1st earnings conference call and webcast... · identified under the headings “risk factors” and...

Copyright Autoliv Inc., All Rights Reserved

Copyright Autoliv Inc., All Rights Reserved1

1st

Earnings Conference Call and Webcast4th Quarter and FY 2018 Financial ResultsJanuary 29, 2019

ALV – Q4-2018 Earnings Call and Webcast


Safe Harbor Statement*

This presentation contains statements that are not historical facts but rather forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include those that address activities, events or developments that Autoliv, Inc. or its management believes or anticipates may occur in the future. All forward-looking statements, are based upon our current expectations, various assumptions and/or data available from third parties. Our expectations and assumptions are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that such forward-looking statements will materialize or prove to be correct as forward-looking statements are inherently subject to known and unknown risks, uncertainties and other factors which may cause actual future results, performance or achievements to differ materially from the future results, performance or achievements expressed in or implied by such forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “estimates”, “expects”, “anticipates”, “projects”, “plans”, “intends”, “believes”, “may”, “likely”, “might”, “would”, “should”, “could”, or the negative of these terms and other comparable terminology, although not all forward-looking statements contain such words. Because these forward-looking statements involve risks and uncertainties, the outcome could differ materially from those set out in the forward-looking statements for a variety of reasons, including without limitation, changes in light vehicle production; fluctuation in vehicle production schedules for which the Company is a supplier, changes in general industry and market conditions or regional growth or decline; changes in and the successful execution of our capacity alignment, restructuring and cost reduction initiatives and the market reaction thereto; loss of business from increased competition; higher raw material, fuel and energy costs; changes in consumer and customer preferences for end products; customer losses; changes in regulatory conditions; customer bankruptcies, consolidations, or restructurings; divestiture of customer brands; unfavorable fluctuations in currencies or interest rates among the various jurisdictions in which we operate; component shortages; market acceptance of our new products; costs or difficulties related to the integration of any new or acquired businesses and technologies; continued uncertainty in pricing negotiations with customers; successful integration of acquisitions and operations of joint ventures; successful implementation of strategic partnerships and collaborations; our ability to be awarded new business; product liability, warranty and recall claims and investigations and other litigation and customer reactions thereto; (including the resolution of the Toyota recall); higher expenses for our pension and other postretirement benefits, including higher funding requirements for our pension plans; work stoppages or other labor issues; possible adverse results of pending or future litigation or infringement claims; our ability to protect our intellectual property rights; negative impacts of antitrust investigations or other governmental investigations and associated litigation relating to the conduct of our business; tax assessments by governmental authorities and changes in our effective tax rate; dependence on key personnel; legislative or regulatory changes impacting or limiting our business; political conditions; dependence on and relationships with customers and suppliers; and other risks and uncertainties identified under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Reports and Quarterly Reports on Forms 10-K and 10-Q and any amendments thereto. For any forward-looking statements contained in this or any other document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we assume no obligation to update publicly or revise any forward-looking statements in light of new information or future events, except as required by law.

ALV – Q4-2018 Earnings Call and Webcast2

(*) Non-US GAAP reconciliations are disclosed in our regulatory filings available at www.sec.gov or www.autoliv.com

http://www.autoliv.com/


Strong order intake and outperformance of light vehicle production for new Autoliv

▪ New executive management team in place

▪ Veoneer spin-off in July

− Improved focus and flexibility for both companies (culture, people, business)

▪ Light vehicle market in China under pressure in second half of the year

▪ New emission test protocol in Europe with volatile light vehicle production in second half of the year

▪ Above market growth from strong order intake since 2015

▪ Continued high order intake supporting our strong market position longer term

3

Autoliv 2018 Achievements and Challenges



Sales and profitability capacity unchanged

Target update

60

65

70

75

80

85

90

95

100

2018 2019 2020

@ Sept 2017 @ Jan 2019

(5) M(3) M


Target update

2020

▪ Global light vehicle sales and production slowdown

▪ Headwinds from other external factors such as raw material

▪ Do not expect to reach targets of >10bn and ~13% adj.

operating margin* in 2020

▪ We expect improvement towards our targets in 2020

Targets remain unchanged

▪ Sales and profitability capacity is unchanged

▪ Sales: >$10 billion

▪ Adj. EBIT margin*: ~13%

▪ Timing is beyond 2020

IHS Global Light Vehicle Production ForecastMillion units

* non-U.S. GAAP measure excluding capacity alignment and antitrust related costs.

