Autoliv Q4 2024 Earnings Report

Autoliv EPS Results

• Actual EPS: $3.05
• Consensus EPS: $2.84
• Beat/Miss: Beat by +$0.21
• One Year Ago EPS: N/A

Autoliv Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $2.71 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Autoliv Announcement Details

• Quarter: Q4 2024
• Date: 1/31/2025
• Time: Before Market Opens
• Conference Call Date: Friday, January 31, 2025
• Conference Call Time: 8:00AM ET

Autoliv (NYSE:ALV), through its subsidiaries, develops, manufactures, and supplies passive safety systems to the automotive industry in Europe, the Americas, China, Japan, and rest of Asia. It offers passive safety systems, including modules and components for frontal-impact airbag protection systems, side-impact airbag protection systems, seatbelts, steering wheels, and inflator technologies. The company also provides mobility safety solutions, such as pedestrian protection, battery cut-off switches, connected safety services, and safety solutions for riders of powered two wheelers. It primarily serves car manufacturers. Autoliv, Inc. was founded in 1953 and is headquartered in Stockholm, Sweden.

Autoliv Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to the Autoliv Inc. Fourth Quarter and Full Year twenty twenty four Financial Results Conference Call and Webcast. All participants will be in listen only mode during the conference. After the speakers' presentation, there will be a question and answer session.

[Operator]

Please note that today's conference is being recorded. I would now like to turn the conference over to your speaker, Anders Rapp, Vice President, Investor Relations. Please go ahead.

[Anders Trapp, Head Of Investor Relations at Autoliv]

Thank you, Rapp. Welcome everyone to our On this call, we have our President and Chief Executive Officer, Nikka Drapp our Chief Financial Officer, Frederic Kristine and me Andersstadt, VP, Investor Relations. During today's earnings call, we will cover several key topics, including our sales and record earnings, strong cash flow and balance sheet. We will outline the expected margin improvement in 2025 as well as how our strong balance sheet and asset returns will support continued high levels of shareholder returns. Following the presentation, we will be available to answer your questions.

[Anders Trapp, Head Of Investor Relations at Autoliv]

As usual, the slides are available on autolive.com. Turning to the next slide, we have the Safe Harbor statement, which is an integrated part of this presentation and includes the Q and A that follows. During the presentation, we will reference non U. S. GAAP measures.

[Anders Trapp, Head Of Investor Relations at Autoliv]

The reconciliations of historical U. S. GAAP to non U. S. GAAP measures are disclosed in our quarterly earnings release available on autolyd.com and in the 10 K that will be filed with the SEC.

[Anders Trapp, Head Of Investor Relations at Autoliv]

Lastly, I should mention that this call is intended to conclude at 3PM Central European Time, so please follow a limit of 2 questions per person. I will now hand over to our Chief Executive Officer, Mikael Bratt.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Thank you, Anders. Looking on the next slide. I am very happy to present a record breaking quarter. This is a testament to our employees' hard work, dedication and commitment. And I want to thank them for their outstanding contributions and for consistently driving our success forward.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Meeting our full year guidance despite accelerated market headwinds showcases the company's adaptability and resilience, driven by our diverse product portfolio and strong customer relationships. This achievement not only highlights our current success, but also lays a solid foundation for 2025 with continued margin expansion. Despite light vehicle production mix deterioration leading to lower sales, we reached new record highs in the quarter for operating profit, operating margin and earnings per share. For the full year, we also had a record high operating cash flow. I am also pleased that we generated an exceptional level of return on our capital employed.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Our strong performance was mainly a result of strict cost control. Our structural cost reduction program enabled us to reduce our indirect workforce by 1400 since We managed to accelerate our operating efficiency improvements, partly supported by an improved customer call off accuracy, which contributed to a reduction of direct headcount by 4500 in the year in one year, which is a reduction of almost 9%. The strong results were also supported by agreement we reached with all major customers on excess inflation compensation. Cash flow continued to be strong, supporting a high level of shareholder returns. In the quarter, we repurchased shares for US102 million dollars and retired three million shares.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

The Board of Directors has approved an extension of the shares repurchase program until the Under the extended repurchase program, USD $4.80,000,000 remains. Autoliv was rated BBB plus with a stable outlook by Fitch Ratings in Nov. 0. Looking now on financials in more detail on the next slide. Sales in the decreased by 5% year over year for several market related reasons.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

This includes negative effects from currency translations, LVP development as well as the regional and customer mix development. Despite this, the adjusted operating income for increased by 5% to US349 million dollars from US334 million dollars last year. The adjusted operating margin was 13.4%, a record for the company. Operating cash flow was a solid USD $4.20,000,000. Looking now on the next slide.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

We continue to generate broad based improvements. Our direct labor productivity continues to improve as we reduce our direct production personnel by 4500 year over year. This is supported by the implementation of our strategic initiatives, including automation and digitalization. Our gross margin was 21%, an increase of 180 basis points year over year. The improvement was mainly the result of direct labor efficiency and headcount reductions, partly offset by lower sales and supplier settlement as communicated in the previous quarter.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

