Q4 2019 Earnings Call
Thank you for standing by and welcome.
For 2019.
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That would be a presentation.
Question answer session.
Tweaked your time, if you wish to ask a question you any progress toward 100 kind of keep out.
Advisory to call it supports it stay on Tuesday.
2020.
I like Richard Vice President Investor Relations Mr. Hunter Stropp. Please go ahead Sir.
Thank you Tracy.
So welcome everyone to our fourth quarter and food here 2019 financial results earnings presentation.
Yeah, and stocking we have our president and CEO Me go though our in Threem, Chief Financial Officer, Christian I guess I myself on this job I stress talking Investor Relations.
During today's earnings call I was CEO would provide a brief overview of our fourth quarter on full year 90, or so that's what has provided an update on our general business on market conditions.
Following me Gotta Keystone will provide further details on commentary around the financial.
The presentation, we will remain available to respond to questions on US you show the slides are available to link on the home page of our corporate website.
Turning to the next slide.
We have the safe Harbor statement, which is an integrated part of these presentation includes to accumulate that folks.
During the presentation, we will reference some non U.S. GAAP measures the reconciliations old historical U.S. GAAP to non U.S. GAAP measures are disclosed in our quarterly press release.
The 10-K that will be filed with the FCC in late February .
What is he going to this presentation referred to continue operations.
Excluding discontinued operations last night I should mention that this call is intended to conclude a three P.M.C.D. So please follow in the middle of two questions per person.
I wouldn't I'll turn it over to our CEO Mika though.
Thank you on those 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 costs improved compared to last year. Despite the challenging beacon markets. The reason for this improvement is mainly a result, the actions initiated in prior quarters to mitigate the defects of tough market condition.
Hi launch activities.
We continue to outperform against global light vehicle production and growing saying, so ganic lean six percentage points more done global LD Pete.
The strong performance is driven across all regions. This quarter marks the seventh consecutive quarter of significantly higher organic growth compared to the market for the strengthening our market share position.
I am pleased to also report that 2019 became the fifth straight year that wants to be achieved an order intake share of around 50%.
Our cash flows remained strong enabling delivering towards our targets to maintain a leverage ratio in range old 0.5 to 1.5.
Our strong performance into fourth quarter enabled us to meet or exceed all of the metrics in our guidance despite softening market conditions.
Uncertainty it remains high and we do not see and it turned around 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 benefits from lower raw material costs in 2020 .
We continue to actively managed to be since I can downturn compared to a year ago headcount is about 1600 less despite arms changed saying.
Looking now on adjusted operating margin progression on the next slide.
As illustrated by these short we have been able to gradually improved margin versus last year from owed on 200 basis points below in the first two quarters to 20 basis points above into 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 I can management activities.
True launch cost efficiency as well as our strong focus on continuous improvements throughout the organization.
That's implied by our full year 2020 indication, we expect adjusted operating margin to improve.
Listen to the positive contribution from our continuous improvement activities, we expect to see further effect strong destruction 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 season ability to be even more pronounced that is 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 Cedar, 0.5%, 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 at all 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.
Worst performance since the financial crisis in 2008, 2009, and by more than 5% into 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 weak consumer confidence as well as the reduction in new energy being two 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 GM U.S. facilities.
Inventories declined by one or 80000 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 car sales came as some countries announced changes to the boom the smallest component of see you 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 a 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 FC Tesla.
Our sales in South America increased by 40% organically despite declining nicely can production.
The third quarter underperformance versus lights can perform production in Europe turn to outperformance in the fourth quarter impacted by recent launches of high volume models at the PSC Reno and BMW.
Sales in Japan decreased organically by 9% compared to the light vehicle production decline of 11%.
The market weakness was the 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.
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.
No content per vehicle segments declined more than the high content per vehicle segments.
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.
Underperformance in Europe any of the upon 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 alternative content per vehicle of around 102 or three on a dollar per car.
Particular interesting or two new Japanese models with strong center airbags, Honda fit and Suso de Max.
The New front center airbag helps avoid driver to interior and drive at the passenger impact.
