Q1 2020 Earnings Call
[music].
Ladies and gentlemen, thank you all for standing by and welcome to get the Q1 trended trends. We all believe incorporated earnings conference call. At this time, all participants will be on they listen only mode. There will be a question patients followed by question answer session at which time should you wish to ask the question you'd really depressed bar and the number one the telephone.
In two weeks, we need to be announced how much would watch all that this conference is being recorded today Friday quite a sport April 2020.
Without any problem. They have like you had the conference over the first few different day.
At least head of Investor Relations Mr. Anders Trapp. Please go ahead.
Thank you you know.
Welcome everyone to our first quarter 2020 financial results earnings presentation.
So can we have our breath for them.
You know me get dropped our new Chief Financial Officer via the Christine on myself on this job.
During today's earnings call, our CEO will provide a brief overview of our first quarter results that spend this provides an update on our general business at a short term market conditions.
Following Michael but I think will provide further the pace and commentary around the financials.
At the end of our presentation, we will remain available to respond to questions. I know you show the slides are available through a link on the home page on our corporate web site.
Turning to the next slide.
We have the safe Harbor statement, which is an integrated fourth of this presentation includes the Q and a that follows.
During this presentation, we will reference some non U.S. GAAP measures reconciliation, well historically with GAAP to non U.S GAAP measures are disclosed in our quarterly press release.
The 10-Q that we'll be fine with the FCC.
Lastly, I should mention that this call is intended to conclude at three PM Central European time. So please follow in the middle two questions per person.
I'll now turn it over to I was the.
Okay.
Thank you and US looking now into the Q1 Twentytwenty key events on the next lives.
Before we start with a former presentation I would like to acknowledge our employees for their continued actions and commitment to quality delivery and safety you in these exceptional times.
During the quarter global light vehicle production and close to 25% that's production in China and part of other markets in Asia came to stop in early February.
And Thats, most vacant manufacturing plants in Europe, and North America close down in mid March.
We continue to outperform against global light vehicle production.
Our same declined organically by 11 percentage points less than global light vehicle production declines.
We outperformed light vehicle production significantly in one region.
Despite the exception on week light vehicle production, we are able to reported strong fourth quarter I.
Im, especially pleased we don't sense outperformance and that our gross margin was slightly higher than a year ago and adjusted operating margin was only 30 basis points lower.
Our cash flow was actually up somewhat higher than Q1 last year.
The task force, we setup to initially managed to situation in China has been expanded to global scale and have been able to act from TV with timely cost reduction actions to offset much of the headwinds from the weekend light vehicle production in the quarter.
We were able to safeguard our supply chain and make sure that no customer was affected by lack of up to this product.
We have undertaken a number of actions to manage to evolving situation, including adjusting production and shorter work week hours to meet lower demand.
We have also reduced or suspended investments on spending that they're not critical per day operations accelerated cost savings initiatives furloughed person orphan in government sponsored programs and reduced compensation for executive officers on board member.
We have intensified working capital control through strict inventory control close monitoring of receivables and close collaboration with suppliers.
In addition, we have counter the dividend drone full.
Our revolving credit facility.
Thereby secured a liquidity of $1.5 billion.
In April.
So far we have not seen any changes to the sourcing behavior of our customers.
During the quarter, our ordering thank share remained high and supportive of a prolonged savings outperformance.
Given the uncertainty in the market we have.
Withdrawn our full year guidance until the effects of cobot 19 pandemic can be better.
Looking now on the Justin sales performance on the next slide.
Our sales declined organically by $283 million or by 30%, which was 11 percentage points better than the light vehicle production decline of almost 25%.
As a result over positive model mix and new launches over the last 12 months, we were able to outperform last week in production in all regions.
The overall sales decline was driven by China, followed by Europe, and North America.
The only areas with organic growth, where axiom and South America.
The most impact from the Corona virus outbreak was in China, where sales and organically by almost 37%.
However, this compares favorably with the light vehicle production decline of nearly 50%.
The outperformance was mainly coming from global Oems.
Thanks in North America decreased organically by 9% two percentage points better than the light vehicle production decrease.
Almost half of the organic decline can be attributed to lower inflators.
The decline was partly mitigated by organic growth.
With a multiple Oems, mainly with Tesla, but also with Subaru Master and BMW.
In South America, our sales increased by 7% organically, despite 17% decline in light vehicle production.
The growth was mainly.
Driven by saying two FCTA.
In Europe, we continue to trend from fourth quarter and outperformed light vehicle production by around eight percentage points impacted by recent launches of high volume model, ASP say VW and renewal.
As we can production came to stop the spread of the Corona wires, our sales dropped by close to 30% in the month of more.
Thanks in Japan decreased organically by 4% compared to the light vehicle production decline of 8%.
Decreasing inflator replacement impacted same negatively with 1.3 percentage points.
