* The amount shown under this item for 2015 differs from that presented in the 2015 consolidated financial statements published in February 2016 since it has been adjusted to reflect the new definition of EBITDA(1).
** Change in working capital excluding the change in non-recurring sales of receivables (positive amount of €20 million in 2016; negative amount of €55 million in 2015).
*** The amount of investments in property, plant and equipment and intangible assets shown for 2015 differs from that shown in the 2015 consolidated financial statements published in February 2016 since it has been adjusted to reflect the impacts of presenting government subsidies and grants on non-current assets within cash flows from investing activities.
Free cash flow(1) generated by the Group in second-half 2016 rose 24% to 322 million euros, primarily reflecting:
- an 18% increase in EBITDA(1) to 1,097 million euros;
- disciplined management of working capital, which added 40 million euros to free cash flow;
- a significant 18% increase in investment outflows to 651 million euros, needed to secure the Group’s growth going forward.
In 2016, net cash flow(1) amounted to a negative 389 million euros and included:
- 58 million euros in financial expenses;
- other financial items totaling 992 million euros, including a 627 million euro outflow relating to the acquisitions of peiker and Spheros, and a 236 million euro disbursement relating to the dividend paid out to Company shareholders.
Net debt at 526 million euros at December 31, 2016
Net debt(1) stood at 526 million euros at December 31, 2016, up 402 million euros (after acquisitions and the dividend payment) compared with end-December 2015.
The leverage ratio (net debt/EBITDA) came out at 0.25x EBITDA and the gearing ratio (net debt/stockholders’ equity excluding non-controlling interests) stood at 13% of equity.
Following the bond issues carried out:
- in 2016: 600 million euro bond issue maturing on March 18, 2026 and placement of non-dilutive cash-settled convertible bonds in two fungible tranches for a nominal amount of 450 million US dollars and 125 million US dollars, respectively, and redeemable at maturity in 2021, and
- in January 2017: 500 million euro bond issue maturing on January 11, 2023,
the average maturity of borrowings and debt was 5.8 years at January 31, 2017, up from 4.3 years at December 31, 2015.
Based on the following assumptions:
- an increase in global automotive production of between 1.5% and 2%;
- raw material prices and exchange rates in line with current levels.
Valeo has set the following objectives for 2017:
- sales growth outperforming the market by more than 5 percentage points;
- a slight increase in operating margin(1) (as a % of sales and before acquisitions).
(1) Including share in net earnings of equity-accounted companies, see Financial Glossary (below).
(2) See Financial Glossary (below).
(3) Including share in net earnings of equity-accounted companies, see Financial Glossary (below).
On November 3, 2016, Valeo announced that it had carried out an additional placement of
125 million US dollars’ worth of non-dilutive cash-settled convertible bonds. These bonds are fully fungible with and assimilated to the original issue and issued on the same terms (save the issue price) as the non-dilutive cash-settled convertible bonds due June 16, 2021, issued by Valeo on June 16, 2016 for 450 million US dollars. This new USD-denominated debt was immediately converted into euros. As the conversion rights in respect of the bonds will be settled solely in cash, the bonds will not result in the issuance of new shares or the delivery of existing Valeo shares. At the same time, Valeo purchased cash-settled call options on its own shares to hedge its exposure to cash payments on any exercise of the new bond conversion rights. The new bonds will not bear any interest. The initial issue price of the new bonds is 107% of their nominal value, corresponding to a negative annual gross yield-to-maturity of 1.45% (final issue price published on November 10, 2016: 214,440.74 US dollars per bond, with the share reference price for this tap issue set at 50.5537 euros, and the reference EUR/USD exchange rate at 1.0880 US dollars for 1 euro).
On November 10, 2016, Valeo announced its acquisition of a 50% stake in the capital of CloudMade, a developer of smart and innovative big data-driven automotive solutions such as a machine learning platform which seeks to improve and personalize vehicle comfort and safety for motorists and their passengers.
On November 30, 2016 following discussions with the European Commission and in agreement with Bain Capital, Valeo decided to withdraw its merger notification and to promptly renotify the Commission with a view to obtaining clearance to acquire FTE and finalize the transaction in 2017.
On December 1, 2016, Valeo and Siemens announced the creation of the joint venture Valeo Siemens eAutomotive GmbH specialized in high voltage powertrains and operational immediately. This Valeo-Siemens joint venture creates a global leader for the supply of innovative and affordable high-voltage components and systems. The portfolio includes e-motors, range extenders, onboard chargers, inverters and DC/DC converters for the entire range of on-road electric vehicles including hybrids, plug-in hybrids and full electric vehicles. Building on their complementary scope and portfolio, the joint venture will benefit from substantial synergies in manufacturing and sourcing and create a base for sustained growth and profitability. The electric vehicle parts market is expected to grow by over 20% through to 2020.
On January 4, 2017, Valeo announced the successful placement on favorable terms of new six-year bonds maturing on January 11, 2023. This 500 million euro issue pays a coupon of 0.625%.
