Autoliv Q1 2025 Earnings Report

Autoliv EPS Results

• Actual EPS: $2.15
• Consensus EPS: $1.72
• Beat/Miss: Beat by +$0.43
• One Year Ago EPS: $1.58

Autoliv Revenue Results

• Actual Revenue: $2.58 billion
• Expected Revenue: $2.50 billion
• Beat/Miss: Beat by +$82.43 million
• YoY Revenue Growth: N/A

Autoliv Announcement Details

• Quarter: Q1 2025
• Date: 4/16/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, April 16, 2025
• Conference Call Time: 8:00AM ET

Autoliv (NYSE:ALV), through its subsidiaries, develops, manufactures, and supplies passive safety systems to the automotive industry in Europe, the Americas, China, Japan, and rest of Asia. It offers passive safety systems, including modules and components for frontal-impact airbag protection systems, side-impact airbag protection systems, seatbelts, steering wheels, and inflator technologies. The company also provides mobility safety solutions, such as pedestrian protection, battery cut-off switches, connected safety services, and safety solutions for riders of powered two wheelers. It primarily serves car manufacturers. Autoliv, Inc. was founded in 1953 and is headquartered in Stockholm, Sweden.

Autoliv Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to the Autoliv Inc. First Quarter twenty twenty five Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer To ask a question during the session, you will need to press 11 on your telephone.

[Operator]

You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today Anders Trapp, Head of Investor Relations. Please go ahead.

[Anders Trapp, Head Of Investor Relations at Autoliv]

Thank you, Melanie. Welcome everyone to our first quarter twenty twenty five earnings call. On this call, we have our President and Chief Executive Officer, Mikael Brat our Chief Financial Officer, Fredrik Kristine and me, Anders Trapp, VP, Investor Relations. During today's earnings call, we will cover several topics, including our strong sales and earnings development in the first quarter, market development and tariffs that are affecting the automotive industry, as well as how our strong balance sheet and asset returns provide financial resilience and support a continued high level of shareholder returns. Following the presentation, we will be available to answer your questions.

[Anders Trapp, Head Of Investor Relations at Autoliv]

As usual, the slides are available on altoliv.com. Turning to the next slide. We have the statement, which is an integrated part of this presentation and includes the Q and A as follows. During the presentation, we will reference non US GAAP measures. The reconciliations of historical US GAAP to non US GAAP measures are disclosed in our quarterly earnings release available on autoliv.com and in the 10 Q that will be filed with the SEC.

[Anders Trapp, Head Of Investor Relations at Autoliv]

Lastly, should mention that this call is intended to conclude at three p. M. Central European Time, so please follow a limit of two questions per person. I now hand over to our CEO, Mikael Braat.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Thank you, Anders. Looking on the next slide. I am happy to present the solid first quarter, showcasing that the company's adaptability and resilience, driven by our diverse product portfolio and strong customer relationships. This achievement lays a solid foundation for 2025. However, we remain cautious about the remainder of the year as we navigate the complexities of tariffs and other economic factors.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

It is encouraging that we, based on light vehicle production data from March, outperformed global light vehicle production despite continued significant headwinds from light vehicle production mix shifts, particularly in China. The stronger than expected sales were partly driven by LVP pull forward in Europe and North America. America. We significantly improved our profit and operating margin compared to a year ago. This strong performance was primarily driven by well executed cost reduction activities.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Our structural cost reduction program reduced our indirect workforce by over 1,500 since Q1 twenty twenty three and our direct headcount by 3,700 over the past year. We neutralized tariffs almost entirely in the quarter by agreements with customers. We also achieved record earnings per share for the first quarter, thanks to lower number of shares and high net profit. I am also pleased that we continue to generate a high level of return on capital employed. Our cash flow remained solid despite higher receivables from strong sales towards the end of the quarter, supporting a high level of shareholder returns.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

In the quarter, we repurchased and retired 500,000 shares for US50 million dollars and paid a dividend of zero seven zero dollars per share. Looking now on the next slide. Last night, Autoliv was recognized by the Automotive News in the category PACE pilot innovation to watch. The prestigious PACE pilot award recognizes achievements under development with new materials, fresh ideas, creative processes and bold execution in the automotive and future mobility space. Autoliv received award for its Bannulli airbag module, which inflates larger airbags more efficiently by leveraging pressure differential with the small single stage inflator, lowering deployment costs and weight.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

I want to thank the team for this great achievement. It reflects our collective effort and commitment to excellence and innovation. Looking now on financials in more detail on the next slide. Sales in the first quarter decreased by 1% year over year due to negative effects from currency, light vehicle production development and adverse regional and customer mix development. The adjusted operating income for Q1 increased by 28% to $255,000,000 from $199,000,000 last year.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

The adjusted operating margin was 9.9%, two thirty basis points better than in the same quarter last year. Operating cash flow was a solid $76 despite a temporary working capital buildup. Looking now on the next slide. We continue to generate broad based improvements. Our positive direct labour productivity trend continues as we reduce our direct production personnel by 3,700 year over year.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

