French Tier 1 automotive components supplier Valeo expects its global production to be down by 2 percent in the year 2020, excluding the possible impact of coronavirus in China.
The company's overall original equipment sales in 2019 were stable. During the second half of 2019, the company’s OE sales in Europe (including Africa) increased by 1 percent. This was driven by the start of production on numerous projects in the camera, electrification system, and lighting segments.
In Asia, the OE sales fell 6 percent, for the same period with India sales down by 18 percent. Valeo’s China sales decreased by 5 percent while in Japan business was down by 10 percent. Concerning the Covid-19 outbreak in China, the company said it is too early to assess the impact on the automotive industry and on Valeo specifically. Valeo's plants at Hubei province, which accounts for 90 percent of their nominal sales in China, have resumed production with supply chains gradually getting back in order. In North America and South America, the OE sales grew at 5 and 6 percent respectively, for the whole year.
Despite an uptick in the second half, aftermarket sales were down 2 percent over the year, owing to the slowdown in business in Europe, China, and Turkey, as well as the closure of the Iranian market.
The Group's order intake for 2019 was around 22.8 billion euros (including 0.8 billion euros relating to Valeo Siemens eAutomotive). Consolidated sales stood at 19,244 million euros, which is up by 1 percent year on year. Their EBITDA is at 2,496 million euros, which is12.8 percent of the sales. Valeo generated 519 million euros in free cash flow. This results from an 86 million euro improvement in EBITDA, a positive 301 million euro change in working capital (decrease in tooling inventories and in customer overdue) and a 150 million euro reduction in capital expenditure.
“The technological platforms we have developed in the past few years, mainly in the electrification and ADAS segments, have driven our sharp outperformance versus the automotive market. This also allowed us to reduce, from the second half of 2019, our R&D expenses and our capital expenditure. With 519 million euros of free cash flow generated in 2019, we have clearly confirmed that even in a tough automotive market, we are able to finance our growth and support the development of our Valeo-Siemens joint venture,” said, Jacques Aschenbroich, Valeo’s Chairman and Chief Executive Officer.
“In a market set to remain uncertain in 2020, we will once again deliver a substantial outperformance, generate significant free cash flow and improve our operating margin, thanks to our strict control over costs and capital expenditure,” he added.