Autoliv Earnings Beat but Sales Decline - Analyst Blog
April 29 2013 - 4:29AM
Zacks
Autoliv Inc. (ALV) recorded earnings of $1.29
per share in the first quarter of 2013, beating the Zacks Consensus
Estimate by a couple of cents. Earnings improved 20.6% from $1.07
per share in the first quarter of 2012 due to a 46 cents effect
from lower capacity alignments and antitrust investigations costs,
partly offset by lower underlying operating profit of 24 cents.
Consolidated revenues slid 2.0% to $2.1 billion due to negative
currency effects and a small divestiture. Excluding divestitures
and effects of currency exchange, organic sales fell by slightly
less than 1.0%.
However, operating income grew 19.0% to $182.4 million or 8.5% of
sales due to a $59 million reduction in costs for capacity
alignments and the antitrust investigations. Excluding capacity
alignment and antitrust investigations costs, operating margin was
8.8%, which was higher than the company’s guidance on account of
better than expected sales performance.
Segment Results
Sales of Airbag products (including steering wheels and passive
safety electronics) dipped 2.7% to $1.4 billion. Excluding negative
currency effects, airbag sales declined organically by slightly
less than 2% due to the declines in light vehicle production (LVP)
of 12% in Western Europe and 16% in Japan.
Sales of Seatbelt products slipped 2.9% to $688.6 million driven by
a small divestiture in 2012 and negative currency effects.
Excluding these effects, organic sales fell 1% primarily due to the
drop in LVP in Western Europe.
Sales of Active safety products (automotive radar and night vision
systems) surged 33.2% to $63.4 million, mainly due to new radar
business with Daimler’s (DDAIF) Mercedes, which is
rolling out collision prevention assist across most of its
platforms.
Financial Position
Autoliv had cash and cash equivalents of $990.5 million as of Mar
31, 2013, up from $732.0 million as of Mar 31, 2012. Total debt
reduced to $633.1 million from $678.0 million as of Mar 31, 2012.
Consequently, debt-to-capitalization ratio declined to 14.3% from
16.5% as of Mar 31, 2012.
In the quarter, the company’s cash flow from operations improved to
$140.8 million from $98.0 million a year ago, due to higher
profits. Capital expenditures (net) increased to $86.0 million from
$78.4 million in the prior-year quarter.
Guidance
Autoliv expects consolidated and organic sales growth of 3% in the
second quarter of the year, with an expected operating margin of
8.5%, excluding capacity alignments and antitrust investigations
costs.
For full year 2013, the company anticipates organic sales growth in
the band of 2% to 4%, a slight upward revision from the previous
outlook of 1% to 3%.
Our Take
Autoliv has a stable market share in both airbag modules and seat
belts in North America, Europe and Asia. The company has
continuously expanded in low-cost countries, including Romania and
China, in order to meet local demand and to consolidate
manufacturing from high-cost countries.
However, we are concerned about the company’s increased raw
material costs. Further, the company faces significant customer
concentration risks as its top-5 represent about 60% of sales.
Currently, the company retains a Zacks Rank #3 on its stock, which
translates to a Hold rating for the short term (1–3 months). Other
stocks that are performing well in the industry include
Tower International, Inc. (TOWR) and
STRATTEC Security Corp. (STRT). They carry a Zacks
Rank #1 (Strong Buy).
AUTOLIV INC (ALV): Free Stock Analysis Report
DAIMLER AG (DDAIF): Free Stock Analysis Report
STRATTEC SEC CP (STRT): Free Stock Analysis Report
TOWER INTL INC (TOWR): Free Stock Analysis Report
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