Q2 2020 Autoliv Inc Earnings Call
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Ladies.
Thank you.
Q2 2020.
Yes.
Good.
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Thank you summed up a welcome everyone to our second quarter 12 to 20, but not the results earnings presentation.
This call.
Our president and CEO me going up and our Chief Financial Officer, Yeah. The Christine.
So on the job.
During today's on this call always CEO will provide a brief overview of our second quarter results. That's my last provides an update on our general business and market conditions.
Following Michael.
<unk> provides further detail a commentary around the financial.
At the end them all presentation, we remain available to respond to questions on a few showing the slides are available to link on the home page of our corporate web site.
Turning to the next slide.
We have the safe Harbor statement, which is an integrated part of this presentation.
The Q and a that follows during the presentation, we will reference ammonia was kept measures.
Reconciliations on historical U.S. GAAP to non U.S kept measures are disclosed in our quarterly press release on the 10-Q that will be filed with the FCC.
Lastly, I should mention that this quarter is intended to to conclude a three P.M.C.E.D. So please follow limit the old two questions per person.
I'll now turn it over to our CEO he can adopt.
Thank you on those look you know into Q2 Twentytwenty highlights on the next slide.
Before we start coming to forward presentation, I would like to acknowledge our employees for their hard work and commitment to close control quality undelivered position.
The co. We'd 19 pandemic is first and foremost human crisis, where safe guarding health and safety is our first priority and our global Smart start to play book has been instrumental to us when restarting our operations in a safe way.
[noise] Delta motive industry slump triggered by the shutdown of car plans and dealership in the wake up to Corona virus pandemic is the worst seen in our history.
However, supported by last year's order intake.
Onyx Saints develops banter done like they can production in all regions.
The drastic decline in light vehicle production in April coupled with the goal of time restart and ramp up in May and June with limited visibility and business predictability I had a drastic effects on our profitability despite forceful cost reductions.
We have undertaken a number of actions to manage to evolving situation by accelerating cost savings reducing expenses.
Strengthening our liquidity position.
These actions include personnel cost reductions of 25%.
His first quarter.
And launching the next step of our structural efficiency program.
However, it is essential to balance the cost reduction response against the need for capacity to manage to cover you don't have started.
We also need to preserve capacity for the new normal market demand and our expected outgrow.
Hi, I'm confident that the actions implemented unplanned our positioning orderly well two benefits from any device recovered.
It is encouraging that operating cash flow turned positive in June and that we were able to reduce capex by approximately 50% compared to the a year earlier.
It is also positive that our customers sourcing activities and modern launch plans are closed on changed.
Our engineering support for these activities remain high even though there are some limited new modern launches delay.
Hi, I'm also pleased that order intake for the first half year was in line with last year.
To further strengthen our liquidity position and credits resources to come from the entered into a lending facility of approximately <unk> point 6 billion with the suite is export credit Corporation.
Looking ahead, we see improvement potential from the fact that the same trend was positive during the quarter month by month and also in the first weeks over the third quarter.
Looking now at the entity development during the quarter on the next slide.
Pandemic restrictions have hit though demob have hard hit the automotive sector.
With deep monthly volume drops and significant uncertainty around volumes.
In China, OEM return to above pre crisis production levels with domestic Oems get growing by 8% why global Oems grew by 6%.
Automotive manufacturing was that the vote should stand still in April in Europe in America, which normally almost two sort of out to the on site.
The recent industry restart in these regions, it's a positive developments.
However, the ramp up started on a very low level and most characterized by strong fluctuations in customer demand.
This low business predictability led to in efficient resource utilization.
Looking now on our sales performance on the next slide.
Okay.
Our sales declined organically by 1 billion or by 48%.
We were able to outperform light vehicle production in all major regions.
Despite strong regional performance our decline was slightly more than the change in global light vehicle production.
As we indicated in early communications the ships.
In the regional NVP mix turned out negative in the quarter.
As markets with high safety content per vehicle declined more than markets with no safety content per vehicle.
These temporary pause our trend of substantially outperforming global light vehicle production that began in the second half on 2018.
The only area with organic growth was China.
Slowing sales over replacement inflation Slater's had a 1.4% this point negative effect on our sales in the quarter.
In North America, our sales fan organically by almost 67%.
However, this compares favorably with the Alipay decline in of nearly 70%.
Despite that we had a 3.6 percentage points negative effect from lower inflator replacement site.
Our outperformance was mainly coming from positive economics, and recent launches with several customer success Tesla FCB and Honda.
Our sales in China recovered strongly during the quarter and grow organically by more than 8% outperforming the light vehicle production by close to two percentage points.
The outperformance was due to strong signs to global Oems.
In Europe organic sales declined by 58%.
We continue to trend from previous quarters, and outperform light vehicle production by three percentage points.
