Valeo : Press release – H1 2022 Results

PRESS RELEASE

Paris, July 26, 2022

First-half 2022 results

Resilient performance, strong business momentum and guidance confirmed

• Sales of 9,419 million euros, up by 5%
• Outperformance in all production regions: 3 percentage points worldwide
• Strong growth in aftermarket sales, up 11% year on year on a like-for-like basis
• Free cash flow of 179 million euros
• EBITDA margin at 11.8% of sales and EBIT margin at 2.7% of sales
• Share in net earnings of equity-accounted companies representing a loss of 76 million euros, in line with the objective of halving the losses from Valeo Siemens eAutomotive over the full year
• 2022 guidance confirmed
• Strong business momentum with order intake of 13.1 billion euros for Valeo and
  2.9 billion euros for VSeA, validating the growth outlook set out in the Move Up plan and confirming Valeo's status as a committed sustainable mobility player

"The resilience of Valeo's first-half 2022 results in a difficult environment marked by high inflation, the electronic components shortage, lockdown measures in China and the conflict in Ukraine reflects our ability to overcome the major challenges we are currently facing.

Thanks to the excellent work of Valeo's teams, our sales growth outperformed automotive production in all regions worldwide, while our free cash flow generation exceeded expectations at 179 million euros.

We are particularly pleased with the high level of order intake, including several particularly strategic orders in electrification and ADAS, illustrating Valeo's accelerating momentum and the strong growth outlook set out in our Move Up plan.

The integration of Valeo Siemens eAutomotive is progressing as planned and will enable us to achieve the 120 million euros in synergies announced by 2025.

Based on the automotive production estimates published by S&P Global Mobility for the second half of the year, we are confident in our ability to achieve our 2022 guidance. This puts us perfectly in line with our Move Up plan."

Christophe Périllat, Chief Executive Officer

1

First-half 2022 key figures

			H1 2022
Sales		(in €m)	9,419
Original equipment sales		(in €m)	7,813
Gross margin		(in €m)	1,589
		(as a % of sales)	16.9%
R&D expenditure		(in €m)	(893)
		(as a % of sales)	(9.5%)
Selling and administrative expenses		(in €m)	(438)
		(as a % of sales)	(4.7%)
Operating margin excluding share in net earnings of equity-accounted		(in €m)	258
companies		(as a % of sales)	2.7%
Share in net earnings of equity-accounted companies		(in €m)	(76)
		(as a % of sales)	(0.8%)
Operating margin including share in net earnings of equity-accounted		(in €m)	182
companies*		(as a % of sales)	1.9%
Net attributable income (loss)		(in €m)	(48)
		(as a % of sales)	(0.5%)
Basic earnings per share		(in €)	(0.20)
EBITDA*		(in €m)	1,111
		(as a % of sales)	11.8%
Change in operating working capital		(in €m)	(35)
Investments in property, plant and equipment and intangible assets		(in €m)	(589)
Free cash flow*		(in €m)	179
Net debt*		(in €m)	3,281
* See financial glossary, page 15.

H1 2021	Change
8,994	+5%
7,512	+4%
1,586	-%
17.6%	-0.7 pts

1. +18%

(8.4%)

-1.1 pts

1. +5.5%

(4.6%)

-0.1 pts

415 -38%

4.6%	-1.9 pts

1. -36%

(1.3%)

+0.5 pts

296 -39%

3.3%	-1.4 pts
90	-153%
1.0%	-1.5 pts

0.38 N/A

1,205	-8%
13.4%	-1.6 pts

1. N/A

1. +3%

145 +23%

3,147 +€134m

2

Implementation of the Move Up plan:

• strong business momentum validating Valeo's growth outlook
• integration of Valeo Siemens eAutomotive on July 4, 2022

In the first six months of 2022, Valeo enjoyed strong business momentum and recorded a significant increase in order intake, which reached 13.1 billion euros or 1.7 times its original equipment sales. In addition, innovations(1) accounted for 65% of the order intake. Valeo Siemens eAutomotive's order intake amounted to 2.9 billion euros. The Group is seeing a sharp rise in the average value of orders it receives for ADAS and electrification technologies, driven by a rise in content per vehicle and the increasing use of platforms by OEMs.

In ADAS, Valeo recorded key strategic orders with:

• Stellantis, for its third generation 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);
• BMW, in a major partnership for which Valeo 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.

The Group is also seeing its order intake accelerate in the field of electrification:

• Valeo Siemens eAutomotive beat its target of more than 4 billion euros in order intake for high-voltage electrification technologies for the 2021-2022 period. The goal was met more than seven months ahead of its roadmap, attesting to Valeo's momentum in the fast accelerating high-voltage electrification market;
• in the Thermal Systems Business Group, the acceleration of electrification led to new order intake in the area of thermal management for electrified vehicles (battery cooling systems, specific climate control systems for electric vehicles, etc.). In the first half of the year, order intake relating to electrified vehicles accounted for more than 60% of the Business Group's new orders.

In the interior and exterior lighting business (the "lighting everywhere" component of the Move Up plan), Valeo received its first orders for front-end lighting and illumination for automaker badges following the phasing out of radiator grilles on electric vehicles, with the booming electrification market offering automakers new opportunities to liven up their design features.

