Q3 2023 Autoliv Inc Earnings Call

[music].

Okay.

Speaker 1: Good day and thank you for standing by. Welcome to the Autolyth Third Quarter 2023 Financial Results Conference call. At this time, all participants are in a listen-all mode. After the speaker's presentation, there will be a question and answer session.

Good day and thank you for standing by welcome to the Ultra Lisa quoted 2023 financial results Conference call.

At this time all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session.

Speaker 1: to ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised.

Good question during the session you will need to press star one one on your telephone.

Then he an automated message it flashing Johan displaced.

Speaker 1: To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Anders Trapp. Please go ahead.

Your question. Please press star one on one again please.

Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today on desktop. Please go ahead.

Speaker 2: Thank you, Sandra. Welcome, everyone, to our third quarter 2023 earnings call. On this call, we have our President and CEO , Nik Kedrat, and our Chief Financial Officer, Sridhar Christine, and me, Andersap VP Investor Relations.

Thank you summed it up well.

Welcome everyone to our third quarter 2023 earnings call on this call, we have our president and CEO , Nicole dropped and our Chief Financial Officer Christine.

On the top VP Investor Relations.

Speaker 2: During today's earnings call Mika and Sredik will, among other things, provide an overview of the strong sales, earnings and cash flow developments we had in the third quarter, the structural cost reduction activities that we are doing to secure our long and medium term competitiveness, and our updated full year indications, as well as provide an update on our general business and market conditions.

During today's earnings call me get on with it.

Among other things provide an overview of the strong sales earnings and cash flow development, we had in the third quarter. The structural cost reduction activities that we're doing to secure our long and medium term competitiveness.

Our updated full year indications as well as provide an update on our general business and market conditions.

Speaker 2: We will then remain available to respond to your questions. And as usual, the slides are available on autoleave.com. Turning to the next.

We will then remain available to respond to your questions and as usual the slides are available on <unk> dot com.

Turning to the next slide.

Speaker 2: We have the safe harbor statement, which is an integrated part of this presentation and includes the Q&A that follows.

We have the safe Harbor statement, which is an integrated part of this presentation and includes the Q&A that follows.

Speaker 2: During the presentation, we will reference some non-U.S. GAAP measures .

During the presentation, we will reference some non U S GAAP measures.

Speaker 2: The reconciliations of historical, together with non-use GAAP measures are disclosed in our quarterly press release. That is available on uplink.com and in the 10Q that will be filed with the SEC. And lastly, I should mention that this call is intended to conclude at 3 p.m. Central European time. So please follow the limit, to purchase your papers.

The reconciliations of historical.

Non us GAAP measures are disclosed in our quarterly press release.

But it's available and I believe you're at home and in the 10-Q that will be filed with the SEC.

And lastly, I should mention that this call is intended to conclude at three P. M Central European time. So please follow a limit.

So it's just a person.

Speaker 2: I will now hand over to our CEO , Leakel Bra. Thank you Anders.

I will now hand over to our CEO Mikael Bratt.

Thank you Anders looking on the next slide.

Our performance continued to improve substantially in the third quarter.

Speaker 3: Our performance continued to improve substantially in the third quarter. First, I would like to thank our employees for their great contributions to the third quarter result and the effort to further strengthen our near and medium-term competitive.

First I would like to thank our employees for their great contributions to the third quarter of a sudden.

Efforts to further strengthen our near and medium term competitiveness.

Our organic sales grew double digits outperforming light vehicle production significantly, especially in Asia.

Speaker 3: Our organic sales had grow bubble digits out performing life vehicle production significantly, especially in Asia. The strong growth was mainly a result of higher than expected life vehicle production, product launches and customer compensation for inflationary pressures.

This strong growth was mainly a result of higher than expected light vehicle production.

Product launches and customer compensations for inflationary pressure.

Speaker 3: Adjusted operating income and a new record for a third quarter seems to be near spin-off.

The adjusted operating income was a new record for a third quarter since the veneers spinoffs.

Speaker 3: We generated a broad-based improvement in key areas, including gross and operating margins, both year-over-year and sequence.

We generated a broad based improvement in key areas, including gross and operating margins both year over year and sequentially.

Speaker 3: Our cash flow was strong and the depth leverage remained well within our target range.

Cash flow was strong and the depth leverage remained well within our target range.

Speaker 3: while we maintain our dividend and almost tripled the obsambles repurchase compared to the second.

While we maintained our dividend and almost tripled.

Shares repurchases compared to the second quarter.

Speaker 3: We are making progress towards our intention of reducing our indirect workforce by up to 2000.

We are making progress towards our intention of reducing our indirect workforce by up to 2000.

Speaker 3: We have now detailed a large part of our structural cost reduction actions, including optimization of the company's geographic footprint and organization.

We have now detailed a large part of our structural cost reduction actions, including optimization of the company's geographic footprint and organization.

Speaker 3: The National Highway Transportation Safety Administration has issued an initial decision to record 52 million airbags in faders, and by our competitor, ARC.

The National Highway Transportation Safety Administration has issued an initial decision to recall 52 million airbag and factors identified by our competitor.

RSV.

Speaker 3: Autolive estimates that less than 10% of the identified inflators were included in airbag modules that out-delive supplied to customers after out-delive acquired certain Delphi assets in 29.

Estimate that less than 10% of the Indentified insulators were included in airbag modules that are supplied to customers. After our dilutive acquired certain Delphi assets in 'twenty.

2019.

Our delay is not aware of any performance issues regarding the AAR senior freighters.

Speaker 3: How to live is not aware of any performance issues regarding the ARC inflators, cloded with its airbags. At this stage, it is too early to talk about any replacement plans.

Loaded with its airbags.

At this stage it is too early to talk about annual replacement plan.

Speaker 3: We are of course prepared to support our customers with replacement products.

We are of course prepared to support our customers with replacement products.

The light vehicle production in 2023 is now expected developed slightly better than expected and we have therefore.

Speaker 3: The life vehicle production in 2023 is now expected, developed slightly better than expected. And we have therefore increased our full year organic sales indications in line with...

We increased our full year organic sales indications in line with this.

Speaker 3: We expect fourth quarter adjusted operating margin to improve by 1.5 to 2 percentage points compared to last year. In line with the previously communicated improvement pattern, we expect to see a higher increase in operating margin by 1.5 to 2 percentage points compared to last year.

Weeks, Greg fourth quarter, adjusted operating margin to improve by one five to two percentage points compared to last year in.

In line with the previously communicated improvement pattern.

Operator: Good day and thank you for standing by.

Operator: Welcome to the Autoliv Cirque Quater 2023 Financial Results Conference School. At this time, all participants are in illusional mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your handy phrase. Do we throw your question? Please press star 1-1 again. Please be advised that today's conference has been recorded.

Speaker 3: Additionally, we expect the ongoing reorganization of our global functions and European operations to lead to the three-line lower tax rate for 2023, then previously anticipated.

Additionally, we expect the ongoing reorganization of our global functions and European operations to lead to lower tax rate for 2023 than previously anticipated.

Speaker 3: These changes are also expected to reduce our normalized tax rate from 2024 and onwards to range of 25 to 30%.

These changes are also expected to reduce our normalized tax rate for 2024 and onwards to range of 25% to 30%.

Speaker 3: Now looking at the significant sequential cost improvements on the next slide.

Now looking at the significant sequential cost improvements on the next slide.

Anders Trapp: I would now like to hand the conference over to your speaker today, Anders Trapp. Please go ahead. Thank you Sandra. Welcome everyone to our third quarter 2023 earnings call. On this call, we have our president and CEO, Nika Drapp, and our chief financial officer, Fredrik Westin, and me, Anders Trapp, VP in restaurants. During today's earnings call, Nika and Fredrik will, among other things, provide an overview of the strong sales earnings and cash flow developments we had in the third quarter, the structural cost reduction activities that we are doing to secure our long and medium-term competitiveness, and our updated full-year indications, as well as providing an update on our general and business and market conditions. We will then remain available to respond to your questions, and as you show the slides are available on outtoleaf.com.

Speaker 3: Year to date, we have made a general broad-based improvement in key areas. Both year over year and sequence.

Year to date, we have paid to generate a broad based improvement in key areas, both year over year and sequentially.

Speaker 3: On this slide, we highlight the sequential improvement.

On this slide we highlight the sequential improvements.

Speaker 3: In the third quarter, we continued to actively address our cost base when negotiating with our customers to secure pricing and other conversations that reflect the high inflation.

In the third quarter, we continued to actively address our cost base, while negotiating with our customers to secure pricing and other compensations.

Hi, Jason.

Yeah.

Speaker 3: Our labour efficiency continues to trend up, supported by the implementation of our strategic initiatives, including automation and digitalisation.

Our labor efficiency continues to trend up supported by the implementation of our strategic initiatives, including optimization of utilization.

Our gross margin improved by 270 basis points compared to the fourth quarter and by 90 basis points from the second quarter.

Speaker 3: Our gross model improved by 270 basis points compared to the first quarters and by 90 basis points from the second quarter.

Anders Trapp: Turning to the next slide, we have the safe harbor statement, which is an integrated part of this presentation and includes a Q&A that follows. During the presentation, we will reference some non-news gap measures. The reconciliations of historical data with non-news gap measures are disclosed in our quarterly press release that is available on outtoleaf.com, and in the 10Q that will be filed with the SEC. And lastly, I should mention that this call is intended to conclude at 3 p.m. Central European time, so please follow limit to questions per person.

Speaker 3: This is mainly a result of the higher labor efficiency and customer...

This is mainly a result of the higher labor efficiency and customer business.

Speaker 3: The positive trend for RDNE and S-DNA in relation to sales have continued and the number now by 130 basis points seems Q1.

The positive trend for <unk> and SG&A in relation to sales have continued.

This will now end by 130 basis points since Q1.

Speaker 3: Combined with a gross model improvement, these lead to some substantially improvement in adjusted operating model.

Combined with the gross margin improvements this lead to a substantially improvement in adjusted operating margin.

Looking now on financials in more detail on the next slide.

Speaker 3: Look in now on financials in more detail on the next slide.

Sales increased by 13%, mainly due to new product with higher prices and favorable currency translation effects.

Nika Drapp: I will now hand over to our CEO, Nika Drapp. Thank you Anders, looking on the next slide. Our performance continues to improve substantially in the third quarter.

Speaker 3: States increased by 13%, mainly due to new productless, higher prices and favorable currency translational effects.

Speaker 3: The strong sales increase and cost reduction activities led to a substantially improvement in adjusted operating income, excluding effects of capacity alignment and antitrust related matters, adjusted operating income increased by more than 40% to 243 million from $103 million US dollars left.

The strong sales increase and cost reduction activities led to a substantially to implement a substantial improvement in adjusted operating income.

Nika Drapp: First, I would like to thank our employees for their great contributions to the third quarter result, and the effort to further strengthen our near and medium-term competitiveness. Our organic sales at the Royal Bubble Digits, outperforming life vehicle production significantly, especially in Asia. The strong growth was mainly a result of higher than expected life vehicle production, product launches, and customer compensation for inflationary pressure. The adjusted operating income was a new record for a third quarter since the VNIR spin-off.

Excluding FX of capacity alignment and antitrust related matters adjusted operating income increased by more than 40% to $243 million.

103 million U S dollar last year.

Speaker 3: The adjusted operating mode is 9.4% in the quarter, and increased by close to two percentage points from the same period last year, and by over four percentage points from the first course.

The adjusted operating mode.

