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January 08, 2020 09:45 AM

Plastic Omnium expects to be profitable in 2019 but warns on costs

Peter Sigal
Automotive News Europe
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    Plastic Omnium

    Plastic Omnium expects to post higher earnings and revenue for 2019 but a lower operating margin.

    Paris — Plastic Omnium told investors that it expects "no rebound" in the global automotive market in the next three years, and the company will need to manage its cost structure to ensure profitable operations.

    The supplier expects to post higher earnings and revenue for 2019 but a lower operating margin.

    Plastic Omnium supplies blow molded fuel tanks and injection molded functional exterior parts, such as grilles and front-end modules through its HBPO joint venture. In North America, its Plastic Omnium Auto Exteriors LLC group is No. 16 in Plastics News’ most recent ranking of injection molders with an estimated $425 million in sales. Its fuel tank business, Plastic Omnium Auto Inergy Division ranks No. 6 among North American blow molders in PN data, with $1.4 billion in sales.

    Revenue would be about 9 billion euros ($10 billion), up from 8.2 billion euros, Plastic Omnium said at a preview of 2019 results in Brussels on Tuesday.

    Earnings before interest, interest, taxes, depreciation, and amortization (EBITDA) would be around 1 billion euros, up from 918 billion euros, and free cash flow would be around 300 million euros, up from 218 billion euros.

    The supplier expects a 2019 operating margin of 6 percent, down from 8.4 percent.

    Short-term cash flow had been hurt by issues with a new factory in Greer, South Carolina, the supplier said. The difficulties at the factory led Plastic Omnium to cut its 2019 outlook to 6 percent.

    For 2020-22, Plastic Omnium said it would outperform the global automotive market by an average of five percentage points per year and have annual free cash flow of "more than 200 million euros."

    "With no expected rebound in the worldwide automotive market over the next 3 years, this will firstly require the proactive management of our cost structure and the strengthening of our balance sheet," said CEO Laurent Favre in a news release.

    Global auto production will fall by 2 percent in 2020 and remain stable in 2021-22, the company said.

    Plastic Omnium will focus on reducing debt and will cap investments at 6 percent of revenue, the company said.

    Favre is the first sole CEO of Plastic Omnium who is not a member of the Burelle family, which holds a controlling stake in the company through Burelle SA. He replaces the team of Laurent Burelle, who is chairman of Plastic Omnium and CEO of Burelle SA, and Jean-Michel Szczerba, who will take on an advisory role.

    Laurent Burelle's daughter Felicie Burelle is now Plastic Omnium's second-ranking executive, with the title managing director.

    Last week Plastic Omnium named new leaders for two of its three divisions. Stephane Noel is president and CEO of intelligent exterior systems, and Christian Kopp is president and CEO of clean energy systems, which makes fuel tanks and pollution controls.

    Noel, who joined Plastic Omnium in 2012, had led the clean energy division since October 2017. Kopp, who joined the supplier in 2007, had led the clean energy division in Asia.

    Plastic Omnium ranks 27th on the Automotive News Europe list of top 100 global suppliers, with automotive revenues of $9.74 billion in 2018.

    The company primarily makes fuel systems and body panels, including front-end modules in a joint venture with Hella.

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