Q4 2019 Earnings Call
Full year 2019 financial results earnings presentation.
Here in Stockholm, we have our president and CEO Meikle, but up our interim Chief Financial Officer, Christiane Hunker and myself on the shop, Vice President of Investor Relations.
During today's earnings call, our CEO will provide a brief overview of our fourth quarter and full year 19 results as well as provides an update on our general business and market conditions.
Following me cataclysm will provide further details on commentary around the financials at the end of the presentation. We will remain available to respond to your questions and as usual the slides are available to link on the home page of our corporate web site.
Turning to the next slide.
We have the safe Harbor statement, which is an integrated part of this presentation and it includes the acute need that follows.
During the presentation, we will reference some non U.S GAAP measures the reconciliations of historical U.S GAAP to non U.S GAAP measures are disclosed in our quarterly press release, and the 10-K that will be filed with the FCC in late February .
All figures in this presentation refer to continuing operations, excluding discontinued operations last night I should mention that this call is intended to conclude a three PMC ti. So please follow element of two questions per person.
I will now turn it over to our CEO nicandro.
Thank you and US looking now into Q4 2019 key events on the next slide.
Firstly I would like to say that I'm very pleased that our adjusted operating margin has improved compared to last year. Despite the challenging vehicle markets. The reason for this improvement is mainly a result of the actions initiated in prior quarters to mitigate the effects of tough market condition.
And high launch activities.
We continued to outperform against global light vehicle production at growing sales organically six percentage points more than global LDP.
The strong performance is driven across all regions. This quarter marks the seventh consecutive quarter of significantly higher organic growth compared to the market further strengthening our market share position.
I am pleased to also reported 2019 became the fifth straight year that Autoliv achieved an order intake share of around 50%.
Our cash flows remained strong enabling delivering towards our target to maintain a leverage ratio in range of 0.5 to 1.5.
Our strong performance in the fourth quarter enabled us to meet or exceed all of them metrics in our guidance despite softening of market conditions.
Uncertainty it remains high and we do not see and a turnaround in light vehicle production in the near term.
Additionally, we continue to see higher raw material costs. However, these year over year effect has slowed and we should start to benefit from lower raw material costs in 2020 .
We continue to actively managed to business cycle downturn compared to a year ago head count is about 1600 less despite unchanged sales.
Looking now on adjusted operating margin progression on the next slides.
As illustrated by these short we have been able to gradually improved margin versus last year from more than 200 basis points below in the first two quarters 220 basis points above in the fourth quarter.
This is despite continued headwinds from declining light vehicle production and raw material costs.
The main reasons for the sequential improvement is our efficiency program, including business cycle management activities improved launch cost efficiency as well as our strong focus on continuous improvements throughout the organization.
As implied by our full year 2020 indication, we expect adjusted operating margin to improve in addition to the positive contribution from our continuous improvement activities. We expect to see further effects from the structural efficiency program as well as lower raw material prices.
Although uncertainties continue to affect industry volumes, we expect to outperform light vehicle production in 2020 in all major regions.
However, we expect 2020 , ses and ability to be even more pronounced than what was in the 29 team in terms of quarterly profitability progression.
The start of the year will be challenging, but we expect this significantly stronger second half year.
This reflects the expectation variation in light vehicle production, where ISS expect Q1 to decline by around 6%, while the second half year is expected to grow more down 2%.
Looking now at a recap of fourth quarter financial performance on the next slide.
Our consolidated net sales virtually flat compared to Q4 2018 impacted by weaker currencies organic sales increased by 6.5%. Despite the global light vehicle production falling by more than 5%.
Adjusted operating income excluding costs for capacity alignment anti trust related matters and separation costs was also essentially unchanged year over year, despite the impact of general market conditions and raw material pricing.
Adjusted EPS increased by 42 cents compared to Q4 18, mainly due to lower income tax and higher adjusted operating income.
Looking now on the market development.
The negative light vehicle production trend that started around mid 2018 has continued global light vehicle production is estimated to have fallen by 6% in 2019, the worst performance since the financial crisis in 2008 2009.
And by more than 5% in the fourth quarter. According to Hs.
China light vehicle production increase for the first time since early 2018.
However, it will still 14% below the level achieved in Q4 17.
In the near term vehicle demand is expected to remain stagnant due to the weak consumer confidence as well as the reduction in new energy vehicles subsidiaries.
Use light vehicle sales finished the quarter down 2% compared to last year.
While sales in Mexico fell by more than 9% and Canada by almost 3%.
Light vehicle production in North America decreased by 9%.
The main reason for the lower light vehicle production was a strike at Gmps us facilities.
Inventories declined by 180000 units to December six year low over around 3.5 million.
Europe's light vehicle registrations were 11% higher than during the same period in 2018.
