ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our Condensed Consolidated Financial Statements and accompanying Notes thereto included elsewhere herein and with our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the United States Securities and Exchange Commission (the “SEC”) on February 16, 2023. Unless otherwise noted, all dollar amounts are in millions.
Autoliv, Inc. (“Autoliv” or the “Company”) is a Delaware corporation with its principal executive offices in Stockholm, Sweden. The Company functions as a holding corporation and owns two principal operating subsidiaries, Autoliv AB and Autoliv ASP, Inc.
Through its operating subsidiaries, Autoliv is a supplier of automotive safety systems with a broad range of product offerings, including modules and components for passenger and driver airbags, side airbags, curtain airbags, seatbelts, steering wheels and pedestrian protection systems.
Autoliv’s filings with the SEC, including this Quarterly Report on Form 10-Q, annual reports on Form 10-K, current reports on Form 8-K, proxy statements and all of our other reports and statements, and amendments thereto, are available free of charge on our corporate website at www.autoliv.com as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC (generally the same day as the filing).
The primary exchange market for Autoliv’s securities is the New York Stock Exchange ("NYSE") where Autoliv’s common stock trades under the symbol “ALV”. Autoliv’s Swedish Depositary Receipts ("SDRs") are traded on Nasdaq Stockholm’s list for large market cap companies under the symbol “ALIV SDB”. Options in SDRs trade on Nasdaq Stockholm under the name “Autoliv SDB”. Options in Autoliv shares are traded on Nasdaq OMX PHLX and on NYSE Amex Options under the symbol “ALV”.
Autoliv’s fiscal year ends on December 31.
Non-U.S. GAAP financial measures
Some of the following discussions refer to non-U.S. GAAP financial measures: see reconciliations for “Organic sales”, “Trade working capital”, “Free cash flow”, “Net debt”, “Leverage ratio”, “Adjusted operating income”, “Adjusted operating margin” and “Adjusted earnings per share, diluted” provided below. Management believes that these non-U.S. GAAP financial measures provide supplemental information to investors regarding the performance of the Company’s business and assist investors in analyzing trends in the Company's business. Additional descriptions regarding management’s use of these financial measures are included below. Investors should consider these non-U.S. GAAP financial measures in addition to, rather than as substitutes for, financial reporting measures prepared in accordance with U.S. GAAP. These historical non-U.S. GAAP financial measures have been identified as applicable in each section of this report with a tabular presentation reconciling them to the most directly comparable U.S. GAAP financial measures. It should be noted that these measures, as defined, may not be comparable to similarly titled measures used by other companies.
21
EXECUTIVE OVERVIEW
The Company is pleased with its strong sales growth, supported by product launches and price increases, and that the Company outperformed LVP in all regions significantly. The operating margin impact of the strong sales growth was lower than it should be in the quarter. This is because new product launches normally have lower operating leverage initially. As production ramps up and stabilizes, operating leverage is expected to improve. Together with the Company's actions for cost reductions and price adjustments, this will give the significant full year profit improvement that the Company expects.
The operating environment in the first quarter of 2023 was, as expected, challenging, especially in Europe. The Company reported an adjusted operating margin in line with prior communication.
Other highlights from the quarter were that the Company's balance sheet and expected cash flow allowed for continued high shareholder returns, and that the Company issued its first ever green bond. The Company expects a strong full year cash flow, although its cash flow was temporarily week in the first quarter due to strong sales growth in March.
The Company saw continued updates of crash test standards and safety regulations in the U.S. and in India which will support continued increase in safety content per vehicle. The Company's market position is strong and is investing for increased production with a new textile facility in Vietnam. The Company also continues to look for ways to improve its footprint and to reduce its costs structurally.
The year has so far developed as expected. Like last year, inflationary pressure impacted the first quarter significantly, and in line with last year, the Company expects to offset this during the rest of the year through productivity, cost reduction actions and price adjustments.
This supports the Company's confidence in expecting a gradually improving adjusted operating margin, which should allow the Company to deliver a significant full year increase in cash flow and adjusted operating income and to reach the full year indications the Company set at the beginning of the year.
Financial highlights in the three months period ended March 31, 2023
Change figures below compare to the same period of the previous year, except when stated otherwise.
