Autoliv (NYSE: ALV) reported Q4 EPS of $2.03, $0.31 better than the analyst estimate of $1.72. Revenue for the quarter came in at $2.73 billion versus the consensus estimate of $2.69 billion.

Comments from Jan Carlson, Chairman, President & CEO: "The fourth quarter ended a year of records and exciting announcements. We are pleased that the fourth quarter sales and gross profit were the highest we have reported for any quarter. The full year 2017 was also the best year we have reported for sales and gross profit. Building on this solid base, we look forward with great expectations, as order intake in 2017 reached new historic highs for each of our Passive Safety and Electronics segments. This includes new record high order intake for Active Safety and for Restraint Control Systems, while ANBS almost managed to repeat its strong 2016 order intake. Our achievements in 2017, especially our order intake records and gross margin progression reinforce our confidence in the sales and margin targets presented at our Capital Markets Day (CMD) on September 14, 2017. We continued to broaden our customer and product base in Active Safety in the fourth quarter, including increasing from three to four Vision customers and winning our first LiDAR order. The strong order intake in the fourth quarter supports the sales progression outlined at our CMD, that we expect the sales trend in Electronics to improve in 2019 and beyond. Following two years of record order intake in Electronics, we will step up our R,D&E efforts further in 2018, to support the development of received orders and future product solutions, by increasing R,D&E costs by up to $70 million. The step-up in growth in Passive Safety was slightly ahead of plan in the fourth quarter, as the increased number of product launches added more than 3pp to organic sales growth* in the segment, partially offset by lower inflator replacement sales and temporary model mix headwinds. In 2018, we expect the contribution from increased product launches to accelerate gradually while the model mix and inflator replacement headwinds subsides after the first quarter leading to our expectation that a more than 2% organic sales growth in the first quarter becomes more than 10% for the full year in Passive Safety. Building on the board’s decision in December 2017 to move forward with the separation of our business segments, we are working hard to prepare for the separate listing of our Electronics business as a stand-alone company in the third quarter of 2018. We are looking forward to seeing Passive Safety and Electronics releasing their full potential in the years to come. With quality as our first priority, we continue to execute on our growth and margin opportunities while staying focused on saving more lives and creating value for our stakeholders.”

Outlook

The expectations and indications provided below are based on the current operating structure for Autoliv. Mainly based on our customer call-offs, we expect organic sales growth for the first quarter of 2018 to increase by less than 1% compared to the same quarter of 2017. Currency translations are expected to add more than 6%, resulting in a consolidated sales growth of more than 7%. The adjusted operating margin, excluding costs for capacity alignments, antitrust related matters and separation of our business segments, is expected to be around 9%. The indication for the full year organic sales growth is more than 7%. Currency translations are expected to have a combined positive effect of around 4%, resulting in a consolidated sales increase of more than 11%. The indication for the full year 2018 is an adjusted operating margin around 9%, excluding costs for capacity alignments, antitrust related matters and separation of our business segments. For the Passive Safety segment, the indication for organic sales growth is more than 2% in the first quarter and more than 10% for the full year, with an indication that the underlying profitability for the segment will increase compared to full year 2017.

For the Electronics segment, the indication is for organic sales growth to be around negative 6% in the first quarter and around negative 3% for the full year as growth in Active Safety is more than offset by declines in Restraint Control Systems (RCS) and Brake Systems. The indication for the underlying profitability for the segment is a decrease compared to full year 2017. The projected tax rate, excluding any discrete items, for the full year 2018, is expected to be around 29% and is subject to change due to any discrete or nonrecurring events that may occur. Supporting our growth strategy, capital expenditures are expected to remain at a high level for the full year. We estimate that R,D&E investments, net, in relation to sales have peaked in Passive Safety but not in Electronics. The forward looking non-U.S. GAAP financial measures above are provided on a non-U.S. GAAP basis. Autoliv has not provided a U.S. GAAP reconciliation of these measures because items that impact these measures, such as costs related to capacity alignments and antitrust matters, cannot be reasonably predicted or determined. As a result, such reconciliation is not available without unreasonable efforts and Autoliv is unable to determine the probable significance of the unavailable information.

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