Financial Report July - September 2023

Stockholm, Sweden, October 20, 2023
(NYSE: ALV and SSE: ALIV.sdb)

Q3 2023: Another strong quarter

Financial highlights Q3 2023

$2,596 million net sales
13% net sales increase
11% organic sales growth*
8.9% operating margin
9.4% adjusted operating margin*
$1.57 EPS, 30% increase
$1.66 adjusted EPS*, 35% increase

Updated full year 2023 indications

Around 17% 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

All change figures in this release compare to the same period of the previous year except when stated otherwise.

Key business developments in the third quarter of 2023

• Sales increased organically* by 11%, which was 7pp better than global LVP growth of 3.8% (S&P Global October 2023). We outperformed in all regions, mainly due to new product launches and higher prices.
• Profitability improved substantially, positively impacted by price increases, organic growth, and our cost reduction activities. Operating income was $232 million and operating margin was 8.9%. Adjusted operating income* improved from $173 million to $243 million and adjusted operating margin* increased from 7.5% to 9.4%, despite inflationary pressure and adverse FX effects. Return on capital employed was 24% and adjusted return on capital employed* was 25%.
• Operating cash flow remained strong, albeit declining from $232 million to $202 million, mainly due to temporary negative working capital effects. Free cash flow* decreased to $50 million from $68 million. The leverage ratio* was unchanged at 1.3X compared to the second quarter of 2023. A dividend of $0.66 per share was paid, and 1.23 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)	Q3 2023	Q3 2022	Change	9M 2023	9M 2022	Change
Net sales	$2,596	$2,302	13%	$7,724	$6,507	19%
Operating income	232	171	36%	453	429	5.5%
Adjusted operating income1)	243	173	40%	586	365	60%
Operating margin	8.9%	7.4%	1.5pp	5.9%	6.6%	(0.7)pp
Adjusted operating margin1)	9.4%	7.5%	1.8pp	7.6%	5.6%	2.0pp
Earnings per share2)	1.57	1.21	30%	3.04	3.06	(0.5)%
Adjusted earnings per share1,2)	1.66	1.23	35%	4.48	2.58	73%
Operating cash flow	$202	$232	(13)%	$535	$251	114%
Return on capital employed3)	24.2%	18.0%	6.2pp	15.6%	15.3%	0.3pp
Adjusted return on capital employed1,3)	24.5%	18.4%	6.2pp	19.8%	13.1%	6.7pp
1) Excluding effects from capacity alignments, 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

Our performance in the third quarter was very encouraging. Our organic sales growth continued to significantly outperform LVP and the adjusted operating income was a new third quarter record since the spin-off in 2018.

I am pleased that our strong performance in the third quarter was broad based, with improvements in several key areas - both
year-over-year and sequentially - including gross and operating margin, labor efficiency and SG&A and RD&E costs in relation to sales. Cash flow was strong, and the debt leverage remained well within our target range while maintaining our dividend and almost tripling the number of shares repurchased compared to Q2.

We continue to work hard to secure a strong medium- and long-term competitive position. In the quarter, we detailed a large part of our structural cost reduction intentions of reducing our indirect workforce by up to 2,000. In addition, the ongoing reorganization of our global functions and European operations is expected to lead to a reduced normalized tax rate. It is also encouraging for our medium- and long-term potential that we continue to improve our position in China with the fast-growing domestic OEMs. In the first nine months, we increased our sales to this group by more than 50% year over year.

We increase our full year sales indication to reflect that LVP has developed better than expected, even with the UAW strike in the U.S. We have continued to see an improvement of supply chain stability throughout the year, with reduced customer call off volatility. However, the improvement is slower than we had expected, as it deteriorated somewhat in Europe in Q3. This, together with the higher sales and adverse FX development, means that we expect a fourth quarter adjusted operating margin improvement year-over-year of around 1.5-2pp, in line with the previously communicated improvement pattern of around 2pp each quarter throughout 2023.

Our performance in the first nine months and the outlook for the final quarter of the year makes me confident that we will deliver a substantial full year increase in sales, operating cash flow and adjusted operating income. Together with the advancement of our structural cost reduction activities, the improving position with fast growing OEMs, the continued gradual improvement of supply chain stability, and the development of inflation compensation, we have a solid foundation for a continued strong development in the years to come, that support our medium-term targets.

 

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 October 20, 2023.