$2,493 net sales
17% net sales increase
21% organic sales increase (Non-U.S. GAAP measure, see reconciliation table below)
5.1% operating margin
5.3% adjusted operating margin (Non-U.S. GAAP measure, see reconciliation table below)
$0.86 EPS - 9% decrease
$0.90 adjusted EPS (Non-U.S. GAAP measure, see reconciliation table below) - 99% increase
Key business developments in the three months period ended March 31, 2023
Change figures below compare to the same period of the previous year, except when stated otherwise.
Sales increased organically (Non-U.S. GAAP measure, see reconciliation table below) by 21%, which was 15pp better than global LVP growth of 6.1% (S&P Global, April 2023). The Company outperformed significantly in all regions, mainly due to new product launches and higher prices.
Profitability in line with the Company's indication, positively impacted by price increases, organic growth and the Company's cost reduction activities. Operating income was $127 million and operating margin was 5.1%. Adjusted operating income (Non-U.S. GAAP measure, see reconciliation table below) improved from $68 million to $131 million and adjusted operating margin (Non-U.S. GAAP measure, see reconciliation table below) increased from 3.2% to 5.3%, despite inflationary pressure, volatile LVP and adverse FX effects. Return on capital employed was 13.0% and adjusted return on capital employed (Non-U.S. GAAP measure, see reconciliation table below) was 13.4%.
Operating cash flow decreased from $70 million to negative $46 million, driven mainly by negative working capital effects due to the high sales growth. Free cash flow (Non-U.S. GAAP measure, see calculation table below) decreased to negative $189 million, as capex, net, increased due to capacity expansions and footprint activities. The leverage ratio (Non-U.S. GAAP measure, see calculation table below) increased from 1.4x in the fourth quarter 2022 to 1.6x, impacted by higher net debt. A dividend of $0.66 per share was paid, and 0.45 million shares were repurchased and retired in the quarter.
22
Business and market condition update
Supply Chain
Global light vehicle production growth year-over-year was around 6.1% (according to S&P Global April 2023) in Q1 2023, negatively impacted by industry supply chain disruptions. Industry supply chain disruptions also led to low customer demand visibility and material changes to customer call-offs with short notice, which negatively impacted our production efficiency and profitability in the quarter. The Company expects the current industry-wide supply chain disruptions to be a limiting factor for the global LVP in the first half year of 2023, while the Company expects that demand and supply will be in a better balance in the second half of 2023.
Inflation
In Q1 2023, cost pressures from labor, logistics, utilities and other items had a negative impact on our profitability. Rising raw material costs amounted to around 0.5pp in operating margin headwind in Q1 2023, which was largely offset by commercial customer recoveries. The Company expects the raw material price changes in 2023 will to a large extent be reflected in price changes in its products, albeit with delays of several months. The Company also expects significant cost pressure from broad based inflation relating to labor, logistics, utilities and other items, especially in Europe. The Company continues to execute on productivity and cost reduction activities to offset these cost pressures, and is continuing to have challenging discussions with its customers on non-raw material cost inflation.
Other matters
Direct COVID-19 related costs and governmental support in connection with the COVID-19 pandemic were immaterial in the first quarter of 2023.
The direct impact of the war in Ukraine on our business is limited. Autoliv has one facility with fewer than 20 employees in Russia. The Company's operations in Russia are currently suspended. Autoliv net assets in Russia consist of USD cash items, which amount to around $3 million. Autoliv has no operations in Ukraine.
23
RESULTS OF OPERATIONS
Overview
The following table shows some of the key ratios management uses internally to analyze the Company's current and future financial performance and core operations as well as to identify trends in the Company’s financial conditions and results of operations. The Company has provided this information to investors to assist in meaningful comparisons of past and present operating results and to assist in highlighting the results of ongoing core operations. These ratios are more fully explained below and should be read in conjunction with the consolidated financial statements in the Company's Annual Report on Form 10-K and the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q.
The Company's management uses the Return on capital employed (ROCE) and Return on total equity (ROE) measures for purposes of comparing its financial performance with the financial performance of other companies in the industry and providing useful information regarding the factors and trends affecting the Company’s business. As used by the Company, ROCE is annualized operating income and income from equity method investments relative to average capital employed. The Company believes ROCE is a useful indicator of long-term performance both absolute and relative to the Company's peers as it allows for a comparison of the profitability of the Company’s capital employed in its business relative to that of its peers.
