Autoliv Inc (ALV) 2002 Q4 法說會逐字稿

… -- seat belts, we are losing market share for technical reasons in the United States. There are some programs that are in the full that will be compensated during the spring of new programs. So, by the end of the year, we will have a much stronger market share seen in the seat belts. But, nevertheles, seat belts are up 6%. We are gaining share, particularly so in Europe and rest of the world, as we call it, notably Korea, for instance. Airbags, up 14%. According to our estimates, we gain market share all across the globe. The Inflatable Curtain is in unit terms up 60%, to 59, which includes special so-called inflatable tubular structure, which is relatively flat in volume development. Curtains are up 60% in volume. Actually, the same price as last year per curtain. Steering wheels, we have percentage increase of about 18% and a major share gain here is in Europe.

As you can see, total production in Europe, Japan and North America, 2.4%. 29% is seat belts and 71% airbags. Turning to the gross margin side, the improvement year-on-year is up 6%. When we look into the figures, it is driven by lower labor costs. Also, better utilization of the fixed assets, because of the growing volumes we can utilize the fixed assets more efficiently. The gross margin 18.2%, we believe is fairly representative. There are many entrances into the gross profit. We have a number of accruals that we have reversed because they are not needed. We have insurance income and various items. But, against that, we have equipment impairment that relates to shut down of the Denver and Indianapolis operations. That evens out and 18.2% is fair estimate of the underlying gross margin for the quarter. Operating margin looks like it is relatively flat compared to the previous year.

There are some comments to make. In 2001, as you can see later on when we look at the numbers, we had low research and development cost, down to 4.4%. And this year we had more normal 4.7%. That in itself is relatively low figure. We charge out a lot of engineering at the end of the year. This year, EBIT or the operating margin is hurting from the shutdown of the Indianapolis and Denver operations. You can say net-net, there is charge of around $3 million to EBIT because of the shutdowns. Next slide will show you the income statement and then start to look at the changes year-on-year. Total sales is up 22%. The gross profit is up around 26%. EBIT is up around 20. Income before tax is up about 25%. And the net income about 21%. So, fairly nice increases throughout the whole profit and loss, then. If we look particularly on the RD& E, research, development and engineering, which we mentioned earlier, you can say last year, as you can see, we had 42.7 million dollars. This year, which does includes vehicular restraint electronics, we have 55.7 million dollars. There is a huge discrepancy, which is unusually low in 2001. The charges we have had for Indianapolis and Denver is charged under other income net, negative of 7 and-a-half million, before we hit EBIT line of 89 million dollars. This is mainly severance cost for Indianapolis and Denver but then as someone mentioned we have some positives up in the gross profit. So, it kind of evens out. Net charge to EBIT is $3 million, again. Having said that, you can say there is always some charge every quarter and every year. If you recall, we had charge from devaluation. 3 Million is really nothing dramatic.

Changing slides to key figures for last year. Earnings per share grew from 40 cents previous year to 49 cents. The return figures grew 2% on return of capital employed from about 10.3% to 12.3. Working capital as percentage of sales went down with no less than 2.3 Down to 8.7%, maybe more impressive, we managed to take it down in dollar terms even though the safe is much higher this year. The net debt has gone from billion 23 to 864, which is nice decrease of about 159 million dollars. That is in spite of sales growth and in spite of repurchase to the tone of $30 million in the fourth quarter. Next slide and showing profitability quarter by quarter, I don't think we need to go through every quarter. But, as you can see here, both return on equity and return on capital employed has basically been better every quarter compared to the same quarter the previous year. We ended up, as we mentioned, with 9.4% on equity and for fourth quarter and 12.3 for the return on capital employed. If we would exclude the goodwill, return on capital employed for last quarter exceeds 25%. So, double digits for each quarter, then.

