Autoliv, Inc. (ALV) Misses Q2 EPS by 10c; Updates on Outlook

Autoliv, Inc. (NYSE: ALV) reported Q2 EPS of $1.45, $0.10 worse than the analyst estimate of $1.55. Revenue for the quarter came in at $2.38 billion versus the consensus estimate of $2.34 billion.

Comments from Jan Carlson, Chairman, President & CEO

“In the second quarter we saw solid growth across our markets, notably North America, Europe and Japan. The exception was Brazil where we saw a sharp decline in light vehicle production. In addition, our main growth engines over the last two years, China and active safety, continued their strong performance.

Coming from low production levels, Europe saw its sixth consecutive quarter of growth with European car sales growing by 7% in the first half of 2014. At the moment we see a slow but sustained recovery in Europe. This supports the operational improvement program in our European steering wheel business which is developing in line with the original plan outlined last year.

The growth in Japan was a positive surprise. At the beginning of the quarter a decline of the light vehicle production was expected as a result of an increase in the Japanese consumption tax. Instead, we saw slight growth and a favorable product mix for Autoliv which led to double digit growth. A sustained recovery in the Japanese economy could also reflect positively on the light vehicle production moving forward.

Active safety showed solid growth in the quarter and in order to support the continued growth and development in this business we have decided to increase the development and engineering spending. In the current situation with millions of cars being recalled for safety related reasons the importance of quality cannot be overemphasized. In this environment we continue to further build our position as the industry’s quality leader, as our business is all about saving lives.

With these issues in mind we continue the focus on our growth strategy, quality, and execution of the 2014 transition."

OUTLOOK:

Based on our customer call-offs we expect organic sales for the third quarter of 2014 to grow by around 6% compared to the same quarter of 2013. Currencies are expected to have a positive effect, resulting in a consolidated sales growth of around 7%. The adjusted operating margin, excluding costs for capacity alignments and antitrust matters, is expected to be around 8.5%.

The indication for the full year is for organic sales growth of more than 6% and an operating margin of around 9%, excluding costs for capacity alignments and antitrust matters. Consolidated sales are expected to grow by close to 7% as effects from currencies are expected to be slightly positive.

Our capacity alignment program continues, and we now expect the costs for the program to be more than $40 million for the full year 2014.

The projected effective tax rate for the full year 2014 is currently expected to be around 29%, excluding any discrete items, and is subject to change due to any other discrete or nonrecurring events that may occur.

Operational cash flow is expected to remain strong and to be at least $700 million excluding any discrete items. Capital expenditures are expected to increase in support of our growth strategy and to be in the previously communicated range of 4.5% to 5.0% of sales.

For earnings history and earnings-related data on Autoliv, Inc. (ALV) click here.

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