Autoliv Inc (ALV) 2011 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Q3 2011 Autoliv earnings release conference call.

At this time, I would like to turn the call over to your host today, Mr.

Jan Carlson.

Please go ahead, sir.

Thank you very much, John.

Welcome, everyone, to this earnings presentation.

Here in Stockholm, we have our CFO, Mats Wallin, and our VP Corporate Communication, Mats Odman, and myself, Jan Carlson, President and Chief Executive Officer.

We will open with a review of our third quarter results, including an overview of general business conditions, then we will discuss our guidance for the fourth quarter and full year 2011.

At the conclusion of this presentation, we will remain available to respond to your questions.

And as usual, the slide deck is available through a link on the front page of our corporate website.

Turning the page, we have the Safe Harbor statement, which, as you know, is an integrated part of this presentation.

As usual, we will reference some non-US GAAP measures throughout the presentation.

The reconciliations to US GAAP are disclosed in our quarterly press release and in the 10-Q filing.

Moving on to the next page, I would like to start out today's earnings call by mentioning another new innovation milestone in automotive safety.

Earlier today, we announced that we have developed and will introduce the world's first integrated vehicle safety control system.

This advanced technology combines the electronic brake controller with our electronic restraint controller.

This reduces overall system complexity and cost, while improving performance.

This breakthrough in combining active and passive safety is a major step forward in achieving our accident prevention strategy.

If you recall, just three years ago, we introduced the first integrated stability control sensor cluster and air bag ECU, which have now become an industry standard.

Congratulations to the Autoliv Active Safety team for this achievement.

As illustrated on the next page, we introduced two new active safety technologies during the quarter.

We launched our first monovision camera with BMW.

This camera system provides the driver with accident avoidance features.

These include forward collision warning, lane departure warning, automatic high beam switching, as well as traffic sign recognition.

We also launched our first radar introduction for a compact car platform as a standard feature on the Mercedes B class.

This is particular application Mercedes is using our 24 gigahertz radar for adaptive braking and blind spot (inaudible).

All of these advances pave the way for future future enhancement to the safety system.

These examples also show the customers' confidence in Autoliv as a technology partner in the emerging industry of active safety.

Moving on to the next page, we continue to execute our operational and growth strategies.

Our actions have resulted in outperforming the global Light Vehicle Production for the eighth consecutive quarter, and achieving a double digit operating margin for the seventh consecutive quarter.

For the first time ever, our sales, on a trailing 12 month, exceeding $8 [billion], and we had a very strong operating cash flow.

During the quarter, we also expanded our product offering in active safety by acquiring 77 gigahertz radar technology from Astyx, a market leader in long range radar technology.

This acquisition complements our already strong market position in radar, which, along with our vision systems, continue to show exceptional growth.

In the emerging markets, we continue to have double digit growth, even when the Light Vehicle Production is somewhat slowing.

Lastly, as to the antitrust investigations, I can only say that they are still ongoing, and that we therefore will not provide any additional information at this time.

On to the next page.

We achieved record sales, gross profit, and EBIT for a third quarter.

Our organic sales growth of 9% was 4 percentage points better than the global Light Vehicle Production, and was in line with our expectations at the beginning of the quarter.

We achieved an EBIT margin of 10.4%, excluding 20 basis points, or $5 million of expenses related to the ongoing investigation.

We therefore exceeded our guidance despite currency revaluation effect.

And lastly, our earnings per share return on capital employed, return on equity, operating cash flow and EBIT margin were all the second best in the history of our Company for a third quarter.

Turning the page, our cash from operations was $192 million for the quarter.

This strong cash flow performance has allowed us to reduce our net debt to $41 million.

Our capital expenditures of $86 million were 4.3% of sales.

The full year 2011 CapEx expectations remain at approximately $375 million, or 4.5% of sales.

Approximately $150 million of these capital expenditures are required to support our rapid growth in the emerging markets and Active Safety.

While focusing on growth opportunities, we remain shareholder friendly, as illustrated on the next slide, where we have our dividend trend.

Since reinstating the dividend in the second quarter last year, we have increased the dividend per share by 50%.

