Valeo : 2020 Integrated Report

INTEGRATED REPORT

INTEGRATED

REPORT

CONTENTS

For the sixth year running, Valeo has elected to use integrated reporting to present its raison d'être and business model. From the vantage point of Group strategy, the report provides an overview of the mechanisms through which its financial and non-financial performance, governance and outlook within its eco-system contribute to short, medium- and long-term value creation. The report is based on the International Integrated Reporting Framework published by the IIRC (International Integrated Reporting Council).

It addresses all of the Group's stakeholders, namely employees, customers, suppliers, the financial community, institutional and non-governmental organizations, and other local partners. The report covers the Group's financial, sales and non-financial performance for 2020, and its carbon neutrality ambition.

The Integrated Report is included in the Universal Registration Document and the standalone version is also available on the Valeo website (www.valeo.com).

Message from

Jacques Aschenbroich

Chairman and Chief Executive Officer

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Key figures in 2020

Financial performance

6

Sustainable development

performance

8

Solid governance	An environment	12 key platforms
in support	in (r)evolution	combining growth
of strategy		and resilience
The Board of Directors	Changes are transforming	12 technological platforms - 29
in support of the	the mobility landscape...	Medium-term strategic plan - 32
Group's strategy - 11	and the automotive market in particular,
An organizational structure
Roles of the Board of Directors'	which is shifting to… - 21
built on four Business Groups - 33
… cleaner mobility solutions - 22
four committees at
A corporate culture
December 31, 2020 - 13	… safer mobility solutions - 24
in support of strategy - 36
Two Management Committees	… smarter mobility solutions - 26
Sustainable development,
to implement
	embedded in Valeo's DNA - 37
the Group's strategy - 14
	2050 Carbon Neutrality Plan - 41
Risk management,
	Valeo and its stakeholders - 45
a key priority for Valeo - 17
Strict adherence		Valeo's value
to ethics and compliance		creation model - 46
principles - 18

Glossaries

48

2020 Integrated Report - Valeo

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R A I S O N

D'ÊTRE

As a tech company, Valeo's goal is to play a major role in the mobility of tomorrow.

In keeping with today's environmental and social issues, future mobility must be greener, safer and more diverse, and must

improve the well-being and safety

of citizens and consumers.

We will achieve this goal thanks to our unique positioning and technological leadership in the areas that are driving the transformation of the automotive industry and sustainable mobility across the globe. This positioning and this leadership

are rooted in our expertise, innovations

and operational excellence.

They are supported by our values

and business culture and built to serve our customers, employees, shareholders and host regions.

2020 Integrated report - Valeo

Valeo today leads the field in electrification and ADAS

2020: a year of two halves with very different profiles

In a market severely disrupted by the health crisis, with a 17% drop in global automotive production over the year as a whole (34% decline in the first half and stable in the second), our efforts focused primarily on taking the necessary steps to protect our employees as well as on preserving our assets and our business operations.

In the first half of the year, the reinforced health protocol - which was mandatory, audited and subject to discussions with employee representatives - was rolled out across all sites in a timely manner, enabling us to protect our employees and resume operations at our 187 plants across the globe under good conditions. Considerable cost variabilization measures were taken, thanks to which we reduced spending by 570 million euros, investments by 141 million euros and gross inventories by 243 million euros with respect to the first half of 2019.

On top of that, our liquidity position was strengthened with 1.1 billion euros in additional liquidity lines secured. As a result, Valeo currently has 2.3 billion euros in undrawn credit lines. I would like to take a moment to thank all of our employees for their outstanding, unwavering commitment during this period, without whom none of this would have been possible.

In the second half of the year, Valeo delivered solid results, demonstrating its strong capacity to bounce back in the current climate. With EBITDA representing 13.9% of sales, free cash flow amounting to a record

1.34 billion euros, and debt having been reduced to less than 3 billion euros one year ahead of our objective, we are in a sound financial position.

These results were achieved thanks to the rigorous operational management of our teams when all of our plants resumed production, and to strict cost control as business picked up sharply in the second half of the year.

4	Valeo - 2020 Integrated Report

MESSAGE FROM THE CHAIRMAN

Validation of our strategic choices, which respond to market acceleration toward cleaner, safer, smarter mobility.

With the Covid-19 crisis, we are witnessing both a clear preference for individual mobility and accelerating demand for safer, even more electric mobility all over the world, further demonstrating the relevance of our positioning.

The 12 technological platforms we have developed in the fields of low- and high-voltage electrification and driving assistance systems, or ADAS, now give us a unique positioning and a major competitive edge.

The massive investments required to develop these platforms put up high barriers to entry on our various markets; their innovative features make for ideal positioning on the most dynamic market segments and a considerable increase in our average content per vehicle, while they open fresh opportunities in new mobility applications such as scooters, electric bikes, autonomous shuttles and even droids.

Now more than ever, the strategic decisions we have made give us confidence in our ability to outperform the global automotive market over the long term and improve our margins, while remaining cautious in 2021 owing to the shortage of electronic components triggered by the crisis.

"The 12 technological platforms we have developed in the fields of electrification and ADAS now give us a unique positioning."

JACQUES ASCHENBROICH

Chairman and Chief Executive Officer

At the start of the year, we announced a commitment to achieve carbon neutrality by 2050 across Scopes 1, 2 and 3. Our aim is to have reached nearly 50% of our objective by 2030. A whole 1,500 of the Group's senior executives are concerned by the objective, confirming Valeo's firm commitment to the Business Ambition for 1.5°C campaign.

I look forward to our upcoming Shareholders' Meeting, to be held on 26 May, when I will introduce Christophe Périllat, to be appointed Deputy Chief Executive Officer at that same meeting. Christophe will become Chief Executive Officer of Valeo in January 2022.

Once again, I would again like to thank all of our 110,300 employees and reiterate my confidence in the future of our Group in a post-Covid world which is proving the relevance of the strategy we have pursued over the past few years.

April 2, 2021

2020 Integrated Report - Valeo

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