ALV - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thank you for standing by and welcome to today's Quarter Three Autoliv Financial Results 2019 Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions].

I must also advise you that this conference is being recorded today on Friday, 25th of October, 2019.

like today, the Mr. now your over would speaker first I to conference hand to And Anders VP Trapp, of Investor Relations. Please sir. go ahead,

Anders Trapp

Carl. our to Welcome XXXX you, presentation. third earnings Thank quarter everyone

and Stockholm, CEO, Financial have Christian myself, Relations. President, and Trapp, Hanke; in Here our Officer, Mikael our Interim we Bratt; Chief Vice Investor Anders President

update our results as well today's our will CEO market quarter During general provide a and provide third an on earnings call, brief our business overview of as conditions.

further provide financial to will will corporate our Christian on and for commentary full-year the XXXX Mikael, Following to the your website. we QX the details as link usual, the our slides results our homepage respond around And remain available presentation, outlook are of and questions. a end available XXXX. At of through

the have page, integrated Q&A of Safe this which includes statement, and, we that part Harbor the is of course, an presentation follows. next On the

will historical filed press measures. the we SEC. our GAAP quarterly that reference release non-US to presentation, are the in measures be will GAAP the GAAP XX-Q US During disclosed some of with and reconciliations The non-U.S.

figures All presentation continuing to i.e. discontinued this operations. refer excluding operations, in

sharp. intended Lastly, that mention this P.M. call conclude I at X:XX is CET should to

So, please person. limit questions two per follow a of

will Bratt. over I now to it Mikael turn our CEO,

Mikael Bratt

Thank you, Anders.

Looking QX highlights XXXX to now the into on the page. following

challenging second despite pleased operations reported our quarter that and adjusted raw like generally compared would I'm I margin to that First, the say to cost operating materials. vehicle for

elevated effect in quarters improvement for to the initiated costs. mitigate reason the and tough conditions is of previous mainly actions the market The launch

the Market revised by somewhat, term. the turnaround we light not down IHS the see production uncertainty decline continued of remains production vehicle rate in be vehicle in slowed light the in do near any and to down outlook high. Although

at challenges our already America, General the Motors operations we to strike affected North adding in face. The

by driven light in a more We outperform organically X.X points, percentage production, growing to vehicle China. continued production mainly than strong light vehicle development

Being decline global company, feel the our launches we vehicle of production the full and of generates a new force light what truly wave outperformance. the global is

sixth intake level, higher organic market, Order at of This growth share a quarter share. further quarter compared prolonged the continued our increasing outperformance. market good marks the to supporting substantially consecutive

our key collaborations strengthening the Being close to to customer competitiveness. quarter, In are announced. customers our new were two

research Firstly, Great China safety Wall. creation a road lab of with American North involving

Secondly, developing airbags next-generation cooperation with passenger Honda. in

We third further continue ago, year-over-year. we the to to headcount organically despite than quarter. manage of our the about sales in the quarter, actively direct X,XXX by XXX more to Adding second during Compared a downturn. growing by X% less workforce totally business workforce the is year cycle reduction reduced headcount

detailed now in the structural the next Looking efficiency at on more slide. program

opportunities. structural improvement Here, summarized have program efficiency the we have identified as cost we structural

already see of have We limited program, although started in the effects the the quarter. positive to

full For million around full to amount year XXXX. effect to December $XX its XXXX, should program and by savings reach we expect the

XXX, North headcount. which is X% have we total and is estimated almost be reduced expected. be operations though to Headcount where is America in indirect countries impact higher Most Europe by impacted, will about of

be program The X% savings is about of cash estimated to from is to QX XXXX spread equal cost be labor around the estimated to XXXX. out for $XX be million is and QX to indirect which $XX costs. to Annualized million, around

likely global additional our in will footprint. operations It's this restructurings our quarters. to evaluate that to and in future further resolve continue We optimize

This our long-term not is, efficiency. all to course, do we improve of

our to November in improving chain building foundation in CMD and detail discuss more efficiency. XX. the end on engineering from end digitalization for investing during We the as flexible are intend such to value organization, We these

Looking on financial the slide. next performance now quarter third our at the recap of

sales QX than increasing XXXX, sales light X%. Our flat X% the net vehicle production with despite to than by organic compared by falling by more more currencies consolidated virtually impacted global weaker

Adjusted excluding vehicle by alignments, production around material costs pricing. antitrust and capacity raw to X% and light decreased related from impacted separation matters cost $XXX for million, lower operating by income $XXX million

margin X% compared XX to by to of basis quarter The adjusted the operating points decreased XXXX. same