The dividend payment in the third quarter of a little more than $40 million is a 29% increase from the previous high in Q3 of 2007.

Over the last 12 months, we have returned approximately one third of our free cash flow to shareholders through dividend payments.

Turning the page, we have the third quarter Light Vehicle Production according to IHS.

The Global Light Vehicle Production increase of 1 million vehicles, or approximately 6% year over year, was essentially in line with their expectation at the beginning of the quarter.

As illustrated, our organic sales outperformed the Light Vehicle Production in all regions except Japan, due to an unfavorable vehicle mix there.

Turning to the next page, we have our production figures for the third quarter, which include acquisitions.

In almost every product area, we continue to significantly outperform the Global Light Vehicle Production, especially on chest side airbags and electronics.

Our Active Safety business continued to grow very quickly, where we expect to virtually double our sales from 2010.

Therefore, we believe that we are currently maintaining an overall market share in the range of 35% to 36%.

On to the next page.

We have the commodity effect, both sequentially and year over year.

For the third quarter, we had a negative year over year effort of $27 million, $6 million less than expected in the beginning of the quarter.

The sequential increase from the second quarter this year was $7 million.

We now expect a negative year over year effort of $25 million in the fourth quarter, and $95 million, or 1.2% of sales, for full year 2011.

This concludes our formal comments around the third quarter results.

Shifting now to the outlook, on the next page, we have the progression of the quarterly Global Light Vehicle Production according to IHS.

The 19.7 million vehicles in the fourth quarter will beat the previous record of 19.2 million in quarter one earlier this year.

The 19.7 million vehicles is a 4% improvement year over year.

However, it is down 3% from the IHS forecast in July.

Turning the page, we have the fourth quarter Light Vehicle Production according to IHS.

All regions are expected to improve year over year with the exception of Europe, which is expected to be down 3%.

However, sequentially, Europe is up over 300,000 vehicles from quarter three.

Even in China, sequentially, light vehicle production is up more than 500,000 vehicles.

The modest increase of 1% year over year is due to a very strong growth last year as the incentives were about to expire.

And lastly, in Japan, the light vehicle production is recovering from the low levels we were experiencing in quarter two, and is expected to be up 23% year over year in quarter four.

On to the next page.

We have the full year production Light Vehicle figures from IHS for 2011.

Global Light Vehicle Production is now projected to be up 4.2%.

This is slightly less than the 4.9% expected in July when we provided our previous guidance.

For our three largest sales regions, Americas, Europe and China, the Light Vehicle Production growth is now expected to be 1 percentage point less than in July.

In addition, rest of Asia is down 4 percentage points from IHS projection in July.

However, Japan is improving 5 percentage points.

These changes since July are slightly unfavorable for Autoliv's geographic mix, as our market share in Japan is lower than in all other regions.

Turning the page, regrettably, we have another natural disaster to contend with.

The flooding in Thailand, which has been ongoing for several weeks, has caused many fatalities and disruptions to the country's infrastructure.

Autoliv facilities are currently not impacted by flooding, as they are located south of Bangkok.

However, several suppliers and many customers have been impacted by the natural disaster, and this has forced us to stop an increasing number of manufacturing lines.

Therefore, we cannot foresee the final effect of the flooding on Autoliv, but we currently estimate it to be a minimum of $6 million in the fourth quarter.

On to the next page.

We have our quarter four and full year 2011 guidance, which is primarily based on our customer call-offs.

For the fourth quarter, we expect a consolidated sales increase of more than 9% year over year, all of which is driven by our organic sales.

These sales assumptions imply an operating margin of approximately 11.5%.

However, given the current uncertainty surrounding the flooding, we now guide the fourth quarter EBIT margin to be in the range of 11% to 11.5%.

For full year 2011, consolidated sales are expected to increase by more than 15% year over year.

Organic sales are expected to increase by more than 9%, while acquisitions and currency are expected to contribute less than 2% and less than 5% respectively.

For full year 2011, our EBIT margin is essentially unchanged from the July indication of more than 11%.

However, given the uncertainties mentioned, we are now slightly modifying our EBIT margin guidance to approximately 11%.

