Valeo : Press release – 2022 Results

PARIS

February 23, 2023

Valeo achieves its 2022 objectives and accelerates in electrification and ADAS

• Sales of 20,037 million euros, up by 16%
• Acceleration in ADAS (up 29% LFL) and electrification (up 32 % LFL)
• Outperformance of original equipment sales in all production regions: 3 percentage points worldwide
• Strong growth in sales for the aftermarket, up 9%LFL
• EBITDA and EBIT margins at 12.0% and 3.2 % of sales, respectively
• Free cash flow of 388 million euros
• Strong business momentum (order intake up 48% to 32.6 billion euros), confirming Valeo's growth prospects in electrification and ADAS
• Reduction in greenhouse gas emissions in line with the "CAP 50" carbon neutrality roadmap
• 2022 dividend of €0.38 per share to be proposed to shareholders at the next Shareholders' Meeting
• Strong growth expected in 2023, with an improved operating margin in line with the Move Up strategic plan

"Owing to the remarkable commitment of our teams, whom I would like to thank, we have achieved all of the financial objectives we set at the beginning of 2022 in a challenging environment marked by high inflation, the electronic components shortage, lockdown measures in China and the conflict in Ukraine.

Growth in our original equipment sales outperformed automotive production in all regions, our EBIT and EBITDA margins, at

3.2 % and 12.0% of sales, respectively, are in line with the guidance published in February 2022, and our free cash flow generation of 388 million euros is above expectations. We are particularly pleased with our order intake, up 48% compared to 2021, including several particularly strategic orders in electrification and ADAS.

This performance attests to the successful first-year implementation of our Move Up strategic plan, and confirms our strong growth prospects in electrification and ADAS.

Leveraging the acceleration in these two sustainable mobility megatrends, we are targeting strong year-on-year sales growth in 2023. We will also aim to curb the impact of inflation through the combined effect of our productivity and cost reduction measures and the price increases passed on to our customers. Against this backdrop, we are targeting sales of between 22 and 23 billion euros, an improved operating margin of between 3.2 and 4.0% and a free cash flow generation of over 320 million euros, with a significant improvement in our financial performance in the second half of the year."

Christophe Périllat, Valeo's Chief Executive Officer

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2022 key figures

Order intake

2022 guidance

2022

2021

Change

Order intake*

(in €bn)

32.6

22.1

+48 %

Income statement			2022 guidance	2022	2021	Change
Sales	(in €m)	19,200 - 20,000	20,037	17,262	+16 %
Original equipment sales	(in €m)			16,748	14,151	+18 %
Outperformance**	(in pts)			+3pts		0pts	N/A
Aftermarket sales	(in €m)			2,256	2,068	+9 %
Gross margin	(in €m)			3,447	3,040	+13 %
(as a % of sales)			17.2 %	17.6 %	-0.4 pt
R&D expenditure***	(in €m)			(1,880)	(1,510)	+25 %
(as a % of sales)			(9.4) %	(8.7) %	-0.7 pts
EBITDA *	(in €m)			2,401	2,308	+4 %
(as a % of sales)		11.8 % - 12.3 %	12.0 %		13.4 %	-1.4 pt
Operating margin excl. share in net earnings of equity-	(in €m)			635	699	-9 %
accounted companies	(as a % of sales)		3.2% - 3.7%	3.2 %		4.0 %	-0.8 pts
Share in net earnings of equity-accounted companies	(in €m)			115	-243	N/A
(as a % of sales)			0.6 %	-1.4 %	N/A
Net attributable income	(in €m)			230	175	+31 %
(as a % of sales)			1.1 %	1.0 %	+0.1 pts
Basic earnings per share	(in €)			0.95	0.73	N/A
Statement of cash flows			2022 guidance	2022	2021	Change
Change in operating working capital	(in €m)			99	-460	N/A
(as a % of sales)			0.5 %	-2.7 %	N/A
Investments excl. capitalized development expenditure	(in €m)			(753)	(678)	+11 %
(as a % of sales)			(3.8) %	(3.9) %	+0.1 pts
Capitalized development expenditure***	(in €m)			(536)	(431)	+24 %
(as a % of sales)			(2.7) %	-2.5 %	-0.2 pts
Free cash flow *	(in €m)	~320	388	292	+33 %
Financial structure and dividend			2022 guidance	2022	2021	Change
Net debt *	(in €m)			4,002	3,104	+898 m€
Leverage ratio (net debt to EBITDA)	N/A			1.67	1.34	N/A
Dividend per share ****	(in €)			0.38	0.35	+9%

* See financial glossary, page 18.

