Financial Report April – June 2023
Stockholm, Sweden, July 21, 2023
(NYSE: ALV and SSE: ALIV.sdb)
Q2 2023: Record second quarter sales
Financial highlights Q2 2023
$2,635 million net sales
27% net sales increase
27% organic sales increase*
3.6% operating margin
8.0% adjusted operating margin*
$0.61 EPS, 32% decrease
$1.93 adjusted EPS*, 115% increase
Full year 2023 indications
Around 15% organic sales growth
Around 1% positive FX effect on net sales
Around 8.5%-9.0% adjusted operating margin
Around $900 million operating cash flow
Key business developments in the second quarter of 2023
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Sales increased organically* by 27%, which was 11pp better than global LVP growth of 15.5% (S&P Global July 2023). We outperformed significantly in all regions, mainly due to new product launches and higher prices.
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Profitability improved substantially, positively impacted by price increases, organic growth and our cost reduction activities. Operating income was $94 million and operating margin was 3.6%. Adjusted operating income* improved from $124 million to $212 million and adjusted operating margin* increased from 6.0% to 8.0%, despite inflationary pressure, adverse FX effects and two isolated supply chain disruptions. Return on capital employed was 9.5% and adjusted return on capital employed* was 21.0%.
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Operating cash flow increased from negative $51 million to $379 million, driven mainly by improved adjusted operating income and positive working capital effects. Free cash flow* increased to $255 million from negative $190 million. The leverage ratio* improved from 1.6x in the first quarter 2023 to 1.3x, impacted by lower net debt and higher adjusted EBITDA. A dividend of $0.66 per share was paid, and 0.48 million shares were repurchased and retired in the quarter.
*For non-U.S. GAAP measures see enclosed reconciliation tables.
Key Figures
| (Dollars in millions, except per share data) | Q2 2023 | Q2 2022 | Change | 6M 2023 | 6M 2022 | Change |
| Net sales | $2,635 | $2,081 | 27% | $5,127 | $4,206 | 22% |
| Operating income | 94 | 124 | (24)% | 221 | 258 | (15)% |
| Adjusted operating income1) | 212 | 124 | 71% | 343 | 192 | 79% |
| Operating margin | 3.6% | 6.0% | (2.4)pp | 4.3% | 6.1% | (1.8)pp |
| Adjusted operating margin1) | 8.0% | 6.0% | 2.1pp | 6.7% | 4.6% | 2.1pp |
| Earnings per share2) | $0.61 | $0.91 | (32)% | $1.47 | $1.85 | (20)% |
| Adjusted earnings per share1,2) | 1.93 | 0.90 | 115% | 2.82 | 1.36 | 107% |
| Operating cash flow | 379 | (51) | n/a | 334 | 19 | 1654% |
| Return on capital employed3) | 9.5% | 13.1% | (3.6)pp | 11.4% | 13.8% | (2.4)pp |
| Adjusted return on capital employed1,3) | 21.0% | 13.3% | 7.7pp | 17.4% | 10.4% | 7.1pp |
| 1) Excluding effects from capacity alignment, antitrust related matters and the Andrews litigation settlement. Non-U.S. GAAP measure, see reconciliation table. 2) Assuming dilution when applicable and net of treasury shares. 3) Annualized operating income and income from equity method investments, relative to average capital employed. | ||||||
Comments from Mikael Bratt, President & CEO
During the quarter, we took further steps towards our full year indications, that support our medium term targets. First, we achieved new second quarter records for sales, adjusted operating income and operating cash flow since the Veoneer spin-off in 2018. Second, we achieved the price compensations from customers we planned for. Third, to secure our medium and long term competitiveness, we announced the acceleration of our structural cost reductions. Last week, we announced the first step towards the necessary optimization of our cost structure to the market environment. This first step is expected to reduce costs by around $25 million in 2024, increasing to around $55 million in 2025 and to reach around $75 million when fully completed. Further actions will be announced as plans materialize.
We generated an organic growth of 27%, growing 11pp faster than LVP due to successful product launches and price compensation achievements. The strong volume growth combined with price compensations, cost saving activities and lower premium freight costs enabled us to improve adjusted operating income by 71%, despite substantial inflationary pressure and FX headwinds.
I am pleased that we delivered an adjusted RoCE of more than 20%. We delivered strong operating and free cash flow in the quarter, driven by an improved adjusted operating income and reversal of the negative working capital effects from the first quarter, in line with our previous indication. This contributed to an improved leverage ratio which supports our share repurchase ambitions.
We saw continued improvement in call-off volatility in the quarter but still higher volatility than pre-pandemic levels. We believe this reflects an improving global supply chain environment for both our customers and suppliers. Except for two isolated supply chain disruptions in Europe and Americas in the quarter, Autoliv’s supply chain showed sequential improvement.
We reiterate our full year indications. Looking to the second half of the year, we expect the adjusted operating margin to be back-end loaded due to normal seasonality between the third and fourth quarters and the expected closing of price negotiations. The steps we took in the second quarter support our confidence in sequentially improving adjusted operating margin which should allow us to deliver a substantial full year increase in operating cash flow and adjusted operating income.
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 Etemad
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 21, 2023.
