Autoliv Inc.
(
ALV
) saw a 14% fall in profits to $1.33 per share in the second
quarter of the year from $1.54 in the year-ago quarter due to weak
markets in Europe and South America as well as higher raw material
prices. With this, the company also missed the Zacks Consensus
Estimate by 6 cents per share. In absolute terms, profits fell 13%
to $126.4 million from $145.0 million a year ago.
Consolidated sales increased a meager 1% to $2.09 billion, lower
than the Zacks Consensus Estimate of $2.13 billion. Excluding
negative currency effects of 6% and a small divestiture, organic
sales went up roughly 8%, outperforming its own guidance of 7% due
to better performance in North America that more than offset lower
sales in China and Western Europe.
Operating income declined to $190 million (9.1% of sales) from
$205 million (10.0%) in the second quarter of 2011. The declines
were driven by an increase in research development and engineering
expenses by $9 million and capacity alignment costs by $4 million
compared with the prior-year quarter.
Segments Results
Sales of
Airbag Products
(including steering wheels and passive safety electronics) edged up
1% to $1.37 billion, with more than 7% rise in organic sales.
It was adversely affected by negative light vehicle production
(LVP) mix with a fall in LVP in Western Europe.
Sales of
Seatbelt Products
were flat at $669 million due to negative currency effects of 8%.
However, organic sales grew 8% due to strong performance in North
America, China and Japan as well as global trend towards advanced
and higher value-added seatbelt systems.
Sales of
Active Safety Products
(primarily automotive radar and night vision systems) escalated 27%
to $49 million and organically by 30%. The strong improvement was
driven by new radar business for
Daimler
's (
DDAIF
) Mercedes' B- and M-classes and new camera business for BMW's 1-
and 3-series.
Financial Position
Autoliv had cash and cash equivalents of $917.3 million as of
June 30, 2012 compared with $559.7 million as of June 30, 2011.
Total debt declined to $644.2 million as of June 30, 2012 from
$693.8 million as of June 30, 2011. Consequently,
debt-to-capitalization ratio declined to 15.3% as of June 30, 2012
from 17.6% in the year-ago
period.
In the first half of the year, cash flow from operations
improved to $316.6 million from $273.3 million a year ago due to
favorable changes in operating assets and liabilities.
Capital expenditures (net) decreased to $163.6 million from
$170.6 million in the prior-year period.
Outlook
Autoliv anticipates organic sales to grow by about 4% in the
third quarter of the year. However, consolidated sales are expected
to decline by 3% in the quarter due to negative currency effects of
6% and the effect from the divestiture of Autoliv Mekan.
For full year 2012, given the forecast of a 5% increase in LVP
provided by
IHS Inc.
(
IHS
), Autoliv expects organic sales to improve 6%. Meanwhile,
consolidated sales are expected to increase marginally by 1% due to
currency effects (4%) and divestiture of Autoliv Mekan as discussed
above. The company expects operating margin to be 10% for the third
quarter and the same for the full year.
In order to outperform global LVP, capital expenditures are
expected to remain at a high level of 4.5% of sales in 2012.
Operations are expected to continue to generate a strong cash flow
in the magnitude of $700 million for the full year 2012, excluding
payments for antitrust investigations.
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, 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 translates to a 'Hold' rating for the short term (1-3
months).
AUTOLIV INC (ALV): Free Stock Analysis Report
DAIMLER AG (DDAIF): Free Stock Analysis Report
IHS INC-A (IHS): Free Stock Analysis Report
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