Rest of Asia organic sales declined by 4%, which was almost 14 percentage points better than light vehicle production.
Within the region sales in South Korea, India fan one cents in RCM increased despite lower light vehicle production.
Looking at our recent model launches on the next slide.
We continue to have a high level of launch activities in the quarter.
The model shows shown on this slide our well distributed across the globe and most of them will be available with some sort of electrified powertrains for example, pure TV mind hybrid or plug in hybrid.
The alternative content per vehicle is between $100 to almost 500 owner.
It is particular interesting to see strong center add backs on three of these vehicles.
We expect to continue to see strong growth coming from from center airbags as you'll end cap has introduced a four site located in the updated rating program.
Four of the vehicles are equipped with knee airbags from Autoliv on the driver side Tesla Modern why has the knee airbag also on the passenger side.
Currently we see limited effect from the Cobot 19 on the Oems Twentytwenty launch plan.
And we continue to support them with engineering testing and by setting up new production line.
However, we believe that some projects that have.
Land launch dates closer to year end or later maybe delayed.
We can face lives in other areas, where the automakers may change the Atlanta.
Now, it's my pleasure to introduce our new Chief Financial Officer Fred existed.
Hey, Rick joined our executive leadership team in early March and he will announce speaks to refinance runs on the next slide.
Thank you makeup.
Slide highlights our key figures for the first quarter.
Net sales were 1.8 billion, which is a 15% decline compared to the same quarter last year.
Despite the lower sales and lower utilization of our assets from the decline in LDP, our gross margin improved by 50 basis points as it was positively impacted by the absence of costs related to the social unrest in Mexico savings from indirect and direct workforce adjustments lower material costs and also positive currency effect or the.
Gross margin improved the lower sales led to a decline of 48 million he rusty.
Gross profit.
Adjusted operating income declined by around $30 million to 136 million Youre seeing mainly as a result of the lower sales.
Reported earnings per share declined by 41 cents to 86 cents. The main drivers behind the decrease were 53 cents from lower operating income and five cents for financial items, partially offset by 16 cents favorable impact from lower tax.
Our adjusted Aro, CE, and our OE or both at 15%.
Evident paid in the quarter was 62 cents looking now on the adjusted operating margin development over the next slide.
Our adjusted operating margin of 7.4% was 30 basis points lower than in the first quarter 2019.
Q1, 20 net loss, however, negatively affected by temporary costs for the social unrest in Matamoros, Mexico. Excluding this cost our adjusted operating margin would have been 8.7% a year ago.
As illustrated by the chart. The adjusted operating margin was positively impacted by lower cost for raw materials of 30 basis points lower cost for SDMA, and our DSD, a 50 basis points and positive FX effects.
These positive developments were more than offset by the effects of lower sales.
The lower organic sales negatively affected the margins by around 37 370 basis points. However, we managed to mitigate some of the negative operating leverage effects from the lower sales by a number of activities such as accelerated cost saving initiatives that started in previous quarters by adjusting production and workweek hours and.
By following personnel.
Looking on the next slide for the first quarter of Twentytwenty.
Operating cash flow was 156 million, new SD compared to 154 million a year earlier.
Thats a lower net income was more than offset by less negative effect from changes in operating assets and liabilities and increased deferred income tax.
Capital expenditures amounted to 88 million USSD in the first quarter, which is about 4.8% in relation to sales.
Compared to last year's capital expenditure decreased by $20 million as we suspended or delayed some investments as a result, our free cash flow improved by 22 million to 68 million compared to the same quarter last year.
Cash conversion improved to 90%.
This quarter compared to 41% the same quarter a year earlier.
Looking on the next slide we have as you know a long history of accrued and financial policy.
Our balance sheet focus and long term shareholder friendly capital allocation policy remains unchanged. Despite the current market conditions the leverage ratio at March 31st Twentytwenty was unchanged at 1.7 since the beginning of the year. The lower net debt was offset by lower last 12 months EBITDA.
At the next slide you can see our liquidity position and the maturities.
Has illustrated our liquidity position is strong.
We had around 1.5 billion MSD and liquidity after drilling fully on our revolving credit facility on April 2nd.
We have very limited amount of maturities in the next three years with around 320 million you see in debt maturities in Twentytwenty and around 275 million, you'll see in Twentytwenty one.
We have no need for any major refinancing of existing debt until 2023.
If we believe that we have secured a significant liquidity cushion to manage our business successfully in this challenging environments.
I will hand back to Michael.
Thank you Frederic.
I am proud on how hopefully them fees have been creative in finding ways that we can use autoliv resources incompetence in supporting societies battle against the Cobot 19 trends.
The next slide we show some examples of initiatives taking by off to the associates around the world.
In Poland, we have worked with local hospitals to manufacturer and deliver masks.
In North America, we are using our laser cutting machines to cap materials for local suing company that manufacturers masks.
In India, we have provided food to mid May migrants that have become standard and have no income to feed their families or themselves.