ROE is the ratio of annualized income (loss) relative to average total equity for the periods presented. The Company’s management believes that ROE is a useful indicator of how well management creates value for its shareholders through its operating activities and its capital management.
KEY RATIOS
(Dollars in millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
or As of March 31, |
|
|
|
2023 |
|
|
2022 |
|
Total parent shareholders’ equity per share |
|
$ |
30.61 |
|
|
$ |
30.43 |
|
Capital employed 1) |
|
|
4,118 |
|
|
|
3,731 |
|
Net debt 2) |
|
|
1,477 |
|
|
|
1,057 |
|
|
|
|
|
|
|
|
Trade working capital8) |
|
|
1,409 |
|
|
|
1,352 |
|
Trade working capital relative to sales, %9) |
|
|
14.1 |
% |
|
|
15.9 |
% |
Receivables outstanding relative to sales, %10) |
|
|
21.1 |
% |
|
|
21.5 |
% |
Inventory outstanding relative to sales, %11) |
|
|
9.9 |
% |
|
|
10.7 |
% |
Payables outstanding relative to sales, %12) |
|
|
16.9 |
% |
|
|
16.3 |
% |
|
|
|
|
|
|
|
Gross margin, % 3) |
|
|
15.2 |
% |
|
|
13.6 |
% |
Operating margin, % 4) |
|
|
5.1 |
% |
|
|
6.3 |
% |
|
|
|
|
|
|
|
Return on total equity, % 5) |
|
|
11.3 |
% |
|
|
12.5 |
% |
Return on capital employed, % 6) |
|
|
13.0 |
% |
|
|
14.6 |
% |
|
|
|
|
|
|
|
Headcount at period-end 7) |
|
|
71,300 |
|
|
|
64,800 |
|
1) Total equity and net debt.
2) Net debt adjusted for pension liabilities in relation to EBITDA. See tabular presentation reconciling this non-U.S. GAAP measure to U.S. GAAP below.
3) Gross profit relative to sales.
4) Operating income relative to sales.
5) Net income relative to average total equity.
6) Operating income and income from equity method investments, relative to average capital employed.
7) Employees plus temporary, hourly personnel.
8) Outstanding receivables and outstanding inventory less outstanding payables. See calculation of this non-U.S. GAAP measure in the table below.
9) Outstanding receivables and outstanding inventory less outstanding payables relative to annualized quarterly sales.
10) Outstanding receivables relative to annualized quarterly sales.
11) Outstanding inventory relative to annualized quarterly sales.
12) Outstanding payables relative to annualized quarterly sales.
24
three months period ended March 31, 2023 COMPARED WITH three months period ended March 31, 2022
Consolidated Sales Development
(dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
Components of change in net sales |
|
|
|
2023 |
|
|
2022 |
|
|
Reported change |
|
|
Currency effects 1) |
|
|
Organic 3) |
|
Airbags, Steering Wheels and Other2) |
|
$ |
1,673 |
|
|
$ |
1,381 |
|
|
|
21 |
% |
|
|
(3.6 |
)% |
|
|
25 |
% |
Seatbelt products 2) |
|
|
820 |
|
|
|
744 |
|
|
|
10 |
% |
|
|
(3.5 |
)% |
|
|
14 |
% |
Total |
|
$ |
2,493 |
|
|
$ |
2,124 |
|
|
|
17 |
% |
|
|
(3.6 |
)% |
|
|
21 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia |
|
$ |
936 |
|
|
$ |
857 |
|
|
|
9.2 |
% |
|
|
(7.8 |
)% |
|
|
17 |
% |
Whereof: China |
|
|
453 |
|
|
|
447 |
|
|
|
1.2 |
% |
|
|
(7.2 |
)% |
|
|
8.4 |
% |
Asia excl. China |
|
|
483 |
|
|
|
410 |
|
|
|
18 |
% |
|
|
(8.4 |
)% |
|
|
26 |
% |
Americas |
|
|
831 |
|
|
|
692 |
|
|
|
20 |
% |
|
|
2.4 |
% |
|
|
18 |
% |
Europe |
|
|
725 |
|
|
|
575 |
|
|
|
26 |
% |
|
|
(4.6 |
)% |
|
|
31 |
% |
Total |
|
$ |
2,493 |
|
|
$ |
2,124 |
|
|
|
17 |
% |
|
|
(3.6 |
)% |
|
|
21 |
% |
1) Effects from currency translations.