I should mention that this outlook excludes costs related to the ongoing antitrust investigations.

Turning the page, before we open up the lines for questions and answers, I would like to spend a few moments to take a quick look into 2012.

As we all know, we have a very uncertain macro environment with many experts predicting another downturn, or even crisis, in the very near future.

Frankly, there are signs of softening with some customers and some markets, including a moderation of the growth in China.

Consequently, since July, IHS has reduced their expectation for next year by approximately 4 million vehicles to 80 million vehicles, a 6% improvement year over year.

That would point to another record year in 2012.

However, given the uncertain macro situation, we remain guarded and flexible.

On to the next page, our response to the uncertainty is to remain flexible, maintain strong balance sheet, and build on our operational and market presence.

Our labor flexibility is better now than in 2008 when the financial crisis broke out.

Now, 20% of our workforce is temporary personnel, versus 16% in 2008.

We now have 35% headcount in high cost countries, versus 46% before, and we have reduced the level of indirect personnel in overhead from 34% to 29%.

Consequently, we have lowered our fixed cost base.

The balance sheet is stronger than ever, with approximately $2 billion of cash in unused credit facilities, with debt maturities of less than $200 million through 2013.

And lastly, our market presence is stronger than ever.

We have roughly one third of our sales in the major regions -- Europe, Asia and the Americas -- while our market position in Active Safety is gaining momentum.

So we are prepared both for a possible downturn in the economy, and continued growth.

Turning the page, this concludes the formal presentations of today's call.

We would now like to open it up for Q&A.

And with that, I leave the word back to you, John.

Thank you.

John, are you there?

Thank you, sir.

(Operator instructions) We'll now take our first question from Thomas Besson with Bank of America Merrill Lynch.

Please go ahead.

Good, thank you much for taking my question.

One, actually, simple and quick question.

Your balance sheet is merely roughly today $41 million net debt.

Can you just update us, Jan, on the priorities for the use of cash?

You've highlighted the dividend payments as a decent share your free cash flow.

But beyond that, can you update us on your view regarding possible M&A transactions versus the history of Autoliv doing buybacks?

Thank you, Tom, for the question.

We remain committed to our strategy to use the balance sheet to grow the Company and to invest in the future for our shareholders, and we have communicated since a number of quarters that we are aiming to look for acquisitions primarily in the area of Active Safety, and also, where possible impact, Passive Safety.

As you have seen over the last year or so, we have done acquisitions, and we have executed on this strategy, even though it has been smaller acquisitions.

But we remain committed to also look for bigger acquisitions in this specific area.

Generally speaking, we are a shareholder friendly company, and if that would not turn out at some point to be successful, I'm sure the discussion will take place in the Board of returning the money to shareholders in one form or the other.

But that is essentially a discussion for the Board, and we are not ready to comment on that today.

Great.

Thank you very much.

Thank you.

Our next question comes from Brett Hoselton with KeyBanc.

Please go ahead.

Thank you very much.

Good morning, Jan -- or, good afternoon.

Ah, good morning, Brett.

First of all, Thailand.

How do you think about the impact of Thailand as you move into 2012, in terms of -- kind of magnitude, but also maybe how long you think it might impact 2012?

Do you think that you're going to have the maximum impact in the fourth quarter, and then maybe move down as you go into 2012, and then, is this a one quarter, two quarter, three quarter event?

Any thoughts there?

It's hard to predict, Brett.

We talked to our Thailand team here just some few hours ago, and as of right now, I think the water is starting to flow into the city of Bangkok in some way.

And the magnitude of this, I don't think we can foresee yet.

We believe it's going to, for sure, continue into 2012, at least for some time, and have an impact on our customers and also on our suppliers.

We are doing everything we can to mitigate this from a supplier standpoint, and currently, we have roughly around 12 suppliers that is down.

We have roughly around also 7 to 10 customers that is also down.

So that is an impact that we expect it to continue, but you know how it is.

It will seek other ways, and we will seek solutions to the issue when time goes by.

All right.

And then, as we think about 2012, primarily thinking about margins, what do you see as being some of the primary factors impacting margins into 2012?

