PLASTIC OMNIUM (EPA:POM) - Significant recovery in Q3 2020
Transparency directive : regulatory news
22/10/2020 07:30
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Levallois, October 22, 2020Significant recovery in Q3 2020
In Q3 2020:
* Revenue: EUR2,097 million (down 3.1%*)
* Faster-than-expected recovery in worldwide automotive production, which was
down 4.3% (versus a decline of 33% in the first half-year), magnifying the
positive effects of the cost- saving and cash generation plans
* Confirmation of operational improvement at the Greer plant in line with
targets
For the first nine months of 2020:
* Revenue of EUR5,330 million (down 20.9%*)
* Worldwide automotive production: down 23.9%
* Outperformance across all regions, with:
o 9 points in Europe, driven by the Group's successful positioning in
electric vehicles and development of more content per vehicle
o 6 points in China, with market share gains
o Outperformance of 3 points worldwide
More ambitious goals:
* 2020 financial performance confirmed
* Group transformation to boost efficiency through its Omega program
* Innovation strategy accelerated to achieve clean and sustainable mobility
"Plastic Omnium's team have accomplished outstanding work to enhance the
flexibility of our industrial facilities and adapt our operations to volatile
automotive production, which will slowly recover over the years to come. The
program to cut costs and increase cash generation is starting to produce
results. Together with its Omega transformation plan to improve operational
efficiency, the Group can plan on rapidly returning to its profitability
benchmarks.
Plastic Omnium has created an opportunity out of this unprecedented crisis to
strengthen its fundamentals.
The Group is unquestionably a leader in clean and connected mobility. Through
its high involvement in 100% electric programs, Plastic Omnium has increased
its content per vehicle and broadened its customer portfolio. At the same time,
the Group is accelerating its strategy to develop clean mobility. At a special
conference scheduled for November 25, we will present our global approach for
the entire value chain of hydrogen solutions, from storage to fuel cell
systems."
Laurent Favre, Chief Executive Officer of Compagnie Plastic Omnium SE
*Like-for-like change in economic revenue
Financial information Phone: +33 (0)1 40 87 66 78 Fax: +33 (0)1 40 87 96 62
investor.relations@plasticomnium.com
Plastic Omnium is the world leader in intelligent exterior systems, clean
energy systems, and automotive modules. The Group and its joint ventures employ
more than 31,000 people in 131 plants, 25 R&D centers and 25 countries
worldwide and serve 93 automotive brands.
Plastic Omnium is listed on Euronext Paris, compartment A. It is eligible for
the Deferred Settlement Service (SRD) and is part of the SBF 120 and CAC Mid 60
indices (ISIN code: FR0000124570).
Change in Q3 2020 revenue
In the third quarter of 2020 and after a 33% decline in the first half of the
year, worldwide automotive production recovered significantly, with a limited
decline of 4.3%. Plastic Omnium's economic revenue(1) of EUR2,097 million
outperformed the market by 1.2 point.
In EUR millions
By business Q3 2019 Q3 2020 Change Like-for-like
change(3)
Plastic Omnium Industries 1,699 1,497 -11.9% -9.3%
Plastic Omnium Modules 542 600 +10.8% +16.2%
Economic revenue(1) 2,241 2,097 -6.4% -3.1%
Joint ventures 153 177 +15.9% +21.1%
Consolidated revenue(2) 2,088 1,920 -8.1% -4.9%
The drop in worldwide automotive production was not as steep as initially
expected but showed considerable disparity between regions:
- In Europe, production fell 7.6% (355,000 fewer vehicles). Plastic Omnium
outperformed the sector by 3.2 points, driven primarily by the robust modules
business in Germany and the Group's good positioning in Spain. It also
continues to benefit from the success of SCR emissions reduction systems (total
of EUR130 million, up 16.6% like for like in Q3 2020).
- In North America, production remained stable (down 0.3%). Adjusted for higher
tooling invoicing due to numerous launches in Q3 2019, Plastic Omnium's
business is consistent the evolution of the production.
- In Asia, business resumed growth (up 7.9% like for like) despite the ongoing
downturn (down 3.1%). Plastic Omnium outperformed the sector by 11 points,
driven by South Korea, India and Thailand. Revenue in China enjoyed a sustained
market recovery, with like-for-like growth of 6.9%.