As a result of our structural efficiency initiatives, the positive trend for RD and E and SG and A from the beginning of the year continued. Combined with the gross margin improvement, this led to the substantial improvement in adjusted operating margin. Looking now on the market developments in the on the next slide. According to S and P Global, total global light vehicle production for the increased by 40 basis points, exceeding the expectation from the beginning of the quarter by over 4 percentage points. Most of this improvement was driven by local OEMs in China, supported by the scrapping and replacement subsidy policy as well as high growth in South America.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Key markets in North America and Europe performed in line with expectations. This resulted in a more unfavorable regional both from the and year over year. We will talk about the market development more in detail later in the presentation. Looking now on our sales growth in more detail on the next slide. Our consolidated net sales were USD 260,000,000,0.0.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

This was USD 136,000,000 lower than a year earlier, driven by lower light vehicle production, negative currency translation effects and lower out of period cost compensations. The negative currency translation effect reduced sales by almost 2% in the quarter. Out of period cost compensation contributed with approximately US24 million dollars in the quarter. This was US21 million dollars lower than in the same period last year. Out of period compensations are retroactive price adjustments and other compensations that mainly related to the but were settled in the Looking on the regional sales split.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

It reflects the high growth of automotive markets in Asia and our strong market position there. China accounted for 23%. Asia, excluding China, accounted for 20%. Americas, thirty % for 30% and Europe for 27%. We outlined our organic sales growth compared to light vehicle production on the next slide.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Our quarterly sales were robust but slightly below our expectations, primarily due to a more unfavorable regional and customer mix. We continued to outperform light vehicle production significantly in Japan, rest of Asia and in Europe, fueled by product launches and pricing. The outperformance in rest of Asia were driven by India and South Korea. We expect a continued strong outperformance in 2025 in India from a number of launches. In China, we underperformed as the light vehicle production growth mix continued to be tilted towards lower CPV models from Chinese domestic OEMs.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

In Americas, we underperformed light vehicle production by 3 percentage points, mainly as a result of dealer inventory reductions by major customers and strong South American growth. Among the primary growth drivers for the company this quarter, 5 were Chinese OEMs and 2 were Japanese, underscoring the significance of the Asian market and its customers. On the next slide, we have the organic sales growth for the full year 2024. For the full year, we outperformed global light vehicle production by around 2 percentage points. We estimate that the regional light vehicle production mix was 2 to 3 percentage points worse than expected in the beginning of the year.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

We outperformed in Japan by 13 percentage points, in rest of Asia by 10 percentage points and in Europe by 6 percentage points. Our sales to domestic Chinese OEMs grew by 24%, and they accounted for more than 37% of our China sales, up from 28% in 2023. Even so, the negative market mix still resulted in an underperformance of 7 percentage points in China. We expect this to improve in 2025 as our strong order intake with Chinese OEMs should result in a record number of new launches in 2025, leading to significantly better sales performance compared to light vehicle production in China. Our global market position is strong, and we are the market leader in all regions and product categories.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

In 2024, our global market share was around 44%. This excludes sales of components such as inflators. This is almost 5 percentage points higher than in 2018. Supported by new launches, especially with Chinese OEMs and CPV growth, we expect sales to outperform light vehicle production by 2 to 3 percentage points in 2025. On the next slide, we see some key model launches from We saw a record number of significant launches in 2024.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

For 2025, we also anticipate a high number of launches, especially with Chinese OEMs. In this slide, 3 of these models are from Chinese OEMs and 3 from OEMs in India. This highlights our growing position with Chinese OEMs and our success in capturing growth in the Indian market. The models shown here have an autolive content per vehicle from around USD 100 to over USD 400. In terms of Autoliv sales potential, the Toyota 4Runner and Suzuki Desire are the most significant.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

This is the first time we have a model in India with the highest sales potential. The long term trend to higher CPV is supported by front center airbags on 6 of these models. Now looking on the next slide. In 2024, the industry's sourcing of new business was at its lowest level since 2018. This was driven by technological and geopolitical uncertainties, causing the sourcing of several large platforms to be postponed until 2025.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

In addition, model lifetime is shortening as Chinese OEMs share of the order book increase. Models from Chinese OEMs typically have an average lifetime that is a couple of years shorter. In order intake market share with the rapidly growing Chinese OEMs exceeded 40%, a significant improvement compared to our current market share of close to 25% with this group. Looking on the order intake more in detail on the next slide. In 2024, order intake for new automakers, mainly in the North America and China, accounted for almost one third of our order intake.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