This surge in core sales came as some countries announced changes to the bonus modest component of Cu to base taxation for 2020 .
However, despite the increase in European light vehicle registrations light vehicle production in Europe decreased by 5%.
The west European production of vehicles with high safety content dropped by 6% in Q4 19 on top of the 9% decline in Q4 18.
Looking to our sales growth on the next slide.
Our sales grow organically by 0.5% as the result of new launches over the previous quarters, we were able to outgrew light vehicle production in all regions.
Sales in China increased organically by 13% outperforming light vehicle production, both with global and domestic Oems.
Combined we outperformed light vehicle production by around 10 12 percentage points.
In North America, our sales declined by 3%, which is close to six percentage points better than the decline in light vehicle production, mainly due to product launches from previous quarters, particularly with FCTA and Tesla.
Our sales in South America increased by 40% organically despite declining light vehicle production.
The third quarter underperformance versus light vehicle perform production in Europe turn to outperformance in the fourth quarter impacted by recent launches of high volume models at PSC renewal and BMW.
Sales in Japan decreased organically by 9% compared to the light vehicle production decline of 11%.
The market weakness was a reaction to the sales tax increase in October .
Rest of Asia organic sales declined by 2%, which was almost eight percentage points better than light vehicle production.
Looking at sales person performance for full year 2019 on the next slide.
In full year 2019, our sales outperformed global light vehicle production by over seven percentage points.
At the beginning of the year, the outperformance was expected to be 5% to 6%.
Divested unexpected outperformance was partly due to the positive development in the market mix as low content per vehicle segments declined more than the high content per vehicle segment.
2019 marks the second year with 6% to 7% outperformance versus light vehicle production.
This trend is expected to continue into 2020 .
We outperformed light vehicle production in China, Americas, and rest of Asia by between eight and 13 percentage points.
The underperformance in Europe and year over year Pan reversed in the fourth quarter and we believe that this trend will be maintained in 2020 .
We estimate that our market share of passive safety in 2019 increased by almost two percentage points to more than 41%.
The largest increase came from passenger airbags and steering wheel.
Looking to our key model launches in Q4 19 on the next slide.
These models are well distributed across the globe and have an orderly content per vehicle of around 102 or 300 dollar per car.
Particular interesting or two new openings models with from center airbags, the Honda fit under Isuzu de Max.
The New front center airbag helps avoid driver to interior and drive into passenger impact.
We expect to see strong growth coming from France Center airbag as Euro and cap has introduced a four side low case in the 2020 rating program.
Going into 2020 , we again have a high level of launch activities to support new vehicle to be introduced over the coming quarters, and we believe that will prolong outperformance of light vehicle production I.
Ill now hand over to our interim CFO , Tristan hand get to speak to the financials.
Thank you Michael looking now to our financials on the next slide.
This slide highlights our key figures for the fourth quarter, our net sales were unchanged at 2.2 billion.
Our gross profit and margin increased slightly year on year supported by lower lower launch related costs and our structural efficiency program. In addition, the net operating leverage on the organic sales growth from the ramp up of new vehicle programs was more than offset by.
Lower capacity utilization due to the sharp drop in light vehicle production.
Reported earnings per share improved by $2, an 84 cents to one dollar and 78 cents.
The main drivers behind the increased were 242 cents from lower cost for capacity alignment and antitrust matters for the three cents from lower tax and two cents from higher adjusted operating income.
Our adjusted return on capital employed was 26% and return on equity was 31%.
We have maintained our quarterly dividend as 62 cents.
Looking now on the next slide.
Our adjusted operating margin of 11.1% was 20 basis points higher than the fourth quarter of 2018.
As illustrated by the chart. The adjusted operating margin was negatively impacted by higher raw material costs of 10, Bips, which was more than offset by 20 basis points from SDMA and or DNA and 10 basis points from FX effects.
We managed to offset the negative operating leverage effects of the 5% LDP declined by a number of activities such as business cycle management and operating leverage on sales growth from new product launches.
Additional support came from normalized launch related costs and the structural efficiency program.
Looking on the next slide.
Operating cash flow was strong in the fourth quarter of 19 and amounted to $312 million.
Which was about $25 million higher than for continuing operations in 2018, mainly explained by improved operating working capital.
Capital expenditures amounted to 118 million in the fourth quarter, which is about 5.4% in relation to sales and an improvement from the 6.1% a year earlier.
For the full year 19 operating cash flow, excluding the C. Antitrust fine amounted to 844 million. This was 36 million higher than for continuing operations in 2018.
Capex in relation to sales amounted to 5.6%.
Moving onto the next slide we have as you know a long history of the prudent financial policy.
