Valeo : Press release - Q1 2017 Sales

Sales up 22% to 4.8 billion euros

Original equipment sales jumped 13% on a like-for-like basis, beating global automotive production by 8 percentage points

Jacques Aschenbroich, Valeo's Chairman and Chief Executive Officer, commented:

"Our sales grew by 22% in the first quarter. This performance once again demonstrates, in line with the strategic plan presented at our Investor Day in London on February 28, 2017, the high growth potential of each of our four Business Groups, which are well placed to leverage the technological disruptions taking place in the automotive industry.

During the period we were also delighted to welcome Ichikoh's teams to Valeo. The consolidation of Ichikoh's operations will enable Valeo and our Visibility Systems Business Group to accelerate our expansion in Asia, particularly with our Japanese customers."

• Consolidated sales of 4,767 million euros, up 22% (up 13% on a like-for-like basis)
  • Original equipment sales of 4,174 million euros, up 21%, or up 13% on a like-for-like basis representing an outperformance of 8 percentage points compared with global automotive production:

  • Europe: up 12%(1), 6 percentage points higher than automotive production

  • China: up 25%(1), 18 percentage points higher than automotive production, driven in particular by strong growth with Chinese customers, which accounted for more than 40% of sales in the country in the first quarter of the year. This pace of growth will enable the Group to double its sales in China over the next four years

  • Asia excluding China: up 6%(1), 1 percentage point higher than automotive production. After taking into account the consolidation of Ichikoh as from February 1, 2017, original equipment sales in the region were up 38%(2)

  • North America: up 11%(1), 9 percentage points higher than automotive production

  • South America: up 16%(1), 5 percentage points higher than automotive production

• Aftermarket sales up 19% (up 8% on a like-for-like basis) 2017 outlook

  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 confirms its objectives for 2017:

• sales growth outperforming the market by more than 5 percentage points;

• a slight increase in operating margin(3) (as a % of sales and before acquisitions).

1 Like for like (constant Group structure and exchange rates).

2 At constant exchange rates.

3 Including share in net earnings of equity-accounted companies, see Financial Glossary, page 6.

Automotive production rose by 5% year on year in the first quarter of 2017.

Growth in automotive production was driven by continued expansion in Asia (up 6%) driven by China (up 7%), Europe (up 6%) and North America (up 2%), as well as by an upturn in production in South America (up 11%) after several years of sharp decline.

Automotive production (year-on-year change)

* LMC automotive production estimates.

Sales (in millions of euros)

* Unaudited.

** Like for like (constant Group structure and exchange rates).

Valeo delivered market-beating growth, driven by:

• an improved product mix resulting from technological innovations for CO2 emissions reduction and intuitive driving;

• its balanced customer and geographic positioning.

  Original equipment sales (by destination, in millions of euros)

  First-quarter
  2016 2017 LFL Outperformance** change*
  Europe & Africa Asia, Middle East & Oceania	1,734 885	2,001 1,189	+12% +15%	+6 pts +9 pts
  of which China excluding China	451 434	564 625	+25% +6%	+18 pts +1 pt
  North America South America	762 56	895 89	+11% +16%	+9 pts +5 pts
  TOTAL	3,437	4,174	+13%	+8 pts

  * Like for like (constant Group structure and exchange rates).

  ** Based on LMC automotive production estimates.

  In the first three months of 2017, the Group outperformed global automotive production by 8 percentage points, powered by original equipment sales growth across all production regions:

• in Europe (including Africa), like-for-like original equipment sales rose 12%, lifted by an attractive portfolio of high technological value products and a favorable customer mix, outpacing automotive production by 6 percentage points;

• in China, like-for-like original equipment sales climbed 25%, outpacing automotive production by 18 percentage points, driven in particular by market share gains with Chinese customers, which accounted for more than 40% of sales in the country in the first quarter of the year. This pace of growth will enable the Group to double its sales in China over the next four years;

• in Asia excluding China, like-for-like original equipment sales were up 6%, outpacing automotive production by 1 percentage point. After taking into account the consolidation of Ichikoh as from February 1, 2017, original equipment sales in the region were up 38%(1);

• in North America, like-for-like original equipment sales rose 11%, outpacing automotive production by 9 percentage points;

• in South America, like-for-like original equipment sales came in 16% higher, outpacing automotive production by 5 percentage points.

  1 At constant exchange rates.

  Valeo is benefiting from the geographical alignment of its businesses...