We've obviously talked about Thailand potentially impacting margins in 2012, but what do you see as maybe some of the other primary drivers, whether it be commodities, or other things?

With commodity prices, it's hard to predict, and it's hard to look into the future.

The only thing you can say on the commodity side is, if you would take today's commodity prices that we are now seeing here, and that we use as a basis for the guidance for this year, it will have an impact of $30 million year over year 2012 to 2011.

And predominantly, in first half, or basically, all of it in first half.

Otherwise, it is the usual effect, Light Vehicle Production, which is the main factor, of course, that is coming into play.

Thank you very much, Jan.

Thank you, Brett.

Our next question comes from Himanshu Patel with JPMorgan.

Please go ahead.

Hi.

Good afternoon, guys.

Hi.

Good morning, Himanshu.

Just going to slide 9, where you discuss your regional revenue growth relative to industry production, it looks like you nicely outpaced the industry in Europe, America and China, but significantly underperformed in Japan.

Two questions.

One, the Europe outperformance seems relatively new.

It doesn't look like that was occurring in the most recent couple of quarters in the first half.

Should we expect that to continue in Q4 relative to industry production?

And then, the sort of underperformance in Japan also seems like that's a new development.

Is that something we should continue to expect in Q4 as well?

If you look to the European one, we have had a favorable vehicle mix, thanks to the launches.

We have had a good mix on the premium segments, while the effect has been more on the volume cars, where we have not had that significant content.

So from a European standpoint, it is a vehicle mix favorable to us on the premium segment.

We should look into this for fourth quarter, which is basically what we have visibility for, and we expect that to continue here for -- at least, in the fourth quarter.

Thereafter, it will be more difficult to say.

We will have to come back to that in our February 1 call.

When it comes to Japan, you remember we said in July we had a good, a better vehicle mix in Japan, because when they restarted and ramped up production, the mix was more oriented towards export vehicles, where we had a relatively higher content, in particular on our side system, and therefore, we had a favorable mix.

This quarter, it was negative mix, because the production was more oriented towards domestic vehicles, in particular, Daihatsu, where we had very low content, and therefore, you see this turnout.

I don't have any specific information on the Japanese vehicle mix into the fourth quarter, so I will -- I'm not able to answer that straight on my head.

Okay, no worries.

Just on that -- do you guys have an approximate estimate of how much of your intra-Europe revenue mix is German luxury?

No, we don't have that.

I don't -- I'm sorry, on that one.

Okay.

And then lastly, just going back to the balance sheet questions.

Now, you guys have been making some acquisitions in the Active Safety side, but they've all been kind of modest sized.

And I guess I'm just curious, does a potential antitrust fine impact your balance sheet planning decisions for the next 12 months, meaning, is this an item that you would like to get greater visibility on before potentially pulling the trigger on a bigger sized acquisition or share repurchase?

Our efforts on acquisitions and on our strategy is unchanged.

We are continuing to access and see what we can find in terms of assets.

So that is essentially no change on the strategy that we are executing, looking ahead.

Every case will be decided on its own terms and on its own conditions in the environment we are in at that point, so that will be a decision when it comes up (multiple speakers) future.

Yes.

And you did mention that you would consider bigger acquisitions.

Can you just elaborate on that, on the Active Safety side, are bigger Active Safety assets available?

Are you finding -- I mean, my understanding was, a lot of the prospective assets were those from companies that basically were not sellers.

Are you seeing a change on that?

Well, you know, this is very digital, as we have said many times.

Assets that are not for sale can become for sale (inaudible).

It's hard to say.

It comes when it comes.

Then when there is something out there, we will be ready to bite on it.

But you're talking about the size of acquisition -- I think a figure we have mentioned is, acquisition for $1 billion.

And for us, a quite substantial acquisition.

Okay, thank you.

Thank you.

We'll now take our next question from Rod Lache at Deutsche Bank.

Please go ahead, sir.

Rod?

Are you there?

It seems, sir, he's not on the line anymore.

I'll move to the next question.

Our next question is from Philip Watkins with Citi.

Please go ahead.