This is supported by the implementation of our strategic initiatives, including optimization and digitalization. Our gross margin was 18.6%, an increase of 160 basis points year over year. The improvement was mainly the result of direct labor efficiency and headcount reductions, partly offset by a supplier settlement, as communicated last year. As a result of our structural efficiency initiatives, the positive trend for RD and E continued. Combined with the gross margin improvement, this led to two thirty basis points improvement in adjusted operating margin.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Looking now on the market development in the first quarter on the next slide. According to S and P Global data from March, global light vehicle production for the first quarter declined 40 basis points, exceeding the expectation from the beginning of the quarter by 140 basis points. Supported by the scrapping and replacement subsidy policy, we continue to see strong growth for domestic OEMs in China, while light vehicle production in higher content per vehicle markets in North America and Western Europe declined by 710%, respectively. This resulted in an unfavorable regional light vehicle production mix of more than three percentage points in the quarter, significantly impacting our outperformance negatively. In the quarter, we did see call off volatility continue to improve year over year.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

We will talk about the market development more in detail later in the presentation. Looking now on our sales growth in more detail on the next slide.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Our

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

consolidated net sales were US2.6 billion dollars This was slightly lower than a year earlier, driven by negative currency translation effects, which reduced sales by almost 4% in the quarter. Excluding currencies, our organic sales grew by 2%, including out of period compensations of US4 million dollars The regional sales split reflects the seasonally weak sales in China due to the Lunar New Year celebrations. China accounted for 17%. Asia, excluding China, accounted for 20%. Americas for 33%.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

And Europe for 30%. We outline our organic sales growth compared to light vehicle production on the next slide. Our quarterly sales were robust and slightly exceeded our expectations, driven by strong performance across most regions, particularly in Europe and America. Based on light vehicle production data from March, we outperformed light vehicle production in all regions except China, fueled by product launches and pricing. In China, our sales to domestic OEMs grew by 19%, aligned with the light vehicle production growth.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Our growth with the global customers in China was just one percentage point below their LVP growth. Due to LVP mix shifts that continues, we underperformed significantly in China overall. Among the primary net sales growth drivers for the company this quarter, four were Chinese OEMs and two were Japanese, highlighting the importance of the Asian market and its customers. On the next slide, we show some key model launches. New launches in the first quarter of twenty twenty five was, as you can see on this slide, mostly in Americas, Europe and South Korea, with few launches in China.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

The reason for this is that many OEMs are planning to unveil new vehicles in the Shanghai Auto Show in April. We expect significant number of new launches in China as of Q2, but we are unable to disclose these launches as the vehicles have not yet been unveiled. The models displayed here features Autoliv content per vehicle ranging from approximately $130 to nearly $500 terms of Autoliv's sales potential, The US produced Honda Passport and the Ford Expedition are the most significant. Now looking at the next slide. I will now hand it over to Frederic Kristin.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

Thank you, Mikael. I will talk about the financials now more in detail on the next few slides. So turning to the next slide. This slide highlights our key figures for the first quarter of twenty twenty five compared to the first quarter of twenty twenty four. Our net sales was SEK2.6 billion, representing a 1% decrease.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

Gross profit increased by SEK35 million and the gross margin increased by 1.6 percentage points. The adjusted operating income increased from SEK199 million to SEK255 million and the adjusted operating margin increased by two thirty basis points to 9.9%. The reported operating income was $1,000,000 lower than the adjusted operating income, mainly due to costs for capacity alignment. Adjusted earnings per share diluted increased by $0.58 where the main drivers were $0.48 from higher operating income and $0.13 from lower number of shares. Our adjusted return on capital employed was a solid 26% and our adjusted return on equity was 29%, driven by share buybacks impacting total equity.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

We paid a dividend of $0.70 per share in the quarter and repurchased shares for slightly over US50 million dollars and retired $05,000,000 shares. Looking now on the adjusted operating income bridge on the next slide. In the first quarter of twenty twenty five, our adjusted operating income increased by US56 million Operations contributed with SEK46 million, mainly from higher organic sales and improved operational efficiency, supported by the better call of accuracy. The net currency effect was $5,000,000 negative as the positive effects from the Mexican peso versus The U. S.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

Dollar was offset by translation and revaluation effects. The impact from raw materials was around $5,000,000 negative. Out of period cost compensation was $4,000,000 higher than last year. Costs for SG and A and RD and E net decreased slightly despite higher costs for SG and A personnel. The recycled accumulated currency translation differences related to the divestment of our idle operations in Russia amounted to $12,000,000 And the year over year impact from the supplier settlement in 2024 was around $2,000,000 negative.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