On July 4, Valeo Siemens eAutomotive was integrated within the Powertrain Systems Business Group. The Business Group intends to harness synergies from the integration, particularly in R&D. The amount of these synergies, estimated in the Move Up plan at 120 million euros on an annual basis by 2025, is confirmed.

Valeo, committed to sustainable mobility for the long term

Positioned in the four megatrends set out in the Move Up plan - acceleration of electrification and ADAS, reinvention of the interior experience and lighting everywhere - and committed to diversity and inclusion, Valeo is in step with the United Nations' key Sustainable Development Goals.

Valeo develops solutions that contribute to significantly reducing greenhouse gas emissions, such as hybrid and electric powertrain systems, including rare earth-free EESM eMotor and 800V SiC technologies. It also manufactures solutions that help improve road safety, with a panel of sensors that is unmatched worldwide, including its most advanced third generation LiDAR.

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.

1 Products and technologies in series production for less than three years.

3

Change in sales

In first-half2022, automotive production contracted by 2% compared to the same period in 2021. The automotive industry faced a number of challenges during the period:

• disruption in the supply chain for electronic components which, as expected, are showing signs of gradual improvement;
• lockdown measures in China, which had a significant impact on sales in April. Since then, business has recovered rapidly, returning to normal levels in early June;
• the Russia-Ukraine crisis, which affected the activity of certain manufacturers in February and March.

H1 sales

As a % of

vs. H1 2021

H1 2022

H1 2022

LFL*

(in millions of euros)

H1

Change

sales

change

Original equipment

83%

7,813

7,512

+1%

+4%

Aftermarket

12%

1,140

1,030

+11%

+11%

Miscellaneous

5%

466

452

-%

+3%

H1 total

100%

9,419

8,994

+2%

+5%

* Like for like(2).

Consolidated sales of 9,419 million euros in the first half, up 5% compared with the same period in 2021. Changes in exchange rates had a positive 3.4% impact, primarily due to the depreciation of the euro against the US dollar and the Chinese yuan. Changes in Group structure had a negative 0.4% impact for the period.

Original equipment sales increased by 1% on a like-for-like basis despite the decline in automotive production. Thanks to an increase in content per vehicle, the Group was able to more than offset the contraction in global automobile production.

Like-for-likeaftermarket sales rose sharply by 11%, buoyed by an attractive offering for customers as well as market momentum.

"Miscellaneous" sales were stable on a like-for-like basis, supported by customer contributions to the Group's R&D efforts.

First-half 2022 original equipment sales by destination region

				As a % of									vs. H1 2021
	Original equipment sales			H1 2022			H1 2022				H1 2021		LFL*	Outperf.**
	(in millions of euros)			sales								change
	Europe & Africa	45%			3,548	3,606	-2%		+9 pts
	Asia, Middle East & Oceania	32%			2,485	2,379	+1%		+1 pt
	o/w China	15%			1,184	1,022	+5%		+4 pts
	o/w Japan	6%			505	548	-6%		+8 pts
	o/w South Korea	7%			528	583	-6%		-4 pts
	o/w India	1%			106	93	+9%		-7 pts
	North America	21%			1,614	1,390	+6%		+1 pt
	South America	2%			166	137	+13%		+14 pts
	H1 total	100%	7,813	7,512	+1%	+3 pts

• Like for like(2).
• Based on S&P Global Mobility (formerly IHS Markit) automotive production estimates released on July 15, 2022.

2 See financial glossary, page 15.

4

First-half 2022 original equipment sales outperformed global automotive production by 3 percentage points (3 percentage points excluding the geographic mix).

Valeo outperformed automotive production in the main production regions:

• in Europe and Africa, original equipment sales were down 2% on a like-for-like basis, outpacing automotive production by 9 percentage points, mainly driven by the Comfort and Driving Assistance and Thermal Systems Business Groups;
• in Asia, original equipment sales grew by 1% on a like-for-like basis, outpacing automotive production by
  1 percentage point:
• • in China, like-for-like original equipment sales were up 5%, outperforming automotive production by 4 percentage points. Business was well above pre-crisis levels despite lockdown measures which significantly affected the Group's activity during the second quarter. The Comfort & Driving Assistance Systems Business Group saw a significant acceleration in its camera business with its Chinese and international customers, and the Thermal Systems Business Group benefited from an acceleration in sales to German customers. The Visibility Systems Business Group, however, was negatively impacted by an unfavorable product mix (lower electronics content), while the Powertrain Systems Business Group experienced a decline in its truck business due to an unfavorable basis of comparison (strong growth in first-quarter 2021),
  • in Japan, original equipment sales declined by 6% on a like-for-like basis, representing an outperformance of 8 percentage points, driven by a favorable customer mix amid supply chain disruption;
• in North America, original equipment sales increased by 6% on a like-for-like basis, outperforming automotive production by 1 percentage point, driven mainly by the ramp-up of numerous projects in ADAS and market share gains with several automakers in powertrains;
• in South America, original equipment sales expanded by 13% on a like-for-like basis, outperforming automotive production by 14 percentage points.

5