In EUR millions and as a % of
revenue
By region Q3 2019 Q3 2020 Change Like-for- Automotive
like change* production(4)
Europe 1,119 1,067 -4.7% -4.4% -7.6%
North America 697 621 -10.9% -4.8% -0.3%
Asia 355 367 +3.4% +7.9% -3.1%
of which China 221 229 +3.6% +6.9% +8.4%
South America 47 23 -51.9% -30.9% -20.5%
Africa 23 20 -14.5% -5.0% -4.6%
Economic revenue(1) 2,241 2,097 -6.4% -3.1% -4.3%
Joint ventures 153 177 +15.9% +21.1%
Consolidated
revenue(2) 2,088 1,920 -8.1% -4.9% -4.3%
Change in revenue for the first nine months of the year
Over the first nine months of 2020, worldwide automotive production fell by
15.3 million vehicles (down 23.9%), dropping from 63.9 million vehicles to 48.7
million vehicles.
In this context, Plastic Omnium's economic revenue stood at EUR5,330 million,
down 22.2% compared to the first nine months of 2019 (down 20.9% like for
like). Outperformance compared to worldwide automotive production was 3 points,
driven by Plastic Omnium Modules (outperformance of 11.6 points).
In EUR millions
By business 9 months 9 months Change Like-for-like
2019 2020 change(3)
Plastic Omnium Industries 5,157 3,891 -24.5% -23.7%
Plastic Omnium Modules 1,695 1,439 -15.1% -12.3%
Economic revenue(1) 6,852 5,330 -22.2% -20.9%
Joint ventures 496 449 -9.5% -6.8%
Consolidated revenue(2) 6,356 4,881 -23.2% -22.0%
While Plastic Omnium significantly surpassed automotive production in most
regions, its geographic mix led it to outperform at Group level by 3 points.
Europe and North America, the regions most heavily impacted by the drop in
production volumes, accounted for 80% of the Group's economic revenue but
represented 40% of worldwide automotive production.
In EUR millions and as a % of revenue
By region
9 months 9 months Change Like-for-like Automotive
2019 2020 change* production(4)
Europe 3,564 2,811 -21.1% -21.0% -29.8%
North America 2,007 1,473 -26.6% -24.6% -26.9%
Asia 1,083 935 -13.7% -11.5% -19.4%
of which China 606 565 -6.7% -5.0% -10.8%
South America 129 53 -58.9% -43.4% -40.5%
Africa 68 58 -15.3% -8.9% -5.1%
Economic
revenue(1) 6,852 5,330 -22.2% -20.9% -23.9%
Joint ventures 496 449 -9.5% -6.8%
Consolidated
revenue(2) 6,356 4,881 -23.2% -22.0% -23.9%
* Like-for-like change: at constant scope and exchange rates
In Europe, Plastic Omnium's revenue for the first nine months of the year
amounted to EUR2,811 million. Revenue for the region fell 21%, against a 29.8%
decline in automotive production. This outperformance of 8.8 points was driven
by Germany, Spain, France and Slovakia. The Group benefited from the successful
positioning of its modules business in new electric vehicle programs (Porsche
and Volkswagen), the extension of its modules offering, along with the strong
contribution from sales of SCR emissions reduction systems, which have
increased its content per vehicle.
In North America, Plastic Omnium's revenue totaled EUR1,473 million for the
first nine months of the year. Revenue for the region fell 24.6% at constant
exchange rates, while industry production was down 26.9%. After ramping up
production at its new plants in recent years (five plants launched operations
in three years), the Group's position in the North American industrial
footprint has reached its target size.
In Asia, revenue came to EUR935 million for the first nine months of the year,
down 11.5%. Against a market decline of 19.4%, this represented an
outperformance of 7.9 points. Business benefited from a strong recovery in
China, Korea, India and Thailand. More specifically in China, which accounts
for 11% of Group economic revenue, Plastic Omnium posted revenue of EUR565
million. The figure was down 5% like for like for the first nine months of the
year, but represented an outperformance of 5.8 points. This was due to market
share gains and growth in the modules business, which launched in China in
2018.
The cost-saving program has started to produce results
With ongoing market volatility, Plastic Omnium continues to find ways to gain
flexibility in its cost structure.
Along with these flexible cost measures, the Group is adapting its industrial
facilities to accommodate the assumption that worldwide automotive production
will not regain pre-crisis levels (92 million vehicles) before 2024 or 2025.
The plan is to save EUR40 million per year by the end of 2022.
These measures, combined with a stronger-than-expected recovery, have already
begun to produce results on the Group's profitability and cash generation in
the third quarter.
Additionally, the Omega transformation plan will improve the Group's agility,
organizational operation and industrial efficiency by simplifying processes,
accelerating digitization, and facilitating a more cross-functional approach.