We expect to see strong growth coming from from center airbags.
Europe and cap has introduced a four side load case in the 2020 rating program.
Going into 2020 , we again have a high level of launch activities to support new vehicles to be introduced over the coming quarters, and we believe that will prolong outperformance of light vehicle production.
I'll now hand over to our interim CFO , Tristan Hank get to speak through the financials.
Thank you Michael looking now to our financials on the next slide.
This slide highlights our key figures for the fourth quarter or a net sales were unchanged at 2.2 billion.
Our gross profit and margin increased slightly year on year supported by lower lower launch related cost 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, a native four cents to $1.78 cents.
The main drivers behind the increase were 242 cents from lower cost for capacity alignments 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 62 cents.
Looking now on the next slide.
Our adjusted operating margin of 11.1%, what 20 basis points higher than the fourth quarter of 2018.
As illustrated by this 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.
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 sale.
An improvement from the 6.1% a year earlier.
The full year 19 operating cash flow, excluding the C and to trust 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 per se.
Yes.
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 compared.
To what we reported subs at September Thirtyth.
Our strong free cash flow generation should allow de 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 very soon.
Looking at the recap over to 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, a sharp contrast to 1% growth that was expected when the year started.
Combined with higher raw material costs large number of product launches an improvement initiatives.
The 19 was challenging year. Indeed, however, 2019 loss also a year, where we've built on the foundation for the sustainable profitability improvements for the coming 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 near.
I'm also pleased with where the fifth straight year maintained around 50% order intake share supporting our growth for a 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 trend to 19, the savings amounted to almost $10 million and the program should reach its full effect by me 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 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 asked 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.
As high level of order intake.
One our key performance indicators customer satisfaction has improved.
Sequentially 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 deceased consecutive year of booking around or more than 60% of available order value.
The 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 , instead contraction of 2% to 3%.
Which is lower than Isis outlook of a decline of 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 as we take five years from now until will reach 2017 global light vehicle production level.
The reason for our more negative view on global light vehicle production compared to.
Yes is the impact from district to emissions limits in Europe .
We note that many Oems.
2020 launch schedules for electric and plug in vehicles are backend loaded potentially bringing production will facilitate.
Additionally, we do not see a rebound in China in the current weak consumer confidence environments, and we're closely monitoring detract development.
Corona virus in China, engaging is potentially impact on the automotive industry.
In the U.S., we expect a modest contraction still 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 more or less are expected to account for large share of our organic sales growth. During 2020 . Seven of these models were launched recently five are yet to be launched.
These 12 mourners represents close to 9% of sales.
And our content per vehicle is in the range of 132 almost $500.
Looking to our more in 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 historical weak market environment gives us confidence that we are on track to to 12% medium term targets.
You can see to maintain wins include growth from executing on a strong order book and the structural efficiency program.
Main headwinds include lower inflator replacement sense 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.
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 costs will capacity alignments 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 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 operating 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 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 factored in future.
These projects are key drivers to our medium term targets for shareholder value creation.
We will also continue to our effort to flawless execution of our new launches improving customer satisfaction further.
By supporting our new and stronger market position.
Unfortunately that will be millions of traffic accidents in 2020 , some fatal some where people will get injured. Therefore, we will relentlessly continue to innovate and to deliver best quality products that will save more lives.
I'll now hand back to Anders.
Chemicals.
Turning the page. This concludes our formal comments for todays earnings call and we would like to now to open up the lines for questions I will now turn effect.
Yes.
Thank you Sir.
Thanks, gentlemen, Larsen mines, if you wish to ask a question.
Glenn on your telephone keypad.
Daniel.
Your first question today comes from the line.
Roster Deutsche Bank.
Your line is open do you have your cellphone me.
And then you're going to hit your line is open for your question.
We'll take the next question then that comes from Hum.
From hospitals banking.
Thank you very much.
Three questions from me.
Talking a phone on.
The underlying core production.
Talking about 2% to 3%. This this is just based on your call offshore or.
Yes.
How to come to that compared to.
Chess and given that there is a sharp.
First off and I, just want to recover and second offerings are you seeing a shorter haul first half or.