Looking at the market situation on the next slide.
You can see that our industry is in a downturn of historic proportions.
Mosh March is typically one of the busiest months of the year for the core industry.
This year, however, down motor industry has seen is worse March.
For decades.
As consumers were unable to visit core showrooms due to social distancing and government and forced closures as well as shutdown of Portugal Society light vehicle sales declined roughly by 38% in the U.S. and by 55% in Europe in March.
That's a great uncertainty in light vehicle sales and production due to the evolution of the Pandemics.
Government actions and policies changes as well as and consumer demand for new vehicle.
Therefore is currently not possible to estimate the light vehicle production run rate, we will reach post to cope with 19 pandemic.
Regardless of what level of light vehicle production that we will be the new normal.
We will have to adapt.
We are therefore, working with different scenarios and preparing for the new normal some of them significantly lower than the current Hs estimates.
Keeping a high degree of flexibility and agility is therefore essential to be an even stronger company pose to cope with 19 pandemic.
Moving to the next page.
The situation from major light vehicle market is very uncertain and changes day by day.
We have seen China are gradually coming back to their previous production levels and sign our passenger car Association reported that the retail sales were 14% above last years level in the second week in April.
However, the situation remains fluid.
And the Oems will be adjusting the pace of production according to inventory levels and Mac market demands.
Production disruption in other regions, which supply components out to make is in China can potentially slowdown the recovery.
The number of European automotive plants have restarted or are preparing to start again of the more than a month of corona virus related shutdowns.
The production rate will likely be volatiles will reduce chips to adapt to uncertain demand.
Allotment demand development and availability of components.
In the U.S and Canada most of them plan.
Plans to resume production after facilities by early May.
Production disruption of components in Mexican Mexico can potentially slow down the rest of the region.
Yes uncertainty around the startup four plants in Mexico due to the government stay at home measures.
Most Oems in Japan have announced closures on slowdowns in April and May the Golden week holiday is expected to be extended by a couple of days.
Looking on the next slide.
We have summarize the situation for Autoliv operations in our major regions.
In China, our production has gradually recover to around 100% compared to this time last year.
However, the automotive industry has been particularly hard hit during the pandemic and it will take months for the industry to recover to full efficiency and to reach a stable demand.
In Europe, our plants or assuming and ramping up production in line with our customers need.
All tech centers are back in operation, however, with lower than normal capacity.
In North America, 10 of our 13 sites are fully shutdown.
In the three sites that are open we run limited production for overseas customers.
In Japan, 70% of our plants are running.
In South Korea, our airbag plant is producing at near normal rate.
And the seat belt plan is open but not running full ships.
Looking on the next slide.
We show our response to the challenge in market conditions. This includes much more than your head count and work week our reductions.
Firstly in response to the new working situation brought by the Corona buyers. We have stepped up our efforts to secure health and safety for our employees through new policies and procedures for increased awareness and change behavior as well as protective equipment.
In addition to securing a strong liquidity position of 1.5 billion. We have also intensified our capital management through strict inventory control reduced or suspended investments and and spending that are not critical for data operations.
Close monitoring of receivables and close collaboration with suppliers.
We have undertaken a number of cost reduction activities, such as adjusted production and workweek hours accelerated cost savings initiatives furloughed personnel orphan in government supported programs and accelerated the redesign of product products for lower cost.
Yes.
In addition, we have for the time being suspended our dividend payments and reduce effective salary levels.
While we continue to focus on further cost reduction actions. We are also planning and preparing to restart production as shown on the next slide.
We are preparing for restarting and ramping up in coordination with our customers and suppliers.
We are deeply focused on keeping our employees customers and suppliers safe when will restart production at our facilities.
To navigate these new normal we have developed a playbook that lays out processes to raise awareness of new health protocols and to support execution in a challenging situation.
This smartstart guideline includes practical recommendations based on guidelines from World Health organization, and our lessons learned from our recent ramp up in China.
We are providing personally predict protection equipment, such as masks and disease.
And making redesign of production environment for instance, setting up a protective screens.
Our first focus is now in Europe, which is starting to ramp up.
As of this week.
Turning to page.
We are summarized the business environment in Q1 and Q2.
The pandemics at impacts on the consumer demand supply chain and OEM production cannot be forecast that we the saflex factory degree of confidence.
Consequently, we drove our full year guidance and it's not possible to determine when a new full year outlook can be made.
The situation is however, more challenging currently than it was in the fourth quarter.
Customer closures are now effecting the majority of our operations for unclear period of time.
Compared to the more limited, but significant scope in the first quarter.
It is currently difficult to estimate how large the second quarter light vehicle production decline will be.
The regional mix will have a more negative impact on sales in the second quarter due to higher safety content in vehicles in Europe, and North America.
In the first quarter, we had a positive impact on sales from regional mix.
