Autoliv Inc (ALV) 2016 Q4 法說會逐字稿

Good day, and welcome to the Q4 2016 Autoliv Earnings Conference Call.

Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. Anders Trapp.

Please go ahead, sir.

Thank you, Daniel.

Welcome, everyone, to our fourth quarter 2016 earnings presentation.

Here, in Stockholm, we have our Chairman, President and CEO, Jan Carlson; our Chief Financial Officer, Mats Backman; and myself, Anders Trapp, Vice President of Investor Relations.

During today's earnings call, our CEO will provide a brief overview of our overall Company performance and outlook as well as an update on general business conditions, while our CFO will provide further details and commentary around the financial results and outlook.

Then at the end of our presentation, we will remain available to respond to your questions.

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

Turning to the next page, we have the Safe Harbor statement, which is an integrated part of this presentation, and includes the Q&A that follows.

During the presentation, we will reference some non-US-GAAP measures.

The reconciliations of historical non-US-GAAP measures to US GAAP are disclosed in our quarterly press release and the 10-K that will be filed with the SEC.

Today's call will last for one hour sharp.

I will now turn it over to our CEO, Jan Carlson.

Thank you, Anders.

Looking first to a recap of our business for 2016 by turning the page, we're pleased with our strong finish to last year with another quarter of solid performance.

Our full-year 2016 organic sales growth of approximately 7% of which Active Safety grew approximately 16%, was roughly 2.5 percentage points higher than the year-over-year growth in global light vehicle production.

This strong organic sales growth along with acquisitions, resulted in a 10% consolidated sales growth for 2016, and that despite a top-line headwind from currencies of around 2%.

Our full-year 2016 adjusted operating margin of 8.8% was in line with our expectations of more than 8.5%.

We further expanded our safety electronics capabilities with ANBS joint venture, the Autoliv Nissan Brake Systems joint venture, which closed at the end of the first quarter and strengthened our active safety competence by signing a definitive agreement with Volvo Car Corporation to form a software joint venture in the areas of ADAS and autonomous driving.

Our operating cash flow of approximately $870 million was our second-best ever, while we returned roughly $200 million to our shareholders through record dividend.

This, along with other actions, resulted in a leverage ratio of 0.4 times, while our adjusted return on capital employed and return on equity of 21% and 15%, respectively, continued to run above our historical levels.

I would like to sincerely thank the entire Autoliv team for delivering another year of solid financial performance.

And lastly, for the long term, we will continue to execute towards our end-of-decade targets, as we expand in the growth markets and launch new technologies in both passive and active safety business, while we integrate acquisitions and adjust our global footprint within the market.

Now looking on our order intake on the next page, 2016 was a record order intake year for our Company.

In Passive Safety, we had another year of record order intake of around 50% for the second consecutive year.

In our Electronics segment, we also had a strong order intake of around 30% in 2016, which included securing one of the largest global OEMs for passive safety electronics.

Within Electronics, our Active Safety order intake of around 25% includes vision wins with two new customers utilizing Autoliv internally developed algorithms.

In addition, we were recently awarded a major platform from a Detroit-based OEM with an estimated lifetime revenues of around $1.1 billion within the ANBS joint venture.

This anticipated acceleration of growth comes at the cost up front, due to the increased number of projects of more than 2.5 times the level we saw in 2014.

To cope with this wave of new projects, I am pleased that we are well on track to hire the 1,000 engineers as planned and as communicated earlier.

Despite this increase in engineering resources, we contained RD&E net within the low end of the range of 6.5% to 7% of sales in 2016.

However, in 2017 we expect to be at the high end of this range, due to the ramp-up of engineers during the second half of 2016 and the first half of 2017.

As mentioned on our last earnings call, we believe the positive order intake should allow us to exceed our end-of-decade sales target of $12 billion.

Now looking on to our current volumes on the next page, we have summarized our delivery quantities for the full-year 2016.

We had another year of strong volume growth where we grew faster than the global light vehicle production in most product areas, and delivered around 150 million seatbelts and 150 million airbag assemblies.

Including all our products, we delivered more than 1 million units per day.

In particular, high value-added seatbelts, side airbags, electronic control units, and active safety sensors performed exceptionally well versus the global light vehicle production.

Frontal airbags and steering wheels grew more in line with the global LVP, while the brake control volume increase is a direct result of the ANBS joint venture.

Overall, this performance illustrates our investments for growth continue to pay off within strong volume growth.

Now looking on our Active Safety business on the next page, as we have communicated earlier, we are now seeing a period of lower organic sales growth in our Active Safety business.

In the fourth quarter, accounting for the 3 fewer working days, Active Safety grew organically by approximately 3%.