Nine 4% in the quarter and increased by close to two percentage points from the same period last year and by over four percentage points from the first quarter.

Nika Drapp: We generated a broad-based improvement in key areas, including growth and operating margins, both year-over-year and sequentially. Our cash flow was strong, and the depth leverage remained well within our target range. While we maintained our dividend and almost tripled the number of shares we purchased compared to the second. We are making progress towards our intention of reducing our indirect workforce by up to 2000. We have now detailed a large part of our structural cost reduction actions including optimization of the company's geographic footprint and organization.

Operating cash flow was $202 million, which was $30 million lower than the same period last year. The main reason for the lower cash flow was the unusually strong cash flow last year, which was related to timing effects of customer recoveries.

Speaker 3: Operating cash flow was $202 million US dollars, which was $30 million US dollars lower than the same period last year. The main reason for the lower cash flow was the unusual strong cash flow last year, which was related to timing effects of customer recovery.

Speaker 3: Looking now on the limit impact of the UAW strike in North America on the next side.

Looking now on to limit impact of the UAW strike in North America on the next slide.

Speaker 3: The UAW strike in North America is in its fifth week. The impact of the relief in Q3 was very limited.

The UAW strike in North America is in its fifth week.

The impact of go live in Q3 was very limited.

Our north American employees on rented by UAW, but we are indirectly impacted by lost sales and more unpredictable and volatile and BP.

Speaker 3: Our North American employees are funded by UAW, but we are indirectly impacted by lost sales and more unpredictable and volatile LBP.

Nika Drapp: The National Highway Transportation Safety Administration has issued an initial decision to recall 52 million airbag inflators benefited by our competitor, ARC. Autoliv estimates that less than 10% of the identified inflators were included in airbag modules that Autoliv supplied to customers after Autoliv acquired certain Delphi assets in 2009. Autoliv is not aware of any performance issues regarding the ARC inflators and included with its airbag. At this stage, it is too early to talk about any replacement plans.

In.

Speaker 3: First half, 23 and the Detroit 3 North American accounted for around 30% of our global sales. All 36% of our sales are in a-

First half 'twenty III and the Detroit, three North American accounted for around 30% of our global sales or 36% or a sale.

Yes.

We estimate that we lost less than $2 million in sales in the fourth quarter.

Speaker 3: We estimate that we lost less than 2 million in sales in third year. As per of two.

As per October 19th.

Speaker 3: The per week revenue hit from the assembly plant strike is around 6 million.

Weak revenue hit from the Assembly plant strike is around $6 million.

Speaker 3: We have developed bonds plan to the strike and build some inventory of components and finished products to support a quick ramp up when the strike is over.

We have developed bonds plan to the strike and built some inventory of components and finished products to support a quick ramp up when the strike is over.

At this point, it's difficult to estimate the full impact of the UAW strike on our fourth quarter sales and profitability.

Speaker 3: At this point, it's difficult to estimate the full impact of the UWAW strike on our fourth quarter sales and profitability.

Nika Drapp: We are of course prepared to support our customers with replacement products. The life vehicle production in 2023 is now expected to develop slightly better than expected and we have therefore increased our full-year organic sales indications in line with this. We expect both quarter-adjusted operate the modern to improve by 1.5 to 2 percentage points compared to last year, in line with the previously communicated improvement pattern. Additionally, we expect the ongoing reorganization of our global functions and European operations to lead to 3.5 lower tax rate for 2023 than previously anticipated. These changes are also expected to reduce our normalized tax rate from 2024 and onwards to range of 25 to 30%.

Speaker 3: There are many unknown factors in clothing scope, length of action, as well as potential recovery of lost volumes of the strike, but also possible sales increases for brands not affected by their strike action.

There are many unknown factors, including scope lengths of action as well as potential recovery of lost volumes. After the strike, but also possible sales increases for brands not affected by the strike actions.

Speaker 3: A full year 2023 indications are based on the assumption that the U.S. double strike is not prolonged beyond what is included in the S&P Global October out.

Our full year 2023 indications are based on the assumption that the UAW strike is not prolonged.

What is included in the S&P Global October outlook.

Looking now on the announced structural cost reductions initiatives on the next slide.

Speaker 3: Looking now on the announced structural cost reduction initiatives on the next slide.

Yes.

To secure our medium term long content competitiveness and to support our financial targets, we are accelerating our global structural cost reductions as previously communicated.

Speaker 3: To secure our medium for long-compactiveness and to support our financial targets, we are accelerating our global structural cost reductions as previously communiqued.

Speaker 3: He includes a substantial reduction of our global workforce with a particular focus on our European operation.

This includes a substantial reduction of our global workforce with a particular focus on our European operations.

Nika Drapp: Now looking at the significant sequential cost improvements on the next slide. Here to date, we have made a generally broad-based improvement in key areas, both year-over-year and sequentially. On this slide, we highlight the sequential improvements. In the third quarter, we continued to actively address our cost base when negotiating with our customers to secure pricing and other conversations that reflect the high inflation. Our labour efficiency continues to trend up, supported by the implementation of our strategic initiatives, including automation and digitalization.

These initiatives will continue to optimize our geographic footprint for more effective structure, while reducing costs and driving.

Speaker 3: These initiatives will continue to optimize our geographic footprint for a more effective structure while reducing costs and driving improvement volume and cash.

Volume and cash flow.

We intend to simplify how we operate in all areas.

Speaker 3: We intend to simplify, and it's how we operate in all areas.

Speaker 3: The head-count reduction will affect people in the base, our offices, technical centers and plans including leadership positions at all levels.

The head count reduction will affect people based our offices technical centers and plants, including leadership positions at all levels.

Speaker 3: On July 13th, we announced the first step of our plan reductions of around 1100 indirect and direct number.

On July 13th we announced the first step of our planned reductions of around 1100 indirect and direct them. Please.

Speaker 3: On October 5th, we announced the reduction of 300 indirect employees in China, Japan, Sweden, and the state and the closure of an office in Nadel.

On October five we announced the reduction of 300 indirect employees in China, Japan suite.

Two states and the closure of an office in Netherlands.

Nika Drapp: Our gross modern improved by 270 basis points, compared to the first quarter and by 90 basis points from the second quarter. This is mainly the result of the higher labour efficiency and customer social competence. The positive trend for RDNE and SDNA in relation to sales have continued and is now signed by 130 basis points. This point seems Q1. Combined with a gross modern improvement, these lead to a substantially improvement in adjusted operating modern.

Speaker 3: These first steps are expected to reduce cost by around 35 million in 2024, 50 billion in 2025 and 85 million one fully implement.

These first steps are expected to reduce costs by around $35 million in 2024.

$600 million in 2025 and $85 million when fully implemented.

Speaker 3: Looking now on our sales growth in more detail on the next...

Looking now on our sales growth in more detail on the next slide.

Speaker 3: Our consolidated net sales increased to $2.6 billion USD, a record for the third quarter.

Our consolidated net sales increased to $2 6 billion U S dollar a record for the third quarter.

Speaker 3: It was close to $300 million US dollars or 13% higher than the year earlier. Driven by price, volume and count.

It was close to $300 million or 13% higher than a year earlier, driven by price volume and currency.

Fredrik Westin: Looking now on financials in more detail on the next slide. Tastes increased by 13%, mainly due to new productless, higher prices and favourable currency translations effects. The strong sales increase and cost reduction activities led to a substantial improvement in adjusted operating income, excluding effects of capacity alignment and antitrust related matters, adjusted operating income increased by more than 40% to 243 million from 103 million US dollars last year. The adjusted operating model in 9.4% in the quarter and increased by close to two percentage points from the same period last year and by over four percentage points from the first quarter.

Speaker 3: Out of the period cost compensations contributed with 6 minutes.

Out of the period cost compensations contributed with $6 million.

Speaker 3: out of period conversations are retroactive, price adjustments and other conversations that mainly relate to first and second quarters what Loushae did in the third course.

Out of period compensations are retroactive price adjustments and other compensations that mainly relates to first and second quarters.

But go shaded in the third quarter.

Looking on the regionals.

Speaker 3: Looking on the regional state, Asia accounted for 40%, America's for 35, and Europe for 25.

Asia accounted for 40% Americas, 435, and Europe for <unk>.

75.

We outlined our organic sales growth compared to light vehicle production on the next slide.

Speaker 3: We outrun our organic sales growth compared to light vehicle production on the next.

Speaker 3: I am very pleased that our organic sales growth significantly out to foreign global light vehicle production growth in the third quarter. As we continued to execute.

I am very pleased that our organic sales growth significantly outperformed global light vehicle production growth in the third quarter.

As we continued to execute on our strong order book.

Speaker 3: According to S&P Global, third quarter, light vehicle production increased by close to 4% year over year. This was 7% this point higher than expected at the beginning of the quarter.

According to S&P global third quarter light vehicle production increased by close to 4% year over year. This was seven percentage points higher than our expectations at the beginning of the quarter.

Fredrik Westin: Operating cash flow was $202 million US dollars which was $30 million US dollars lower than the same period last year. The main reason for the lower cash flow was the unusual strong cash flow last year which was related to timing effects of customer recoveries.

Speaker 3: with most of the higher than expected production coming from the tick-oh-m in China and o-m in Eastern Europe .

With most of the higher than expected production coming from the Oems in China and Oems in Eastern Europe .

Speaker 3: In the filter out to phone, globalized-week production by around 7% is...

In the quarter outperformed global light vehicle production by around seven percentage points.

Nika Drapp: Looking now on limit impact of the UAW strike in North America on the next slide. The UAW strike in North America is in its fifth week. The impact of the leave in Q3 was very limited. Our North American employees are selected by UAW but we are indirectly impacted by lost sales and more unpredictable and volatile LVP. In first half 23 and the Detroit 3 North American accounted for around 30% of our global sales, all 36% of our sales are in the case.

Speaker 3: We outperformed in the rest of Asia by 15% of points, in Japan by 14% of points, and in China by 6%.

We outperformed in the rest of Asia by 15 percentage points in Japan by 14 percentage points and in China by six percentage points.

Speaker 3: The performance in China was mainly driven by increasing sales to the fast growing domestic Chinese OEM.

The performance in China was mainly driven by increasing sales to the fast growing domestic Chinese Oems.

Our sales to this group outperformed light vehicle production with close to 30 basis points as we continued to deliver on the strong order book in China.

Speaker 3: Our sales to this group out-of-the-form light vehicle production we close to 13th-inch points as we continue to deliver all the strong audible quenching.

We expect the positive year over year sales growth trend to continue into the fourth quarter.

Speaker 3: We expect the positive year of Year sales growth trend to continue into the fourth quarter.

Speaker 3: On the next slide we see some key model launches from the third course.

On the next slide we see some key model launches from the third quarter.

In the quarter, we had a high number of product launches, especially in China and Europe .

Speaker 3: In the quarter, we had a high number of product launches, especially in China, Europe . The trend towards electrification.

Nika Drapp: We estimate that we lost less than two million in sales in quarter. As per October 19th the per week revenue hit from the assembly plan strike is around six million. We have developed bonds plan to the strike and build some inventory of components and finished products to support a quick ramp up when the strike is over. At this point it's difficult to estimate the full impact of the UAW strike on our fourth quarter sales and profitability.

The trend towards electrification is clear.

With six models being available as electric version.

Speaker 3: with six models being available as electric version.

Speaker 3: Six of the mallets shown on this slide have an out-to-live content per vehicle of around $300 or higher, with the highest at over $750 US dollars.