Our balance sheet focus and the shareholder friendly capital allocation policy remains unchanged. Despite the current market conditions as of December 31st 2019. The company had a leverage ratio of 1.1, 0.7, which is slightly lower compare.
Our two what we reported as of September September Thirtyth.
Our strong free cash flow generation should allow the leveraging and should allow continued returns to shareholders, while providing flexibility.
We expect to be within our target leverage ratio range by the end of 2020 . This excludes any other discrete items and other non foreseeable changes to our business I will now hand back to Michael.
Thank you Christian looking at the recap of the full year 19 on the next slide.
The year 2019 was one of the most challenging years for the automotive industry will close to 6% decline in global light vehicle production Ashar contrast to 1% growth that was expected when the year started.
Combined with higher raw material costs, a large number of product launches and improvement initiatives 2019 was the challenging year indeed.
However, 2019 loss also a year, where we've built on the foundation for the sustainable profitability improvements for the coming in coming years.
Outperformance progress throughout the year and in the fourth quarter. We show the first year on year improvement in adjusted operating margin since the spin off of the unit.
I'm also pleased that before the fifth straight year maintained around 50% order intake share supporting our growth for the longer term.
Looking at the details of our structural efficiency program on the next slide.
We have already started to see the positive effects of the program, although limited in the quarter.
For full year 2019, the savings amounted to almost $10 million and the program should reach its full effect by made to 2020 .
Most operations will be impacted and we expect to head count reduction of around 800.
The cost for a program is now estimated to be around $52 million dollars and a cash out to be spread from Q2 90 into Q2 2020 .
The sequential savings in 2020 is estimated to be around 30 to 40 million us dollars on top of the savings already achieved in 29 team.
We continue to evaluate our global operations and to optimize our footprint. This may result in additional restructurings in the future quarters as needed.
On the next slide you can see that our order intake share for the full year continued on the same high level as in 2018.
Supporting our growth opportunities also beyond 2020 .
This is strong evidence that our company is the leading company in the past in safety automotive industry and shows that we have successfully managed operations of ramping up of previous years high level of order intake.
One our key performance indicators customer satisfaction has improved substantially and is at the high level.
The best we have had for several years. However, this does not mean that we can relax, we always strive for improving products services processes and costs.
We estimate that we booked about 50% of available order value in 2019, making 2019, the fifth consecutive year of booking around of or more than 50% of available order value.
To order intake is broad based we have improved our market position in three dimensions.
Regional customer and product category.
On the next slide we have the outlook for major light vehicle markets, which has become increasingly more on certain due to weaker consumer confidence and regulatory changes.
Reflecting the increasing uncertainty in the market our base scenario for global light vehicle production in 2020 is the contraction of 2% to 3%.
Which is lower than Isis outlook of a decline of Ciro, 0.7%.
This would be the third year in a row with declining light vehicle production.
Looking further ahead as we have outlined at the capital markets day in November last year, we do not expect the market to return to historic growth raise rates in medium term.
Our base assumption is that it will take five years from now until will reach the 2017 global light vehicle production level.
The reason for our more negative view on global light vehicle production compared to our Hs is the impact from the strict C emissions limits in Europe .
We know that many Oems.
2020 launch schedules for electric and plug in vehicles are backend loaded potentially bringing production volatility.
Additionally, we do not see a rebound in China in the current weak consumer confidence environment and we're closely monitoring the traffic development of the Corona virus in China engaging is potentially impact on the automotive industry.
In the U.S., we expect a modest contraction steel with the stable consumer environment.
As a result over the past years Throngs order intake, we expect to outgrow light vehicle production by around six percentage points.
Looking at how we will outperform the light vehicle production in 2020 on the next slide.
Here you see some of the key models supporting our outperformance in 2020 .
This modest are expected to account for large share of our organic sales growth. During 20 to 27 of these models were launched recently five or yet to be launched.
Annually. These 12 models represents close to 9% of sales and our content per vehicle is in the range of 132 almost $500.
Looking to our margin development for 2020 on the next slide.
As we communicated at our capital markets day in November we see some tailwinds and some headwinds for 2020 .
We believe the net effect, so tailwinds and headwinds should result in a year over year improvement in adjusted operating margin.
To be able to indicate an improvement by at least 40 basis points in in historical weak market environment gives us confidence that we are on track to to 12% medium term targets.
You can see the maintained wins include growth from executing on a strong order book and the structural efficiency program.
The main headwinds include lower inflator replacement sales and continued decline in light vehicle production.
Now looking on the full year 2020 outlook on the next slide.
We are summarized our full year 2020 indications and we do not see any signs of turnaround in the light vehicle demand.
Our financial outlook assumes a 2% to 3% decline of global light vehicle production.
These indications exclude cost to capacity alignment and antitrust related matters.