We won multiple awards, supporting new markets and industry trends like foldable steering wheels for self driving vehicles, including a new type of driver airbags that deploys from the dashboard or ceiling. Autoliv has successfully secured business in the commercial vehicle sector, bolstering our Mobility Safety Solutions business. This expansion not only strengthens our market position, but also enhances our ability to deliver innovative safety solutions to a broader range of customers. We also won airbag contract featuring low carbon cushion material, a significant step towards sustainability in automotive safety. These innovative airbags not only reduce the environmental impact, but also lower the cost of the airbag module.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Thanks to the robust order intake in recent years, we anticipate that the number of product launches in 2025 to be on a similar level as in 2024. This progress support our long term success. Let's now look at the sustainability program during 2024 on the next slide. Sustainability is an integral part of our business strategy and an important driver for market differentiation and stakeholder value creation. Our sustainability approach is based on 4 focus areas with clear ambitions and targets defined for each area.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

During 2024, we initiated and concluded a number of activities within these areas. For example, we continue to expand our addressable users by expanding testing, including diverse body shapes, ages and genders. Through collaborations, we address protection for vulnerable road users. We significantly improved our recordable incidence rate. Greenhouse gas emissions in own operations were reduced by 15% compared to 2023.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

And the share of renewable electricity increased to 30%, having positive environmental and financial effects. We conducted our annual supplier climate survey to assess their readiness for our net 0 supply chain goals. And we also integrated climate performance into supplier selection and launched a climate accelerator program to support them. Turning the slide. I will now hand it over to Frederik Vistel.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

Thank you, Mikael. I will talk about the financials more in details on the next few slides. So turning to the next slide. This slide highlights our key figures for the compared to the The net sales exceeded $260,000,000,0.0 representing nearly a 5% decrease. The gross profit increased by $20,000,000 and the gross margin increased by 1.8 percentage points.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

The adjusted operating income increased from $3.34,000,000 dollars to $3.49,000,000 dollars dollars and the adjusted operating margin increased by 120 basis points to 13.4%. The reported operating income of $3.53,000,000 dollars was $4,000,000 higher than the adjusted operating income, thanks to a positive impact from reversal of capacity alignment accruals. Adjusted earnings per share diluted decreased by $0.7 where the main drivers were $0.9 from higher taxes

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

and $0.1

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

from higher financial and non operating items, partly compensated by $0,.11 from higher operating income and $0,.19 from lower number of shares. The adjusted return on capital employed was a solid 35% and our adjusted return on equity was 41% driven by share buybacks impacting total equity. We paid a dividend of $0.7 per share in the quarter and we repurchased shares for around US102 million dollars and retired 3,000,000 shares. Looking now on the adjusted operating income bridge on the next slide. In the our adjusted operating income increased by $16,000,000 despite market headwinds from lower light vehicle production.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

Operations contributed with $57,000,000 mainly from improved call off accuracy and higher operational efficiency as well as lower recall costs. The largest offsetting factor to the increase was lower net sales. The net currency effect was $1,000,000 negative as the positive effects mainly from the Mexican peso versus U. S. Dollar was offset by translation effects and negative transaction effects from the Mexican peso versus the euro, the Japanese yen versus the Thai baht and the U.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

S. Dollar versus the Korean won. The impacts from raw materials was around $6,000,000 negative. Out of period, cost compensation of $24,000,000 was $21,000,000 lower than last year. Costs for SG and A and RD and E net increased slightly on higher costs for SG and A personnel despite the offset from higher engineering income.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

The impact of the supply settlement, Mikael mentioned earlier, was around SEK 10,000,000 in the Looking now at the full year results on the next slide. 2024 was again impacted by labor and supplier cost inflation, lower and volatile light vehicle production and customer price negotiations. Our net sales were 10400000000.0 a 1% decline on negative currency translation effects. The adjusted operating income increased by 9.5% to over US1 billion dollars The adjusted operating margin was 9.7% compared to our guidance of around 9.5% to 10%. The operating cash flow was US1.1 billion dollars in line with the guidance.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

Adjusted earnings per share increased to $8,.32 per share, partly as a result of the share repurchases. Dividends of $2,.74 per share were paid. Despite market headwinds and lower sales, adjusted operating profits, operating cash flow as well as the earnings per share were all the highest we have ever achieved. Looking now at the cash flow in more detail on the next slide. For the the operating cash flow decreased by 27000000 to $4.20,000,000 dollars compared to the same period last year, mainly due to a less favorable working capital development.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

Capital expenditures net decreased by CAD 18,000,000 compared to the same period the previous year. Capital expenditures net in relation to sales was 5.4 versus sorry, 5% versus 5.4% a year earlier. The free operating cash flow was positive $2.88,000,000 dollars compared to positive $2.97,000,000 dollars in the same period the prior year. For the full year 2024, operating cash flow increased by $77,000,000 to $110,000,000,0.0 mainly on higher net income. The free operating cash flow was almost $50,000,000,0.0 Capital expenditures net decreased by SEK 6,000,000.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

Capital expenditures net in relation to sales was unchanged at 5.4%. This level is slightly above what we expect for the longer term due to investments in capacity made in Asia and in footprint optimization. The cash conversion in 2024, defined as free operating cash flow in relation to net income, was around 77 percent in line with our target of 80%. Now looking at our trade working capital development on the next slide. Trade working capital decreased by $117,000,000 compared to the same period last year, where the main drivers were $2.00 $4,000,000 in lower accounts receivables, $179,000,000 in lower accounts payables and $91,000,000 in lower inventories.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