2) Including Corporate and Other sales.
3) Non-U.S. GAAP measure.
Sales by product - Airbags, Steering Wheels and Other
All major product categories increased organically (Non-U.S. GAAP measure) in the quarter. The largest contributor to the increase was inflatable curtains and steering wheels, followed by side airbags and passenger airbags.
Sales by product - Seatbelts
The main contributor to Seatbelt products organic growth (Non-U.S. GAAP measure) was Europe, followed by Asia excluding China and Americas.
Sales by region
The Company's global organic sales (Non-U.S. GAAP measure, see reconciliation table above) increased by 21% compared to the global LVP increase of 6.1% (according to S&P Global, April 2023). The 15pp outperformance was driven by new product launches, price increases and a positive geographical LVP mix development. Autoliv outperformed LVP by around 16pp in China, by around 14pp in Europe and in Asia excl. China and by around 7pp in Americas.
First quarter of 2023 organic growth1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
Europe |
|
China |
|
Asia excl. China |
|
Global |
Autoliv |
|
18% |
|
31% |
|
8.4% |
|
26% |
|
21% |
Main growth drivers |
|
Honda, Nissan, GM |
|
VW, Stellantis, Renault |
|
Lixiang Auto, Honda, BYD |
|
Hyundia, Toyota, Nissan |
|
Honda, Hyundai, VW |
Main decline drivers |
|
Ford, BMW |
|
Mitsubishi |
|
Nissan, GM, Xpeng |
|
|
|
Ford, Xpeng, Great Wall |
1) Non-U.S. GAAP measure.
Light Vehicle Production Development
Change three months period ended March 31, 2023 versus three months period ended March 31, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
Europe |
|
China |
|
Asia excl. China |
|
Global |
LVP1) |
|
11 % |
|
17 % |
|
(7.5)% |
|
12 % |
|
6.1 % |
1) Source: S&P Global, April 2023.
25
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
(Dollars in millions, except per share data) |
|
2023 |
|
|
2022 |
|
|
Change |
|
Net Sales |
|
$ |
2,493 |
|
|
$ |
2,124 |
|
|
|
17 |
% |
Gross profit |
|
|
379 |
|
|
|
288 |
|
|
|
32 |
% |
% of sales |
|
|
15.2 |
% |
|
|
13.6 |
% |
|
|
1.6 |
pp |
S, G&A |
|
|
(132 |
) |
|
|
(115 |
) |
|
|
14 |
% |
% of sales |
|
|
(5.3 |
)% |
|
|
(5.4 |
)% |
|
|
0.1 |
pp |
R, D&E, net |
|
|
(116 |
) |
|
|
(107 |
) |
|
|
8.7 |
% |
% of sales |
|
|
(4.7 |
)% |
|
|
(5.0 |
)% |
|
|
0.4 |
pp |
Amortization of Intangibles |
|
|
(0 |
) |
|
|
(1 |
) |
|
|
(70 |
)% |
Other income (expense), net |
|
|
(4 |
) |
|
|
70 |
|
|
n/a |
|
Operating income |
|
|
127 |
|
|
|
134 |
|
|
|
(5.4 |
)% |
% of sales |
|
|
5.1 |
% |
|
|
6.3 |
% |
|
|
(1.2)pp |
|
Adjusted operating income1) |
|
|
131 |
|
|
|
68 |
|
|
|
93 |
% |
% of sales |
|
|
5.3 |
% |
|
|
3.2 |
% |
|
|
2.1 |
pp |
Financial and non-operating items, net |
|
|
(18 |
) |
|
|
(15 |
) |
|
|
22 |
% |
Income before taxes |
|
|
109 |
|
|
|
119 |
|
|
|
(8.8 |
)% |
Income taxes |
|
|
(34 |
) |
|
|
(36 |
) |
|
|
(5.0 |
)% |
Tax rate |
|
|
31.6 |
% |
|
|
30.3 |
% |
|
|
1.3 |
pp |
Net income |
|
|
74 |
|
|
|
83 |
|
|
|
(11 |
)% |
Earnings per share, diluted2) |
|
|
0.86 |
|
|
|
0.94 |
|
|
|
(8.8 |
)% |
Adjusted earnings per share, diluted1,2) |
|
|
0.90 |
|
|
|
0.45 |
|
|
|
99 |
% |
1) Non-U.S. GAAP measure, excluding effects from capacity alignment, including gain on sale of property in the first quarter of 2022, and antitrust related matters.