However, our organic sales growth for our core vision and radar products combined was around 15%, and around 20% for the full year of 2016.

This lower growth in Active Safety is mainly due to the phase-out of our incumbent brake control business and a faster-than-expected decline in take rates on certain GPS programs, as communicated last quarter.

For 2017, we anticipate our vision and radar products combined to grow slightly lower than the market growth for these products, due to the lower order intake in previous years, as also communicated earlier.

We are very pleased with the order intake for our core Active Safety business during 2016, where we are gaining momentum in vision, radar, and ADAS ECUs.

This is evidenced by recently awarded vision business to Autoliv from a new premium European-based customer utilizing our internally developed algorithms.

Looking now upon 2017 outlook on the next page, we continue to execute towards our end-of-decade targets announced at our Capital Market Day in October 2015.

Our early indication for 2017 for an organic sales growth of approximately 4%, which is more than 2 times better than the global light vehicle production.

However, due to the net effect of currencies and acquisitions, we expect consolidated net sales growth of approximately 2%.

Included in our organic sales growth is a slight decline of inflator replacement, as some OEMs have pushed out their orders to 2018, which is a change from what we previously expected for 2017 sales.

Currently we also see potential for additional deliveries beyond 2018.

Our early indication for full-year 2017 is for an adjusted operating margin of around 8.5%, despite headwind from commodities and planned increases in RD&E and infrastructure to support future growth.

Based on our full-year indication and quarterly guidance, you can see that we anticipate an improvement in both organic sales growth and adjusted operating margin during the second half of this year.

In this uncertain macro environment, we believe it is important to maintain our strong balance sheet, not only to navigate through these uncertainties, but also to be able to capitalize further on strategic growth opportunities.

Our indication for full-year 2017 is to generate more than $800 million of operating cash flow, excluding any discrete items, and maintain a leverage ratio within our long-term range of 0.5 to 1.5.

Lastly, during 2017 we continue our Company transformation and executing towards our end-of-decade targets.

This will include integration of acquisitions, improving utilization in investments for growth, and further capacity alignment all while continuing our relentless focus on quality.

Now looking onto the next page, we have highlighted some of our key upcoming model launches in 2017.

These models are well-equipped with our products and will contribute to our overall organic sales growth in full-year 2017.

In addition, we are well-represented with our electronics products on many of these models.

On an annualized basis, we estimate that these nine models represent around 5% of group sales.

However, six of these models have more than $300 in content per vehicle.

Looking into the underlying market conditions on the next page, we have the most recent light vehicle production figures according to IHS.

The early indication for full-year 2017 is for the global light vehicle production to increase by 1.6% year over year.

This increase is mainly driven from Asia of around 3% and Europe of approximately 2%.

This is based on a strong global light vehicle production growth of around 3% during the first half of the year, and roughly flat for the second half of the year.

During the first quarter, light vehicle production in China is expected to increase around 3% year over year, while Japan shows an increase of more than 6% year over year, and rest of Asia shows a decline of approximately 2%.

Within the Americas for the first quarter, the light vehicle production in North America is expected to increase around 2% year over year, while in South America the weak demand is expected to continue, resulting in the light vehicle production decline of 2%.

In Europe, the overall light vehicle production continues its steady recovery with an expected light vehicle production increase for first quarter of around 6%, mainly driven by Western Europe.

In summary, the early light vehicle production indication for 2017 is for solid growth in Asia and Europe, and a slowing of growth in North America during the second half of the year.

I will now turn it over to our CFO, Mats Backman, for the financials and further details on our outlook.

Mats?

Thank you, Jan.

Looking on the next slide, we have some key highlights from our fourth quarter.

Our organic sales growth of around 1% was 1% unit better than we expected, mainly due to higher-than-expected growth in China.

On a comparable basis, excluding the fewer days' effect, our organic sales growth was about 6%.

This growth was slightly below the global LVP, primarily due to lower growth in North America as a result of model mix and the lingering effects from the GM new business [hold] from 2011 and 2012.

Our strong organic growth resulted in a better-than-expected adjusted operating margin of 9.3%, and an adjusted EPS of $1.71.

Including the impact of recent acquisitions, we continue to deliver strong adjusted return on capital employed of 23% and a return on equity of 15%, and returned $51 million to shareholders during the quarter through dividends.

In our Electronic business, we had a consolidated sales growth of around 26%, mainly driven by acquisitions and passive electronics.

And as Jan mentioned earlier, we have had many positive developments in these business areas, which will position Autoliv well for the future.

Looking now at the volumes on the next slide, we have highlighted some of the key models that have contributed to our strong organic growth during the fourth quarter.

These models contributed significantly to our overall organic sales growth during the quarter.