We expect our organic growth to be around six percentage points higher than the global light vehicle production.
Consequently, our full year 2020 indication is for a 3% to 4% organic sales growth with no expected currency translation effects or net sales growth is assumed to be in line with organic growth.
Reflecting the low light vehicle production assumptions, our indications for the adjusted operating margin is at least 9.5% for the full year 2020 .
We anticipate the currency effects on the opera operating margin for full year 2020 to be relatively neutral.
Operating cash flow, excluding any unforeseen events, excluding unusual items is expected to be above the 2019 level.
Turning to page.
To drive towards our financial targets, our 2020 focus is directed to efficiency and productivity.
The number of product launches have now stabilized at the new higher level, enabling an increased focus on productivity improvements in 2020 .
With more than hundred improvement projects being evaluated we have set the high pace towards factor to future.
These projects are key drivers to our medium term targets and for shareholder value creation.
We will also continue to our effort to flawless execution of our new launches improving customer satisfaction, further and thereby supporting our new and stronger market position.
Unfortunately, there will be millions of traffic accidents in 2020 , some fatal some where people will get injured. Therefore, we will really relentlessly continue to innovate and to deliver best quality products that will save more lives.
I'll now hand back to Anders.
Thank you Michael.
Turning the page. This concludes our formal comments for todays earnings call and we would like to now to open up the line for questions I will now turn it back.
Casey.
Thank you Sir.
Ladies and gentlemen ask your line is if you wish to ask a question sod one on your telephone keypad your name Vietnam.
Your first question today.
Line of Emmanuel Rosner Deutsche Bank.
Your line is open to happen so for me.
Hi, Daniel will set your line is open for your question.
We'll take the next question Kevin from.
England from Handelsbanken.
Thank you very much.
Three questions from me.
Backing off on on on the underlying car production or Youre talking about 2% to 3% assist yes, it's just based on your call offshore or.
Yes.
Outcome to that compared to Cook and.
I chess and given that the very sharp.
First half indigestion in a recurring second office are you seeing a sharper off first half or how should we think about that.
Second question, if I take one at one at a time sorry.
Okay no problem.
Go ahead, and we can take them all three.
Okay.
If I.
And on the order intake you continue to trend trend that 50%.
I think also you highlighted that is more broad based and does this mean that you're also breaking into other products. I mean first it was more frontal airbags steering wheels that was the result on a collapse the costs on and I was wondering if this is becoming more and tough to keep this market shares I. It is such an interim or on pricing.
And how should we think the stickiness if your assumption for this year is correct, where would you end in terms of market shares if we had 41% in Q4.
Last question is is more on.
On the efficiency program, if we should expect them to be more front end loaded in terms of savings. Thanks.
Okay. Thanks, Thank you and pause.
Start dealing with the light vehicle production outlook here.
I think we we do as we always do I think we're looking at the external.
Underlying.
Guidance that.
Companies like ISS is giving of course, Dan we build in what we see in terms of our core lab. So you're correct. There when it comes to the Q1 horizon on the beginning of year, we have higher level of visibility to that is being.
Baked into our total outlook, but also of course in dialogues with our customers et cetera gives.
Gives a more complete picture that.
Builds our own view here for the full year end with what we see there in the beginning of year, we'll see a.
So the sharp decline in Q1 near and Dear.
Challenging first half of the year and then gradually improve proven.
And I think of course, you further out you'll get the year, the visibilities is lower and.
Is more of a assumptions when they get their done.
Data points, but.
That's where we are right now and I think I would like to stress that the with everything that is happening globally here now in terms of geopolitical.
And and I will say also the overall business cycle here on the.
Adds to the uncertainty here and.
The potential impact on light vehicle production so we.
We have 2% to 3% down but with the high level on uncertainty and of course, our job is to follow the development than making sure that we take countermeasures when when necessary here.
On the second question here on the order intake EM I think.
We see the same thing as we have seen and see I mean, we are in a very competitive and challenging industry here as the tier one supplier into the automotive and there's no changes to that I.
I think in terms of.
The wins, we have here it is broad based across the different products.
But also across the different customers main customers, we have and regions. So.
The connection to where it's account.
The catheter related.
Situation that is beyond us now and is beyond losses in sometime back I would say and this is really wins on our own marriott's across the.
The industry here.
How sticky is this.
And we will see but I asked would like to stress again here that 50% in terms of new order intake share is not the targets that we have per se. Our focus here is to protect the market share that we are growing into.
And the market share we expect to grow into is the mid fortys.
And at this for the <unk>, we are we're focusing on here.
When it comes through efficiency programs I think of course, when we go into 2020 , we have we dose what.
Was done in 19, and the foundations that was down on in 19, but of course, we are continuing on.