Impacted by recent launches of high volume models at Volvo PSC and BMW.
Sales in Japan decreased organically by 47% in line with the light vehicle production decline.
The only Oems, where our sales increased in the quarter was with Honda answer Suky based on recent major launches.
In rest of Asia organic sales declined by almost 42%, which was almost 20% this points better than light vehicle production decline.
Within the region sales in South Korea was less affected by the pandemic and the sales decline was limited to 11%.
Looking on the next slide.
The situation for major light vehicle markets continues to be uncertain asked the development of the pandemic and the different government than measures are difficult to predict.
Based on our smart start playbook develops where our ramp up following koby 19 related shutdowns, we have invested in employee safety equipment.
Redesigned production lines and workplaces.
We also adopted new processes for interactions with our suppliers and customers to safely managed to restart and ramp up of our operations.
Well, we EMS in China have gradually come back to their previous production levels.
In the second quarter, China accounted for 47% of global light vehicle production, which is close to twice the normal chair.
All European automotive plants have restarted production of the more than a month of shutdowns.
However, the production rates are still volatile with reduced ships to adapt to uncertain demand development.
In North America vehicle production resumed in mid May about two weeks later than in Europe.
However, the ramp up has been faster and less volatile.
Supply disruptions in Mexico can potentially slow down the rest of the region due to the government's stoplights system.
In Japan, a rest of Asia Oems are adjusting the pace of production according to inventory levels and to domestic and export market demand.
Looking at our recent model launches on the next slide.
As expected we had the relative low number of launches during the quarter.
A few launches were pushed out and we expect higher number of launches during the second half over the year.
When a number of important platforms are scheduled to be introduced.
The models shown on this slide or well distributed across the globe.
And our to live content per vehicle is between 120 to over $300.
The majority of these models will be available with some sort of electrified powertrains for example, pure easy or plug in hybrid.
The long term trend to higher CPV is supported by the continued trend of more from center airbag installations.
We are starting to see some coal with 19 effects on the OEM.
Launch plans for Twentytwenty on Twentytwenty one.
And we expect to see a few months of delays on several platforms. We have recently seen increased demand for engineering development work as Oems are trying to catch up time lost during the close down in April and May.
Now I will hand over to our Chief financial Officer freight existing will talk about the financials on the next slide.
Let me tell.
This slide that were on slide eight highlights our key figures for the second quarter.
Our net sales were 1 billion.
The decline of 51% compared to the same quarter last year.
Gross profit increased by $385 million, the gross margin decreased by 17 percentage points.
Second quarter 29.
Gross margin decline was primarily driven by lower sales and lower utilization for assets due to the decline in light vehicle production.
Well as direct corporate 19 related costs.
Since the kind of.
Coupled with a volatile restart.
And ramp up in May and June with limited visibility and predictability I had a significant effects on our gross margin despite significant reductions in costs for material and labor.
The adjusted operating income declined by on CNS $55 million to negative $171 million.
Earnings per share declined by 3.2 $5 to minus 2.0 dollars.
The main drivers behind the disease or 5.7 dollars from lower operating income, partially offset by 2.3, $7 and favorable as from Texas.
Our adjusted return on capital employed.
Equity were minus 18% notice from the 4% respectively.
No no dividends was paid in the quarter.
Looking now will develop ended the quarter on the next slide.
It highlights the fact that challenges and the second quarter more of a completely different magnitude than in this quarter.
Sharpschool seats at an April coupled with a volatile restart and ramp up in May and June.
The visibility and predictability has been a challenge to manage.
It has been difficult to optimize and efficiently run operations locked lease when it comes to utilize resources, such as labor and material into production.
In addition, certain countries have an ordinary locked on protocols, such as Mexico in India, which kraken specific challenges as employees that must stay at home or still tied to full base pay.
Looking now on our cost base on that Tim.
Normally we consider 75% of our cost can be variable or semi variable, including direct material say 10 direct labor.
Thank you for sense are considered semi fixed meaning that given enough time these costs can be adjusted.
5% are considered six calls.
In response to the pandemic, we have implemented actions on each and every cost line, including.
The lion headcount, including hiring freeze reduced work with ours.
Following supported by government programs one available.
And reduced discretionary spending sharply.
The next slide which is 11, you can see cost breakdown for the second quarter.
And the current environment with sales declining Brian on the magnitude coupled with a volatile ramp up some costs that normally are considered to be variable are no longer fully variable.
Yes, the time element to the viability of some costs.
Additionally, when adjusting the variable cost to sales the kind of 50% fixed costs would represent a much larger part of the costs that are under normal circumstances.
As you just the fixed and semi fixed cost increased from 25% normal environment, 36% of total costs, which of course means a larger than normal impact on profitability from changes in six.
On slide 12.
Looking now the adjusted operating income to that income development.