Oh, thanks very much.

Wondering if you could just talk a little bit about recent pricing trends, and also, perhaps, comment on wage inflation, and particularly in emerging markets.

Thank you.

If you look to the pricing pressure, you see it's essentially unchanged.

We have talked about pricing between 2% and 4% over the cycle, and somewhere, when the cycle -- when the times are not -- or, slow within the lower part, and when times are good, it's in the higher part.

Currently, we are talking about, we're seeing a pricing pressure of between 3% and 4%.

When it comes to the wage inflation, we are seeing a higher wage inflation in the emerging markets.

There is no news -- we are seeing that, as everybody else.

And if you think about China, wage inflation actually, '11 to '10, is maybe around 15% or so.

But that is that we are seeing all above (multiple speakers).

Thank you.

And this is -- do you think you can counter this, then, with direct purchasing cost reductions?

Well, all of this inflation, we are working hard on this in China and in every other country.

What is important to remember, when you see a 15% increase in China, it's coming from a still very, very low level.

So even if the number is high, the absolute dollar value of it is still reasonable.

Thank you.

We'll now move to our next question from Johan Dahl with Erik Penser Bank.

Please go ahead.

Thank you.

No, it also relates to the developmental poster.

And I noticed here, you trimmed the guidance likely in the second quarter report ahead of the third quarter, and also, a slight trimming of the guidance for the fourth quarter.

Now, albeit that the volumes that you've turned out pretty much as you have expected, so my question is, given that raw material costs also has been slightly less headwind than you previously expected, what sort of costs are surprising on the down side, or what sort of extra costs are you seeing in your operations that you haven't calculated with before?

Essentially, I think what you're -- what we're seeing here is, without the Thailand, the guidance is unchanged, actually.

That's essentially what it is.

But Mats will explain more into the details.

Yes.

If you look into the fourth quarter itself, we have to remember now that one of the improvements we now had in the third quarter was the fact we had more engineering income.

We had more engineering income, $6 million in the third quarter.

Part for that was income coming in a little bit earlier.

We expected that to come in Q4.

So that's one of the parts.

To the Q4 itself, you look into it, has more R&D costs (inaudible) that the impact.

And then on top of that, you have the Thai flooding in the fourth quarter, where we expect at least $6 million.

So that's the main drivers for the change on the cost side.

Were you able to say anything about the -- you talked earlier about the increased costs for erratic Light Vehicle Production, and also, some extra costs in growth markets.

Have that been as planned in the third quarter, and looking ahead, in the fourth quarter?

That is as planned, as we communicated earlier.

There is no change to what we said before.

The (inaudible) costs we had was very much related to the second quarter, where we had Japan and the earthquake impact to struggle with, and then the emerging market part of it was more coming along the year, on the second half of the year, and that is more according to plan.

Yes, finally, we saw belts growing more than airbags for the first time, for a number of quarters.

Is that the way -- is this seen going forward as well in the coming quarters, given your -- the planned production rates?

No, you cannot say that, really.

It depends on the vehicle mix very much, and that may shift, at least over time.

Thank you.

We'll now move to our next question, from Richard Hilgert with Morningstar.

Please go ahead, sir.

Thanks for taking my question.

Good afternoon.

Good afternoon to you.

Couple of things.

Just a minor housekeeping item, first of all.

The $5 million in expenses for the antitrust, is that in SG&A, or is that in the Other Income/Expense line?

That is in the Other Income/Expense line.

Okay.

Then, the SG&A line, and the RD&E line, both went up in excess of the percentage increase in sales.

Is that something that we should continue to expect for the next few quarters, where those increases will be higher in those line items than the increases in sales, or will those line items start to flatten out?

First of all, on the SG&A line, we have to remember that if you compare it to last year, there is an (inaudible) translation currency impact, actually increasing the SG&A to a certain part.

And then on top of that, we had last year on SG&A a positive impact from a release of the reserve last year, which we don't have this year.

So we have some extra impacts in the SG&A, but we have to remember that in relation to sales, it was 4.4% last year.

It's 4.5% this year, and we expect 4.5% to be the number for 2011.