EPS to XXXX, operating decreased mainly lower income. due Adjusted to by compared $X.XX QX

and the than negative by the according Looking to light in market X% estimated HIS. now performance the X% since on the and third mid-last trend production development. have continued. financial around in that started XXXX has year-to-date, fallen is vehicle worst Global with The XXXX, more quarter year crisis to

generous by China's light providing dealerships vehicle straight government in efforts discounts contracted boost market for many some Despite to the the month provinces September. and in XXth sales.

vehicle and X% meaningful we both continued by inventories any see vehicle OEMs carrying did light still reduction inventories. light of not the Light vehicle Consequently, see high we fell fairly in approximately sales and production quarter. to

America X reason last US light light beginning GM's sales facilities. in quarter production vehicle North at X% One sales the while year, strike originally the production at vehicle quarter. up decreased forecast which almost compared X% US vehicle lower lower percentage than by the by finished the the for more was in than to X%. the Light fell of points Mexico was

higher to a sales, [indiscernible] declined the X.X Thanks vehicle to inventories healthy by million.

was X% XXXX. vehicle period during than same and light were vehicle registrations X% higher European light higher the in production

following production level when this many XXXX year QX European West the WLTP as reduced decline important due on is low in still it introduction. a the to dropped double-digit OEMs X% the However, volumes

growth on Looking slide. next sales the our to

production light rest production, to sales world continued global Americas. the China, in vehicle of Our vehicle light substantially and outgrowing outperform

organic sales was million Europe. respectively In the the by in contributed with China quarter, Americas slowing and and This partly offset million $XX growth. $XX to

from X in sales launches around light BMW of Nissan, than Honda, Tesla. driven organic by The to the production. higher North growth quarters, GM, product and America, change vehicle was previous points mainly X% close In were with percentage

South America organically, by in outperforming substantially vehicle production. sales XX% light Our increased

and we Europe, BMW a demand from affected been Daimler, Toyota. In have including OEMs, of JLR, weaker by number

and important launches relative OEM affected key our now on improve by negatively were a sales track. which other delaying launch, performance quarter. in model our few a should the fourth Additionally, These is

years, Sales Honda OEMs. in the both around China light organically in outperformed sales higher driven Combined, production VW. The thanks percentage we intake and domestic were to outperforming recent sales vehicle OEMs, global order by XX%, and mainly with increased XX mainly by by to global higher points. strong

sales increase in X. Our production ahead on models Japan underperformed October the by consumption impacted vehicle car to selling of tax negative mix, light due well in

product said expect launches before, improved from As in we Japan we XXXX. in sales have QX performance begin to new an

weaker vehicle by decline of sales X%. of in light Sales sales in decline production an was rest market organic India. by percentage The a Asia result the despite outgrew points, X mainly

launches next the model key our QX in to on XXXX Looking slide.

an see you third content the to models are models quarter. key well of some Here, the launched from across and the have distributed globe $XXX up $XXX vehicle per car. Autoliv per during These

of Particularly XXX, from engines same will with models. traditional interesting is on both The a best and combustion offered the be to one XXX versions safety Autoliv. full Europe's content Both see selling powertrain. Peugeot the our content with electrical

prolong into LVP. we quarters, to support again will a high of coming of the introduced fourth that and to Going have new be level quarter, the vehicles outperformance over launch activities

Christian I financials. speak will CFO, the to hand interim Hanke, to over our on

Christian Hanke

Thank you, Mikael.

page. next the on financials our to now Looking

We sales around effects and $XX have million negative currency key of the $XX quarter, translation organic of million. our third figures growth including for

Our net sales reached $X billion.

offset operating was more net declined on margin higher The organic the by sales leverage higher than costs. gross Our commodity year-on-year.

due most capacity drop sharp Additionally, production. utilization we light in experienced the vehicle lower regions to in

that lower operating savings quarter. comment third to of was in from adjusted A Our and the higher sales. year-on-year, SG&A limited the the declined due relation mainly is a here margin X% to structural gross slightly program the efficiency profit in very

Our adjusted capital employed and quarterly return our XX% XX% maintained we return on and And equity have $X.XX. respectively. at dividend on were

X% XX slide, bps lower on margin operating of now Looking year-on-year. was adjusted next the our

As and operating margin higher illustrated negatively adjusted raw XX from bps material partly FX RD&E, XX from by bps by and the of impacted offset chart, was effects. SG&A by bps XX costs the

the decline Despite normal from launches. our course, was costs and, effects a negative These leverage. of organic the improving positive growth by platforms contribution. with business LVT had operations on impact positive cycle low from launch-related improvement partly and improvement, of the operating were result continuous product mature yielded new mainly This disproportionate factors margin a growth, offset management

strong continuing flow Looking $XX net XXXX, amounted on income. million Operating in from cash the the which to operations was lower million, than and $XXX was next mainly lower slide. explained by

last strong, was this quarter. flow with conversant than XXX%, particularly cash year more of was it cash a QX XX% while

the Capital quarter third is around in million expenditures capital X.X% In expenditures XXXX, third were sales. amounted of quarter, the in to $XXX to $XXX for operations relation sales. continuing about or of which million X%