What's an exceptional quarter with adjusted operating income $355 million lower than in the second quarter of 2019.
That equals to about 25 percentage points lower adjusted operating margin.
As illustrated the adjusted operating income was positively impacted by lower cost for materials lower cost for SGN, eight and audience and positive FX effects.
These positive developments were more than offset by the effects lower sales volumes and productivity from low business predictability in the volatility start to ramp up at Additionally, direct Corbett 19 related costs, such as costs for personal protective equipment temporary supplies works.
Great and multiple almost 10 million stars in the quarter.
We managed to mitigate some of the negative leverage effects from the lower sales by a number of activities such as accelerated cost saving initiatives that started in previous quarters and by adjusting production work, regardless of the Florida in personnel.
As a result are these measures personnel costs were reduced by 25% versus the first quarter of this year.
Looking at next slide.
From the second quarter of Twentytwenty.
Operating profit was negative $128 million.
Decrease of taking a $10 billion when excluding the.
Hey, mental last year.
The decline and operating cash flow was the result of the lower net income.
Set by improved working capital, mainly due to accounts receivables declining more than accounts payables.
We have also intensified working capital controls to stitch inventory controlled close strings overdues in close collaboration with suppliers.
Nick I already mentioned terrestrial turned positive again in June thanks to gradually improving sales and working capital console.
Capital expenditures amounted to 64 million in the second quarter, which is about 6% innovation to sales.
The compared to last year capital expenditures decreased 50% as we suspended or delayed investments substantially.
Free cash flow was never the that's negative $192 million.
Kind of 247 million year over year.
Now looking on next slide 14.
Well as you know a long history of a prudent financial policy.
Despite the current market conditions, our balance sheet.
Remains unchanged.
Leverage ratio at June Thirtyth, Twentytwenty was 2.9 times.
And that rich was the result of our net debt increased about $280 million in the quarter. While EBIT. The are over the last 12 months same time decreased by $350 million.
It is whats multiyear compared to year ago net debt has only increased by 60 minutes.
Our ambition is to improve our net debt EBITDA either near future. However, as leverage ratio is calculated on last 12 months data. We do expect surveys show to remain elevated for some time.
Well the next slide slide.
You can see that our liquidity position remained strong.
We entered a new lending facility and the core of point $6 billion compared to the cash outflow of point 2 billion usdeight in the quarter.
At around 1.7 billion in liquidity and unused credit facilities as of June 13th.
We have no need for any major refinancing existing depth on June 20 to 23.
Therefore, we believe this to happen to have secured and significant liquidity cushion to manage our business successfully in the current challenging environment.
Looking at Mic slide.
These charts show that our industry as an adult sort of historic proportion.
According to I address full year Twentytwenty Global light vehicle production is expected to reach 67 million units, which is a decline of 22% against went to 19.
Thats, great uncertainty in light vehicle sales and production due to the evolution of the pandemic government actions and policy changes as well and customer demand for new vehicles.
For the second Hassles Twentytwenty my chest predicts a decline of about 11% in global light vehicle production with the largest contractions occurring in China, Europe and Japan.
As you can see from the chart on the left it took almost a decade for car sales in Europe to recover from recession that began 2008.
The us markets took about five years to bounce back but sales have been.
Since 2015.
Significant growth in China, initially helped compensate but the market has been a decline since 2018.
And the current uncertain environment I inch S is not expecting global light vehicle production to return to 20 that team level of 2019 levels before 2023.
Looking at the next slide 17.
As we communicated earlier this year.
We see some tailwinds and some headwinds will tend to 20.
You can see the me headwinds include growth from executing on the strong order book and the structural efficiency programs.
The main headwinds include operational headwinds from corporate 19 until the volatility and customer ramp ups and declining and unpredictable.
Production.
Inflator replacement same.
We continue to evaluate and analyze prevailing optimal conditions, especially as Lockdowns east and phase three openings continue for for OEM chance and dealer show across the world.
We believe the net effect of Tailwinds and headwinds should result in as year over year decline in adjusted margin in the second half of Twentytwenty compared to the second half is 2019.
Whatever we do expect the business pilots to improve significantly in the second half year compared to Q2 Twentytwenty.
With that I hand back to.
Thank you very much Frederick and moving to the next page.
As you all are aware, we orient downturn of historic proportions, and we have so far in these core quite naturally focused on the short term effects and actions.
However, it's important to continue to execute on the strategic initiatives does create shareholder values.
Our focus areas for shareholder value creation or unchanged, we would like to share with you some of the key components.
We have visible near term and long term Saints outgrow backed by a strong order book.
We also have our solid foundation and out to live heritage with cash flow focus on shareholder return to coupled with a strong balance sheet and prudent leverage policy.
Connectivity, our focus area some business strategy execution will realize our full potential for creating shareholder value.