And once again, our electronics products are on all of these models, with one exception at Fiat.

On an annualized basis, these models represent around 10% of our total group sales.

Turning the page, we have our key figures for the fourth quarter.

Our record sales of $2.6 billion were driven by strong sales growth in Asia, where for the first time ever we exceeded $1 billion in sales for a quarter.

The consolidated net sales increased 3%, and that is despite the negative currency translation effects of around $55 million, lower inflator replacement sales, and the fewer working days' effect of approximately 5 percentage points.

Consequently, high organic sales and acquisitions drove our record gross profit.

Our adjusted EPS of $1.71 was lower than the last year, mainly due to higher RD&E due to investing for growth in both Passive Safety and Electronics, and also a higher tax rate.

Looking now at the operating margin on the next slide, looking to the chart on the left, our adjusted operating margin improved versus guidance.

That was mainly due to better-than-expected organic sales growth and slightly lower RD&E, which was partly offset by currencies.

Compared to prior year, as illustrated by the chart on the right-hand side, our adjusted operating margin was about 180 basis points lower.

The benefit from organic sales growth and net currency effects were more than offset by the planned higher investments in RD&E to support our future growth and the other net which primarily includes launch costs investment for growth including vertical integration and the impact from acquisitions.

Looking now to the next slide where we have our key figures for the full-year 2016, despite negative currency translation effects of around $175 million, our consolidated net sales reached a new record $10.1 billion.

This was driven by strong organic sales growth of around $660 million, mainly in Europe, China, and Active Safety; along with North America, Japan, and India.

While acquisitions added around $420 million.

Our gross margin improvement is mainly due to higher organic sales, currency effects, and a positive effect from commodity costs.

Our adjusted operating margin of 8.8% declined year on year, mainly due to higher RD&E and acquisition effects.

Our adjusted EPS of $6.75 improved year on year, mainly due to a lower tax rate and lower interest net.

Despite the investment for vertical integration, inflator replacement capacity, and acquisitions; our adjusted return on capital employed was around 21%, while our adjusted return on equity was about 15%.

Looking now at the segments on the next slide, where we have summarized our segments reporting for the full-year 2016.

In Passive Safety, organic sales growth of 6% was primarily driven by strong growth in Europe, North America, China, Japan, and India; in particular with airbags and high value-added seatbelts.

The strong growth was impacted by a negative 2% currency translation effect.

Consequently, consolidated net sales in Passive Safety increased by around $300 million to $7.9 billion.

In Passive Safety, the 10.3% operating margin was a result of higher organic sales, favorable commodity costs, lower capacity alignment and antitrust related matters, which partly offset by higher RD&E.

In Electronics, the strong organic sales growth of more than 13% was primarily driven by new model launches and higher customer take rates in Active Safety and Passive Electronics, while the acquisition benefit was $418 million.

The strong sales growth resulted in a consolidated net sales of $2.2 billion for the segment, an increase of $600 million year on year.

The 2.8% operating margin for the Electronics segment was affected by higher RD&E and the impact of acquisitions.

Looking now to our cash flow on the next slide, our full-year 2016 operating cash flow of $868 million was better than our full-year indication a year ago.

CapEx net of 5% was in the lower part of our range of 5% to 6% of sales.

We anticipate that this delay in expenditures will result in CapEx to be near the high end of the range of 5% to 6% for the full year 2017.

We expect operating cash flow to remain above $800 million for the full year 2017.

During the quarter, our capacity alignment activities included a cost of $3 million with a cash outlay of $22 million.

And for the full-year 2016, our capacity alignment cost was around $24 million, with a cash outlay of around $73 million.

The commodity cost savings during the fourth quarter were around $1 million, and $33 million for the full-year 2016.

Looking now to our outlook on the next slide, where we have our guidance for the first quarter based primarily on customer call-offs.

Our organic sales are expected to increase year on year by more than 3%, mainly due to strong growth in Europe, China, India, and South America; which is partly offset by lower inflator replacement sales.

In addition, sales related to the ANBS joint venture are expected to add about 5% year on year.

Sequentially, our consolidated sales are expected to decline by 1%, mainly due to the normal seasonal effects.

As a result, we expect to achieve an adjusted operating margin of around 8% for the first quarter.

Year on year, the benefit from higher organic sales and currencies are more than offset by higher commodity costs, planned higher RD&E, and costs related to the ramp-up of capacity and new technologies for growth, along with the impact from acquisitions.

Sequentially, the adjusted operating margin decline is mainly due to the seasonality effects in RD&E and net, currencies, and increased commodity costs.

Looking now up on our full-year 2017 on the next slide, where you can see the early indication for 2017 for organic sales growth of around 4%.

