Autoliv adapts to new business conditions and reiterates full-year indications

Rhea-AI Summary

Autoliv (NYSE: ALV) announced its adaptation to new business conditions amid inflation and supply chain disruptions. The company has begun seeing results from price increase negotiations with customers designed to offset inflation. Although global light vehicle production (LVP) has been impacted by supply issues and COVID-19 restrictions in China, projections indicate a potential recovery in the second half of 2022, driving overall LVP growth to around 5% for the year. Autoliv reiterated its full-year sales growth expectations of 12-17% and an adjusted operating margin of 5.5%-7.0%.

Positive

• Successful price increase negotiations showing results.
• Projected recovery in global light vehicle production (LVP) for the second half of 2022.
• Full-year organic sales growth expected at 12-17%.
• Adjusted operating margin guidance maintained at 5.5%-7.0%.

Negative

• Chinese LVP saw over 40% year-over-year decline in April.
• Second quarter LVP projections lowered by 11% compared to earlier estimates.
• Negative content mix due to reduced vehicles with high safety content in China.

STOCKHOLM, June 20, 2022 /PRNewswire/ -- Autoliv, Inc. (NYSE: ALV) and (SSE: ALIVsdb), the worldwide leader in automotive safety systems, is adapting to new business conditions and is beginning to see results from its price increase negotiations with customers to offset inflationary pressures.

Market and business update

Year-to-date, global LVP has been limited by supply side issues and COVID-19 related lockdowns in China, rather than by underlying market demand issues. The lockdowns in China have affected the LVP more negatively than expected. This led to more than 40% year-over-year Chinese LVP decline in April. May saw a recovery to around flat vs. May 2021. IHS Markit's latest update for the second quarter LVP in China is 11% lower than it was in April, when our Q1 2022 results were published. Furthermore, vehicles with high safety content were reduced in China in May leading to a negative content mix for Autoliv. Government incentives are expected to drive a second half year recovery. Therefore, combined with an improved availability of semiconductors, IHS Markit expects that the second half of 2022 will recover what was lost in the second quarter and thus global LVP growth remains at around 5% for the full year.

Autoliv is accelerating mitigation activities to support our medium-term targets

Autoliv continues to work intensely with customers to secure price increases to compensate for the inflationary pressure and supply chain disruptions. We have made progress on cost recovery through sustainable price increases, with some customer pricing being retroactive to cover costs incurred earlier in 2022. We preserve our ability to seek further adjustments in the future should the need arise.

In parallel with the price negotiations, Autoliv is introducing further cost reductions to reduce annualized spend, mainly by reviewing and prioritizing certain projects, reducing headcount, consultants, and temporary employees.

"Our mitigation activities include price negotiations with customers to support a sustainable business model in the current higher inflationary environment. This includes sustainable price increases and a higher frequency of price adjustments as well as broad-based cost reductions," says Mikael Bratt, President and CEO of Autoliv. "This means negotiating more flexible customer contracts to ensure that inflationary pressures are effectively pushed through the value chain. It also includes closer engagement with customers to enable more predictable production schedules," Mikael Bratt continues.

Reiterating full-year indications

Despite the challenging environment, Autoliv reiterates its full-year 2022 indications of an organic sales growth of around 12-17% and an adjusted operating margin of around 5.5%-7.0% based on the assumptions that global LVP will grow by 0-5% and that we continue to achieve our targeted cost inflation compensation objectives.

"We have seen conditions change in the automotive industry which impacts Autoliv and the whole supply chain. Based on Autoliv's mitigation activities to date and future planned activities, I am comfortable in reiterating our full year organic sales and adjusted operating margin indications despite additional headwind with regards to inflationary pressure and the challenges in China," says Mikael Bratt, President and CEO of Autoliv. "We maintain a healthy balance sheet and remain committed to a shareholder friendly capital allocation policy as communicated at our Capital Markets Day last year."

Inquiries: 
Investors & Analysts: Anders Trapp, Tel +46 (0)8 587 206 71
Investors & Analysts: Henrik Kaar, Tel +46 (0)8 587 206 14
Media: Gabriella Ekelund, Tel +46 (70) 612 64 24

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SOURCE Autoliv

FAQ

What are Autoliv's projections for 2022?

Autoliv expects organic sales growth of 12-17% and an adjusted operating margin of 5.5%-7.0%.

How has the COVID-19 situation affected Autoliv?

COVID-19 lockdowns in China led to a significant decline in LVP, impacting Autoliv's performance.

What actions is Autoliv taking to mitigate inflation impacts?

Autoliv is negotiating price increases with customers and implementing cost-reduction strategies.

What is the current state of the automotive market according to Autoliv?

Despite challenges, Autoliv anticipates a recovery in the automotive market due to government incentives and semiconductor availability.