Our strategic roadmap towards our midterm targets and in in that context, it's still early days and this is year one so to speak in the in the three to five year journey towards the.
Around 12% adjusted EBIDTA, the we have us on a target in the mid terms. So of course us we get more and more traction on this roadmap we will see it also gradually hitting the bottom line here. So in that sense of course, it we'll see more.
Further.
And we get to two year and I think also reflects.
The the indication we have given on the quarterly progression here.
Thank you.
Hospitals have it say, how big the passes aftermarket off last year and Howie.
Cool.
No I can't give you a number on on that now, but as you know we have said that.
In average it grows with 1% a year over year, roughly and I think here without having any.
Confirmation on it we should expect that to be the case also for Nike.
Fair enough. Thank you.
Thank you.
Okay and the next question comes from the line Marty Hollenbeck.
Thank you much in summary, dnbi markets here.
Youre CMD November you guided for 3% to 4% outperformance versus light vehicle production in the medium term now with this guidance for 6% outperformance in 2020 .
Just two to understand what goes beyond the 2020 . Then is this an indication that there should be a drop in your outperformance versus NBP beyond 2020 .
Or is it rather than the 3% to 4% stated at the same d., we're too conservative.
No I think you should see.
Really as a continuation on the development that we.
I mean, we talked in capital markets day in 17 that we should expect dealer, we should expect those we should see.
Around 6%.
Outperformance year over year after 2020 and.
What we have seen here in the past the year 17, 18, 19, and now with what we're saying for 2020 is exactly that.
It's around 6%.
In average drop is three years than what we said in the capital markets day was from 20 to 22 to the mid term down three to five years out of course.
For us to knowing that the or assuming the 6% that we now talking for for 2020 baked in so.
It ties together and there is no change to what we have communicated for different time periods. So.
The first what we said for three years from 17 to 20 that we are confirming with the last year not period and for the next period, we maintained a 3% to 4% knowing what we have in plentiful.
Right.
A follow up accordingly.
Thank you a follow up on that regarding the market share in the order intake compared to the market channel sales, where there's Dennis a rather large this discrepancy. It did you expect these two to converge over time.
That is how long would that take approximately.
Yes, I think it's important to cdis conversion over a longer time period on the us between a single years here as there is you know everything 18 to 36 months in average from when you're taking orders. So it goes into production and of course in if you take a single year if that is to.
Future May look differently, you may have some that is but more backend loaded and so on so thats why you can't compare really one year to another but what we're saying here is that our estimation is that we expect within these timeframe that we're talking about mid term here to grow gradually growing into the mid fortys.
So we need to see it over a longer tier period, but this year 19.
We grow with.
Reflected on the two percentage points.
Thank you so much.
Thank you.
Thank you. Your next question comes from the line of VJ rack.
Hi, guys just looking at 2020, you mentioned hi launch high numbers launches here, just wondering what the numbers launches and expecting 2020, which is going in 19, and if we could give us.
Some more.
Detail on the launch costs that you expect the puts and takes in between the launch costs versus 90. Thanks.
I think what accounts for a number of launches we do have no number to give to you hear about what we have said here is that an anomaly we talked more about the actual number of launches. When we did this step change and the step change is now beyond us well behind us.
And we are now seeing launches on the new higher level, which we don't call the new normal so to speak Gander.
So we continue to run launches with them and high activity level that we have seen now for for the last year.
When it comes to elevate the launch costs that we talked about in 2018 that should gradually go away during 2019.
This is Dan so.
With the development that they're seeing quarter over quarter sequentially 19, we have delivered on that so when we go into 2020 , we have a normal launch cost level of the launch as we are doing so of course is more launches done it has been his historically, but.
Average cost for a launch is at the historic level. So so that we are back to where we should be and.
We know how to do launchers, and that's where we're at now we there when we have adjusted and trim the system to the new.
New level of launches.
Got it and then the raw material setting we mentioned cost going up.
How much projects division were 2020 raw material costs and how much was in 2018. Thanks.
And 2019, we saw in hand window of roughly 60 basis points between 18 and 19.
And the headwind was gradually coming down.
Towards the end of the year for 2020 , we see a I would say, yes, you can say tailwind, but marginal Intel tailwind so.
Moreover, flattish positive.
Development here. So so no no no significant a tailwind from raw materials in 2020 According to our expectations here.
Thanks, and as you know there is the delays seeing them how it comes comes through also so.
Therefore, we don't see any major tailwind from launches in 2000 differently.
Okay. Next question comes from the line of Brian .
Hi, This is Jason store Dreyer on for Brian first question just on the margin guidance the at least 9.5%.
Question as what factors could allow your full year margin to be higher than that.
Asked differently why not just guide to around 9.5% why say at least 9.5%.
