Dear friends of CIE Automotive:
The Annual Report we have the honour of introducing is an account of a successful year for our company. In 2022, despite the macroeconomic and sector difficulties, we managed to set a new earnings record, while continuing to advance on ESG goals, even though production and sales remained depressed in the automotive industry we serve.
Our net profit increased by 12%, to over €300 million, thanks to both revenue growth, to €3.84 billion, and delivery of healthy profit margins in all regions, even those most affected by the war in Ukraine. In tandem we met our ESG commitments, guided by the 2030 Agenda and its Sustainable Development Goals, to which we are committed as signatories of the United Nations Global Compact.
How did we perform so well in such an adverse scenario as that encountered in 2022? To explain our countercyclical performance, throughout this Annual Report we delve into the five keys that make our company a benchmark in the automotive parts sector, enabling us, yet again, to circumvent the prevailing crisis. Allow us to briefly outline those enablers here.
The first key to our success and the secret to our resilience is the solidity of our business model. Since we set up in the business 25 years ago, we have come through a series of crises by gripping tightly to the five hallmark traits of our model: multiple locations, customer diversification, a multi-technology approach, disciplined investing and decentralised management. In recent years, we have added the integration of ESG criteria as our sixth pillar. Those criteria are fully embedded into our day-to-day operations and our Process Map.
Thanks to our strategic diversification, we are capable of offsetting lower demand across some regions, technologies or customers with healthier dynamics across others. By decentralising management, we give the various factories and regions greater autonomy so that they can make the best decisions in the prevailing circumstances. Our investment discipline imposes the prudence needed to generate higher returns and cash.
We turned obstacles into
challenges, eking out
growth of 24%, outperforming
the market by 9.7 points
The second key of our success story is our 2025 Strategic Plan, the integrated strategy we launched in 2021 in response to the profound social and sector transformation we are navigating. That roadmap is turning us into a better company, etching out the business and financial pathways that will lead to strong results, alongside the ESG lines of initiative designed to make us more sustainable, to which end we are measuring our impact along almost 80 indicators.
We are proud to be able to inform you that in 2022, we delivered the targets set and we are in a position to reiterate all our forward-looking commitments, even though the automotive sector has yet to fully recover to pre-pandemic health. Thank you to everyone who participated in this formidable achievement.
The third key is the desire to improve that translates into exceptional earnings no matter how complicated the environment. We measure our success not only by the results obtained but also the scale of the obstacles surmounted in the course of achieving them.
In 2022, the automotive sector once again had to face a very complex health, macroeconomic and sector situation, exacerbated by Russia’s invasion of Ukraine in February 2022. On the supply side, some of the problems the sector had already been grappling with worsened: spiralling energy costs, disruption caused by the chip shortage and the higher cost of essential raw material and labour inputs. As for demand, the uncertainty regarding the outlook for the global economy, rampant inflation and rising interest rates affected vehicle purchases. As a result, the global industry was unable to return to pre-pandemic production levels: in 2022, production amounted to 82 million vehicles.
Faced by that adverse situation, we managed to turn those obstacles into challenges, and, stepping into the gaps left by the weaker competitors, increased our market share, registering growth of 24% and outperforming the market by 9.7 points.
Besides our sales momentum, a number of factors combined to boost our operating profit: the activation of our pass-through clauses to pass on the bulk of the increase in the cost of inputs; our strategic commitment to local suppliers, which mitigated transport costs and logistics issues; process productivity gains underpinned by highly efficient manufacturing consumption ratios; and stringent control over investments in maintenance and capacity.
Shaped by excellent management, our EBITDA increased by 12%, to over €633 million. And more importantly, we were able to convert 65% of that EBITDA into operating cash flow, which is of the utmost importance to us here at CIE Automotive.
Just as relevant as the volume of cash generated is how we use it. Virtually all of the cash generated went to remunerating our shareholders by paying out a third of our net profit, buying back owned shares and purchasing minority interests in MCIE. In total, we are talking about over €200 million invested in generating value for our shareholders and offsetting, at least partially, the mismatch between the company’s intrinsic value and its share price.
That brings us to the fourth key to our success: loyal collaboration with our stakeholders. Our shareholders, but also our customers, employees and suppliers, help us forge our value-added proposition, which is why we want to involve and vest them in our success.
Indeed, in 2022, we devoted over more than €600 million to remunerating the close to 25,000 people spread over 18 countries who make up the CIE Automotive team. We work hard to provide them with a safe and stimulating place to work in which they can develop their careers, helped by over 812,000 hours of training. We conduct diversity and inclusion assessments in all our business regions so all our employees have access to the same opportunities.
Virtually all of the cash generated
went to remunerating our shareholders
by paying out a third of our net profit,
buying back own shares and
increasing our interest in MCIE
Our suppliers (92% of whom are local), who were likewise key in enabling delivery of our corporate objectives, benefitted from over €2,800 million of purchases. Those purchases are framed by a procurement model based on excellence which earned ISO 20400 – Sustainable procurement certification in April, making CIE Automotive the first company from the automotive sector to obtain that certification in Spain.
As for our OEM and Tier 1 customers, we continue to work tirelessly to improve the quality of our products and provide them with solutions that respond to the dominant market trends: electrification, user experience, safety and protection and outsourcing of production, among others.
In parallel, we sought to position ourselves at the forefront of the transport decarbonisation thrust by participating in Basquevolt, the Basque solid-state battery initiative.
Likewise, in December 2022, we raised our environmental strategy ambitions, approving a new roadmap that establishes new medium- and long-term targets framed by science and the Paris Agreement. Specifically, we are committed to being zero net by 2050 at the latest, a pledge we want to rally our suppliers around by means of the Supply Chain Race to Zero initiative.
We are committed
to achieve net zero
greenhouse gas emissions
no later than 2050
All these activities are having a positive impact on society, to which we try to give back much of we have been so fortunate to receive, as is evident in our total tax contribution of €468.5 million and various social action programmes that benefited more than 78,000 people. We would like to highlight two new corporate programmes: CIE STEM Planet, to encourage people to study maths and science in the Basque region, and an UNHCR programme for the provision of job training and skills to refugees and migrants in Brazil.
Lastly, we would like to refer to the fifth key to our success: our ethical and effective management. Here at CIE Automotive we have a corporate governance regime that helps us meet the targets we set and minimise our risks. Over the year we met all our compliance requirements and continued to add to our compliance model by introducing our criminal risk map in India, Spain, France and Germany. We also continued to engage all our professionals in the integration of ESG matters by holding new ESG Days in United States, Italy and Slovakia.
These are five of the keys that helped us write a success story in 2022. We have faith that they and all of you will enable us to continue to surmount whatever other challenges lie in store.
Many thanks,
Antón Pradera | CHAIRMAN
Jesús Mª Herrera | CHIEF EXECUTIVE OFFICER