Hi, Hs latest outlook dated April 16 indicated global light vehicle production decline of 45% in the second quarter.
The decline of such magnitude would of course have a significant negative impact on our sales and we do not expect to be able to offset the effect.
Of the lower sales with cost reduction activities, while planning for production resource.
Good therefore expecting the decremental margin in the second quarter to be significantly higher it was in the first quarter.
When it comes to Capex, we are scrutinizing everything delaying and what can be delayed.
Typically 70% or Capex is related to new production lines, which were much is driven by the plans of our customers and our difficult for us to postpone.
Onto the next slide.
We have to manage the current challenges posed cobot 19 pandemic without losing focus on the long term opportunities.
Our two lease operating from a position of strength.
In terms of available liquidity flexible structure and not at least dedicated and experience entry.
This exceptional situation requires tough decisions that we will make as necessary.
It is our most importance to ensure that we have an adequate cost structure that supports our profitability targets, regardless of what level of light vehicle production that will be the new normal.
The strategic initiatives structurally program improvement projects, we outlined on our capital markets day in 29 team remain key priorities, although some projects may be somewhat delayed.
We will continue our efforts for flawless execution of new launches improving customer satisfaction further and thereby supporting our stronger market position.
I'll now hand back to Anda.
Thank you Michael turning the page.
This concludes our former comment for today's earnings call and we would like to now open up the line for questions. So ill turn it back to Gina.
Thank you, Sir ladies and gentlemen, who will now begin to question answer session again should you wish to ask the question you really depressed star and the number one the telephone keypad and weeks ending to denounce condition to cancel if you press the pound or hanky once again, it's far in one for questions.
So our first question comes from your line is James Speaker Yellow. Please go ahead and is now open.
Hey, Hey, guys.
It's just.
Yes, just just on.
The quarter significant market outperformance.
Within your guidance framework last quarter, and I know, obviously a lot has changed since then but you talked to a stronger growth over market position for the second half.
Now.
It was that factor of a better mix in the quarter favorable customer exposure was there really just such a delayed ramp down which maybe gets caught up in the second quarter.
I would say that the outperformance in the fourth quarter was.
Two lots extends contributed by favorable regional mix in the quarter.
Well, we saw China light vehicle production falling loss of 50% and.
That we have.
Lower content in the sense and then you had high end.
Called value like content per vehicle in Europe, and you're still.
High level for the most of the quarter. It was not until the last two weeks basically where you sort effects in Americas in Europe. So so a favorable regional mix in the quarter contributions route.
Got it and have you did you also benefit from any competitor issues, maybe competitors struggling more more so than.
And our lives in the quarter.
Thank you, but no I mean in the quarter is purely.
I will say mathematics of the run rate in the end.
In the Oems on the OEM side here and.
There you had the effect which sales.
Sure.
Right, Okay, and just just on Mexico.
Can you remind us what percentage of your North America sales mix is tied your production operations in Mexico, and then just given what's what's going on with the pay so will there be a sizable FX transactional benefit potentially this year just to help us Walker.
Help us walk through how to think about that flow through thank you.
I think when it comes the Mexico us relationship that I would say you should more see thats. The total automotive industry that is very.
Connect that so.
I think for US of course, we have a high portion of production in Mexico, I mean, thats one our biggest production countries. So of course that these important that goes hand in hand with.
It was what's happening in the U.S., but I think the question is much broader than than Autoliv specific years, the whole automotive industry that needs to be seeing between Mexico and to use to to actually get into ramp up that is sustainable.
And just the pace just your thoughts on that on the FX transactional.
No. It is not know how you shouldn't.
Count on anything that I would say it's not.
I mean, if at all we have no guidance as you know for four for the quarter or the year here and.
I think the FX is in that category here as well I mean.
We.
We have no.
Occasions for the quarter on that.
Thanks, guys.
Thank you Sir your next question comes from the line of Lashing from Wolfe Research. Please go ahead. Your line is now open Rob.
Great. Thank you.
So a few questions first.
Youve historically.
Demonstrated a lot of agility in terms of adjusting your cost structure.
Pretty it you have a very variable cost structure compared to most.
Other auto suppliers can you just maybe give us a sense of.
How that could come into play here for example, obviously not in Q2, but longer term if revenue stayed below historical levels, maybe to it stayed at the levels that you are you saw in the first quarter.
And your given enough time is there any way to characterize.
The magnitude it.
The adjustment and margin that you would ultimately believe you could achieve.
I think I mean, what you're mentioning here about timing stick the critical here as I think we have.
Rated four for long time, when it comes to our medium to long term targets here that the critical question. There is not that we need to get back to some kind of.
The.
All time high levels that we have seen in the past year instability that is critical.
But thats over time and says we're not giving any guidance here I don't want to get into any time horizons. When we talk about this but we have.
Structure that provides good good flexibility and.
I will say here that I mean, if you look at our total cost base I mean around half hour sales is purchase components.