Six of the models shown on this slide have an ultra live content per vehicle of around $300 or higher.

With the highest at over 750 U S dollars.

Speaker 3: In terms of how to let say potential the BMW i5 5 series launch is the most significant.

In terms of outlet sales potential.

W. I five five series launch is the most significant.

Nika Drapp: There are many unknown factors including scope, length of action as well as potential recovery of lost volumes of the strike but also possible sales increases for brands not affected by the strike actions. Our full year 2023 indications are based on the assumption that the UAW strike is not prolonged beyond what is included in the S&P global October outlook.

Speaker 3: For the full year, we expect a record number of launches with high number in China, Europe and South Korea.

For the full year, we expect a record number of launches with high number in China, Europe , and South Korea.

Speaker 3: I will now hand it over to our CFO , Fredic Vistin, who will talk about the financials on the next few slides.

I will now hand, it over to our CFO <unk>, who will talk about the financials on the next few slides.

Yeah.

Thank you Mikael.

Speaker 4: Thank you, Miguel. This highlights our key figures for the third quarter of 2023, compared to the third quarter of 2022.

This slide highlights our key figures for the third quarter of 2023 compared to the third quarter of 2022.

Nika Drapp: Looking now on the announced structural cost reductions initiatives or the next slide. To secure our medium and long-contept competitiveness and to support our financial targets we are accelerating our global structural cost reductions as previously communicated. This includes a substantial reduction of our global workforce with a particular focus on our European operations. These initiatives will continue to optimize our geographic footprint for a more effective structure while reducing costs and driving improvement volume and cash flow.

Speaker 4: Our net sales were 2.6 billion. This was a 13% increase. The gross profit increased by 82 million, or by 21% to 465 million. While the gross margin increased by 1.3% to 17.9%.

Our net sales were $2 6 billion. This was a 13% increase the gross profit increased by 200, sorry by $82 million or by 21% to $465 million, while the gross margin increased by one three percentage points to 17, 9%.

Speaker 4: The growth profit increase was primarily driven by price increases, volume growth, lower cost for material and premium.

The gross profit increase was primarily driven by price increases volume growth lower costs for material and premium freight.

Speaker 4: This was partly offset by increased cost for personnel related to volume growth and weighting.

This was partly offset by increased costs for personnel related to volume growth and wage inflation.

Speaker 4: In the quarter, we made a total adjustment of 11 million to the operating in grant of which 10 million was for capacity.

In the quarter, we made a total adjustment of $11 million to the operating income of which $10 million was for capacity alignments.

Nika Drapp: We intend to simplify, or to convey it how we operate in all areas. The headcount reduction will affect people to base our offices, technical centers, and plans including leadership positions at all levels. On July 13th, we announced the first step of our planned reductions of around 1,100 indirect and direct employees. On October 5th, we announced the reduction of 300 indirect employees in China, Japan, Sweden, and the state and the closure of an office in Netherlands. These first steps are expected to reduce cost by around 35 million in 2025 and 85 million when fully implemented.

The adjusted operating income increased from $173 million to $243 million and adjusted operating margin increased by 180 basis points to nine 4%.

Speaker 4: The adjusted operating income increased from 173 million to 243 million. And the adjusted operating in large increased by 180 basis points to 9.4%. I will explain more when we.

I will explain more when we go through the operating income bridge.

Speaker 4: Adjusted earnings per share, the lucid increased by 4 cents, where the main drivers were 57 cents from higher adjusted operating income, partly all set by 10 cents from financial items, and 7 cents from...

Adjusted earnings per share diluted increased by 40.

Were the main drivers were 57 from higher adjusted operating income.

Partly offset by <unk> from financial items and seven from Texas.

Speaker 4: are adjusted, return on capital and fluid and return on equity increased to 25% and 21% respect.

Our adjusted return on capital employed and return on equity.

Kris to 25% and 21% respectively.

We paid a dividend of $6 <unk> per share in the quarter.

Speaker 4: We paid a dividend of 66 cents per share in the quarter and we repurchased and retired around 1.23 million shares for 120 million dollars under our stock repurchase program.

We repurchased and retired around one to two 3 million shares for $120 million under our stock repurchase program.

Nika Drapp: Looking now on our sales growth in more detail on the next slide. Our consolidated net sales increased to 2.6 billion USD, a record for a third quarter. This was close to 300 million USD or 13% higher than a year earlier, driven by price, volume, and currency. Out of the period cost compensations contributed with 6 million. Out of period compensations are retroactive price adjustments and other compensations that mainly relate to first and second quarters, but go shaded in the third quarter. Looking on the regional stage, Asia accounted for 40%, America's for 35%, and Europe for 25.

Speaker 4: Looking now on the adjusted operating in Cambridge on the next

Looking now on the adjusted operating income bridge on the next slide.

Speaker 4: In the third quarter of 2023, our adjusted operating income of 243 million was 70 million higher than the same quarter last year.

In the third quarter of 2023, our adjusted operating income of $243 million was $70 million higher than the same quarter last year.

Our operations were positively impacted by improved pricing.

Speaker 4: Our operations were positively impacted by improved pricing and other customer computations, higher volumes, lower cost for premium freight, as well as our strategic initiatives that were partly offset by the significant headwinds from general cost inflation. The impact from-

And other customer compensation higher volumes lower cost for premium freight as well as our strategic initiatives that were partly offset by the significant headwinds from general cost inflation.

The impact from raw material prices was limited.

Speaker 4: Out of period cost compensation was approximately 6 million lower than during the same period last.

Out of period cost compensation was approximately 6 million lower than during the same period last year.

FX impacted the operating profit negatively by $8 million.

Speaker 4: FX impacted the operating profit negatively by 18,000,000. This was mainly a result of negative cancellation.

Nika Drapp: We outlined our organic sales growth compared to likely production on the next slide. I am very pleased that our organic sales growth significantly out to four global light vehicle production growth in the third quarter, as we continued to execute on our strong order book. According to S&P Global, third quarter light vehicle production increased by close to 4% year over year. This was 7% this point higher than expected at the beginning of the quarter.

This was mainly a result of negative translation effects.

Speaker 4: costs for SGNA and RD&E net combined was 14 million higher, mainly due to higher personnel costs and projects. However, in relation to sales, it is...

Costs for SG&A and <unk> E. Net combined was $14 million higher mainly due to higher personnel costs and projects.

However in relation to sales it was down 50 basis points.

As a result, the leverage on the higher sales excluding currency effects was in the upper half of our typical 20% to 30% operational leverage range. This is despite not getting any leverage on the inflation compensation from our customers.

Speaker 4: As a result, the leverage on the higher sales, excluding currency effects, was in the upper half of our typical 20 to 30% operational leverage.

Speaker 4: This is despite not getting any leverage on the inflation compensation from our customers.

Nika Drapp: With most of the higher than expected production coming from thick OEMs in China and OEMs in Eastern Europe. In the growth growth performance global light vehicle production by around 7% this point. We outperformed in the rest of Asia by 15% this point, in Japan by 14% this point, and in China by 6% this point. The performance in China was mainly driven by increasing sales to the fast growing domestic Chinese OEMs. Our sales to this group out to four light vehicle production will close to 30 of these points as we continue to deliver on the strong order book in China. We expect the positive year of year sales growth trend to continue into the fourth quarter.

Looking now on the cash flow on the next slide.

For the third quarter of 2023.

Speaker 4: For the third quarter of 2023, or 13th of decreased by 30 million to 202 million compared to the same period last year, mainly as a result of less favorable working capital effects, partly offset by the higher net.

Sure it decreased by $30 million to $202 million compared to the same period last year, mainly as a result of less favorable working capital effects, partly offset by the higher net income.

Year to date operating cash flow increased by $285 million compared to the same period last year.

Speaker 4: The air-to-date operating cash flow increased by 285 million compared to the same period last year, 235 million, mainly due to higher adjusted operating income and less negative working capital.

Two $535 million, mainly due to higher adjusted operating income and less negative working capital effects during.

Speaker 4: During the third quarter, working capital grew by 36 million, driven by higher end.

During the third quarter working capital grew by $36 million driven by higher inventories.

Speaker 4: We will provide more information on trade working capital on a later

We will provide more information on trade working capital.

Later slide.

Capital expenditures net decreased to $151 million from $164 million in the previous year.

Speaker 4: Capital expenditures net decreased to 151 million from 164 million in the previous

Nika Drapp: On the next slide, we see some key model launches from the third quarter. In the quarter, we had a high number of product launches, especially in China, Europe. The trend towards electrification is clear. With six models being available as electric version, six of the models shown on this slide have an Autolive content per vehicle of around $300 or higher, with the highest at over $750. In terms of Autolive sales potential, the BMW i5 5 series launch is the most significant. For the full year, we expect the record number of launches with high number in China, Europe and South Korea.

Speaker 4: Capital expenditure's net inflation to sales was 5.8% compared to 7.1% a year.

Capital expenditures net in relation to sales was five 8% compared to seven 1% a year earlier.

Free cash flow was $50 million in Q3, 8 million lower than a year earlier and year to date free cash flow has improved by $186 million to $170.

Speaker 4: Pre-Caslo was 50 million in Q3, 18 million lower than a year earlier. And your today's pre-Caslo has improved by 186 million to 170.

Speaker 4: Our full year indication of an operating cascode of around 900 million is

Our full year indication of an operating cash flow of around $900 million is unchanged.

Speaker 4: Last 12 month cash conversion defined as free cash flow in relation to the net income was 99.

Last 12 month cash conversion defined as free cash flow in relation to the net income was 99%.

Speaker 4: Now looking on our trade-worth and capital developments on the next slide.

Now looking on our trade working capital development on the next slide.

Speaker 4: During the third quarter, trade working capital increased by 11 million, driven by 35 million higher inventories, partly offset by 14 million higher account tables, and by 10 million in lower receiver.

During the third quarter trade working capital.

<unk> increased by $11 million.

Driven by $35 million higher inventories, partly offset by $14 million higher accounts payables and by $10 million and lower receivables.

Fredrik Westin: I will now hand it over to our CFO, Fredrik Westin, who will talk about the financials on the next few slides. Thank you, Mikael. This slide highlights our key figures for the third quarter of 2023, compared to the third quarter of 2022. Our net sales were 2.6 billion. This was a 13% increase. The growth profit increased by 82 million or by 21% to 465 million, while the growth margin increased by 1.3% to 17.9%.

Speaker 4: The higher inventory was mainly due to the continued volatility and the UAWs.

The higher inventories was mainly due to the continued volatility and the UAW strikes.

In 2019, we launched our capital efficiency program aiming to improve working capital by 800 million to date, we have achieved almost $350 million all from payables so far.

Speaker 4: In 2019, we launched our Capital Efficiency Program, aiming to improve working capital by 800 million. Today, we have achieved almost 350 million all from payables so far.

Speaker 4: Receivables and especially inventories are lagging due to the high colo folatility and hence planning challenges resulting in if

Receivables and especially inventories are lagging due to the high call of volatility enhanced planning challenges, resulting in inefficiencies.

Speaker 4: We do expect this to improve significantly and tan them with the reduced call of volatility. Now looking on our

We do expect this to improve significantly in tandem with our reduced call of volatility.

Now looking on our leverage ratio development over the next one.

Fredrik Westin: The growth profit increase was primarily driven by price increases, volume growth, lower cost from material and premium freight. This was partly offset by increased cost for personnel related to volume growth and wage inflation. In the quarter, we made a total adjustment of 11 million to the operating income of which 10 million was for capacity alignments. The adjusted operating income increased from 173 million to 243 million, and the adjusted operating margin increased by 180 basis points to 9.4%.

