H1-2008 - Valeo

H1-2008 Results
Thierry Morin – Chairman & CEO
July 29, 2008

Agenda
1 Highlights
2
3
4
Financials
Business and corporate development
Outlook
July 29, 2008 I 2 I

Half-year highlights

Half-year highlights
Financials
Net income up 41% to €100m (€1.30/share)
Fourth consecutive quarter of improved margins in Q2
Net debt down €178m from year-end 2007
Business and corporate development
Strong order intake and good traction for innovative products
Established an initial presence in Russia
Additional portfolio restructuring
July 29, 2008 I 4

Half-year key figures
In euro million
Total operating revenues
Operating margin
as % of total operating revenues
Net income
Return on capital employed
Net financial debt
*year-end 2007
July 29, 2008 I 5
H1-2008
4,914
203
4.1%
100
16.7%
621
H1-2007
5,006
177
3.5%
71
13.6%
799*
Change
-1.8%
+14.7%
+ 0.6 pt
+40.8%
+22.8%
€(178)m

Quarterly key figures
Total Operating Revenues
Gross margin
% of Sales
Operating margin
% of Total Operating Revenues
Net income
% of Total Operating Revenues
July 29, 2008 I 6
Q2-2008
2,444
403
16.7%
113
4.6%
57
2.3%
Yoy
change
-2.5%
+2.3%
+0.8 pt
+9.7%
+0.5 pt
+50.0%
+0.8 pt
Q1-2008
2,470
388
15.9%
90
3.6%
43
1.7%
Yoy
change
-1.2%
+2.9%
+0.6 pt
+21.6%
+0.6 pt
+30.3%
+0.4 pt

Business environment
Global economic slowdown
Global car production decelerates from +4.2% in Q1 to
just +1% in Q2; D3 under considerable pressure in North
America
Renewed pressure on raw materials
Dramatic currency shifts
Interest rates heading higher in Europe
July 29, 2008 I 7

Sales

Total operating revenues
In euro million
*at identical functions
July 29, 2008 I 9
5,006
Perimeter
Forex
Prices*
Volumes*
+3.5%
-1.8%
+0.1%
-2.5%
-2.9%
+3.5%
Prices *
Scope/ forex
4,914
H1-2007 H1-2008

H1-2008 net sales
Geographical trends
Market -12%
Incl. D3: -17%
-3%*
North America
12% of total Sales
Market +20%
+19%*
South America
July 29, 2008 I 10
6% of total Sales
*At same perimeter & exchange rate
Market +5%
Europe
67% of total Sales
Valeo sales
-3%*
Market +8%
Asia
13% of total Sales
+23%*

Results

Gross margin
As % of sales
15.6%
July 29, 2008 I 12
+0.2 pt
Raw material
prices
+ 0.1 pt
Pass through/
Contract renewal
+0.4 pt
Activity/
Productivity
H1-2007 H1-2008
16.3%

LME basket average price
Euro / Ton
2 600
2 500
2 400
2 300
2 200
2 100
2 000
Jan Feb March Apr May June July Aug Sept Oct Nov Dec Jan Feb March Apr May June
July 29, 2008 I 13
H1
€2,463
LME Average: CU + AL + AA + ZN*
H1
€2,265
2007 2008
* CU: Copper Cuivre, AL: Primary Aluminium, AA: Aluminium Alloy, ZN: Zinc

1200
1000
800
600
400
200
Steel price (Hot-rolled- Dollar / Ton)
349
J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J
2003 2004 2005 2006 2007 2008
July 29, 2008 I 14
Spot price
1,207

140
120
100
80
60
40
20
0
Oil prices
$26.5
J
A S
O NDJF
M
A
M
JJ
A S
O NDJF
July 29, 2008 I 15
Brent-Monthly average
M
A
M
JJ
A S
O NDJF
M
A
M
JJ
A S
O NDJF
2001 2002 2003 2004 2005 2006 2007 2008
M
A
M
JJ
A S
O NDJF
M
A
M
JJ
A S
O NDJF
M
A
M
JJ
A S
O NDJF
$139.0
M
A
M
J