Now the 10% is connected more to direct say that direct labor and then not a 10% other flexible type of cost or flexibility. So it leaves around 30% as fixed cost.
Roughly there, but as we all know.
Long term you can also work with death, but.
Side of the ballpark you should think about and then when you have a situation like we have right now where it comes to.
Definite stop and you asked a few couple of days it looks very differently and also when we look into that sort of quarter here. It's a very steep stock. So I was a normal calculations maybe not.
It's about here, but over time that's.
Both for figures you think about.
Okay.
And.
Do you have any views on obviously every company.
In the world is putting in place new operational protocols for safety social dispensing.
Is that in your view have any long term consequences for productivity for how we think about.
Just operationally that the inefficiency that lets introduce there and then lastly can you comment just on what you're hearing about the trajectory of these restarts. So Europe seems like Thats underway is it just a few plant.
Our your customers, telling you anything about.
The level of production and how that that is expected to ramp over the next week.
I think year all in all I mean, if you start with a lot question I think when it comes to the visibility here. It is of course is very very low under the circumstances and as we've mentioned on they also have seen some Oems are starting some of their plants. So it's more site.
By sites I would say model by model.
They are starting and the levels or very low and this point in time and I think also when you look at the ramp, but we'll go relatively slow but.
What it all depends on its of course higher how the virus is developing here. If it's stabilizing if is declining or if it's continued to to the spread an increase so that that's the that the million dollar question on how that is developing because thats how it.
We will be able to restart the across the continent here.
And that visibility suppose very low four for everybody in the industry. So.
I think we will have.
No not.
It will be required to have lots of flexibility and thats what be focusing on here because you could very well see increasing in the upcoming down a little bit again and so on so.
So that is very high and very low visibility.
And I think Thats also.
Feeling and seeing as we get from from our customers for sure.
Looking at on the consequences, if I understood credit question right on the new.
Mesh measures that we need to implement too to keep our employees safety undercurrent current circumstances that Teva.
Long term negative impact on productivity and so on and I would say.
I guess, it's too early to say that but I don't expect it because.
The the measures we are taking.
It's under these current circumstances I don't see Dave.
Two large extent continue beyond the buyer situations. It is more connected once again to how to cope with 19 pandemic.
Evolves here.
Of course is there is some.
I will temper some procedures there in terms of equipment us on that you need but I.
I don't see any problem for us to to keep up with our.
Productivity work and securing quality deliver is according to customer expectations here. So.
It's something we are well equipped to to manage.
Great. Thank you.
Thank you.
Thank you next question comes from buying us not the as home from Dnbi. Please go ahead.
Thank you.
You show quite decent decline year on year in Capex spend and I'm, just trying to understand that.
Sort of assuming that.
There are no changes or delays to your customers launch schedule activities.
Is there still in a room to further scale down capex level from what you reported in Q1.
I mean, we did thats an ongoing work of course to see how we can optimize the timing of the things that needs to be invested so I.
I think years.
The.
The usual scrubbing of the campus.
Has been ongoing and we'll continue to go on and that's why it's so important here to stay very close to our customers to understand these days and it changes to their own schedule or so when it comes to launches et cetera on on how that could impact us in the way that we could delay some.
Of the investments but.
Well just auto production commitments that we have we are customers of course can ever be jeopardize. So so that's the bottom line in terms of.
The account type of Capex investments within two to stay on with but we continue to scrub numbers here absolutely.
Thank you one more question from my side.
Okay, but the regional mix again, which you expand their how it impacted positively in in Q1, given the dynamics of how the citrus been impact the throughout.
The year, so for would it be reasonable to assume that you've done would have been Nick negative media mix impact in the second quarter.
Yes, I mean.
I mean going into the second quarter.
With what we have described around the volumes in Europe, North America, and that China is ramping up so.
I would say its should be assumed that we should see reversed.
In the second quarter here.
But it's very dynamic situation here, but.
Based on the understood. Thank you.
Thank you next question comes first line of Sasha Goldman from Jefferies. Please go ahead. Your line is now open.
Hi, Good afternoon. Thank you for taking my question.
Well first one will be on working capital and how they're going to unwind the second quarter because eurs.
Absolute level of receivables is higher than payable.
So is it fair to assume that from that side, we should expect a little bit of an inflow and then similarly from inventory it ticked up a bit Q1 versus full year numbers. So the also expect from from an from inventory side that you said you get some support.
Let me take that question, so if I start with the the inventory side.
Backers of course at end of March we were ramping up in China.
While ramping down in Europe, and the U.S. and this was that with a very very.
Steep curve at the same time.
So we need to make sure that we have the material that one hand side to be prepared for the ramp up.
But also.
We don't.
And that we're not jeopardize that bottomed at the same type of course also do what we can do to take out the necessary for the unnecessary inventory, it's a very difficult balancing act at the moment and with with the uncertainty on the volumes it will remain so.