When it comes to RD&E, we have said RD&E, you should look for below 6%, and we expect for the year, for the full year here, to be now around 5.5%.

So that's also within the limits we have talked about.

Has the increase there been coming from more of your customers and changes that they've been making, or are you spending more on more growth opportunities in RD&E?

It is both, but we are investing more in Active Safety, as we have been talking about.

So, it is a combination of both.

Okay, great.

Thanks.

Thank you.

We'll now move on to our next question, which comes from Rod Lache with Deutsche Bank.

Please go ahead, sir.

Hello.

Do you hear me now?

Sure.

Now we can hear you well, Rod.

Oh, okay.

Yes, I got disconnected and dialed back in, so I apologize for that.

Just to clarify, first of all, the guidance for the fourth quarter, 9% top line growth implies about $2.08 billion of revenue and 11.5% margin would be about $239 million of earnings versus the $243 million of last year.

Can you just help us a little bit with -- just some of your expectations for raw material headwind, R&D increase and G&A, just to kind of bridge the slight moderation of earnings against the organic growth that you're talking about on the top line?

Are you then referring to last year in that perspective then?

So, Q4 last year, we expect the organic growth to give us around $50 million more earnings.

But that $50 million is then hurt by higher raw material prices, and we expect the raw material prices to have increased around $25 million, compared to Q4 last year.

And then on top of that, we have to come back also to what we said earlier, that we invest more in RD&E.

Very much in Active Safety, but also, in emerging market.

And the impact on RD&E net is $29 million more costs.

So of course, that is sort of the story compared to last year.

Okay, that's helpful.

And also, I'd like to just clarify your comments on the Thai floods.

Are there component issues that you're seeing within Thailand that are expected to impact production outside of that market?

And do you, yourselves, use Thailand as an export base?

Yes, we use Thailand as an export base, so this could also affect, and will probably affect also some production outside Thailand.

Okay.

And that's incorporated into your expectation of at least a $5 million impact in the fourth quarter?

Yes.

What -- everything that we now as of now is included in this, yes.

Okay.

And then, just lastly, if you can maybe expand a little bit on this, the new product, the integrated brake control, do you have an estimate for how large the market is for these kinds of components, and what would be a reasonable market share objective, or any color on whether you've booked any business in this area?

This is our first order in this area, and we are very, very happy and very proud to be able to announce this today, as this has been a strategy for some time, to combine Active and Passive Safety into one integrated controller entity.

We estimate the market size to be roughly around $6 billion in this range.

But as this is our first order in this -- production order in this area, we will not commit and talk about any share as of right now.

The only comparison you could make is when we took the first step, as this is the second step in the chain.

The first step was the sensor integration in airbag controllers, and that first order, we took in 2006.

And as of today, 50% of our sales is now having integrated sensor clusters into the airbag [ETU].

So that has been a very rapid development of that type of introduction.

If this is going to be similar or not, it's way too early to speculate in.

What we do with this integration is also that we add another 25% to 30% value from a -- the design that we have today.

So that is a significant value increase for us.

Do you have a kind of intermediate term objective for what you would expect Active Safety, with these new products and the radar and vision systems, to account for, as far as Autoliv's sales there, like a mid-decade kind of objective with all of these?

No, we have not.

More than on the previous before, we had an announcement of this.

We have said that $0.5 billion by 2015, but that was excluding this part, these new technologies.

So this would be, and come in addition.

But we have not yet done any estimate of that.

We will save that until a little bit further.

Okay.

All right, thank you.

Thank you, Rod.

We now move (technical difficulty), from Niclas Hoglund with Swedbank.

Please go ahead, sir.

Yes, good afternoon.

A couple of questions, if I may.

Firstly, if we stay on the Active Safety area and the new products, do you have -- have you had any launch costs related to the new production that you're starting up on the new products?

All the launch costs?

You mean the -- you're talking about the brake controller, and the order we are taking here.

But all of these costs are taken over the P&L, so that's all into the result as it is, and they expand R&D costs.

Okay, so no extraordinary costs are related to these new items?

No, no, no, not more than what we have talked about.

No.