For sales XXXX. to the we to expenditures capital in XXXX, year in with line be expect full relation

cash was net conversion months of XX%. EC the and last Excluding was XX the XX-month operating $XXX flow million antitrust last income cash fine, on

Looking next earnings share on per the now our to slide.

behind to development. year UPS decrease are by $X.XX adjusted earnings per income. by alignments Reported share $X.XX one same $X.XX XXXX, and share main to We lower capacity QX $X.XX decreased the per adjusted $X.XX. operating drivers from declined the the for from costs $X.XX earnings have the In ago. higher approximately around The period to compared

Looking now to our slide. next the on financial position

of history policy. We a know, as you financial prudent have, long

capital shareholder-friendly focus current sheet policy market despite conditions. balance allocation Our unchanged remain and the

X a to is leverage X.X to around range to within a debt maintain of policy net EBITDA times. of Autoliv's ratio times X.X

we times, the XXXX, slightly ratio which As X.X compared lower company XX. what XX, leverage for reported June of September a had to is of

The the ratio high the in investigation leverage of the the main of for are the the portion quarter XXXX EC of fine Veoneer and for XXXX. payment second reasons of the capitalization remaining in

deleveraging strong continued returns cash allow allow to should while flow flexibility. Our and shareholders, free should generation providing

times be other expect and to of any other business. end items We our This changes XXXX. non-foreseeable the to by X.X discrete excludes around

confidence, the has for and due The for to on increasingly Looking rest vehicle major changes. market become next the slide. tariffs outlook weaker light trade market at of consumer year more regulatory development the uncertain

the American production beginning plants in According the expected the for the UAW to quarter vehicle is light strike quarter, of assembly a result fourth XX% is States. as affecting quarter to down partly the fourth United – the and all of in seen North HIS, GM

China is decline, than a LVP recent expected have in continue rate at seen to we but quarters. more in what modest to

decline lower demand. European QX production around is X% anticipated to by on

export which impacted sector a an increasing X demand. the due tax to Japanese global to domestic point tipping demand stagnant XXXX production be October see after points, by consumption which will negatively XX will a and percentage affects from

has year worth XXXX by million points of vehicle or light is to this full that, noting X million units X.X by their XX global since production of units. year, January It around IHS expectations reduced percentage

the X% outlook IHS the to of for global in XXXX the market, in decline production uncertainty a lower X%, X.X%. increasing is base than vehicle is light Reflecting our of scenario which

seen have for in vehicle production due drops we our and The to reason of models. demand India of more in is light global lower IHS Korea new view to and negative call offs delays compared certain that Japan,

However, to X we to outgrow percentage light by expect production vehicle points. X

next we uncertainty vehicle light and any demand we the therefore, The on full-year profitability currently high XXXX indications. end and lower XXXX sales turnaround signs of in have LVT summarized our indicate of a environment previously Looking now the a in slide, our not see full-year and, ranges. we falling do in remains communicated

capacity and for prevail. assumes to cost that volatile continue near in and mid-October been matters well exclude alignments future. Note indications have the so exchange in rates rates recent be the and history quite antitrust-related could exchange These

uncertainty a in financial reflects X% to vehicle assumes range decline the production. of the of markets. The Our global light high continuing automotive outlook level X%

to growth points around than organic global our expect X We LVP. be higher percentage

organic year growth net of full X% is decline a our around translation percent, with a of X% negative effect for sales around currency in sales resulting for XXXX. a Consequently, indication X%

adjusted XXXX. vehicle our the light for for assumption, X% full-year production Reflecting is lower operating indication around the margin

We be to basis to expect million full-year flow effects be costs events the for operating million. previous relatively approximately anticipate XXXX by between to the on increase payment any the cash raw neutral, and points. is $XXX We excluding operating the material $XXX margin currency unforeseen XX antitrust EC to XXXX expected

to Mikael. back hand now will I

Mikael Bratt

Thank you, Christian.

page. the Turning

last and versus have XXX quarters As materials this gradually This to two chart, first more from decline year is continued points despite the margin reduce basis by vehicle able we raw expected. than to illustrated QX basis XXXX. the more points in production light in declines than headwinds been XX from

the improvement main business continuous launch the efficiency is cost The chart for sequential throughout strong The organization. improvements. the as sequential our focus well activities. as management shows also Improved cycle improvement on reason