Looking now at the full year results on the next slide sorry, on the cash flow, sorry, on the next slide. The first quarter of twenty twenty five, operating cash flow decreased by $45,000,000 compared to the same period last year to $77,000,000 mainly a result of increased receivables following the strong sales towards the end of the quarter. Capital expenditures net decreased by $47,000,000 Capital expenditures net in relation to sales was 3.6% versus 4.5% a year earlier. The lower level of net is mainly related to lower flat base mix in Europe and Americas and less capacity expansion in Asia region. The free operating cash flow was negative 16 million compared to negative SEK 18,000,000 in the same period the prior year, as the lower operating cash flow was offset by lower CapEx.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

The cash conversion in the last twelve months, defined as free operating cash flow in relation to net income, was around 72%, slightly below our target of 80%. Now looking at our trade working capital development on the next slide. Trade working capital decreased by $56,000,000 compared to the prior year, where the main drivers were $11,000,000 in higher accounts receivables, 17,000,000 in lower accounts payables and $84,000,000 in lower inventories. In relation to sales, the trade working capital decreased from 12.8% to 12.4%. The improvement in trade working capital is a result of our multi year working capital improvement program and an improvement in customer call up accuracy enabling a more efficient inventory management.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

Now looking on our debt leverage ratio development on the next slide. Altalin has consistently prioritized maintaining a strong leverage ratio, reflecting our prudent financial management and commitment to a strong balance sheet. This approach has enabled the company to navigate economic fluctuations, invest in innovation and continue delivering value to stakeholders over time. Our leverage ratio is virtually flat year over year at 1.3 times despite close to US700 million dollars in shareholder returns. Compared to the end of last year, our debt leverage ratio increased by 0.1x as our net debt increased by US242 million dollars while the twelve month trailing adjusted EBITDA increased by US55 million dollars With that, I hand it back to you, Mikael.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Thank you very much, Fredrik. On to the next slide. In recent years, our business has faced significant challenges from COVID, disrupted global supply chain, component shortages, inflation, and the changing LVT landscape. Our company has adapted quickly, found new ways to mitigate risks and maintaining profitability. Now facing a challenging tariff situation, we are well equipped with a diversified customer portfolio, a broad regionalized footprint, a strong balance sheet and a single focus on automotive safety and saving lives.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Autoliv has a diversified customer and model mix in North America. This diverse model mix base helps Autoliv mitigate risks associated with slowing import of certain vehicle models from Mexico and Canada. The company has multiple production and assembly facilities across North America, ensuring timely delivery of airbags, seat belts and steering wheels. Our largest production hub is in Mexico. However, not all products are made there meet USMCA standards due to customer specific components or the unavailability of certain materials, like magnesium and leather for steering wheels.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Our logistics in North America are complex. While some of our Mexican production support local vehicle manufacturing, the majority is still destined for US vehicle assembly plants. For products sent to The US customers manage about one third of the transportation and import, and these shares continue to grow. Driving from past experiences, Autoliv has developed handle tariffs. Over the years, we demonstrated that our methods for navigating challenging environments are effective.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

On to the next slide. The instability and overall magnitude of the tariffs have placed the automotive industry in a challenging position. Tariff costs need to be passed on to the end consumers, which would lead to higher vehicle prices and potentially impact consumer demand and light vehicle production. To mitigate the effects of U. S.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Tariffs on outer parts and materials, we have implemented several strategic measures. We established a task force early in the year with a focus on minimizing the impact of tariffs. We are engaged in ongoing discussions with our customers to find setups that are mutually beneficial while negotiating compensation for the transition period. Our large existing footprint in The U. S.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Enable us to navigate the challenges posed by tariffs effectively. It gives us opportunities to ramp up production in The U. S, should that be the best option when evaluating future production locations together with our customers. We are committed to increasing our compliance with the USMCA regulation, working closely with our customers and suppliers to achieve this through increased local sourcing of components and changing of specifications. On to the next slide.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

The outlook for global light vehicle production in 2025 has become significantly more uncertain since January, with regional variation influenced by tariffs, slowing economic growth and other factors. In North America, the production outlook may be significantly downgraded due to trade risks and higher vehicle prices from import tariffs. This reduction is likely to affect vehicles produced in Mexico and Canada more severely. In Europe, production is expected to increase slightly short term due to revision in EU regulations and higher demand in some Eastern European markets. China is also growing, driven by government policies supporting the new energy vehicle market.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Japan and South Korea are potentially facing declines due to the impact of lower exports to The U. S. Overall, while some regions are still expecting growth, the global outdoor industry remains cautious. Navigating the complexities of tariffs and other economic factors. Now looking on the business outlook on the next slide.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

We expect 2025 to be a challenging year for the automotive industry. However, our ongoing focus on efficiency is expected to further enhance our profitability. We anticipate a significant improvement in our sales performance in China. Additionally, our strong cash conversion and solid balance sheet provide financial resilience and a robust foundation for maintaining high shareholder returns. We expect cost pressures from in 2025.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