2) Assuming dilution, when applicable, and net of treasury shares.
First quarter of 2023 development
Gross profit increased by $91 million and the gross margin increased by 1.6pp compared to the same quarter 2022. The gross profit increase was primarily driven by price increases, volume growth and lower costs for premium freight. This was partly offset by increased costs for personnel to manage the high customer call-off volatility as well as to prepare for higher sales levels expected in coming quarters. Other adverse effects were higher costs for raw materials and unfavorable foreign currency translation effects.
S,G&A costs increased by $16 million compared to the prior year, mainly due to increased costs for personnel and projects, partly offset by positive currency translation effects. S,G&A costs in relation to sales decreased from 5.4% to 5.3%.
R,D&E, net costs increased by around $9 million compared to the prior year, mainly due to higher costs for personnel, partly offset by positive foreign currency translation effects. R,D&E, net, in relation to sales decreased from 5.0% to 4.7%.
Other income (expense), net was negative $4 million compared to $70 million in the prior year. The prior year was positively impacted by around $80 million from the sale of a property in Japan.
Operating income decreased by $7 million compared to the same period in 2022, mainly as a consequence of the change in Other income (expense) and the higher costs for S,G&A and R,D&E, net, partly offset by the higher gross profit.
Adjusted operating income (Non-U.S. GAAP measure, see reconciliation table below) increased by $63 million compared to the prior year, mainly due to higher gross profit, partly offset by the higher costs for S,G&A and R,D&E, net.
Financial and non-operating items, net, was negative $18 million compared to negative $15 million a year earlier, mainly due to increased interest expense as an effect of higher debt and higher interest rates.
Income before taxes decreased by $11 million compared to the prior year, mainly due to the lower operating income.
Tax rate was 31.6% compared to 30.3% in the same period last year. Discrete tax items, net, increased the tax rate this quarter by 0.8pp. Discrete tax items increased the tax rate by 0.6pp in the same period last year.
Earnings per share, diluted decreased by $0.08 compared to a year earlier. The main drivers were $0.52 from capacity alignments and $0.05 from taxes, partly offset by $0.51 from higher adjusted operating income (Non-U.S. GAAP measure, see reconciliation table below).
26
LIQUIDITY AND CAPITAL RESOURCES
The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on its financial position, results of operations or cash flows. The Company’s future contractual obligations have not changed materially from the amounts reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 16, 2023.
First quarter of 2023 development
Trade working capital (Non-U.S. GAAP measure, see calculation table below) increased by $57 million compared to the same period last year, where the main drivers were $282 million in higher receivables and $73 million in higher inventories, partly offset by $298 million in higher accounts payables.
Operating cash flow decreased by $116 million to negative $46 million compared to the same period last year, mainly due to negative working capital effects.
Capital expenditure, net increased by $126 million, mainly due to the impact on the prior year of $95 million from the sale of property, plant and equipment, but also due to increased investments related to capacity expansions and footprint activities. Capital expenditure, net in relation to sales was 5.7% vs. 0.8% a year earlier.
Free cash flow (Non-U.S. GAAP measure, see calculation table below) was negative $189 million, compared to $53 million in the same period prior year. The decline was due to the lower operating cash flow and higher capital expenditure, net.
Cash conversion (Non-U.S. GAAP measure) defined as free cash flow (Non-U.S. GAAP measure, see calculation table below) in relation to net income, was not meaningful in the period as free cash flow was negative.
Net debt (Non-U.S. GAAP measure, see reconciliation table below) was $1,477 million as of March 31, 2023, which was $420 million higher than a year earlier.
Liquidity position. As of March 31, 2023, our cash balance was around $0.7 billion, and including committed, unused loan facilities, our liquidity position was around $1.8 billion.
