) saw a 14.7% fall in earnings per share to $1.45 in the fourth
quarter of 2012 from $1.70 a year ago due to capacity alignment
and antitrust investigation costs (7 cents) and increase in
shares outstanding (4 cents) by 2.7% to 95.8 million, partially
offset by a lower effective tax rate (12 cents). However, EPS
exceeded the Zacks Consensus Estimate of $1.32.
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Net income declined 12.5% to $138.7 million but consolidated
revenues rose marginally by 0.4% to $2.1 billion due to higher
sales of Seatbelt and Active Safety products, partially offset by
lower Airbag product sales.
Organic sales (sales excluding the impact of
acquisitions/divestitures and exchange rates) went up 1.5% in the
quarter, driven by higher light vehicle production (LVP) in North
America and vehicle launches as well as the recovery in LVP from
the flooding in Thailand.
Sales growth was also propelled by strong performance in China
and fast growing active safety systems sales, especially radar
) Mercedes and
General Motors Company
Operating income declined 22.2% to $174.3 million due to higher
other operating expenses mainly related to higher costs for
capacity alignments and the antitrust investigations. Operating
margin declined 2.5 percentage points to 8.5% in the quarter.
Sales of Airbag Products (including steering wheels and passive
safety electronics) inched down 1% to $1.3 billion driven by
negative currency effects, leading to flat organic sales. Sales
were favorably affected by higher volumes of steering wheels,
knee airbags and pedestrian protection airbags, which were fully
offset by lower sales of airbag electronics and inflators, and
side curtain airbags.
Sales of Seatbelt Products slid 1% to $658 million due to
negative currency effects and divestiture. Hence, organic sales
grew 1% excluding these effects. Sales were negatively affected
by the sharp fall in LVP in Western Europe but it continued to be
strong in North America, the Rest of Asia region and China.
Sales of Active Safety Products (primarily automotive radar,
mono-vision and night vision systems) swelled 44% to $64 million
and organically by 45% from the fourth quarter of 2011. This
increase was mainly attributable to new radar business for
Mercedes and Cadillac models as well as new camera business with
many BMW models.
For full year 2012, Autoliv's profits rose 22.5% to $483.1
million or 23.6% to $5.08 per share, missing the Zacks Consensus
Estimate of $5.50. Apart from lower operating profit, EPS was
reduced by higher costs for capacity alignments and antitrust
investigations (60 cents), higher effective tax rate (22 cents),
negative currency translation effects (13 cents) and increase in
shares outstanding (8 cents), offset partially by lower financial
expenses (18 cents).
Consolidated revenues inched up 0.4% to $8.3 billion while
organic sales increased 4%. The marginal increase was
attributable to an 8% decline in LVP in Western Europe and lower
market share in Japan where LVP grew at a fast pace.
Autoliv had cash and cash equivalents of $977.7 million as of Dec
31, 2012 compared with $739.2 million as of Dec 31, 2011. Total
debt was reduced to $632.7 million as of Dec 31, 2012 from $666.3
million as of Dec 31, 2011. Consequently, the
debt-to-capitalization ratio declined to 14.4% from 16.7% a year
In 2012, the company's cash flow from operations deteriorated
9.2% to $688.5 million from $758.2 million a year ago, due to
lower profits. Capital expenditures (net) increased to $360.4
million from $357.0 million in the prior year.
Autoliv expects consolidated revenues to decline in line with
organic sales increase of 4% in the first quarter of 2012.
Excluding capacity alignments costs and antitrust investigations
expenses, the company expects operating margin of 8% in the
For the full year 2013, Autoliv anticipates organic sales to grow
between 1% and 3% and operating margin of 9%, excluding costs for
capacity alignments and antitrust investigations. Consequently,
consolidated sales are expected to grow between 2% and 4%.
The company expects to generate a strong cash flow of 700 million
in 2013, while capital expenditures are expected to increase only
marginally from 2012.
Autoliv has a stable market share in both airbag modules and seat
belts in North America, Europe and Asia. The company has
continuously expanded in low-cost countries, including Romania
and China, in order to meet local demand and to consolidate
manufacturing from high-cost countries.
However, we are concerned about the company's increased raw
material costs. Further, the company faces significant customer
concentration risks as its top-5 represent about 60% of sales.
Due to these factors, the company retains a Zacks Rank #3 on its
stock, which translates to a Hold rating for the short term (1-3
months). Other stocks that are performing well in the industry
). This company carries a Zacks Rank #1 (Strong Buy).