Yes, I mean as always when you do guidance like this.
Based on the two our vast knowledge.
How to deliver and this is the what we what we see in our pre actions here under the set of.
No parameters that we have talked about here.
So so that is to divest our knowledge.
Guidance.
And yes, I think that that's where we are.
Okay, but we shouldnt assume that 9.5 assumes the bottom half or the bottom part of that growth range.
Well, maybe you can clarify growth range, you mean margin expansion or.
Well within the three or 4% I guess I can follow up on that after.
That's helpful color. Thank you I guess and then final question.
I was wondering if you could as it related to your order when rates I was wondering if you could remind us of away your market share as by region right now and where maybe the highest delta is between where your order rates are per region versus what your current market share as per region.
Yes, we don't disclose it per region or into the granularity here, but but what we had said here is that we see that we are gaining.
Market shares in the three dimensions that we talked about here and I think we have said showed you before relative progression in the different regions and so on but not in exact numbers. So.
But you what you also want to capital markets day is basically.
What is coming through here in a in the numbers, we had talked about here.
We will you can look at that the progression there.
Okay. Thank you.
Thank you.
Next question comes from the line.
All right.
And.
Thank you.
Two questions from from the Yeah, you have a slide I think aside 19 will ensure that the 2020 tail Tailwinds I guess on on the margin side and I'm. Just wondering if that is some some kind of order.
The of relevance and also wondering why the absence of the Mexico.
Unrest isn't isn't on that list and if you could perhaps also on the other side of that perhaps quantify a few of the major headwinds, perhaps particularly the drag from inflator replacement sales coming down and the increase in net depreciation orientation.
And then the second question just looking at your overall volume development, both for the full year 2019, and the fourth quarter. It it's quite close to the organic growth you reported implying that price mix is more or less zero is that a result of pricing being that they're all or positive mix primarily thank you.
I think in in terms of Tailwinds and headwinds I think you'll see under slide areas.
The bigger ticket here on and as always when you have the year over year improvement. There is a large number of a have a contributing factors to two to the development here and of course Matamoros. This is one that we expect not to.
We'll have a this year, but is probably them being met by other.
Headwinds that we see in other areas. So so this is more of a net effect.
Picture here, but what you can say here as the of course that I mean, we have done and we are doing them the structural efficiency program that.
Its a.
Yes.
You know contributing to to the overall operational challenges.
We did led light vehicle production, we will see the same a you know.
Portfolio mix headwind.
We have so thats an important component into this we have also highlighted here the inflator replacement sales.
And boat, we see them as the as tailwind is very much of all the efforts that we are doing to manage the business cycle together with the strategic.
Roadmaps here.
So.
Without going into any specific details here I already alluded to the raw materials here that.
We see small positive effects from but the.
That I would say that its a.
So.
Many different components, adding up to the totality here.
Okay and on the organic growth seen in Q4 19 versus the the volume development. The Delta there quite limited what is that price or.
I think better or mix, that's offsetting continued negative pricing.
No I think I mean, we aren't went off the.
Seeing any here.
But we are.
Talking about here is I mean of course, the the mix comes into it the elsewhere when we look at our forecast.
For 40 year, we're looking at the underlying a.
I'll repeat development in different countries together with our own outperformance in respective regions, but you shouldn't read anything into it when it comes to to a price development or anything on that.
Okay and then just one final question, if I really look at it sort of absolute levels of order intake toward an extent whats was 2018 will in extreme year for in terms of industry awards for the for the market and to what extent you feel at 2019 was perhaps a bit.
Hangover from that than perhaps a bit lower relative to that sort of long term trend.
I think in in general in the business dynamics between the different years varies depending on how to customers.
Renewal or up updates of the product the Ela car models looks like so so that is not evenly spread of course than another factor that you have when you look at the lifestyle meals also is the light vehicle.
Production.
Volumes assumptions that these are the respective year. So of course, if youre in a year, where where youre at the high level and you don't expect to see any dramatic or drops or dramatic increases you have a certain level and then you move for button down across the market. The development comes in.
The play at which also affects the numbers. So so there is assumptions built into it based on the light vehicle production outlook.
Which affect the numbers Wilson.
And then of course, the expected life time of the particular model. So there is many factors go into.
Thanks, but I think but a kiosk.
The key is of course that when we look at these the 50% is 50% of available.
RF keeps.
Yes.
Okay next question from the line.
Okay.
Yes, good afternoon, and good morning. Thank you for taking my questions. The first one would actually be on your when you're working capital. If there was anything particularly in Q4 to view. The do you want to highlight and then more specifically around receivables we heard other suppliers, indicating that Oems are paying late.
At the end of the 19 DC similar development.
