Autoliv Beats but Profits Fall - Analyst Blog


Autoliv Inc. ( ALV ) saw an 11% fall in profits to $158.5 million or $1.70 per share in the fourth quarter of 2011 from $177.5 million or $1.89 per share in the same quarter of 2010. The decline in profits was mainly attributable to increase in raw material costs and higher research, development & engineering (RD&E) expenses. However, the profit was higher than the Zacks Consensus Estimate of $1.67 per share.

Consolidated sales escalated 7% to $2.0 billion with a 7% increase in organic sales. The rise in sales was driven by recent vehicle launches and a favorable vehicle mix. Moreover, strong demand for inflatable curtains, side airbags and the continued global trend of upgrading seatbelt systems with pretensioners also drove sales during the quarter.

Operating income dipped $18 million to $224 million driven by higher RD&E expenses. Operating margin declined by 1.7 percentage points to 11.0%.

Performance by Segments

Sales of Airbag Products (including steering wheels and passive safety electronics) scaled up 6% to $1.3 million. Currency effects added about 1% to the sales growth. Organic sales grew nearly 6%. The increase in sales was mainly driven by strong demand for side airbags for chest protection and inflatable curtains, particularly from Ford Motor ( F ), Chrysler and Hyundai/KIA.

Sales of Seatbelt Products grew 6% to $664 million. Currency effects and a divestiture had a negative impact of 1% to the sales growth. Organic sales increased 7%. Higher sales were driven by new businesses, mainly in North America and China, especially from Chrysler, Volkswagen ( VLKAY ) and Nissan Motor ( NSANY ).

Sales of Active Safety Products (primarily automotive radar, mono-vision and night vision systems) surged 74% to $45 million. Organic sales growth was also 74%. The higher sales were mainly driven by new radar business with Chrysler and higher optional take-rates at Mercedes.

Performance by Regions

Sales in Europe decreased less than 1% to $717 million due to negative currency effects. Organic sales were flat despite the 3% decline in European light vehicle production (LVP).

Sales in North America escalated 14% to $628 million despite negative currency effects of 2%. Organic sales growth of 16% was higher than the increase in the region's LVP by 6 percentage points.

Sales in China increased 12% to $276 million. Currency effects added 5% to the growth in sales. The organic sales growth of nearly 7% was higher than the 2% fall in Chinese LVP.

Sales in Japan increased more than 5% to $218 million due to positive currency effects of slightly more than 7%. Organic sales fell 2%, primarily due to an unexpected weak LVP resulting from component shortages caused by the severe flooding in Thailand.

Sales in Rest of the World rose 15% to $206 million despite negative currency effects of 1% and a divestiture of certain non-core assets that had 2% negative impact on sales. Organic sales growth of 18% was significantly higher than the 8% decline in the region's LVP.

Annual Results

Autoliv reported a profit of $623.4 million or $6.65 per share in 2011 compared with $590.6 million or $6.39 per share in 2010. Sales in the year increased 15% to $8.2 billion.

Currency effects and acquisitions (net of divestitures) contributed 6% to the sales growth. The organic sales growth of about 9% was almost three times as much as the growth in global LVP.

Financial Position

Autoliv had cash and cash equivalents of $739.2 million as of December 31, 2011 compared with $587.7 million at the end of 2010. Total debt reduced to $666.3 million as of December 31, 2011 from $724.8 million as of December 31, 2010.

In 2011, the company's cash flow from operations deteriorated to $758.2 million from $924.4 million a year ago, due to unfavorable changes in operating assets and liabilities. Capital expenditures (net) increased to $357.0 million from $224.4 million in the prior-year.


Autoliv expects consolidated sales to increase by 2% for the first quarter of 2012 and by 4% for the full year 2012. The company anticipates continuing to outperform global LVP and increase its organic sales by 5% in the first quarter and 7% during the full year, based on a favorable vehicle model mix. It also expects an operating margin of 10% for the first quarter and 10-11% for the full year.

Our Take

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 (LCCs), 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 #3 Rank on its stock, which translated to a Hold rating for the short term (1-3 months).

AUTOLIV INC ( ALV ): Free Stock Analysis Report
FORD MOTOR CO ( F ): Free Stock Analysis Report

NISSAN ADR ( NSANY ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: ALV , F , NSANY

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