Now looking on distracted is on the next slide.
Our meantime, finances tragedies brings together our key initiatives.
Crisis management to offset near term cope with 19 effects.
Adapting and optimizing our global operations and our footprint to the new normal medium term markets.
Continuing to execute on the strategic plan that was outlined in 29 team.
Now looking more on these initiatives on the next slide.
Here, we show our response to the challenging market conditions as covered in the previous slide.
As you can see it includes much more than yours to head count on work week our reductions.
In addition, we continue to full focus on further cost reduction actions, while balancing the need for capacity to manage the market recovery.
Considering the uncertainty over to market development, keeping a high degree of flexibility on agility. This is Samson and will allow us to be an even stronger company post to cope with 19 pandemic.
On the next slide you can see the structural efficiency program, one that was launched a year ago.
This program is now almost fully implemented.
We have seen the expected positive effects of the program.
The program should reaches full effect during the second half of this year and we expect full year twentytwenty year over year savings to amounted to 50 million.
We have now Indentified further structural cost improvement opportunities and are launching a second step of structural efficiency program.
For Twentytwenty into program is expected to generate savings of around 10 million.
For the most part it should be implemented by in the first quarter of 2021 and it should reach its food effect by the end of 2021 with annualized savings of around 65 million us dollars.
The program will mainly impact America us in Europe.
Headcount is estimated to be reduced by more than 900, which is close to 5% of total indirect headcount.
When the Toubro programs are fully implemented we expect head count being reduced by more than 1700.
The cost for program is estimated to be around 65 million U.S. dollar and cash out to be spread from Q3 Twentytwenty into Q4 20 to 21.
Looking now on the next slide.
We also continue our work with strategic initiatives and structural improvement pro Dex outlined at our CMD in 29 team.
We are investing to improved if improve the efficiency of value chain from end to end such as flexible optimization.
Hey, good talent basin, and engineering efficiency, including factor of the future.
The ambition is to ensure we have an adequate cost structure that supports our medium term profitability targets also in a lower light vehicle production environment.
Although the additional challenge over lower market could mean more time is needed to reach our targets.
Looking now on the next slide.
To summarize.
We have to manage the current challenges posed by the coal with 19 pandemic without losing focus on the longer term opportunities.
I want to maybe its operating from a position of strength in terms of available liquidity flexible structure, and especially our dedicated to experience and please.
This exceptional situation it requires tough decisions that we will make as necessary.
I am proud that we have a solid organization doesn't managed to reduce costs safely restart operations, while continuing to execute our long term strategy.
I'll now hand back to Anda.
Thank you Micaela.
Turning to page.
This concludes our formal common for today's earnings call.
We would like to now open up the lines for questions. So I'd now turn it back into.
Sandra.
Thank you.
Ladies and gentlemen, we'll now begin the question and answer session.
Reminder, if you wish to ask a question please.
One on utilization.
Turning to be announced please.
Compile acuity Q.
We'll only take a few moments.
To continue requests please.
Keith.
Once again please.
One if you wish to ask a question.
First question comes from the line.
Well Rosemary please go ahead.
Hello, everybody.
I was wondering if you would.
Share with us on starts around.
Your outlook for growth above market over over the rest of the year. It was very encouraging to hear that stuff.
In the.
Meaningful or long delays in some launch so does that mean that you should still be able to grow more than maybe six points above market in the second huh.
No.
Yes, reconfirm I would say that our expectation is still that we should outperform.
The light vehicle production with around 6%. Thus we are.
Earlier communicate.
As you see now in the quarters.
We have a handsome fluctuations.
Already in Q1 was a maybe higher than expected, but as we said when the more get mix that we had it should most likely be reversed on in the second quarter on that this won't be so we'll now so.
I think that confirms that we arent attracts that we have indicated as the market hopefully now starts to normalize.
On a regional basis.
We believe that we will still come to the 6%.
Outperformance.
Great.
Thank you and then.
Secondly regarding its all the factors that you highlighted headwinds and tailwinds in the second half.
Very helpful. I was wondering if you'd be.
Willing to speak by the second half outlook in terms of.
Decremental margins.
Going into this quarter, you had indicated for the second quarter potentially 30 plus percent decremental margins, obviously, what sort of played out any color you can you.
Around either how to quantify those factors or how to think about decremental margins over the rest of the you.
Yes, we.
Real vertically you're seeing from giving specific guidance for the second half and also there could be it's difficult to make comment on on the.
Okay incremental modular and also moving into Q3 and four.
Be highly dependent on the volume and also on the mix that we will see all sit in the second half.
As we showed the second quarter was.
Hopefully a bunch of quarter in terms of though.
Speed and.
Magnitude so.
So if the volume decline.
Which as we expand had.
Decremental effect on on say the cost composition.
That should more normalized on Q3 and four.
