Faurecia : 2019 Half year results

Press release

Nanterre (France), July 23, 2019

FIRST-HALF 2019 RESULTS

RESILIENT SALES, PROFITABILITY AND CASH GENERATION IN A CHALLENGING ENVIRONMENT

FULL-YEAR GUIDANCE CONFIRMED

in €m	H1 2018	H1 2019*	Change
Sales	8,991	8,972	-0.2%
At constant currencies and excluding Clarion			-2.8%
Operating income	647	645	-0.4%
as % of sales	7.2%	7.2%	stable
Net cash flow	247	257	+3.9%
Net income, Group share	342	346	+1.0%

• First application of IFRS16 as of January 1, 2019 (impacts detailed in appendix and no pro forma for 2018 accounts) All definitions are explained at the end of this Press Release

SALES OUTPERFORMANCE OF 420bps AT CONSTANT CURRENCIES (excluding Clarion)

• All three historical Business Groups outperformed worldwide automotive production (-7.0%,source: IHS Markit forecast dated July 16 - vehicles segment in line with CAAM for China)
• All regions, except North America (impacted by the end of production of a significant Seating program for Daimler in Cottondale), outperformed local automotive production

RESILIENT PROFITABILITY AT 7.2% OF SALES (including Clarion)

• Improved or stable margin in all three historical Business Groups, thanks to structural initiatives and increased agility
• Operating margin at 7.3% of sales, excluding Clarion

NET CASH FLOW OF €257m AND NET INCOME OF €346m INCLUDED HIGHER RESTRUCTURING TO ADAPT TO MARKET CONDITIONS AND COSTS RELATED TO THE ACQUISITION OF CLARION

FULL-YEAR GUIDANCE CONFIRMED

• Sales growth outperformance at constant currencies between 150 to 350bps (excluding Clarion consolidation)
• Operating income increase in value and operating margin of at least 7% (including Clarion consolidation as from April 1)
• Net cash flow at least €500m (including Clarion consolidation as from April 1)

Patrick KOLLER, CEO of Faurecia, declared:

"The first half of the year was tougher than expected, mostly due to significantly lower production volumes in China. In this context, we demonstrated again our ability to deliver a very resilient performance.

Since we took control of Clarion, we have put in place a strong organization for Faurecia Clarion Electronics, combining Faurecia and Clarion competencies. We are currently focused on executing a significant cost reduction plan and we will present our strategic plan and profitable growth roadmap for the new Business Group at our Capital Markets Day, on November 26.

Our first-half performance and forecast for the second half allow us to confirm our guidance for the full-year."

1

Press release

• The 2019 half-year consolidated statements have been approved by the Board of Directors at its meeting held on July 22, 2019, under the chairmanship of Michel de Rosen. These financial statements have been subject to a limited review and the external auditors have issued their report.
• Application of IFRS16 as from January 1, 2019:

1. Faurecia is using the simplified retrospective method, according to which there will be no pro

forma of the previous year

1. All lease contracts are accounted for in the balance sheet with a "Right to use the asset" as

an asset and a corresponding debt representing the obligation to pay the future leases

• 1. The impact of IFRS16 on Faurecia's main indicators are detailed in appendix
• Fourth new Business Group "Faurecia Clarion Electronics" reported as from January 1, 2019:
• 1. This new Business Group mainly regroups the operations of Coagent (consolidated as from
     January 1, 2018 and previously classified within "Interiors"), Parrot Faurecia Automotive (sales

consolidated as from January 1, 2019) and Clarion (consolidated as from April 1, 2019)

• 1. Due to time constraints related to the first consolidation of Clarion, it was accounted for only two months (April and May) in the half-year consolidated statements. The month of June will be caught up at the financial closing of September 30.
• All figures related to worldwide or regional automotive production for the half-year refer to IHS Markit forecast dated July 16 - vehicles segment in line with CAAM for China.
• All definitions are explained at the end of this Press Release, under the section "Definitions of terms used in this document".