Next slide shows cash flow and we had the strongest cash flow ever. You could say net after investment, we got $80 million, a record in itself, particularly impressive by itself but take into account we had a fairly high CAPEX in the fourth quarter, of about $77 million. Yes, we got $80 million left. Turning to next slide, we have the operating and free cash flow in numbers. As you can see, the two big swings are of course the net income and income for 48 million to $181 million. Even bigger, the turnaround in working capital from negative 138 to positive of 54. So, all in all, we had cash flow close to $300 million free cash flow. We can say for full year CAPEX came in below depreciation. That has been the story as in all of 1999. This is fourth consecutive year where depreciation is higher than CAPEX. Next slide demonstrates evolution of working capital. As we mentioned before, we went down to 8.7% from 11.3, I think we had on another slide here. Either way, it is now down below 10% and we are down to 385. So, we decreased the working capital 12 million, in spite of having 112 million higher sales. Fairly nice. Then, next slide will show the CAPEX and depreciation and generally speaking, as you can see, we are running at level past year of about $55 million. You can also see that the CAPEX during the fourth quarter was relatively high and the CAPEX did exceed the depreciation for the fourth quarter alone. And the reason for that is we have a number of new inflator lines. In North America, as well as in Europe, that is a new side hybrid inflator, called Ash 2. Each line is about 2. some million dollars. Some of the major CAPEX’s on the next slide, inflated capacity in Europe was about 13 million. Another 7 million of inflated capacity in the United States. Electronics took about 8 million. Capacity in Europe and United States about 11 million. The items listed are about 40 million after the total.

Generally speaking, this has increased capacity, plus couple of new inflated types we need to produce. Next slide shows you some of the recent events and what happened during the fourth quarter. As I believe you are aware, we decided to shut down the Indianapolis operation and the Denver operation, and that will essentially be done during the third quarter, giving us $5 million this year and $20 million next year in improved EBIT. We opened new seat belt plant in Poland. We have bought back $1.6 million shares. We paid on average 19.6 dollars per share. If you take the Swedish ones, we paid 180 crowns. There is about another 3.9 million -- I'm sorry, 3.6 million shares to be bought under the present authorization. Regarding the end cap, we have actually four models that got five stars where we have system supplied to two of them. We also supply a lot of equipment to the SUAB and Mercedes E class. We have technical advisory board where we try to get leading researchers from throughout the world to participate. And we have got a new professor Onah from Tokyo University. The board has distinguished members from US, UK, Sweden and Japan, fairly international. Professor Onah is very welcome. The next slide shows the number of employees, not headcount, but employees in low labor cost countries. The growth came from about 7700 up to roughly 9500 or 1800 employees. We are presently running 31% of the employees in low cost countries, which is increase of 4% in the past year. If we look forward, what could we believe about the first quarter and the coming year? The inventory in the United States took much needed improvement here in December. If we calculate correctly, inventories went down 240,000 units in December. And ended up on level that is actually below the 10-year average. That was needed fairly badly. As you can see on the graph in November they were unusually high. That was good news.

Looking ahead on the slide titled North America Light Production. This is estimates from CSM. If we take all of 2003 CSM predicts modest decrease of some 2% or so in volume. This, of course, assumes that there is no international conflicts, where nobody can make a decent forecast. We believe that the Q1 figure of slight increase may be optimistic given the very, very strong proformance in quarter 4. There may be a pull ahead from quarter 4 last year into quarter 1 this year. If we take TSM figures for quarter 4, they were too optimistic in quarter 4 and that may be the case also for quarter 1. We have seen the plant schedules for the first couple of weeks in January have been a little bit low. Nothing alarming, but little bit below where we thought they should be to have slight increase of somewhat maybe a little hesitant for the figure in North America.

Then, as you can see, turning the page to Europe, there is roughly the same in 2% decrease for the whole 2003. Here the DRI source predicts a slight decrease in Europe. We have also feeling that the tax incentives that are given here in Europe might feel the mix to mid-sized cars. We may be facing that the prestige cars have a growth pause. The low US dollar does not influence very much in the short-term, but in the long-term, exports from Europe may be hurt if the dollar remains too low too long, hurting exports, of course. I don't think that will happen within the coming year because most people hedged currency fairly long ahead. What we don't have a slide on is Japan. In Japan the same estimate is downhill about 2% for the first quarter. So, that means the quarter 1 might be down a bit actually. Put that in perspective, which is the next slide demonstrating the sales in the United States. I would like to emphasize, this is sales, this is not production. If CSM is correct, that means 2003, as well as 2004, would be below the long-term trend line in the United States. So, little bit down all three and up in all four.

