PARIS — Adapting to a slowing global automotive market, Valeo has set new financial targets through 2022, including doubling free cash flow to reach between 1.3 billion euros and 1.5 billion euros ($1.4 billion and $1.7 billion.)
The supplier also seeks to increase earnings before interest, tax, depreciation and amortization to 15 percent of sales in 2022, compared with 13 percent in 2018.
CEO Jacques Aschenbroich said in a news release ahead of its investors' day on Friday that Valeo expected to outperform the global automotive market by five percentage points, relying on projections by IHS Markit that show an overall decline of 2 percent over the next three years.
Valeo supplies a range of functional plastic parts such as lighting and front-end carriers.
Valeo described the automotive market as "more challenging than anticipated" in 2019, with growth 11 percent lower than predicted in the company's previous strategic plan. That plan had anticipated outperformance by seven percentage points.
Aschenbroich said Valeo would meet its targets by reaping the benefits of investments into vehicle electrification and driving assistance systems, as well as increasing r&d efficiencies.
He told Automotive News Europe in an interview earlier this year that Valeo was instituting cost-cutting measures to deal with the slowing market.
"We have already reduced capital expenditures by 100 million euros ($110 million), compared with last year, and by the end of this year, we will reduce another 100 million euros," said Aschenbroich, 65, who is in his last term as CEO.
The company also released new targets for its joint venture with Siemens to produce components for electric and electrified vehicles. Valeo now expects 2022 revenue for the joint venture of 1.4 billion euros ($1.5 billion), down from earlier projections of 2 billion euros ($2.2 billion), with earnings margin of 8 percent. Free cash flow for the joint venture should be at the breakeven point in 2022.
In 2022 Valeo will take full control of the venture, which was started in 2016 to produce electric motors, range extenders, onboard chargers, inverters and DC-to-DC converters.
"We continue to like Valeo's electric vehicle exposure, which is well ahead of peers," Morgan Stanley wrote in an investors' note.
Aschenbroich said in the release that the company would present 12 technological platforms to investors, which would increase profits and give the supplier a competitive edge because of "high barriers to entry, allowing us to sharply increase our average content per vehicle."
Valeo ranks 10th on the Automotive News list of Top 100 global suppliers, with automotive sales of $19.7 billion in 2018.
