Financial Overview

(in million USD)

	FY ended Dec. 31, 2014	FY ended Dec. 31, 2013	Rate of change (%)	Factors
Net Sales	8,420	7,964	5.7	1)
Net Income	270	222	21.6	-
Sales by Segment
Clean Air	5,811	5,444	6.7	-
Ride Performance	2,609	2,520	3.5	-

 

Factors
1) Net Sales
-For FY ended Dec. 2014, the Company's net sales increased by 5.7% year-on-year. Excluding the impact of currency and substrate sales, net sales grew by 7.9%, primarily due to stronger light vehicle volumes in North America, Europe and China, higher commercial truck, off-highway and other sales in Europe, China and Japan Clean Air and North America Ride Performance.

Contracts

Clean Air
-The Company announced that it is supplying key emissions control technologies on the 2014 "Ram Heavy Duty" diesel truck series, which includes the "2500 and 3500 Heavy Duty" diesel pickups and the "3500", "4500" and "5500" chassis cab trucks. The Company supplies aftertreatment components, including the diesel oxidation catalyst, diesel particulate filter and selective catalytic reduction (SCR) system on the full truck line. The Company produces the components at its manufacturing facilities in Smithville, Tennessee, USA and Puebla, Mexico. Engineering and development was conducted at the Company's global emissions control technical center in Grass Lake, Michigan, USA. (From a press release on March 3, 2014)

-For the 2014 model of "Chevrolet Corvette Stingray" the Company supplies emission control components, including electrical valves for exhaust system sound tuning. (From a press release on February 4, 2014)

Ride Control
-The Company announced that Renault has chosen the latest generation of the Company's Continuously Variable Semi-Active suspension system (CVSAe) for the new "Espace". The Volvo Car Group has chosen the same suspension system as a standard feature on its limited run "XC90 First Edition".

-For the 2014 "Chevrolet Silverado 1500" the Company supplies ride performance technologies including monotube shock modules and rear shocks. The Company also provides elastomer products, including its all-new Hydroelastic body mount; front suspension bushings; spring bushings and front top mounts.

Awards

-The Company announced that it has been selected as a winner of the Volvo Group Purchasing Supplier Awards 2014. The Company was awarded the Cost Excellence Award. The Company supplies Volvo Group Trucks with cabin and axle dampers for heavy-duty applications in Europe, Russia, North America and Brazil. The Company also supplies Volvo with elastomers in North America. (From a press release on September 24, 2014)

Outlook

-In 2015, the Company expects that its total sales will increase by 5 - 8% excluding the impact of currency. The Company anticipates sales growth from the light vehicle market to continue outpacing global industry production growth of 3%. Off-highway industry and commercial trucks business in Brazil will remain weak, however, business growth is expected to be driven by the ramp up of content to meet global emissions requirements, including in China.

R&D Expenditure

(in million USD)

	FY ended Dec. 31, 2014	FY ended Dec. 31, 2013	FY ended Dec. 31, 2012
Total	169	144	126

-In FY ended Dec, 2014, USD 26 million was spent on research and development of unproven products and processes, USD 118 million was spent on applications of existing products and technologies to vehicle platforms, and the remainder was spent on improvements to existing products and processes.

R&D Facilities

-The Company's Clean Air segment operates 5 engineering and technical facilities while its Ride Performance segment has 7 engineering and technical facilities. In addition, both segments share 3 technical centers.

<China>
-The Company announced the opening of a new Clean Air research, development and manufacturing facility in China. The new wholly-owned facility, based in Kunshan, Jiangsu Province, will design, develop and manufacture emission control products and technologies for the Company's growing commercial truck business in China. The Kunshan facility will also serve the Company's commercial truck and off-highway equipment business throughout the Asia Pacific region, and will be the Company's center for designing and developing large engine solutions for Asia marine, locomotive and stationary applications. The 10,200-square meter facility currently has 150 employees including 120 engineering and testing personnel. Once fully operational, the facility is expected to employ about 400 people. (From a press release on September 23, 2014)

Product Development

Emission control solutions to meet US EPA Tier3 emissions regulations
-The Company showcased its suite of emission control solutions, which include fabricated manifolds, catalytic converter systems, air gap pipes, and heat exchangers, are designed to meet upcoming US EPA Tier 3 emissions regulations. (From a press release on August 27, 2014)

Lightweight Technologies for Emission Control Systems
-The Company showcased these technologies at the opening of the American Lightweight Materials Manufacturing Innovation Institute (ALMMII) in Detroit in January 2015.

• Electronically controlled Exhaust Valve: Used in acoustic tuning applications and cylinder deactivation applications, the Company's electronically controlled exhaust valves provide a compact, lightweight and cost-effective solution for precise sound design and noise control in tailpipe applications, as well as adaptive exhaust control in vehicles featuring cylinder deactivation. Use of electronic valves in exhaust system designs can also reduce the mass of the muffler, resulting in total system weight savings.
• Fabricated Manifolds: Balancing an exhaust system's overall mass and thermal management properties plays an important role in meeting emissions requirements without adding unnecessary weight. The Company's fabricated manifolds offer weight reduction of up to 50% compared with traditional cast manifolds. Test data confirms that fabricated manifolds can also achieve temperature benefits of up to 50 degrees Celsius, which can result in faster catalyst light off and improved overall catalyst efficiency.

Continuously Variable Semi-Active suspension system: CVSAe
-CVSAe is a electronic suspension shock absorber which was co-developed with Oehlins Racing AB. It enhances the comfort and handling of a vehicle's ride by continuously adjusting all four shock absorbers up to 100 times per second to changing road conditions and dynamic driving situations like cornering, lane changes, acceleration and braking.

Electronic suspension product DRiV - Digital valve applied
-The industry first electronic suspension product digital valves being used offers faster response, lighter weight, and reduced power consumption compared to existing analog products.

Licensing Agreement

-The Company and Sturman Industries, Inc. announced that Tenneco has acquired exclusive rights to the digital valve technology used in Tenneco's DRiV suspension products, which was previously licensed from Sturman. DRiV is a suspension system designed by Tenneco featuring electronically controlled dampers with hydraulic valves for use in automotive, light and heavy-duty trucks, off-road equipment, locomotives, and other vehicle damping applications. (From a press release on February 6, 2014)

Capital Expenditure

(in million USD)

	FY ended Dec. 31, 2014	FY ended Dec. 31, 2013	FY ended Dec. 31, 2012
Clean Air	223	181	170
Ride Performance	92	71	92
Total	317	254	263

Outlook

-The Company expects to spend between USD 300 million and 320 million in capital expenditures for 2015.