Both below the long-term trend. Turning to the next slide, we can say the same is true for European saves both '03 and '04 would be below the long-term trend. That leaves us with the last slide, outlook for quarter 1 this year. We are basically saying here that if it is so that the currency exchange rates would stay roughly where they are for the time being and if we believe that the production of light vehicles is down just 1 or 2% or so or a marginal decrease in production volume, we believe sales, as well as earnings should increase at least 15% during quarter 1 2003, compared to the same quarter 2002. With that, I believe we have gone through the slide package and I would be happy, together with Magnus and Matt to answer your questions.

Hello.

Thank you, sir. If you would like to ask a question, press 1 on your telephone keypad. To cancel simply Press the hash or pound sign. To ask a question, press 1 on your telephone keypad. Our first question is from Nicholas Hurst from Morgan Stanley. Please go ahead.

Good afternoon, guys. Nicholas Hurst at Morgan Stanley. One quick question on the share repurchase. Are you planning to cancel the shares? Secondly, could you seek another authorization if you completed the current plan?

The answer to the first question is no, we are not planning to cancel the shares. Number two, being an American company, we do not have to go to shareholder meeting to get authorization, we can get that from the board of directors. That is relatively easily arranged, with a telephone call. But, we also have a board meeting coming in February. That is easily done through the board of directors. We will do that if we need to.

And can you also remind us on the dividend, it is coming up for this year. But, what is the long-term pay-out or what can you give guidance on the dividends in the medium term?

We have not or the board has not adopted a policy for dividends. They sort of reserve the right to remain flexible and want to give -- we did increase the dividend 18%. That is in lieu of the strong cash flow we have and the net debt increasing so fast. For the time being we will stay where we are. There is no policy declared by the board.

Thanks a lot and congratulations on the good cash flow.

Thank you. Our next question comes from Andy Trapp from InSkilla.

Congratulations on strong results. Couple of questions, if I may. You had a very impressive organic growth rate in the quarter and I just thinking about what do you sort of end result for the first quarter of 2003? How much will it go down, basically, in your guidance that you have given for the growth on top line?

Thank you. We agree it was strong link in quarter 4 of 2002. For first quarter of 2003, as you may have understood, we are less optimistic than DRI and CSM. We believe that there will actually be a small decrease in car production. Given that fact, we still believe it will be on organic growth in quarter 1, but not as strong as quarter 4. I believe the currency you can calculate easily for yourself. The only kind of acquisition we have made is the Villareal Company and they add 40, 45 million dollars. Call it 3%, if you like. The rest would be organic growth.

And the organic growth you created yourself, if you like, on top of the core production, in the quarter 4, was like 10, 10 1/2 percent. Would you expect that to go down by half or so in the first quarter?

Yeah, you are very right. Everybody can have their own opinion on core production. I think the truth is as we do not split up this 15% plus that we indicate. We do not split it up. But, I think based on your own idea about core production and 3%, you can do it yourself.

All right. Regarding I wonder if you could say something about the difference in the different regions, Japan, Europe and US, if there are major differences you would like to discuss and inform us about? The growth for the different regions is important aspect.

I think it is a known fact the margins are a bit lower in Japan than in Europe and the United States. Having said that, we have fairly efficient use of the assets in Japan. If you talk profitability, I don't think we are hurt. The profit margin is lower in Japan than the United States, particularly. The cost per capital is close to zero in Japan, which it is not at all in the United States. It would be unreasonable to ask for the same margin in Japan. Correct me if I am wrong, Magnus, half a percent in that order of magnitude, and what do we pay in the United States?