As expect margin indication, implied trend continue in QX. we improvement full-year by to our sequential the

higher well to as structural addition raw engineering improvements from In and income continuous as material start contribution effects should activities, seasonally positive to sales our and we seasonally headwinds. program higher from efficiency see the lower

outperform remainder volumes, to to vehicle continue year regions. uncertainties industry for all Although affect production major expect in of the light the we

this been now light entire vehicle by later, dramatic. things in is year percentage X%. to by with decline is points deal grow started X%, while to put the to production context, X The To X has year expected That X% to months to with. company expected it nine change for the

unrest the quarter, increases and we were first social cost which Matamoros, Additionally, substantial affected Mexico by for created disturbances in in us.

material our are we Although somewhat in profit of combination margin. of raw falling guide costs. dramatic light least operating in environment, proud LVP pleased the not demand are adjusted sharply usual for able we such Not with levels, we that are rising around X% to and the

the now next on slide. Looking

the in our facilities returns. I'm cost to Our will Utah, month improve level seeing now of company and many less we At further, looking to show we you our a how of there. Autoliv will CMD next growth, forward taking improvements is than away.

hand to I Anders. will now back

Anders Trapp

Mikael. Thank you,

Turning our for earnings comments question. the for page, today's the And up like this now we call. line open formal to concludes would

it operator, I hand back to Carl. So, the

Operator

from of McNally line Chris [Operator the our question first Evercore. Instructions]. And comes from

is Your in open. line now

Chris McNally

much. of couple progression. margin afternoon, maybe questions the on A And gentlemen. so Thanks good

it's I think been based million $XXX of tough delta. – million obviously, or you commented on $XXX revenue year a

taken I think better have about the pretty pretty XXXX, think that the though, guys from actions cost out structure we have laid been strong As on argument you a getting place. much

to it have the of envelope $XX left Just it like million go. seems you back math,

a that XX only get XX you will back happens, materials obviously have some points, of organic and or if be the could portion you even So, of raw growth. that still basis then

are Is feasible have lot. So, could we or the look, but year we could of basis better? side, just on get And where the sort changes XX things everything factors? a you improvement sort of putting XXX these and some a thinking of stay of production get question point have it they just volume that next base this reversion on again, aside, – don't

Mikael Bratt

the focused cost to the our we continuing But, base in adjust of not what here. We're are believe start we of here you. position to in market thank overall comment on course, Yeah, now to on to development XXXX here. extremely relation

opportunities that along our core and And have the we making have the fully capture see all alluded of company also before, being to as to on we we value focused here sure want now full improvements chain. on the focus here businesses

here. think improved driving I ambitions quite clear we're So, the being our on to in profitability in that. That come support years should

But third the is too in the about market going discussion XXXX where into I any just quarter detailed going. here be here. in second the quarter has way And on uncertainty we reinforced the early talked is around think

keeping that. to a and on think that I then steps So, need we be on close take to start eye with

Chris McNally

Okay, great. And the one then order just book. on another quick

Could close order like over – been something It years it's took but pretty almost Takata. a since very remain it. it's qualitatively key Joyson still, to lost? about some bid process? you sort trying the them. the selective? Are was are very just they they share seeing you're for trying to current really just just aggressively retake reemergence that of retain what commented, Maybe XX% you it's think not maybe levels been that's and seems two talk been safety customers and subdued good at I to levels. of not It's Or in

Mikael Bratt

doing comment, because I I what simply course, can't really they know. of on are don't

it commitments our into here here, and is, are competitive. I go know, and share focus opportunities and on of here And, comes the delivering years and, we sense is to our the it's position shown for of But as same position course, are player, quality tender a focus. have that last here, business we that course, a here. being delivery price a on course, are growing when market to focusing visible that lot our on we are of a market they the here. good our in of in you And think full in the defend We which business full of global as we business the probably couple

us see don't any other priorities our I to focus own business. on So, for than

Chris McNally

you great. so Okay, Thank much.

Mikael Bratt

you. Thank

Operator

from next James from KeyBanc question comes line the of Picariello Our Capital.

open. Your line is now

James Picariello

morning good guys. Hey,

Mikael Bratt

Good morning.