But still, we expect some pressure coming mainly from labor, especially in Europe and America. However, the ongoing tariff situation could add inflationary pressure. Certain raw material prices have increased, and we expect headwind for the year, mainly in The U. S. We successfully navigated the new tariff environment in the first quarter.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

This gives us confidence that it's possible to continue on that course, but there is significant uncertainty. Contrary to the past three years, we do not anticipate a gradual quarter by quarter adjusted operating margin increase as the inflationary environment differs from recent years. However, the fourth quarter is still expected to be the strongest of the year. Turning to the next slide. This slide shows our full year 2025 guidance, which excludes effects from capacity alignment, antitrust related matters, as well as no further changes to tariffs or trade restrictions that are in effect as of 04/15/2025, as well as no significant changes in the macroeconomic environment or changes in customer call off volatility or significant supply chain disruptions.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

The business environment uncertainties make it difficult to predict the remainder of 2025. However, based on the strong first quarter performance and and Operating cash flow is expected to be around US1.2 billion dollars Our positive cash flow and strong balance sheet supports our continued commitment to a high level of shareholder return. Our full year guidance is based on a global light vehicle production decline of around negative 0.5%, a tax rate around 28% and that the net currency translation effect on sales will be around minus 3%. We are monitoring the situation closely and are prepared to be as agile as needed to adjust to any changes. Looking on the next slide.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

We are pleased to invite you to the Autoliv Capital Markets Day on 06/04/2025 in Stockholm, Sweden. Join us to learn more about our journey towards achieving our targets, capturing growth opportunities and translating these into attractive and sustainable shareholder returns. We will showcase our outlook in strategically securing a strong position with successful OEMs supporting our medium and long term growth in a rapidly changing market environment. You will also have the opportunity to see our latest innovation and technologies. I personally look forward to seeing you all in Stockholm.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Now turning the slides. This concludes our formal comments for today's earnings call, and we would like to open the line for questions from analysts and investors. I will now hand it back to Madeline.

[Operator]

Thank you. Please note that there is a limit of two questions per person on today's call. Our first question comes from the line of Colin Langan from Wells Fargo. Please go ahead. Your line is open.

[Colin Langan, Automotive & Mobility Analyst at Wells Fargo]

Great. Thanks for taking my question. I know mid quarter you were trying to size the USMCA exposure. Do you have any better clarity now on how much of your sales are non USMCA compliant that are at risk? Because I didn't see any actual impact on the walks on margin or sales, so I assume it was pretty small in March.

[Colin Langan, Automotive & Mobility Analyst at Wells Fargo]

But at any run rate, you could kind of help so we could frame the potential risk.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Yes. We haven't given you any detail around the split there with the USMCA compliance or noncompliance here because it's I would say, with the current circumstances here, I mean, it's a pretty fluid situation here. And giving too much details in this environment, I think, would more confuse than support. I think the bottom line here is that we are well positioned here with the footprint we have described here. We are having a regionalized setup, so meaning America for America.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

However, now with this focus on The U. S. Side, it means the tariffs impact us mainly for the Mexican flow. But as we have mentioned here, that production we have in Mexico is to a large extent for OEMs in Mexico also. Our customers are there.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

They also have pickup points in Mexico, meaning that they are carrying them over. And then a smaller part of that is also carried by us over the border into the customers' plants in The U. S. We are working with our customers here to see what we can do to improve that. But the reason why we are not why we have USMCA non compliant components here is because there is no, to a very large extent, there is no available supply the region there.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

And we mentioned, for example, leather, we mentioned magnesium for the steering wheels. We have also uniqueness when it comes to certain directed components, when it comes to electronics in the steering wheels, etcetera. So we are working to find alternatives with our customers, but that will take time. But wherever we are impacted by there, it's what we pass on to the customer here through surcharges. So I think we are as good as we can get in this environment here right now, and we monitor it carefully going forward, see what we can do.

[Colin Langan, Automotive & Mobility Analyst at Wells Fargo]

And the vast majority was passed on to the customer in the quarter already?

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Yes, yes.

[Colin Langan, Automotive & Mobility Analyst at Wells Fargo]

Just as a follow-up, in

[Colin Langan, Automotive & Mobility Analyst at Wells Fargo]

your comments, you said, I believe maybe I misheard, but the profit trajectory is not going to be like prior years now. Is that but it would be strongest in Q4. So how should we be thinking about, I know you don't guide quarters, but Q2, any rough color there? Are we now expecting that to not increase sequentially? And why would that be the case?

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

No. I I would say we are more back to the normal pre inflationary environment here, where where you always had a weaker, you know, Q1, you had a stronger Q4, and then Q2 and Q3 was was more average in between there. And I think that's what we're trying to say now, that we are not seeing the same inflationary pressure that creates this sequential development that we have seen for the last three years. So more back to normal.

[Colin Langan, Automotive & Mobility Analyst at Wells Fargo]

Got it. All right. Thanks for taking my questions.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Thank you.

[Operator]

Thank you. We'll now move on to our next question. Our next question comes from the line of Erik Golrang from Sweden. Please go ahead. Your line is open.