How should we think about that.
Second question is.
Thanks, I wanted to time sorry.
Okay no problem.
Go ahead, and we can take the military.
If I.
Okay and order intake you continue to trend.
50%.
I think we'll see you highlighted that this is more broad based does this mean that you're also breaking into.
Products I mean, firstly it was more frontal airbags and steering Windsets was the result on the collapse with the costs on and I was wondering if this is it's becoming more and tough to keep this marketshare scientists, so thats, an interim or on pricing and how should we think we'll just stick enough. If your assumption for this year is correct.
Would you and in terms of market shares if we had 41% in Q4.
Last question this 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 posts.
Start thing, we 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, then we are building what we see in terms of our call up so you're correct there when it comes through.
Q1 horizon on the beginning of year, we have higher level of visibility so 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.
Bill our own view here for the full year end with what we see there in the beginning of year, we see.
So the sharp decline in Q1 here and.
Silencing first half of the year and then gradually improve proven.
Hi.
Think of course, you further out you get two years Visibilities is lower and.
It's more of a assumptions when you get their done.
Data points, but.
That's where we are now and I think I would like to stress that with everything that is.
Happening globally here now in terms of geopolitical.
And and I will say also the overall vis vis psych Julia and.
Ads to.
So here.
The potential impact on light vehicle production so.
We have 2% to 3% down, but with a high level of 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.
I think.
We see the same thing as we have seen and see I mean, we are in Nevada competitive and challenging industry here as tier one supplier into the automotive and there's no changes to that.
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 read yet so.
The connection to wear to cap.
The catheter related.
Situation.
That is beyond us now and is beyond us in some time back I would say.
This is really wins on our own marriott's crossed.
The industry here.
How sticky is this.
We will see but I also like to stress again here that.
50% in terms of new order intake share is not a target 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 growing too is the mid fortys.
And that this fall.
We are focusing on here.
When it comes to efficiency programs I.
I think of course, when we go into 2020 do we have we done what.
Was done in 19 under foundations that was done in 19, but of course, we are continuing on.
Our strategic roadmap towards our mean term targets and in that context, if daily early days.
This is year, one so to speak in in the three to five year journey towards the.
Around 12% adjusted EBIDTA, we have us and targets.
I mean 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, you will see more.
Further.
We get.
Two year I think also reflects.
The indication we have given on the quarterly progression here.
Thank you.
Hospital suffice to say, how big the passes to market last year and how it.
Gross.
No.
I'll give you a number on on that now, but as you know we have set up.
In average it grows with 1%.
We're roughly.
I think year without having any.
Information on it we should expect that to be the case also for Nike.
Fair enough. Thank you.
Thank you.
Okay. Next question comes from the line of MACI Bank.
Thank you much is almost 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 and 2020 .
Just 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 CMD were too conservative.
No I think you should see.
Really us 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%.
Our performance year over year after 2020 and.
What we have seen here in the past year. Some in 18 19 and now with what we are seeing for 2020 is exactly that.
It's around 6%.
In average throughout these three years.
What we said in the capital markets day was from 20 to 22 to two there I mean turned on three to five years out of course.
For us to knowing that 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 last year in that period and for the next period, we maintain the 3% to 4% knowing what we have infant defensive.
Right.
Hello, Thank you.
Thank you follow up on that regarding the market share in the order intake compared to the market share on saves where theres Dennis a rather large this discrepancy.
Do you expect these two to converge over time and indicate how long would that take approximately.
Yes, I think it's important to cdis conversion over a longer time period on the us between.
Single years here.
There is.
Everything 18 to 36 months in average from when you take in order to so it goes into production and of course in if you take a single year is the distribution may look different you may have some that is that more backend loaded and so on so thats why akorns compare really one year to another but what we've said here is that our estimate.
Thank goodness that we expect within these timeframe that we are talking about mid term here to grow gradually growing into the mid fortys.
So we need to see it over a longer period, but.
This year 19.
We grow with.
Roughly.
Two percentage points.
Thank you so much.
Thank you.
Thank you.
Next question comes from the line of CJ Rick.