  Taking into account the consolidation of Ichikoh in Valeo's consolidated financial statements as of February 1, 2017, the share of original equipment sales in the four main production regions in the first quarter of 2017 was as follows:

• 48% of original equipment sales was produced in Europe (down 3 percentage points on 2016), including 32% in Western Europe (down 3 percentage points on 2016) and 16% in Central and Eastern Europe and in Africa (stable versus 2016);

• 28% was produced in Asia (up 2 percentage points on 2016);

• 22% was produced in North America (stable versus 2016);

• 2% was produced in South America (up 1 percentage point on 2016).

  ...and from a more diverse customer portfolio

  Taking into account the consolidation of Ichikoh in Valeo's consolidated financial statements as of February 1, 2017, the share of original equipment sales among the Group's customers in the first quarter of 2017 was as follows:

• German customers accounted for 28% of original equipment sales, down 2 percentage points;

• Asian customers accounted for 32% of original equipment sales, up 6 percentage points;

• US customers accounted for 20% of original equipment sales, down 3 percentage points;

• French customers accounted for 14% of original equipment sales, down 2 percentage points.

The sales performance for the Business Groups reflects the specific product, geographic and customer mix and the relative weighting of the aftermarket in their activity as a whole.

Sales by Business Group* (in millions of euros)

* Including intersegment sales.

** Unaudited.

*** Like for like (constant Group structure and exchange rates).

In the first quarter of 2017, like-for-like growth in original equipment sales outpaced automotive production in all Business Groups:

• buoyed by their attractive portfolio of technologies focused on CO2 emissions reduction, like-for-like original equipment sales for the Powertrain Systems and Thermal Systems Business Groups grew by 11% and 15%, respectively;

• like-for-like sales for the Comfort & Driving Assistance Systems and Visibility Systems Business Groups rose 10% and 14%, respectively, reflecting the market's keen interest in intuitive driving and LED lighting technologies. First-quarter sales for the Visibility Systems Business Group, which surged 30%, include the contribution of Ichikoh, which has been fully consolidated in Valeo's consolidated financial statements since February 1, 2017.

  2017 outlook

  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 confirms its 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).

As the world leader in CO2 emissions reduction and intuitive driving, Valeo is intent on continuing its R&D efforts in order to meet its customers' needs and leverage new growth opportunities for powertrain electrification, autonomous and connected vehicles, as well as new forms of mobility driven by digital technology. All four Business Groups will harness the potential stemming from these new opportunities within the automotive industry, and will undergo several waves of growth as these new technologies enter production. Valeo has solid fundamentals thanks to its diversified customer and geographic positioning with a footprint that is set to increase in high-growth potential regions, notably in Asia, which is expected to account for 37% of original equipment sales by 2021 (versus 27% in 2016).

Building on the growth in the order intake due to the success of its innovations, over the 2016-2021 period, the Group is aiming to accelerate organic growth through higher content per vehicle and a better product mix, to improve profitability and to increase free cash flow generation with, by 2021:

• sales of over 27 billion euros(2), representing average annual sales growth in excess of 10% and outperforming automotive production by more than 7 percentage points;

• operating margin(1) (as a percentage of sales) of around 9%;

• free cash flow(3) generation of 3.7 billion euros over the 2017-2021 period, twice the level recorded over the 2012-2016 period of 2 billion euros.

On March 27, 2017, Valeo took first place in France's 2016 INPI industrial property institute ranking, with 994 patents published in France in 2016 versus 668 in 2015 (third place), illustrating the importance accorded to innovation in the Group's strategy, particularly its drive to reduce CO2 emissions and develop intuitive driving.

1 Including share in net earnings of equity-accounted companies, see Financial Glossary, page 6.

2 Including Ichikoh, Valeo-Kapec and FTE.

3 See Financial Glossary, page 6.

Annual Shareholders' Meeting: May 23, 2017

First-half 2017 results: July 20, 2017

Third-quarter 2017 sales: October 24, 2017

• Operating margin including share in net earnings of equity-accounted companies corresponds to operating income before other income and expenses.

• 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.

Safe Harbor Statement

Statements contained in this document, 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 document, 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, 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 2016 Registration Document registered with the AMF on March 24, 2017 (under no. D.17-0226).

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 document. 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 document.

Valeo is an automotive supplier, partner to all automakers worldwide. As a technology company, Valeo proposes innovative products and systems that contribute to the reduction ofCO2 emissionsand to the development of intuitive driving. In 2016, the Group generated sales of 16.5 billion euros and invested over 11% of its original equipment sales in Research and Development. Valeo has 166 plants, 20 research centers, 38 development centers and 15 distribution platforms, and employs 100,900 people in 32 countries worldwide. Valeo is listed on the Paris stock exchange and is a member of the CAC 40 index.

press-contact.mailbox@valeo.com

thierry.lacorre@valeo.com