Autoliv, Inc. · NYSE:ALV
Autoliv — Non-Deal Roadshow (July 2013)
32 slides from Autoliv's roadshow presentation, Jul 25, 2013
Slide 1: The Worldwide Leader in Automotive Safety
Autoliv The Worldwide Leader in Automotive Safety Investor Meetings Boston & NYC Jan Carlson – CEO & President July 25-26, 2013 Driven for Life. © Autoliv Inc., All Rights Reserved Safe Harbor Statement * This presentation contains statements that are not historical facts but rather forward-looking
Slide 2: Q2 Highlights; Operational Focus
Q2 Highlights - Sales growth driving solid performance Q2’13 better than expected • Organic sales growth 5.7%, 2.7 pp higher • EBIT* margin 9.1%, 0.6 pp higher EPS* $1.48 • YoY increase driven by growth, financial net and taxes Strong Operating Cash flow • $192 million Solid returns • RoCE ~ 23% Org
Slide 3: Strong Organic Sales Growth; Enhanced Market Position
Strong Organic Sales Growth - Q2 2013 Contributing Models Renault Clio Cadillac SRX Mercedes E-Class Hyundai Santa Fe BMW 3-Series Ford Kuga Volvo V40 Land Rover Evoque Great Wall Haval H6 Autoliv content per vehicle above global average on these models ALV Q2’13 Financial Earnings Report - 5 © Auto
Slide 4: Q2 Financial Overview; Q2 2013 EBIT Bridge
Q2 Financial Overview - Solid performance (US$ Mil’s unless specified) 2013 2012 Sales $2,198 $2,089 Gross Profit $431 19.6% $422 20.2% EBIT * $200 9.1% $196 9.4% EPS * (assuming dilution) $1.48 $1.39 RoCE * 23% 23% RoE * 15% 15% Operating Cash flow $192 $219 DPS ** $0.50 $0.47 GLVP *** (annual run
Slide 5: Capacity Alignment; Cash Flow
Capacity Alignment - Summary (US$ Mil’s unless otherwise specified) FY12 Q1 13 Q2 13 FY’ 13 Cost (gross) $79 $3 $3 $25-50 Cash outlay - $5 $4 $30-40 Savings - ~ $3 ~ $3 ~ $15 Carry forward $75 $70 $70 Balance Sheet * Expected payback 2-3 years from the cash outlay (*) Employee related ALV Q2’13 Fina
Slide 6: Long-Term Targets and Growth Strategies
Long-Term Targets and Growth Strategies - Recap Long-Term Targets Executing our Growth Strategies Organic sales growth at least in line Textile Center in China with our market • Includes weaving plant, “cut&sewn” • and faster than our market including cushion plant and development technical acquisit
Slide 7: Executing our Growth Strategies; Market Conditions
Executing our Growth Strategies - Improving “Night Driving Assist” at Mercedes • Far-infrared: detection performance • Near-infrared: image clarity Improved Night Vision system display Original Night Vision system display Combining the best of “Far Infrared” with “Near Infrared” ALV Q2’13 Financial
Slide 8: Market Conditions: Americas and Asia
Market Conditions - Americas * North America • Demand remains stable with overall inventories ~ 60 days • Replacement cycle remains positive, SAAR ~ 15M for several months South America • LVP recovering YoY • Frontal airbag adoption rates increasing due to legislation in Brazil Overall market outloo
Slide 9: Euro Zone Crisis; EU Light Vehicle Registrations
Euro Zone Crisis - Light vehicle production vs. sales and exports vs. imports Estimated inventory increase > 2M units in EU27 since Q1 2010 ALV Q2’13 Financial Earnings Report - 17 © Autoliv Inc., All Rights Reserved EU Monthly Light Vehicle Registrations - Trend line indicates continued weakness 20
Slide 10: Light Vehicle Sales LTM; US Light Vehicle Inventory
Light Vehicle Sales LTM* - US and EU Source: IHS and Acea, (*) Last Twelve Months ALV Q2’13 Financial Earnings Report - 19 © Autoliv Inc., All Rights Reserved US Light Vehicle Inventory Inventory days remain around 60 days Source: JD Powers ALV Q2’13 Financial Earnings Report - 20 © Autoliv Inc., Al
Slide 11: Light Vehicle Production
Light Vehicle Production - 3rd Quarter 2013 2012 2013 vs. 2012 ALV YoY Vehicles in millions @ Jul 17 @ Jun 18 Org. Growth Americas 5.1 4.8 6% 6% 7% - North America 4.0 3.7 8% 8% 6% - South America 1.1 1.1 0% 0% 45% Europe 4.2 4.3 (3%) (3%) 1% - WEU 2.7 2.8 (3%) (3%) - EEU 1.5 1.5 (2%) (2%) Japan 2.2
Slide 12: Looking Ahead: Q3 2013; FY Indication
Looking Ahead - Q3 2013 Sales • YoY organic sales increase close to 6% Mainly related to strong sales in Active Safety, China and RoA • Sequentially organic sales ~ 7% decline from Q2 mainly due to customer summer shutdowns EBIT* Margin ~ 8.5% • YoY effect of organic sales is more than offset by cur
Slide 13: Outlook; Thank you!
