Autoliv: Financial Report October - December 2023

Rhea-AI Summary

Autoliv (ALV) reported record sales and strong profitability in Q4 2023, with a 18% increase in net sales and 16% organic sales growth. The company's operating margin was 8.6% and adjusted operating margin was 12.1%, with a 51% increase in EPS and 105% increase in adjusted EPS. The full year 2024 guidance includes around 5% organic sales growth, 10.5% adjusted operating margin, and around $1.2 billion operating cash flow. Despite outperforming in all regions except China, the company faced challenges in the Chinese market due to lower safety content for global OEMs. The company also saw improvements in operating cash flow and leverage ratio, with a dividend increase of 3% and $207 million returned to shareholders as dividends and share repurchases. The company's CEO indicated that 2023 performance exceeded expectations, with strong order intake and improved gross margin. The company's sustainability agenda also yielded positive results in GHG emissions, renewable electricity use, and incident rate. The company expects a seasonality pattern in 2024, with an expected Q1 adjusted operating margin of around 7% and gradual quarterly improvements leading to a full year 2024 adjusted operating margin of around 10.5%.

Insights

Financial Analyst

The reported 18% increase in net sales and 105% increase in adjusted EPS for Q4 2023 indicates a robust financial performance, surpassing industry growth rates. This growth is particularly notable given the context of global economic uncertainties. The company's ability to outperform the global LVP growth suggests strong market demand for its products and effective business strategies, including new product launches and price adjustments.

Investors should note the company's operating margin decline compared to the previous year, which could raise concerns about rising costs or pricing pressures. However, the improved adjusted operating margin suggests that when excluding certain non-recurring costs, the underlying profitability is actually stronger. This distinction between reported and adjusted figures is crucial for a comprehensive understanding of the company's financial health.

The strong operating cash flow and an improved leverage ratio indicate sound financial management, which is reassuring for stakeholders. The company's commitment to shareholder returns, evidenced by dividend increases and share repurchases, reflects confidence in its financial stability and future prospects.

Market Research Analyst

Autoliv's performance in the automotive safety market is impressive, particularly given the disparity in regional performance, with significant growth in all regions except China. This regional analysis is important for investors considering geographic diversification and exposure to emerging markets. The mention of strong order intake and a balanced mix of contracts across traditional and electric vehicle (EV) platforms highlights the company's strategic positioning in a transitioning automotive industry.

The company's focus on structural cost reductions and direct labor productivity improvements are indicative of ongoing efforts to enhance operational efficiency. As the automotive industry faces challenges such as supply chain disruptions and shifting consumer preferences, Autoliv's proactive cost management strategies appear to be paying off, which may contribute to its competitive advantage and investor confidence.

Sustainability Analyst

Autoliv's mention of progress in its sustainability agenda, including reductions in GHG emissions and increased use of renewable electricity, aligns with the broader industry trend towards environmental responsibility. For socially responsible investors, this focus on sustainability is not only ethically appealing but can also mitigate regulatory risks and enhance the company's reputation. The mention of incident rate improvements suggests a commitment to safety and employee welfare, which can impact long-term productivity and brand perception.

While sustainability initiatives are often viewed as long-term investments, the company's ability to show tangible progress may influence investor sentiment and could potentially lead to cost savings through more efficient operations and reduced environmental impact liabilities.

STOCKHOLM, Jan. 26, 2024 /PRNewswire/ -- (NYSE: ALV) and (SSE: ALIV.sdb)
 

Q4 2023: Record sales and strong profitability
 

Financial highlights Q4 2023

$2,751 million net sales
18% net sales increase
16% organic sales growth*
8.6% operating margin
12.1% adjusted operating margin*
$2.71 EPS, 51% increase
$3.74 adjusted EPS*, 105% increase

Full year 2024 guidance

Around 5% organic sales growth
Around 0% FX effect on net sales
Around 10.5% adjusted operating margin
Around $1.2 billion operating cash flow

All change figures in this release compare to the same period of the previous year except when stated otherwise. 

Key business developments in the fourth quarter of 2023

• Record sales, increased organically* by 16%, which was 7pp better than global LVP growth of 9% (S&P Global January 2024). We outperformed in all regions, except China, mainly due to new product launches and higher prices. LVP in China grew by 31% for domestic OEMs with typically lower safety content but only by 7% for global OEMs with typically higher safety content.

• Profitability improved substantially, positively impacted by price increases, organic growth, and our cost reduction activities. Operating income was $237 million and operating margin was 8.6%. Adjusted operating income* improved from $233 million to $334 million and adjusted operating margin* increased from 10.0% to 12.1%. Return on capital employed was 24% and adjusted return on capital employed* was 33%.

• Operating cash flow remained strong, at $447 million. Free cash flow* was unchanged at $297 million. The leverage ratio* improved to 1.2X compared to 1.3X in the third quarter of 2023, despite returning $207 million to shareholders as dividends and share repurchases. A dividend of $0.68 per share was paid (a 3% increase), and 1.51 million shares were repurchased and retired in the quarter

*For non-U.S. GAAP measures see enclosed reconciliation tables. 

