Plastic Omnium - 2018 Registration Document

1 PRESENTATION OF PLASTIC OMNIUM AND ITS BUSINESSES Business and strategy PLASTIC OMNIUM 2018 REGISTRATION DOCUMENT 29 The Clean Energy Systems business is the global leader in fuel systems produced with blow-molded polyethylene (1) . Combining integrated safety and emissions control, fuel systems must serve a number of functions: refueling, storage, ventilation, engine supply and fuel level gauge systems. 22 million systems were manufactured in 2018 by the Clean Energy Systems business, representing a global market share of 22%. Its three main competitors are Kautex, a subsidiary of US-based Textron, YAPP, a Chinese group, and TI Automotive, an English group, which have market shares of 15%, 12% and 10% respectively. Metal fuel tanks still account for 19% of the global market, offering substantial growth potential for the expected replacement of metal with plastic, particularly for safety and weight reasons. Growth in the Clean Energy Systems business’ market share, which went from 16% in 2010 to 22% in 2018, is due partly to increases in this type of substitution but is also attributable to the heavy capital expenditures made to establish the business in high-growth regions. The Clean Energy Systems business also develops and markets new product lines such as the SCR diesel emissions control system, which is capable of eliminating up to 95% of NOx emissions and up to 8% of CO 2 emissions, and fuel systems for plug-in hybrid vehicles (PHEVs). In addition, at the beginning of 2018 the Group created “Plastic Omnium New Energies” which is part of the Clean Energy Systems business and is dedicated to the development of future energies, particularly fuel-cell and hydrogen propulsion. After the creation of Ξ PO-CellTech in 2016, development is now in the fast lane with the acquisition in December 2017 of two companies with a strong technological content: Swiss Hydrogen, a Swiss company based in Fribourg specializing in the design and production of energy management and control solutions in fuel cell systems ("balance of plant"), and Optimum CPV, a Belgian company based in Zonhoven specializing in the design and production of composite filament vessels for high-pressure hydrogen storage. In the Plastic Omnium Modules business line, which accounted for 17% of economic revenue in 2018 (€1,410.3 million) and 13% of 2018 consolidated revenue (€956.9 million) – (see comments on the consolidated financial statements on page 128), the Group is currently present through a business, HBPO, where it is a market leader. Plastic Omnium Modules (including its joint ventures) employs 2,400 people in 25 plants, 1 R&D center and 11 countries worldwide. 2018, representing a global market share of 17%. This market share is rising organically due to the expansion of the business line in high growth regions. Its 4 main competitors are: Mobis, a South Korean group with 16% market share, JiQiang, a Chinese group with 8% market share, Decoma, a German group with 7% market share and the French group, Valeo, which has a 7% market share. 27% of global front-end module production remains in the hands of the carmakers themselves. HBPO runs on a just-in-time basis and is located close to the plants of its automotive carmaker customers. Its expertise in this field enables it to respond to the growing demand for customization and connectivity. The HBPO business is the world leader in front-end module development, assembly and logistics (1) . A front-end module is a complex assembly at the front of a vehicle. With a high tech front-end, it integrates the impact beam, the lighting and engine cooling systems, the active radiator grille shutters and the driving-aid radar and sensor systems. This is the area of expertise of HBPO, a subsidiary held 66.67% by Plastic Omnium. From design and manufacture, through to just-in-time delivery, HBPO is the only supplier of front-end modules to have end-to-end control of this process. The HBPO business produced around 6 million front-end modules in The two Plastic Omnium business lines, Plastic Omnium Industries and Plastic Omnium Modules, are present on 4 continents, producing and assembling components through a network of 124 local manufacturing plants. Just-in-time deliveries, the large size of components and – in the case of bumpers painted the same color as the bodywork – their fragility, means production must take place close to the carmakers’ plants. However, as they do not use the same production techniques or raw materials, each of the Group’s three businesses, Intelligent Exterior Systems, Clean Energy Systems and HBPO, must have their own plants. In its two business lines, Compagnie Plastic Omnium is developing in the long-term in a market with future growth potential. Worldwide automotive production is expected to grow at an average of around 2% between now and 2025 (source: IHS January 2019). Global vehicle production is set to rise from 91.3 million units in 2018 to 105.6 million in 2025: of these 14.3 million additional units produced, China should account for 6.5 million units, or more than 40% (and that would represent 30% of global car production by 2025). It is anticipated that 3.7 million additional vehicles will be produced in Asia (excluding China), 1.6 million in Europe, 1.4 million in South America and 0.6 million in North America. Accordingly, the first strand of Plastic Omnium’s development strategy is to support this growth with targeted investment in new plants. This is leading to changes in the location of the Company’s main production centers. In December 2018, the Group had 124 automotive plants distributed as follows: North America (20 plants), Asia (42 plants), Europe (54 plants) and South America/Africa (8 plants). Alongside volume growth in Plastic Omnium’s global markets, there will be an increase in the demand for more environmentally friendly products, driven by new regulations especially in mature markets in Europe and North America. The second strategic objective is therefore to increase Research and Development resources to respond to this demand. In the short term and to factor in macro-political and macroeconomic risks which have led to heightened uncertainty and volatility, in particular in the automotive sector, for the period between 2019 and 2021, Plastic Omnium is making an assumption of stable automobile production. In-house analysis using IHS data (1)