About 2%, 2 and-a-half percent.

Two percent is the difference on capital costs. Slightly lower but probably not when it comes to capitol employed, particularly since there is no roadway in Japan.

Very good. One important aspect I am impressed about the cash flow you have been generating in the last quarters or years, even. Looking into the components there, what do you target in terms of working capital development and CAPEX in 2003?

Magnus, will CAPEX be around where we are now? I think we ended up where we guided 225 or so for the full year. As you saw, we have for a number of years been running high in depreciation. That is target to stay that way, of course.

Do you think working capitol will improve or get higher in the year?

We think it is quite an achievement to come down to 8.7%, but we will continue to do our damnest to continue down. In actual dollars and sense I think its doubtful if we can come any farther but in sales it would be a decrease in percentage. But I think it fairly is a low figure in capitol today.

Okay. Thank you.

Thank you. Our next question comes from come Thomas Bayson from Salomon Smith Barney.

Hello. I have a couple of questions for you. One for the results first. I would like to ask you what is going to be the trend in R&D? You said it was particularly low in '01 guidance. It came up quite nicely in 02. What can we expect in this year is the first question. My second question would be on pricing of air bags. You said you had 60% increase in in terms of in itself or in price. I would like to have more details on this. Do you expect this situation to continue? What is the competition you get in this business?

Okay. If we take the first one, trend for R&D&E. If you look historicly here essentially in quarter 1, we always had higher RD&E costs, then you know, throughout the year, we do projects together with customers and income statements and so on, testing and stuff. That means at the end of the year we both want to wrap up what we did in the past year. Traditionally we end up with lower RDE in the fourth quarter. That is sort of a seasonal pattern, if you like. On top of that, we have had a high ordering take during the year 2002. Actually, the record breaking order intake. That drives RDE cost, unfortunately. We still believe that the RD&E over the whole year is probably going to be around 5 and-a-half percent. That is the best estimate we have. One would like to see it go down. But, we would have to stop taking so many orders.

Regarding the IC’s,there is some here in the report we have said that the market is going from $10 million in 2001, to about $30 million in 2005. We believe we want to take half of that. So, there you can easily calculate how much it is, then. And regarding the price, it is correct what we say, the price per curtain was the same during these two years, more as a footnote, you could say. It depends on so many things, the size of the curtain and how it is packaged, if it should be -- some people simply have a textile bag and barcode and inflators. Some companies have up to four inflators and one curtian, when you have one of these huge vans. It is very difficult to say if it is going up or down. That would require that we ship the same curtain, and that rarely happens. So, I would say the mix is changing too much to give you good answer.

Okay. Would you mind saying a word about the competition for this product? Are you alone or are there other competitors there?

I wish we were alone. TAW and Tacota primarily.

Thank you very much.

Thank you. Our next question comes from Grant Phillips from UBS Warburg. Please go ahead.

Good afternoon. Grant Phillips, UBS Warburg. Couple of questions, more on the Inflatable Curtain, I think in the past you have spoken about difficulty predicting a trend there. One thing to focus on is which vehicles have a standard. Perhaps you could talk about that. And the fourth quarter was strong compared to earlier quarters in growth, what particular customers and mix may have driven that? And the second thing is on the US pensions and health care, can you remind us in other liabilities line, 174 million .5 , is there anything in there for that that we should think about? Thirdly, on raw material prices. I think there was not much impact last year. You were saying personnel costs should come down, which helped. In terms of gross margin in early part of the year, will we start to see impact from higher raw material prices in earlier quarters?

If we start with the first question and the one on ICs. We tried to guide you on the last couple of quarters by saying when we launch products what is included and what is not included. We have a fairly large number of carton installations coming up, not the least in the Asian cars. When we sell to Japanese car makers, we are very much overrepresented in export cars from Japan and typically we sell a lot of side systems here. In the last quarter, we had Toyota, with side airbags, inflatable cartons. We had sint and (inaudible). It is difficult to give you trend, actually. As you may have seen, the goals standardize the option to standard in the curtains. In the US, I would say massive steel by large an option. There are probably a couple of cars coming up here. As an industry, we have a task here to educate the market and educate maybe the cars statement in the United States particularly, what is the benefits of a curtain. So, it started in Europe and spread over to the United States, but mainly as an option. We see strong growth in Japan on inflatable curtains. I am not sure we can keep pace of 60% per year. That is probably overly optimistic. Regarding pension, I’ll hand it over to Magnus our CFO.