But it will still highly dependent on.
Market growth or specific market to be able to determine what what the decremental margin will be.
And then we also do still expect Olson in Q3 and to some extend those into Q4.
A fairly unpredictable market environments.
Which means that there will be still difficult to balance source our own capacity.
With the customer needs.
So it's it's difficult to give give us more specific guidance at this point the fine.
Understood. Thank you very much.
Thank you.
Thank you.
Next question comes from the line of.
Please go ahead.
Thank you very much two questions for me.
What is it possible.
So its later on.
On the order intake.
Instead orders for slack periscope.
Compared to last year now with.
Thanks.
Compared to the little business that you were building for babies you can add some favorable so the market shares in that the orders.
Let's first question second question is is on this.
Decremental effects on EBIT is related to volume and productivity 380 million.
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We did the possible to maybe get some more favorable what is productivity and what this volume to to help us predicting sold in fourth quarter. Thanks.
Thank you I'm from us.
First on the order intake and then.
And over to the Frederic for the decremental margin.
As you know, we we're not giving market share.
During the year, we gave is once a year when we close the year, but what we have indicated to here in the report is that.
I have an order intake that continues on healthy levels and supports our.
Directionally.
As a company or when it comes to or long term targets here. So.
We will have to come back to markets are numbers, when when and when it's time for us.
Good good first half year.
No matter if you can elaborate as to bid on the decremental margin there.
Yes sure.
As I said on the on the cost side, we have had laser focus on discretionary spending as we said our personnel costs came by 20.
Compared to the first quarter or from 28% to fill up the year over year.
That is still production for doing.
And so on that.
But the sheer magnitude and also to speed up the decline makes it.
Impossible to compensate the cost reduction worst act with cost reduction has been in April our older people stone for LTC was down 19% North America.
Yes.
And then.
For the group there was 65% in April the 55% in May.
So with those.
Or cancel that magnitude.
Becomes very difficult to to adjust the costs accordingly, so I cannot say workforce volume and workforce productivity.
I don't know so.
So some meaningful but for sure we had large productivity challenges during the quarter.
Thank you and they should also the special seasonal going into Q3, and four has the volumes will normalize more.
So that's what level of looking for thank you.
Thank you.
Next question comes from the line of fruit Lash. Please go ahead.
Hello, everybody.
Two questions first.
Sounds like you still have some concerns about volatile production schedules and it seems that that to some extent is focused on Europe can you maybe give us a little bit more color.
Maybe a few examples of what you're seeing and what you're seeing just vis-a-vis the the tier two supply chain, there and whether there are some concerns along those lines Thats My first question.
Yes, I think when it comes to the tier twos and I mean, our supplier base I mean, that's something we are more and have been monotone very carefully from from from the beginning as we've indicated here and.
I think there its is holding up quite well almost say and the challenge here of course is more of a let's call it physical nature connected to the the Cobiz 19.
Limitations that then in Knockdowns and so on potentially could have but.
So far so good I would say in and also when it comes to the fashion helps them, though so so.
I think is.
Relatively good situation there under these circumstances and I mean would be indicating here as we live with uncertainty when considered demand side continues to be high as we still have to cope with 19 in societies and many of the important markets on and I think the bigger question at the end of that.
[music].
Kobin period here will be than the underlying impact on the economy and we see of course unemployment increasing in many of these markets as well so I think thats the big question.
Okay. So just to clarify that your answer is it more.
Economic and macro uncertainty as opposed to operational uncertainty there.
Sure you're highlighting okay and then.
Hi.
Go ahead.
No. That's my second question was the just you originally targeted 12% margin.
I think for 2023.
And.
You highlighted that Hs isn't expected to get back to 2019 levels of production until 2020 threes that I presume that that.
That's lower than what you originally anticipated when you laid out those forecasts.
Can you, maybe just address that a little bit more.
Should we still be thinking about that as as your target within that timeframe and what kind of adjustments. If it is what kind of adjustments do you anticipate making in order to get there.
No I think I mean, we have us we laid out than the CMD, a roadmap towards our midterm targets and.
12% see referring to here.
What we are saying here is to that's continues to be army Tom targets, but that's the remember the meantime targets was expressed as a three to five year target than when the headwind. We see now it's more likely to be closer to five down to three years or so yes, there's as a.
LDP.
Significantly lower than what was expected when we stood here.
And the fourth quarter 19 on talked about the.
Directions. So.
That's of course is the additional headwind soon but we.
We are confirming to 12% on me, saying.
Depending on.
Scenarios here on light vehicle production it may take a little bit longer time.
So just to clarify area are there any thoughts you could provide to us on.
A little bit near term, maybe two or three years from now.
You should we.
Sort of just take 300 basis points of margin expansion that you were originally anticipating and just spread that between equally through.
Through the next couple of years or.