In relation to sales, trade working capital decreased from 11.2% to 10.7%. The improvement in trade working capital is a result of our multiyear working capital improvement program and an improvement in customer call of accuracy enabling a more efficient inventory management. Our capital efficiency program

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

aims to improve working capital by SEK 800,000,000

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

and to program aims to improve working capital by SEK 800,000,000. And to date, we have achieved around SEK 700,000,000. Now looking on our shareholder returns on the next slide. Over the years, Autoliv has demonstrated its capability to generate solid cash flow across different market conditions. During 2024, we returned over US770 million dollars to shareholders through dividends and share buybacks, setting a new record for the company.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

Over the last five years, we have significantly reduced our net debt, while returning US1.9 billion dollars directly to shareholders. This includes stock repurchases totaling over US1 billion dollars Since initiating the current stock repurchase program in 2022, we have reduced the number of outstanding shares by over 12%. When executing the program, we consider several factors, including our balance sheet, the cash flow outlook, our credit rating and the general business conditions as well as the debt leverage ratio. We always strive to balance what is best for our shareholders in both the short and the long term. Now looking on our debt leverage ratio development on the next slide.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

Altoliv has consistently prioritized maintaining a strong leverage ratio, reflecting our prudent financial management and commitment to a strong balance sheet. This approach has enabled the company to navigate economic fluctuations, invest in innovation and continue delivering value to its stakeholders. While investing in our footprint and returning over US770 million dollars to shareholders during 2024, our leverage ratio is unchanged at 1.2 times. Compared to the our debt leverage ratio decreased by 0.2 times as our net debt decreased by $2.27,000,000 dollars while the twelve months trailing adjusted EBITDA increased by $17,000,000 With that, I hand it back to you, Mikael.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Thank you, Frederic. On to the next slide. As we enter 2025, the full year outlook for the global light vehicle production by S and P Global stands at the minus 0.5%. The light vehicle production outlook is factoring in regional specific influences, particularly the recent extension of the vehicle scrappage and replacement policy in China, persistent headwinds in Europe and North America and North America and a slower EV adaptation growth. The latest forecast indicates a LVP decline of almost 2% for the versus last year.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

LVP in China is projected to increase 4% in the following a particularly strong performance in the The ongoing trend of global OEMs losing market share is expected to persist, but to moderate in the following quarters. The forecast for North America First Quarter LVP is minus 6%. The main reason is the continued need for more vehicle inventory corrections. The light vehicle production in Europe is expected to drop 9% for the mainly due to inventory adjustment. From the to the global LVP is projected to decline by 14%, a reduction of over 3000000 vehicles.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

This drop is significantly higher than what we have observed over the past three years, where it has averaged around 7%. Based on S and P Global's forecast and our own analysis, our 2025 guidance is built on a global light vehicle production decline of around 0.5, and the region meets in line with S and P's forecast for the full year. Now looking on the business outlook on the next slide. We expect 2025 to be a challenging year for the automotive industry with LVP declining and geopolitical risks remaining. However, our continued efficiency focus is expected to support further improvement of our profitability.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

We expect to significantly improve our sales performance in China and that the continued strong cash flow and balance sheet sets a solid foundation for our continued commitment to a high level of shareholder returns and our financial targets. We expect cost pressure from inflation to moderate in 2025, but we still expect some pressure coming mainly from labor, especially in Europe and The Americas. We expect call off volatility in 2025 to on average to be slightly lower than it was in 2024, but remaining higher than the pre pandemic level. We also anticipate the challenging in terms of operating margin, which should gradually improve throughout the year. Similar sequential development as we've seen in the past few years with a relatively weak and gradual improvement throughout the year.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Turning to the next slide. In closing, to summarize our 2025 outlook, we expect continued sales outperformance versus light vehicle production, improved profitability compared to 2024. This improvement is primarily supported by structural cost reduction and strategic initiatives, higher sales as well as favorable currency effects. We remain mindful of the risk of deteriorating economic conditions and potential tariffs, But I am confident that our leading position, the work we have done to become more resilient and our experience and agility will enable us to manage future challenging conditions. Now looking on the 2025 guidance in detail on the next slide.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

This slide shows our full year 2025 guidance, which excludes effects from capacity alignment, antitrust related matters and other discrete items. Our full year guidance is based on a global life vehicle production decline of around 0.5%, a tax rate of around 28% and that the net currency translation effects on sales will be around minus 2%. Based on this, we expect our organic sales to increase by around 2%. The guidance for adjustment the guidance for adjusted operating margin is around 10 to 10.5%. Operating cash flow is expected to be around US1.2 billion dollars Our positive cash flow trend and our strong balance sheet supports our continued commitment to high level of shareholder returns.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

The guidance for 2025 does not include any new or increased tariffs or other trade limitation, which may impact our operations. We are monitoring the situation closely and are prepared to be agile as possible to adjust to any such development. Looking on the next slide. This concludes our formal comments for today's earnings call. And we would like to open up the line for questions from analysts and investors.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

I'll now hand it back to operator, Ran.

