Industria
FORVIA H1 RESULTS
NANTERRE (FRANCE)
JULY 27, 2023
H1 2023 RESULTS ON TRACK WITH PRIORITIES & POWER25 PLAN
* Restated for SAS (part of the “Interiors” Business Group), presented as Discontinued operations as from January 1, 2022
** Source: S&P Global Mobility (ex-IHS Markit) dated July 2023
FY 2023 NEW GUIDANCE
Based on actual worldwide automotive production growth in the first half and expected evolution in the second half, FORVIA is revising upward its worldwide automotive production assumption in 2023 to around 86 million LVs, from 82 million estimated in February.
As a consequence, the Group is adjusting upward its 2023 guidance as follows:
Faurecia's SAS Cockpit Modules division (assembly and logistics services), that was part of the “Interiors” Business Group and whose contemplated disposal was announced on February 19, 2023, is now presented as Discontinued operations. Impacts on the Group's 2022 consolidated figures are presented in Appendix, at the end of this document.
H1 2023 KEY ACHIEVEMENTS
In H1, FORVIA recorded order intake above €15 billion, a high level reflecting strong momentum of both Faurecia and HELLA.
Received awards reinforce the Group's development on its key activities and geographies:
It is worth mentioning:
The order intake recorded in H1 2023 has an average operating margin above the Group's Power25 objectives.
The pace of the combination with HELLA accelerated in H1, allowing FORVIA to make further progress on revenue and cost synergies
In H1, FORVIA and Stellantis amicably resolved claims between the parties allowing FORVIA to exit from the Just-in-time part of the Jeep Grand Wagoneer seating program in Michigan. The following actions will allow the program to break even by the end of Q3 2023:
In H1, operating margin continued to be impacted by cost inflation. Compared to 2022, when cost increases were predominantly caused by raw material prices, inflation in 2023 is mainly related to energy, labor and, to a lesser extent, raw material prices.
In H1, FORVIA has decided not to accept insufficient compensation offered by some OEMs for around €30 million and will continue negotiations, in order to reach more acceptable agreements in H2.
At the end of 2022, the cumulated inflation pass-through represented 87% of total gross inflation. Based on the carry-over effect of past agreements and expected positive impacts of ongoing negotiations, the Group expects to recover a higher percentage of inflation in H2 and reach at year-end at least the same level of 87% as reached at the end of 2022.
In H1, FORVIA signed three agreements finalizing its €1 billion asset disposal program that started in 2022:
The related cash proceeds will contribute to the accelerated deleveraging of the Group, with an objective to reduce Net debt/Adj. EBITDA ratio to between 2.0x and 2.2x by year-end.
MSCI leading ESG rating agency upgraded FORVIA's rating from 'BBB' to 'A'. The agency welcomes positive evolution in the governance, specifically the alignment of the Board structure with investor's interests. MSCI also highlights the entry in the Lighting business which has intrinsically lower exposure to product liability risks than other products in the auto supplier sector. After the previous upgrade from 'BB' to 'BBB' obtained in July 2022, this new step underlines the Group's constant progress on ESG topics and now ranks FORVIA within the first quartile of the MSCI 32 auto components manufacturers universe.
Building on its 2045 SBTi-validated Net zero carbon emissions roadmap, FORVIA made a new step forward in decarbonization by signing a ten-year Power Purchase Agreement (PPA) with Renewable Capital. This deal is securing almost all the output from the 417 GWh, 24 wind turbines, Klevberget onshore farm in Sweden and will generate the equivalent of more than 40% of all FORVIA's European yearly electric consumption, taking its renewable energy capacity to up to 70% across Europe.
H1 2023 KEY FIGURES
The worldwide automotive production showed strong dynamics in H1 with a global production of 43.3 million light vehicles, corresponding to an 11.2% growth year on year. The market was supported by a very robust global demand and the progressive normalization of semi-conductor's supply.
In our main regions, trends were as follows:
H1 2022 consolidated sales of €13,621 million: +21.3% on a reported basis and +18.6% on an organic basis, representing an outperformance of +740bps
All Business Groups recorded a strong organic outperformance.
H1 2023 consolidated operating income of €675 million, up 150bps at 5.0% of sales
The €277 million year-on-year increase reflected:
It is worth reminding that commercial actions to mitigate inflation have a dilutive impact on operating margin, as they are at zero margin.
H1 2023 SALES AND PROFITABILITY BY BUSINESS GROUP
Sales
Operating income
On July 20, FORVIA and BYD announced that will reinforce their partnership with the construction of new seat assembly plant in Thailand.
FORVIA and BYD will launch the construction of a new state-of-the-art seat-assembly plant in the Rayong province of Thailand. This new facility will produce complete seat sets under Shenzhen Faurecia Automotive Parts Co., Ltd, a joint venture created by BYD and Faurecia in 2017, majority owned by FORVIA.