Raw material impact
ppt of sales - cumulative
Gross impact
Net impact
0.7
0.5
2004 2005 2006 Q1 Q2 Q3 Q4 Q1 Q2
July 29, 2008 I 16
2.1
1.1
1.6
3.6
1.8
1.9
4.5
2.0
4.3
1.9
4.7
4.7
2.2 2.2
2007
4.3
1.8
1.8
4.3
4.2
1.7 1.6
2008
4.5
1.8

LCC implementation
% of productive employees
HCC
LCC
July 29, 2008 I 17
72
28
70 68 66
30
32
34
2001 2002 2003 2004 2005 2006 2007 juin-08
62
38
56
44
52 51
48
49

Quality levels –More consistency across the
organization
185
Customer returns
In parts per million
53
32
2003 2004 2005 2006 2007 H1
2008
July 29, 2008 I 18
15
10
14
H1 2007
H1 2008
Single-digit PPM
Including
14 sites at ppm
70 sites (51%)
Including 26
sites at 0 ppm
96 sites (77%)

Four consecutive quarters of margin improvement
Quarterly YOY change in operating margin (Q1-07 to Q2-08)
(pt)
-0.4
July 29, 2008 I 19
0
+ 0.3
+1.1
+0.6
Q1 Q2 Q3 Q4 Q1 Q2
2007 2008
+ 0.5

Results
In euro million
R&D (net)
SG&A
Total overhead
Operating margin
Operating income
July 29, 2008 I 20
as % of total op. revenues
as % of total op. revenues
as % of total op. revenues
as % of total op. revenues
Other income & expenses
as % of total op. revenues
as % of total op. revenues
H1-2008
(270)
5.5%
(318)
6.5%
(588)
12.0%
203
4.1%
(21)
0.4%
182
3.7%
H1-2007
(279)
5.6%
(315)
6.3%
(594)
11.9%
177
3.5%
(10)
0.2%
167
3.3%
Change
-0.1 pt
+0.2 pt
+0.1 pt
+0.6 pt
+0.2 pt
+0.4 pt

Results (cont.)
In euro million
Operating income
Cost of net debt
Other financial income/(expenses)
Associates
Income before taxes
Taxes
Effective tax rate
Minority interests and others
Net income
July 29, 2008 I 21
H1-2008
182
(22)
(6)
7
161
(56)
36.4%
(5)
100
H1-2007
167
(25)
(20)
5
127
(47)
38.5%
(9)
71
Change
+ 9.0%
-12.0%
-70.0%
+ 40.0%
+26.8%
+19.1%
-2.1 pts
-44.4%
+40.8%

Cash flow and
balance sheet

Net financial debt walkdown
In euro million
799
Net debt @
Jan. 1, 2008
-89
July 29, 2008 I 23
-77 -12
Free
Truck
Engine cooling
cash flow disposal Others
621
Net debt @
June 30, 2008
Gross operating cash flow
Cash Tax
Change in working capital
Operating cash flow
Customer contributions
Interest paid
Acquisitions of intangible assets
Acquisition of tangible assets
Disposal of tangible assets
Free cash flow
2008
395
-41
49
403
18
-34
-75
-232
9
89
2007
380
-38
4
346
22
-41
-77
-211
39
78

Shareholder’s equity and net debt
In euro million
1,836
940
1,263
51%
Gearing
July 29, 2008 I 24
1,782
799
Gearing
45%
30/06/2007 31/12/2007
* Before dividend payment (€ 92m)
968
1,782
622*
Gearing
35%
30/06/2008
Shareholder’s Equity
incl. minority interests
Net Debt

Solid financials
250
200
150
100
50
0
-50
Valeo
Continental
July 29, 2008 I 25
Faurecia
BorgWarner
JCI
Autoliv
Magna
Net debt/Equity (LA) Net debt/ebitda
Lear
TRW
Visteon
3,5
3
2,5
2
1,5
1
0,5
0
-0,5
-1
-1,5

Return on capital employed* analysis
Asset turn (x)
Operating margin (%)
ROCE (%)
* Pretax excluding goodwill
** Before dividend payment
July 29, 2008 I 26
H-2008
4.07**
4.1
16.7
H1-2007
3.88
3.5
13.6
H1-2006
3.75
3.8
14.2