And then maybe you can also just remind us on the 11 refactoring at the end of 2019.
And then my second question on your leverage ratio you say you're within range by the end of 2020.
So I was wondering if that implies we could expect share buybacks to start in 21. Thank you.
Hi, such as Christian here, yes, so in terms of working capital I mean, I don't think this anything in particular in the quarter per se, but I think if you have followed our operating working capital and duration to sales that has improved quite a bit since last year. So I think it's a continuous improvement and focus that we have in that.
Area, we don't really see anything on the Dsos side and their sales outstanding I think it's.
Slightly improved in the fourth quarter compared to where we're before and in terms of factoring it. It's on the same level out as we close the year last year.
Thats on the factoring side now in terms of the in terms of buybacks I mean, it's obviously not anything that we.
We are forecast to indicate that the market when we do so I mean, it's more in terms of the focus is on the leverage ratio together, but in the range and then will he will make any decisions based on where we are at that point in time, considering our cash flow performance future cash flow performance and the market. So.
Not so much more than I can set it up Sasha.
Appreciate it thank you very much.
Yes.
Okay.
Okay.
Thanks.
Yes, sorry for that the volume of solo and I have first one it's on a quarterly seasonality you talked about that I do you expect to see snarling 2020 to be more pronounced starting 2019 is this due to your older coal off or is more of them underlying market tens is your own call often you.
On the organic growth in that sounds more extreme.
Now I think you could.
Contributed to actually both factors down and the remote what we see in terms of.
Core losses is indicating clearly a very challenging Q1.
And the beginning of the year.
Then of course, you have natural seasonality I mean seasonality.
You know that in end of the year. We also have the engineering income more pronounced in in the fourth quarter and so forth. So so.
The and maybe I should add also the outperformance there actually as well because we see that also coming much more towards the end of year here.
In terms of our own losses Anderson.
Thanks, and my follow on one there's some corona virus you mentioned it earlier, but if this actually accelerate sweat can actually impacted for you. What you are taking a cautious like necessary and what you do here to prevent things happening.
As I think is first of all too early to draw any conclusions of where that may end up from a from a from a business perspective at this point in time and we are currently actually in the Chinese new year break steel or them, we know that money or regions or cities have talked about prolonging the.
The.
And one time offering in terms of guarantee in time, but.
First of all that we are.
Following this by by the hour basically first of all by our local Chinese management team, but also on a global level to make sure that we all following all recommendations and and suggestions from from authorities and likewise.
First and foremost to make sure at we protect our employees here so.
The traveling bond and restrictions on on that both in the regions affected but also in a in a more broader Chinese context are looking after that.
We do not have our own facilities within the area that is.
He is in the and the focus right now.
Of course, we have customers on some suppliers here and we're following it very very closely to make sure that we managed it in the best possible way here and do some scenario planning et cetera et cetera here. So.
Of course, if it continues.
It will definitely add to the uncertainty and the challenges here, but.
As of today too early to draw any conclusions on it.
Okay. Thank you very much.
Thank you next question comes on the line of Sabrina Lee.
Hi, gentlemen, thank you for taking my question I have two so the first question is actually going back to another question. It a colleague ask Phil.
Just on your 2020 EBIT margin guidance.
Let me correct to assume that the 9.5% can be achieved at a 3% organic growth that you guide for Endo light vehicle production of minus 2% or is the 9.5% margin.
[noise] achieved.
If light vehicle production ends up being even the low minus 2%.
It would be my say unless I cant one would be on you mentioned in your presentation tier two impacting specifically in Europe and do you see an increase Jay said Oems or put more pressure pricing pressure on suppliers, depending on the market acceptance for ease and how much of that risk. If at all is baked into your guidance. Thank you.
I think your first question there is that the guidance we have put out here of at least nine and a half is with the with the with the indication of.
The led light vehicle production going down with a 2% to 3% will it be more.
Then of more pronounced decline then it's a different scenario it will it be much better.
It's it's.
At least as we said here. So so oh, okay. That's really the foundation for four form for a our guidance into Tyler. This is should see each each of the lines together and Indianness, we have given that.
Uh huh.
Well when it comes down to a the pricing pressure I think theres always a.
Pricing pressure from from our customers or with a high expectations on on year over year productivity and we don't see any difference now and of course, I can't say that I see something directed towards us specifically related to.
Electrical vehicle, it's more dependent on.
How are the different Oems.
Our acting and having the challenges all together so it should it needs to be seen more a case by case and in broader business context in our relationship with a with a customer but.
Sure.
Challenging.
Discussion all the time around pricing for sure.
Okay. Thank you.
Thank you next question comes from the line effect next please.
Thank you. My first question is about your guidance for six percentage points outperformance I guess I'm kind of markets 2020 .