This strengthens the partnership developed with BYD, already active through seven cutting-edge factories established in China, including four within the past 18 months.
FORVIA's entry into Thailand's market for its Seating activities marks a powerful milestone, complementing the Group's existing industrial presence in the country across its Interior, Electronics, and Clean Mobility businesses.
Sales
Operating income
Sales
Operating income
Sales
Operating income
Sales
Operating income
Sales
Operating income
H1 2023 SALES AND PROFITABILITY BY REGION
Sales
Operating income
H1 2023 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
As detailed above by Business Groups and regions, operating income (before amortization of acquired intangible assets) rose by 69.6% from €398 million in H1 2022 to €675 million in H1 2023, an improvement of 150bps as a percentage of sales, from 3.5% in H1 2022 to 5.0% in H1 2023.
Income before tax of fully consolidated companies was a profit of €200 million vs. a loss of €182 million in H1 2022.
After deduction of the share of net income of associates (only €0.1 million in H1 2023 vs. €12 million in H1 2022) , the impact of discontinued operations (a profit of €18 million in H1 2023 vs. a loss of €6 million in H1 2022) and deduction of minority interest (€74 million in H1 2023 vs. €52 million in H1 2022) , the consolidated net income Group share was back to profit at €28 million in H1 2023 vs. a loss of €296 million in H1 2022.
H1 2023 CONSOLIDATED CASH FLOW STATEMENT
Adjusted EBITDA increased by 26.9% to €1,607 million representing 11.8% of sales (vs. €1,266 million and 11.3% of sales in H1 2022).
Net cash flow increased by 11.0% to €172 million (vs. €155 million in H1 2022).
As a result, net financial debt at June 30, 2023 stood at €8.1 billion (including an IFRS 16 impact of €76 million), representing a Net debt/Adj. EBITDA ratio of 2.4x (before IFRS 5 impact) and 2.5x (after IFRS 5 impact), significantly reduced vs. 3.1x one year ago.
At June 30, 2023 due to IFRS 5 implementation, Adj. EBITDA excludes the contribution from SAS considered as “Discontinued operations”, while debt is not yet reduced from proceeds to be received from the disposal. To better reflect performance, net debt/Adj. EBITDA ratio before IFRS 5 impact stood at 2.4x at June 30, 2023, fully comparable to 3.1x one year ago.
Net debt/Adj. EBITDA ratio will significantly decrease at December 31, 2023 to between 2.0x and 2.2x, thanks to (i) the collection, by the end of Q3, of all proceeds related to the finalization of the disposal program launched in 2022 and (ii) the net cash flow generated in H2.
At December 31, 2023, FORVIA will already be more than half-way of its trajectory to reduce its Net debt/Adj. EBITDA ratio from 3.1x at June 30, 2022 (first semi-annual ratio after the payment of the majority stake in HELLA) to below 1.5x at December 31, 2025, its objective included in the POWER25 plan presented in November 2022.
AVAILABLE CASH OF €3.5 BILLION AT JUNE 30, 2023
As of June 30, 2023, Group liquidity amounted to €5.5 billion, of which €3.5 billion of available cash, €1.5 billion from the fully undrawn FORVIA Senior Credit Facility and €500 million from the fully undrawn HELLA Senior Credit Facility.
As part of its ongoing proactive debt management policy, FORVIA has recently extended the maturity of almost all of its €1.5 billion Senior Credit Facility by one year to May 2027 (with options up to 2028), has successfully refinanced its €500 million line now maturing June 2026 (with two possible extensions by one year each) and has extended a term loan of €200 million by two years until June 2025.
FULL-YEAR 2023 NEW GUIDANCE
Based on actual worldwide automotive production growth in the first half and expected evolution in the second half, FORVIA is revising upward its worldwide automotive production assumption in 2023 to around 86 million LVs (vs. 82 million estimated in February and S&P Global Mobility's latest forecast dated July 2023 of 86.7 million LVs).
As a consequence, the Group is adjusting upward its 2023 guidance as follows:
This guidance reflects the expected sequential improvement of operating margin in H2 vs. H1, led by:
This guidance is based on full-year average currency rates of 1.08 for €/USD and of 7.54 for €/CNY and assumes no major lockdown impacting production or retail sales in any automotive region in H2 and takes into account the Group's latest update of net impact from cost inflation.
ON TRACK TO ACHIEVE POWER25 OBJECTIVES
The Group also confirms its FY 2025 objectives, as presented at the Capital Markets Day held on November 3, 2022:
These financial objectives are based on the following main assumptions:
They assume no major lockdown impacting production or retail sales in any major automotive region over the period.
FINANCIAL CALENDAR
A webcasted conference call will be held today at 10:30am (CET).
If you wish to follow the presentation using the webcast, please access the following link: https://www.sideup.fr/webcast-forvia-h1-2023-results/signin/en
A replay will be available as soon as possible.