Yeah, regarding US pension, we have an extra cost of $2 million US dollars this year, we expect next quarter, 2003, of another 2 million. It is not very much. What accounts to the ability and balance sheet, we have roughly pension costs of $42 million and unrecognized net losses of $25 million, not in the balance sheet, half of which we will amortize over 10 or 11 years and half we will take as it comes so to say. We expect it to increase cost for 2003 about 2 million dollars.

Okay. At the moment there is sort of a 25 million shortfall if you look over the assets and liability in the pension fund?

Long-term, yes.

What about health care is that exposed separately, as well?

Yes, but it is really magnitude to this pension.

Okay. On the gross margin raw materials?

Raw materials, we believe the situation is such that we will have decrease of raw materials this year, 2003, but we are afraid that the decrease may be somewhat lower than it was in 2002. So, the answer is that we believe we are not going to see higher raw material prices, but possibly lower decrease is likely. But then, you talk about a normal picture. In the US, there are many parts of the whole raw material costs.

Okay. Thanks. Just one final thing. Also, when you look at generally this allows trends to sole supplying from the OEM side. Have you seen any more change in the trend recently?

You mean systems supplied?

That is right, for a particular model or platform?

I could say we believe the trend is toward system supply, actually. But, you might have seen here that the Renault we supply a lot of systems that we share five stars and that is not the not a coincidence. I believe that is more cost efficient for the OEM because you have someone to talk to, and its a combination between the OEM and supplier. Together you make it better. It is difficult with four or five suppliers. It is true to say, some customers prefer to buy side systems from one supplier, front systems from another supplier and so on. There are all sorts of variance on the scene. We believe it goes toward system supply.

Yeah, but not sole supplying, so, the single supplying from you just to a particular model again, you are not seeing that, it tends to be side from one and front from another or something like that?

We have a fair amount of models where we supply the whole lot, like the Megane, they are two examples where we supply all of it.

In the industry in general do you think you are seeing more of that?

We think we see more of it and will it continue to increase our point of view, we would like it to increase faster, because that limits the number of competitors no doubt. Yes, it is going on and increasing, but could be faster.

Thanks very much.

Thank you. Our next question comes from Patrice Salervic.

Good afternoon. Couple of questions. First one regarding share buyback program. You mentioned you don't intend to cancel the shares, can you tell why you don't intend to cancel the share? Regarding the strong cash flow, as you mentioned, you are a American company and easy for an American company to write money. Second question about the back seat airbag system. You are going to launch with the new Celic already interest on the? And question regarding your organic growth, let's talk about Q1 to all of Q3, do you think your ability to fight the growth in value term, but excluding market? Thank you.

Patrice, couldn't you use the receiver. This is a conference call and it is difficult to hear what you say.

Use the receiver, please. Not your conference call.

Okay. wrong with mine. Okay.

Thank you. Quite an echo in this end.

Thank you. Our next question comes from Hans Westerberg from Swiss Bank.

Two questions. The first one is net debt, the average maturity and your average cost of the debt. The other one is the supply value per vehicle.

Okay. Magnus, will you start with net debt and maturity and cost?

The average is more than three years. Average cost as it looks today, is a little bit more than 5%.

Are you happy with that answer?

Absolutely. Supply value for the car , how it developed during the year?

From our point of view, it varies a whole lot between the various OEMs here. We can say from our point of view and that is all we can mesh, we went from about 85 to 92 dollars per vehicle. But, I do not know if that is representative for the whole industry, I suspect this is much more than what the total for the whole world market to be increased. This is like 7 or 8% and I think that was not the case if you look globally. We took more share again, that is reflected in the figures.

