Q3 Valeo sales were up 5% at constant exchange rates to EUR4.5bn (US$5.1bn) following what it describes as the successful integration of three recent acquisitions – Ichikoh in Japan, Valeo-Kapec in South Korea and FTE automotive in Germany.

The company says a two percentage point market out-performance (on a like-for-like basis) in a complex environment, driven mainly by an outperformance of three percentage points in North America and Asia excluding China, and 18 percentage points in Brazil. However consolidated growth was also impacted by WLTP in Europe and market downturn in China in the third quarter, effects of which expected to continue into fourth quarter.

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Jacques Aschenbroich, Valeo’s chairman and chief executive officer, commented:
“On 25 July, we made it clear that Valeo’s sales would be impacted in the third quarter, temporarily by WLTP in Europe and by the market slowdown in China. In this complex environment, Valeo outperformed the market by two percentage points during the period. The impact of WLTP in Europe is set to continue into the fourth quarter, and market conditions in China will remain challenging. The Group responded to these changing market conditions and the continued rise in raw material prices as early as July, implementing a vigorous action plan aimed at reducing its capital expenditure by 100m euros compared with 2017 and cutting costs by around EUR100m. These measures will be maintained into 2019 as necessary.

In light of this situation, the group is revising its objectives for full-year 2018:

  • Sales growth of around 6% at constant exchange rates, after the successful integration of Ichikoh in Japan, Valeo-Kapec in South Korea and FTE automotive in Germany, and an original equipment sales outperformance of around two percentage points over the second half of the year;
  • Operating margin excluding share in net earnings of equity-accounted companies at between 6.2% and 6.5% of sales, and free cash flow generation of between 120 and EUR150m.

Aschenbroich added: “We remain very confident in the relevance of our strategy and the solidity of our growth model, driven by our unique portfolio of technologies and products designed to meet the automotive industry’s major challenges, namely powertrain electrification and the rise of the autonomous and connected vehicle. Production start-up for new contracts leveraging these innovations, which include cameras, 48V solutions and LED lighting, will enable us to achieve a stronger outperformance versus global automotive production throughout 2019.”

Third-quarter 2018:

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  • Consolidated sales of EUR4,488m:
  • up 5% at constant exchange rates;
  • down 1% like for like.
  • Original equipment sales of EUR3,904m:
  • up 4% at constant exchange rates;
  • down 1% like for like, outpacing automotive production by two percentage points.
  • Aftermarket sales up 11% at constant exchange rates and up 3% like for like.

First nine months of the year:

  • Consolidated sales of EUR14,427m:
  • up 8% at constant exchange rates;
  • up 2% like for like.
  • Original equipment sales of EUR12,532m:
  • up 8% at constant exchange rates;
  • up 2% like for like, outpacing automotive production by two percentage points.
  • Aftermarket sales up 12% at constant exchange rates and up 5% like for like.
  • Under IFRS 15, consolidated sales totalled EUR4,434m in the third quarter of 2018.

Updated 2018 outlook

  • Based on growth in automotive production of close to 0% in 2018, Valeo is setting the following objectives for the full year:
  • Growth of around 6% at constant exchange rates;
  • Original equipment sales outperformance of around 2 percentage points in the second half;
  • Operating margin excluding share in net earnings of equity-accounted companies (as a % of sales) at between 6.2% and 6.5% of sales;
  • Free cash flow generation of between EUR120m and EUR150m.

Valeo Siemens eAutomotive:

  • To accommodate its fast-paced expansion going forward, Valeo Siemens eAutomotive will bear the costs required to push ahead with ongoing projects and structure its organisation. Accordingly, the “Share in net earnings of equity-accounted companies” caption will have an impact of between -0.4 and -0.5 points on Valeo’s statement of income in 2018;
  • By 2022, Valeo Siemens eAutomotive should be delivering sales of more than EUR2bn and a similar EBITDA margin (as a % of sales) to that of Valeo.

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