This strong organic sales growth, more than 2 times the latest global LVP growth according to IHS, is mainly driven from Europe, Asia, and Active Safety; which is partly offset by lower inflator replacements.

Year on year, inflator replacements are expected to be lower than our early expectations for 2017.

However, we still expect to supply 30 million replacement inflators from 2015 to 2018, of which a little less than half have been delivered in 2015 and 2016 combined.

Our early indication for full-year 2017 is for an adjusted operating margin of around 8.5%.

Year on year, the positive margin effect from organic sales and currencies are more than offset by higher commodity costs, our planned higher RD&E, and costs related to the ramp-up of capacity, and new technologies for growth, and the impact from acquisitions.

Summarizing our outlook on the next slide, our outlook excludes costs for capacity alignment and antitrust-related matters, and assumes mid-January exchange rates.

Our net consolidated sales growth for the first quarter is expected to be more than 5%, mainly due to our strong organic sales growth and acquisitions, which are partly offset by negative currency translation effects.

For the full-year 2017 indication, our net consolidated sales are expected to grow by around 2%, mainly due to strong organic sales growth and acquisitions, which are partly offset by negative currency translation effects.

Based on these sales assumptions, we expect an adjusted operating margin of around 8% for the first quarter, and around 8.5% for the full-year 2017.

Excluding any discrete items, we expect a tax rate of about 32% for the full-year 2017.

In summary, these estimates indicate strong growth with an operating margin within our long-term range, despite the higher RD&E, net, higher investment to support future growth, and the impact from acquisitions.

Turning the page, I will now turn back to Jan before we are going into the Q&A.

Thank you, Mats.

This concludes our formal comments for today's earnings call, and we would now like to open it up for questions.

So I turn the call back to you, Daniel, please.

(Operator Instructions) Joe Spak, RBC Capital Markets

Hi.

This is Jacob Hughes on for Joe.

In your release you talked about in North America, lower sales of replacement inflators and unfavorable model mix.

Can you unpack that?

What was unfavorable at the model mix with crossovers still strong?

And how many replacements did you ship in 2016?

If you look to the release here, it refers to organic sales growth of roughly negative 6.7%.

You should adjust for the day effect here of around 5%.

So we have an underperformance compared to light vehicle production of ballpark 3%.

Half of that is related, roughly [talk], it's related to the inflator replacements.

And the remaining part is related the model mix, as we speak about it.

And one is Detroit three, primarily Ford and also some others that is consisting of the model mix.

Okay.

And then the production in China was up about 15%-- I think you were up about 12% organically.

What was the underperformance, and how should we think about that for 2017?

If you look to the numbers also here, you have to adjust for the day effect.

And you have, as usual, the separation between the Chinese OEMs and the global OEMs.

And we are essentially in line, adjusted for the day effect, with the global OEMs of around 11% growth.

When it comes to the Chinese OEMs, we have a significant outperformance adjusted here for the 5% for the three working days.

We are above 30% growth compared to a light vehicle production of around 20%.

We believe there we have been gaining a little bit of share with Chinese OEMs.

We still have an effect of what we have talked about, the mini-SUVs that we have not been equally good represented on.

So that remains also into 2017.

It remains to be seen.

We don't guide per region when it comes to outperformance here.

But as we indicated here in the call, roughly for the first quarter around 3% global light vehicle production, a little bit less for the full year on the production side.

Okay.

Thank you.

And then lastly on this-- the vision contract win, is that a new program or a new customer?

It's for us a new program.

And it's also for us a new customer.

We refer to here, a premium European OEM.

We refer to two new wins where one here is a premium European OEM.

Okay.

Thank you very much.

Brian Johnson, Barclays

Yes, hi.

Good afternoon, gentlemen.

Steven Hempel on here for Brian Johnson.

I just wanted to drill down a little bit more on that active safety win.

I guess, is that a level 3 or below program?

Or is that for a level 4/5 program?

I guess, how does that fit in with the new JV with Volvo?

I believe you already explained night vision to Audi.

So just trying to get a little more granularity into that program and whether or not it does include radar/vision fusion or just kind of the software from a vision perspective.

It is a system win that we talk about.

If you refer to the premium OEM, the premium European OEM we are talking about.

It's a system win including radar and vision.

It starts with ADAS to start with, and then remains to be seen whether this is going to be further developed into [HAD] level 4 or level 5. But it's starts with lower level ADAS products in the beginning.

And when is roughly that expected to launch?

Towards the end of the decade.

Okay.

And then in terms of the NAFTA border adjustment here, potentially from either a border adjustment or a tariff risk; have you guys done any sensitivity around that and what the potential net impact could be on Autoliv's effective tax rate as well as the impact to cost of goods sold?

This is Mats.