Could you please remind me what is your supply value to the new Volvo XC90, please?

Depends if there is telephone or no telephone. Would it be fair to say 1100 dollars? It used to be a thousand dollars, but the dollar is down. I would say 1100 dollars is a rough estimate. Fortunately, we sell a lot of them.

(laughter.) Many thanks.

Thank you. Our next question comes from JJ Beneva from Chefro.

You received direct new order bookings this year, can you give us more flavor on this and what kind of growth did you see over 2001?

Thank you very much. Basically we never publish the order intake. You know, it keeps moving around, you could say. Our customers change the way they are going to compose or they standardize stuff or make it optional and decrease the options and so forth and so on. Let's say following the previous record, it was actually 2000. We got a very, very healthy order intake. Then, 2001, it is our impression not so many orders were given. I shouldn’t say not so many, rather fewer orders were given. We had little bit of set back compared to 2000. Therefore, the 2002, we had a healthy increase compared to 2001. We also succeed to overtake the previous record, then, which was the 2000. Mumbling a little bit because whenever published, we would have to say it was very high increase to 2001.

Thanks. Try to break it down, what kind of products are not moving through the order backlog? Where are you gaining most, if you would like that?

If you take it geographically, no doubt we grew very much in Asia and actually if you look only on the fourth quarter on the percentage growth, percentage again, not dollars. Number one would be Toyota, number two Mitsubishi, number 3 would be Jundine , four would be Honda and 5 would be Volkswagen. And the order intake is the same story, you could say. The order intake is very high over in Asia. That of course is export cost and transplants. That was very much our strategy as you may recall. Because we were afraid our market share in the US will go down with the big three losing market share.

Are you seeing interest -- additional interest for new novel product if you take the whiplash protection system and nightvision and these type of things.

Night vision, we have just started to quote. One needs to figure out if it is going to work before we quote it. We don't have an order for that and don't believe we will for half a year. We supply to a couple of foreign models in Europe, only.

Any break through in the US?

No, I think we have no production in the US at all. As you know, we do not participate in the seat production at all and that is a drawback for us.

Thank you very much.

Thank you. Our next question comes from Dayton Rotagat from Columbian Management. Please go ahead. Do you have a question? Dayton? Seem that is question has been withdrawn. Next question from Deon Yohanson from Centra Invest. Please go ahead.

Hello, I was wondering you are estimating 15% growth in turnover and the results in the first quarter of '03 with today's currency rates? Do you hear me?

Loud and clear.

I can see here that the euro versus the dollar has strengthened by about 20% since first quarter of last year. So, when you were saying you are increasing earnings this year, given that you are selling 60 to 70% in the euro, that means actually you aren't increasing earnings organically without taking concern of the conversion to dollars? Do you understand where I am coming from?

Yes, we understand. I can start by saying the euro is more like 50%. You should take half of it, roughly 50%. And given the growth in the Asia arena, that is likely to go down, rather than up. That is part of the explanation. Then, on top of that, we had the DRI, which is 3. We believe maybe we are too pessimistic, but we believe there will be slight setback on production volume first quarter this year compared to last year. That would add up to organic increase in any case.

I understand. Where I am coming from, if you look at Europe, for instance, on stand alone basis, are you increasing earnings in Europe in euro? In the first quarter of this year as compared to the first quarter of last year?

Oh, yeah, we do. We do.

Okay. Thank you.

Thank you. Once again, if you have a question, press 1 on your telephone keypad. Our next question comes from Andy Trapp from Endskill. Please go ahead.

Follow-up on raw material question. I wonder if you could explain why you expect cost to go down when we are seeing trend of increasing prices for basically everything that resembles raw material at the moment?

The answer to that, is that it is already negotiated.

For the full year?

I think you should say for the most part for the full year. What do you say guys? Yes. It is a fact.

Good negotiation, then. Thanks.

