Q3-2008 RESULTS Thierry Morin – Chairman & CEO October 21, 2008
Agenda 1 Quarterly financial performance 2 Business highlights 3 Outlook October 21, 2008 – Q3-2008 Results I 2 I
Quarterly financial performance
Quarter summary Trading conditions Valeo Significant production cuts in core Volume resilience markets Price competitiveness Productivity gains, cost cutting initiatives Rising raw material costs Compensated ¾ of gross impact Cash focused/ Ample access to Liquidity constraints/ Higher liquidity interest rate Operating margin up 40bps year to date October 21, 2008 – Q3-2008 Results I 4 I
Quarterly key figures Q3-2008 Q3-2007 Change In euro million Total operating revenues 2,112 2,245 -5.9% 315 Gross margin 340 -7.4% as a % of net sales 15.2% 15.4% - 0.2 pt 65 73 -11.0% Operating margin as a % of total operating revenues 3.1 % 3.3 % - 0.2 pt 6 Net income (40) nm as a % of total operating revenues 0.3% -1.8% + 2.1 pts 735 Net debt 932* -21.1% * Excluding Valeo Connective Systems (€ 60m) October 21, 2008 – Q3-2008 Results I 5 I
Year-to-Date key figures 9 months 9 months Change In euro million 2008 2007 Total operating revenues 7,026 7,251 -3.1% 1,106 Gross margin 1,111 -0.5% as a % of net sales 16.0% 15.5% + 0.5 pt 268 250 +7.2% Operating margin as a % of total operating revenues 3.8% 3.4% + 0.4 pt 106 Net income 31 +241.9% as a % of total operating revenues 1.5% 0.4% + 1.1 pt Basic earnings per share from 1.41 1.13 +24.8% continuing operations (€) October 21, 2008 – Q3-2008 Results I 6 I
Total operating revenues In euro million = Q3-2007 Q3-2008 = Prices * Perimeter/ forex -5.9% 2,245 2,112 Perimeter -1.6% Forex -1.6% -2.7% Prices* 0% Volumes* *at identical functions October 21, 2008 – Q3-2008 Results I 7 I
Q3-2008 OE light vehicles net sales (yoy change) Market -1% Market -16% -7%* Europe -14%* North America 64% of total Sales 12% of total Sales Market +3% +14%* Asia Market +14% 14% of total Sales +20%* South America 9% of total Sales Valeo sales *At same perimeter & exchange rate October 21, 2008 – Q3-2008 Results I 8 I
Results Q3-2008 Q3-2007 Change In euro million Net sales 2,076 2,214 -6.2% 315 340 -7.4% Gross margin as a % of net sales 15.2% 15.4% October 21, 2008 – Q3-2008 Results I 9 I
Gross margin As % of sales + 0.3 pt - 0.1 pt - 0.4 pt 15.4% 15.2% Pass through/ Activity/ Raw material Contract renewal Productivity prices Q3-2007 Q3-2008 October 21, 2008 – Q3-2008 Results I 10 I
Raw material impact ppt of sales - cumulative Gross impact Net impact 5.1 4.7 4.7 4.5 4.3 4.3 4.2 3.6 2.2 2.2 2.2 2.1 1.9 1.9 1.8 1.8 1.8 0.7 1.1 1.6 0.5 2004 2005 2006 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2007 2008 October 21, 2008 – Q3-2008 Results I 11 I
Slight relief from non ferrous metals Euro / Ton LME Average: CU + AL + AA + ZN* 2 600 2 500 Q3 €2,426 -5.4% 2 400 Q3 €2,294 2 300 2 200 2 100 2 000 n b h r y e y g v n b h r y e y g t t t c p a p c p p n l u o a n l u a e c u e a e c u A e O A e M u N M u J F r A J F r A J D J a a S S J J M M 2007 2008 * CU: Copper Cuivre, AL: Primary Aluminium, AA: Aluminium Alloy, ZN: Zinc October 21, 2008 – Q3-2008 Results I 12 I
Major burden from steel HR price evolution- In Dollar / Ton 1,127 1300 1100 Spot Price 900 700 500 236 300 100 Nov Nov Nov Nov Nov Janv Mars Mai Juil Sept Janv Mars Mai Juil Sept Janv Mars Mai Juil Sept Janv Mars Mai Juil Sept Janv Mars Mai Juil Sept Janv Mars Mai Juil Sept 2003 2004 2005 2006 2007 2008 October 21, 2008 – Q3-2008 Results I 13 I
