Financial Report October - December 2018
Financial Summary - Q4'18
• Consolidated Net Sales $535 million
• Net Sales growth (10)%, Organic Sales* growth (9)%
• Active Safety Sales growth 1%, Organic Sales* growth 3%
• Operating Margin (14)%
• Light vehicle production slightly down as compared to 2018
• Organic Sales* are expected to be flat to decline slightly versus 2018
• Currency translation impact on sales ~(2)% versus 2018
• Operating margin weaker during H1'19, with improvement in H2'19
• FY'18 record order intake for Veoneer was more than $1.2 billion average annual sales, estimated lifetime order value ~$5.9 billion
• FY'18 record order intake for Active Safety close to $900 million average annual sales, estimated lifetime order value ~$3.8 billion
• Awarded a significant LiDAR contract with a major global OEM for an autonomous vehicle application
• Hired ~350 engineers in RD&E during the fourth quarter and ~1,100 during FY'18 to prepare for future organic sales* growth
• Organization refinement in combination with our market adjustment initiatives is expected to deliver efficiencies, agility and stronger customer engagement
For Key Figures summary table, please refer to attached file below.
Comments from Jan Carlson, Chairman, President and CEO
The environment around us is rapidly changing and we currently see a shift across the automotive and autotech industries. New technologies, creating new levels of interaction and driver support are starting to revolutionize driving, but we also see the driver being actively involved for years to come. We call this Collaborative Driving; the industry also calls it “Level 2+” driver support. At the same time there is also a growing realization that the introduction of truly self-driving cars will likely take longer and be more expensive than previously anticipated. This fundamental insight opens up new opportunities for companies, including Veoneer, but it also requires a reprioritization of resources.
In the near term there is also an increased uncertainty regarding the development of global light vehicle production (LVP). During the fourth quarter of 2018 we saw a sharp decline in the LVP in China and Western Europe and we anticipate that these markets will continue to show weakness in the first half of this year. We expect the situation to improve in the second half, but we currently expect a slight decline in the global LVP for the full year 2019.
In response to the larger role in the market for Collaborative Driving, the expected delay of self-driving, and the weaker LVP trend, we are actively reviewing our investment priorities and the focus of our product portfolio. Our purpose is to identify the most effective way to allocate talent and capital to meet these new market realities. In December we refined our organization to create a more agile and focused company, and during 2019 we expect our renewed organization, combined with other initiatives, to gradually start delivering efficiency gains and stronger customer engagement.
We expect the combined effects of a stronger LVP and new program launches in the second half of the year combined with our own efficiency and prioritization initiatives to start to lead to improved cash-flow in the latter part of the year. Assuming successful execution of these initiatives, we expect our net cash to cover our funding requirements until the Company reaches positive cash flow. However, additional funding may be required if order intake increases beyond our expectations, if the underlying near-term business conditions deteriorate further, or if we make acquisitions.
We build our 2019 plan on a strong base. In 2018, our order intake grew strongly to a record lifetime order value of close to $6 billion. Active Safety orders almost doubled, and we expanded our Active Safety customer base from 9 to 12 car manufacturers. From a product perspective, I am particularly pleased with the strong market and customer reception of our vision products based on Veoneer’s internally developed software algorithms and the fact that we won our first major commercial LiDAR order with a global OEM.
We move forward in 2019 with a strong focus on capturing the opportunities in a new industry situation. By balancing growth, cost, and effective capital allocation we are building a focused, industry leading product portfolio, all with the objective to make Veoneer the leading company in our chosen business segments.
An earnings conference call will be held today, February 13, 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.
*For these non-U.S. GAAP financial measures, and any others marked with an “*” throughout this earnings release, 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.
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 Wednesday February 13, 2019. Inquiries - Corporate website www.veoneer.com.