Okay.

And then moving into geographical mix.

Firstly, on Q4, we're noticing the Japanese market, the rebounding strongly, and you previously indicated that you are having slightly a lower margin related to Japan, and still, you're expecting to improve, continue to improve margins.

Now, have you seen any changes on profitability in Japan, and how will the mix issues moving into next year, if I assess it right, have any impact on your gross profit and gross margin?

Hello?

Hello.

I seem to be lost -- well.

Should I start over?

Yes, you said you were you talking about --

I got some music.

(laughter)

You heard music?

Oh, okay.

It was not us playing, that I can tell you.

Yes, okay, then.

Not music (inaudible), maybe.

(laughter).

If we go into geographical mix, firstly, if we look at Japan for the fourth quarter, and you still expect to have improvement in the gross profit despite the negative mix from Japan.

Have you seen any changes related to the profitability in Japan?

Well, you know, we don't comment so much about each country, or each different region's profitably.

In Japan, as it is also a region where you import and export parts of the production, it's also having a currency impact, so depending on the level of yen, also having a profitability impact on the Japanese as such.

So that's not what we comment so much about.

If you look to the vehicle mix, and you -- we commented in the July call, we had a favorable mix, and now we're saying we have a negative mix.

This only points to how difficult it is from one quarter to the other to have an opinion of how it's going to look like.

And therefore, I cannot say I give you more color on what it will be for quarter four, and even less for 2012, actually -- unfortunately.

I don't know if you have anything to add to that, Mats?

No?

Okay.

I'll wait, sorry.

Just a follow up, then, on 2012.

You're showing us the IHS numbers.

Is there anything that you -- that we should think about, thinking of -- if we are assuming these growth rates coming through on the gross profit side, which you want to highlight?

No, as we commented about before, it is, if you look on these numbers here, they are revised from July to October, from above [11 to around 6].

From our point of view, we feel (inaudible) profit impact, it is raw materials and things like that, that -- you know, can come -- it's the usual factor affecting our profitability, actually, and we will see also how the Thai -- how that impact will play out at the end of the day.

We don't know, really.

Okay, thank you very much.

Thank you.

Our next question will come from Adam Brooks with Sidoti.

Please go ahead, sir.

Yes, good afternoon.

For cars where you were -- products such as night vision are offered, do you have any sense for what take rates are currently?

Well, on the premium segments -- we were talking about the BMW 7 series, and the Audi 8, it's quite high.

And then on the A6 and the 5 series, it's somewhat lower, less.

Okay.

And if you look at CSM for 4Q based on what you're seeing from your customers, is there any reason in particular that you see more strength than what they're suggesting, or maybe on the other side, more weakness?

We believe it's essentially in line.

The question we have is, to what extent they have included the Thai effect, effects from Thailand.

We are not sure.

We cannot judge on that.

But otherwise, we don't see any big discrepancy.

All right, thank you.

You're welcome.

We now move to our next question, which comes from Hampus Engellau with Handelsbanken.

Please go ahead.

Thank you very much.

I have two questions, if I may.

Firstly, on Brazil, maybe if you could update us on your operation there, talking about market shares, and also maybe changes in penetration rates by key products.

And then also, finally, a questions on Brazil.

This suspended -- the Supreme Court has suspended the higher tax on imported cars, and I'm just wondering if that would affect you in any way, coming into fourth quarter.

Thanks.

Your take on Brazil, what we are doing there is we are investing significantly in several areas -- in steering wheel facilities, inflator manufacturing in Brazil, just to meet the increased demand.

In Brazil as a country, we expect sales to actually double until 2014.

So we are on the path of doubling of the sales inside Brazil, and that's mainly due to the penetration of airbags, which as of today, should point to a 100% penetration of frontal airbags for model year airbags for 2014.

And this is -- this, we see already now.

The cars are launching here in 2012 with increased penetration of airbags.

But 100% from 2014 is what we expect it to be.

And in terms of market share?

We believe our market share, that is increasing as of today.

And it's somewhere in the neighborhood of around 30%, as of today.

Yes.

And maybe, finally then, on this higher tax.