James Picariello

Thanks. relates you industry guys. share another trends? You comment for gain weak this as made the yet again. Good quarter activity order Can talk for trends? thoughts quarter was to that bookings afternoon you color you about your are fourth industry the the What provide it and any for could your that

Mikael Bratt

Yeah.

think, we intake I year. point that the order as we healthy here here. here this to when really have But intake of an prolonged And forward levels. exact numbers, as have come have still supports all, close is that will indicated move first we back outperformance we on we the we order

the all have should Then than in that of year, that absolute also there, on looking very lower of is them so it to is seen here model much how it's gears or and we not volume last the the out year previous and remember plans that – terms are the every and equal orders like. the we depends But year. renew RFQs what it's in on

So, numbers when business fundamental any putting slightly the or looking year be out to out with ordinary a changes course It changes to just it there. RFQs. of comes lower not happened I'm like is activities to or how a reading

still expected But to as the half, that stands. have year in QX than of the second indicated we first half be higher before here, we and

say, ultimately where we an it for I up means full of year. that to on gradual important a the ended course, QX So, And, define is would improvement. quarter

it's QX expected. in here bit activities higher as a So,

James Picariello

what impact baking but in fourth GM this, Got and it. what the the I strike Thanks then, for the quarter hopefully, And you quarter? in was for didn't are miss that. quantified

Mikael Bratt

you it's affected weeks started it's the say America it. for given mid, the around There today a or here. quarter, – strike Mid, here. the We number if a not. to GM by within is third in workers there in ongoing North could of – And sales in is I say. then, to But haven't agreement as should still place accept two the I that vote the UAW understand right end-September and

will to an end we today. strike the hopefully, later So, see

four another fourth of is four weeks that that a is, means the That part and quarter here. obviously, weeks,

So, potentially about them we're weeks. talking all, all in six

And to on X% total us GM sales around is sales.

important some scene, and is global a customer a has the you total. at it's look X% course, if it totality of big to impact. in of the and us But So, then sizeable the

James Picariello

guys. Thanks

Operator

Okay.

Our Hampus of next the question comes line from from Engellau Handelsbanken.

Your line open. is now

Hampus Engellau

very XXXX? XXXX you it you be Would much. Thanks. to compared terms you up That's what for you to have for launches And comparable in basis, dynamics for of possible XXXX just Thank see on first a discuss the my understand here? do much maybe to how on ramp question.

Mikael Bratt

continue Thank of here. the book the about course, you. launch to talked I say we year would on XXXX, that where order we is have

say have come normal, would so to I we So, up new to speak. now a

launches, to as here number a but I way, dramatic So, I don't a to now up expect have of see don't we're step think of speak. so the share the to I in the number here, midst in

level height risen activity here will on. that has we new the So, continue a to

at started on world. expect part and now outperformance remember, as So, the wave normal. up in visible we we by have and more are of America in the starting the moved in gear that quarter And you new to the Japan and to the fourth that, then China North

Hampus Engellau

launch that delaying in terms any or a of just is that base you've delays have et lower of production, there demand? been adjustments the of back the in on of reducing seen customer rate model a cetera, on terms run are certain it OEMS they're And the your

Mikael Bratt

would here has no effect in rate it to the overall market more, to And from do material, say. have It we it, as start here. has some run mentioned the the the And has and I had technical been development. call with connection OEM really do we that has with the is overall we presentation, but delays ourselves not let's other of development has, and decisions production, it of It's see, earlier to nothing as nothing it that market the reason. been

Hampus Engellau

much. very you Thank

Mikael Bratt

you. Thank

Operator

Okay.

Our the next question comes Spak of from from Capital Joseph line RBC Markets.

Your now line open. is

Joseph Spak

maybe along quarter have basis which indirect then points, – the about much. fourth with Thank just be quickly fourth is seems sort higher is just as the like Is about with of we points. you in if the XX on sales of should very guidance the seems just think for there leverage you it remainder about on some or labor and fourth the about so which quarter the recoveries, like follow quarter-over-quarter should we implied XX margin XXX be quarter? could think we the it your typically lower savings, points so, rest basis the R&D another Maybe factor estimate should that basis

Mikael Bratt

is And here now, – increased course, of engineering towards I are think always the between have and to step performance we it indicated QX. And sales QX is full-year we key see factors also biting. its' quarters, the the the in combination we here, then And programs part here with results to our in conducting. income. that year and up get as giving sale that R&D, this effects here efficiency that increased for is, guidance seasonality of the

there. the but factors here, main that's the I'll math let do you So,

Joseph Spak

process? Okay. force. you direct Maybe have also on Can looks work got maybe indirect – where update It the you then are comments XXX I like in the appreciate another just that you the employees. us workforce, on

Mikael Bratt

our we something assessed meet our customers. very all That's commitment have that Yeah. is close the and resources requirement have to. we Constantly needed plants to the capacity towards

quite showing a they top sure think demonstrating is constant and here. the to the a with in on therefore, and demands are that changing different it we flexibility about process ongoing to is And lot here. the meet balanced that we make proactiveness that plants of agility our area. are that And, organization talk good well So, in I

managing are a way. that we that feel I in So, good

Joseph Spak

see That's the how you there's environment… sort no of sort there? of flexible with target So,