Hi, guys just looking at 2020, you mentioned hi launch animals launches here, just wondering what the numbers lunches and expecting 2020, which is going in 19, and if you could give us.
Some more.
The deal on the launch costs.
You expect puts and takes in 2020 launch cost versus 90. Thanks.
So I think what accounts for a number of launches.
We.
Have no number to give to you here, but what we have said here is that.
We talked more about the actual number of launches when we did this step change.
A step change is now beyond us well behind us and we are now seeing launches on.
New higher level, which we don't call new normal so to speak and.
So we continue to run launches within 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.
We ended 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 than it has been his historically, but.
Average cost for a launch is the historic level. So so that we are back to where we should be and.
We know how to do launches and Thats, where we are up now we did when we have adjusted entry in the system to the new.
New level of launches.
And then the raw material setting you mentioned costs going up.
How much what's expertise with 2020 raw material costs and how much was in 2018. Thanks.
920, 19, 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.
I would say, yes, you can say tailwind, but marginal Intel tailwind so.
More of a slot this positive.
Development here. So so no no no significant tailwind from raw materials in 2020 , According to our expectations here.
Thanks, and as you know diaries delays scene.
How it comes comes through also so.
Therefore, we don't see any major tailwind from raw materials.
Thank you.
Thank you.
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, thats always when you do guidance at this.
Based on.
So our vast knowledge.
How to deliver and this is what we what we see in our projections here on the set of.
Parameters that we have talked about here.
So so that is some divest our knowledge.
Items.
And.
Yes, I think that's that's where we are.
Okay, but we shouldn't assume that 9.5 assumes the bottom half or the bottom part of that growth range.
Maybe you can clarify growth range.
In the margin expansion or.
Within the 3% to 4% I guess I can follow up on that after.
That's helpful color. Thank you Jess 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 why 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 you're correct market share as per region.
Yes, we don't disclose it per region or into the granularity here, 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.
What you what you also want to capital markets day is basically.
What is coming through here in the numbers, we have talked about here.
You can look at that progression there.
Okay. Thank you.
Thank you.
Next question comes from the line.
All right.
Thank you.
Two questions from from the yet you have the slide I think aside.
19 ratio that 2020 tail Tailwinds I guess on on the margin side and I'm, just wondering that some some kind of order of.
Of relevance and also wondering why the absence of the Mexico.
On rest isn't isn't on that list and if you could perhaps 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 amortization.
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 on pricing the investor or positive mix, primarily thank you.
I think in terms of Tailwinds and headwinds setting you see under slide there is.
The bigger ticket.
Always when you have the year over year improvement there is a large number of.
Of contributing factors to two to the development here and of course Matamoros is one that we expect not to have this year, but is probably them being met by other.
Headwinds that we see an address so so this is more of a net FX.
Picture here, but what you can say here.
Of course that I mean, we have done.
Doing them the structural efficiency program.
Yes.
Yes.
Contributing to the overall operational challenges.
We did led light vehicle production, we will see the same.
Portfolio mix headwind.
We have.
So thats an important component into this we have also highlighted here.
Play to replacement sales.
And.
But we see them.
As tailwind.
It's very much of all the efforts that we are doing to manage to 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.
That I would say that is.
So.
Many different components, adding up sort itself out there.
Okay and on the organic growth seen in Q4 19 versus 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.
We are not.
Seeing any.
Yes.
But we are.
Talking about here is I mean of cost.
The mix comes into it the asked when when we look at our forecast.
So 40 year, we're looking at the underlying.
LDP development and different standards together with our own outperformance in respective regions, but you shouldn't read anything into its when it comes to to price development or anything of that.
Okay and then just one final question, if I really look at it sort of absolute Kevin some order intake.
Toward an extent was was 2018 will in extreme year for in terms of industry awards for the for the market and to what extent you feel that 2019, most perhaps a bit of the hangover from that than perhaps a bit.
Lower relative to that sort of long term trend.
I think in general in the business dynamics between the different years varies depending on how to customers.
Renewal or up updates of the product.
Core modest 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 east a light vehicle.
Production.
