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29 Jul 2010
Frankfurt, July 29, 2010 -- Moody's Investors Service has today upgraded Valeo's corporate family
rating to Ba1 from Ba2. The outlook is stable.
Falk Frey, lead analyst for Valeo, said: "The upgrade
reflects the sizeable achievements in adjusting the company's cost
base and improvements in its operating footprint." Frey went
on: "Financial results for the first half of 2010 evidence the company's
progress ahead of expectations incorporated in the previous rating.
Although the phase-out of scrapping schemes across Europe will
adversely affect Valeo, we expect the company to meet financial
ratios in line with a Ba1 rating in 2010."
On July 27, Valeo reported revenues of EUR4,787 million for
the first six months of 2010, up 38% compared to the prior
year period. The Operating profit as reported (before Moody's
adjustments) amounted to EUR292 million (6.1% of sales)
versus an operating loss of EUR51 million in 2009. Reported net
financial debt before Moody's adjustments) reduced to EUR438 million
from EUR722 million at the end of 2009.
While the strong improvements were supported by the scrapping incentives
introduced across Europe in 2009, the results also reflect operational
and structural improvements at Valeo. The company estimates to
have lowered its break-even point from EUR 8.1 billion pre-crisis
to EUR 7 billion. Major elements of recent restructuring efforts
were a shift of production capacity from high cost/low growth to high
growth/low cost countries and a significant reduction of the company's
workforce. In addition, management has streamlined the group's
purchasing activities and Valeo continued to enhance its operating efficiency.
Although we expect a notable, though temporary, decline in
European car production volumes as the effect of the various scrapping
schemes is phasing out, we believe these improvements will allow
for financial ratios in line with the current rating. This view
also considers that Valeo generates approximately one third of revenues
outside Europe. The current rating reflects the guidance laid out
previously for an upgrade, ie that Valeo should achieve in Moody's
view an EBIT-margin of 3% or more in 2010 with further improvement
onwards, (ii) positive free cash flow generation in 2010 as well
as (iii) Debt/EBITDA reduced towards 3.5x or lower in 2010 with
further improvement in the years beyond (all ratios after Moody's
Major risks in our view are a more pronounced decline in production rates,
in Europe or elsewhere, driven by a deterioration in the overall
economic environment, increasing price pressure from OEM-customers
and potential volatility in raw material costs.
The further development of Valeo's rating will be largely driven
by evidence that the recent recovery in financial results can be maintained
on a sustainable basis or even surpassed in future.
..Issuer: Valeo S.A.
....Probability of Default Rating, Upgraded
to Ba1 from Ba2
....Corporate Family Rating, Upgraded
to Ba1 from Ba2
....Multiple Seniority Medium-Term
Note Program, Upgraded to Ba1, Ba2 from Ba2, Ba3
....Senior Unsecured Regular Bond/Debenture,
Upgraded to Ba1 from Ba2
The principal methodology used in rating Valeo was Moody's Global Auto
Supplier Industry Methodology, published in January 2009 and available
on www.moodys.com in the Rating Methodologies sub-directory
under the Research & Ratings tab. Other methodologies and factors
that may have been considered in the process of rating this issuer can
also be found in the Rating Methodologies sub-directory on Moody's
Moody's last rating action on Valeo was a downgrade of the Corporate Family
Rating from Ba1 (negative outlook) to Ba2 (stable outlook) on 12 August
Headquartered in Paris, Valeo S.A., is one of
the leading global suppliers of automotive components. In 2009
Valeo generated net sales of EUR 7.5 billion.
Senior Vice President
Corporate Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Eric de Bodard
MD - Corporate Finance
Corporate Finance Group
Moody's France S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's upgrades Valeo to Ba1; outlook stable
No Related Data.
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