Will that affect you in any way, or --

Well, that's why we are -- that tax rate, I'm unsure.

I cannot answer you on question there, but from the import of components, that's one of the reasons also that we are investing inside, to get into the the customs barrier inside Brazil, and to have a high vertical integration inside Brazil.

All right.

Thank you much.

Thank you, Hampus.

Our next question comes from Anders Trapp with SEB.

Please go ahead.

Yes, Anders Trapp here.

I have a question, a couple of small questions.

First, on the size of your Thai operations -- you know, in terms of sales or costs or anything [or manning.] Second, also, you continue to accumulate cash, almost no debt, but still pay a lot of interest costs, and I just wondered what you expect to happen next year in terms of interest payments, if it's going to come down, and I fear some loans that you will reprice or anything.

And final, also, I just wondered what your competition is -- what you're up against with your new products, please.

Okay, if you take the main plant that we have in Thailand, it's between $40 million and $50 million in sales.

That's our main plant for 2011, so that's what we look at to -- for that.

So that is what we have as of today.

And then I leave the other part of the question to you, Mats.

Yes, if you now look into -- we have almost $700 million in loans today, and we have both a very strong cash generation.

And many of those loans are fixed, fixed interest rates, so we believe that that will be better in 2012, because first of all, we have the loan which we did in connection to the equity unit offering which needs to be repriced in April.

That's around $105 million loan, which today is carrying around 15% book rate.

So that should, given what we see today in the market, be significantly lower in 2012.

And then on top of that, we are also able to start to now amortize also on the [USPP] loan, which in total is around $400 million, and we will do the first part of that amortization later on in 2012.

So we believe the interest rates will be better in 2012, and we have to come back about actual numbers, and how much better it will be.

Okay, very good.

Then also -- okay, so who are you competing against with your new advanced products?

Well, I'm not sure -- I don't know.

There are probably a lot of activities out there on the same one, but again, we are the first one.

We are launching the world's first, as we did with step one.

So I don't know who will be a fast follower here (multiple speakers) --

No, but that's -- I rather mean, I understand, I guess, that you will -- somehow would be compete to suppliers of stability and traction control products today.

Yes.

Not -- they don't have the integrated (multiple speakers) of course.

Okay, but if you take the traditional one, the two big ones today is Bosch and Continental, and then you have also TRW, you have others also that is out there suppling this product.

But there are two major one of stability control as we understand it, is Continental and Bosch.

Okay, very good.

Thank you.

We'll now take our next question from David [Jacobsen with Pariador].

Please go ahead.

Hi.

Just another follow up on these brake controls.

Could you say something about the sales cycle, the lead times that you expect?

And secondly, in what region your first order was, and how your view on the different regions for this type of product?

Well, this is a first order we have taken, and we will not comment on the region on this one.

We are going to launch this product in 2014.

So that's about the sales cycle and the cycle you see when it comes -- goes from order to launch.

But who it is and where it is, we will not at this time comment on.

Okay, thanks.

Thank you.

Our next question comes from Peter Nesvold with Jefferies.

Please go ahead.

Good afternoon.

Most of my questions have been answered.

The presentation was very thorough, as always.

Thank you.

There is one question -- one question I would have, would be related to Thailand.

Are there any industry components that are disproportionately sourced for the industry out of Thailand, such that if things materially got worse from here, that it could have a disproportionate impact on global production?

Well, yes, I think one part that is critical here and that may impact is the yarn manufacturing and the yarn supply, which also then indirect also will affect cushion supply.

So that is one component that is critical, and may have -- could have an impact.

Okay, great.

Thank you.

All my other questions have been answered.

Thank you.

As we have no further questions, I'd like to hand the call back to Mr.

Jan Carlson for any additional or closing remarks.

Thank you, John, and thank you, everyone, for your attention and continued interest in our Company, and we look forward talking to you again, and during our fourth quarter earnings call on Wednesday, February 1, 2012.

And until then, I hope you all will have a safe and relaxing holiday season in the meantime.

Thank you very much, all of you.

Ladies and gentlemen, that will conclude today's conference call.

We thank you for your participation, and have a good day.