Financial Report April – June 2021
Stockholm, Sweden, July 16, 2021
(NYSE: ALV and SSE: ALIV.sdb)
Q2 2021: Recovery in a challenging environment
Financial highlights Q2 2021
$2,022m net sales
85% organic sales growth*
8.1% operating margin
8.2% adjusted operating margin*
$1.19 EPS - an increase of $3.19
$1.20 adjusted EPS* - an increase of $2.60
Full year 2021 indications
Around 20-22% net sales growth
Around 16-18% organic sales growth
Around 9-9.5% adjusted operating margin
Key business developments in the second quarter of 2021
- Strong organic sales growth* in all regions, except China, as global LVP grew by 52% vs. Q2 last year (according to IHS Markit June 2021). Sales increased organically by 85%, outperforming global LVP by more than 33pp, largely due to launches and positive vehicle and geographical mix effects. All regions except Rest of Asia outperformed LVP by 4-38pp. Sequentially, LVP declined by 8% compared to Q1 2021.
- Major profitability improvement, mainly driven by the strong sales growth. Adjusted operating margin* improved by 24.6pp to 8.2%. ROCE improved to 17.7% and ROE improved to 16.3%.
- Improved cash flow and balance sheet. Operating cash flow increased to $63m while free cash flow* was negative $33 million. Net debt* declined substantially and our leverage ratio* improved to 1.1x. Quarterly dividend of $0.62 was declared for Q2 2021.
*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.
|(Dollars in millions, except per share data)||Q2 2021||Q2 2020||Change||6 M 2021||6 M 2020||Change|
|Operating income (loss)||$164||$(234)||n/a||$401||$(99)||n/a|
|Adjusted operating income (loss)1)||$166||$(172)||n/a||$403||$(36)||n/a|
|Operating margin, %||8.1||(22.3)||30.4pp||9.4||(3.4)||12.8pp|
|Adjusted operating margin, %1)||8.2||(16.4)||24.6pp||9.4||(1.2)||10.6pp|
|Earnings (loss) per share, diluted2, 3)||$1.19||$(2.00)||n/a||$2.98||$(1.14)||n/a|
|Adj earnings (loss) per share, diluted1, 2, 3)||$1.20||$(1.40)||n/a||$2.99||$(0.53)||n/a|
|Operating cash flow||$63||$(128)||n/a||$249||$28||795%|
|Return on capital employed, %4)||17.7||(25.0)||42.7pp||21.8||(5.3)||27.1pp|
|Adjusted return on capital employed, %5)||17.8||(18.2)||36.0pp||21.9||(1.9)||23.8pp|
|1) Excluding costs for capacity alignment. 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. 5) Annualized operating income and income from equity method investments, relative to average capital employed. Non-U.S. GAAP measure, see reconciliation table.|
Comments from Mikael Bratt, President & CEO
The COVID-19 pandemic continues to affect us in several ways. Supply shortage of semiconductors resulted in a Q2 global LVP that was 8% lower than what was expected at the beginning of the quarter, and 8% lower than the first quarter (according to IHS Markit, June 2021). The lower than anticipated LVP, along with the material changes in customer call offs with short notice, negatively impacted our sales and profitability in the quarter. The low visibility of these changes prevented us from using furloughs effectively to mitigate the effects of the lower customer demand. Although the situation improved towards the end of the quarter, we still expect supply disruptions to impact LVP negatively in the third quarter with some improvement in the fourth quarter.
I am pleased with our strong sales growth and outperformance vs. LVP in Q2, and the level of our order intake for the first half of the year. I am also pleased with our leverage ratio* coming down to 1.1x and that we reinstated a quarterly dividend.
We took an important sustainability step in the quarter when we announced ambitious climate targets. This includes plans to become carbon neutral in our own operations by 2030, aiming for net-zero emissions across our supply chain by 2040, and committing to the Science Based Targets initiative.
Raw material prices have continued to increase, with some key commodities increasing by more than 20% in the past three months and despite significant mitigation actions, we now expect raw material cost for the full year to amount to around 130 basis points operating margin headwind.
We continue to be diligent in our cost control to manage demand volatility. However, as a result of continued demand and supply chain uncertainty, we are adjusting our full year indication. Based on an assumption of 9-11% global LVP growth for the full year 2021, we expect an organic sales growth of around 16-18%, and an adjusted operating margin of around 9-9.5%.
We also continue to drive forward with our strategic initiatives, such as increased digitalization and automation of the value chain, which are yielding good results. Our internal progress and a light vehicle market outlook with a production recovery in the next few years makes us confident of our 2022-24 targets of average annual 4-5% growth over LVP and 12% adjusted operating margin. We will elaborate on this and our long-term opportunities at our virtual CMD on November 16, 2021.
Inquiries: Investors and Analysts
Vice President Investor Relations
Tel +46 (0)8 5872 0671
Director Investor Relations
Tel +46 (0)8 5872 0614
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 16, 2021.