Financial Report April - June 2019
Financial Summary - Q2'19
- Results slightly better than our internal expectation
- Net Sales $489 million
- Net Sales decline 14%, Organic Sales decline 10%
- Active Safety Net Sales decline 14%, Organic Sales decline 9%
- Operating cash flow $(70) million
- LVP decline in the mid-single digits versus 2018
- Organic Sales decline in the high-single digits versus 2018
- Currency translation impact on sales ~(2)% versus 2018
- Operating loss improvement during H2'19 versus H1'19
- Cash flow expectation for FY'19 remains on track
- Successful capital raise in May 2019, gross proceeds of $627 million including both Common Stock and Convertible Senior Notes
- Resolved VNBS joint venture funding issues during the quarter, acquired Nissin Kogyo's 49% interest in the JV's US operations
- Market adjustment initiatives delivering results: strong working capital performance drives better than expected cash flow and sequential improvement in RD&E gross cost
- Q2'19 order intake in line with our expectations, LTM more than $1 billion average annual sales with Active Safety ~75%
Comments from Jan Carlson, Chairman, President and CEO
The fusion of the automotive and technology industries is continuing, and this quarter we saw the pace of change accelerating, with new alliances and partnerships being formed on almost a weekly basis. Industry announcements and statements during the quarter also confirmed that the main trend for the decade to come is collaborative driving, with fully autonomous vehicles only playing a significant role towards the end of the next decade. This clear shift in industry focus toward advanced driver support systems plays into the strengths of the Veoneer product portfolio which is supported by the continued expansion of our customer base.
The rapid introduction of new technologies in the automotive industry creates tremendous opportunities, but also challenges in ensuring that the technology is safe, robust and user-friendly enough to be implemented in millions of new vehicles. The weakness in the global light vehicle production is currently impacting us and while market forecasts still anticipate the second half of 2019 to be somewhat stronger than the first, it is a less pronounced comeback, coupled with increased uncertainty, than what was anticipated a few months back.
With this as a backdrop, I am quite pleased that the results for the second quarter were better than we earlier indicated due to the strong execution of our market adjustment initiatives including:
- cash flow was significantly better than expected due to diligent management of working capital and capital expenditures,
- early positive results from engineering process improvements, built on broader platform reuse, has led to productivity and efficiency increases resulting in a lower RD&E cost run rate, and
- the initiation of a partnering model in the area of data annotation activities, which is part of our initiative to drive efficiencies.
We executed two key strategic projects during the quarter. First, and most importantly, we completed a successful capital raise of $627 million through the sales of a combination of common stock and convertible senior notes. This raise, which was oversubscribed by approximately three times, provides us with the financial stability needed to execute on our strong order book, while at the same time enabling Veoneer to become an agile leader in the new autotech industry. Secondly, we resolved the short-term funding issue in our brake control joint venture VNBS and in mid-June we acquired 100% of the entity responsible for its US operations. This successful resolution better positions us to continue with our strategic review of options for VNBS and will allow us to act quickly once the path forward is decided.
Our technology development is also progressing rapidly. This quarter we saw the first on-road public demonstration of the full Zenuity software stack integrated with Veoneer’s computing solution and sensor suite - an important milestone for our company. In the second half of 2019 the business environment is likely to be tougher than previously anticipated. We remain fully focused on securing $1.2 billion in order intake, executing on our current customer programs and upcoming important launches, delivering on our market adjustment initiatives program and gradually returning to organic growth with improving EBIT and cash flow in 2020.
I would like to end by thanking our owners, employees and partners for being committed and supportive through Veoneer’s development into one of the global autotech leaders.
Thomas Jonsson - EVP Communications & IR, +46 8 527 762 27 or firstname.lastname@example.org and
Ray Pekar - VP Investor Relations, +1 248 794 4537 or email@example.com. Inquiries - Company Corporate website www.veoneer.com.
This report is information that Veoneer, Inc. is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the EVP Communications and IR set out above, at 12:00 CET on Friday, July 26, 2019.
An earnings conference call will be held today, July 26, 2019 at 14:00 CET. To follow the webcast or to obtain the phone number/pin code, please see www .veoneer.com. The slide deck will be available on our website prior to the earnings conference call. See also the Non-U.S. GAAP Financial Measures section on page 10 of this earnings release for further disclosures.
1For these non-U.S. GAAP financial measures, see the reconciliation tables in this earnings release, including the Non-U.S. GAAP Financial Measures section on page 10. See the Non-U.S. GAAP Financial Measures section for further discussion of the forward-looking organic sales non-U.S. GAAP financial measure.