Mikael Bratt

plant is flexibility, direct part a it improvements. have no that It we comes And, of always per course, with when is sure intensively working of target as said. we do, making workforce. as There to I productivity absolute

business, so in extra speak. face try there, our an it So, gear normal support And, to we we of our these headwinds, you could to support course, but of put that when say business. daily

Joseph Spak

Right.

went and IHS the is you built out, off forecasts the I of conservatism. Finally, some your as more India, think through offs about you guidance you areas call I know called Japan, and maybe talked Korea,

Just to and curious about your guess, thoughts, because as IHS on there China Europe shutdowns hearing we're I on well relative fourth some talk quarter. plant of the on

So, outlook that your into factored as well? is

Mikael Bratt

Yeah.

the I the think here. we LVP across see weaker across demand board

I out we the actually now called think here that they have hold ones these the up countries longest. because are

forth. If due partly look Japan here. and say in pre-tax quarter. the growing to still Japan Hence, the so you you at third And was could

a comes to So, regions and here, shift it rest we increasing when of bigger the it's see the And there. reductions. negative still

So, that is…

Joseph Spak

you line regions? those IHS in are for But other with more

Mikael Bratt

IHS front exactly the in here, how When up we we region link the and offs here. us to region by call on. disclose a so we we of don't We at have have quarter look

it's about, you'll anything us, our closure, customer et of terms in cetera, So, course, of dialogs. tangible for plant in hear very

happening, see coming So, when for that we say that course, quarter. it's, to part of of a I want is what just the

Joseph Spak

much. Okay. very Thank you

Operator

Okay.

Rakesh Vijay from the next from of question Mizuho. line comes Our

line now Your open. is

Vijay Rakesh

Yeah. Hi, guys.

of couple a questions. Just

just stimulate better if comps mentioned provinces at given out, XXXX But think I you to LVP look trying on you figure doing LVP, was how I XXXX, bit things from start perspective, but side multiple little a a at were not to was. there's the discounts as up. it's picked to bad you China, look should look

was what in I drives LVP Thanks. next year. better into wondering China So,

Mikael Bratt

Yeah.

I to have out a would we we too early think of view said,. high the that here haven't way commented with As on terms XXXX uncertainty because I strong play have. XXXX how on it's in demand

right to need across on board. many creates parts is back that we uncertainty this that. there But think now the to I So, wait moving come

are on some pushing have around ones. in restrictions new if We there there countries, are the and restrictions meaning drivelines, – driveline, everything traditional any for the

VI. We have invest new in then, you to China as difficult have, have that situations a vehicle specifically offset in to Then mentioned, China also we where China maybe the have people V vehicle. that the

So, little also the surrounding that the landscape that's have And, changed bit. course, here. we situations of geopolitical a China

as well issue the as So, driveline altogether. there

So, parts that needs I think, we some there is before to here. so to, have more many settled moving be clarity

to back to quarter. have come that the in next So, we

Vijay Rakesh

just know Got would I it's as this important year? or was year, much year I with geography the this Europe headwind. Western there issue look you that for Thanks. look you or carbon – obviously, new saw at huge it. what And Is think WLTP Europe next regulations an any When we at you. than more be a benign

Mikael Bratt

adds depending respective look there. to in to you of course, targets in the And restriction uncertainty well vehicle year implication more a think of I the different consumer speak. and that OEM buy think new starting here mix that. which planning fleet for how to terms the then, is think also And the the nature, tax of are environment is the But the meet I to their legislation next will so that I like. the of comes to how mix the of on

and would it little for I So, bit as see say, a right we perhaps many consumers, see now. wait

Vijay Rakesh

Got it. Thanks.

Mikael Bratt

But in test the was same WLTP it's very terms when think of individual it, OEM. the But meeting I the as was it of question cycle. on kind it's not at

Vijay Rakesh

Okay. Thanks.

Mikael Bratt

Thank you.

Operator

Okay.

the from SEB. comes of Erik question next Golrang Your from line

Your now line open. is

Erik Golrang

have questions. you. Thank two I

high intake the of an the dates previously. for year And market this for sort total the Was is on extraordinarily back The level that order first market? availability of order it up XXXX a orders one had follow you or to XXXX.