[Operator]

Thank you, sir. We are now going to proceed with our first question. The questions come from the line of Colin Langan from Wells Fargo. Please ask your question.

[Colin Langan, Automotive & Mobility Analyst at Wells Fargo]

Great. Thanks for taking my questions. Maybe if you could just start with maybe framing some of the puts and takes when we think about the margins year over year. I think you mentioned FX transaction. I mean, I think in 2023 that was like $60,000,000 of a drag.

[Colin Langan, Automotive & Mobility Analyst at Wells Fargo]

Is that kind of the framework of the good news that we should be thinking about? And then does the labor inflation, is that offsetting 1100% through the year with recoveries? Or is that maybe a net negative? And then maybe any framing of the restructuring help we should be expecting?

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

Yes. On the FX, I would refrain from the guidance. When it's included in, obviously, what we have here on the operating margin side, but I don't want to give what we expect from different currency peers here to contribute. But the piezo should continue to be a positive for us. Then on the contribution of restructuring, we expect, as we've said before, around $50,000,000 incremental savings in 2025, and we had $50,000,000 of savings in line with our expectations in 2024.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

And other than that, it's the headwinds are from inflation. The headwind from supplier cost inflation is higher than what we're expecting from labor cost inflation. And the labor cost inflation continues to come down. I mean, we've seen a gradual improvement and we're talking now about clearly a small percentage numbers versus or has an excess inflation versus when this all kicked in. And then we are expecting to offset that by commercial recoveries from our customers, but it will be throughout the year.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

We also had lump sum settlements last year, although the majority was peace price agreements, but some of them now fall away in the already. And then we need to replace them gradually throughout the year. But the ambition is to have a full offset for the gradual inflation that is hitting us.

[Colin Langan, Automotive & Mobility Analyst at Wells Fargo]

Got it. That's very helpful. Obviously, a lot of headlines these days around tariffs, particularly on goods from Mexico to The U. S. Can you help us frame if a tariff is in place, how much of an impact that would be and how you think you might be able to offset and work with customers to offset that?

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

I think if or when tariffs would be implemented there and for us it's mostly a question of Mexico, U. S. Tariffs. Of course, that's passed on to our customer that is necessary there. So I mean, that would start immediately to be a discussion with our customer because there is no reason at all why we as a supplier should absorb any cost like that.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

And I mean, ultimately, it will be a higher cost for vehicles sold in The U. S. And we are preparing ourselves for that as soon as that might come. So that would start immediately, that discussion.

[Colin Langan, Automotive & Mobility Analyst at Wells Fargo]

Okay, great. Thanks.

[Operator]

We are now going to proceed with our next question. The questions come from the line of Edison Yu from Deutsche Bank. Please ask your question. Your line is open.

[Edison Yu, Analyst at Deutsche Bank]

Thank you for taking our questions. First up on the outlook, I'm curious what kind of impact are you embedding from mix in 2025? Is that going to actually be a positive going forward relative to 2024?

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

We expect around a 1 percentage point negative mix in 2025 versus 2024. So we it should be better than it was in 2024. So there we had a negative mix, as we said, around between two and three percentage points. And then in '25, that should improve to around 1 percentage point. And maybe 1 correction, I think in the presentation before, we said 4 basis points negative mix in That would be 4 percentage points in

[Edison Yu, Analyst at Deutsche Bank]

Understood. And then on the order intake, I know you have this slide showing obviously there's a decline and I think you called out a couple of big programs or a couple of big platforms. Can you give us a sense of what happened there and when you expect those or what kind of impact you would expect on the growth, if any?

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

Yes, I mean, we have seen, as we saw, I mean, the lowest sourcing activity from our customers, basically since we spun off the electronics business. So it is a rather unusually low sourcing or it was unusually low sourcing activity, which continued to come down throughout the year. What we see is that, I mean, there have been a lot of discussions around that OEMs are delaying sourcing on projects due to uncertainties on the drivetrain side. But what we also see on top of that is also uncertainty to location of production. So where actually they would start or in which location would they produce a certain platform.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

And that had a significant impact on the overall market development in 2024 and more than we had expected going into the year. We also said here that there are a couple of platforms that we are the incumbent that have also been delayed into 2025. And the expectation here is that, that sourcing should come in during the first half of this year then.

[Edison Yu, Analyst at Deutsche Bank]

Got it. Thank you.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

Thanks.

[Operator]

We are now going to proceed with our next question. The question has come from the line of Chris McNally from Evercore. Please ask your question.

[Chris Mcnally, Head of Global Auto & Mobility Research at Evercore]

Thanks so much, Tim. I actually just wanted

[Chris Mcnally, Head of Global Auto & Mobility Research at Evercore]

to follow-up on Edison's question and think about mix in a different way. I don't think you obviously don't guide by region, but when I think about plus 2% organic at the midpoint, I was wondering if you could just take a shot at sort of ranking from strongest organic to weakest sort of across your 4 regions, Non Asia, China, North America and Europe, just sort of where we may see the highest to lowest?