[Erik Golrang, Head of Equity Research at SEB]

Thank you. I have three questions. Firstly, on Europe, if you could some more color on that big outperformance, what's behind that? And then the second question on the size of tariff compensation in Q1 to the extent you would share that. And then thirdly, continuing on the tariff topic, just some more sort of color on this.

[Erik Golrang, Head of Equity Research at SEB]

I mean, you've covered yourself fully in Q1. It seems that you're confident that you'll be able to continue to do so. Just thinking of why wouldn't this burden be shared across the value chain? Thank you.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Okay. Thank you. On the European side, we see the result of our position here with the European OEMs and a positive result of the mix we have there as they have some because I pulled forward here also well connected to the European regulations here. So we have a good mix there. So more on the tariff side, I would say here that we start with the last question and maybe why I'm confident.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

I mean, we have been very clear thing here that these tariffs needs to be passed on to our customers and obviously to the end consumer here in my view. Then, of course, it's up to the OEMs what they want to do here. But I don't see any logic at all why the supply chain should absorb these tariffs. And this is, you know, the cost of doing business, which is implemented from one day to another. And, yeah, we'll see for how long and at what magnitude they will be.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

But there's no way the supply chain can absorb this kind of magnitude of additional costs. So the pure nature of it, in my mind, needs to be passed on to the end consumer. So we start forming that and we'll continue to hold that position as we move forward. Then with that said, of course, we will working with our customers to see what can be done in terms of fulfill the requirements so you don't need to have to pay a tariff at all. But in order to do any bigger things there, you need to have some kind of stability and certainty on the tariff situation before you can take that kind of decisions.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

For example, moving a large part of your capacity from, let's say, Mexico or somewhere else into The U. S. So you see that you have the right circumstances there to have a business case to do it. But as I said, we are well positioned here with the footprint we have. And of course, we can work on the footprint we have here to see what kind of pressures we can do there in terms of using the footprint we already have.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

We are, I would say, our peers, the one with the strongest industrial footprint in The U. S. Here. So we are in a good start there. And then when it comes to what we discussed before here with the non U.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

S. MTA compliance is the availability. And there, of course, it's more forces than our own force here that can change that. So we are dependent on the industry here as well. But we're working together with industry on this and see what happens.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

But once again, stability and predictability is required before any bigger change can be done, if they could be done. And we haven't given any details on how much the tariffs are because I don't think that I mean, it's a figure that is not meaningful in terms of the details here because we are cutting on the tariffs that we get as a result of this. And it's changing all the time also. So it's a lot of changing parts here because besides the automotive tariffs here, you have the steel, manganese, aluminium and all that. So, yes, it's a very complicated picture.

[Erik Golrang, Head of Equity Research at SEB]

Thank you. And if I could just follow-up, you mentioned the business case to relocate production probably early days. You see that? Is there sort of an investment that you could do in The US where the total cost to bring your product to the market and your customers doesn't go up, or is actually beneficiary? Or do you think that you'll stay where you are based on the at least the current level of It's

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

way too early to, you know, be any have any firm views on that because, as I said, we need to know what the landscape will be for the foreseeable future so you can actually do a business case around it. And for certain, the cost in in The US will go up. I mean, there is a reason why we are in Mexico. So the question is what that would be and what everybody is prepared to do there. So it's too early to have any firm opinions about the intervening.

[Erik Golrang, Head of Equity Research at SEB]

Okay.

[Erik Golrang, Head of Equity Research at SEB]

Thank you.

[Operator]

Thank you. We'll now move on to our next question. Our next question comes from the line of Emmanuel Rosner from Wolfe. Please go ahead. Your line is open.

[Emmanuel Rosner, Managing Director - Senior Autos & Auto Technology Analyst at Wolfe Research LLC]

Great. Thank you so much. My first question is your decision to reiterate guidance. Can you elaborate a little bit about this? Is it mostly a function of just a lot of uncertainty, so it's really difficult to know what to assume for any changes?

[Emmanuel Rosner, Managing Director - Senior Autos & Auto Technology Analyst at Wolfe Research LLC]

Or is it strong confidence in the ability to offset future challenges? Is it both? Can you just comment a little bit more about it?

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Sure. No, I think, first of all, we feel comfortable with the guidance here when we look at our own ability to move forward here. I think we had a strong first quarter here, And we continue to see also when we look into the horizon that we have with the call offs that we continue to see a healthy level of light vehicle production moving into the second quarter with the horizon we have there. And as I said, our own activity level controlling what we're approaching from in a good way. So I feel that we are steadily moving forward in the right direction there.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

So we have no reasons, I would say, to change our guidance here. We feel comfortable with what we can see. Then, of course, what you're pointing to here, we are absolutely fully aware of the risks, you could say, that is out there connected to the tariffs and overall uncertainty there. But today, we don't have any data points pointing in dramatic changes to that. Plus that we also, in our guidance, have a range mentioned there also that, you know, can absorb some movements as well.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

So, we feel comfortable with the guidance that I've given here today with what we know.