Key Figures

(Dollars in millions, except per share data)	Q4 2023	Q4 2022	Change	FY 2023	FY 2022	Change
Net sales	$2,751	$2,335	18 %	$10,475	$8,842	18 %
Operating income	237	230	3.1 %	690	659	4.7 %
Adjusted operating income1)	334	233	43 %	920	598	54 %
Operating margin	8.6 %	9.8 %	(1.2)pp	6.6 %	7.5 %	(0.9)pp
Adjusted operating margin1)	12.1 %	10.0 %	2.2pp	8.8 %	6.8 %	2.0pp
Earnings per share2)	2.71	1.80	51 %	5.72	4.85	18 %
Adjusted earnings per share1,2)	3.74	1.83	105 %	8.19	4.40	86 %
Operating cash flow	$447	$462	(3.4) %	$982	$713	38 %
Return on capital employed3)	24.4 %	24.3 %	0.1pp	17.7 %	17.5 %	0.2pp
Adjusted return on capital employed1,3)	32.9 %	24.9 %	8.1pp	23.1 %	16.0 %	7.1pp
1) Excluding effects from capacity alignments, antitrust related matters and for FY 2023 the Andrews litigation settlement. Non-U.S. GAAP measure, see reconciliation table. 2) Assuming dilution when applicable and net of treasury shares. 3) Annualized operating income and income from equity method investments, relative to average capital employed.

 
Comments from Mikael Bratt, President & CEO

As we indicated throughout the year, we finished 2023 strong. We achieved or exceeded all of our 2023 indications. Sales and adjusted operating income hit new records while operating cash flow remained strong. I am pleased that gross margin improved substantially. 2023 order intake was the highest in the past five years, supporting our around 45% market share position, with a good mix of new and traditional OEMs as well as EV and ICE platforms. 

We increased shareholder returns to more than $200 million in the quarter while continuing to improve our leverage ratio. As of the end of 2023, we have repurchased shares close to $0.5 billion under our existing $1.5 billion repurchase program.

We outperformed LVP in all regions except China, which had a very strong LVP growth for domestic OEMs with typically lower safety content. We strengthened our market position in China and our order intake was strong in the rapidly changing market, where domestic OEMs are now the drivers behind LVP development.
We continue to deliver on our structural cost reductions, with around 75% of the planned indirect workforce reductions detailed and announced. We also see positive effects on direct labor productivity.

Our 2023 performance developed very much as we indicated with heavy cost headwinds early in the year, which led to a weak Q1 2023. However, quarter-by-quarter, our performance improved, driven by customer recoveries, efficiencies, and organic growth leading to a substantial full year profitability improvement. Our sustainability agenda is yielding results with good progress in GHG emissions, renewable electricity use and incident rate. 

The seasonality of past years is likely to be repeated in 2024, with an expected Q1 adjusted operating margin of around 7%, followed by gradual quarterly improvements, leading to a full year 2024 adjusted operating margin of around 10.5%. Key drivers for the full year margin progression are continued improvement in call-off stability, outgrowing LVP and benefits from strategic and structural initiatives. The improving results we expect in 2024 should take us one important step closer to our target of around 12% adjusted operating margin.
 

Inquiries: Investors and Analysts

Anders Trapp
Vice President Investor Relations
Tel +46 (0)8 5872 0671

Henrik Kaar
Director Investor Relations
Tel +46 (0)8 5872 0614

Inquiries: Media

Gabriella Etemad
Senior Vice President Communications
Tel +46 (0)70 612 6424

Autoliv, Inc. is obliged to make this information public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the VP of Investor Relations set out above, at 12.00 CET on January 26, 2024.

The following files are available for download:

https://mb.cision.com/Main/751/3916250/2565256.pdf

The full report (PDF)

 

 

 

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SOURCE Autoliv

FAQ

What was Autoliv's ticker symbol mentioned in the press release?

The ticker symbol for Autoliv is ALV.

What were the financial highlights of Autoliv in Q4 2023?

Autoliv reported $2,751 million net sales, an 18% increase, and 16% organic sales growth in Q4 2023, with an 8.6% operating margin and 12.1% adjusted operating margin.

What is Autoliv's full year 2024 guidance?

Autoliv's full year 2024 guidance includes around 5% organic sales growth, around 10.5% adjusted operating margin, and around $1.2 billion operating cash flow.

What challenges did Autoliv face in the Chinese market in Q4 2023?

Autoliv faced challenges in the Chinese market due to lower safety content for global OEMs, despite outperforming in all regions except China.

What improvements did Autoliv see in Q4 2023?

Autoliv saw improvements in operating cash flow and leverage ratio, with a dividend increase of 3% and $207 million returned to shareholders as dividends and share repurchases.

What were the key developments in Autoliv's Q4 2023 performance?

Autoliv's Q4 2023 performance exceeded expectations, with strong order intake, improved gross margin, and positive results in the company's sustainability agenda.

What is Autoliv's expected Q1 adjusted operating margin for 2024?

Autoliv expects an expected Q1 adjusted operating margin of around 7% for 2024, with gradual quarterly improvements leading to a full year 2024 adjusted operating margin of around 10.5%.