I think it's-- I mean too early to start talking about the kind of financial effects in terms of the tax effect and so forth.

Because we don't know what this will end up with.

But maybe a starting point is to describe our flows.

Because I mean that will be the most important thing.

And I mean it's not only about Mexico.

It's about all imports to US.

And if I'm looking on imports and exports to US, we have higher imports than exports.

And the NAFTA is about 300 million, if we're looking on the difference between imports and exports.

And I think that's the kind of important number in order understand where we are in potential impacts.

And then we have heard everything about the border adjustment tax.

But on top of that, it's probably also a decrease of the corporate tax rate that will come in that tax reform then.

That will kind of mitigate the effect a little bit.

Okay.

That's very helpful.

One last quick one, just Jan, you noted that you're pleased with the growth, particularly with the domestic Chinese OEMs.

I guess in terms of the China market, is there any CPV differences or margin differences that we should be aware of?

And I guess as you look at kind of fiscal year 2017 organic growth, I know 2016 was in line with the industry.

But let's look at 2017 and assume there's no cost or mix headwinds.

Do you expect to grow in line with the market, above the market, below?

And if you could try and bucket that between content growth or market share gains and price-downs, that would be helpful.

As I said, we are not guiding for our own growth in China as such.

We are giving the corporate guidance for the quarter and the indication for the year.

If you look to the content per vehicle, as we have said a little bit before, there are a significant difference between Chinese OEMs.

If you take the content per vehicle, it's ballpark $210 in content for the average.

If you take the Chinese, it's more in the ballpark of $140 per car.

And if you go into the global, it's more in the level of $260 per car.

So there is a significant difference.

And we don't see any meaningful differences going into 2017.

We would assume this would correct itself when the Chinese NCAP is getting stricter and enforced in a higher level.

But not any meaningful difference into 2017, as we can see it today.

Great.

Thanks for taking my questions.

Emmanuel Rosner, CLSA

Hi.

Good afternoon, gentlemen.

First, on the active safety side, you're indicating you're expecting 2017 growth slightly lower than the, I guess, the addressable market.

What is that growth of the market for 2017?

And then on your new business win on the active safety side, can you say if it's mono or stereo vision?

For the market growth, we anticipate the core product market, vision and radar, to be between 20% and 25% market growth.

So that's to the best of our knowledge, how the market is developing.

If you look to this win that we are saying, it may be stereo vision.

It starts off with mono vision, but it may be stereo vision at the end of the day.

But we are not sure about that yet.

Got it.

And then on your margin guidance for 2017 full year, in your slide 18, you specify a whole bunch of puts and takes; the positive from organic, but then obviously investment.

Would you be able to put a finer point on some of these buckets?

What is the impact from commodity prices?

How much higher is the RD&E, and then obviously what are the costs related to the capacity and ramp-up in new technologies?

Maybe starting with the obvious one, I mean, we will have the headwind looking on the raw materials.

And that will about 30 bps for the full year.

We will also have an acquisition effect in 2017, but on the full year, maybe like 10 bps approx., as we added ANBS in the second quarter last year.

So we didn't have a full year on that one.

We have RD&E where we have been clearly communicating that we'll be in the upper end of that range.

We are for the full year 2016, on the level of 6.5%.

So just saying that, this is approx.

50 bps in that difference.

And that explains almost the whole difference between the years.

But then we also have a couple of items related to more of the investment for growth in terms of production, overhead, and so forth.

But that's the main items.

Got it.

And then just really finally these whole bunch of backs-and-forths in the media around the process around Takata.

And I certainly would not expect you to comment on speculation.

But can you spell out for us what your official stance is in this process.

Are these assets you're interested in, and under what sort of conditions?

We have communicated before, we could under certain conditions be interested in certain parts or participating in this restructuring.

But this is at the end of the day, an OEM decision.

And more than that, we have not given any color to it.

Great.

Thanks a lot.

Erik Golrang, Nordea

Thank you.

I have three questions, please.

The first one on Active Safety, if I understood you correctly, you expected a positive contribution from Active Safety for 2017 relative to that 4% group organic growth.

I assume that that will be more towards the end of the year, based on comparisons in the first half.

Is that correct?

Yes.

It's hard to say.

It depends on-- quarterly variations may come.

But as it looks today, it's probably towards more the second half than first.

Thank you.

And then two more questions, they are connected.

You say that you had 50% order share again on the passive side for 2016.

Any signs of that slowing down?

And then the last question is you provide an update there on the number of projects, engineering projects initiated, 2.5 times the 2014 level I think you said.

So squaring that with 4% organic growth is a bit difficult.

Is it fair to say that the absolute bulk of that pickup in orders is yet to be seen in the growth numbers?