Financial Outlook Q3 2013 FY2013 Sales Organic close to 6% ~ 4% Acquisitions / (Divestitures) 0% ~ (0.2%) Fx** ~ (0.8%) ~ (1%) Consolidated Sales ~ 5% ~ 3% EBIT Margin * ~ 8.5% ~ 9% (*) Non US GAAP Earnings Before Interest & Taxed excludes legal costs & other charges related to the ongoing antitrust
Slide 14: Steady Growth Hides Dramatic Business Transformation
Steady Growth Hides Dramatic Business Transformation Challenging World Sales Protection to Prevention 70 60 Million Light Vehicles 50 10 40 8 30 6 US $ (illions) 20 US$ (Billions) 4 10 2 0 0 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 LVP Growth Markets ALV Q2’13 Financial Earnin
Slide 15: Market Forecast
Market Forecast – Current Market 40 35 30 CAGR 5% 25 US$ (Billions) 20 15 10 5 0 2012 2015 2017 Passive Safety Developed Markets Passive Safety Growth Markets Active Safety ALV Q2’13 Financial Earnings Report - 29 © Autoliv Inc., All Rights Reserved Market Forecast – Additional Potential Market 40 3
Slide 16: Light Vehicle Production Growth; Market Drivers
Light Vehicle Production Growth - 2012 thru 2017 2012-17 CAGR LVP Global Market 4% 100.0.0 ~ 98M ~ 91M Growth 7% Markets ~ 80M 80.0.0 33 RoW + EEU 5% 30 25 ~59M 60.0.0 ~42M China 9% 26 23 17 40.0.0 8 Japan (4%) Light vehicles millions 9 8 13 13 20.0.0 13 WEU 2% ~39M ~37M 15 17 18 North America 3% .0
Slide 17: Market Drivers: Penetration and Innovation
Market Drivers - Increasing penetration in growth markets China India South Global America Side and frontal airbag penetration grows by up to 20% in key markets ALV Q2’13 Financial Earnings Report - 33 © Autoliv Inc., All Rights Reserved Market Drivers - Innovation in Passive Safety Strengthening ma
Slide 18: Sales Drivers: Growth Markets and Product Segments
Sales Drivers - Strong presence in Growth Markets 30 25 Growth Markets excl. China CAGR US$ (Billions) 11% 20 China GAGR 14% 15 Japan CAGR (4%) 10 W.Europe CAGR 2% 5 North America CAGR 4% 0 2012 2015 ALV Q2’13 Financial Earnings Report - 35 © Autoliv Inc., All Rights Reserved Sales Drivers - Strong
Slide 19: Active Safety - a Strategic Journey
Active Safety - a Strategic Journey - On track to reach 500 MUSD sales target Launches Night Vision/ Radar/ Mono Vision/ Brake Stereo BMW BMW Mercedes Control Vision Potential Astyx Acquisitions Radar Visteon Acquisitions Visteon RC Tyco Radar Hella Radar Vision 500 MUSD Organic sales ALV Q2’13 Fina
Slide 20: Increasing Shareholder Value; Summary
Financial Strategy - Increasing “Shareholder Value” Long-term operating margin target* 8-9% thru the business cycles Off-set customer pricing margin effect with; Direct material savings ≥ 3% Direct labor savings ≥ 5% New Value-added products Capacity alignments to manage global footprint RD&E invest
Slide 21: Guiding Principles; Long-term Operating Margin Target
Financial Guiding Principles for Increasing Shareholder Value Cash flow generation focus Growth with tight cost and capital control “Strong Investment Grade” credit rating “Financial Flexibility” for growth in a cyclical industry “Shareholder Friendly” Increasing Shareholder Value thru returns to Sh
Slide 22: Strategy for Margins - Cost Structure; Direct Material
Financial Strategy for Margins - Cost Structure (% of Sales) EBIT Before Crisis After Crisis Other D&A Major Fixed Costs Indirect labor Major Fixed Costs 20.5 % Direct labor 17.2 % Major Direct Costs Major Direct Costs 60.7 % Value Add 61.9 % Raw Material Fixed costs and direct labor improvement is
Slide 23: Strategy for Margins - Vertical Integration; Modular Designs