**Based on S&P Global Mobility automotive production estimates released on February 16, 2023 (2022 global production growth: 7%)

***For a comprehensive view of Research and Development expenditure, see page 13 of the press release.

****The dividend for 2022 will be recommended to shareholders at the Shareholders' Meeting of May 24, 2023..

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Order intake of 32.6 billion euros, reflecting the acceleration in electrification and

ADAS

• Two-thirdsof Powertrain Systems and Thermal Systems Business Group order are for high-voltage solutions designed for electrified vehicles
• ADAS orders representing 3x original equipment sales
• Order intake profitability significantly above 2025 operating margin objective set in Move Up plan, leading to further improvement in margins beyond 2025

Valeo enjoyed strong business momentum in 2022, reporting a 48% increase in order intake(1) to 32.6 billion euros.

Achieved through strict financial discipline, this order intake was recorded at a level of profitability significantly above the 2025 operating margin objective set in the Move Up plan, leading to continued improvement in our margins beyond 2025.

The Powertrain Systems and Thermal Systems Business Groups are seeing an acceleration in orders for electrification solutions:

• Orders for high-voltage solutions designed for electrified vehicles accounted for two-thirds of orders for the Powertrain Systems and Thermal Systems Business Groups in 2022.
• Orders placed with the Powertrain Systems Business Group by both existing and new customers concern end-to-end powertrain assemblies or their components (electric motors, inverters, reducers, onboard chargers and DC/DC converters), including the new 800-volt silicon carbide (SiC) technologies. With these new orders, Valeo demonstrates its aim of supporting its customers in Europe, China and, most recently, North America.
• The acceleration in electrification also benefited the Thermal Systems Business Group, which reported new orders in the area of thermal management of high-voltage electrified vehicles (battery cooling systems, dedicated air conditioning systems for electric vehicles, new Smart Heat Pumps, etc.). These included a record order with Stellantis for its next electric platform and an order with another leading European automaker for which Valeo will supply the air conditioning unit and front-end cooling module for one of the automaker's major electric platforms.

Sales momentum was particularly strong in ADAS, where the order intake represented 3x ADAS original equipment sales and included several particularly strategic orders:

• The Group saw a significant increase in the average size of its ADAS orders thanks to software-defined vehicles (SDV), the new vehicle architecture.
• Valeo signed a major partnership with BMW for which the Group will supply the ADAS domain controller, sensors (ultrasonic sensors, surround view cameras and a multifunctional interior camera) and software for parking and low-speed maneuvering on the next generation BMW "Neue Klasse" platform due to launch in 2025. At the start of 2023, BMW and Valeo announced a new partnership to co-develop fully automated parking systems up to Level 4, also for BMW's upcoming "Neue Klasse" platform generation.
• Stellantis adopted the third-generation LiDAR Valeo (LiDAR Valeo Scala 3), whose technical features in terms of resolution and field of view enable vehicles to reach a high level of autonomy (level 3).
• A large volume of orders was also placed by Chinese automakers in the second half of the year in the camera and parking assistance segments.

"CAP 50" plan - greenhouse gas reductions exceeding annual targets in 2022

To deliver its value creation strategy, announced in February 2022 when unveiling its Move Up plan, Valeo is building on its leadership in sustainable mobility technologies, particularly electrification and ADAS, and on its recognized ESG performance.

In its CAP 50 carbon plan, Valeo has defined its roadmap for reducing greenhouse gas emissions to achieve carbon neutrality across its value chain (Scopes 1, 2 and 3) by 2050.