If we start with order intake, it varies by quarter.

A slowdown, sometimes it has a seasonality effect.

It's hard to say about if you see a slowdown or not here on the order intake.

That's also a reason why we do not comment on orders more than on a yearly basis, because it's hard to make conclusions from one quarter to the other.

Sometimes you have big platforms up for bid and up for awards.

And then other quarters you have smaller platforms.

So we cannot say.

We can only say that we now have seen around 50% for two consecutive years.

One add of information we can have here is that the two last years' market award has been slightly higher than normal.

You can say on average, you could say a fifth of the market is awarded every year, one fifth, 20% per year.

But the last two years have been a little bit above that, you could say.

And still we have been able to capture that amount of business in percentage.

Number of projects and the order and the growth; you know that from award to launch it is between 18 and 36 months.

So all the orders that we are taking here will start to materialize during 2016 will start to materialize in 2018 and onward.

So nothing that we can see or extremely little portion of what we can see in order intake for 2016 will have any impact on 2017.

Some of the order intake we saw in 2015 may start to materialize towards the end of this year.

So that's the lead time of it.

And that's why the organic growth and the numbers we are guiding for here is not really connected to the higher level of order intake.

That will materialize down the road.

Thank you.

Ryan Brinkman, JPMorgan

Great.

Thank you.

Maybe first a question on R&D, you've guided to R&D remaining toward the higher end of the long-term rate, kind of in the 6.5% to 7% range maybe for 2016 and 2017, as you invest in new active safety technologies.

Do you think it's reasonable to assume that R&D spend can then normalize beyond that point in time, 2018 and beyond, or would you maybe have to continue to spend at a higher rate to keep up with competition or the fast pace of technological change in active safety?

We will come back and outline more of our future R&D spend in our Capital Market Day in September.

For this year, we will be at the high end of the range.

It's all depending on the order intake and what will happen, if we will continue to see this amount of high order intake.

Longer term, when program starts to materialize into sales, when as I just talked about here in the previous question that when the order intake now is materializing into higher sales, the key ratios will start to normalize.

But that will take some time.

And if we are able to have a lower spend because of lower order intake, even in shorter period of time, remains to be seen.

I cannot answer that for the time being.

The best we have now is 7% or the high end of the range for 2017.

And then we'll be back in CMD.

Okay, thanks.

And then can you delve a bit into this $1.1 billion Autoliv Nissan contract win for braking systems on a major platform?

Does it relate to, at all, advanced technologies like autonomous emergency braking?

And then maybe more generally, do you think that your recent year kind of foray into braking technology can help you to win object detection, radar, or vision awards, or maybe vice-versa the vision expertise, radar expertise help you win braking awards potentially?

This product is not directly related into a specific HAD environment or any specifics around advanced technologies for AEB or so forth.

But this is a very important program for us.

And it shows the trust from a customer of ours that really appreciates technology, what we can do.

And I think that's the most important part for us; a recently-formed joint venture here with (inaudible), and we can still so early be able to win significant awards of this size.

It shows that our product is very compelling, competitive, and technology-wise very interesting for customers in general.

But it's not directly related to an HAD project.

Okay.

And then just finally, I understand you're limited in what you can say about Takata process, of course.

But short of that, could you remind us of those parts of the world where Takata maybe has a higher market share than Autoliv?

I don't know.

I'm guessing maybe Japan or otherwise an attractive position.

And maybe which geographies are you both big, such that your potentially combined share might be atypically high?

Thank you.

Well I am, to be very honest with you, I'm not that familiar with their detailed market share per region or per customer, so I can give you any precise number here right off the cuff.

I think if this situation would arise, at the end of the day, it's depending on the customer view, whether they would allow higher market share or lower market share.

It's not unusual that you have high market share.

It depends on if the customer wants a two, or three, or four supplier panel in their sourcing process, in their sourcing decision.

If they have two or three suppliers, you can go with 60/20/20 or 50/25/25 or so.

So it's depending on the customer view at the end of the day, which I think is very important to have in mind.

I'm sorry I can't give you specific numbers here.

No.

It's helpful.

Thank you.

Peter Testa, One Investments

Hi.

Thanks very much.

I was wondering if you could help us understand inside the active safety, the points you're making about positioning systems versus radar and camera, if you could give us any kind of steer in terms of relative size, or your comment on the slowdown in positioning systems versus expectations.

This slowdown is coming faster than anticipated.

We have communicated that we will have lower organic growth rates than we've previously showed, if you go back four quarters so ago.

But it came faster in 2016 than we earlier anticipated.

So that has been a change.

That coincided with also an earlier-than-anticipated and faster ramp-down of our incumbent brake control program.

So we had the two overlapping instances there taking down the overall sales number.