And that's despite the headwind that you have from inflator replacement business can you tell us about the kind of profile through there you mentioned that you expect.
Hi off the Florida Star stand up there and also water than me driving regions and then additionally on down a inflator replacement business.
Well just your view on Daniels three cents recall.
HM Inflators made by the customer thank you.
I think in terms of the proof I mean, we don't give exact I mean, we don't give guidance here part by quarter, but as we said here is that I mean, it's really a question of gradually increasing the outperformance on a and the challenging first quarter brought together both when it comes to Alipay and our own outperformance.
So I think that as far as I can.
Say when it comes to the quarterly progression there.
When it comes to the recalls.
That has been announced a around the Capex I am actually nothing more tried and what is all that out there and I don't see that any of these are or expect any of these vehicles to have any significant.
Impact on us so so it's more outside our our areas will speak in scope.
Okay and any color on the regions.
In terms of.
In terms of outperformance in 2020 .
What would it be though.
But the main driver.
Yeah I think.
I said before.
We don't go into.
Regional details there, but the what be saying is that a it's it's.
Maybe less of an outperformance in America. This year as they are you know through their.
Through their.
Step change that we saw last year and this for now so a in terms of outperformance is really a question of Ace John There, we have talked before about the Japan being late in the outperformance and has started to come through.
Now in the fourth quarter and that is what you will see going into two to 2020. So soon.
Japan and come catching up with the rest of the on regions here.
Dan we will see China.
Also being on a very healthy levels in terms of outperformance and then Oh.
So you are up but not as strong as a Asia, China, but still above Americas.
Perfect and then my last question is on Capex, well you are guiding for lower topics in 2020 .
Despite the investments that you mentioned in your factories and also a kind of how significant this decrease year on year could be in capex. Thanks.
No.
First of all I mean, we support of our overall.
Efficiency improvements here to make sure SB scrutinize, all our activities, including the Capex and what we're saying here is that the investments in a factor futures should be down.
Two very large extent within the frame of the regular capex here.
And as you've seen here, we need more flexible tools et cetera, we also have longer.
I want you no longer.
Periods of usage for this machine and I can cover broader.
Range of programs as well so so we should see some efficiencies coming through into Capex as well here. So so that's clearly our ambition here and also support of course, all of our cash flow focus here.
Perfect. Thank you.
Thank you and your final question today comes from the line all fashion week Korea.
Hi, Thanks for taking my question just have.
One one question left as to why you still winning 50% off the market share on margins and they don't need to be cynical, but at least on the seat belt side you would've thought then at some point cases should start to get some of the modest back given that it's slightly less punctuation then.
Joining me be contracts for going to actually add backs.
Maybe just keen keen to get your thoughts Institute.
Why you're seeing in the industry landscape that you still winning.
More than 50%, 50% 50 oddities.
Yeah, I think I mean first of all we are very focused on making sure that we deliver superior quality that this on top of our agenda in terms of our customer commitment.
Together with.
Making sure that we or a supplier that is a delay.
I have high order flow less.
Delivery both in a daily production, but also very importantly in the development projects because you know all of these programs is a.
Recall L.A.'s, requiring very close collaboration with the we deal wins when it comes to tuning our products into their respective car model and of course, making sure that we have there.
You know.
Top.
Competence and commitment in delivering death, and last but not least being price competitive so it's really making sure that we.
Our order best choice from these three categories and at this hour focus on securing customer.
Expectations on us.
If I can follow I mean, the reason I'm asking do you still stick video views that you you continue to defend the 40 due to 45% market share. That's that's you you mentioned target in terms of warranty audio market yet so at some point you do expect audits or the market share an audience to go back to maybe mid.
Mid Fortys Im just wondering in your view then what does this flip happen when does the when does the order momentum in what causes it to go go too much to 44%.
Yeah, I think I mean, I can only reemphasize our focus on on a customer.
Commitment here and.
We of course think that is important to be a very strong supplier to to our OEM Sun and.
When we say that our focus is to defend our market share is that we think that.
There is no reason why we shouldn't have any added ambition if it becomes more it's is great, but but I think.
Growth in that sense is not a top priority, we will get the market share that we earned by being the strongest supplier.
I would see what is.
Thank you.
Thank you.
Thank you that with our final question I'd like to yourself.
Thank you Tracy and before we announce today call I would like to say that we will continue to execute on our growing business volumes and new opportunities with a never ending focused on quality and operational excellence.
I would also like to take this opportunity to thank Chris young for his great contribution during his time at Autoliv and wish him well on its next adventure.
Our first quarter earnings call is scheduled for Friday April 24th and 2020 .
Thank you everyone for participating on today's call. We sincerely appreciate your continued interest in Autoliv until next time Goodbye for now.