Thank you. Our next question comes from Thomas Bayson from Salomon Smith Barney. Please go ahead.

Quick follow-up question. With your strong cash flow and quick debt reduction, do you have any more liquidation in mind to complete your offer to increase what you already have?

Well, the answer is yes, we have a couple of small acquisition, but we always have those cooking. Do we have a major acquisition where we need cash flow? The answer is no. First off, we believe in many arenas, we would have problems for both customer reasons and trade limitations. In most markets we are really in nothing big these days. We have small yes, always some small we work on, but nothing big.

Yeah, thank you very much.

Thank you. Our next question comes from Rob Langrick from Cazenove & Co..

Hi there it is Rob Langrick from Cazenove here. Interested in progress of the inflatable curtain in the US , which has been underrepresented for a while now. Looking at present US hysteria in the last week about the safety of SUVs. You have been talk being marketing campaign for the consumer for the inflatable curtain in the US, just wondering when you will do that and what you expect in terms of market share gain this is year? Thanks.

Well, that campaign is mainly directed toward the dealers. We will not comment on that very general campaign. Because it is the dealeras that have to know something about the product so they can sell it to the car buyer. And that campaign is under -- starting now. The take rates are still very low in the US and that is quite logical because people don't know so much about the product. We think this will change to some degree because of this campaign, but more importantly, I would say is the fact the insurance institute of Safety, Highway Safety, will start to publish tests where they will see how safe cars are in side impacts. That will focus much, much more on the curtains. So, the top will be a lot of imported cars European and Asian cars equipped with the curtain as standard. People will become aware of the product and the benefits from this product. So, after sometime, you will see probably about steep increase for demand for the curtain in the US, slow start, but catch-up will be quick in the US once it starts.

And if I read the volume increase here, fairly percentage terms is big increase from '02 to '03 and '03 to '04. We talked about order of magnitude of 50% in volume terms in the statistics we have here. So, even the -- wish it could be more. The trend is up.

50% for '03 and '04, I take it?

Correct. 50% the first year and another 50% the second year.

Thanks very much.

Thank you. Our next question comes from Chad Cox from Harris Associates. Please go ahead.

Good afternoon, gentlemen. One question. With no large acquisitions on the horizon and generating strong cash flow, why have you chosen not to cancel the shares you have repurchased?

Well, we will consider that when we have finalized this program, what we will do with the shares. It is possible we will cancel them.

Thank you.

Thank you. Our next question comes from Max Wardton from Goldman Sachs. Please go ahead.

Good afternoon. Quick one. I would like to come back to someone's earlier question about your first quarter assumptions, the 15% earnings growth target seems fairly modest. I want to understand the things behind your assumptions principle among which is when exactly do your customer price cut demand take effect? Do they happen throughout the year or do we have a phenomenon where most price reduction happens at the first of January? It that what makes Q1 a little bit tougher then we might see based on your other assumptions you discussed?

No. First off, the price cuts are nowhere near what they used to be. They are very much modest these days. I would say if they are agreed, they are more or less throughout the year. But, most of the price cuts these days are more of the type that here we have these nice platform we need restraints for. If we give the order, we need to get help with the present pricing. It is kind of give and take situation, more than give away money. It has developed that way, you could say.

Okay. That is helpful. Quick second question. Volvo business looks like it is growing of more importance with the rates you are talking about on the new SUV, are they still billed in Swedish Croner or are they using a global purchasing system and therefore paying in euros now?

I am truly sorry. I do not know. We are going to send out a – what do you call it, scout. We will be back within a couple of minutes.

Great.

There appear to be no further questions at this time. Hand back to you for further remarks.

Then, I am sorry we do not get the answer if we bill in Swedish for the dollars for Volvo. If you call, he will be happy to answer once we have found out. So, I just would like to say thank you very much for your attention and for participating in the phone conference and the next meeting is on April 24th. It said January in the Swedish edition of the report. Thank you very much.

Thank you. That concludes today's conference, you may now disconnect your line. (Normal Termination.) The call ended at 9:53. --- 0