All the way through 2025 or is there anything he can suggest the as is the near term.
Landmark for us.
I wouldn't like to going to that kind of.
Yeah, very detailed calculation or.
Scenarios, there, but I think the point is here to.
We continue with our strategic.
My P. around we we have all <unk> all the way said, the we don't need a peak LDP to get there, but we need a stable SVP and of course you lowered this from.
During this scenario.
More time is needed to adjust the cost base cost base to two to two whatever SVP, we're talking about there so.
So I mean, I think when you look three to five years out in time, there's many different scenarios, Oh, how LDP who developed our so.
I I think thats, the best way I can describe our our intentions there.
Alright, thank you.
Thank you.
Next question comes from the line of James Picariello. Please go ahead.
Hey, guys.
Okay. Thanks.
As we consider.
Every scenarios for next year can you just talked about what normalized incremental margins are for the company and maybe what puts and takes might affect that.
Normalized range for next year, maybe just any color on that bridge, you'll have the incremental 45 million in phase two savings that that should help.
Recovery and legacy programs, which comes through at a higher contribution margin than your than your new launches, which you're sitting in backlog.
Any any color on this bridge, which would be great.
Yes sure on so they of course, the efficiency measures were taking no adjust.
For the volume declines that we've been facing.
And of course, and as William come back.
They would they would have an effect on the margin.
But it's it is very very heavily dependent on where the topline will end up.
Sneaker laid out I mean, we still have the 12%.
Targets that we strive for.
But it will be.
Deciding factor will be whether the volumes.
Yes, and Twentytwenty, one will be to give any type of play for us where the normalized margin that market environment will be but with the cost message we're taking now.
Actually our breakeven point is lower so you should see a benefit from that.
And the normalized incremental margin range.
Historically has been.
What would you.
What would you state that ranges.
And we've talked about 30% from each of you want to comment.
Thank you, but when it comes to.
Growing.
Business here I think what we have been sent us a.
Guide us on ballpark figure there is the 20%.
Around 20%, but I think where we all right now on the volatility and uncertainty I mean, I would say, it's not normal incremental scenario, where youre right now so.
Hence then that we all refraining from giving any guidance.
Or a.
Indications all the way for right here I think what we are saying it really is we are taking severe measures.
To adjust our cost base for whatever the new normal yes, and then we have to come back when we have some let's call it more normal business.
Question here that.
Makes it more predictable on how things develops and of course, we will come back and B B b more clear down on guidance and outlooks.
Got it and just.
One.
Go ahead.
That's it.
DNA.
It is part of the a this headwind for the back half DNA trended largely flat year over year through the first half so what's the the order of magnitude on the headwind for the back half on a year over year basis for DNA.
And then just on Capex is capex still.
Kind of trending in the third lower.
Then your prior guidance, which are a third lower than they know their last year's Capex is that the right way to be thinking about capex. Thanks.
Yes, so capex will come up and I'll during the second half it's been a lot.
Delaying and pushing out capex, but.
We said before 70% of our Capex typically is.
Related to two new program.
And then have nickel laid out into the launch plans have not changed significantly.
And with that we will also have increased Capex said during the second half. So we will not able to maintain it at the level that into first half.
And that's been done was to have an effect on.
Depreciation and amortization.
That will increase also during the second half.
Got it thanks.
Thank you next question comes from the line is Mathias Lundberg. Please go ahead.
Thank you.
Thank you mentioned in conjunction with the Q4 results that you expected the outperformance versus light vehicle production to be higher in the end of the year compared to the beginning of the year due to the facing or model launches and would you say that this the list the base case or will they still want to just be impacted by the delays that you mentioned.
Yeah.
Yes, that's still investing in the base case, but.
I see any and I mean with all the volatility in the markets.
The has been.
More volatile.
Development and unexpected, but when youre sum it up but then today, we still expect a 6% businesses.
If the quest and another question is due to delays impact the 6%. It's nothing we can see would impact.
So today here I mean.
What we indicate that either some delays.
But no significant today so.
We have no reason with what we see no no today.
The will change that number so dust into it.
Thank you.
Thank you.
Next question comes from line of Chris Mcnally. Please go ahead.
Thanks, so much gentlemen.
Maybe I could just a follow up on the.
The outgrowth question from from before I think incremental margins have been covered pretty extensively.
Maybe not about the new launches, but just on mix compared to what what you see now if we have a second half where China is again better than expectations, though I realize it's China.
Something like minded and and we get negative revisions in Europe, which would that be a drag on the 6% outgrowth.
Yeah.
Thank you mean.
The bottom line of course is that the market share that we are taking all together is still there, but when you look at the Comparables here of course, we will have an impact if you have high content because.
The lower rate than the other vehicles here you will have a mix effect.
So mathematic, you'll get the effect, but I think that will.