[Emmanuel Rosner, Managing Director - Senior Autos & Auto Technology Analyst at Wolfe Research LLC]

Thank you. If I could just ask this sort of like a different way, then I have a quick follow-up. But so for example, this morning, I think, you know, you're you're based on the March S and P file, but this morning, S and P, you know, cut the global production, you know, a little bit deeper than the down 0.5% that you're assuming. So all else equal, is that something that we should be flowing through your guidance and essentially saying, look, the production is lower than assumed, therefore, you know, it's actually sort of like a lower outcome? Are you essentially saying that you have offsets or the Q1 was so much stronger than expected that all in, even with sort of like this somewhat weaker outlook, you're still good with your guidance?

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

I mean, as we said here, I mean, we have based our guidance on the So we were already from the beginning, remember, more as a negative than S and P Global. Now they have made an adjustment. I would say that ballpark figure around where we are at also, I mean, 1% lower than what we have. So I mean, I would say it's within margin of error when you look at the light vehicle production.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

So it doesn't change the picture for me here.

[Emmanuel Rosner, Managing Director - Senior Autos & Auto Technology Analyst at Wolfe Research LLC]

That's great. And then the quick follow-up is your capital allocation strategy and in particular the shareholder returns. Are you still comfortable with your existing strategy? Or is the current uncertain environment make you want to potentially slow down the cash returns to shareholders or change it in any other way?

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

No. Think I mean, our strategy and commitment here lays firm to be a shareholder friendly company, return liquidity to our shareholders. We continued in the first quarter here with our buybacks, even though at a slightly lower pace, but we'll hold on to it. And what we will do going forward, of course, we can't comment here, but our commitment still stands.

[Emmanuel Rosner, Managing Director - Senior Autos & Auto Technology Analyst at Wolfe Research LLC]

Thank you so much.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Thank you.

[Operator]

Thank you. We'll now move on to our next question. Our next question comes from the line of Edison Yu from Deutsche Bank. Please go ahead. Your line is open.

[Edison Yu, Analyst at Deutsche Bank]

Hi. Thank you for taking our questions. First one on near term, in terms of the tariff related cost, it seems like you absorbed it or able to pass it on sorry, pass it on very quickly. Would you expect that going forward to be that quick in terms of the time when you pass it on to when you actually run it through the P and L?

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Yeah, I think it needs to be quickly. I mean, you remember when we have described our negotiations when it comes to the inflationary compensation? That was related to very detailed and complicated negotiations on the component by component, plant by plant level across the whole globe. The tariffs is very, I would say, clear and obvious when you have to pay them and, let's say, the evidence to prove that you have had this cost is much more simple, and therefore, the negotiations will go much faster.

[Edison Yu, Analyst at Deutsche Bank]

Okay. So just to check, let's say tariffs continue on for the next couple of quarters, you would expect to recover that pretty much intra quarter going forward?

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

I mean, I will not promise anything here. But as I said, we stand firm in our opinion here that the tariff cost needs to be passed on, and we will continue to do so. And I think we have a well established way of doing it with our customers there.

[Edison Yu, Analyst at Deutsche Bank]

Gotcha. And then longer term, on automation, I know it's a bit early to decide whether to necessarily relocate a lot back to The US. But I think you you've discussed in the past, you you've done a lot of automation overseas in in China. It's been very successful. So if you had to automate, do you have a playbook?

[Edison Yu, Analyst at Deutsche Bank]

Do you have kind of a system that you can implement based on your learnings?

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Yeah. I mean, I'm not worried about, you know, the process or the the the way of moving capacity or establishing capacity in The US. It's more a question about the the business case. And as I said, the reliability in the environment that makes you comfortable in making investments this environment. It's not how or so that is the problem.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

It's the calculation, the business case that we can provide the competitive better cost domestically than with tariffs, basically, the breakeven calculation.

[Edison Yu, Analyst at Deutsche Bank]

That is it. Thank you.

[Operator]

Thank you. We'll now move on to our next question. Our next question comes from the line of Chris McNally from Evercore. Please go ahead. Your line is open.

[Chris Mcnally, Head of Global Auto & Mobility Research at Evercore]

Thanks so much team. And I apologize if I missed this in the prepared remarks, but just in terms of the call ups you're seeing through early April, do they align with some of the March projections around Q2? I think we're all sort of anticipating basically any day now that we'll get major Mexico and Canadian shutdowns basically permanently until tariffs are changed. So just curious if some of that is reflected in what you've seen in the call offs over the last two to three weeks.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

As I indicated before here, we see that the call offs is holding up well and no other indications than that we are moving forward here with horizon we have from the call offs.

