Autoliv (NYSE:ALV) released first-quarter financial results and hosted an earnings call on Friday. Read the complete transcript below.
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Summary
Autoliv reported a strong first quarter for 2026, with sales exceeding expectations due to strong March performance and productivity improvements.
The company’s growth in Asia, particularly in China and India, was notable, with sales in India growing by 38% organically.
Despite a 4% decrease in adjusted operating income, Autoliv maintained its full-year guidance of flat organic sales and an operating margin of 10.5-11%.
Operational highlights include the introduction of the first airbag for motorcycles and a complete wearable airbag solution.
The company continues to focus on strategic cost reductions and optimization to offset raw material headwinds, estimated at $90 million.
Autoliv paid a dividend of $0.87 per share and paused buybacks but remains committed to its $2.5 billion share repurchase authorization through 2029.
Management highlighted the resilience of cash flow generation across economic cycles and maintained a positive outlook despite geopolitical uncertainties.
Full Transcript
OPERATOR
And thank you for standing by. Welcome to The Autoliv Inc. First Quarter 2026 Financial Results Conference call and webcast. At this time, all participants are in a listen only mode. After the speaker’s presentation, there will be a question and answer session. To ask a question during the session, please press Star one one on your telephone. You will then hear an automated message as your hand is raised to withdraw your question, please press Star one one again. Please note that today’s conference is being recorded. I would now like to turn the conference over to First Speaker, VP Investor Relations. Please go ahead.
Anderstrap (VP Investor Relations)
Thank you Razia. Welcome everyone to our first quarter 2026 earnings call. On this call we have our President and Chief Executive Officer Mikael Bratt, our Chief Financial Officer Monica Gramma and I am Anderstrap, VP Investor Relations. During today’s earnings call we will highlight several key points: our strong performance in a challenging market environment, our full year guidance, the potential impact of ongoing and new geopolitical challenges, an update on the latest market developments, and finally an overview of our continued strong shareholder returns. Following the presentation we will be available to answer your questions. As usual, the slides are available on autoliv.com Turning to the next slide, we have the Safe Harbor Statement which is an integrated part of this presentation and includes the Q and A that follows. During the presentation we will reference non-U.S. GAAP measures. The reconciliations of historical US GAAP to non use GAAP measures are disclosed in our quarterly earnings Release available on autoliv.com and in the 10Q that will be filed with the SEC and at the end of this presentation. Lastly, I should mention that this call is intended to conclude at 3:00pm Central European Time, so please follow a limit of two questions per person. I now hand over to our CEO Mikael Bratt.
Mikael Bratt (President and Chief Executive Officer)
Thank you Anders. Looking on the next slide, the first quarter exceeded our expectations driven by strong sales in March. Operational performance was also ahead of plan, supported by solid productivity improvements, partly reflecting reduced call off volatility. Our positive trend in Asia continued with strong growth in India, South Korea and China. In China we continued to grow faster than light vehicle production, especially with the Chinese OEMs outperforming by more than 40 percentage points. In India, we grew sales by 38% organically, reflecting mainly the trend of increased safety content in vehicles in India, but also the continued high level of light vehicle production growth. Underlying profitability improved with gross Profit increasing by 10%, although adjusted operating income was slightly lower due to temporary lower RD and E reimbursements and a one time income in Q1 last year. In the quarter we paid a dividend of US$0.87 per share representing a total payout of US$65 million. Buybacks were paused as the company was in a restricted period following multiple filings and the announcement of a new CFO. Our 2.5 billion US dollar share repurchase authorization through 2029 remains unchanged with the Ambition annual share repurchase between 300 and 500 million US dollars. Hostilities in the Persian Gulf had a limited impact this quarter and we are continuously monitoring any potential wide reaching impact on the industry. Based on what we know today, we reiterate Our full year 2026 guidance of flat organic sales. With continued significant outperformance of light vehicle production in both China and India, we continue to expect an adjusted operating margin of around 10.5 to 11%. This is based on the assumption that light vehicle production will decline by around 1% and that the gross headwind from raw materials is around US$90 million. I am also pleased that we introduced our first airbag for motorcycles as well as our first complete wearable airbag solution for motorcycle riders, building on our long term strategy of growing outside our traditional core business. Looking now on the next slide, first quarter sales increased by approximately 7% year over year driven by strong outperformance relative to light vehicle production along with favorable currency effects and tariff