Volumes assumptions that this at the respective year. So of course, if youre in a year, where where youre at a high level and you don't expect to see any dramatic drops or.
The increases.
Have a certain level and then you move forward and then of course to market.
Development comes into play with those effects the numbers. So so there is assumptions built into it based on the light vehicle production outlook.
Which affect the numbers will soon.
And then of course, the expected life time of the particular, Montana, so that as many factors going into it.
Thanks, but I think but the key.
The keys of course that when we look at these the 50% is 50% of available.
Our skills.
Yes.
Your next question comes from the line.
Okay.
Yes, good afternoon, and good morning. Thank you for taking my questions. The first one would actually be on your on your working capital. If there was anything particularly in Q4 and a view that you want to highlight and then more specifically around receivables we heard other suppliers, indicating that Oems are paying late.
At the end of 19 DC similar development.
Maybe you can also just remind us on 11 factoring 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 and 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.
You have followed our operating working capital and duration to sales. It 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 what were before and in terms of factoring at its on the same level as we close the year last year.
On the factoring side now in terms of in terms of buyback some of that's obviously not anything that we.
We forecast to indicate to the market when we would do so I mean, it's more in terms of the focus is on the leverage ratio to get within the range and then we'll see we'll 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.
So much more than I can set it up Sasha.
Appreciate it thank you very much.
Thanks.
Justin.
Okay.
Okay.
Please open.
Yes, sorry for that the volume was so low.
First one is on quarterly seasonality you talked about that you expect to seasonality in 23 to be more pronounced done in 2019.
This due to your own call offs or is more of them underlying market tens if youre on call offs and youre on organic growth in that sounds more extreme.
No I think you could.
Contributed to actually both factors.
Dan and than what we see in terms of.
Call offs is indicating clearly a very challenging Q1.
And the beginning of the year.
And 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 fourth quarter and so forth. So so.
And maybe I should add on to the outperformance actually.
Well, because we see that also coming much more towards the end of year here.
In terms of our own losses.
Thanks, and my final one this some corona virus you mentioned it earlier, but.
This actually accelerate sweats connection impacts the for you what you taking a cautious like necessary in.
Lets you do here to prevent things happening.
I think is first of all too early to draw any conclusions of where that may end up from from from a business perspective at this point in time on we are currently actually in Chinese new year break still.
We know that many regions or cities have talked about prolonging the.
Time and time offering in terms of currently in time, but.
First of all.
We are.
Following this by bide, our basically first of all by our local Chinese management team, but also on a global level to make sure that we all following or recommendations and and.
So the essence from from authorities and likewise.
First and foremost to make sure we protect our employees here so.
The traveling bond and restrictions on on that both in the regions effected bottles in the.
More broader.
Chinese context.
So.
We do not have our owned facilities within the area that is.
Is in the and the focus right now.
But of course, we have customers on some suppliers.
We are following its very very closely to make sure that we manage it in the best possible way here and do some scenario planning et cetera et cetera here. So.
Of course, if it continues.
Definitely add to down certainty and challenges here, but.
As of today too early to draw any conclusions on it.
Okay. Thank you very much.
Thank you next question comes from the line of Sabrina Lee.
Hi, gentlemen, thank you for taking my question.
So the first question is actually going back to another question at a colleague asked so.
Just on your 2020 and EBIT margin guidance.
Would it be correct to assume that the 9.5% can be achieved at 3% organic growth.
Guide for Anda light vehicle production of minus 2% or is the 9.5% margin.
Achieved.
If light vehicle production ends up being even the low minus 2% that would be my first and second one would be on.
You mentioned in your presentation, Seok kyu impacting specifically in Europe .
Do you see an increase Jason Oems or put my question 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 indication.
Both.
Led light vehicle production going down with 2% to 3%.
Will it be more.
More pronounced decline then it's a different scenario and will it be much better.
It's.
At least as we said here. So so okay thats really the foundation for four four.
Our guidance into Telesis's should seeds each of the lines together in the guidance we have given there.
Okay.
When it comes down to.
The pricing pressure I think theres always a.