1

2


2014A 2015A 2016A 2017A 2018A

Order Intake Momentum Remains Strong

~37%

~50%~50%

>50%


Annual S

ale

s (

MU

SD

)

~50%

▪ 2018 order intake in line with 2017

▪ Market share gains within all product areas and

regions compared to today’s level

▪ Major wins with all leading OEMs

▪ Several new contracts for front center airbags

▪ Some OEMs making rear side airbags standard

▪ Knee airbag growth accelerates

▪ Contracts with new emerging EV manufacturers

Around 50% Order Intake Share Continued In 2018

Order Intake Annualized Sales and Share

2014A-18A


Q4’18 Highlights

6 ALV – Q4-2018 Earnings Call and Webcast

▪ Above market growth supported by strong order intake since 2015

− Organic sales* growth >4%, ~10 pp better than LVP**

− Execution on strong order book

− Launches on track although launch related costs remain on the high levels seen in Q3

− Strong performance with transplants in North America partly offset weak performance in other regions

▪ Unfavorable market fundamentals taking its toll on global auto demand/production

− Unprecedented weakness in China

− Continued volatility in Europe

▪ Flexibility in our Chinese operations mitigated effects from lower than expected sales

▪ Accrued $210 million in connection with the remaining portion of the EC investigation

▪ Operating cash flow on a high level despite weaker than expected market conditions

▪ Ongoing actions to mitigate market softening and reduce elevated costs related to product launches

▪ Raw material headwinds persist

(*) Non-US GAAP measures exclude costs for capacity alignments, antitrust related matters and and separation of our business segments,

(**) Light Vehicle Production (LVP) according to IHS @ January 17, 2019.


Step-up in sales growth from strong order book


Q4´18 Financial Highlights

2,193

Q4´17 Q4´18

Consolidated Sales$ million

254

240

Q4´17 Q4´18

Adjusted Operating Income* $ million

>4%** ~(5)%

(*) Non-US GAAP measures exclude costs for capacity alignments, antitrust related matters and and separation of our business segments,

(**) Organic sales growth Non-US GAAP measure.

2.26

-1.06

Q4´17 Q4´18

Reported EPS $

(3.32)

(1.06)


AMERICAS

18.9%LVP* (0)%

EUROPE

(6.4)%LVP* (5)%

REST OF ASIA

13%LVP* 8%

JAPAN

6.4%LVP* 3%

CHINA

(3.7)%LVP* (15)%

Q4´18 Sales Growth

Regional Organic Growth**Sales Bridge

+1.6%

Org. growth**

+4.2%


(*) Light Vehicle Production (LVP) according to IHS @ January 17, 2019,

(**) Non-US GAAP measure.

$ million


Q4’18 - Key Model Launches

Chevrolet Blazer

Honda Passport

Kia Telluride

Hyundai Palisade

BMW 3-Series

BMW X7

Geely SX11

Tata Harrier

Toyota RAV4



Product Launches per Quarter

10

0

50

100

150

200

250

Num

be

r o

f L

au

nch

es

2017 2018 2019

~710~720

Q1’19 is expected to increase 20% YoY

~600

+20%



FY’19 - Key ModelsContributing to the ramp-up of sales growth

Nissan Altima

Nissan Quashqai/Rogue Sport

Honda CR-V Honda Crider

Renault Captur

VW Passat

VW T-Cross

Audi Q3

Ford Ranger


U.S. Truck

EU Car


Softening of Major light vehicle markets


Market Conditions Q4´18

▪ China− Chinese** light vehicle registrations declined by 14%, making it a sixth consecutive monthly decline

− LVP declined by 15%, this was more than 12 pp lower than expected in October by IHS

▪ Americas− US SAAR** rebounded slightly. Inventories remain flat YoY* at ~3.8 million units, or ~61 days by

the end of the quarter

− LVP* was flat, with North America increasing 2% while South America declining 9%. For the region

this was 4 pp lower than expected in the beginning of the quarter

▪ Europe− EU28** light vehicle registrations fell by 8%, on WLTP related issues and uncertainty among end-

consumers on what drivetrain technology to choose

− LVP* in the important WEU* fell by ~9% , 6 pp lower than expected, while production in EEU*

increased by 4%

▪ Other− In South America, strong Brazil sales were not enough to outweigh plummeting sales in Argentina

and Uruguay

− Light Vehicle sales Japan increased in Japan by more than 5%

Q4’18 global LVP was 23.2 million units, ~1.5 million units lower than the October forecast

(*) Light Vehicle Production (LVP) according to IHS @ January 17, 2019, Year over Year (YoY), Rest of Asia (RoA), Western Europe (WEU), Eastern Europe (EEU), Last Twelve Months (LTM),

(**) Source: ACEA, Ward’s Auto, CAAM, CADA.