Okay.

But within active safety, how significant are those two areas versus the faster-growing rate on camera and new product segments?

It's a much smaller part of it, of course.

As you know, when we bought the MACOM business, it's a much smaller part, and it's ramping down.

But as the active safety business is smaller as such, this amount have a meaningful impact on it.

But the bulk of our business or majority of our products in Active Safety is the vision and radar products, whereas the radar product is the absolute biggest one.

Yes.

Okay.

And then on the replacement sales, the 30 million unit pool, can you give some sort of sense as to how big that was in 2016 versus your expectation for 2017?

We would anticipate the 2017 volume to be a little bit lower now than in 2016.

So we have seen a decline.

And we have seen a push-out into 2018 of the inflator replacement, which is affecting actually the organic growth rate also here negatively on 2017.

We also communicated we should also potentially see this to be further pushed out into 2019.

And the reason for that is that cars are not coming in as fast as originally expected.

Our customer, the OEMs, doesn't get the cars to be able to replace the inflator in the speed they have anticipated.

And can you give any sense or quantify what the impact that's having on the organic growth in either 2017 or had in, say, Q4 for example, just so we can understand how to look at the underlying business in Passive Safety?

For the fourth quarter it had a total effect of about 1% unit, looking on the organic growth for the fourth quarter.

And I think that's a good indication.

Okay.

And last thing is just if you look at the business opportunities coming out of Takata's struggles, can you give a sense as to whether you're seeing some visibility either on the platform side, or whether you're experiencing some cross-flow out of the supplier panels which is benefitting you now and then looking into 2017-2018?

Just so it gives some sort of sense as how that opportunity is heading your way?

Well, it's hard to judge from the future.

But of course, the higher than normal order intake is coming from the special situation where Takata is in heavy distress.

So that is, of course, a big reason for it.

How this will play out at the end of the day, is impossible for us to say today.

The only thing we can do here is to continue to deliver to our customers, take the high order intake rate that we have gotten, and deliver on that in flawless launches.

That's the best insurance we can have for seeing continued order awards on a high level.

And within the supplier panels, the mix at which you're winning in the supplier panels, the extent to which you're taking market share there now and going forward?

Is that something which you've experienced largely during this troubled period?

And now you're at a level, or do you think the supplier panel mix is something that will benefit you still in 2017 further?

Yes.

I don't think there is any change to what we have seen in 2016.

I don't see any differences in the supplier panel or so forth, for what we have seen last year.

I can't imagine that.

Fine.

Okay.

Thank you very much.

Kai Mueller, Bank of America Merrill Lynch

Hi.

Thank you very much for taking my questions.

I've got a few.

Maybe to kick off with the first one, your Active Safety business targets towards the end of the decade, I mean we've now seen some of the older businesses are ramping down more now than were originally anticipated.

How do you see that developing?

Do you see then a double-digit pickup in 2017-2018-2019?

Because, I mean the further you push it out, the less time you really have to get to that target.

Well, if you look to our growth targets, as we have said, we would expect our vision and radar business to continue to grow slightly below the market, as we have said.

So that would be-- we reported here now growth adjusted for the days of around 15% for our core business.

So the targets we have set out of a billion dollar, then one year later than originally expected is still there.

And that is including the ramp-down that we are seeing, the new business awards, and the start of production of the order book that we are seeing, and also of course, potential for future business that we are including in this.

Okay.

And then a second point on the inflator replacement business, just to clarify, the question has been sort of raised in Q4.

But throughout the last year, how much did the replacement inflator business add to your organic growth number?

Is that the 1% that you quoted for Q4 or how do I have to see that?

I mean what is the 7% ex-replacement inflator business?

No.

The 1% I referred to was the negative effect on the fourth quarter organic sales.

So that was 1% unit.

Okay.

And what was the tailwind of the replacement business in 2016?

Well, I don't have the number here.

But we can come back to you with that one.

If I recall here, I think it is less than 50 basis points, less than half a percent for the full year.

Okay, great.

Then also--

30 basis points.

30 basis points is the number.

Okay.

Excellent.

Thank you.

Then on another point is you always talk about these-- your margin ex-capacity alignment cost.

Can you just clarify exactly what you take into account for that?

I mean I would assume it's only for restructurings, not for additions.

But can you just clarify if there's anything in the planning for the next years that we have to be taking into account?

You are right.

It is for restructuring.

It is for planned downsizing and for plant closures.

It's for restructuring our global footprint.

We had a cost on 2016 of approximately $25 million or 25 basis points.

We have communicated that from last year and onwards, the restructuring should be on 30 basis points or lower, which is also was last year.

But the adjusted operating margin here is excluding restructuring and excluding legal costs.