GROUP OPERATING PERFORMANCE IN H1 2019

• RESILIENT SALES AND OUTPERFORMANCE OF 420bps IN A TOUGH ENVIRONMENT
• RESILIENT PROFITABILITY WITH STABLE OPERATING MARGIN AT 7.2% OF SALES

First-half sales amounted to €8,972.0 million, down 0.2% on a reported basis

• Currencies had a positive impact of €82.3 million, representing 0.9% of last year's sales (positive impact from the US dollar vs. the euro partly offset by negative impact from the Turkish lira and the Argentine peso vs. the euro).
• Sales at constant currencies (excluding Clarion) were down 2.8%, representing an outperformance of 420bps compared to worldwide automotive production that dropped year-on-year by 7.0% (source IHS Markit dated July 16, 2019). They included:
  o A positive effect of €164 million due to the contribution from bolt-on acquisitions (see detail in appendix), representing 1.8% of last year's sales,
  o A negative effect, as expected and announced on February 18, of €218 million (representing 2.4% of last year's sales) due to the end of production of two Seating programs in North America (Cottondale) and Europe (Vigo),
  o A negative effect of €15.5 million from the wind-down of activities in Iran as from June 30, 2018.
• Sales included a positive scope effect of €150.4 million, due to the consolidation of Clarion as from April 1. It was only accounted for 2 months (April and May) in the half-yearfinancial consolidated statements (for the reason already mentioned above).

First-half operating income amounted to €644.8 million, broadly stable in value (-0.4%) with stable margin at 7.2% of sales, despite a dilutive impact from Clarion consolidation; excluding Clarion, operating margin stood at 7.3% of sales, up 10bps year-on-year

• All three historical Business Groups improved or maintained profitability year-on-year, despite tough environment.
• Profitability proved very resilient, thanks to structural cost reduction initiatives and accelerated restructuring.

2

Press release

SALES AND PROFITABILITY BY REGION

Europe (50% of Group sales): Sales of €4,530.8million (vs. €4,730.1 million in H1 2018) and operating income of €295.0 million (vs. €305.3 million in H1 2018)

Year-on-year sales evolution:

• Down 4.2% on a reported basis
• Down 3.8% at constant currencies, 180bps above regional automotive production (-5.6%, source: IHS Markit dated July 16, 2019)
• Currencies had a negative impact of 31.1 million (-0.7% of last year's sales, mainly attributable to the Turkish lira)
• The positive scope effect from Clarion consolidation represented €13 million of sales in the region

Sales at constant currencies benefited from a contribution of €31 million from bolt-ons (Hug Engineering for €14 million, whose consolidation started as from Q2 2018, and Parrot Automotive for €17 million, whose sales consolidation started as from January 1, 2019).

Conversely and as expected, European sales were negatively impacted by the end of production of the Berlingo program in Vigo (Seating) that represented a year-on-year negative impact of €83 million.

Operating income proved resilient with stable operating margin at 6.5% of sales.

North America (26% of Group sales): Sales of €2,288.9 million (vs. €2,232.0 million in H1 2018) and operating income of €152.9 million (vs. €135.4 million in H1 2018)

Year-on-year sales evolution:

• Up 2.5% on a reported basis
• Down 6.3% at constant currencies, 380bps below regional automotive production (-2.5%, source: IHS Markit dated July 16, 2019)
• Currencies had a positive impact of €150.1 million (+6.7% of last year's sales, mainly attributable to the US dollar)
• The positive scope effect from Clarion consolidation represented €47 million of sales in the region.

Sales at constant currencies, as expected, underperformed regional automotive production because of the significant impact from the end of production of the Seating GLE/GLS program for Daimler in Cottondale (Alabama) that represented a year-on-year negative impact of €135 million (i.e. 5.9% of last year's sales). Clean Mobility posted a strong outperformance with a 0.5% growth during the period.

