Valeo (FR) CMD 2025 summary

Strategic vision and financial targets for 2028

• Targets sales of €22–24 billion, operating margin of 6–7%, and free cash flow after interest above €500 million by 2028, with leverage ratio below 1x EBITDA and a goal of regaining investment-grade status.

• Growth resumes in 2027, driven by a robust order book, large multi-year contracts, and new business models with longer lifetimes and slower ramp-ups.

• The plan is based on conservative market assumptions, including a 3% haircut to S&P Global Mobility forecasts, and does not rely on major M&A or disposals.

• Each division has specific growth and margin drivers: Power targets doubling its margin to 5–6%, Brain aims for 7–8%, and Light for 6–7% by 2028.

• Beyond automotive, expansion into adjacent markets such as two/three wheelers, datacenter cooling, agriculture, and defense is planned, with main impact after 2028.

Financial guidance and performance outlook

• 2025 guidance confirmed: ~€20.5bn sales, 4.5–5.5% operating margin, and free cash flow revised upwards to above €550 million.

• Divisional profitability to improve: Power margin from 2.9% (2024) to 5–6% (2028), Brain from 5.8% to 7–8%, Light from 5.5% to 6–7%.

• No major refinancing needs until 2027; progressive dividend increase and no major M&A planned.

• Gross margin to remain above 19% of sales, with €300 million annualized savings from self-help measures by 2026 and recurring €100 million cost savings annually.

• Working capital improvements are not assumed in the plan, with focus instead on operational levers for cash generation.

Operational transformation and cost discipline

• Since 2022, profit and cash flow have improved through strict price discipline, selective order intake, and €400 million in self-help measures, including 10,000 FTE reductions and 34 site closures.

• CapEx and R&D spend are structurally reduced, with CapEx targeted at 4.5–5% of sales and R&D spend already €200 million lower in 2025 versus 2024, aided by AI-driven efficiency.

• Ongoing annual restructuring costs of €100 million are planned through 2028 to maintain cost competitiveness, especially in Europe.

• AI adoption in R&D and manufacturing boosts productivity, with 100% of software engineers trained and 25% of certified code AI-generated.

• The company is adapting its supply chain and production footprint to regional requirements, especially in China and India, and is prepared to adjust sourcing in response to geopolitical shifts.