Laurent Favre, CEO of Plastic Omnium, gave an interview to Le Revenu.
Laurent Favre, 50 years old, has been Chief Executive Officer of Plastic Omnium since January 2020. Laurent Burelle is chairman. This graduate engineer from Estaca has spent his entire career in the automotive industry, most notably at Thyssenkrupp, ZF and Benteler. Valuable experience to grasp the technological and industrial challenges of a sector on the eve of a new wave of concentration.
Plastic Omnium returned to profitability in 2021. But the automotive sector is barely recovering. What is your analysis of the situation?
Laurent Favre: Our outlook for 2022 is cautious due to the lingering effects of the semiconductor crisis. In February, our expectations for the market were 5% lower than IHS’s, or 76 million cars produced worldwide, against 81 million according to the research firm whose forecasts refer. We were right. IHS has since revised its forecast to 78 million. What we are currently seeing in the market is consistent with our scenario. The first half has been severely constrained, especially by semiconductors, but we are hoping for an improvement in the second half of the year.
Is the situation more difficult on the European market?
Laurent Favre: This has been the case until now, with greater exposure to the lack of semiconductors and the fallout from the war in Ukraine. Several manufacturers, especially German ones, have outsourced their cabling and connector capacities there locally. Today they are reorganizing their skills, but it may take several months.
How does inflation affect your business relationships with contractors?
Laurent Favre: Last year, manufacturers were able to manage their “product mix” – that is, produce vehicles with the highest margins – and raise prices far better than equipment manufacturers. We struggled to pass on inflation because it was not contractually provided for. Today, discussions with manufacturers are still intense, but more constructive. Because everyone understood that inflation was structurally anchored and that it was necessary to enable equipment manufacturers to maintain an investment capacity that is essential to the sector. On the other hand, one of the consequences will be more concentration.
More concentration also means fewer customers…
Laurent Favre: We continue to win customers, especially from “new entrants” in the automotive industry – such as: Rivian, Polestar or Lucid Air. It is important for us to work with them, to confront ourselves with their new approaches. They are often aggressive in terms of time-to-market and want to continuously develop their vehicles. This requires us to be more agile and efficient.
With the acceleration of electric, investors fear that you will lose ground in your traditional business faster than you gain in electric. How do you trade?
Laurent Favre: Electrification is not a risk for Plastic Omnium† We approach this transition with great serenity. First, electrification in the world is not moving at the same pace. Even in Europe, the most proactive zone, several countries such as France and Germany have taken a stand against the 2035 ban on thermal vehicles and for the development of alternative fuels.
Then the potential remains in the fuel storage. Reservoirs represent 2.5 billion euros in turnover for us, or approximately 30% of our turnover. We are already a leader, but aim to achieve a 29% market share by volume in 2025-2026, compared to 22% today. These stocks we gain will offset the structural decline in the market.
Finally, in our other activities – bumpers and modules – we already have a strong presence in 100% electric vehicles, which represent about 20% of our turnover. Manufacturers, in their quest for more autonomy, set high standards in terms of weight and aerodynamics. There is no 100% electric platform from a French, German or American manufacturer where we are not present. Our portfolio is well balanced.
Laurent Favre: Today we are the world leader in our three businesses – tanks, bumpers and rags, and modules assembled through HBPO, our joint venture with Hella. Our hydrogen business, hitherto associated with our reservoirs division, has been a fourth division since 1 January. It is our wish to appeal to the entire market: individual vehicles, trains, trucks, buses, coaches…
Laurent Carme, former Managing Director of McPhy, has joined us to become Director of Operations for this New Energies division. Our hydrogen sales are still modest, but the order book is growing rapidly, with more than 700 million euros. We aim for a turnover of 300 million in 2025 and 3 billion in 2030, with profitability in 2025. This requires new capacity investments in Europe, but also in Asia and America.
You return to acquisitions (Actia Power, AMLS, investment in Verkor). With what objectives?
Laurent Favre: Our desire to be a player that counts in the decarbonisation of mobility also includes our presence 100% electrified, especially batteries. The project to be acquiredActia Power corresponds to this approach with promising synergies with our hydrogen division. In addition, we are investing 20 million euros in Verkor, securing future capabilities and a prime place to support future technologies in the battery. Finally, we acquire AMLS, a division that produces lighting components. Tomorrow, more and more manufacturers will no longer be looking for equipment manufacturers, but for integrators. We will be able to respond with unique solutions that do not exist on the market. With EUR 2.6 billion in cash and available credit facilities, combined with low debt of approximately once EBITDA, we have the capacity to be mobile and reactive in the face of market concentration.
With the idea of a transformation acquisition?
Laurent Favre: It is not current today. This does not mean that it is prohibited for the future.
Interview by Lionel Garnier
To buy. [POM] Objective: 26 euros.
Next appointment: turnover 1er quarter, April 27.