Omega's first two phases are currently in progress, focusing on indirect
purchases and on project design and development. Savings of EUR200 million per
year are forecast by the end of 2022.
The target of this overall plan is to save EUR240 million per year by the end
of 2022. This will enable the Group to return to its profitability benchmarks
before production resumes its 2019 levels.
Greer plant (South Carolina) in line with targets
The action plan at the Greer plant in the United States is moving forward as
announced. During the plant shutdown in the second quarter, the Group completed
work to transform its industrial and logistics processes, which has improved
all industrial indicators. Currently operating at high output rates, the plant
now delivers the quality and service expected by customers.
The Group confirms its target for the Greer plant to return to break even in
2021.
Plastic Omnium, poised to harness growth in electric vehicles
* Strong positioning in battery electric vehicles
Numerous new programs for 100% electric vehicles are coming on stream. They
represent an opportunity for Plastic Omnium to increase its content per vehicle
and broaden its customer base. For example, Plastic Omnium equips the following
recently launched vehicles:
- ID3 (Volkswagen): front-end module and center console (Germany), and front
and rear bumpers and tailgate (China);
- ID4 (Volkswagen): front-end module and center console (Germany), and front
and rear bumpers (United States);
- Model 3 (Tesla): front and rear bumpers (China);
- Model Y (Tesla): front and rear bumpers (China) and front-end modules (North
America and China).
In 2022, Plastic Omnium will generate 11% of its revenue from battery electric
vehicles (BEVs). That is twice as much as the BEV penetration rate in the
market mix of types of engines forecast on that timeline.
- Accelerating the Group's hydrogen strategy
The Group has registered the following advances in hydrogen storage solutions
over the past few months:
o Plastic Omnium obtained certifications for its 200-, 350- and 700-bar
vessels;
o The Group won its first contract to develop vessels for buses with a German
customer, with production set to start in late 2021. It also signed a contract
to develop and manufacture hydrogen storage systems for Dutch heavy-duty truck
builder VDL. This collaboration is part of the European project H2HAUL, which
aims to deploy zero-emission mobility in road transport using hydrogen power;
o Plastic Omnium has become a partner in MissionH24 and exclusive supplier of
hydrogen storage systems for cars competing in the 24 Hours of Le Mans race as
of 2024.
On November 25, Plastic Omnium will hold a virtual conference to present its
strategy and goals as a leader in carbon-free, hydrogen-powered mobility.
An ambitious corporate social responsibility policy to drive performance
Plastic Omnium remains committed to CSR. On November 24, the Group's 31,000
employees will unite to support its global program, "Act for All". Held across
all sites, the day-long event will focus on the issues of health, ethics, the
environment and gender equality. At this seventh edition, employees will be
active stakeholders in promoting Plastic Omnium's corporate social
responsibility goals.
2020 Outlook
Clear signs of recovery were observed in the third quarter. But the direction
of the automotive market remains uncertain in the short term and uneven from
one region to another. Worldwide automotive production, particularly in the
fourth quarter, will hinge on developments in the health crisis, the impact of
support measures taken by national governments and how automakers manage their
year-end inventories.
For the full year 2020, Plastic Omnium expects its business to moderately
outperform worldwide automotive production, which remains extremely volatile
according to estimates from the main forecasting institutes.
In current market conditions and taking a prudent approach, the Group confirms:
For the second half of 2020:
- an operating margin of at least 4%;
- EBITDA of at least 10%;
- free cash-flow of at least EUR250 million.
For the full year 2020:
- EBITDA higher than 8% of consolidated revenue;
- a positive operating margin.
Calendar
November 25, 2020 Virtual conference on Plastic Omnium's hydrogen strategy
February 18, 2021 2020 Annual results
Glossary
1. Economic revenue reflects the Group's operational and managerial reality. It
corresponds to consolidated revenue plus the Group's share of revenue from
joint ventures based on ownership percentage: BPO (50%) and YFPO (50%) for
Plastic Omnium Industries and SHB Automotive Modules (33%) for Plastic Omnium
Modules.
2. Consolidated revenue does not include the share of joint ventures, which are
consolidated using the equity method, in implementation of IFRS 10-11-12.
3. Like-for-like: constant scope and exchange rates:
a. The currency effect is calculated by applying the exchange rate of the
previous period to the revenue of the current period. For the first nine
months of 2020, the effect was negative for EUR93 million with respect to
economic revenue and for EUR80 million with respect to consolidated revenue.
b. During the first nine months of 2020, there was no scope effect.
4. Source: IHS, October 2020.
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