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

No, I think as we have indicated here, I mean, we see the strongest growth opportunities and growth in Asia. I mean, you have, of course, China, where we are also taking market share with the Chinese OEMs here that continue to strengthen our already leading market position there. And of course, in the rest of Asia also, you have a strong contribution from India, where we not only see the LDP growing, but also the content is growing there. And then of course, we have, I would say, Europe in a challenging situation and also, I would say, North America here when we look at LDP growth in general there. So yes, I think it's a little bit the same picture as we have seen this year here.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

So the trend continues more.

[Chris Mcnally, Head of Global Auto & Mobility Research at Evercore]

It's super encouraging. And I know it's hard with qualitative, but it's nice to hear China towards the top. This sort of implies that growth over market there is turning back positive. You mentioned that. Second question, on some of the weakness in North America and Europe, is that where the OEM mix also is sort of when you mentioned the minus 1 where we should think about the impact the most?

[Chris Mcnally, Head of Global Auto & Mobility Research at Evercore]

The independent forecasters have 2 of the Detroit Three down sort of low to mid single digits, the German three in Europe, it's going to be probably a tougher year given any NEV regulations. Again, is there less secular growth in North America and Europe? Or is it really more a mix issue for 2025 in those 2 regions?

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

I think, I mean, it's very much related to, I would say, the overall economic situation in those regions. So I mean, it's the LDP production per se that is the biggest challenge there. So no, nothing specific there on an OEM level, I would say. It's more related to what was mentioned here before around uncertainty on drivelines from the end consumer, the overall affordability from the end consumer and so forth, so holding it down. And of course, when it comes to export out of these regions also the competitiveness, you could say.

[Operator]

We are now going to proceed with our next question. The question has come from the line of Vijay Rakesh from Mizuho. Please ask your question.

[Vijay Rakesh, Managing Director at Mizuho Financial Group]

Yes. Hi. Just a quick question. When you look at that 2% organic growth, I was wondering what you're embedding in terms of any potential tariffs, looks like coming down the pipe here in Canada, tariffs on the Mexico side or how that impact to the 2025 LVP or or even the AB mandated piece? How do you what are we embedding in that assumption?

[Vijay Rakesh, Managing Director at Mizuho Financial Group]

Thanks.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Yes. No, I would say, I mean, there is no tariff assumptions included in the guidance for 2025 here. Basically, for reason, it's very difficult to have a view on it. It's many different scenarios you can think about, the level of tariffs, the length of the tariffs and as an example. So that is not included in the outlook here.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

It's something we are following very closely. And as we said here, in terms of our own impact, potentially there, we will start negotiating with the customer immediately about passing that on. And then the impact it may have on the demand from the end consumer, we have no detail around at this point in time.

[Vijay Rakesh, Managing Director at Mizuho Financial Group]

Got it. And then on China, definitely encouraging to see that you're focusing on that. When you look at the STPV in 2024, like approximately where did it average out? And just wondering how much of a step up you would see on the average CPV, let's say, on 2025? Thanks.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

Actually, the CPV in China went down year over year, 2023 to 2024 slightly. And that was mostly due to the market mix that we saw, whereas we said before, these scrappage premiums and so on have favored more, say, lower end vehicles. So with that, we have to actually see saw that the overall Continental Vehicle in the China market went down year over year, but we expect this to reverse in 2025.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

And the trend in the market is, of course, to gradually increase the content in the vehicles in all different segments here. So I would say this is more a temporary nature as a result of the shift in the OEM mix, so to speak.

[Vijay Rakesh, Managing Director at Mizuho Financial Group]

Got it. Thank you.

[Operator]

We're now going to proceed with our next question. The questions come from the line of Hampus Engello from Handelsbanken. Please ask your question.

[Hampus Engellau, Equity Analyst at Handelsbanken Capital Markets]

Thank you very much. 2 questions for me. I'm sorry to come back on the LVP. It's just that when you look at your outlook, is it based on what your talks with the OEMs or S and P? Because I think SAP has included 10% tariffs in The U.

[Hampus Engellau, Equity Analyst at Handelsbanken Capital Markets]

S. And at the same time, we have a lot of ongoing in Europe with maybe a massive program on some sort of battery electrics and also changing the regulation on not putting penalties directly on the OEMs that will fail on the 93.6 MG and maybe having that measured over three years in average. It's just interesting to hear you're moving parts on being on par with S and P on 0.5 MPP. That's my first question. Second question is more on if you could talk a little bit about Continental Vehicle in India.