On January 13, 2017, Valeo announced the successful completion of its Ichikoh takeover bid at a price of JPY 408. The takeover bid ran from November 24, 2016 to January 12, 2017. Valeo now holds 55.08% of Ichikoh’s capital and therefore takes control of Japan’s leading automotive lighting company, which remains listed on the Tokyo Stock Exchange. Ichikoh is consolidated by Valeo with effect from February 1, 2017.
On February 6, 2017, Valeo announced that it had signed an agreement with its long-standing South Korean partner to create a 50/50 joint venture in transmission manufacturing. The new company will be called Valeo-Kapec. The transaction is subject in particular to clearance from certain antitrust authorities. From its headquarters in South Korea, Valeo-Kapec will leverage a global manufacturing footprint to become the world leader in torque converters for automatic and continuously variable transmissions. The partners will contribute their respective torque converter businesses, located for Valeo at Nanjing (China), Atsugi (Japan), San Luis Potosi (Mexico) and Troy (United States), and for Kapec in Daegu, Waegwan and Seongju (South Korea). The new company will employ some 3,000 people and will be controlled and therefore consolidated by Valeo. It is forecast to generate sales of around 1 billion euros in 2017 on an annualized basis and will be accretive to Valeo’s operating margin from year one.
Investor Day: February 28, 2017, in London
First-quarter 2017 sales: April 26, 2017
- Order intake corresponds to business awarded by automakers during the period (including joint ventures at least 50%-owned by the Group) less any cancellations, based on Valeo’s best reasonable estimates in terms of volumes, selling prices and project lifespans. Unaudited indicator.
- Operating margin including share in net earnings of equity-accounted companies corresponds to operating income before other income and expenses.
- Net attributable income excluding non-recurring items corresponds to net attributable income adjusted for “other income and expenses” net of tax and non-recurring income and expenses net of tax shown in operating margin including share in net earnings of equity-accounted companies.
- ROCE, or return on capital employed, corresponds to operating margin (including share in net earnings of equity-accounted companies) divided by capital employed (including investments in equity-accounted companies) excluding goodwill.
- ROA, or return on assets, corresponds to operating income divided by capital employed (including investments in equity-accounted companies) including goodwill.
- EBITDA, which corresponds to (i) operating margin before depreciation, amortization and impairment losses (included in the operating margin) and the impact of government subsidies and grants on non-current assets, and (ii) net dividends received from equity-accounted companies.
- Free cash flow corresponds to net cash from operating activities (excluding the change in non-recurring sales of receivables) after taking into account acquisitions and disposals of property, plant and equipment and intangible assets.
- Net cash flow corresponds to free cash flow less (i) cash flows in respect of investing activities, relating to acquisitions and disposals of investments and to changes in certain items shown in non-current financial assets, (ii) cash flows in respect of financing activities, relating to dividends paid, treasury share purchases and sales, interest paid and received, and acquisitions of investments without a change in control, and (iii) changes in non-recurring sales of receivables.
- Net debt comprises all long-term debt, liabilities associated with put options granted to holders of non-controlling interests, short-term debt and bank overdrafts, less loans and other long-term financial assets, cash and cash equivalents and the fair value of derivative instruments hedging the foreign currency and interest rate risks associated with these items.
Safe Harbor Statement
Statements contained in this press release, which are not historical fact, constitute “Forward-Looking Statements”. These statements include projections and estimates and their underlying assumptions, statements regarding projects, objectives, intentions and expectations with respect to future financial results, events, operations, services, product development and potential, and statements regarding future performance. Even though Valeo’s management feels that the Forward-Looking Statements are reasonable as at the date of this press release, investors are put on notice that the Forward-Looking Statements are subject to numerous factors, risks and uncertainties that are difficult to predict and generally beyond Valeo’s control, which could cause actual results and events to differ materially from those expressed or projected in the Forward-Looking Statements. Such factors include, among others, the Company’s ability to generate cost savings or manufacturing efficiencies to offset or exceed contractually or competitively required price reductions. The risks and uncertainties to which Valeo is exposed mainly comprise the risks resulting from the investigations currently being carried out by the antitrust authorities as identified in the Registration Document and risks relating to legal action resulting from such investigations, risks which relate to being a supplier in the automotive industry and to the development of new products and risks due to certain global and regional economic conditions. Also included are environmental and industrial risks as well as risks and uncertainties described or identified in the public documents submitted by Valeo to the French financial markets authority (Autorité des marchés financiers – AMF), including those set out in the “Risk Factors” section of Valeo’s Registration Document registered with the AMF on March 26, 2016 (under no. D.16-0211).Valeo has recognized an expense of 99 million euros in its consolidated financial statements to cover the main risks resulting from investigations currently being carried out by the antitrust authorities, as identified in the Registration Document, and risks relating to legal action resulting from such investigations.The company assumes no responsibility for any analyses issued by analysts and any other information prepared by third parties which may be used in this press release. Valeo does not intend or assume any obligation to review or to confirm the estimates of analysts or to update any Forward-Looking Statements to reflect events or circumstances which occur subsequent to the date of this press release.