Leverage ratio (Non-U.S. GAAP measure, see calculation table below). As of March 31, 2023, the Company had a leverage ratio of 1.6x compared to 1.4x as of March 31, 2022, as the net debt (Non-U.S. GAAP measure, see reconciliation table below) increased proportionally more than the 12 months trailing adjusted EBITDA (Non-U.S. GAAP measure, see calculation table below) increased.
Total equity decreased by $33 million compared to March 31, 2022. This is mainly due to $225 million in dividend payment and stock repurchases of $139 million as well as $106 million in adverse currency translation effects, partly offset by $416 million from net income.
NON-U.S. GAAP MEASURES
The Company believes that comparability between periods is improved through the exclusion of certain items. To assist investors in understanding the operating performance of Autoliv's business, it is useful to consider certain U.S. GAAP measures exclusive of these items. Accordingly, the tables below reconcile from U.S. GAAP to the equivalent non-U.S. GAAP measure.
Reconciliation of U.S. GAAP financial measures to “Adjusted operating income”, “Adjusted operating margin” and “Adjusted Earnings per share, diluted”
(Dollars in millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2023 |
|
|
Three Months Ended March 31, 2022 |
|
|
|
Reported U.S. GAAP |
|
|
Adjustments1) |
|
|
Non-U.S. GAAP |
|
|
Reported U.S. GAAP |
|
|
Adjustments1) |
|
|
Non-U.S. GAAP |
|
Operating income |
|
$ |
127 |
|
|
$ |
4 |
|
|
$ |
131 |
|
|
$ |
134 |
|
|
$ |
(66 |
) |
|
$ |
68 |
|
Operating margin, % |
|
|
5.1 |
% |
|
|
0.2 |
% |
|
|
5.3 |
% |
|
|
6.3 |
% |
|
|
(3.1 |
)% |
|
|
3.2 |
% |
Earnings per share, diluted |
|
$ |
0.86 |
|
|
$ |
0.03 |
|
|
$ |
0.90 |
|
|
$ |
0.94 |
|
|
$ |
(0.49 |
) |
|
$ |
0.45 |
|
1) Effects from capacity alignments, including gain on sale of property in the first quarter of 2022, and antitrust related matters.
27
Items included in Non-U.S. GAAP adjustments
(Dollars in millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2023 |
|
|
Three Months Ended March 31, 2022 |
|
|
|
Millions |
|
|
Per share |
|
|
Millions |
|
|
Per share |
|
Capacity alignments |
|
$ |
3 |
|
|
$ |
0.04 |
|
|
$ |
(66 |
) |
|
$ |
(0.76 |
) |
Legal costs |
|
|
1 |
|
|
|
0.01 |
|
|
|
— |
|
|
|
— |
|
Total adjustments to operating income |
|
|
4 |
|
|
|
0.05 |
|
|
|
(66 |
) |
|
|
(0.76 |
) |
Tax on non-U.S. GAAP adjustments1) |
|
|
(1 |
) |
|
|
(0.01 |
) |
|
|
23 |
|
|
|
0.26 |
|
Total adjustments to net income |
|
$ |
3 |
|
|
$ |
0.03 |
|
|
$ |
(43 |
) |
|
$ |
(0.49 |
) |
1) The tax is calculated based on the tax laws in the respective jurisdiction(s) of the adjustment(s).
The Company uses the non-U.S. GAAP measure “Trade working capital,” as defined in the table below, in its communications with investors and for management’s review of the development of the trade working capital cash generation from operations. The reconciling items used to derive this measure are, by contrast, managed as part of the Company’s overall cash and debt management, but they are not part of the responsibilities of day-to-day operations’ management.
Calculation of “Trade working capital”
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
|
March 31, 2022 |
|
Receivables, net |
|
$ |
2,106 |
|
|
$ |
1,907 |
|
|
$ |
1,824 |
|
Inventories, net |
|
|
986 |
|
|
|
969 |
|
|
|
913 |
|
Accounts payable |
|
|
(1,683 |
) |
|
|
(1,693 |
) |
|
|
(1,385 |
) |
Trade working capital |
|
$ |
1,409 |
|
|
$ |
1,183 |
|
|
$ |
1,352 |
|
The non-U.S. GAAP measure “Net debt” is also used in the non-U.S. GAAP measure “Leverage ratio”. Management uses this measure to analyze the amount of debt the Company can incur under its debt policy. Management believes that this policy also provides guidance to credit and equity investors regarding the extent to which the Company would be prepared to leverage its operations. For details on leverage ratio refer to the table below.
