Autoliv Financial Report April – June 2022

STOCKHOLM, July 22, 2022 /PRNewswire/ —

(NYSE: ALV) (SSE: ALIV.sdb)

Q2 2022: Progress in customer price discussions

Financial highlights Q2 2022
$2,081m net sales
2.9% net sales increase
8.0% organic sales increase*
6.0% operating margin
6.0% adjusted operating margin*
$0.91 EPS – a decrease of 24%
$0.90 adjusted EPS* – a decrease of 25%

Full year 2022 indications
Around 13%-16% organic sales growth
Around 5% negative FX effect on net sales
Around 6.0%-7.0% adjusted operating margin
Around $750-850 million operating cash flow

Key business developments in the second quarter of 2022

Sales increased organically* by 8%, which was around 7pp better than global LVP which increased by around 1% (IHS Markit July 2022). The outperformance was mainly due to price increases and new product launches.
Stronger than expected performance in June driven by price increases, LVP recovery and a patent litigation settlement led to a better-than-expected operating profit for the quarter. However, profitability declined due to higher raw material costs, currency movements, low and volatile LVP and lockdowns in China. Operating margin and adjusted operating margin* declined by 2.2pp. Commercial recoveries relating to periods prior to second quarter 2022 and the patent litigation settlement combined amounted to around $50 million in the quarter. Return on capital employed was 13.1% and adjusted return on capital employed* was 13.3%.
Negative Q2 operating cash flow, expected to recover in the second half. Operating cash flow was negative $51 million and free cash flow* was negative $190 million impacted by adverse effects from working capital. Net debt* increased and EBITDA declined vs. a year earlier, leading to a leverage ratio of 1.7x. A dividend of $0.64 per share was paid and 0.30 million shares were repurchased in the quarter.

*For non-U.S. GAAP measures see enclosed reconciliation tables. All change figures in this release compares to the same period of previous year except when stated otherwise.

Key Figures

(Dollars in millions, except per share data)	Q2 2022	Q2 2021	Change	6M 2022	6M 2021	Change
Net sales	$2,081	$2,022	2.9 %	$4,206	$4,265	(1.4) %
Operating income	124	164	(25) %	258	401	(36) %
Adjusted operating income1)	124	166	(25) %	192	403	(52) %
Operating margin	6.0 %	8.1 %	(2.2)pp	6.1 %	9.4 %	(3.3)pp
Adjusted operating margin1)	6.0 %	8.2 %	(2.2)pp	4.6 %	9.4 %	(4.9)pp
Earnings per share2, 3)	0.91	1.19	(24) %	1.85	2.98	(38) %
Adjusted earnings per share1, 2, 3)	0.90	1.20	(25) %	1.36	2.99	(55) %
Operating cash flow	$(51)	$63	n/a	19	249	(92) %
Return on capital employed)	13.1 %	17.7 %	(4.6)pp	13.8 %	21.8 %	(8.0)pp
Adjusted return on capital employed 1,5)	13.3 %	17.8 %	(4.6)pp	10.4 %	21.9 %	(11.5)pp

1) Excluding costs for capacity alignment. Non-U.S. GAAP measure. 2) Assuming dilution when applicable and net of treasury shares. 3) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from the EPS calculation. 4) Annualized operating income and income from equity method investments, relative to average capital employed. 5) Annualized operating income and income from equity method investments, relative to average capital employed. Non-U.S. GAAP measure, see reconciliation table.

Comments from Mikael Bratt, President & CEO

We managed good execution in a challenging environment in the second quarter, leading to better-than-expected results. A strong performance in June, with some LVP recovery and progress in the customer price discussions, including some retroactive compensations, means we are reporting a second quarter adjusted operating margin that is better than in the first quarter. Supply chains remained distressed in the quarter, aggravated by lockdowns in China. Raw material cost increases, currency movements and a lower-than-expected and volatile LVP were also major challenges in the quarter. Cash flow was negative in the quarter, mainly due to volatility and timing effects on working capital. We expect to recover most of these effects in the second half of the year.

In a quarter where we saw continued low and volatile LVP, Autoliv managed to outperform global LVP significantly, despite negative regional mix effects.

It is encouraging that we are making progress in compensation from our customers in the form of sustainable price increases. Discussions continue where we aim for prices that reflect changes in the cost environment and a contract structure that is flexible and allows for broader and faster adjustments to future changes in the business environment.

Recent developments in supply chains, customer production plans, raw material prices and our cost recovery discussions are encouraging, and we believe we are well prepared for an improved market development. However, we are also making sure we are agile and prepared for a more adverse market development should that be necessary. Therefore, we continue to step up our cost control measures. Cost reductions and footprint initiatives are on plan and include capacity alignments and footprint optimizations.

We are adjusting our full year 2022 indication to a narrower range, reflecting our actions and the shorter time span remaining of the year. Although leverage ratio currently is above our target range, we remain committed to our share repurchase ambitions over time. We remain confident in our medium-term adjusted operating margin target of 12%, based on the framework we outlined at our CMD in 2021.

Inquiries: Investors and Analysts
Anders Trapp
Vice President Investor Relations
Tel +46 (0)8 5872 0671

Henrik Kaar
Director Investor Relations
Tel +46 (0)8 5872 0614

Inquiries: Media
Gabriella Ekelund
Senior Vice President Communications
Tel +46 (0)70 612 6424

Autoliv, Inc. is obliged to make this information public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the VP of Investor Relations set out above, at 12.00 CET on July 22, 2022.