So it's very difficult to then predict where where the inventory development will be in the second quarter.
Our plan is to of course take out as much as we count but it is this balancing act that I I described them.
On the on the receivable side.
It's it will follow the sales development.
And we expect that to pick up during the second quarter.
So with that you should expect then also build up of receivables.
In the second quarter.
And then that then we'll have a negative development on on cash from working capital.
But they are that the key is to managed and the over two part of that and make sure that we don't have.
Late on on collecting.
But it is I think it will be.
It will follow the mathematics of the ramp up and Thats, the very very difficult part explain or to forecast at the moment.
Understood. Thanks, We and then my second question would be on your.
Decremental margin.
We touched.
A couple times already.
Will you be willing to give a number of like if we would exclude product a little makes how much your underlying operating leverage is just to get a better understanding of how much of that is actual makes and how much of it is actually volumes.
Yes, I think I mean, I was a little bit touching that in the previous question when I talked about the flicks fixed and flexible.
Cost and.
What we said here's at around 30% or Fig. So there.
With the short.
So.
Let me see right now.
It's.
Maybe worse situational is most likely much worse situation than than normal rule of Tom's here of around 30%.
So I would say.
We'll see but it depends on a lot of things here as you said, it's fluid fluid situation, but.
We saw stops like this it's very very challenging.
Understood. Thank you very much.
Hi, good weekend.
Thank you. Thank you.
Thank you next question comes from the line as Chris Mcnally Americorps. Please go ahead Chris.
Thanks, gentlemen, I'm, just going to fall on the topic of.
Decremental margins.
You had a great raw material benefit in the quarter.
Looking at sort of the drag over the last year or two.
Could you put some parameters around either maybe the benefit going forward or when the peak benefit and should be should it sort of being Q2, and and Q3 somewhat offsetting.
The pure volume.
At the margin.
No I think as I said.
We can't give any guidance and we're not giving any guidance here. So so I think it's.
We cannot basically give you on it.
Time horizon on this I think learning what we said in the beginning of the year was to the direction. We saw at this time I think what is happening right now is impacting so many things in our industry, but also other industries that.
It's all moving parts right now so.
I think we would like to OLED, we we need to refrain from giving any indications there because it's 200 basis.
That's fair and then maybe just more of them.
Fall onto rods, a question about a more longer term you to variable margins.
And in previous downturns, we've seen significant restructuring you you took a.
Good amount of restructuring last year as.
We were already yet at the option levels that were well below.
The $100 million to $110 million, we all thought a couple of years ago.
Is there a level of production or sort of a.
Triggers that would.
The next round of restructuring I'm thinking more about.
Permanent and thoughts that too.
Our production capacity and like all workforce.
Yes.
I mean of course, we are working with a number of scenarios here and.
As we've indicated here I mean, the rule alone normal rule of Tom is stated before and I think beyond that is.
Depending on how the development is coming through here and.
We are of course, working with number of scenarios here and we will need to do whatever we need to do to make sure.
Come out in a in a strong way and I'm convinced that we have the Tucson and also the.
The measures available here for whatever we need to do so.
It all depends on on overall situation and we will execute accordingly.
But we can't give anymore details in terms of time and.
Yes.
Absolutely. Thank you.
Thank you.
Next question comes from the line of Eric Langan from FCB. Please go ahead Eric.
Okay.
Everyone. Thanks, everyone question that hasn't been.
Also more or less.
And it today.
Thank you don't want to get a full year guidance here on sale, even though there is for it.
Our vehicle protection still to relate to but.
The on the topic about outperformance then for the full year is it fair to assume if the second quarter regional mix in terms of auto production continues for the second off that.
Previous indication of around six percentage point about performance would be lower.
I think.
Thank you one.
I think I mean, we know what kind of orders we are talk taking over the past couple of years I think the long term direction.
Direction that we have indicated as a result of these orders is still there of course the basis for four looking forward here, but what is happening right now with a very volatiles movements in our industry.
Regionally, but also I mean in terms of size it's of course.
Changes the short term measurement see around.
It.
Hard to explanation for the fourth quarter, we believe that.
What we have describe now.
Current situation is you could expect the reversed but it all depends also of course on beyond that on how the market is coming back and how it synchronize back to some kind of normalized relationship there but of course those things impacting so therefore, it's very difficult to give you M&A and Thats why we refraining from the whole.
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All guidance.
Altogether, because it's so many moving parts, including this one.
Okay. Thank you.
Thank you.
Hey, good. The next question comes from the line up before we had grier some Morgan Stanley. Please go ahead.
Afternoon, Yeah, just just can you. Please firstly I understand how much did all material situation is nearing the range could you give us an indication of how much that contribution just in Q1.
The second thing and on the geographic mix you've outlined.
