Valeo Turns to Connected-Car Technology to Boost Growth

Valeo SA intends to fuel growth by focusing on technologies that reduce carbon dioxide emissions, enable self-driving vehicle systems and help connect with each other and their surroundings.

The huge components supplier tells investors the strategy will boost its annual sales to €20 billion by 2020 from €12.7 billion in 2014. Valeo expects its own organic growth to exceed that of the industry by about five percentage points per year.

The company forecasts its operating margin will rise to 8% by 2017 from 7.2% last year and achieve a range of 8%-9% by the end of the decade. It aims to hike its free cash flow seven points to 28% of earnings before interest, taxes, depreciation and amortization by 2017. The company targets a ratio above 30% by 2020.

Valeo also anticipates a geographic shift in where it generates sales to carmakers. It expects by 2020 to raise the proportion coming from Asia to 40% from 28% and lower the ratio of sales generated in Europe to 40% from 49%.