Our debt leverage ratio at the end of September 2023 was one three times unchanged compared to the prior quarter.

Speaker 4: Our debt-level ratio at the end of September 2023 was 1.3 times unchanged compared to the prior code.

Speaker 4: This was a result of 36 million higher net depth and 77 million higher 12 months trailing adjusted EVDA. Now looking on.

This was a result.

6 million higher net theft, and $77 million higher at 12 months trailing adjusted EBITDA.

Now looking on shareholder returns on the next slide.

Yeah.

Alterative is shown in the past several years its ability to generate solid cash flow in periods with difficult market environments, such as Covid lockdowns, the warrant Ukraine industry supply chain challenges and related a substantial decline in light vehicle production.

Speaker 4: I'll leave us shown in the past several years its ability to generate solid cash flow in periods with difficult market environments such as Covid lockdowns, the war in Ukraine, industry supply chain challenges and related substantial decline in light vehicle.

Fredrik Westin: I will explain more when we go through the operating income range. Adjusted earnings per share that looted increased by 4 cents, where the main drivers were 57 cents from higher adjusted operating income, partly offset by 10 cents from financial items and 7 cents from taxes. Our adjusted return on capital employed and return on equity increased to 25% and 21% respectively. We paid a dividend of 66 cents per share in the quarter, and we repurchased and retired around 1.23 million shares for 120 million dollars under our stock repurchase program.

Speaker 4: We produce dividend payments and share repartises to create shareholder events.

Reduced dividend payments and share repurchases to create shareholder value.

Speaker 4: Currently the dividend has usually represented a yield of approximately two to three percent in relation to the average ship.

The dividend is usually represented a yield of approximately 2% to 3% in relation to the average share price over.

Speaker 4: over the last five years, they have reduced the net debt significantly, while returning 1.2 billion directly to share.

Over the last five years, we have reduced the net debt significantly while returning $1 2 billion directly to shareholders.

Speaker 4: This includes stock repurchases of 3.6 million shares, per total of 317 million, a part of our current stock repurchase program.

This includes stock repurchases of $3 6 million shares.

A total of $317 million.

Part of our current stock repurchase program.

Speaker 4: We are considering several factors when executing the program, such as our balance sheets, the cash flow outlook, our credit rating, and the general business conditions, not only the debt leverage rate.

We are considering several factors, we're executing the program such as our balance sheet, the cash flow outlook, our credit rating and the general business conditions, not only the debt leverage ratio.

Fredrik Westin: Looking now on the adjusted operating income bridge on the next item. In the third quarter of 2023, our adjusted operating income of 243 million was 70 million higher than the same quarter last year. Our operations were positively impacted by improved pricing and other customer compositions, higher volumes, lower cost for premium freight, as well as our strategic initiatives that were partly offset by the significant headwinds from general cost. Foundation The impact from raw material prices was limited.

Speaker 4: We always strive for the balance that is best for our shareholders both long and short term.

We always strive for the balance that is best for our shareholders, both long and short term.

Speaker 3: And now I have to make back to you. Thank you for Rick. Looking at the next slide.

I'll now hand, it back together.

Fredrik.

Looking at the next slide.

Speaker 3: As supply chains have improved in many regions, vehicle demand, sales backlogs and inventory stocking are now the main drivers of market development.

Our supply chains have improved in many regions vehicle demand sales backlogs and inventory restocking or now the main drivers of market development.

Speaker 3: S&P Global now expects that the fourth quarter global life-bakey production to increase by 3.6% compared to last year.

S&P global now expects that the fourth quarter global light vehicle production to increase by three 6% compared to last year.

Fredrik Westin: Out of period cost compensation was approximately 6 million lower than during the same period last year. FX impacted the operating profit negatively by 18 million. This was mainly a result of negative cancellation effects. Costs for SGNA and RDNA net combined was 14 million higher, mainly due to higher personnel costs and projects. However, in relation to sales, it was down 50 basis points. As a result, the leverage on the higher sales, excluding currency effects, was in the upper half of our typical 20 to 30 percent operational leverage range.

Speaker 3: Compared to the third quarter, volumes are expected to increase by around 2%, mainly to normalcystinality from summer shutdowns in the third.

Compared to the third quarter volumes are expected to increase by around 2% due mainly to normal seasonality from summer shutdowns in the third quarter.

Yes.

Speaker 3: Despite concerns surrounding elevated vehicle pricing in some markets and deteriorating credit conditions, global full year 2023 light vehicle production is projected to increase by over 7%.

Despite concerns surrounding elevated vehicle pricing in some markets and deteriorating credit conditions global full year 2023 light vehicle production is projected to increase by over 7%.

This is 250 basis points higher than their forecast from July .

Speaker 3: This is 250 basis points higher than their forecast from July .

Fredrik Westin: This is despite not getting any leverage on the inflation compensation from our customers. Looking now on the cash low on the next slide. For the third quarter of 2023, our cash rating decreased by 30 million to 202 million compared to the same period last year, mainly as a result of less favorable working capital effects partly offset by the higher net income. Year to date operating cash low increased by 285 million compared to the same period last year to 535 million, mainly due to higher adjusted operating income and less negative working capital effects.

This increase is driven by lower content vehicle models in China, and higher growth in eastern Europe , while production forecast for higher content market.

Speaker 3: This increase is driven by lower content vehicle models in China and higher growth in Eastern Europe while production forecasts for higher content markets Western Europe and North America is lower.

Western Europe , and North America is lowered.

Speaker 3: For out to leave, this change impacts average content per vehicle negatively.

For our two lead this change impacts average content per vehicle negatively.

Speaker 3: By more than 800 points compared to SMPs, you lie for.

By more than 100 points compared to S&P's July forecast.

Speaker 3: Nice vehicle production in China continues to show relative strength, owing to both a strong EV demand and export activity. Mainly benefiting this

Light vehicle production in China continues to show relative strength.

<unk> to both a strong EBIT demand and export activity.

Mainly benefiting the domestic Oems.

Fredrik Westin: During the third quarter, working capital grew by 36 million driven by higher inventory. It will provide more information on trade working capital on a later slide. Capital expenditure net decreased to 151 million from 164 million in the previous year. Capital expenditure net in relation to sales was 5.8 percent compared to 7.1 percent a year earlier. Free cash low was 50 million in Q3, 18 million lower than a year earlier. And year to date, free cash low has improved by 186 million to 107 million.

Speaker 3: Near-term production, light vehicle production in North America continues, it will be impacted by the ongoing UAW strike.

Near term production light vehicle production in North America continues to be impacted.

By the ongoing UAW strike.

The latest S&P forecast for the fourth quarter is revised down to minus 7%.

Speaker 3: The latest S&P forecast for the fourth quarter is revised down to minus 77.

This includes.

Speaker 3: continue the creation of the strike actions all are announced through Thanksgiving.

We continue variation of the strike actions already announced through Thanksgiving.

Production in Europe is to large extent secured by Oems sales backlog. However, we are.

Speaker 3: Production in Europe is to large extent secured by OEM sales backlogs. However, we are set in to see the underlying demand has abated due to higher vehicle price. This is tight-to-credit condition.

And to see the underlying demand.

Fredrik Westin: Our full year indication of an operating cash low of around 900 million is unchanged. Last 12 months cash conversion defined as free cash low in relation to the net income was 99 percent. Now looking on our trade working capital development on the next slide. During the third quarter, trade working capital increased by 11 million, driven by 35 million higher inventories, partly offset by 14 million higher accounts payables and by 10 million in lower receivables.

Abated due to higher be comprised tight credit conditions and the order backlogs at the Oems are shrinking going into 2024.

Speaker 3: and the order backlogs at the WM are shrinking going into 2024.

Speaker 3: We base our full year saved indication on global light vehicle production growth of around 7%.

We based our full year sales indication on global light vehicle product showing growth of around 7%.

Speaker 3: Now looking at the expected adjusted operating more in progression in the next slide.

Now looking at.

<unk> adjusted operating more in progression in the next slide.

For the fourth quarter, we expect substantial improvement of the adjusted operating margin.

Speaker 3: For the fourth quarter, we expect substantial improvements of the adjusted operating model.

Fredrik Westin: The higher inventories was mainly due to the continued volatility and the UAW strikes. In 2019, we launched our capital efficiency program aiming to improve working capital by 800 million. To date, we have achieved almost 350 million all from payables so far. Receivables and especially inventories are lagging due to the increased significantly in tandem with the reduced call of volatility. Now looking on our leverage ratio development on the next slide. Our debt leverage ratio at the end of September 2023 was 1.3 times unchanged compared to the prior quarter.

Speaker 3: We anticipate further cost compensations from customers. The headcount reductions that we talked about previously should support operating leverage and profitability.

We anticipate further cost compensation from customers the head count reductions that we've talked about previously should support operating leverage and profitability.

Speaker 3: We expect continued high-zero-vegear sales growth supported by launches, higher-life vehicle production and higher price.

We expect continued high year over year sales growth supported by launches higher light vehicle production and higher prices.

We have continued to see an improvement of supply chain stability throughout the year with reduced customer call off volatility.

Speaker 3: We have continued to see an improvement of supply chain stability throughout the year. We reduced customer call of volatility.

Speaker 3: However, improvement is somewhat slower than we had expected, as it deteriorated somewhat in Europe in Q3.

However, the improvement is somewhat slower than we had expected.

Is it deteriorated somewhat in Europe in Q3.

Speaker 3: These together with the higher sales and adverse effects development means that we expect the fourth quarter adjusted operating margin improvement year over year over around 1.5 to 2%.

This together with the higher sales and adverse FX development.

Fredrik Westin: This was a result of 36 million higher net depth and a 77 million higher 12 months trailing adjusting with the A. Now looking on shareholder turns on the next slide. Autoliva has shown in the past several years its ability to generate solid cash flow in periods with difficult market environments such as COVID lockdowns, the war in Ukraine, industry supply chain challenges and related substantial decline in light vehicle production. Produced dividend payments and share repurchases to create shareholder value.

Meaning that we expect the fourth quarter adjusted operating margin improvement year over year over around one five to two percentage points in line with the previously communicated improvement pattern of around two percentage points each quarter throughout 2023.

Speaker 3: in line with a previously communicated improvement pattern of around two percentage points each quarter throughout 2023.

Looking at our full year 2023 financial indications on the next slide.

Speaker 3: Looking at our full year 2023 financial indications on the next.

Speaker 3: This slide shows our updated full year 2023 indication.

This slide shows our updated full year 2023 indications.

Speaker 3: The indications exclude costs and gains from capacity alignment and the trust related matter, a litigation settlement and other discreet items.

The indications exclude costs and gains from capacity alignment.

Fredrik Westin: Historically, the dividend has usually represented a yield of approximately 2-3% in relation to the average share price. Over the last five years, they have reduced the net debt significantly while returning 1.2 billion directly to shareholders. This includes stock repurchases of 3.6 million shares worth total of 317 million a part of our current stock repurchase program. We are considering several factors when executing the program, such as our balance sheets, the cash flow outlook, our credit rating and the general business conditions, not only the debt leverage ratio.

Antitrust related matters and litigation settlement and other discrete items.

Our full year indication is based on the light vehicle production growth assumption of around 7%.

Speaker 3: Our full year indication is based on a light vehicle production growth assumption of around 7% up from 4% in the previous indication.

Up from 4% in the previous indication.