Light Vehicle Sales LTM**

Copyright Autoliv Inc., All Rights ReservedALV – Q4-2018 Earnings Call and Webcast13

(1) Non-US GAAP measures exclude costs for capacity alignments, antitrust related matters and separation of our business segments. (2) Return on Capital Employed (RoCE) and Return on Equity

(RoE), (3) Light Vehicle Production (LVP) according to IHS @ January 17, 2019.

(US $ Millions unless specified) Q4’18 Q4’17

Sales $2,193 $2,159

Gross Profit $425 19.4% $441 20.4%

Operating Income1 $240 10.9% $254 11.8%

EPS (assuming dilution) $(1.06) $2.26

RoCE1,2 26% n/a

RoE1,2 24% n/a

Operating cash flow Cont. Ops $289 n/a

Dividend per share $0.62 $0.60

Global LVP3 (annual rate) ~93M ~98M

Q4´18 Financial Overview


Q4’18 vs. Prior Year


Adj. Operating Margin* Bridge

(0.9)pp

Adj. EBIT*

(5.4)%

(*) Non-US GAAP measure excludes costs for capacity alignments, antitrust related matters and separation of our business segments.

70 bps

(80) bps(80) bps

Copyright Autoliv Inc., All Rights ReservedALV – Q4-2018 Earnings Call and Webcast15

1) Non-US GAAP measures exclude costs for capacity alignments, antitrust related matters and separation of our business segments. (2) Return on Capital Employed (RoCE) and Return on Equity

(RoE), (3) Light Vehicle Production (LVP) according to IHS @ January 17, 2019.

(US $ Millions unless specified) FY’18 FY’17

Sales $8,678 $8,137

Gross Profit $1,711 19.7% $1,680 20.6%

Operating Income1 $908 10.5% $899 11.1%

EPS (assuming dilution) $4.31 $6.68

RoCE1,2 22% n/a

RoE1,2 20% n/a

Operating cash flow Cont. Ops $806 $870

Dividend per share $2.46 $2.38

Global LVP3 91M 92M

FY´18 Financial Overview


FY’18 vs. Prior Year


Adj. Operating Margin* Bridge

Adjusted Operating Margin of 10.5% includes ~50 bps increase in Raw material and Currency impact

(0.6)pp

Adj. EBIT*

1.0%

(*) Non-US GAAP measure excludes costs for capacity alignments, antitrust related matters and separation of our business segments.

(10) bps

(40) bps (10) bps


(US $ Millions unless specified) Q4’18 Q4’17 2018 2017 2016 2015

Net Income (91) (56) 184 303 562 458

Depreciation & Amortization*** 89 341 397 660 383 319

Other, net 219 (4) 239 (27) 1 0

Change in operating WC** 72 108 (229) (0) (78) (26)

Operating cash flow 289 389 591 936 868 751

Capital Expenditures, net (133) (168) (555) (570) (499) (450)

Free cash flow** 156 221 36 366 369 301

Acquisitions, net**** 0 14 72 124 227 128

Dividends paid 54 52 214 209 203 196

Shares repurchased 0 0 0 157 0 104

17

Operating Cash Flow Q4’18 of $289M, indicate a ~120% Cash conversion on Adjusted EBIT

Cash Flow – including discontinued operations*Investments for growth and shareholder returns


(*) include discontinued operations up until the second quarter of 2018, (**) Non-US GAAP measure, before acquisitions, reconciliation of free cash flow is provided above, (***) Includes

one-time Goodwill impairment charge related to the ANBS JV in 2017, (****) includes investments in affiliates.


EPS development

$2.26

-$1.06

Q4´17 Q4´18

Earnings per Share

$

$2.29

$1.42

Q4´17 Q4´18

(38)%

$(3.32)

Earnings per Share excluding items

affecting comparability* $

(*) Non-US GAAP measures exclude costs for capacity alignments, antitrust related matters and separation of our business segments. Assuming dilution.

The main negative items impacting EPS were

▪ ~240 cents from anti-trust accrual

▪ ~44 cents from discrete tax items

▪ ~24 cents from higher tax rate

▪ ~12 cents from lower adjusted operating

income*

Q4’18 vs. Prior Year

($1.06)



0.0

0.5

1.0

1.5

2.0

Q4´13 Q4´14 Q4´15 Q4´16 Q4´17 Q4´18

(*) Autoliv Inc. group statistics, prior to spin; Non-US GAAP measure, Leverage Ratio and Net Debt includes Pension Liability.