Reconciliation of U.S. GAAP financial measure to “Net debt”
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
|
March 31, 2022 |
|
Short-term debt |
|
$ |
577 |
|
|
$ |
711 |
|
|
$ |
347 |
|
Long-term debt |
|
|
1,601 |
|
|
|
1,054 |
|
|
|
1,647 |
|
Total debt |
|
|
2,179 |
|
|
|
1,766 |
|
|
|
1,994 |
|
Cash and cash equivalents |
|
|
(713 |
) |
|
|
(594 |
) |
|
|
(938 |
) |
Debt issuance cost/Debt-related derivatives, net |
|
|
12 |
|
|
|
12 |
|
|
|
1 |
|
Net debt |
|
$ |
1,477 |
|
|
$ |
1,184 |
|
|
$ |
1,057 |
|
Management uses the non-U.S. GAAP measure “Leverage Ratio” to analyze the amount of debt the Company can incur under its debt policy. Management believes that this policy also provides guidance to credit and equity investors regarding the extent to which the Company would be prepared to leverage its operations. The Company's long-term target for the leverage ratio (sum of net debt plus pension liabilities divided by EBITDA) is 1.0x with the aim to operate within the range of 0.5x to 1.5x. For details and calculation of leverage ratio, refer to the table below.
28
Calculation of “Leverage ratio”
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
|
March 31, 2022 |
|
Net debt1) |
|
$ |
1,477 |
|
|
$ |
1,184 |
|
|
$ |
1,057 |
|
Pension liabilities |
|
|
159 |
|
|
|
154 |
|
|
|
172 |
|
Debt per the Policy |
|
|
1,636 |
|
|
|
1,338 |
|
|
|
1,229 |
|
|
|
|
|
|
|
|
|
|
|
Net income2) |
|
|
416 |
|
|
|
425 |
|
|
|
363 |
|
Income taxes 2) |
|
|
176 |
|
|
|
178 |
|
|
|
153 |
|
Interest expense, net2,3) |
|
|
60 |
|
|
|
54 |
|
|
|
53 |
|
Other non-operating items, net2) |
|
|
4 |
|
|
|
5 |
|
|
|
5 |
|
Income from equity method investments2) |
|
|
(4 |
) |
|
|
(3 |
) |
|
|
(2 |
) |
Depreciation and amortization of intangibles2) |
|
|
359 |
|
|
|
363 |
|
|
|
391 |
|
Capacity alignments and antitrust related matters2) |
|
|
10 |
|
|
|
(61 |
) |
|
|
(58 |
) |
EBITDA per the Policy (Adjusted EBITDA) |
|
$ |
1,021 |
|
|
$ |
961 |
|
|
$ |
905 |
|
Leverage ratio |
|
|
1.6 |
|
|
|
1.4 |
|
|
|
1.4 |
|
1) Net debt (non-U.S. GAAP measure) is short- and long-term debt and debt-related derivatives, less cash and cash equivalents.
2) Latest 12-months.
3) Interest expense, net including cost for extinguishment of debt, if any, less interest income.
Management uses the non-U.S. GAAP measure free cash flow to analyze the amount of cash flow being generated by the Company’s operations after capital expenditure, net. This measure indicates the Company’s cash flow generation level that enables strategic value creation options such as dividends or acquisitions. For details on the calculation of free cash flow, see the table below.
