• Revenue: EUR21.5 billion.
• Gross Margin: 19%, improved by 1.1 points.
• EBITDA Margin: 13.3% of sales.
• Operating Margin: 4.3% of sales.
• Net Debt: Reduced by EUR215 million to EUR3.8 billion.
• Free Cash Flow: EUR481 million after restructuring costs.
• Net Attributable Income: EUR162 million, 0.8% of sales.
• New Orders: EUR17.8 billion.
• R&D Expenses: Reduced by EUR177 million in H2.
• Administrative Expenses: Reduced by EUR49 million year on year.
• Dividend Proposal: EUR0.42 per share.

• Warning! GuruFocus has detected 7 Warning Signs with VLEEF.

Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Valeo SA (VLEEF) achieved its margin and cash guidance despite a challenging environment, marking the third consecutive year of financial improvement.
• The company reported a gross margin improvement to 19%, up by 1.1 points, supported by cost-reduction measures and operational control.
• Valeo SA (VLEEF) reduced its net debt by EUR215 million, leading to a leverage ratio of 1.3 times EBITDA, down from 1.5 times the previous year.
• The company recorded EUR17.8 billion in new orders, indicating strong competitive positioning and customer trust.
• Valeo SA (VLEEF) achieved its CO2 emissions guidance and received an A rating from the Carbon Disclosure Project, highlighting its commitment to sustainability.

Negative Points

• Original equipment sales were down 2% on a like-for-like basis, notably affected by the high-voltage electric powertrain business.
• China posted an underperformance of 10 points due to a challenging customer mix, impacting overall sales performance.
• The high-voltage powertrain business negatively impacted group performance by 3 points, underperforming the market.
• EUR7.3 billion of orders were canceled due to changes in OEM product strategies, particularly in electrification and North America.
• The net attributable income was EUR162 million, representing only 0.8% of sales, indicating room for profitability improvement.

Q & A Highlights

Q: Can you clarify the net debt target for the end of 2025 and the impact of the EUR7.3 billion order cancellations? A: Edouard de Pirey, CFO, confirmed the net debt reduction of EUR215 million and the plan to continue decreasing net debt in 2025, even with a EUR0.42 per share dividend. Christophe Perillat, CEO, explained that the EUR7.3 billion order cancellations were due to changes in customer strategies, particularly in North America. Valeo is seeking compensation for these cancellations, and the order book remains strong despite these changes.

Q: What impact did electronic component costs have in 2024, and what is expected for 2025? A: Christophe Perillat, CEO, stated that electronic components, which were previously a challenge, have become a tailwind due to decreasing costs. This trend is expected to continue into 2025, providing further savings.

Q: How did working capital impact free cash flow in 2024, and what is expected for 2025? A: Edouard de Pirey, CFO, noted that working capital was a significant tailwind in 2024, with a EUR251 million reduction in inventories. For 2025, while the impact will be lower, further inventory reductions and improved payment terms with suppliers are expected to continue supporting free cash flow.

Q: Can you explain the bridge between 2024 and 2025 margins and the impact of potential tariffs? A: Christophe Perillat, CEO, highlighted three main factors supporting margin improvement: restructuring savings, tailwinds from electronic components, and operating leverage. Regarding tariffs, Valeo plans to seek 100% compensation from customers for any additional costs due to tariffs, as the company cannot quickly change its supply chain or footprint.

Q: What are the main drivers for the revised 2025 guidance compared to previous expectations? A: Christophe Perillat, CEO, explained that the electrification business has not developed as expected, leading to lower sales projections. Despite this, Valeo is adjusting its cost base to improve profitability. The company plans to release updated KPIs in its next strategic plan, acknowledging the need for more state-of-the-art metrics.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.