Financial Strategy for Margins - Vertical Integration Steering Wheel Cushion Why Vertical Integration? Margins Process flow Module Supply Chain Management Quality Inflator Initiator Propellant Also produce close to 100% of our seatbelt webbing in house ALV Q2’13 Financial Earnings Report - 45 © Auto
Slide 24: Strategy for Margins - Direct Labor; Flexible Roll-folder
Financial Strategy for Margins - Direct Labor Direct labor savings ≥ 5% thru: Productivity Adapting our global footprint Automation Target One Product, One Process Direct labor Headcount Automation (when & where it makes sense) ALV Q2’13 Financial Earnings Report - 47 © Autoliv Inc., All Rights Rese
Slide 25: Strategy for Margins - New Innovations; Global Footprint
Financial Strategy for Margins - New Innovations Bag in Belt Pedestrian Airbags New Seatbelt function Stereo Vision System Introducing new value added products leveraging our core competencies in seatbelts, airbags and vision ALV Q2’13 Financial Earnings Report - 49 © Autoliv Inc., All Rights Reserv
Slide 26: RD&E Looking Ahead; Interest and Debt Maturities
Financial Strategy for Margins - RD&E, net looking ahead Factors Affecting RD&E: Many new technologies in development not yet launched Improved leverage as gaining critical mass Increased RD&E in growth markets RD&E, net is expected to continue to be in the range of 5.5 to 6% of sales thru 2015 ALV
Slide 27: Strategy for EPS - Tax Rate; Currency
Financial Strategy for EPS - Factors affecting the Tax Rate Tax rate may be increased by: Change in country mix New or increased start up losses US Tax Rate 35% Write off of Deferred Tax Assets Antitrust settlements/penalties New tax legislation Use of Capital Tax rate may be decreased by: Change in
Slide 28: Return on Capital Employed; Operating Working Capital
Return on Capital Employed - Among Industry Leading Returns RoCE Goodwill represents ~ 50% of Capital Employed (*) Non US GAAP measures see Annual Reports for reconciliation ALV Q2’13 Financial Earnings Report - 55 © Autoliv Inc., All Rights Reserved Financial Strategy for Cash Flow - Operating Work
Slide 29: CapEx, D&A; Increasing Capital Employed Turnover
Financial Strategy for Cash Flow - Capital Expenditures, Depreciation and Amortization Capital Management: Source CapEx from low cost countries Campus Facility Concept Global Products and Process Vertical Integration CapEx is expected to be in the range of 4 to 5% of sales. over the long-term to sup
Slide 30: Free Cash Flow; Debt Limitation Policy
Financial Strategy for Free Cash Flow* - Free Cash flow vs. Net Income & Use of Free Cash flow Acquisitions Dividends ~ 80% of Free Cash flow been returned to Shareholders or been used for acquisitions Over the business cycles Free Cash flow conversion is ~ 98% of net income (*) Non US GAAP measure
Slide 31: Capital Structure: Effects of Revised Policy
Capital Structure - Debt Limitation Policy Effects of Revised Policy Current limitation $1.3B headroom available for acquisitions, shareholder returns and others Max We intend to start adjusting this year and Target plan to be within the range during 2014 Incremental improvement in RoE, Min excludin
Slide 32: Continued focus on value creation
Financial Strategy - Continued focus on value creation Solid growth with industry leading margins Continued focus on cash flow and returns on capital Increase Shareholder Value thru acquisitions or returns in line with the revised debt limitation policy Long-term EPS growth rate faster than organic