[Chris Mcnally, Head of Global Auto & Mobility Research at Evercore]

And maybe just to follow-up on that, because I think you've answered the other questions really, really helpfully. It basically seems like production is the primary variable here. There'll be a little bit on raw materials, but you're expecting to get repaid for any tariffs from suppliers. I think we've heard that from every supplier. I'm just a little surprised.

[Chris Mcnally, Head of Global Auto & Mobility Research at Evercore]

Mean, basically, there was no change in call offs, particularly Mexican and Canadian facilities, it would sort of imply that the Detroit three were continuing to build, which means they weren't planning to cross the border, which does not seem to be the case. So could you help us reconcile that? Because you would imagine we would see weakness based on everything that we know if shutdowns were to be coming soon because they're building inventory at the border essentially.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

No, I mean, I can't suppose comment or speculate in what our customers are doing here specifically. But I mean, the totality of the call offs that I referred to here when we look at Autoliv order book, so to speak, is, as I said, holding up well here as we move forward into the second quarter with what we can see and the time horizon we have.

[Chris Mcnally, Head of Global Auto & Mobility Research at Evercore]

Okay. Excellent. So it's sort of a global order perspective and maybe we'll hold off on giving very specific Canadian Mexican facility because a lot of that stuff is live. Thanks so much for the comments. Really appreciate it.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Thank you.

[Operator]

Thank you. We'll now move on to our next question. Our next question comes from the line of Hampus Engelau from Handelsbanken. Please go ahead. Your line is open.

[Hampus Engellau, Equity Analyst at Handelsbanken Capital Markets]

Thank you very much. Two questions for me. Starting off on the capacity line and program. Just a question, if you are you happy where you are on these levels? Or are you going to go ahead fully on the 8,000 that you previously indicated in terms of headcount reduction?

[Hampus Engellau, Equity Analyst at Handelsbanken Capital Markets]

Second question is more related to the mix. I was also surprised on the warehouse growth in Q1. And if we look at the quarters ahead on the LVT outlook, should we assume any big changes in mix in the quarter from what you see now? I know you're not going to guide on the quarters, but just a sense for us to model. Thank you.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

Yes. On your first question on the headcount reduction, I think we're progressing well. You saw now that we have reduced our indirect or salaried headcount by over 1,500. So that has progressed further versus the Q4 report. And we also hold on to the expected savings of an incremental 50,000,000 for the year.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

So that's progressing well. Also on the direct labor side, I think we're down in total headcount, we're down 6%, whereas organically we grew sales by 2%. So also here we see a good development on the operational excellence side and productivity side. So that's also, of course, helped by the better quarter volatility. That was around 93% here in the first quarter, so a continuation of the positive trend we saw in the fourth quarter.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

And then on mix side, and we mentioned here we had three percentage points negative mix in the first quarter. That will most likely continue also in the second quarter. And then we expect a more favorable development in the second half of the year, at least when you look at our expected sales performance versus MVP development in China. But we still expect a negative mix also for the full year, still above one percentage point.

[Hampus Engellau, Equity Analyst at Handelsbanken Capital Markets]

Okay, fair enough. Thank you.

[Operator]

Thank you. We'll now move on to our next question. Our next question comes from the line of Agnieszka Vilela from Nordea. Please go ahead. Your line is open.

[Agnieszka Vilela, Managing Director at Nordea Bank]

Thank you so much. So my first question is on the pull forward impact that you saw in Q1 when it comes to car production. I wonder if you can just tell us about what has been happening. And also, did you only see that on the kind of car production or did you also see that OEMs are stocking up your products?

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

Yes, mean, it's very difficult for us to say what volume deviation here that we saw in the first quarter, which was favorable. I mean, volumes in the first quarter were better than we had expected going into the quarter. But to quantify a pull ahead effect of that is incredibly difficult for us and was even impossible. But as Mikael already pointed out here that we see the call off continuing at a good level also here in the second quarter. So it's not that we see them falling off yet.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

So that would indicate that either the pull ahead effect continues or it was smaller in the first quarter.

[Agnieszka Vilela, Managing Director at Nordea Bank]

Understood. Thank you. And then maybe just if you could help us to understand the impact on the P and L from getting compensations from tariffs and overall tariff impact. Does it filter through sales and your cost? Or how should we think about it when you get the compensation for tariffs?

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

Yes, the majority filters through sales. But in the first quarter, it was not of such a large magnitude that it would have any meaningful effect on the top line.

[Agnieszka Vilela, Managing Director at Nordea Bank]

Thank you.

[Operator]

Thank you. We'll now move on to our next question. Our next question comes from the line of Jairam Nathan from Daiwa Capital Markets America. Please go ahead. Your line is open.

[Jairam Nathan, Executive Director at Daiwa Capital Markets]

Hi, thanks for taking my question. Just wanted to understand in terms of the cost reduction or your SEP, can you make any enhancements or increase the cost reduction potential if things worsen from here? What kind of flexibility would you have?