You know even out over time here, but of course, you can play a different scenarios in the quarters here, but you will get the effect from the mix if the mix effect.
If you have the mix there of course.
So, but the bottom line is that our market share gain on is still there.
Great and then just to tie back to Rod previous question. It is the sort of 12% margin target maybe more like a three to five years. So the 2024 2025 can you just give us an idea of how long we should be using this 6% I think you also use 4% to 6% in the past when does the.
Actual market share started just tail off because the law of large numbers you'll be in the high 40% on market share just just any when when that sort of we have to start dropping and just because you're approaching 50% market Jeff.
No I think the range, we gave the capital markets day, I mean, thats valid for that time period that we talked about the and then each year, we coming with a with a number for for the current year end the 6% now is for Twentytwenty.
And then we will come back with the wind or the guidance for four Twentytwenty one.
When it's time for that but the rains she is still valid.
Okay. Thank you very much.
Thank you next question comes from the line of Joseph Spak. Please go ahead.
Hi, Thank you.
The first question I, just want to clarify the.
The order intake first half in line with last year. It I know you're not talking about market share, but is that dollar basis, because if so like we've definitely heard that awards are still somewhat constrained given customer focus and other has another challenges and.
And the out of your volume assumptions are also lower so it would suggest your share picked up a little bit.
No I said I mean, we are not comment the market share of the order intake, but what we're saying is that in terms of.
Value is still.
Filler.
Okay. So on a dollar basis, it's flat with the first ask last year.
Yes.
Okay and then the second question I have is.
If we go back to the financial crisis.
Autoliv Adeptly.
Sally plants and adapted your production capacity.
I think I lost track of amount of times on this call that you mentioned this is a downturn of historic proportions and you also mentioned the potential or further structural cost reductions, including fit footprint, which remain under evaluation. So can you just had a little bit more light on your thought process. There on the considerations is it really just a lower volume outlook.
Than prior or is there also a chance here to take advantage of the overall situation maybe increase the efficiency of your footprint, even if volume outlook is would be not as changes.
As some of the drastic scenarios.
Yeah.
Yes, I mean, what I laid out in the end order presentation I was really to get back to our roadmaps towards our meantime targets here on that these to drive efficiency across the whole value chain on really end to end on including done footprint.
Thanks.
That magnitude.
So that this supports our long term Jordan and no.
In response to sort of current situation.
I think what we have done in this quarter is too aggressively or I would say forcefully.
Adjusted cost base to the concentration, but underlying is still that we are driving these efficiency again done effectiveness I doubt that we have so asked maybe indicate that here, we will have some most likely thumb some capacity alignments coming here, but.
We will announce on inform about them when those.
See sense on down on the case by case basis.
And if if that occurs is their scope with in not too could you sort of mentioned to 12% target maybe three to five years I mean is their scope to maybe bring that closer to the lower end of the range if that if those actions were taken.
No I wouldn't like to go into that.
Type of specification either I mean, as we said from the beginning in I mean, the meantime targets is three to five years out then of course, we that's a potential headwind will see now.
With the light vehicle production significantly lower than originally thought.
Indicates any it will take little bit longer potentially take a little bit longer time.
But we have also been very clear from the beginning is that we're not looking for you know light vehicle production to be at some kind of peak levels here, we just need to make sure that we have a stable light vehicle production.
At reasonable levels that we need time.
Thank you.
Thank you next question comes from the line of BJ cash. Please go ahead.
Yes, hi, thanks, guys.
Got it in Frederick So just I was looking at your comments you as Ted said order intake.
Pretty much decking flat year on year.
And looks like in our risk ABTS down for staff, but.
Given the strong order trends and I think Hs otherwise up some numbers yesterday looks like some decent output from time to how do you see using thing there's some upside versus what you're thinking do you think the trends have improved a little bit further.
No I would like I mean, I think that uncertainty is so high out there with both the Colgate on and on the impact on the economy there. So.
Well not like to speculate the fifth.
Could be better or worse related to I Hs numbers that you see out there. So for US is very much working with our scenario planning and making sure that we do the right activities for whatever developmental see here.
Got it and I know you mentioned mix shift.
A little bit of headwind here when you look at those that will make shift to lower garden bakers ought be used to make those.
Do you have any visibility and how long those plan sustained.
See any trends that.
Okay.
Make you you more favorable in terms of shifting back to have a new products. Thanks, that's it.
No.
I mean is almost the same same question down how to different markets will develop.
I think of course, the regional mix effect that we have seen no. Both in Q1 are now in Q2.
Indicated.
ER should normalize over time and again the same relationship between the between the regions, but when or how quick that will happen I think it's the same question there's too much.
Question, Mark still out there.
Thanks.
Thank you.
Thank you next question comes from the line of Ryan Brinkman. Please go ahead.
