Financial Report July - September 2020

News provided by

Oct 23, 2020, 06:13 ET

STOCKHOLM, Oct. 23, 2020 /PRNewswire/ -- Q3 2020: Better than Q3 2019

Financial highlights Q3 2020

$2,037m net sales
0.4% organic sales growth*
8.6% operating margin
10.1% adjusted operating margin*
$1.12 EPS - an increase of $0.14
$1.48 adjusted EPS* - an increase of $0.18

Full year 2020 indications

Around 14.5% net sales decline
Around 13% organic sales decline
Around 6% adjusted operating margin

Key business developments in the third quarter of 2020

Organic sales* increased by 0.4% which was 4.7pp higher than the change in global light vehicle production. Organically, all major regions developed better than LVP. Sales in China grew by 10.4% compared to 8.7% growth in LVP. Sales in Americas grew by 1.2% compared to the LVP decline of 4.3%. In Europe, LVP declined by 7.6% while our sales declined by 4.8%. Customer sourcing activity was, as expected, low in the quarter, with more than half of planned sourcing for the year expected in the fourth quarter. First nine months order intake supports a prolonged period of outgrowth.
Profitability improved as demand recovered and our cost reduction activities progressed according to plan. Adjusted operating margin* improved both vs. Q2 2020 and Q3 2019. The gross margin improved by 0.9pp compared to Q3 2019. Indirect workforce was reduced by around 4% vs. Q3 2019 and by around 2% vs. Q2 2020.
Strong cash flow and strengthened balance sheet. Operating cash flow of $352m and free cash flow* of $276m was significantly above Q3 2019 levels. Net debt* declined vs. a year earlier and the debt leverage ratio* of 2.4x improved vs. 2.9x in Q2 2020, although still higher than the 1.8x in Q3 2019. As of October 2, 2020, our Revolving Credit Facility is repaid and available for us to draw on as needed.

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

Key Figures

(Dollars in millions, except per share data)	Q3 2020	Q3 2019	Change	9M 2020	9M 2019	Change
Net sales	$2,037	$2,028	0.5%	$4,931	$6,356	(22)%
Operating income	$175	$154	14%	$75	$497	(85)%
Adjusted operating income¹⁾	$206	$183	13%	$170	$532	(68)%
Operating margin	8.6%	7.6%	1.0pp	1.5%	7.8%	(6.3)pp
Adjusted operating margin¹⁾	10.1%	9.0%	1.1pp	3.5%	8.4%	(4.9)pp
Earnings per share, diluted^{2, 3)}	$1.12	$0.98	14%	$(0.02)	$3.50	(101)%
Adjusted earnings per share, diluted^{1, 2, 3)}	$1.48	$1.30	14%	$0.95	$3.87	(75)%
Operating cash flow	$352	$195	80%	$380	$328	16%
Return on capital employed⁴⁾	18.7%	16.2%	2.5pp	2.7%	18.0%	(15.3)pp
1) Excluding costs for capacity alignment, antitrust related matters and in 2019 separation of our business segments. 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.

Comments from Mikael Bratt, President & CEO

I am proud how the company has handled the COVID-19 crisis. The worst demand decline on record in the second quarter was followed by a faster than expected recovery in the third quarter, with its challenges of managing the supply chain in a safe and efficient way. The quarter started weak and volatile but gradually grew stronger and more stable and we managed to record higher sales, higher profits and higher cash flow compared to the third quarter 2019. The Q3 outcome reflects our efforts to come out of the crisis as a stronger company. The adjusted operating margin was the second highest for a third quarter in the past 10 years, the operating cash flow and free cash flow are the highest we have recorded in a third quarter and our net debt is the lowest since the spin-off of Veoneer. The strong performance was a result of good operational execution, effects of our Structural Efficiency Programs and crisis management in the second quarter leading to cost reductions which, although of a more temporary nature, still supported our third quarter performance.

I am pleased that our sales outperformed organically the global light vehicle production by almost 5%, with outperformance in all major regions. Backed by recent product launches, we expect a further pick up of outperformance in the fourth quarter, supporting a full year outperformance of around 6 pp. As expected, order intake activity was slow in the third quarter, but we expect a very busy fourth quarter.

Although it is important to realize that the COVID-19 crisis is not behind us, and global uncertainty persists, business stability and visibility have nevertheless improved, which allows us to provide a full year guidance.

Our Structural Efficiency Programs are on track and delivering savings. As part of our footprint optimization ambitions, we decided to close one plant in Germany and we will continue with further footprint optimization. With the health and safety of our employees as our first priority, we continue with more activities to further improve efficiency, optimizing our footprint and implementing the strategic initiatives outlined last year to support next year being a solid stepping stone on the journey to our 2022-24 targets.

Conference call and webcast

An earnings conference call will be held at 2:00 p.m. CET (8:00 a.m. ET) today, October 23, 2020. Information regarding how to participate is available on www.autoliv.com. The presentation slides for the conference call will be available on our website shortly after the publication of this financial report.

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 October 23, 2020.

This information was brought to you by Cision http://news.cision.com

https://news.cision.com/autoliv/r/financial-report-july---september-2020,c3221793

The following files are available for download:

https://mb.cision.com/Main/751/3221793/1323362.pdf

The full report (PDF)

SOURCE Autoliv