related compensations. The adjusted operating income for Q1 decreased by 4% to US$245 million compared to a strong first quarter last year. The adjusted operating margin was 8.9%, 1 percentage points lower than in the same quarter last year. Operating cash flow was a negative US$76 million, a decrease of US$153 million compared to last year. The lower cash flow was mainly driven by a temporary negative working capital impact from strong sales towards the end of the quarter as well as other temporary effects that are expected to reverse later in the year and the normalization of payables from year end. Looking now on the next slide, we continue to deliver broad based improvements with particularly strong progress in direct costs. Our positive direct labor productivity trend continues. This is supported by the implementation of our strategic initiatives including optimization and digitalization. Gross Profit increased by US$48 million and the gross margin improved by almost 60 basis points year over year. RD&E net cost rose year over year primarily on negative currency translation effects and lower engineering income due to timing of specific currency. Customer development project SGA costs increased by 16 million US dollars mainly due to negative currency translation effects. Higher costs for personnel and non recurring costs of US$4 million. Looking now on the market development in the first quarter on the next. According to S and P Global data from April, global light vehicle Production declined by 3.4% in the first quarter, slightly better than earlier expectations. The modestly stronger than expected outcome was mainly supported by Europe in March and rest of Asia. The decline in global light vehicle production was primarily driven by China. India contributed positively to global light vehicle production performance, benefiting from substantially lower taxes on new vehicle purchases. As an effect of the declining light vehicle production in China in the quarter, the global regional light vehicle production mix was approximately 1.5 percentage points favorable during the quarter. Volatility improved despite higher than expected call offs in March. We will talk about the market development more in detail later in the presentation. Looking now on our sales growth in more detail on the next slide, Our consolidated net sales were almost US$2.8 billion, the highest for a first quarter yet. This was around US$175 million, higher than last year, mainly driven by US$154 million, positive kerosene translation effect and US$14 million from higher tariff related compensation. Excluding currencies, our organic sales grew US$21 million or by 80 basis points including tariff cost compensation. Based on the latest light vehicle production data from S and P Global, we outperformed the market by over 4 percentage points. Globally. Our outperformance was significant in China and Restoration. In rest of Asia we outperformed the market by 7 percentage points, driven by continued strong sales growth in India where we outperformed by close to 30 percentage points. South Korea and the Asian sub region also contributed to the outperformance, partly offset by Japan. In China we outperformed overall with 15 percentage points, mainly driven by sales to Chinese OEMs that outperformed light vehicle production with over 40 percentage points. Despite light vehicle production decline in China, China increased its share of our sales to 18% versus 17% a year ago. Asia excluding China accounted for 20%, Americas for 31% and Europe for 30%. On the next slide, we will look more on our growing business in India. Autoliv is rapidly expanding its business in India, securing its market leadership. India now represents almost 6% of Autoliv’s global sales, which is almost triple what it was in just three years ago. Fuelled by regulatory focus and rising consumer demand for safety. Safety content in vehicles has increased by around 20% annually for the past two years in India. Autoliv operates five manufacturing plants, a technical centre and a global support engineering center with more than six associates in total. To further strengthen our footprint, Autoliv recently opened a new inflated plant to meet growing demand for airbags from both India and other Asian markets. Autoliv’s largest customers in India, including Maruti, Suzuki, Hyundai, Mahindra and Under, reflecting the company’s strong position among leading vehicle manufacturers in the country. Looking now on the next slide, the first quarter of 2026 saw a relatively high number of new launches, primarily in China with both Chinese and other OEMs. These new China launches reflect strong momentum for autoliv in this important market. Higher content per vehicle is driven by front center airbags on many of these new vehicles. In terms of Autoliv’s sales potential, the Nissan Voracia is the most significant in the quarter. Here you also see the Yamaha Tri City 300 commuter scooter. For rest of 2026, we expect a high number of new product launches mainly driven by Chinese OEMs, offsetting fewer launches in America and Europe. Let’s continue with the next slide. Before I’m moving on, I’d like to introduce our new CFO Monika Grammer. Monika joined AutoLeave in 2009 and has been instrumental in strengthening the EMEA division during a particular challenging period for the automotive industry. I am very pleased to welcome her to the executive management team and looking forward to her continued contributions in her new role. I will now hand it over to Monika.