Calculation of “Free Cash Flow”
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2023 |
|
|
2022 |
|
Net income |
|
$ |
74 |
|
|
$ |
83 |
|
Changes in operating working capital |
|
|
(202 |
) |
|
|
(18 |
) |
Depreciation and amortization |
|
|
92 |
|
|
|
95 |
|
Gain on divestiture of property |
|
|
— |
|
|
|
(80 |
) |
Other, net |
|
|
(10 |
) |
|
|
(11 |
) |
Operating cash flow |
|
|
(46 |
) |
|
|
70 |
|
Capital expenditure, net |
|
|
(143 |
) |
|
|
(17 |
) |
Free cash flow1) |
|
$ |
(189 |
) |
|
$ |
53 |
|
|
|
|
|
|
|
|
1) Operating cash flow less Capital expenditures, net. |
|
|
|
|
|
|
Headcount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
|
March 31, 2022 |
|
Total headcount |
|
|
71,300 |
|
|
|
69,100 |
|
|
|
64,800 |
|
Whereof: |
|
|
|
|
|
|
|
|
|
Direct personnel in manufacturing |
|
|
52,700 |
|
|
|
50,600 |
|
|
|
47,000 |
|
Indirect personnel |
|
|
18,600 |
|
|
|
18,400 |
|
|
|
17,800 |
|
Temporary personnel |
|
|
11.1 |
% |
|
|
10.6 |
% |
|
|
9.4 |
% |
By March 31, 2023, total headcount increased by 6,500 compared to a year earlier. The indirect workforce increased by 4.5% while the direct workforce increased by 12%, as sales grew organically by 21% compared to a year earlier. The increase also reflects preparations for the expected sales growth in coming quarters.
Compared to December 31, 2022, total headcount increased by around 2,200, direct workforce increased by around 2,100 and the indirect workforce increased by around 200.
29
Full year 2023 indications
The Company's outlook indications for 2023 are mainly based on its customer call-offs, a full year 2023 global LVP growth of around 3%, that the Company achieves its targeted cost compensation effects and that customer call-off volatility is reduced.
|
|
|
Financial measure |
|
Full year indication |
Organic sales growth |
|
Around 15% |
Foreign currency impact on net sales |
|
Around 1% negative |
Adjusted operating margin 1) |
|
Around 8.5%-9% |
Tax rate 2) |
|
Around 32% |
Operating cash flow 3) |
|
Around $900 million |
Capital expenditures, net % of sales |
|
Around 6% |
1) Excluding effects from capacity alignments, antitrust related matters and other discrete items. |
2) Excluding unusual tax items. |
3) Excluding unusual items. |
This report includes content supplied by S&P Global; Copyright © Light Vehicle Production Forecast, April 2023. All rights reserved.
The forward-looking non-U.S. GAAP financial measures above are provided on a non-U.S. GAAP basis. The Company has not provided a U.S. GAAP reconciliation of these measures because items that impact these measures, such as costs and gains related to capacity alignments and antitrust matters, cannot be reasonably predicted or determined. As a result, such reconciliation is not available without unreasonable efforts and the Company is unable to determine the probable significance of the unavailable information.
Other recent events
Key launches in the three months period ended March 31, 2023
•Fisker Ocean: Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags, Knee Airbag, Steering Wheel, Front Center Airbag, Seatbelts.
•Subaru Impreza/Crosstrek: Driver/Passenger Airbags, Side Airbags, Seatbelts, Pedestrian Airbag.
•Buick Electra E5: Driver/Passenger Airbags, Side Airbags, Steering Wheel, Seatbelts.
•Jeep Avenger: Driver/Passenger Airbags, Side Airbags, Steering Wheel, Seatbelts.
•Hyundai Kona: Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags, Front Center Airbag.
•Havel H-Dog: Side Airbags, Seatbelts.
•Xpeng P7i: Driver/Passenger Airbags, Side Airbags, Steering Wheel, Seatbelts.
•Toyota Prius: Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags, Steering Wheel, Seatbelts.
•Chevrolet Trax: Driver/Passenger Airbags, Side Airbags, Head/Inflatable Curtain Airbags, Steering Wheel, Seatbelts.
Other Items
•On February 17, 2023, Autoliv announced the renewal for one year of its €3 billion guaranteed euro medium term note program, originally established on April 11, 2019.
•On March 9, 2023, Autoliv announced it had priced a 5-year bond offering of EUR 500 million in the Eurobond market. The notes were issued as green bonds on March 15 at a coupon of 4.25%.
•On April 20, 2023, Autoliv announced its plans to expand to Vietnam, and build a new state of the art airbag cushion and fabric plant in Vietnam. The investment in the new textile facility is in response to customer demands and is intended to meet expanded future airbag production needs for the growing Asia market.
•In Q1 2023, Autoliv repurchased and retired 0.45 million shares of common stock at an average price of $92.19 per share under the Autoliv 2022-2024 stock purchase program.
30