[Hampus Engellau, Equity Analyst at Handelsbanken Capital Markets]

I know you have a few sort of market share there. What's happening with this commitment by the OEMs? Thank you.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Thank you, Anne. First, on the LVP, the outlook and what we base it on, I mean, as always, we in the short next coming weeks, months, we adjusted maybe with what we adjusted with our own insights there. But when I look at the total year here on the 0.5 negative that we are mentioning here, it's I would say it's mainly based on the LAT based on S and P Global tier. So we have not, as I mentioned before here, made our own judgment here on potential impacts on tariffs and so on. So in the extent it is included in the S and P is there, but we have not massaged it on our side here.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

So as you said, we don't have a better crystal ball here than anybody else. And I think when it comes to India there, I mean, we see that continue to improve overall. In 2024, it was around $120 And for next year, we expect it to raise to close to $140 and onwards here, so even $160 in size here. So what we have alluded to before here about the growth opportunities in India, we see both LVP and CPV contributing to this. And with our 60% market share in India, we are well positioned to capture this.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

And it's 4% of India stands for 4% of our sales, which is basically equal to the South Korean market here.

[Hampus Engellau, Equity Analyst at Handelsbanken Capital Markets]

Thank you very much.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Thank you.

[Operator]

We're now going to proceed with our next question. And the questions come from the line of of the question. Hello, Michael. Your line is open.

[Analyst]

Great. Hi, Mikhail, Frederic. Thanks for taking my questions as well. My first question would be great if you could share a more specific reading on the exit rate for call up accuracy in It looks like it ticks up quite nicely. And how that compares to the level that is built into the 2025 guidance?

[Analyst]

And then my second question just goes back to the point on favorable ForEx transactional effects.

[Analyst]

I know, Fred, you don't want

[Analyst]

to give a very specific guide on that, but does that imply that you see a net tailwind at an EBIT level? Or is you're just referring to some kind of an offset against the top line ForEx headwinds that you're expecting?

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

Yes. So on the exit rate

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

in terms of call off stability, so we as you see in the graph there, we were at around 94% in the And we saw a good development in Europe, Americas and also in rest of Asia, whereas China continues to be at that lower reliability levels. And as we indicated here, we believe that 2025 on average should be at a better level than 2024 on average. So that it continues to be somewhere between 90%, ninety five % range, which we believe I think is encouraging. And Michael, can you ask your second question again?

[Analyst]

Yes, sure. Thanks for that. Just back to the point on transactional effects for ForEx. Does that statement or that guide imply that you see a net tailwind at an EBIT level from transactional effects? Or is it meant to be just an offset against the top line ForEx headwind that you've seen?

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

I mean, yes, as I said, I don't want to guide on the transactional effect for the full year. But what we saw in the was a very positive development, obviously, on the U. S. Dollar to Mexican PSO development with our cost base in PSO that had around $12,000,000 positive transactional effect for us. But then that was offset by, I already mentioned that the currency pairings with the Japanese yen against the Thai baht, the U.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

S. Dollar against the Korean bond and then that we're importing euro denominated products into Mexico, and they all roughly had about a $4,000,000 negative effect. So that almost completely offset the positive effect we saw from the PSO. And yes, so it's depending on how this currency moves there, you have the assumptions on our guidance slide here, what we're basing the forecast on, and then we will have to see where the FX rates end up.

[Analyst]

Okay, clear. Thank you, Fred. If I could just sneak in 1 final 1. Just in terms of your expectations around the phasing of improved outperformance in China, I think previously you were a little more confident that you could start to see some out performance already at the Is that still the case? Or is it more an H2 situation?

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

No. I think what we said here is that it will gradually improve here and we it's always difficult to be exact on the timing here due to, as you said, I mean, here we're seeing a real push due to the incentives that are in place. But we feel confident about the shift in trend here as a result of the increased share of the orders that we are taking. So we are on the right track and have to come back on exactly that as they've played through, come through.

[Analyst]

Super. Thank you very much.

[Operator]

We are now going to proceed with our next question. The question has come from the line of George Galiz from Goldman Sachs. Please ask your question.

[George Galliers, Analyst at Goldman Sachs]

Yes. Good afternoon and thank you for taking my questions. I had 2 questions, if I may. The first one just related to order intake and Slides eleven and twelve. It's very helpful on Slide 12 to see the share of order take, which is accruing to new OEMs.

[George Galliers, Analyst at Goldman Sachs]

But if I apply that to the dollar order amount on Slide 11, it would seem to imply that the absolute order intake from new OEMs was down year over year. Is that correct? And if yes, could you perhaps explain why that is? Is it because of the new OEMs also reconsidering product offerings? Or is it related to the point you make around some of the Chinese OEMs having shorter lifetimes for their programs?

[George Galliers, Analyst at Goldman Sachs]

The second question I had was with respect to shareholder returns. I appreciate the current buyback mandate and what is outstanding, but given the implied EBIT forecast for this year and also the guide on cash flow, is it reasonable to expect a step up in shareholder returns once more in 2025? If we look at the last three years, I think on average the step up has been around 200000000 per annum. Is there any reason not to assume that a similar step up might be possible this year? And if it is, can you give us any insight into the split?

