) revealed a 45% fall in profits to $100.5 million or $1.07 per
share in the first quarter of 2012 from $181.5 million or $1.93 in
the same quarter the prior year. With this, the company has
significantly missed the Zacks Consensus Estimate by 54 cents per
Consolidated sales grew marginally by 3% to $2.2 billion.
Organic sales rose 5%, which is almost in line with the growth in
global light vehicle production (LVP), despite the steep fall in
LVP in Europe, the company's largest market, which was more than
offset by impressive performance in China based on investments made
Operating income plunged 40% to $153.3 million from $254.8
million a year ago. The decrease is attributable to the fall in
gross profit on the back of higher raw material costs and ramp-up
of production in North America and China resulting in overtime and
other extra costs, higher capacity alignment costs, and increased
research, development and engineering expenses. Operating margin
declined to 7.0% from 12.1% in the first quarter of 2011.
(including steering wheels and passive safety electronics) went up
3% to $1.4 billion. Organic sales grew 4%. The improved segment
sales were driven by strong demand for curtain airbags and other
side airbags. Sales of knee airbags grew at a fast pace due to
their further integration into more vehicle models.
increased more than 3% to $709.2 million, driven by strong demand
for advanced seatbelt systems globally. Organic sales increased
Active Safety products
(automotive radar and night vision systems) escalated 29% to $47.6
million and organically by 30%. The increase was attributable to
new radar business for
) Mercedes B- and M-classes and new camera business for BMW's 1-
Autoliv had cash and cash equivalents of $732.0 million as of
March 31, 2012 compared with $605.2 million as of March 31, 2011.
Total debt reduced to $678.0 million from $747.0 billion as of
March 31, 2011.
Consequently, long-term debt-to-capitalization ratio declined to
16.5% as of March 31, 2012 from 19% as of March 31, 2011. However,
gross interest-bearing debt increased by $12 million to $678
million, partially due to currency effects.
In the quarter, the company's cash flow from operations fell
sharply to $98.0 million from $141.4 million a year ago, due to
significantly higher accounts payables at the end of last year.
Capital expenditures (net) decreased to $78.4 million from $80.1
million in the prior-year quarter.
Autiliv expects consolidated sales to grow by 3% in the second
quarter of 2012 where currency effects are expected to have a
negative impact of 4%. Consequently, organic sales are expected to
rise by 7% in the quarter
For the full year 2012, Autoliv expects consolidated sales to
grow by 4% and organically by 7%, implying negative currency
effects of 3%. Operating margin is expected to be more than 9% for
the second quarter and 10%-11% for the full year.
Capital expenditures is expected to be 4.5% of sales in 2012.
The company anticipates to generate strong cash flow to the tune of
$0.7 billion for the year, excluding payments for antitrust
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
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