Brent Barrel in $ 135 Brent Monthly Average 115 $98.2 95 75 55 $24.6 35 15 Oct Oct Oct Oct Oct Oct Oct Juil Janv Avr Juil Janv Avr Juil Janv Avr Juil Janv Avr Juil Janv Avr Juil Janv Avr Juil Janv Avr Juil 2001 2002 2003 2004 2005 2006 2007 2008 October 21, 2008 – Q3-2008 Results I 14 I
Results (cont.) Q3-2008 Q3-2007 Change In euro million -13.6% (108) (125) R&D expenses (net) as a % of total operating revenues 5.1% 5.6% SG&A (142) (142) = as a % of total operating revenues 6.7% 6.3% -6.4% (250) (267) Total overhead as a % of total operating revenues 11.8% 11.9% (15) Other income & expenses (9) +66.7% as a % of total operating revenues -0.7% -0.4% 50 -21.9% Operating income 64 as a % of total operating revenues 2.4% 2.9% October 21, 2008 – Q3-2008 Results I 15 I
Focus on R&D costs In euro million and in % of total operating revenues - 8% Q3-2007 Q3-2008 156 (6.9%) 144 (6.8%) 31 Customer financing + 16% 36 Net expense Net expense - 14% 125 108 5.6% 5.1% October 21, 2008 – Q3-2008 Results I 16 I
Results (cont.) Q3-2008 Q3-2007 In euro million Change 50 Operating income 64 -21.9% Cost of net debt (10) (14) -28.6% Other financial expenses (12) (15) -20.0% Associates 1 1 = 29 Income before taxes 36 -19.4% Taxes (20) (23) -13.0% Effective tax rate 71.4% 65.7% (1) Non strategic activities (52) -98.1% (2) Minorities (1) +100.0% 6 Net income (40) nm October 21, 2008 – Q3-2008 Results I 17 I
Balance sheet
Shareholder’s equity and net debt In euro million 1,813 1,766 1,782 Shareholder’s Equity incl. minority interests Net Debt 932* 799 735 Gearing Gearing Gearing 1,263 968 53% 45% 41% 30/09/2007 31/12/2007 30/09/2008 * Excluding VCS (€ 92m) October 21, 2008- Q3-2008 results I 19
Solid debt structure Debt Maturity Profile C urrent maturities of long-term debt 600 Short-term debt 500 O ther Bond issues 400 Syndicated loans O C EAN E 300 200 Debt Structure 100 0 Gross €1,427m <1 year 2009 2010 2011 2012 2013 and beyond LT Debt €1,294m Net €735 m €1,037m at fixed rate Cash Short term Debt €692m €133m As of 30/09/2008 October 21, 2008- Q3-2008 results I 20
Business highlights
Quarter highlights Footprint optimization � Announced consolidation of rear lighting capacity in Europe � New joint-venture in India for the production of lighting systems (oct 2) Innovation � 2008 Automechanika Innovation Award for StARS micro-hybrid Micro-hybrid StARS extended to other Smart models � � Nissan Global Innovation Award for lane departure warning system October 21, 2008- Q3-2008 results I 22
Outlook
Trading conditions in Q4-2008 Global car production outlook deteriorates materially Erratic car production schedules Steel prices at record highs Softening aluminum and copper prices October 21, 2008 – Q3-2008 Results I 24 I
Worsening production outlook Light vehicle production forecasts for H2-08 (yoy changes) Europe Q4 Q3 + 0.9 July 15 October 14 - 0.9 - 2.5 North America Q4 Q3 - 9.3 July 15 - 4.9 Asia - 5.1 + 7.2 July 15 - 14.2 October 14 + 3.4 - 15.9 + 2.5 October 14 - 0.8 Q4 Q3 October 21, 2008 – Q3-2008 Results I 25 I
Meeting the Q4-2008 challenges Aggressive cost structure alignment � Freeze on overtime � Temporary workforce adjustments � Factory temporary shutdowns � Strict control over R&D and SG&A � Freeze on subcontracting � Additional material costs reduction Selling price adjustments Confirm 2008 operating margin similar to that of 2007 October 21, 2008 – Q3-2008 Results I 26 I
Contact Investor Relations Rémy Dumoulin 43, rue Bayen F-75848 Paris Cedex 17 France Tel.: +33 (0) 1.40.55.29.30 Fax: +33 (0) 1.40.55.20.40 E-mail: remy.dumoulin@valeo.com Web site: www.valeo.com October 21, 2008- Q3-2008 results I 27
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