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

No. I think, I mean, I think we have already shown that we have a high flexibility in the company to manage big shifts in demand here. So of course, what we're seeing the result of from now in the quarter one here, for example, is from really the, what we call then, the strategic road map activities here to drive towards our midterm targets here. If something dramatically would happen in the market, then of course, we have more levers to pull to bring down the cost and reduce labor, etcetera. So the short answer is yes, we can do more if needed there, of

[Jairam Nathan, Executive Director at Daiwa Capital Markets]

Okay. And just as a follow-up, we are seeing a lot of, especially Japanese OEMs, I think, moving, trying to shift production back to The U. S. And I just want to understand how would that have any impact on margins coming from in Japan versus The U. S.

[Jairam Nathan, Executive Director at Daiwa Capital Markets]

Or and would The U. S. Facilities have the capacity?

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

No, I think, yes, mean, first of all, yes, we see some of that also. And of course, if there is platforms that we are on that changes location, we have a procedure for that. That has happened before, so that's nothing dramatically with that. That's basically a reset of the programme and we need to do a new calculation and all that stuff. So we have a well defined way of working around that.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

And I think here we have also a big advantage since we have this global footprint we have. We can also support our customers if they want to move to a different region. So that's not very dramatic for us today. So yes, and I think it will take some time until you actually see any meaningful volume impacting that. I think they have the same situation here as we as a supplier have, that you need to make sure that you have a long term view on the landscape here in order to actually make those investments at the end of the day.

[Hampus Engellau, Equity Analyst at Handelsbanken Capital Markets]

Okay. Thank you. That's all I had.

[Operator]

Thank you. We'll now move on to our next question. Our next question comes from the line of Dan Levy from Barclays. Please go ahead. Your line is open.

[Dan Lévy, Senior Equity Research Analyst at Barclays]

Hi. Good afternoon to you. Thank you for taking the questions.

[Dan Lévy, Senior Equity Research Analyst at Barclays]

First, can you just

[Dan Lévy, Senior Equity Research Analyst at Barclays]

outline what your exposure is within Europe and Asia to vehicles that are exported to North America?

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

I don't have the number here in front of me. We could come back to you on that one. Yeah. Mean, it's premium vehicles more that are exported, and then we are a bit overweighted maybe against those. But I would have to come back on the exact number.

[Fredrik Westin, CFO & EVP of Finance at Autoliv]

But you can talk to and we can understand.

[Dan Lévy, Senior Equity Research Analyst at Barclays]

Okay, thank you. And then second question is on the tariffs and what specifically is not USMCA compliant? How much of this is Tier two directed content by the OEMs that is essentially in a position where the OEMs have to negotiate because they've directed this content as opposed to content that you've chose to source on your and there's maybe a little less of a basis for getting those recoveries?

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

We're not breaking it down in detail. It's, I was going to say, too detailed to keep in an external content there, and especially in a situation like this one, it's quite fluid here. As I said, I mean, the directed parts, as I said, it's obviously something we need support from the OEMs, allow our customers here to find alternatives to. But most cases, when we are not USMCA compliant, it's because it's not available under those conditions. So I think you have to live with it.

[Dan Lévy, Senior Equity Research Analyst at Barclays]

Okay, thank you.

[Operator]

You. Due to time constraints, this concludes our question and answer session. So I'll hand the call back to Michael Bratt, President and CEO, for closing remarks.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Thank you, Melanie. Before we conclude today's call, I want to emphasize our commitment to achieve our financial targets. Our focus remains on structural cost reductions, innovation, quality, sustainability and on tariff mitigation efforts. Despite significant market challenges in key markets, we expect to continue to perform strongly. We remain vigilant about the risks associated with the tariffs and geopolitical challenges, which could impact our cost structure and market dynamics.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Navigating these complexities as well as we did in the first quarter will be instrumental in maintaining our momentum throughout the year. Once again, I'm delighted to invite you to our Capital Markets Day on 06/04/2025. I look forward to see you there. Our second quarter call is scheduled for Friday, 07/18/2025. Thank you for your attention.

[Mikael Bratt, Member of Research Advisory Board, President, CEO & Director at Autoliv]

Ride safely.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.

Participants

Executives

• Anders Trapp, Head Of Investor Relations
• Mikael Bratt, Member of Research Advisory Board, President, CEO & Director
• Fredrik Westin, CFO & EVP of Finance

Analysts

• Colin Langan, Automotive & Mobility Analyst at Wells Fargo
• Erik Golrang, Head of Equity Research at SEB
• Emmanuel Rosner, Managing Director - Senior Autos & Auto Technology Analyst at Wolfe Research LLC
• Edison Yu, Analyst at Deutsche Bank
• Chris Mcnally, Head of Global Auto & Mobility Research at Evercore
• Hampus Engellau, Equity Analyst at Handelsbanken Capital Markets
• Agnieszka Vilela, Managing Director at Nordea Bank
• Jairam Nathan, Executive Director at Daiwa Capital Markets
• Dan Lévy, Senior Equity Research Analyst at Barclays