Jefferies Jason in terms of content per vehicle, that's clear on the topline but is there any difference in margin there and then the last thing on the Matamoros impact. Thanks for sequentially in the page should we think site any ongoing year over year impact or was that mainly just a Q1 90 issue that the Duncan.
For the year.
I think Kevin.
First question raw material impact in in the first quarter SSC front abridged, we're talking about the trade 30 basis points.
Positive contribution from raw materials, so starting the or sorry and.
And on.
And on the topline sorry about that that's what I meant what you did you on the topline.
The raw material impact on the topline.
Yes.
I don't.
Can't give you a number of wasn't there okay.
Sure.
On the own goal if I'm not I'm owners was a onetime from last year that way reversing this year. If your question was do we have ongoing actually.
For the rest of the year that would have the same effect.
Yes is there anything more to come.
And for the remaining quarters, where it was just a few of 19 effect. That's been this one else impact on all the margin to the doesn't repeat.
So all of that things so this water.
May be one.
And then sort of the third question was.
On the geographic mix and the difference in content per car in the different regions. You include about that impact on the top line that will reverse in Q2 should we think about any different margins there or its just.
Content.
No I mean, what I referred to areas.
Contacted show and the first line effect here, but.
And of course in terms of.
EBIT mix here, we don't go into details for product and region here.
Alright, thank you.
Thank you.
Hey, Good next question comes from the line, Yes, yes. The left from Nordea. Please go ahead.
Thank you I have couple of questions starting with the kind of cost side of your business and taught you can do there.
We know that the program, we announced last year, we're supposed to bring about $60 million yearly savings.
That's proceeding.
They already seeing it for.
Extending restructuring because of what's happening now thank you.
I think when it comes to the structural efficiency program, we launched last year on the.
So some effects last year, but the full effect should be reached during this year I would say we are on track on that and we're expecting to see the full delivery order. During during this year I think we have indicated in the past year that fully poorly executed its not until we come into the to the second quarter here.
Correct.
And you plan anything above that.
I think going forward here I mean, we are.
Working through all types of cost reductions over let's call. It short term nature right now than I think the this scenario planning we are working will give additional more long term effects that is needed potentially.
But it all comes down to what will be there the new normal so to speak beyond the current short term.
The challenge, where we're all dependent on the result of the Colby 19. So.
To get to win new normal we need to leave Colby 19 behind us.
And if you could quantify and the cost benefit that you see strong support from the government. So stay tuned different Rachel and also just tell us if you believe that that Senan away at this friends from what's happened is from the financial crisis.
I think the.
Governmental support programs.
Too early to give any effects, let's talk about than a numbers, so broad range of or programs and we orals and different phases of these different programs.
And I would say also some.
Much is similar to so for similar to what we saw in the financial crisis I think some counters here have added some.
Initiatives that was not there so it's a little bit mixed picture, but but.
In many places, especially in the bigger ones, we see similar kind of activities here, but I would say, it's too early to give a number on it.
And then the last question for me is really if you could.
Operator, why you saw the Ulrich to throw down on all your revolver.
Given the fact that you have quite limited maturities.
In both for 12 to 20 and 2021. So so what was the reason already behind us.
I think you should see it see us the very cautious.
And and proactive.
Activity here for what the is a very challenging time and we have alluded to here during the call Harris animals in our report is that uncertainty is very very high.
And we are talking about restarts here in Europe, and the intention of restarting in North America gain early may.
But.
As we are dependent on on these pandemic year situation, meaning.
We need to get that beyond lost in order to get back to where.
We will should be in the industry. So to speak we don't know how it will develops if it's improving or if it's stabilizing or if its a.
Diminishing so.
Very very uncertain. So we think thats the prudent way to manage the company.
Okay. Thank you.
Thank you.
Hey, Good next question comes from line at some place and allow fundamentals Bakken, It's got a dentist.
Thank you very much two questions for me and I apologize if our solar the north because those will get later on this call much in then 11 percentage points to outperform those.
When it goes through the quarter Little apostrophe, it's maybe split watches is sales mix on China, how much is market share gains.
And referring back to the six percentage points for their costs about outperformance for the year. When you talked about previously it was that figure that can load that that's my first question.
Well when we talked about it in the beginning of the year, where we said we will have an outperformance of 6%, yes. It was backend.
Loaded.
So.
What we see now into first quarter is.
The two fullest extent regional mix effect, as we said here where China.
Lower content per vehicle falling with 50%, while Europe, and North America was holding up well.
That was to the consequences.
Yes.
Fair enough regionally.
Yes.
And then.
None on I know that youre, giving any guidance, but.
If I looked at the jets numbers.
With a 45 central second quarter minus seven Q3 and minus eight Q4.
From from your talk studio Oems like indicated even if it's like to read.
Early stage trending for second half is that in the ballpark on.
The discussions you're having with Acorda Williams customer upset.
Yes.