Mikael Bratt

it a year. high Yeah. was, Extraordinary. know I don't what

yes. say would I So,

Erik Golrang

terms have that been customer high window. the times, of an you've also at talking very bit of then, some sort And IHS you've you. weaker year for Thank a about – bit than markets guess, a than continued volatility and about now you've Has unchanged call changes very in had with offs, so I But, being pace? closed on. lead with second question, talked indicated the more very within short a even

Mikael Bratt

it No, during Then, in very fashion there. the the last especially as autumn had the year. challenging we Europe WLTP was situation same not during

this falling, more notice. it's it as So, a year, trend, it's more down. with course, But But, still volatile. falling comes shorter not than… the of It's market it's less going is up but or like

Erik Golrang

Okay. second and year half year not [indiscernible] last versus half? it's compared really first to this

Mikael Bratt

last compared really it's No, year. to

Erik Golrang

it. you. That's Thank

Mikael Bratt

you. Thank

Operator

Okay.

of line Your next from question comes from Deutsche Bank. the Rosner Emmanuel

Your is open. now line

Unidentified Participant

Good for on morning. Two Edison [ph] Emmanuel. questions. It's

mats It maybe raw the FX. XQ kind margin. quarter. the on about looks the the impact just in from like, us especially in think Can First, still mats the you material the and the third help raw costs, were of pretty launch

we So, should just how kind about that? think of

then, it organic on XQ. growth second looks pretty Thanks. like in in call was there? Anything Europe And the out to weak question, the

Mikael Bratt

we QX. same we a were off matched me the there. start were in overall what's the temporary start question vehicle had issues see end some Europe and as And just the production Yes, we with in to coming contributed from this than is light and mix production and third we with of platforms production situation the with there. Let where weaker second in also of that producer quarter, were that not

it we So, so to when direction the we here. be increasing sales supporting of expect when overall the quarter, fourth to on to company then track, speak, the get back into comes our

a So, say. temporary could question, mix you

Christian Hanke

quarter impact we've – bps communicated backwards, you a year for previous bps. to of commodity of think you if then, material. because capture for guided And I so fourth for raw in sort – of Yeah. around the materials, slight then math quarters, Mikael, the what the raw result do that of the would we've that for a of XX terms in XX QX or now terms in And cost at lower sort know the full

improvement be – an quarters. So, should what we've in that been compared the to where previous

addition already terms in third said that's of the So, to what Mikael over fourth quarter. improvement quarter has margin in

Unidentified Participant

costs On the the and launch FX?

Christian Hanke

compared we terms last expect year. neutral. we in that launch that to improvement will third FX, be quarter year. of I showed to the throughout to And has continue bridge think, an think been costs, that and be an already And the relatively in improvement I

Unidentified Participant

Great, thanks.

Operator

Okay.

line Sascha of Jefferies. Gommel the from Our next comes from question

Your open. line is now

Sascha Gommel

Yes, questions. good you Thank afternoon. taking for my

me a be cash cash income my first flow. are And help your the of costs your lower booked $XX million separation you is, had little only cost last provision. explanation the are non-cash you The bit actually because QX you've would a net year. some the can Maybe for also and understanding understand flow into in one on

the maybe cash So, context understand I flow of just year-on-year said. help in a bit free what you little me can swing

Christian Hanke

are that quarter? is that you for quarter… the Or looking – the on Is

Sascha Gommel

Purely quarter. the on quarter. the On

Christian Hanke

really think driver I year-on-year. the So on… the But big earnings is

Sascha Gommel

down only is EBIT adjusted million. $XX your But

much quarter. of restructuring how – in already in cashed the of the the are So, costs or

Christian Hanke

much cash the quarter Not in of in that of taken. charges terms we've

I sort really it's EBIT think of driven. the So, underlying

Sascha Gommel

Okay.

Christian Hanke

because be driven another last actually, – year, could we component the compared more cost think by was in I tax driven to by quarter tax alignment And that negative this booked. capacity

Sascha Gommel

Understood.

Okay. And then, your GM my of includes weeks to guidance six strike second half. the confirm, question, for second just

correct? and So, in two in QX. QX That's four

Christian Hanke

the year. for – our we what in incorporated [indiscernible] That's

Sascha Gommel

Okay, understood. very Thank much. you

Operator

Okay.

line of Rod Our next the from Research. Wolfe Lache question from comes

line Your open. now is

Shreyas Patil

This Hi. on Rod. Patil Shreyas for is

Mikael Bratt

Hi.