Operating income significantly improved with an operating margin at 6.7% of sales, up 60bps year-on-year,mainly driven by improved performance from Seating operations (including the accretive effect from the end of production of the GLE/GLS program for Daimler).

Asia (19% of Group sales): Sales of €1,716.3 million (vs. €1,542.8 million in H1 2018) and operating income of €171.0 million (vs. €179.7 million in H1 2018)

Year-on-year sales evolution:

• Up 11.2% on a reported basis
• Up 4.4% at constant currencies, 1,260bps above regional automotive production (-8.2%, source: IHS Markit dated July 16, 2019)
• Currencies had a positive impact of €16.2 million (+1.0% of last year's sales, mainly attributable to the Chinese yuan renminbi and the Thai baht)
• The positive scope effect from Clarion consolidation represented €90 million of sales in the region.

Growth at constant currencies benefited from bolt-on contribution of €132 million (mainly the Seating JV with BYD for €106 million, whose consolidation started as from Q3 2018, and the Interiors JV with Wuling for €21 million, whose consolidation started as from Q2 2018). Even restated for this contribution, sales in Asia proved resilient in the current tough environment, with an outperformance of 400bps vs. regional automotive production.

3

Press release

In China, sales amounted to €1,208 million (vs. €1,169 million in H1 2018), up 3.3% on a reported basis and up 1.4% at constant currencies, an outperformance of 1,710bps vs. the Chinese automotive production (-15.7%, source: IHS Markit dated July 16, 2019). Sales in China included the above-mentioned contribution of €132 million from bolt-ons. Even restated for this contribution, sales in China proved resilient with an outperformance of 580bps vs. the Chinese automotive production.

Sales to Chinese OEMs amounted to €409 million and represented 34% of sales in the country (vs. 25% in H1 2018).

Operating income proved resilient with a double-digit operating margin at 10.0% of sales (vs. 11.6% in H1 2018), despite a dilutive impact from Clarion consolidation. Margin resilience was supported by a significant cost rationalization program in China, including the closure of 7 plants during the period.

South America (4% of Group sales): Sales of €344.7 million (vs. €363.4 million in H1 2018) and operating income of €18.5 million (vs. €11.8 million in H1 2018)

Year-on-year sales evolution:

• Down 5.2% on a reported basis
• Up 7.2% at constant currencies, 1,030bps above regional automotive production (-3.1%, source: IHS Markit dated July 16, 2019)
• Currencies had a negative impact of €45.9 million (-12.6% of last year's sales, attributable to the
  Argentine peso and the Brazilian real)

Growth at constant currencies in Brazil was mainly driven by Clean Mobility, while exposure to Argentina was reduced through the sale of the Interiors plant in Malvinas.

Operating income significantly improved with an operating margin at 5.4% of sales, up 210bps year-on-year.Margin improvement was driven by significant loss reduction in Argentina and by a one-offeffect from tax recovery (ICMS in Brazil).

SALES & PROFITABILITY BY BUSINESS GROUP

Seating (41% of Group sales): Sales of €3,640.1 million (vs. €3,781.5 million in H1 2018) and operating income of €219.1 million (vs. €221.5 million in H1 2018)

Year-on-year sales evolution:

• Down 3.7% on a reported basis
• Down 4.5% at constant currencies, 250bps above worldwide automotive production (-7.0%, source: IHS Markit dated July 16, 2019)
• Currencies had a positive impact of €28.5 million (+0.8% of last year's sales)

Growth at constant currencies included a bolt-on contribution of €106.1 million from the JV with BYD in Asia (consolidated as from Q3 2018).

Conversely, it was penalized, as previously commented, by the end of production of two programs in North America (Cottondale) and Europe (Vigo), representing a combined year-on-year negative impact of €218 million.

Operating income proved very resilient with an operating margin at 6.0% of sales, up 10bps year-on-year.This was mainly driven by improved performance in South America and also by the accretive effect from the end of production of the GLE/GLS program for Daimler in the USA.

