Plastic Omnium posts strong results despite global production slump

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Photo by Plastic Omnium Plastic Omnium is forecasting that it will outperform the global automotive market by at least five percentage points in 2019

Plastic Omnium SA, the French supplier of front-end modules and fuel system components, reported strong results for 2018 despite a slump in global auto production.

Sales rose 7.6% to €8.2bn, with an operating margin of €610m, or 8.4% of sales, down slightly from 2017, when it was 9.6%.

Free cash flow was €218m, compared with €176m in 2017, the company said in a statement.

Investors welcomed the results, with shares up 3.6% in day trading on the French bourse on 14 Feb. Plastic Omnium's share price took a hit in 2018, down 46% for the year as the European supplier sector lost 39% overall. The company said Thursday it was proposing a dividend of €0.74 per share, a 10% increase.

Looking ahead to this year, Plastic Omnium is forecasting that it will outperform the global automotive market by at least five percentage points, generate at least €200m in free cash flow and increase the value of its operating margin.

Last year was a transition year for Plastic Omnium, as it sold off its plastics container business to become a pure automotive player. The company also bought out Mahle's 33.3% stake in the HPBO front-end module joint venture. Plastic Omnium is now organised around two main businesses: Plastic Omnium Industries, which makes exterior panels and trim as well as fuel system components such as tanks and filters; and Plastic Omnium Modules.

Plastic Omnium Industries had revenue of €6.8bn in 2018, down 1.3% from 2017, with an operating margin of 9.2%, compared with 9.3% in 2017. The modules operation had €1.4bn in revenue and an operating margin of 3.4%.

European sales surge

Europe accounted for 54% of Plastic Omnium's sales in 2018, with sales up by 11%. Excluding sales after the Mahle acquisition, revenue rose 1.7% in a flat automotive market. Eastern Europe was a bright spot, up 5.6% on components for the Porsche Cayenne SUV in Slovakia.

North American sales grew by 1.1%, driven by strong business in Mexico at the Daimler plant in San Luis Potosi, which makes the Mercedes A Class. Plastic Omnium expects stronger North American growth this year, particularly in bumper production for the new BMW X5 and new orders in Mexico.

China was another bright spot, with business up 7.1% even though overall automotive production fell by 1%. The country accounted for 10% of Plastic Omnium revenue, a total that is expected to increase as three new factories come on line by 2021.

Capital investments continue

Plastic Omnium is in the middle of an aggressive program of capital investment. Investments rose by 26% in 2018 to €561m. Major projects include two plants to supply BMW, one in Shenyang, China, and the other in Greer, South Carolina. Plants are also under construction in China, India, Malaysia, Morocco and Slovakia. The capital spending is largely financed by earnings, the company said.

Major new innovation projects include a joint venture with Hella, starting in January, that will combine exterior systems and lighting; a project with the German supplier Brose for "an innovation side-door system"; and Plastic Omnium New Energies, a business unit that will develop future energy systems, including fuel cells and hydrogen propulsion.

Plastic Omnium ranks 26th on the Automotive News Europe list of Top 100 global suppliers, with automotive sales of $9.6 billion in 2017.

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