✓ Provided $1B of cash liquidity for Veoneer at time of spin-off

✓ EC Antitrust cash-out of $210m would effect by around 0.2 up

✓ S&P long-term credit rating A- (negative outlook)

✓ Q1’19 dividend set at unchanged level

Strong Balance Sheet and Prudent Financial PolicyCommitted to Maintain “Strong Investment Grade” Rating Supported by High FCF Conversion

Net Debt/ EBITDA*

x

Long-Term Target: 1.0x 0.5-1.5xLong-Term Range


1.5x

▪ Focus unchanged

‒ Prudent balance sheet

‒ Shareholder friendly capital allocation

▪ Primary tools remain buybacks and dividends

▪ Long term target remains Net Debt/ EBITDA of 1.0x


2019 Light Vehicle Production Outlook


Market Development

IHS: 2019 Light Vehicle Production*

Region

Q1´19 FY´19

Millions

Units

YoY

Chg.

Millions

Units

YoY

Chg.

China 5.9 (9)% 26.2 2%

Japan 2.5 5% 9.2 1%

RoA* 3.3 1% 13.4 3%

North America 4.1 0% 15.7 (1)%

South America 0.8 1% 3.6 6%

Europe 5.6 (5)% 21.9 0%

Global 22.8 (4)% 92.3 1%

▪ Challenging first half year with recovery projected for second half year

▪ Light Vehicle production in North America is expected to be flat or slightly down

▪ The WLTP impact in Europe appears on track to fade over the coming months. LVP is expected to stabilize with potential for growth in H2 depending on the Brexit outcome

▪ In China, without any government driven stimulus, we see a downside risk to IHS LVP outlook, especially in Q1 but potentially also in Q2

FY’19 global LVP forecasted to 92.3 million vehicles

(*) Light Vehicle Production (LVP) according to IHS @ January 17, 2019, Year over Year (YoY), Rest of Asia (RoA),

(**) Source: ACEA, Ward’s Auto, CAAM, CADA.


Financial Outlook 2019


(*) Non-US GAAP measures exclude costs for capacity alignments, antitrust related matters and separation of our business segments,

(**) Compared to 2018 Continuing Operations

(***) Mid-January 2019 exchange rates,

Exchange rates*** FY’19

EUR / US$ 1,1416

US$ / JPY 108,57

US$ / KRW 1121

US$ / MXN 19,00

US$ / CNY 6,76

Full year indication Indication

Organic sales growth* ~5%

FX ~(1)%

Consolidated sales, net ~4%

Adjusted Operating margin* ~10.5%

Tax rate ~28%

Operating Cash flow Higher than 2018**

Capex % of sales Lower than 2018**

R,D&E, net % of sales Lower than 2018**

Leverage ratio by year end Well within range


▪ Continue to Execute on Strong Order Book

▪ Product Launch Effectiveness

▪ Productivity Development

▪ Monitor and Manage Light Vehicle Market Volatility

▪ Secure Our New and Stronger Market Position

▪ Save More Lives

22

Our focus for 2019



autoliv.com

Each year, Autoliv’sproducts save over30,000 lives



Appendix



Strong volume growth in Frontal airbags

25

Autoliv Quantities Delivered(Millions unless specified)

Q4´18 vs. PY** (%)

Seatbelts 37.7 (6)%▪ Pretensioners (of which) 18.5 (6)%

▪ Active Seatbelts (of which) 1.5 21%

Frontal Airbags 14.8 8%▪ Knee Airbags (of which) 1.4 6%

Side Airbags 25.3 0%▪ Chest (Thorax) 14.0 0%

▪ Head (Curtain) 11.3 0%

Steering Wheels 5.4 8%

LVP* (Triad) 9.7 (2)%

LVP* (Global) 23.2 (5.3)%

Q4´18 Product Volumes

(*) Light Vehicle Production (LVP) according to IHS @ January 17, 2019, TRIAD (Western Europe, North America, Japan), (**) Prior Year (PY).



Definition of Symbols

▪ Driver and/or Passenger airbags

▪ Seatbelts

▪ Side airbags

▪ Steering Wheel

▪ Head/Inflatable Curtain airbags

▪ Knee airbag

26 ALV – Q4-2018 Earnings Call and Webcast

1st earnings conference call and webcast... · identified under the headings “risk factors” and...

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