Speaker 3: As a consequence, our organic sales is expected to increase organically by around 17%. Instead of the earlier indications of growth of around 50%.

That's the cost accounts, our organic sales is expected to increase organically by around 17% instead of the earlier indications of growth of around 15%.

Currency translation effects are assumed to be around positive 1%.

Speaker 3: currency translation effects or assume to be around positive 1 to

Speaker 3: The range for the adjusted operating model is unchanged around 8.5 to 9.5.

The range for the adjusted operating margin is unchanged around eight 5% to 9%.

Fredrik Westin: We always strive for the balance that is best for our shareholder's both long and short term. And now let me back to you. Thank you for a quick looking at the next slide. As supply chains have improved in many regions, vehicle demand, sales backlogs and inventory stocking are now the main drivers of market development. S&P Global now expects that the fourth quarter global life vehicle production to increase by 3.6% compared to last year.

Speaker 3: operating cash flow is expected to be around 900 million.

Operating cash flow is expected to be around $900 million.

Our positive cash flow trend should allow for continued high shareholder return.

Speaker 3: Our positive cash load trend should allow for continued high share of the return.

Note that our full year 2023 indications are based on assumptions that the USW strike is not prolong beyond what is included in the S&P Global October outlook.

Speaker 3: Note that our full year 2023 indications are based on the soundsions that the U.S.W. strike is not prolonged beyond what is included in the S&P Global October Outlook.

Speaker 3: I will now hand it over to Fredrick to briefly talk about 2024 and improvements we see.

I will now hand, it over to <unk> to briefly talk about 2024 and the improvements we see.

Fredrik Westin: Compared to the third quarter, volumes are expected to increase by around 2%, mainly to normal seasonality from summer shutdowns in the third quarter. Despite concerns surrounding elevated vehicle pricing in some markets and deteriorating credit conditions, global full year 2023 light vehicle production is projected to increase by over 7%. This is 250 basis points higher than their forecast from July. This increase is driven by lower content vehicle models in China and higher growth in Eastern Europe, while production forecast for higher content markets, Western Europe and North America is lowered.

Turning to the next slide.

For 2024, we see some tailwind and headwinds.

Speaker 4: For 2024, we see some tailwinds and headwinds.

Speaker 4: The main tailwinds include call of stability, leading to direct labor efficiency improvements, savings from the structural initiatives as I outlined earlier, effects of continued operational improvements from automation, utilization, but also favorable raw materials and executing on the strong order.

The main tailwind include call it stability, leading to direct labor efficiency improvements savings from restructuring initiatives as outlined earlier.

Effects from FX of continued operational improvements from automation utilization.

It also enrollment favorable raw materials and executing on the strong order book.

Speaker 4: The main headwinds include operational headwinds from expected continued inflationary pressure, although smaller than this year, which we expect to lead to a customer conversation catch up later in the year. Just as it was in 2022 and 2020.

The main headwinds include operational headwinds from expected continued inflationary pressure, although smaller than this year, which we expected to lead to a customer compensation catch up later in the year just as it was in 2022 and 2023.

Considering these potential tailwind and headwinds we expect our year over year improvement in adjusted operating margin.

Speaker 4: Considering these potential tailwinds and headwinds, we expect a year-over-year improvement in adjusted operating mode.

Fredrik Westin: For out to leave, this change impacts average content per vehicle negatively by more than 800 points compared to S&P's July forecast. Life vehicle production in China continues to show relative strength, owing to both a strong EV demand and export activity, mainly benefiting the domestic oil. Near term production, life vehicle production in North America continues and will be impacted by the ongoing UAW strike. The latest S&P forecast for the fourth quarter is revised down to minus 7%, himself.

Speaker 4: We expect the 2024 to be an important step towards our medium-term target of 12% adjusted operating mode.

We expect 2024 to be an important step towards our medium term target of 12% adjusted operating margin.

Speaker 4: As we have communicated, the median turn targets rest on a few key, or targets rest on a few key conditions, which are that global light vehicle production is at least 85 million. That the call of volatility is back to pre pandemic levels and that we have full compensation for inflationary pressure after 2021 for a full year.

As we have communicated the medium term targets rests on a few key target rests on a few key conditions.

Which are the global light vehicle production is at least $85 million.

That's the call of volatility is back to pre pandemic levels and that we have full compensation for inflationary pressure after 2021 for a full year.

Speaker 4: We intend, as usual, to come back with a 2024 full year indication in connection with our fourth quarter earnings release in January . And I now hand it back to you, Mika. Thank you, Ferrik.

We intend as usual to come back with a 2020 for full year indication in connection with our fourth quarter earnings release in January .

Ill hand, it back to you makeup thank.

Thank you for a rig onto the next slide.

Fredrik Westin: This includes the continuation of the strike, actions all are announced through Thanksgiving. Production in Europe is to large extent secured by OEM sales backlogs. However, we are set in to see the underlying demand has abated due to higher vehicle price, despite the current conditions. And the order backlogs at the OEMs are shrinking going into 2024. We base our full year sales indication on global life vehicle production growth of around 7%. Now looking at the expected operating more in progression in the next lives.

This conclude our formal comments for today's earnings call and we would like to open the line for questions from analysts and Investor.

Speaker 3: This concludes our formal comments for today's earning school and we would like to open the line for questions from analyst and investor.

I will now hand, it over back to our operation operator Sandra.

Speaker 3: I will now hand it over back to our operator Sandra.

Speaker 1: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced.

Thank you.

A reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.

Speaker 1: to weath or your question, please press star one and one again.

To withdraw your question. Please press star one on one again.

Please standby, while we compile the roster.

Yeah.

Speaker 5: Our first question comes from the Emmanuel Rosner from Deutsche Bank. Please go ahead.

Our first question comes from the LLC and Manuel Rosner from Deutsche Bank. Please go ahead.

Fredrik Westin: For the fourth quarter, we expect substantial improvements of the adjusted operating model. We anticipate for the cost compensations from customers, the headcount reductions that we talked about previously should support operating leverage and profitability. We expect continued high year-over-year sales growth supported by launches, higher life vehicle production and higher prices. We have continued to see an improvement of supply chance stability throughout the year with reduced customer call of volatility. However, improvement is somewhat slower than we had expected, as it deteriorated somewhat in Europe in Q3.

Alright, thank you so much.

Speaker 6: Thank you so much. I have two questions around some of the factors you've highlighted going into 2024. The first one you're mentioning on the slide is the customer call-offs.

Two questions around some of the factors you highlighted going into two.

2020 for the first one you are mentioning on this slide is the.

Our customer call offs.

As a positive. So just was curious if you could give a little bit more color of what you've actually seen in Europe . This quarter, where you you indicated that they may have been some sequential deterioration what are you seeing drive this and is that sort of an ongoing issue and then as we move essentially into two.

Speaker 6: as a positive. So just what's good if you give a little bit more color of what you've actually seen in Europe this quarter where you...

Speaker 6: you indicated that they may have been some sequential degeneration. What do you think drives this? And is that sort of an ongoing issue? And then as we move essentially into 2024, how do we think about these savings? Is it just...

24, how do we think about these savings is it just better incremental margin on the higher volume or is it like is there a discrete buckets.

Speaker 6: better incremental margin on the higher volume, or is there a discrete packet of...

Speaker 6: I don't know, head count reduction that you can, uh, but see as a result of more stable calloff.

I don't know headcount reduction that you can.

Fredrik Westin: These together with the higher sales and adverse effects development means that we expect the fourth quarter adjusted operating margin improvement year-over-year of around 1.5 to 2% this month. In line with the previously communicated improvement pattern of around two percentage points each quarter throughout 2023. Looking at our full year 2023 financial indications on the next slide. This slide shows our updated full year 2023 indications. The indications exclude costs and gains from capacity alignment and trust related matter, elitigation settlement and other discrete items.

As a result of more stable call offs.

Speaker 3: Thank you, Emmanuel. Let me start with the call of the hand over to Fredrik to take you through the second part of your question there.

Thank you.

Let me start with the core lodestone and hand over to <unk> to take you through the the second part of your question.

As we have talked about throughout.

Speaker 3: As we have talked about throughout not only this year but since some time back here we have had a challenging situation where it has come to this volatility resulting in a stop and go in our operations here and that has throughout the year improved and and gone in the right direction including Europe but what we saw in Q3 here in Europe was that it

Not only this year, but <unk> seen some time back here.

We have had a challenging situations.

Come to this volatility, resulting in a stop and go in.

Our operations here in that pass.

Throughout the year improved and going into right direction, including Europe , but what we saw in Q3 here in Europe is that it.

Fredrik Westin: Our full year indication is based on a light vehicle production growth assumption of around 7% up from 4% in the previous indication. As a consequence, our organic sales is expected to increase organically by around 17% instead of the earlier indications of growth of around 15%. Currently translation effects are assumed to be around positive 1%. The range for the adjusted operating margin is unchanged around 8.5 to 9%. Operating cash flow is expected to be around 900 million.

Speaker 3: turned to the worst again. And that is, I would say, purely related to supply issues in our customers' value chain here. So of course, the root cause for that could vary. But for example, we still see that the semiconductor situation is still a problem for the firm of our customers.

Turn to reverse again and that is I would say purely related to <unk>.

Supply issues in the in our customers' value chain here.

So.

Of course, the root cause for that could vary but but.

For example, we still see that the.

The semi conductor situation is still a problem for some of our customers.

Speaker 3: We have no reason to believe that this deterioration in Europe will come.

We have no reason to believe that this.

Deterioration in Europe , where it comes from Annie and consumer.

Speaker 3: from any end consumer deterioration or situation at the wall. So I see it very much connect.

Duration or situation of the world.

It's very much connect.

Connected to the re since we've had the last quarters and years here that Unfortunately went in the wrong direction for <unk>.

Speaker 3: The reasons we have had the last quarters and years here that I hope they went in the wrong direction for.

Speaker 3: for Europe . But otherwise I would say as an average, we are climbing up towards the 90% level. But as you remember, pre-pandemic we were basically at 100. So we are still...

For Europe , but otherwise I would say as an average.

Fredrik Westin: Our positive cash flow trend should allow for continued high shareholder return. Note that our full year 2023 indications are based on the assumptions that the USW strike is not prolonged beyond what is included in the S&P Global October I will now hand it over to Fredrik to briefly talk about 2024 and the improvements we see. Turning to the next slide. For 2024, we see some tailwinds and headwinds. The main tailwinds include call of stability, leading to direct labour efficiency improvements, savings from destruction initiatives as I outlined earlier, effects of continued operational improvements from automation, visualization, but also favorable raw materials and executing on the strong order book.

We are climbing up towards the.

90% level.

Fredrik Westin: The main headwinds include operational headwinds from expected continued inflationary pressure, although smaller than this year, which we expect to lead to a customer compensation catch-up later in the year, just as it was in 2022 and 2023. Considering these potential tailwinds and headwinds, we expect a year of a year improvement in adjusted operating margin. We expect 2024 to be an important step towards our medium-term target of 12% adjusted operating margin. As we have communicated, the medium-term target rests on a few key conditions, which are that global light vehicle production is at least 85 million, that the call of volatility is back to pre-pandemic levels and that we have full compensation for inflationary pressure after 2021 for a full year.

But as you remember pre pandemic, we were basically at 100, so we are still.

Speaker 3: far from where we were before the pandemic when it comes to the stability altogether in the regardless of region there. So, Fredic, maybe. Yeah, so then.

Far from where we were before the pandemic when it comes to the stability altogether in the company regardless of region there.