And legal costs are then related to antitrust.

You know we have an outstanding antitrust discussion here with the European Union and some others.

So that's our adjusted operating margin.

But capacity alignment was 25 basis points for the year.

Okay.

Thank you.

And then sort of a last one from my side, on page 13 of the presentation, you sort of outline your adjusted margin bridge.

And I know you sort of briefly mentioned it.

But could you just clarify again what is in that other box, which is quite significant, which was sort of the step-down year over year.

Is that purely the day effect?

And also in terms of the day effect, how come your day effect is so much bigger than, let's say, other competitors where we haven't really seen that in Q4 versus Q1 last year?

Starting with the day effect, that's the effect on the organic growth.

So I mean that is included in the organic growth number in the bridge analysis.

So that's where you can find it.

Because I mean if we wouldn't have had that effect, we would have a higher kind of organic growth number and leverage on the organic sales.

When it comes to the reason why being different, this is related to our internal operational calendar.

So it's not related to holidays and normal calendar effect.

So that's how we are kind of closing the books in the Company.

And we have always done that.

So it's an internal Autoliv calendar, rather than the external one.

Moving over to the other items, I mean first of all you need to remember the acquisition effect from ANBS when you're looking on the fourth quarter.

And that is about 70 bps year on year.

So that's one important part.

And on top of that one, we have been talking about the investment for growth that's included in the production overhead and other kind of structural costs to meet the higher volumes that will come with that.

Okay.

Okay, I see.

Thank you very much on that.

And maybe just, sorry, very last point.

On the Takata, I know it's been mentioned before, but just to clarify again.

Do you reckon it's really up to the OEMs to decide who will go for it?

Because they can ultimately decide whether they want certain market shares.

And if so, could they impose much stricter terms on someone like you in terms of price-downs or pricing?

Well, I think it's premature to discuss pricing or price-downs or whatever and demands on that one.

I believe at the end of the day they are the customers of this, and they are having a very big impact on the final decision.

Okay.

No.

Thank you, very much.

That's very clear.

May I just remind everybody that we are limiting this call to one hour, which leaves I think, two minutes for maybe one final question.

Hampus Engellau, Handelsbanken

Thank you very much.

And I just make one question, and it's related to the number of employees.

If I read this correct, you're about 6,000 more employees by the end of 2016 compared to 2015.

And I would be interested to maybe hear how much of this is more R&D efforts put into the Company, and how much is planning for higher volumes going forward?

Thanks.

As we have reported, we have had-- you recall we mentioned that we should hire 500 more people in second half and 500 in first half of 2017.

And we are on target on that recruitment.

So it's a blend of direct and indirect people.

But R&D is a significant increase during the year.

All right.

Thank you.

Thomas Besson, Kepler Cheuvreux

Thank you very much.

It's Thomas Besson, Kepler Cheuvreux.

I'll be very quick.

Can you please explain why the minority interest line was increasingly negative in the second half and what we should anticipate for 2017 and 2018?

My understanding-- and I may be completely wrong on that-- was that you would be somehow being back part of the year earnings of your braking joint venture to the owners.

So can you please clarify on that please?

Yes.

I mean the major item looking on that [row] is like you are saying, I mean that is related to the ANBS joint venture.

Yes.

I understand that.

Is it going to stay a positive driver to your group earnings in 2017-2018, or are they going to be earning a positive figure, and therefore you're going to pay a negative minority interest?

I mean then you need to look at the ANBS, the performance, but also the PPA and the integration effect.

And what we have is about $7 million per quarter related to integration and PPA that is negatively affecting ANBS earnings.

But if we are looking-- if we are taking away the PPA and integration-related costs, we have a positive margin on ANBS.

And that is slightly lower than the corporate average.

And I think that gives you the guidance about the minority row going forward.

Okay.

And how long do we have this PPA, please, and integration costs?

Is it just 12 months or is it going to last for multiple years?

It will last for multiple years.

Great.

Thank you very much.

Okay.

So that is the conclusion of the Q&A, and I hand it back to you, Jan.

Thank you, Anders.

Before we end today's call, I would like to mention that our 2017 quarter 1 earnings call is scheduled for Friday, April 28th.

And we plan also to host our Capital Market Day this year in Germany on September 14th and 15th, around the Frankfurt Auto Show.

And we hope that as many of you as possible will be able to join.

Please follow on our corporate website, the details and updates with regard to the Capital Market Day.

Finally, I would like to thank everyone for participating on today's call.

We sincerely appreciate your interest and questions around Autoliv and comments.

And I wish you all a good day, and good-bye for now.

Thank you.

That will conclude today's conference call.

Thank you for your participation.

Ladies and gentlemen, you may now disconnect.