Autoliv has outlined details of its financial performance in the quarter ended 30 September 2012 (Q3 2012) showing performance that was slightly below that predicted by the company at the end of July. As a result, the company has again pared its forecast for revenue growth for the full year and further shaved its operating margin estimate.
Autoliv now believes its organic revenue will grow in the range of 0-2% in Q4 2012, lower than the original estimate primarily due to the accelerated European light vehicle production (LVP) deterioration and slower than expected growth in China (partially due to the political tension between Japan and China affecting the Japanese OEMs in China). Currency effects and a small divestiture are expected to reduce revenue by an aggregate of 1%, provided that mid-October exchange rates prevail. As a result, consolidated revenue is expected to be virtually flat compared to Q4 2011. An operating margin of around 9% is expected for the quarter, excluding costs for capacity alignments and antitrust investigations and related class action suits. This lower margin than indicated in July is mainly due to the lower sales growth expectation.
The company has added that, due to the uncertain market conditions in Europe, it is still unclear how long the holiday shutdowns will be this year among the OEMs. Consequently, revenue and margin guidance is more uncertain than usual.
In response to this uncertain situation and the accelerating drop in European LVP, Autoliv now expects its capacity alignment costs for full year 2012 to reach the higher end of the US$60m-80m range communicated in July. This cost has increased from the “more than US$50m” originally estimated at the beginning of 2012. These expectations would yield an organic revenue growth of approximately 4% for 2012 (6% estimated previously) with a flat consolidated revenue (+1% previously) due to negative currency effects and a small divestiture. It would also yield an operating margin of more than 9.5% (previously “approximately 10%”) for the year (excluding costs for capacity alignments etc). Operations are now expected to continue to generate a strong cash flow in the magnitude of US$0.7bn in 2012.
The company reported record Q3 revenue of US$1,947.1m, down 3.5% year-on-year (Q3 2011; US$2,017.6m), taking the year-to-date total to US$6,214.8m, versus US$6,187.7m in the first nine months of 2011, a gain of 0.4%. Organic revenue in Q3 2012 rose by 2% compared to expected growth of nearly 4% at the beginning of the quarter. This shortfall was primarily due to “many unexpected temporary plant closures among European vehicle manufacturers, the strike in South Korea (at Hyundai/Kia) and weaker demand in China.” Organic revenue growth was mainly driven by North American LVP growth, continued strong performance in China and rapidly growing sales for active safety systems, especially radar systems for Mercedes-Benz and GM.
Q3 revenue from sales of airbag products (including steering wheels and passive safety electronics) decreased by 3.8% year-on-year to US$1,268.7m compared to the same quarter in 2011 (US$1,318.8m). Negative currency effects reduced revenue by 5% while organic revenue from sales of airbag products grew by 1%. The company reported that sales of knee airbags almost doubled due to their further integration into more vehicle models, which partially offset the effects from the strikes in South Korea and the decline in European LVP. Year-to-date revenue from airbag product sales was US$4,062.0m, versus US$4,056.6m in 2011, a rise of just 0.1%.
Q3 revenue from sales of seat belt products declined 5.7% year-on-year to US$621.4m (US$659.0m). Negative currency effects of 7% and a 1% divestiture effect from the sale of Klippan Ltd in 2012 more than offset organic revenue growth of 2%. Sales were reported to be strong in North America, China and the rest of Asia, partially as a result of the global trend towards more advanced and higher value added seat belt systems. January-September 2012 revenue from seat belt product sales was US$1,998.9m, versus US$2,015.5.5m in 9M 2011, a fall of 0.8%.
Revenue from sales of active safety products (automotive radar, night vision systems and cameras for emergency braking, traffic-sign monitoring and automatic head-beam switching) in Q3 increased by 43.0% to US$57.0m and organically by 47%. This increase was mainly due to new radar business for Mercedes-Benz’s B-, E- and M-Classes and Cadillac’s ATS, XTS and SRX models, as well as due to new camera business for BMW’s 1 and 3 Series. Year-to-date 2012 revenue was US$153.9m, compared with US$115.6m in the first nine months of the previous year, a rise of 33.1%.
Autoliv’s Q3 2012 operating income decreased by US$17.5m, or 8.5%, year-on-year to US$187.4m (US$204.9m), reflecting a gross profit decline of US$23.6m. The margin therefore eased to 9.6% from 10.2%, primarily due to the 0.5 percentage point decline in gross margin. Capacity alignment costs, which amounted to US$9m, and legal costs related to antitrust investigations, which amounted to less than US$1m, had a combined negative margin effect of 0.5 percentage points. Therefore, the operating margin excluding these costs was 10.1%, in line with the guidance at the beginning of the quarter of “approximately 10%”.
Operating profit in the first nine months of 2012 was US$531.1m (margin of 8.5%), versus US$665.1m (10.7%) in the same period of 2011.
Net income attributable to controlling interests in the latest quarter declined by US$20.9m year-on-year to US$117.5m (US$138.4m), taking the January-September total to US$344.4m (US$464.9m).