Interiors (30% of Group sales): Sales of €2,746.1 million (vs. €2,795.6 million in H1 2018) and operating income of €170.8 million (vs. €167.6 million in H1 2018)

Year-on-year sales evolution:

• Down 1.8% on a reported basis
• Down 2.3% at constant currencies, 470bps above worldwide automotive production (-7.0%, source: IHS Markit dated July 16, 2019)
• Currencies had a positive impact of €14.6 million (+0.5% of last year's sales)

4

Press release

Sales at constant currencies included a bolt-on contribution of €20.9 million from the JV with Wuling in Asia (consolidated as from Q2 2018).

Operating income improved year-on-year with an operating margin at 6.2% of sales, up 20bps year-on-year.This was mainly driven by increased operating efficiency in North America and in Europe.

Clean Mobility (26% of Group sales): Sales of €2,351.2 million (vs. €2,360.3 million in H1 2018) and operating income of €254.7 million (vs. €255.3 million in H1 2018)

Year-on-year sales evolution:

• Slightly down (-0.4%) on a reported basis
• Down 2.0% at constant currencies, 500bps above worldwide automotive production (-7.0%, source: IHS Markit dated July 16, 2019)
• Currencies had a positive impact of €38.5 million (+1.6% of last year's sales)

Growth at constant currencies included a bolt-on contribution of €13.6 million from Hug Engineering in Europe (consolidated as from Q2 2018). Lower tooling sales, due to fewer launches, had a negative impact on sales in Europe and North America, while Asia was mostly impacted by lower sales to international OEMs and Geely.

Operating income proved very resilient and operating margin was stable year-on-year at 10.8% of sales. This was mainly driven by improved performance in North and South America, offsetting reduced contribution from China.

Faurecia Clarion Electronics: Sales of €234.6 million and operating income of €0.2 million

In H1 2019, sales for this new Business Group included:

• €61 million from Coagent (consolidated since January 1, 2018), vs. €54 million in H1 2018,
• €23 million from Parrot Automotive (sales consolidated since January 1, 2019),
• €150 million from Clarion (sales consolidated only for April and May in H1 2019).

Operating income for the period stood at €0.2 million. It included a negative contribution of €1.2 million from Clarion. Clarion contribution to operating income will be positive in the second half of the year.

NET INCOME (GROUP SHARE) OF €346 MILLION INCLUDED HIGHER RESTRUCTURINGS TO ADAPT TO MARKET CONDITIONS AND COSTS RELATED TO THE ACQUISITION OF CLARION

Group operating income in H1 2019 stood at €644.8 million, broadly stable (-0.4%) in value vs. H1 2018.

• Amortization of intangible assets acquired in business combinations: net charge of €10.8 million vs. a net charge of €5.4 million in H1 2018; it mainly included Parrot Automotive for €4 million, Coagent for €3 million and Hug Engineering for €2 million.
  As regards Clarion, the purchase price allocation process is ongoing. As a consequence, there was no amortization accounted for Clarion at June 30 and amortization for the 9 months will be booked in H2.
• Restructuring costs: net charge of €71.0 million vs. a net charge of €27.8 million in H1 2018; the increase mainly reflected the actions taken to adapt to a more challenging environment.
• Other non-recurring operating income and expenses: net charge of €22.0 million vs. a net charge of €36.0 million in H1 2018; in H1 2019, it included a charge of €16 million related to Clarion acquisition and integration costs (in H1 2018, it included a charge of €17 million due to the wind- down of activities in Iran).
• Net financial result: net charge of €94.5 million vs. a net charge of €68.4 million in H1 2018; in H1 2019, it included €20 million related to the financing of Clarion (annual run-rate of €32 million) and €24 million from the implementation of IFRS16
• Income tax: net charge of €93.1 million (21% of pre-tax income) vs. a net charge of €136.0 million in
  2018 (27% of pre-tax income); the expected tax rate for the year should be of c. 25%.
• Share of net income of associates: profit of €24.9 million vs. a profit of €16.8 million in H1 2018.

5