Plastic Omnium posts strong results despite global production slump

Paris —Plastic Omnium SA, the French supplier of front-end modules and fuel system components, reported strong results for 2018 despite a slump in global auto production.

Sales rose 7.6 percent to 8.2 billion euros, with an operating margin of 610 million euros, or 8.4 percent of sales, down slightly from 2017, when it was 9.6 percent.

Free cash flow was 218 million euros, compared with 176 million euros in 2017, the company said in a statement.

Investors welcomed Thursday's results, with shares up 3.6 percent in day trading on the French bourse. Plastic Omnium's share price took a hit in 2018, down 46 percent for the year as the European supplier sector lost 39 percent overall. The company said Thursday it was proposing a dividend of 0.74 euros per share, a 10 percent increase.

Looking ahead to this year, Plastic Omnium is forecasting that it will outperform the global automotive market by at least five percentage points, generate at least 200 million euros in free cash flow and increase the value of its operating margin.

Last year was a transition year for Plastic Omnium, as it sold off its plastics container business to become a pure automotive player. The company also bought out Mahle's 33.3 percent stake in the HPBO front-end module joint venture. Plastic Omnium is now organized around two main businesses: Plastic Omnium Industries, which makes exterior panels and trim as well as fuel system components such as tanks and filters; and Plastic Omnium Modules.

Plastic Omnium Industries had revenue of 6.8 billion euros in 2018, down 1.3 percent from 2017, with an operating margin of 9.2 percent, compared with 9.3 percent in 2017. The modules operation had 1.4 billion euros in revenue and an operating margin of 3.4 percent.

Europe accounted for 54 percent of Plastic Omnium's sales in 2018, with sales up by 11 percent. Excluding sales after the Mahle acquisition, revenue rose 1.7 percent in a flat automotive market. Eastern Europe was a bright spot, up 5.6 percent on components for the Porsche Cayenne SUV in Slovakia.

North American sales grew by 1.1 percent, driven by strong business in Mexico at the Daimler plant in San Luis Potosi, which makes the Mercedes A Class. Plastic Omnium expects stronger North American growth this year, particularly in bumper production for the new BMW X5 and new orders in Mexico.

China was another bright spot, with business up 7.1 percent even though overall automotive production fell by 1 percent. The country accounted for 10 percent of Plastic Omnium revenue, a total that is expected to increase as three new factories come on line by 2021.

Plastic Omnium is in the middle of an aggressive program of capital investment. Investments rose by 26 percent in 2018 to 561 million euros. Major projects include two plants to supply BMW, one in Shenyang, China, and the other in Greer, South Carolina. Plants are also under construction in China, India, Malaysia, Morocco and Slovakia. The capital spending is largely financed by earnings, the company said.

Major new innovation projects include a joint venture with Hella, starting in January, that will combine exterior systems and lighting; a project with the German supplier Brose for "an innovation side-door system"; and Plastic Omnium New Energies, a business unit that will develop future energy systems, including fuel cells and hydrogen propulsion.

Plastic Omnium ranks 26th on the Automotive News Europe list of Top 100 global suppliers, with automotive sales of $9.6 billion in 2017.