You may also follow the presentation via conference call:
Confirmation code: 816 8525 3171#
About FORVIA, whose mission is: “We pioneer technology for mobility experiences that matter to people”.
FORVIA, 7 global automotive technology supplier, comprises the complementary technology and industrial strengths of Faurecia and HELLA. With over 290 industrial sites and 76 R&D centers, 157,000 people, including more than 15,000 R&D engineers across 40+ countries, FORVIA provides a unique and comprehensive approach to the automotive challenges of today and tomorrow. Composed of 6 business groups and a strong IP portfolio of over 14,000 patents, FORVIA is focused on becoming the preferred innovation and integration partner for OEMS worldwide. In 2022, the Group achieved a consolidated revenue of 25.5 billion euros. FORVIA SE is listed on the Euronext Paris market under the FRVIA mnemonic code and is a component of the CAC Next 20, CAC 40 ESG, and CAC SBT 1.5° indices. FORVIA aims to be a change maker committed to foreseeing and making the mobility transformation happen. www.forvia.com
DISCLAIMER
This presentation contains certain forward-looking statements concerning FORVIA. Such forward-looking statements represent trends or objectives and cannot be construed as constituting forecasts regarding the future FORVIA's results or any other performance indicator. In some cases, you can identify these forward-looking statements by forward-looking words, such as "estimate," "expect," "anticipate," "project," "plan," "intend," "objective", "believe," "forecast," "foresee," "likely," "may," "should," "goal," "target," "might," "would,", “will”, "could,", "predict," "continue," "convinced," and "confident," the negative or plural of these words and other comparable terminology. Forward looking statements in this document include, but are not limited to, financial projections and estimates and their underlying assumptions including, without limitation, assumptions regarding present and future business strategies (including the successful integration of HELLA within the FORVIA Group), expectations and statements regarding FORVIA's operation of its business, and the future operation, direction and success of FORVIA's business. Although FORVIA believes its expectations are based on reasonable assumptions, investors are cautioned that these forward-looking statements are subject to numerous various risks, whether known or unknown, and uncertainties and other factors, all of which may be beyond the control of FORVIA and could cause actual results to differ materially from those anticipated in these forward-looking statements. For a detailed description of these risks and uncertainties and other factors, please refer to public filings made with the Autorité des Marchés Financiers (“AMF”), press releases, presentations and, in particular, to those described in the section 2."Risk factors & Risk management” of Faurecia's 2022 Universal Registration Document filed by Faurecia with the AMF on February 28, 2023 under number D. 23-0064 (a version of which is available on www.faurecia.com ). Subject to regulatory requirements, FORVIA does not undertake to publicly update or revise any of these forward-looking statements whether as a result of new information, future events, or otherwise. Any information relating to past performance contained herein is not a guarantee of future performance. Nothing herein should be construed as an investment recommendation or as legal, tax, investment or accounting advice. The historical figures related to HELLA included in this presentation have been provided to FORVIA by HELLA within the context of the acquisition process. These historical figures have not been audited or subject to a limited review by the auditors of FORVIA. HELLA remains a listed company. For more information on HELLA, more information is available on www.hella.com. This presentation does not constitute and should not be construed as an offer to sell or a solicitation of an offer to buy FORVIA securities.
DEFINITIONS OF TERMS USED IN THIS DOCUMENT
Sales growth
Faurecia's year-on-year sales evolution is made of three components:
As “Scope effect”, Faurecia presents all acquisitions/divestments, whose sales on an annual basis amount to more than €250 million.
Other acquisitions below this threshold are considered as “bolt-on acquisitions” and are included in “Growth at constant currencies”.
In 2021, there was no effect from “bolt-on acquisitions”; as a result, “Growth at constant currencies” is equivalent to sales growth at constant scope and currencies also presented as organic growth.
Operating income
Operating income is the Faurecia group's principal performance indicator. It corresponds to net income of fully consolidated companies before:
Adjusted EBITDA
Adjusted EBITDA is Operating income as defined above + depreciation and amortization of assets; to be fully compliant with the ESMA (European Securities and Markets Authority) regulation, this term of “Adjusted EBITDA” will be used by the Group as of January 1, 2022 instead of the term “EBITDA” that was previously used (this means that “EBITDA” aggregates until 2021 are comparable with 'Adjusted EBITDA” aggregates as from 2022).
Net cash-flow
Net cash-flow is defined as follow: Net cash from (used in) operating and investing activities less (acquisitions)/disposal of equity interests and businesses (net of cash and cash equivalents), other changes and proceeds from disposal of financial assets. Repayment of IFRS 16 debt is not included.
Net financial debt
Net financial debt is defined as follow: Gross financial debt less cash and cash equivalents and derivatives classified under non-current and current assets. It includes the lease liabilities (IFRS 16 debt).
APPENDIX
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