Pricing pressure from from our customers 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.
The different Oems.
Our accessing and having the challenges altogether. So it's just needs to be seen more a case by case and in broader business context in our relationship with.
With the customer but.
For sure.
Financing.
Discussion all the time around pricing for sure.
Okay. Thank you.
Thank you next question comes from the line of vaccination Seattle.
Thank you. My first question is about your guidance for six percentage points performance I guess.
2020 .
Despite the headwind that you have for later replacement business.
Can you tell us.
About declines profile through the year, you mentioned that you expect.
Our performance towards the end of the year and also Walter attending Jiving regions and then additionally on down.
Placement business.
Well this year field most recent recall.
Thanks, Mike Decata. Thank you.
I think in terms of that.
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.
Challenging first quarter growth 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.
Recalls.
That being announced around the Capex.
Actually nothing more to add and what is watered out there and I don't see that any of these.
We expect any of these three caused by an insignificant.
Impact on us so so.
It's more outside our our areas will speak in scope.
Okay.
Colour on the regions.
In terms of.
Terms of outperformance in 2020 .
What would be those for restaurant the main driver.
Yes, I think.
As I said before.
Don't go into.
Regional details there but.
What we saying is that the is maybe less of an outperformance in America. This year as they are.
Through there.
Through them.
Step change that we saw last year at least for now so 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 and started to come through now into fourth quarter and that is what you will see going into two to 2020. So soon.
Yep.
Come catching up with the rest of the on regions here.
And we will see China.
Also being on a very healthy levels in terms of outperformance and then.
So Europe , but not as strong as Asia, China, but still above.
Yes.
Perfect and then my last question is on Capex.
Guiding for lower Capex and 2020 . Despite the investments that you mentioned in your factories and also.
How significant this decrease year on year could be in capex. Thanks.
No.
First of all I mean, we support to our overall.
Efficiency improvements here to make sure SBS scrutinize, all our activities, including the Capex and what they're saying here is that the investments in factory futures should be down.
Two very large extent within the frame of the regular capex here.
And.
We've seen here, we need more flexible tools et cetera, we also have longer.
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 thats clearly our ambition here and also support of course of our cash flow focus here.
Perfect. Thank you.
Thank you and your final question today comes from the line of Ashik Kurian.
Hi, Thanks for taking my question is to have.
One one question left as to why you still winning 50% off the market share on margins and they don't mean to be cynical, but at least on the seat belts side, you will just thoughts and at some point cases should start to get some of the oddness back given that it's slightly less contribution then.
Joining me be contracts for contracts Ambac so.
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% just the on entities.
Yes, I think I mean first 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 commitments.
Together with.
Making sure that we are supplier that is.
Hi order flow lessened.
Delivery both in a daily production, but also very importantly in the development projects because you know all of these programs is.
Recall lace, requiring very close collaboration with the we deal wins when it comes to tuning our products into their respective call model.
Making sure that we have there.
Top.
Competence and commitment in delivering death, and last but not least being price competitive so it's really making sure that we.
Are the best choice from these three categories and that this our focus on securing customer.
Expectations on us.
If I can talk to them in the reason I'm asking you should take video views that you continue to defend the 40 due to 45% market share that stats you inventions target in terms of what your auto market share. So at some point you do expect orders on the market share an audience to go back to maybe mid.
Mid Fortys Im just wondering in your view then what is this flip happened when does the vendors the order momentum in what causes it to go go to insist 45%.
Yes, I think I mean, I can only reemphasize our focus on on.
Customer.
Commitment to year end.
We of course thing that is important to be.
Very strong.
Suppliers to two hour Oems and.
When we say that.
Focusing to defend our market share is that we think that.
There is no reason why we shouldn't have and added ambition.
It becomes more 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.
Thank you.
Thank you.
Thank you that with our final question I can't talk to your staff.
Thank you Tracy.
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.
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 2020 .
Thank you everyone for participating on today's call. We sincerely appreciate your continued interest in Autoliv until next time Goodbye for now.
Thank you, ladies and gentlemen that does conclude your call for today. Thank you all for participating and you may now disconnect.