Industria
FORVIA FY 2024 guidance update
NANTERRE (FRANCE)
SEPTEMBER 27, 2024
FORVIA ADJUSTS ITS FULL-YEAR 2024 GUIDANCE TO REFLECT LOWER PRODUCTION OUTLOOK AND UNCERTAIN ENVIRONMENT
ACCELERATION OF INITIATIVES TO IMPROVE PERFORMANCE IN 2025
IN A CHALLENGING ENVIRONMENT
DELEVERAGING KEY TARGET OF NET DEBT/ADJ. EBITDA RATIO < 1.5x AT END-2025 REMAINS UNCHANGED, SUPPORTED BY DISPOSAL PROGRAM UNDERWAY
ADJUSTED 2024 GUIDANCE
2024 Sales
Recent unfavorable news commands greater caution on the sales forecast for the remainder of the year. This news notably includes:
The deterioration in market conditions is reflected in the latest S&P forecast of September, with potential further downward revision in the coming months.
Group sales will be penalized by unfavorable customer mix and foreign exchange evolution:
FORVIA now expects sales of between €26.8bn and €27.2bn in FY 2024 at updated estimated 2024 average exchange rates (vs. July indication of “in the lower end of the €27.5bn to €28.5bn initial February guidance”) , implying an organic growth outperformance estimated at around 300bps.
2024 Operating margin
FORVIA now expects operating margin of between 5.0% and 5.3% of sales (vs. July indication of “in the lower end of the 5.6% to 6.4% initial February guidance”), reflecting:
This operating margin range includes caution about potential risk of write-offs due to volume adjustment of some customer programs.
2024 Net Cash Flow (NCF) & Net debt/Adjusted EBITDA ratio at December 31, 2024
The impact of revised operating margin on EBITDA leads to revise NCF expected for FY 2024 to ≥ €550m (vs. ≥ 2023 in value, i.e. ≥ €649m, previously).
Consequently, Net debt/Adjusted EBITDA ratio is now expected ≤ 2.0x at December 31, 2024 (vs. ≤ 1.9x previously).
Figures above-mentioned fully reflect yesterday's announcement of FORVIA HELLA.
ACCELERATION OF INITIATIVES TO IMPROVE PERFORMANCE IN 2025 IN A CHALLENGING ENVIRONMENT
FORVIA expects the environment in 2025 to remain challenging, notably as automotive production in Europe (representing c. 45% of Group sales) remaining under pressure, impacted by overall economic environment and uncertainties related to powertrain mix evolution. In this region, automotive production in 2025 may be lower than in 2024. Despite this context, FORVIA's European operations are expected to improve their overall operating margin in 2025, primarily through the EU-FORWARD program initiated in 2024 and whose first significant benefits are expected in 2025.
Conversely to Europe, China (representing c. 20% of Group sales) should offer growth potential for FORVIA in 2025 through start of customer projects that were delayed in 2024 and ramp-up of sales with new Chinese customers, fueling significant outperformance. China is accretive to the Group's operating margin and is expected to maintain double-digit margin going forward.
To be prepared to this volatile environment and support improvement in its 2025 performance vs. 2024, FORVIA accelerates its key initiatives and actions:
This initiative aims at leveraging FORVIA's strong presence in Asia, notably in China, where FORVIA is the 5 largest Tier-1 supplier, holding a strong market share with Chinese OEMs. This region offers the highest automotive production growth potential, reflected in the recent order intake, and FORVIA intends to achieve over 35% of its global sales and maintain an operating margin above 10% by 2028.
In China, as an example, FORVIA should benefit in 2025 from the rapid ramp up of its recently formed joint venture with Chery in the domain of smart and sustainable cockpits, and the Group should resume outperforming automotive production in the country by at least 300bps.
FORVIA also continues to strengthen its relationship with Chinese customers outside of the Asian market, notably with BYD, through a new cooperation in Hungary, and with Chery to support its next developments in Spain. This will allow FORVIA to consolidate its market share in Europe, irrespective of the OEM mix evolution in this region.
This five-year initiative, launched in 2024, aims at reinforcing the competitiveness and agility of the Group's operations in Europe, adapting its European manufacturing and R&D set-up to the fast-changing regional environment.
The EU-FORWARD initiative, planned to cover the 2024-2028 period, will be accelerated and headcount reduction announced by the end of 2027 could already reach over 90% of the total five-year headcount reduction planned.
The latest target to reach over €350 million of cumulated cost synergies by the end of 2025 is revised upward to €400 million, leveraging on additional initiatives, notably in the field of purchasing and operations.
DELEVERAGING KEY TARGET OF NET DEBT/ADJ. EBITDA RATIO < 1.5x AT END-2025 REMAINS UNCHANGED, SUPPORTED BY DISPOSAL PROGRAM UNDERWAY
As indicated in July, the detailed 2025 Guidance will be given on February 28, 2025, along with the release of FORVIA's FY 2024 results, in accordance with the Group's usual practices.
2025 sales
Assuming stable global automotive production in 2025 vs. 2024, with growth in Asia offsetting lower volumes in Europe, FORVIA confirms its ambition to continue to outperform worldwide automotive production in 2025, notably including outperformance in China.
FORVIA's FY 2025 sales expectation that was communicated in July of between €28bn and €28.5bn will be updated in February 2025, according to the most up-to-date vision of worldwide automotive production.
2025 operating margin and NCF
FORVIA confirms its ambition to significantly improve operating margin and NCF in 2025 vs. 2024, supported by:
Net debt/Adjusted EBITDA ratio at December 31, 2025
FORVIA confirms its POWER25 key target of reaching Net debt/Adjusted EBITDA ratio < 1.5x at December 31, 2025 through continuous improvement in net cash flow generation and targeted asset disposals.
On top of continuous deleveraging, as 2024 and 2025 maturities have been almost fully cleared thanks to recent refinancings, FORVIA will continue, according to market opportunities, to actively manage its debt and should benefit in the coming years from the already engaged easing of monetary policies, especially in Europe and in the US.
FINANCIAL CALENDAR
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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 2023, the Group achieved a consolidated revenue of 27.2 billion euros. FORVIA SE is listed on the Euronext Paris market under the FRVIA mnemonic code. 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 FORVIA's 2023 Universal Registration Document filed by FORVIA with the AMF on February 27, 2024 under number D. 24-0070 (a version of which is available on www.forvia.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. FORVIA HELLA remains a listed company. For more information on FORVIA 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
FORVIA's year-on-year sales evolution is made of three components:
As “Scope effect”, FORVIA 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 FORVIA 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).
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