So fredrik maybe yeah.

<unk>.

Yes for next year I mean, it's.

Speaker 4: If you look at S&P global based on that, there will also be expectations, is that we should also expect some, even a bit limited volume growth.

If you look at S&P global.

Just on that they will also have an expectation is that we should also expect some.

Even a bit limited volume growth.

Speaker 4: That should help the margin development, but then it is more importantly, the further improvement on the call of stability. And we do have significant inefficiencies in our operations due to the current.

So that should that should help the margin development, but then it is more importantly b.

Further improvement on the call offs.

Stability and then we do have significant inefficiencies in our operations.

Due to the current.

Speaker 4: significantly lower level of stability. And the further this comes up to the 100% that Mika mentioned, the more it will allow us to move back or operate back at the efficiency levels that we've been using.

A significantly lower level of stability.

And the further this comes up to the 100% that Nick had mentioned.

Sure.

It will allow us to move power operate back yet.

Efficiency levels that we've been used to.

Speaker 4: But of course, then the third component is the structure initiatives that we have added on to this and both on the indirect side and the direct side that is also supported by what we're doing on an automation and did

But of course, then the third component is destruction initiatives that we have added on to this and both on the indirect side and the direct side, but it is also supported by what we're doing on automation and digitalization.

Yeah.

Thank you.

Speaker 6: Thank you. And then my technical question is specifically by the structural initiatives. I think earlier in the year when you had first announced,

Then my second question is specifically about the structural initiatives.

I think earlier in the year when you had first announce.

Speaker 6: plans for headcount reduction. I think you had mentioned at the time a potential total of 8,000 headcount reduction. I think so far based on the the plans announced the first steps.

Our plan for head Count reduction I think you had mentioned at the time a potential total of.

8000 head count reduction I think so far based on the plans announced.

Fredrik Westin: We intend, as usual, to come back with a 2024 full year indication in connection with our fourth quarter earnings release in January. And I now hand it back to you, Miguel. Thank you, Ferric, on to the next slide.

First steps I think you announced maybe about 1400 or so of this 8000, so obviously a lot more to go.

Speaker 6: I think you announced maybe about 1,400 or so of this 8,000. So obviously, a lot more to go. So my questions are, is 8,000 still, you know, the right number in the current environment? And then what could be the timing for?

My questions are is 8000 so.

Numbering in the current environment and then what could be the timing for now just announcements of additional steps, but again any of those still benefit 2024 or would that be beyond that.

Operator: This concludes our formal comments for today's earnings call, and we would like to open the line for questions from analysts and investors. I will now hand it over back to our operator, Sandra. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Please standby, we will compile the roster.

Speaker 6: not just announcements of additional steps, but can any of those still benefit 2024 or would that be beyond that?

Speaker 4: Yeah, so we did announce 8,000 but we also split that into two groups. It was 2,000 of what we call indirect or a c-salaried employees and then 6,000 on the direct.

Yes, so we did announce a thousand but we also split it into two groups. It was 2000 of what we call indirect order salaried employees and then 6000 on the direct side.

Speaker 4: The direct file, the 6000 is very much connected to what we just talked about before. So it is also based on that the stability levels on the call of also support.

The direct side. The 6000 is very much connected to what we just talked about before so it is also.

Based on that we come back with that stability levels on the core loss.

Daniel Emanuel Rothner: Our first question comes from Daniel Emanuel Rothner from Deutsche Bank. Please go ahead. Thank you so much. I have two questions around some of the factors you've highlighted going into 2024. The first one you're mentioning on the slide is the customer call-offs as a positive. Just what skills, if you give a little bit more color of what you've actually seen in Europe this quarter, where you indicated that they may have been some sequential deterioration.

Also support that.

Speaker 4: And then we should be able to come back to the regular type of productivity achievements that we have been operating at, which would then allow us to take out 6,000 people with the volumes of end of March as the basis for that number. And that is progress.

And then we should be able to come back to the regular type of productivity achievements that we have been operating at at which would then allow us to take out 6000 people.

With the volumes of end of March as the basis for that number and that is progressing.

Speaker 4: Then on the 2000, yeah, we have announced so far 1,400 of which 300 were direct. So of the 2000, we have announced 1,100. And also the savings associated with that. So there's more to come, but we have so far progressed on more than half of the 2000. And also cost wise of what we've taken. Again, also more than half.

Then on the 2000, yes, we have announced so far 1400.

Of which 300 were direct so of the 2000, we have announced 1100.

And.

Also the savings associated with that.

Daniel Emanuel Rothner: What do you think drives this? Is that an ongoing issue? And then as we move essentially into 2024, how do we think about this savings? Is it just better incremental margin on higher volume? Is there a discrete bucket of, I don't know, head count reduction that you can, at least as a result of more stable call-offs? Thank you, Emanuel.

So theres more to come but we have so far progressed on more than half of the 2000.

And also cost twice of what we've taken.

Also more than half has been booked already.

Speaker 7: And you can also see now in the third quarter that our head count is down by 400 employees on the intellect side. So yes, some of those activities are already in place. Thank you very much.

And you can also see now in the in the third quarter that our head count is down by 400 employees on the on the indirect side. So yes some of those.

Activities are already in place.

Nika Drapp: Let me start with the call-offs, Daniel. I hand over to Fredrick to take you through the second part of your question there. As we have talked about throughout not only this year, but since some time back here, we have had a challenging situation where it has come to this volatility resulting in a stop-and-go in our operations here. And that has, throughout the year, improved and gone in the right direction, including Europe.

Thank you very much.

Thank you. Thank you. Thank you.

We will now take the next question.

From the line of Colin Langan from Wells Fargo. Please go ahead.

Speaker 5: from the line of calling Langan from Wells Fargo. Please go ahead.

Oh, great. Thanks for taking my questions.

Speaker 8: Great, thanks for taking my questions. In the last slide, you noted inflationary pressure and the timing of customer compensation.

And the last slide you noted inflationary pressure and the timing of customer compensation and sort of the big headwind into next year.

Nika Drapp: But what we saw in Q3 here in Europe was that the Turned to the worst again, and that is, I would say, purely related to supply issues in our customers' value chain here. So, of course, the root cause for that could vary, but for example, we still see that the semiconductor situation is still a problem for some of our customers. We have no reason to believe that this deterioration in Europe comes from any end-consumer deterioration or situation at the wall.

Speaker 8: big headwind into next year. I mean, what are the new inflationary costs that we should be thinking about into next year? Or is it that you're getting a little bit more pushback on getting recoveries? Is that the other part of the issue? And then in general, can you just remind us how much of what you've already gotten recovered is in the peace price versus what would actually need to get maybe renec-

What are the new inflationary costs that we should be thinking about into next year or is it that you are getting a little bit more pushback on getting recoveries is that they are.

Part of the issue and then in general can you just remind us how much of what you've already gotten recovered as in the piece price versus what actually going to get maybe renegotiate it at the start of next year.

Speaker 4: Yeah, so on the first, I mean, we use the same macroeconomic forecast that you have to our hand and available. So we do expect that inflation levels should come down as they are right now and they should be lower next year than this year.

Yeah, so on the first.

We use the same macroeconomic forecast.

You have to her hand and available.

So we do expect that inflation level should come down as they are right now and they should be lower next year than this year.

Nika Drapp: So, I see it very much connected to the reasons we have had the last quarters and years here that are all of the ones in the wrong direction for Europe. But otherwise, I would say, as an average, we are climbing up towards the 90 percent level, but as you remember, pre-pandemic, we were basically at 100. So, we are still far from where we were before the pandemic when it comes to the stability altogether in the company revolvers of region there.

Speaker 4: But we do also expect that special labor will have a higher inflation level next year than what it has had as historical averages. But most likely less than what we've had in this year. But we'll come back to that when we talk more specifically on 20-

But we do also expect that especially labor.

Have a higher inflation level next year than what it is has had.

As historical averages, but most likely less than what we've had in this year, but we'll come back to that when we talk more specifically on 2024.

Speaker 4: Then on the recovery side, I think we are, as we have progressed as expected. When we did indicate after the second quarter's earnings or in the call that there might be a delay from Q3 into Q4, but that has not really happened. So Q3 developed more or less as we had expected initially, meaning that is not as much back and loaded in this year as we had communicated back then.

And then on the recovery side I think we are.

As we have progressed as expected when we did indicate after the second quarter's earnings.

Or in the call.

That there might be a delay from Q3 into Q4, but that has not really happened. So Q3 develop develop more or less as we had expected initially.

Nika Drapp: So, Fredrik, maybe? Yeah, so then, yeah, for next year, I mean, if you look at S&P global, based on that, there will also, or the expectations is that we should also expect some even a bit limited volume growth. So, that should help the margin development, but then it is more importantly, the further improvement on the call of stability. And we do have significant inefficiencies in our operations due to the current significantly lower level of stability.

Nika Drapp: And the further this comes up to the 100 percent that Nikhil mentioned, the more it will allow us to move back or operate back at the efficiency levels that we've been used to. But of course, then, the third component is the structure initiatives that we have added on to this and both on the indirect side and the direct side that is also supported by what we're doing on automation and digitalization. Thank you.

Meaning that it's not as much back end loaded in the Crs, we had communicated back down here.

Speaker 4: And it was also more peace price recovery in the third quarter here now than Lampson, than what we had communicated in the second.

And it's also it was more.

Peace price recovery.

In the third quarter here now with a lump sum.

We had communicated in the second quarter.

Speaker 8: But does that mean when you go into next year, you'll have to renegotiate those lump thumbs?

But does that mean when you go into next year.

You'll have to renegotiate those lump sum again.

Speaker 8: that a concern as you go into next year that you might get more pushback.

Our concern as you go into next year that you might get more pushback given the labor inflation the automakers are facing.

Speaker 3: I think, already last year we also had lumped some stuff that we really negotiated this year. I think the important thing is that we have a process together with our customers how to get compensated for the inflationary components here. And we have...

I think.

Last year, we also add lump sums that we renegotiated this year I think the important thing is that.

We have I would say.

Process together with our customers how to get compensated for the.

The inflationary components here and there.

We have a.

I will say an annual process here, where we take that into account. So I think the split of what this lump sum.

Speaker 3: I was an annual process here where we take that thing to account. So I think...

Nika Drapp: And then my second question is specifically by the structural initiatives. I think earlier in the year, when you had first announced a plans for headcount reduction, I think you had mentioned at the time, a potential total of 8,000 headcount reduction. I think so far, based on the plans announced, the first steps, I think you announced maybe about 1400 or so of this 8,000. So obviously, a lot more to go. So my questions are, is 8,000 still, you know, the right number in the current environment and then what could be the timing for not just announcements of additional steps, but can any of those still benefit 2024 or would that be beyond that?

Speaker 3: The split of what is lumped some and what is more a pitch price related is connected to the type of inflation. You could say, I mean, if it's something of temper or nature, it should, of course, not need to be in the same level as we move forward. So it's a very detailed negotiation with each customer. But what you need to remember also is that this is mirroring what we have with our suppliers. So we have a...

What is more price related is connected to the type of inflation.

You could say I mean, if it's something of temporary in nature.

It should should of course not need to be in the same level.

As we move forward so.

Yes.

Very detailed negotiation with each customer, but what you need to remember also is that this is mirroring what we have with our suppliers. So we have.

Speaker 3: a fair amount of land sums paid to our supply base as well. So we balance these two sides of the business here, against the charger here to make sure that we have a good cost structure and a flexible cost structure.