Monika Grammer
Thank you Michael. I will talk about the financials more in detail on the next slide. Turning to the next slide, this slide highlights our key figures for the first quarter of 2026 compared to the first quarter of 2025. Our net sales were almost 2.8 billion, representing a 7% increase. Gross profit increased by 40 million 48 million US dollar and gross margin increased by almost 60 basis points compared to the prior year. The drivers behind the gross profit improvement were mainly positive. FX translation effects improved operational efficiency with lower cost for labor and as well as positive effects from higher sales. This was partly offset by increased tariff cost. The adjusted operating income decreased from 255 million US dollar to 245 million and the adjusted operating margin decreased from 9.9% to 8.9%. The reported operating income of 237 million US dollar was 8 million lower mainly due to capacity alignment activities. The adjusted earning per share diluted decreased by 10 cents. The main drivers 9 cents from lower operating income, 4 cents from financial and non operating items, 4 cents from taxes, partly offset by 7 cents from lower number of outstanding shares diluted. Our adjusted Return on capital employed was a solid 23% and our adjusted return on equity was 24%. We paid a dividend of $0.87 per share in the quarter. Looking now on the adjusted operating income bridge on the next slide, in the first quarter of 2026 our adjusted operating income decreased by 10 million US dollar. Operations contributed 28 million positively, primarily driven by higher organic sales and the successful execution of operational improvement initiatives supported by better call off stability. Excluding the 13 million from ethics translation effects, cost for RB and E net and SGA increased by 28 million driven by lower R&D reimbursement of 9 million. Due to timing and the non recurring cost of 4 million during the quarter we recovered approximately 70% of our US tariff costs. This recovery rate was lower than last year due to delays from the implementation of the new U.S. administration’s import adjustment Offset Program. We expect though most of the outstanding tariffs to be recovered later in the year. The combination of unrecovered tariffs and the dilutive effect of the recovered portion resulted in a negative impact of around 40 basis points on our operating margin in the quarter. Looking now at cash flow on the next slide, Operating cash flow for the first quarter was negative 76 million, a decrease of US$153 million year over year. This change was primarily due to a negative working effect of 349 million US dollar compared with a negative impact of 179 million in the prior year. The working capital effect was was largely driven by higher end of quarter sales which is the good reason other temporary effects that are expected to reverse later in the year and the normalization of payables from the year end 2025. Capital expenditures net for the quarter decreased by 9 million. Capital expenditures net in relation to sales was 3% versus 3.6 a year earlier. The lower level of capital expenditure net is mainly related to lower footprint optimization, less capacity expansion and timing effects. Reoperating cash flow for the quarter was negative 159 million compared to negative 16 million in the same period in the prior year due to lower operating cash flow partly offset by lower CapEx. The cash conversion for the last 12 months, defined as free operating cash flow in relation to net income was 83%, exceeding our target of at least 80%. Now looking on our cash flow and shareholder returns on the next slide, our cash flow generation has proven resilient across economic cycles as shown on this slide, we have consistently delivered positive operating and free operating cash flow through major disruptions such as the financial crisis, the COVID 19 pandemic and periods of structural change. Cash generation has strengthened in recent years, reaching record levels. This resilience reflects disciplined working capital management, a flexible cost base and limited capital intensity of our operations, supporting higher asset returns, durable long term growth and shareholder value …
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