Hi, Thanks for taking my question, which is are there certain financial or operating milestones with regard to your own performance or certain industry conditions that are you were you are looking for that could cause you to reinstate the dividend and while you have historically been I think more conservatively capitalized and most peers do you.
Foresee any change going forward with regard to your targeted leverage ratio to protect against unforeseeable disruptions, such as Pandemics et cetera.
No I think first of all the dividend. This a question for the board.
Certainly but of course, we need to get through this.
Yeah, Karen the Colgate crisis here on and then come out on the other side of that.
Then of course as soon as we feel that we are on some more stable ground I think all those questions. We.
We'll be answered over time here, but what we all right now I think fully focused on.
You know.
Driving liquidity on.
Sort of driving cash flow and securing liquidity here.
For a few trend of course, our our ambition here is to make sure that we continue to be a shareholder friendly company in terms of very toning liquidity to our shareholders absolutely but.
One step at a time here as we come out of the.
Most challenging quarter in alternatives is there.
Okay. Thanks, I heard you talked earlier about kind of 30% ish normalized decrementals, 20% plus normalized incremental after 2008 2009 now your margin your incremental was so strong because of your cost cuts that your margin actually rose to higher than the pre crisis levels.
How are you thinking about this crisis and its ultimate impact on margin how much of that cost cut your instituting could maybe stick. After volume comes back caught in margin to potentially be higher is that a potential outcome here.
As I said I don't want to give an indication of guidance on on on our future earnings on topline here based on everything I want to send here, but once again I mean, we are.
Extremely focused here in the company now to drive productivity.
And efficiency to gets to our midterm targets or overtime here on that this will be working on and on of course, we have to come back.
On the progress of that on on US we come out of it is also a more stable drowned also coming back to two a guidance on those kind of forward looking statement when the time Sir.
Okay. Thank you.
We have.
Time for one more question.
Next question comes from the line of Brian Jones. Please go ahead.
Hi team. This is Jason store there on for Brian I appreciate for squeezing me in here, maybe just a quick question to round out the cash flow discussion on as we think about the second half Theres, obviously puts and takes between Capex stepping up I'm working capital.
Going one way or the other but but I think coming into the quarter. We were cautiously optimistic that potentially you could be cash flow breakeven for the year.
Obviously highly contingent on volumes, but if we do see the type of volumes Chasses is calling for.
At a reasonable target for investors to think about or is there some.
Precluding factor that.
I would prevent us.
And you guys from getting there.
Yes, I mean.
I address is one one data point, where they were not.
And then the case.
We will of course, not during the Q3 and four because of the ramp up will be also tie up of working capital.
With receivables and inventories.
That being up.
Volumes increase.
And we would have a very very strong focus on our cash conversion and we also have a target there that that we're striving for to achieve.
But it also they are.
A highly uncertain journey here during the second half.
But we will be very very focus both on capex as we said.
There will be an increase the cause of say higher loss activity in the in the second house and because we pushed out so much of the second quarter.
But then there will so the other elements of networking capital that will build up.
Nature, just something increasing volumes.
But it's.
So just difficult.
To make any more specific guidance on that Karen.
Also a lot depends on.
Now how the top line also plays out to during the second half.
Understood. Okay. That's that's helpful color and then just just my last question just on just on the launch cadence within the industry I.
I think we've all been impressed are surprised by how resilient. The launch plans of Oems have been up until this point and indeed, the comments that you had in the press release in your prepared remarks made it seemed like those plans were still on track I think there as one line that said recently you've seen.
You Oems talk about launch delays just just curious of your overall comments in general are around new launches are more constructive or less constructive than they were.
At this on a quarter ago.
No I think as I said I mean, we're seeing some.
Some delays, but I mean, it's not the significant delays is.
It's a.
Two large sex then that will save following through on I mean of course, when you have the situation like this that could be a lot of practical reasons for four delaying it down under these circumstances. So.
It's not very dramatic I would say and actually we also see some its own corners. So I'm ambitions to speed up also to catch up for for last time. So.
I think.
I mean.
Potentially netting out the self over time here, but.
Hi, I missed on steel to follow through on all those programs and as Bill said also don't rescue activity and terms of new.
Quote synthesize also following the renewed plan. So we don't see any push outs or delaying so many and and a meaningful.
With that either.
So.
Very much coming through.
Understood. Thank you.
Thank you.
With these back over to Michael Braxton final remarks.
Thank you Sandra.
Before van today's call I would like to say that while we continue to manage to affect sort of pandemic. We have a never ending focus on quality and operational excellence. Our third quarter earnings call is scheduled for Friday October 23rd Twentytwenty.
Thank you everyone for participating on today's call. We sincerely appreciate your continued interest in order to leave I know until next time stay safe.
That does conclude our conference for today. Thank you for participating you may disconnect.
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