A fair amount of lump sums paid to our supplier base as well. So we balance these two sides of the business here against the charter here to make sure that we have a good cost structure and a flexible cost structure.

Nika Drapp: Yeah, so we did announce 8,000, but we also split that into two groups. It was 2000 of what we call indirect or as a salary employees and then 6000 on the direct side. The direct side, the 6000 is very much connected to what we just talked about before. So it is also based on that we come back or that the stability levels on the call of also support, that. And then we should be able to come back to the regular type of productivity machine, as we have been operating at, which would then allow us to take out 6,000 people with the volumes of end of March as the basis for that number.

Speaker 8: to offset any changes there. But for me, I feel very comfortable with the way we get compensated here. And as long as we are in inflation environment, this will be an ordinary course of business to negotiate with our customers on an early basis for this type of costs. Got it. All right, thanks for taking my question.

To offset and the changes there but.

For me I feel very comfortable with the way, we get compensated here and as long as we are in an inflationary environment. This will be.

Ordinary course of business to negotiate with our customers on an early basis for these type of costs.

Got it alright, thanks for taking my questions.

Thank you.

We will now take the next question.

Speaker 5: one moment please. From the line of Matthias Holmberg from the MB markets please go ahead.

One moment, please from the line of Mathias Hornbeck from Dnb markets. Please go ahead.

Nika Drapp: And that is progressing. Then on the 2,000, yeah, we have announced so far 1,400 of which 300 were direct. So of the 2,000 we have announced 1,100. And also the savings associated with that. So there's more to come, but we have so far progressed on more than half of the 2,000. And also cost wise of what we've taken, also more than half has been booked to a wedding. And you can also see now in the third quarter that our head count is down by 400 employees on the indirect side. So yes, some of those activities are already in place. Thank you very much. Thank you.

Operator: We will now take the next question.

Speaker 9: Great, thank you. First I would just like to clarify on the tax rate given that it's...

Great. Thank you.

First I would just like to clarify on the tax rate given that it.

Speaker 9: material impact on the net profit going forward. So in order to get to the 20% for the full year, given that you've had sort of a bit above 30% here today.

I'd like to take quite a material impact on the net profit going forward. So in order to get to 20% for the full year.

Given that you've had sort of a bit above 30% year to date.

Speaker 9: Am I correct to assume that you're paying basically zero tax in Q4? And then also on that topic, the 25 to 30% that you see, there's a new normalized tax rate going forward, quite wide range and also significant below, and then the 32% divended a post. Could you specify it perhaps a little bit more than that? Or is there any reason why you're given such a wide range?

Am I correct to assume that Youre paying basically zero tax in Q4, and then also on that topic, the 25% to 30% that you see the rest of the new normalized tax rate going forward quite wide range and also significantly lower than the 32% you've had the deposits could you specify it perhaps a little bit more than that or is there any reason why why.

You have given such a wide range. Thank you.

Speaker 4: Yeah, so yeah, you're right. I mean, we're taking down the guidance here for the tax from 32% to around 20%. This is due to the ongoing, very significant reorganization of those global functions and our European operations, which is expected to lead to a reduced tax rate in this year, which is also very much associated with the ongoing restructuring.

Yes, so yes, you're right I mean, we were taking down the guidance here for the taxes of 32% to around 20%.

This is due to the ongoing very significant reorganization of both global functions and our European operations, which is expected to lead to a reduced tax rate in this year, which is also very much associated with the ongoing restructuring.

Colin Langan: From the line of calling, Langan from Wells Fargo, please go ahead. Oh, great. Thanks for taking my questions.

Nika Drapp: You know, in the last slide, you noted inflationary pressure and the timing of customer compensation is sort of the big headwind into next year. I mean, what are the new inflationary costs that we should be thinking about into next year? Or is it that you're getting a little bit more pushback on getting recoveries? Is that the other part of the issue? And then in general, can you just remind us how much of what you've already gotten recovered is in the peace price versus what would actually need to get maybe renegotiated at the start and next year?

Speaker 4: But it's also important this is not cash effective in this year. So it will not affect the taxes paid in this year.

But it's also important this is not cash effective in this year.

So it will not affect the taxes paid in this year.

Speaker 4: Then going forward, we do expect, as we said, the normalize tax rates to be then around 25 to 30% from 2024 onwards.

Then going forward.

We do expect as we said that the normalized tax rate to be around 25% to 30% from.

From 2024 onwards.

Yes.

Speaker 4: I think using the midpoint of that range is not a bad assumption at the moment. And this would also be also impacting the tax, the tax is paid also from 2024 onwards.

Using the midpoint of that range is not a bad assumption at the moment and this will then also be.

Nika Drapp: Yeah. So on the first, I mean, we use the same macro economic forecast that you have to your hand and available. So we do expect that inflation levels should come down as they are right now and they should be lower next year than this year. But we do also expect that special labor will have a higher inflation level next year than what it has had as historical averages, but most likely less than what we've had in this year.

Also impacting the tax taxes paid also from 'twenty to 'twenty four onwards.

Speaker 9: And should we view this sort of as a permanent steady state going forward in terms of tax rates?

And should we view this as sort of as a permanent steady state going forward in terms of tax rate.

Yes, you can yes, great.

Speaker 9: Thank you. And a final question from me. You mentioned the potential recall here of the ARC inflators. I'm just curious.

Great. Thank you.

Our final question from me you mentioned the <unk>.

Potential recall here of the ERC insulators.

I'm just curious.

Speaker 9: Or you as a company liable for the inflators, or CS produced, or how would that work in a potential record?

You asked the company liable for.

Nika Drapp: But we'll come back to that when we talk more specifically on 2024. Then on the recovery side, I think we are as we have progressed as expected when we did indicate after the second quarter's earnings or in the call that there might be a delay from Q3 into Q4, but that has not really happened. So Q3 developed more or less as we had expected initially, meaning that is not as much back and loaded in this year as we had communicated back then.

She has produced or how would that work in a potential re concentration.

Speaker 3: I mean, ARC is, I mean, they are competitors to us. I mean, that's their exposure. Then, of course, our part of that, as mentioned here, is where we have purchased these components from them. So we are also a customer to them in this regard. And

I mean.

C is.

Is this.

I mean, they are a competitor to us I mean, that's their exposure then of course our.

Part of that is mentioned here.

Is.

Is where we have.

Purchase these components from from them.

So we are also a customer to them in this regard.

Nika Drapp: And it's also, it was more peace price recovery in the third quarter here now than lump sum than what we had communicated in the second quarter. But does that mean when you go into next year, you'll have to renegotiate those lump sums again? And is that a concern as you go into next year that you might get more pushed back? given the labor inflation, the automakers are facing. I think already last year we also had lumped some steps really negotiated this year.

The the portion that is related to two hour to live more deals.

Speaker 3: the portion that is related to out-to-live modules.

Speaker 3: As far as we understand and see here, there's not been any cases connected to that volume here. So we are of course following this development here.

As far as we understand and see here that has not been any cases connected to that volume here.

So we of course following this development here.

Very closely but we see this also.

Speaker 3: very closely but we see this also clearly as something we can support our customers with in case of over-requel but where they need to have replacement but we are not there yet.

Clearly is something we can support our customers.

In case of a recall, but what I need to have replacement, but we're not there yet.

Nika Drapp: I think the important thing is that we have a process together with our customers how to get compensated for the inflationary components here and we have an annual process here where we take that into account. I think the split of what is lumped some and what is more a pitch price related is connected to the type of inflation. You could say I mean if it's something of temper nature it should of course not need to be in the same level as we move forward.

Speaker 9: And do you believe that you could get compensation in a potential recall from ARC or would you have to sort of cover that cost yourself?

And do you believe that you could get compensation and a potential recall from <unk> or would you have to sort of cover that cost yourself.

If if there would be such a situation and our expectations of course is that this is on arc's accounts for sure that's clear. Thank you.

Speaker 7: If there would be such a situation, our expectations of course is that this is on ARC's account. Push on. Thank you.

Thank you.

We will now take the next question.

From the line of Jairam Nathan from Daiwa. Please go ahead.

Speaker 5: from the line of Jairam Nathan from Dive-Out. Please go ahead.

Hi, Thanks, Thanks for taking my question.

Speaker 10: Hi, thanks, thanks, take my question. I was just wanted to go to the

Nika Drapp: So it's a very detailed negotiation with each customer but what you need to remember also is that this is mirroring what we have with our suppliers. So we have a far amount of lumped sums paid to our supplier base as well. So we balance these two sides of the business here against the charger here to make sure that we have a good cost structure and flexible cost structure to offset any changes there.

Just wanted to go to the.

Speaker 10: So it looks like the outperformance in North American Europe have declined quite a bit from the staff.

Elliot.

<unk>.

Performance slide.

It looks like the outperformance in North America, and Europe have declined quite a bit from the first half.

And what.

What are the main reasons for that and how should we think about the regional outperformance for next year.

Speaker 3: I think if you go back in time, you can see that this number is a little bit volatile, but the direction is clearly that we are continuing to grow our market share in respect to the regions you talk about here. And of course, in a single court, you can have certain mixed effects. So I shouldn't read in too much to that. I think we are

No I think if you go back in time, you can see that this number is.

A little bit volatile, but.

Nika Drapp: But for me I feel very comfortable with the way we get compensated here and as long as we are in the inflation environment this will be ordinary costs of business to negotiate with our customers on an hourly basis for this type of costs. Got it. All right thanks for taking my question. Thank you. We will now take the next question.

The direction is clear that we are continuing to grow our market share in respective <unk>.

And as you talked about here.

Of course, you're in a single quarter, you can have certain mix effects. So I shouldnt read in too much to that.

I think we are steadily moving towards the market share of around 45% that we have communicated earlier on.

Speaker 3: then moving towards the market share around 45% that we have communicated earlier on. And yeah, I think we have a...

Yes, I think we have good activity level also to backfill our order book to support that.

Speaker 3: good activity level also to backfill our audiobook.

Matthias Holmberg: One moment please. From the line of Matthias Holmberg from DMB markets please go ahead. Great thank you.

Speaker 10: Thanks, and just finally on the share buybacks and that too on that levels. Given the higher interest rate environment and maybe for longer, does that change your thinking on the...

Okay. Thanks, and just finally on the share buybacks and debt.

Fredrik Westin: First of which is like to clarify on the tax rate given that it like to have quite material impact on the net profit going forward. So in order to get to the 20% for the full year given that you've had sort of a bit above 30% here to date am I correct assume that you're paying basically zero tax in Q4 and then also on that topic the 25 to 30% that you see sort of as a new normalized tax rate going forward quite wide range and also significant to lower than the 32% if I'm not a post could you specify it perhaps a little bit more than that or is there any reason why why you're given such a wide range.

Debt levels, given the higher interest rate environment, and maybe for longer does that change your thinking on the debt levels.

And.

Buyback funding.

I think we believe that with the good cash flow generating operations, we have today it support well the buyback program.

Speaker 11: I think we believe that with the good cash flow generating operations we have today, it supports well the buyback program that we are committed to here. And I don't see this being something that would affect our way forward here. OK, great, thank you.

We are committed to here and.

I don't see this being.

Something that would affect our <unk>.

Our way forward here.

Okay, great. Thank you.

Thank you.

Fredrik Westin: Thank you. Yeah so yeah you're right maybe we're taking down the the guidance here for the tax from 32% to around 20%. This is due to the ongoing very significant reorganization of both global functions and our European operations which is expected to lead to a reduced tax rate in this year which is also very much associated with the ongoing restructuring that but it's also important this is not cash effective in this year so it will not affect the taxes paid in this year.

