Europe's two Superior Awards for Quality;

- The StARS micro-hybrid system won a 2006 PACE Award in the European Products category;

- The Group announced the disposal of Logitec, a logistics subsidiary in Japan.

Outlook for the second quarter

The Group anticipates a slowdown in automotive production in Europe and North America due mainly to an unfavourable calendar.

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 134 plants, 68 R&D centres and nine distribution centres and employs 72,000 people in 27 countries.