Business highlights

Strategy implementation
Operational excellence
Toyota Group « Excellent Quality Performance Award »
Innovation
Park4U
– 2008 PACE Award winner (Fourth PACE award in a row)
– Allianz « Genius » Award
StARS micro-hybrid
– Announced the €700m contract from PSA
– Offered on Mercedes A & B class
Technology Start up* sales potential €400m by 2010 (€70m in 2007)
* Torque convertors, micro hybrids, radar and camera applications
July 29, 2008 I 28

New orders
July 29, 2008 I 29
Others
Innovative products
ORDER INTAKE/ X OE SALES
1.2x
€5.0bn
1.3x
€5.1bn
H1-2007 H1-2008

Strategy implementation
Expansion in Russia
First joint-venture (climate control)
Expect 3 more JVs by year-end
€500m sales potential by 2013
Portfolio alignment
Disposal on the truck engine cooling business to EQT for €77m
~50% of the €2bn disposal program now completed
July 29, 2008 I 30

Outlook

Addressing the H2-2008 challenges
Global car production decelerating
further
Price competitiveness
Customer choice for smaller
car/fuel efficient cars
Rising raw material costs
Higher interest rate
July 29, 2008 I 32
Expanding fast in emerging
markets; strong aftermarket
Productivity gains, successful
turnarounds (VC, VLS, VWS)
Strong market positions with
volume OEMs/ attractive
fuel efficiency solutions
Successful implementation of
compensating measures and
contract renewal effect
Ample access to liquidity and
solid balance sheet
Confirm improvement in 2008 annual results

Contact
July 29, 2008 I 33
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

Back-up

Quarterly P&L
(in euro million)
Net Sales
Other operating revenues
Total operating revenues
Gross margin
R&D expenditures
Selling expenses
Administrative expenses
Other income & expenses
Operating income
Cost of net debt
Income before income taxes
Income taxes
Non-strategic activities
Net income for the period
Minority interest
Net income attributable to equity
holders of the company
July 29, 2008 I 35
as % of net sales
as % of operating revenues
Other financial income and expense
Equity in net earnings of associates
Income from continuing operations
2Q
2,407
37
2,444
403
16.7%
(168)
(48)
(111)
(17)
96
4.0%
(10)
(2)
6
90
(30)
60
0
60
(3)
57
2008
1Q
2,435
35
2,470
388
15.9%
(174)
(46)
(113)
(4)
86
3.4%
(12)
(4)
1
71
(26)
45
(1)
44
(1)
43
4Q
2,397
41
2,438
386
16.1%
(171)
(51)
(109)
(8)
88
3.6%
(12)
(11)
2
67
(13)
54
(3)
51
(1)
50
3Q
2,214
31
2,245
340
15.4%
(156)
(45)
(97)
(9)
64
2.9%
(14)
(15)
1
36
(23)
13
(52)
(39)
(1)
(40)
2007
2Q
2,472
35
2,507
394
15.9%
(173)
(48)
(105)
(13)
90
3.6%
(13)
(10)
5
72
(26)
46
(4)
42
(4)
38
1Q
2,472
27
2,499
377
15.3%
(168)
(49)
(113)
3
77
3.1%
(12)
(10)
0
55
(21)
34
(0)
34
(1)
33
4Q
2,341
35
2,376
351
15.0%
(163)
(47)
(110)
(15)
51
2.1%
(11)
(11)
(6)
23
(4)
19
42
61
(1)
60
3Q
2,125
28
2,153
322
15.2%
(146)
(45)
(94)
(15)
50
2.3%
(12)
(6)
0
32
(22)
10
(2)
8
(1)
7
2006
2Q
2,483
28
2,511
396
15.9%
(161)
(49)
(110)
1
105
4.2%
(14)
17
3
111
(31)
80
(7)
73
(1)
72
1Q
2,487
23
2,510
394
15.8%
(170)
(49)
(113)
(20)
65
2.6%
(14)
(8)
2
45
(10)
35
(11)
24
(2)
22

Share Information
Share Data
Bloomberg Ticker
Reuters Ticker
ISIN Number
Shares outstanding as per 30.06.2008
ADR Data
Ratio (ordinary share: ADR)
Bloomberg Ticker
Reuters Ticker
ISIN Number
Type
Exchange
Sponsor
July 29, 2008 I 36
FR FP
VLOF.PA
FR 000130338
78,209,617
1:2
VLEEY US
VLEEY PK
US 9191343048
Level 1
OTC
JP Morgan Chase