Edit Symbol List
Enter up to 25 symbols separated by commas or spaces in the text box below. These symbols will be available during your session for use on applicable pages.
Don't know the stock symbol? Use the
Symbol Lookup tool.
Alphabetize the sort order of my symbols
Investing just got easier…
Sign up now to become a NASDAQ.com member and begin receiving instant notifications when key events occur that affect the stocks you follow.Access Now
Autoliv Inc. (ALV)
Q3 2017 Earnings Conference Call
October 26, 2017 08:00 ET
Anders Trapp - Vice President, Investor Relations
Jan Carlson - Chairman, President and Chief Executive Officer
Mats Backman - Chief Financial Officer
Brett Hoselton - KeyBanc
Hampus Engellau - Handelsbanken
Victoria Greer - Morgan Stanley
Vijay Rakesh - Mizuho
Brian Johnson - Barclays
Emmanuel Rosner - Guggenheim
Kai Mueller - Bank of America
David Lim - Wells Fargo Securities
Joseph Spak - RBC Capital Markets
Richard Hilgert - Morningstar
Shawn Kim - Gabelli
Previous Statements by ALV
» Autoliv's (ALV) CEO Jan Carlson on Q2 2017 Results - Earnings Call Transcript
» Autoliv's (ALV) CEO Jan Carlson on Q1 2017 Results - Earnings Call Transcript
» Autoliv's (ALV) CEO Jan Carlson on Q4 2016 Results - Earnings Call Transcript
» Autoliv's (ALV) CEO Jan Carlson on Q3 2016 Results - Earnings Call Transcript
Thank you, Mark. Welcome everyone to our third quarter 2017 earnings presentation. Here in Stockholm, we have our Chairman, President and CEO, Jan Carlson. We also have our Chief Financial Officer, Mats Backman and myself, Anders Trapp, Vice President of Investor Relations.
During today’s earnings call, our CEO will provide a brief overview of our overall company performance and outlook as well as an update on general business conditions, while our CFO will provide further details and commentary around the financial results and outlook. Then at the end of our presentation, we will remain available to respond to your questions and as usual, the slides are available through a link on the homepage of our corporate website.
Turning to the next page, we have the Safe Harbor statement which is an integrated part of this presentation and includes the Q&A that follows. During the presentation, we will reference some non-U.S. GAAP measures. The reconciliations of historical U.S. GAAP to non-U.S. GAAP measures are disclosed in our quarterly press release and the 10-Q that will be filed with the SEC. Lastly, I should mention that this call is intended to conclude at 3:00 p.m. CET. So please limit yourself and your questions to two per person.
I will now turn it over to our CEO, Jan Carlson.
Thank you, Anders. Looking on the third quarter highlights on the next page, we are pleased that our investments for growth and execution are on track as we ramp up new program launches, which will result in a step up of our organic sales growth during the first quarter in 2018. For the third quarter, our organic sales growth came in at 0.5% due to lower inflator replacement sales and lower volumes in North America, which overshadowed our better-than-expected growth in all other major regions. This sales growth was lower than the light vehicle production of 2.1% mainly due to lower inflator replacement sales and model mix effects which had a combined effect of roughly 1.5 percentage points.
Our adjusted operating margin of 7.9% was in the high-end of our guidance range, while we had a solid operating cash flow of $218 million and an adjusted earnings per share of $1.47. During the quarter, we returned $52 million to shareholders through dividends and maintained a leverage ratio of 0.7 times. Supporting our growth opportunities, our RD&E net has been in the range of 7% to 7.5% of sales so far this year. Consequently, we didn’t expect our RD&E net to be more than 7% of sales for full year 2017 despite the favorable seasonal effect in Q4. Mitigating this RD&E effect on our operating margins, we continue to see an improving operating leverage in our gross margin despite higher commodity cost. And lastly, we continue to improve our market position for the long-term as we expanded our capabilities through several technology collaborations and pending acquisitions.
Looking into our growth on the next slide, we have highlighted some of our strong performing models during third quarter. These models contributed significantly to our organic sales growth during the quarter, where our electronic products are on two-thirds of these models. On an annual basis, these models represent around 6% of our group sales, while our content on these models is in the range of $60 to $450 per vehicle.
Looking now on our product volumes on the next page, we have summarized our delivery quantities for the third quarter. In passive safety, our seatbelt volumes had a favorable mix towards high end value-added products such as active seatbelts and pretensioners. Our airbag products overall performed slightly better than the global light vehicle production due to our strong growth in Japan, South Korea, South America and India, which was partly offset by a decline in North America. Within electronics, our active safety volumes increased by 1% mainly due to radar and camera systems, while our restraint control and brake system unit volumes declined mainly due to the timing of customer program launches.
Looking into some of our strategic initiatives on the next slide, we are pleased to have recently entered into five new collaborations and signed an agreement for an acquisition. In the product area of LiDAR, we have signed an agreement to purchase the carve-out of the optics company, Fotonic. This pending acquisition includes the transfer of certain intellectual property and assets, along with about 35 engineering experts in the field of LiDAR and Time of Flight cameras. This acquisition is subject to customary closing conditions and complements our earlier collaboration with Velodyne, where we will develop and manufacturing next-generation LiDAR sensors for highly automated driving vehicles.
Related to driver monitoring, we signed a non-exclusive agreement with Seeing Machines to integrate their software into our driver monitoring system. Related to our software platform, Zenuity has agreed to collaborate with Ericsson to develop connected cloud solutions. As you may recall earlier this year at CES, we launched LIV, learning intelligent vehicle, which is intended to understand and manage the state of the driver in order to create a safe and enjoyable experience in CME autonomous vehicles. In order to accelerate our development around this initiative, we signed a collaboration agreement with MIT AgeLab in the field of artificial intelligence. Within passive safety, we are pleased to have partnered with a global leader in seating technologies, Adient, to collaborate on the next generation vehicle seating configurations. And lastly, we joined the consortium with Ericsson, Volvo, Zenuity and Volvo Cars to form Mobility Xlab, an incubator for startups to share new technologies, to develop safer and more efficient future transportation.