[George Galliers, Analyst at Goldman Sachs]

It looks like the dividend has remained flat around the 02/20 mark. Should we expect any step up to be more focused on buybacks and dividends? Thank you.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Let me start with the order intake there. I mean, the factors here when you look at the value of order intake here is the factors we mentioned here that we see many mainly in the, let's call it, the Western world here pushing out in time the launches of new vehicle and thereby also the RFQs. And when it comes to the Chinese OEMs, it is as we said, also there, the shortening lifetime. And those 2 main factors that is adding up to the difference there. I feel that we have an order intake here in order to support our ambition here of safeguarding the market share that we have, which is around 45% as we move forward.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

And very encouraging in all this is that we also see the strong growth we have in the Chinese OEMs here that we have also described in detail here. So this is more reflecting the dynamics in the industry right now than anything else. When it comes to the return to the shareholders here, as you know, we can't communicate anything around what we might do or not do in this regard more than what we have said in the past. And that is that we have a very strong ambition here to be a shareholder friendly company by returning liquidity to our shareholders. I think the last couple of years here shows that we are serious about that.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

And what we also have indicated about the ability to generate liquidity going forward is also, I would say, something that supports that statement going forward. We have the mandates we have today. And how and when we are using that, we have to report afterwards. And as you know, we post on our homepage there on a weekly basis on a week frequent of a frequent of a weekly basis there. And on the direct dividend, we have the ambition to have a stable and increasing dividend in that.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

So yes, I think that there's as much we can say around that.

[George Galliers, Analyst at Goldman Sachs]

Thank you.

[Operator]

We are now going to proceed with 1 last question. And the questions come from the line of Agnieszka Villela from Nordea. Please ask your question.

[Agnieszka Vilela, Managing Director at Nordea Bank]

Perfect. I have 2 questions, if I may. Starting with your market share, it was 44% in 2024, marginally lower than in 2023. Can you just say what was the reason for that? And also do you expect further decline in the market share in 2025?

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

No. Thank you. As I said, I feel comfortable with the order book we have to support our market share around 45%. The difference you see between 2324% is very marginal. And the main reason for that is actually that we have the strong growth of BYD in China, where we and no one else is selling to them as they have their in house manufacturer of safety products.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

But we are selling, for example, a inflator to them, and that's not included in our market share. And that I would say it's a meaningful volume to them. So if you would count that, it will be different. But so in my book here, we are standing stable around the 45%.

[Agnieszka Vilela, Managing Director at Nordea Bank]

Understood. Fair point. And then also you mentioned that will be a challenging quarter in terms of the operating margin. And when I look at your previous performance, usually the margin decreased by some 4 to 5 percentage point sequentially in So should we expect again a similar decrease now or maybe even more pressure due to somewhat weaker Q on Q car production?

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

I don't want to guide you specific on the but I mean, if you look at what have been the drivers for the margin decline in the past couple of years, where it's been around 5 percentage points from to It's been the lower LVP. As we mentioned during the presentation, that was over the last three years a decline of 7% sequentially quarter over quarter. But now we're seeing a decline of 14%, so twice that number. And that, of course, would also have a higher impact on our operating leverage and also the operating income. Then it's the very traditional or typical seasonality that we have on the engineering income side.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

That's not going to be any different this year than it has been in previous years. And then also what we've seen in the last year is the combination of, say, the fall away of lump sum recoveries that we then need to reinstate throughout the year and inflation coming in. And that combined effect is lower this year than it has been in previous years. But if you take all of the 3 combined, maybe that's not so dissimilar to what we've seen previously because of the larger LVP decline.

[Agnieszka Vilela, Managing Director at Nordea Bank]

Thank you so much.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

Thank you.

[Operator]

Thank you. And the session is now closed. I will now hand back to Jimmy Talbrad for closing remarks.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Thank you, Rast. I am pleased to invite you to our Capital Markets Day on June 3, 2025, and I am looking forward to sharing with you how we see our way forward. More details to be announced shortly. Before we conclude today's call, I want to emphasize our commitment to achieving our target of around 12% adjusted operating margins. Our focus remains on structural cost reduction, innovation, quality and sustainability.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Despite significant market challenges such as fluctuating demand and lower LVT in important markets, we continued our strong performance. The positive trend in our cash flow and balance sheet reinforce our dedication to delivering strong shareholder return. Our call is scheduled for Wednesday, April 16, 2025. Thank you all for joining today's call. We truly value your continued interest in Autoliv.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Until next time, drive safely.

[Operator]

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.

Participants

Executives

• Anders Trapp, Head Of Investor Relations
• Mikael Bratt, Member of Research Advisory Board, President, CEO & Director
• Fredrik Westin, CFO & EVP of Finance

Analysts

• Colin Langan, Automotive & Mobility Analyst at Wells Fargo
• Edison Yu, Analyst at Deutsche Bank
• Chris Mcnally, Head of Global Auto & Mobility Research at Evercore
• Vijay Rakesh, Managing Director at Mizuho Financial Group
• Hampus Engellau, Equity Analyst at Handelsbanken Capital Markets
• Analyst
• George Galliers, Analyst at Goldman Sachs
• Agnieszka Vilela, Managing Director at Nordea Bank