Shreyas Patil

about the commodities? of much just I'm some reset thinking longer-term I and One, about there quick headwind of that year. commodity to how just a a mentioned agreements that this couple side, on questions. of point I a XX couple – full is be Is to for is how think example, for related of spot of you the steel, to the had it's on a related would way had to much likely end going basis prices your year? main at

Mikael Bratt

Yeah.

at I because very we we think, all is really much here. through general will the say can't a look raw our suppliers prices majority at of the rule, – material spot – really you as that

month down. six nine a up way to have the delay on way the and on we So,

expecting So, that's to before, raw that to absolute you're as for what the the that have start and we how seeing materials the here. steel us. here see that's for And is on off. talked And it comes big works nylon when to what we're is come and us commodities about mechanics majority

Shreyas Patil

Okay.

prior, So, of commodity a nine will basically, me at that look to should prices give sense if prices now I months six how fluctuate? or costs

Mikael Bratt

on. A you when contract terms, do the it depending exactly. it's And say, here. is map up complicated – rough really what more But, practical you're probably would it's because it feeling, take it of Yeah. will so from conceptually, time on and sign to in it long beginning the is because course, I a saying

see look can at delay look when yeah. you but can and it But You overall. be a that is more a there the details, little bit complicated,

Shreyas Patil

that it quarter. On in thinking I'm the should year-over-year little up by then of a believe to are was was guidance in think be it we for you XXXX looks was where in about the mentioned back R&D about bit Okay. one. – How XXXX. to R&D longer prior And was we just R&D, I decline trying given like just that. last it spending term. context

Mikael Bratt

be should Yeah. absolute said X% now X% range should have decline start will to in be coming of of amount. And to very we But, it course. – not down sales. course, that, affects in gradually relation sharp in in to sales, that see with Medium-to-long-term a market, of we the

are working really with think under we those scrutinizing circumstances, RD&E. inside I and efficiency hard

think because remember order I there line also holding should to book. in and the that good XXXX/XXXX order we levels since So, our have orders continuing is here we take are building good happened [indiscernible] are what we communicated intake this on what we

also activities means our growing that that So, are here. we

X%. long-term but to bit So, I are in medium to tougher, here. it would of little of still becomes committed absolute we And, sales, relation the in a say, amount, to the course, range holding to line we're X%

Shreyas Patil

Okay, thank you.

Operator

Okay.

comes next the from of question Our Brian Barclays. line from Johnson

Your line open. is now

Steven Hempel

Hempel Hi. for This on Steven team. Brian. Good afternoon, is

of here. questions couple Just a

either content way or sales expectation down X% versus growth? the kind any of there for full gains quarter share of is you for – to In of can terms the roughly market the X%, break that into outperformance year

And thinking headwinds continue to into then, then in be you about? thinking for we and percentage that XXXX, also, or for terms how expect then X the any outperformance that to about year? And of the full think that full tailwinds to about X year, do just to major getting up that should points kind of

Mikael Bratt

certainly in market continue down taking share as we that can we for to are I don't from okay, of we exactly so And indicated moved all, think increase the years here XXXX here, share the that But the different see sure. have and it it's book. to came we I for market with our you here. come details what is order share what here we on, in XX%, we break in first here to in up XX% and moving mid-XXs towards

that So, what's happening. is

overall a is the vehicles. in of the also combination course, of then, And growth content

As CAGAR we have talked here. X% about, that should be year-by-year

course, long-term to look that the think a see medium important But the share here market So, that's, at the amount of dollar is market it's we you underlying increasing also growing. and is well. – component I total when as long-term the

Steven Hempel

just Okay. out then at here there breaking cost cycle terms X the headcounts versus it indirect And buckets, is two reduction, you're being by looking efficiency. those within And slide structural out management by in of business both. taken

of business efficiency. if you versus any headcount cycle on part wonder being as structural Just the that's color out the indirect the provide could taken

Mikael Bratt

No.

structural. X, We structural that expect really see program, – page what is the you on efficiency

long-term So, that efficiency that. effect is on a

question asked cycle that – management. business on So, the you is not

we which as a is forward. that we go structural So, intend to capitalize change

Steven Hempel

headcount in as as slide If well you indirect taken out X, being the the efficiency. at cycle, there is look structural business in both

how kinds management or programs? So, programs that think indirect to headcount between just about of wondering different those two

Mikael Bratt

majority of as here. expect answer business We, going here. of still of to the gain structural is a also cycle think part we management staying improvements that same forward the effects have I the the course, here, the

to very the but of it's that operations. unless bucket. in if That we some you that, be a So, have back, support strategically to uptick, to headcount it's same otherwise be might indirect not add means have that is actually close automatically significant there back added

Steven Hempel

Okay.

overall structural program, of upon going kind are flat reduction, efficiency isn't X% that's next change volumes X% down or to basically year, volumes. up independent So, that or the If really the number much?

Mikael Bratt

That's truly independent.

Steven Hempel

it. Got

Okay. taking questions. for the Thanks

Mikael Bratt

Thank you.

Anders Trapp

have think questions. take cannot we I more to any that –

We have have o'clock which a hard X passed stop now. at

So hand you, we to – back Carl. it I

Operator

sir. Sure,

does Okay. conference today. for participating. Thank our for That conclude you

disconnect. all You may

Autoliv (ALV) 25 Oct 192019 Q3 Earnings call transcript