Strong quarterly execution – increases investments for future growth towards end of decade targets
Autoliv, Inc. (NYSE: ALV and SSE: ALIV.Sdb) – the worldwide leader in automotive safety systems – is moving ahead towards its end-of-decade targets for growth, margins and returns outlined in its October 2015 Capital Markets Day. In 2016, the Company increases its RD&E efforts for future growth while indicating 2016 adjusted operating margin above its long term target range.
For the three-month period ended December 31, 2015, the Company reported record sales of $2,520 million. Quarterly organic sales* grew by 13.4%. Operating margin was 11.2%. The adjusted operating margin* was 11.1% (for non-U.S. GAAP measures see enclosed reconciliation tables). The expectation at the beginning of the quarter was for organic sales growth of “around 9%” and an adjusted operating margin of “around 10.5%”.
For the first quarter of 2016, the Company expects organic sales to increase by more than 10% and an adjusted operating margin of around 8.5%. The expectation for the full year is for organic sales growth of around 5% and an adjusted operating margin of more than 9%. RD&E investments, net will be in the higher end of the 6-6.5% range, a significant year-over-year increase.
Comments from Jan Carlson, Chairman, President & CEO
“At our Capital Markets Day in early October 2015, we outlined the Company’s targets for the end of the decade. In 2015 we executed according to plan and we managed to exceed our own expectations from the beginning of the fourth quarter. In 2016 we continue to step up our RD&E efforts in support of long term growth.
I am pleased with our performance in the quarter. Asia, Americas and Europe all showed double-digit organic sales growth* and globally we grew more than 13%. Both our quarterly sales and operating profit set new records, we delivered more than 11% adjusted operating margin* and we had close to record operating cash flow. Through strong execution we managed to benefit from the stronger than expected light vehicle production in the quarter.
In China, light vehicle production exceeded the estimates from the beginning of the quarter which, combined with a beneficial product mix, enabled us to achieve double-digit organic sales growth in the fourth quarter and also deliver full-year organic sales growth. This capped a year that started with unfavorable product mix for Autoliv, followed by instability in the Chinese market during the summer.
Rapid growth in active safety continued and we achieved over 30% organic growth for the full year. In early January the new, best in class active safety vehicle, Mercedes E-Class was launched with a full suite of active safety products from Autoliv, including ADAS-controller, radars and cameras based on our own software algorithms. This was an important milestone towards our ambition to deliver safety products that function in real-life situations and not only in test environments.
2015 was another year tainted by record recalls and other issues in the automotive industry. While this is unfortunate, it is encouraging to see NHTSA and other regulatory bodies sharpen their focus on automotive safety. At Autoliv we continue to put quality first. During the year we reinforced our internal focus and communication further, making it clear that quality is always our number one priority.
The pace of technological development in our industry is higher than ever and in 2016 we expect to make further investments for the future in order to maintain our leadership in automotive safety. We plan for record investments in RD&E, net in the higher end of our current target range of 6-6.5% of sales, all to keep us at the forefront of this rapid development. However, the macroeconomic uncertainty is higher than in previous years, and we are following the global development closely and apply prudent fiscal management.
We continue to execute on our long-term plan. Our strategies, targets and ambitions are clear and we continue into 2016 delivering products and solutions for real-life safety while keeping focused on saving more lives and creating value for our stakeholders.”
An earnings conference call will be held at 3:00 p.m. (CET) today, January 29. To follow the webcast or to obtain the pin code and phone number, please access www.autoliv.com. The conference slides will be available on our web site as soon as possible following the publication of this earnings report.