I think what what we are saying here about uncertainties reflect the reflecting our discussion with the OEM.
No one.
Clear view on how this will develop.
Hands.
The situation here, where we are dependent on a on a.
Virus basic either on the console titles among our customers on how we actually will I think it's of course on plan some.
Expectations and hopes but.
If you know of course.
No.
Hi, Thank you very much.
Thank you next question comes from line of Emmanuel Rosner from Deutsche Bank. Please go ahead Daniel.
Hi, Thanks for taking my question.
One more.
Clarification on the decremental so when they look at your margin progression year over year, Israel's helpfully break ground.
Sort of like the the volumes on other business impact versus some of the offsetting cost savings looks like your decremental margins would have been.
Turning to Mount comment about a sort of it is offset through cost savings and indication and give us around the magnitude of potential cost savings as you move into Q2 and the rest of the could it be desktop at below Q1, or even step that I guess, how this weekend.
No I don't think we can't give anymore.
Detail surrounding that than what we have got yet.
Got it also for here because.
That uncertainties high end and.
Thats the visibility we can give you.
What we already stated unfortunately.
Okay. So then on the under different topic. So obviously over time Youre no gross above market is.
In the heavily driven by each like the market share gains I think you also indicated that your win rates has stayed pretty high can you maybe talk about your.
And your discussion recent discussion with automakers around timing of those launches are there any.
Importantly, major delays or sort of like no all parsing sort of like meeting for the.
For the rest of this year are saying I think you being pushed out and and any notable differences between regions.
No.
I indicated before I mean, so far we don't see any.
Really any delays here of course, that's something we are.
Cautious also considering and down certain development here, but so far no not nothing as indicated in that direction.
So in that sense services as usual.
Okay. Thank you.
We have time for one last question.
Thank you, Sir and that comes from that I know Joseph Spak from RBC. Please go ahead.
Hi, Thanks, so much for squeezing me in.
Maybe one more.
Quick one on on the on the outgrowth.
I know its is a pretty severe just in time industry, but is it possible. There were sort of any you know shipments maybe in like the second week of March like right ahead of sort of the last two weeks shutdown in North America, Europe that sort of contributed to some of the outgrowth it could reverse in the second quarter.
Yeah, I mean, you longer we had.
Europe, and North America rounding here in the quarter it support that mix effect.
So yes.
So so it's possible that they took some orders assuming that they would continue to produce and then they are sort of a probably have to shutdown.
Yeah, I think I mean, I mean, our.
Customers probably to pick up so I mean, we don't have any inside the looks like there, but but that's reasonable to think yes.
Okay, and then maybe just one on on some of the risk you called out in the antenna newsletter.
It is talking about babies potential some.
Demand or even part shortages in China.
Uncertainty in Mexico in the way W.'s coming out around saying, they're not sort of comfortable that started in early may restart and an E. And also just what are you seeing in your supply chain because if I go back to some some very old notes from the financial crisis I. Thank you. You said back then you you guys sort of help support like maybe 10 or so of your suppliers.
Are you seeing anything there or needing to take any action. There. Thank you I mean, we we are of course.
Very close to a our supplier base and.
Working.
Together with them to.
Have all the.
The restart activities lined up and so on and including that of course monitoring also to the health of other suppliers Saddam Hussein so far it looks.
Good.
We are not currently in any way close to the situation, where we were in in the financial crisis. So I will say healthier positions now, but it will also remember that.
We are on live.
Basically two months into this crisis here also so of course, that's something we need to continue to look carefully, but I would say so far so good.
And we haven't needed to do anything yet.
Yes, Joseph any follow up question.
Oh, yes, sorry, and just have on some unlike maybe Mexico or some other us in China you pointed out.
Yes, I think I mean, it's just too.
Terrific and uncertainty here and.
I mean to get us going forward and again you need to have Mexico way beyond that then I think we see different.
Staples in terms of how the stay at home policies are looking like and so on and also the ambitious to restart in terms of timing us on today's a lot of.
Our gnomes surrounding all this and Thats why we are very cautious you know.
Giving any indication so where we think we going because it's so many things that.
He is outside the normal a normal industry judgments Super savings we are.
Once again dependent on.
How the the virus develops and also than the regional and country.
The governments or.
Our reacting to that.
Thank you.
Thank you.
Thank you have owner for your question how has that the call now that the president and CEO Mr., Michael Brad for closing remarks. Please go ahead Sir.
Thank you do you know.
Before we end today's call I would like to say that while preparing for restarting we will continue to managing the effects of the sharp light vehicle production decline, we didn't never ending focus on quality and operational excellence.
Our second quarter earnings call is scheduled for Friday July to 17 Twentytwenty.
And thank everyone for participating on today's call. We sincerely appreciate your continued interest in Autoliv until next time Spacex.
Hi, good.
Conference today's speakers. Please stand by participants you may all disconnect. Thank you for James Thanks, everyone.
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