1. See financial glossary, page 18.

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Valeo's commitment in these areas and those made by the Group in terms of ESG are reflected in its leading position with non-financial rating agencies and its inclusion in the main global ESG indices.

As part of this ambitious plan, Valeo set itself a dual reduction target for 2025 and 2030:

• the first falls under the framework of the Science Based Targets initiative (SBTi);
• the second incorporates the impact of the benefits of electrification provided by Valeo's solutions in terms of reducing CO2-equivalent emissions and is also known as the "net target".

The Group beat this dual annual reduction target in 2022, with emissions of:

• 45.2 MtCO2eq., below the target level of 47.4 MtCO2eq. defined in the SBTi commitment;
• emissions of 41.5 MtCO2eq., below the target level of 43.7 Mt.CO2eq., including gains from Valeo technologies (net target).

Valeo's Board of Directors is fully committed to the governance of the CAP 50 carbon plan, whose implementation is overseen by the Governance, Appointments & Corporate Social Responsibility Committee. The Audit & Risks Committee also closely monitors the topic, going beyond the CAP 50 carbon plan and working on risk analysis as recommended by the Task Force on Climate-related Financial Disclosures (TCFD).

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Sales of 20,037 million euros in 2022, up 16% lifted by electrification and ADAS

In 2022, automotive production climbed 7%(2) compared to 2021.

During the year the automotive industry had to contend with (i) tensions in the supply chain for electronic components, which, as expected, are gradually easing; (ii) the Russia-Ukraine crisis, which had a negative impact on the activity of certain manufacturers in March and April; and (iii) the lockdown measures in China, which significantly impacted sales in April - business recovered quickly and returned to normal levels by early June - and December.

Sales	As a % of	2022				vs. 2021
(in millions of euros)	2022 sales	2021	Change	LFL change*		Scope	FX
Original equipment	84	%	16,748	14,151	+18 %	+10 %	+4 %	+4 %
Aftermarket	11	%	2,256	2,068	+9 %	+9 %		- %	- %
Miscellaneous	5 %	1,033	1,043	-1 %	-5 %		- %	+4 %
Total	100 %	20,037	17,262	+16 %	+9 %	+3 %	+4 %

* Like for like (3).

Total sales came in at 20,037 million euros, up 16% compared with 2021, and rose 9% over the period on a like-for-like basis.

Changes in exchange rates had a positive 4% impact, primarily due to the depreciation of the euro against the US dollar and the yuan.

Changes in Group structure had a positive 3% impact for the period. This mainly resulted from the integration of the high-voltage electric powertrain business (formerly Valeo Siemens eAutomotive) as of July 1, 2022. This business represented sales of 644 million euros in the second half of 2022. Sales for the high-voltage electric powertrain business totaled 1 billion euros for the year as a whole, up 34% year on year.

Original equipment sales were up 10% on a like-for-like basis, lifted by the recovery in global automotive production, an increase in content per vehicle, notably in ADAS (original equipment sales up 29% like for like), as well as compensation from customers for the impact of inflation on our costs.

On an adjusted basis(3), consolidated sales accelerated, rising 11% compared with 2021.

Aftermarket sales moved up 9% on a like-for-like basis, fueled by the increased number and age of vehicles on the road, a more attractive offering with a shift towards more value-added products (transmissions systems kits), and the impact of price increases.

"Miscellaneous" sales (tooling and customer contributions to R&D) contracted by 5% like for like.

Sales accelerated by 25% in the fourth quarter, driven by the surge in electrification and ADAS

Q4 sales	As a % of						vs. 2021
Q4 2022		Q4 2022				LFL
(in millions of euros)			Q4 2021	Change		Scope	FX
sales
			change*
Original equipment	83 %	4,461	3,456	+29 %	+18 %	+9 %	+2 %
Aftermarket	10 %	543	518	+5 %	+4 %	+1 %	- %
Miscellaneous	7 %	355	330	+8 %	+5 %	+1 %	+2 %
Total	100 %	5,359	4,304	+25 %	+15 %	+7 %	+2 %

(2)Based on S&P Global Mobility automotive production estimates released on February 16, 2023

1. See financial glossary, page 18.

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