Okay.

We will now take the next question.

Speaker 5: from the line of Julia Pescatore from BMPP Exxon. Please go ahead.

From the line of Giulio Pescatore from BNP Exane. Please go ahead.

Speaker 12: Thanks for picking my question. The first one on the guidance just quickly, I just trying to understand exactly what assumptions are you.

Hi, Thanks for taking my question. The first one on the guidance just quickly I'm just trying to understand exactly what assumptions are you.

Speaker 12: incorporating with regards to the strike. So you said you are in line with IHS, does that mean that you expect the strike to continue until the end of November ? I think that's what SMPs currently forecasting. And is that, does that mean six million per week until the end of November ? Is that what you are including in the 1.5 to 2 percent margin improvement? Thank you for and maybe if you can give us also an indication of what operating leverage or drop through on that revenue are you incorporating in that?

Incorporating with regards to the strike. So you said you are in line with IHS does that mean that you expect the strike to continue until the end of November I think thats, what S&P currently forecasting and.

Fredrik Westin: Then going forward we do expect as we said the normalized tax rates to be then around 25 to 30% from 20 to 24 onward. Yeah. I think using the midpoint of that range is not a bad assumption at the moment and this would then also be also impacting the tax taxes paid also from 2024 onwards. And should we view this sort of as a permanent steady state going forward in terms of tax rate? Yes, you can. Yeah.

Is that does that mean 6 million per week until the end of November is that what you are including in the one 5% to 2% margin improvement in Q4, and maybe if you can give us an indication of what operating leverage or drop through on that lost revenue.

Matthias Holmberg: Great. Thank you.

Operating in the assumption thank you.

Yes, so the short answer to your first question is yes. So it is until the end of November and from what we can tell right now it is around 6 million per week that is the impact on our topline of course this can change daily.

Speaker 4: Yeah, so the short answer to your first question is yes. So it is until the end of November and from what we can tell right now, it is around six million per week that is the impact on our top line. Of course, this can change daily.

Nika Drapp: And find a question for me. You mentioned the potential recall here of the ARC. The inflators are you as a company liable for the inflators ARCS produced or how would that work in a potential recall situation? I mean, ARC is, I mean, they are competitors to us. I mean, that's their exposure. Then of course, our part of that is mentioned here is where we have purchased these components from, from them. And so we are also a customer to them in this regard.

Speaker 4: And on the drop through here, I mean, it remains to be seen what that will be at the end of the quarter.

Nika Drapp: And the portion that is related to to how to live modules as far as we understand and see here that's not been any cases connected to that volume here. And so we of course following this development here. Very closely, but we see this also clearly as something we can support our customers with in case of over recall, but where they need to have replacement, but we are not there yet. And do you believe that you could get compensation and a potential recall from ARC or would you have to sort of cover that cost yourself? If there would be such a situation, our expectations of course is that this is on ARC's accounts for sure. That's true. Thank you.

And on the drop through year I mean, it remains to be seen what that will be at the end of the of.

For the quarter.

<unk>.

Speaker 4: As Mika mentioned here before, we do see that at the moment, the volumes seem to be picked up, also to try some of the competitors. They are not unionized by UAW, so it's still a very fluid environment here that we need to monitor throughout the court.

Sneak convention here before we do see that at the moment.

The volumes seem to be picked up positive by some other competitors.

Not unionized by UAW, So it's still a very fluid environment.

Environment here that we need to monitor throughout the quarter.

Okay. Thank you and you're also not assuming a big pick up after the end of the strikes a big pickup in volumes.

Speaker 12: Okay, thank you. And you're also not assuming a big pick up after the end of the strikes, a big pick up in volume.

Speaker 4: I mean, I think some pick up, if it goes through into basically Thanksgiving, and then pick up then to recover some with that volume in the fourth quarter, but again, it's very fluid and it remains to be seen or how the overall volume's also developed.

I think some some pickup.

Goes through into.

Basically Thanksgiving.

And then a pickup then to recover some of that volume in the fourth quarter, but again, it's very fluid and it remains to be seen there.

The overall volume source develop.

Speaker 12: Okay, thank you. Then the second question on the article.

Okay. Thank you and then the second question on the on the article.

Is it fair to say that.

Speaker 12: Is it fair to say that you stand to benefit more than way more than you stand to lose out of this recall? I mean, both in terms of the potential replacement impact and in terms of the long term implication, where it has to pricing if one of your competitors was to suffer. And if that's the first question and the second part is, can you maybe help us?

Tend to benefit more than way more than you stand to lose out of this recall I mean, both in terms of the potential replacement impact in terms of the long term implication where he got the pricing at one of your competitors.

Suffer.

The first question on the second part is can you maybe help us.

Speaker 12: quantified a potential opportunity for you on the replacement side because it feels like it's very significant. It's over the course of 10 years of course, but let's say that the 52 million recall does materialize. I mean, it's a fact to say that you might have a 50% share of that recall and you know can you just help us understand the opportunity here if recall does go into effect.

Quantify the potential opportunity for you on the replacement side because it feels like it's very significantly over the course of 10 years of course, but let's say that.

$52 million recall does materialize I mean is it fair.

To say that you might have 50% share of that recall and can you just help us understand the opportunity here if I recall does go into effect I.

Speaker 11: I think it's too premature to speculate in that. I mean, as we all know, it's not in that stage yet. And there is work with Nitsa and of course, ARC and the customer stand at this ongoing. So we are standing by and...

I think you said.

So pretty mature to speculate in that I mean.

Jairam Nathan: We will now take the next question from the line of Jairam Nathan from diver. Please go ahead. Hi, thanks. Thanks for taking my question. I was just wanted to go to the, you know, LAP out for performance slide. So it looks like the outperformance in North American Europe have declined quite a bit from the staff.

We all know it's not in that stage yet.

There is.

Work.

And of course, <unk> and the customer side that is ongoing so.

We are standing by and.

Speaker 13: willing to support our customers if needed, but it's too early to start to talk about any numbers so potential and so forth in this. We just have to wait and see here. Okay, I'm just good. Thank you.

Willing to support our customers if needed, but it's too early to tell.

<unk> started to talk about any numbers, so potentials and so forth and this we just have to wait and see here.

Nika Drapp: And what are the main reasons for that and how should we think about the regional outperformance for next year? No, I think if you go back in time, you can see that this number is a little bit volatile, but the direction is clear that we are continuing to grow our market general respective. Vigeness, you talked about here and of course in a single quarter, you can have certain mixed effects. So I shouldn't read in too much to that. I think we are steadily moving towards the market share around 45% that we have communicated earlier on. And I think we have a good activity level also to backfill our order book here to support.

Okay understood. Okay. Thank you.

Thank you.

Nika Drapp: Okay, thanks.

We will now take the next question.

Speaker 5: from the line of Agneska, Vilella from Northeer, Plysskoa Head.

From the line of Agnieszka <unk> from Nordea. Please go ahead.

Speaker 14: Perfect, thank you. So starting with the EBIT bridge, I noticed that probably for the first time in nine quarters you reported positive impacts from raw materials, a moderate one, but still positive. So could you please maybe talk about some deflation that you see in your cost input and what it is related to? That's my first question.

Perfect. Thank you so starting with the EBIT Bridge I know, that's probably for the first time in nine quarters reported positive impacts from raw materials.

Moderate but still positive.

Could you. Please maybe talk about some deflation that youre seeing in your cost inputs.

Is this related to that is my first question.

Speaker 4: Yeah, correct. It's the first time in a long time here that we see positive effect of raw materials. We have guided for a flat development for the full year, which means that we should see an even...

Yes, correct. It's the first time in a long time that we see a positive effect of raw materials, we have guided for a flat development for the full year, which means that we should see.

Nika Drapp: And just finally on the shared buybacks and dead to dead levels, given the higher interest rate environment and maybe for longer, the third change you're thinking on the dead levels and buyback funding. Thanks. I think we believe that with the good cash flow generating operations we have today, it supports well the buyback program that we are committed to here and I don't see this being something that would affect our way forward here.

Even stronger positive development also in the fourth quarter. So.

Speaker 4: stronger positive development also in the fourth quarter. So yes, we do see that the materials prices are coming, or costs are coming down for us.

So yes, we do see that raw materials prices are coming or costs are coming down for us.

Speaker 4: So far it's been mainly driven by non-therus materials, especially magnesium that has come down from the peaks but also steam has been favorable.

Nika Drapp: Okay, great. Thank you.

So far it's been mainly driven by non ferrous materials, especially magnesium.

That has come down from the peaks, but also steel has been favorable.

Speaker 4: but we have seen still some increases this year, especially on the textile side, but we also expect that this should be more favorable going forward.

But we have seen still some increases this year, especially on the textile side, but we also expect that there should be more favorable going forward.

Speaker 4: Then on what this means for next year, I mean, as we said before, we have this six to nine months time lag between where both prices or indices are moving until that manifests itself in our cost structure. So we are monitoring very closely what that means, but we'll talk more specifically about that then with the guidance for next year.

Then on.

This means for next year.

As we've said before I mean, we have the six to nine months time lag between.

Giulio Pescatore: We will now take the next question from the line of Giulio Pescatore from BMPP Exxon. Please go ahead. Thanks for taking my question. The first one on the guidance just quickly. I just trying to understand exactly what assumptions are you incorporating with regards to the strike. So you said you are in line with IHS, does that mean that you expect the strike to continue until the end of November? I think that's what SMP is currently forecasting.

We're at a spot prices or indices are moving until that manifests itself in our cost structure.

So we are monitoring very closely what that means, but we'll talk more specifically about that but the guidance for next year.

Giulio Pescatore: And is that, does that mean six million per week until the end of November? Is that what you are including in the 1.5 to 2% margin improvement? Thank you for. And maybe if you can give us also an indication of what operating leverage or drop through on that lost revenue, are you incorporating in the assumption? Thank you. Yeah, so the short answer to your first question is yes. So it is until the end of November.

Okay, great. Thank you and just understand a follow up on that.

Speaker 14: Great, thank you. Just to understand the flow up on that.

Speaker 14: Will your customers require them price decreases because of lower input costs for you or how should we think about it?

Will your customers, who require then price decreases because of lower input cost for you or how should we think about it.

Yes, we do expect that we will then also give some of that those price decreases back to our customers and then we have a higher level of pass through clauses, where the customers. Now. So you asked about raw material cost come down. We then also adjust our prices accordingly.

Speaker 4: Yeah, we do expect that we will then also give some of that. Those price decreases back to our customers. And then we have a higher level of pass through closest with the customers now. So yes, when the raw material costs come down, we then also adjust our prices accordingly. But I mean, that should have a favorable impact on the margin because it was margin dilutive on the way up. And then it should be somewhat a creative on the way down.

But I mean that should have a favorable impact on the margin because it was margin dilutive on the way up and then it should be somewhat accretive on the way down.

Speaker 14: Perfect, thank you. And then my second question, I think Mike you mentioned that the car production in Europe so far is secured by backlog, but you see demand abating abating also order backlog shrinking going into 2024 and if color you could provide to us when you speak to your customers in Europe in regards to their production planning

Perfect. Thank you and then my second question I think Michael you mentioned that the car production in Europe . So far is secured by backlog.

Giulio Pescatore: And from what we can tell right now, it is around six million per week that is the impact on our top line. Of course, this can change daily. And on the drop through here, I mean, it remains to be seen what that will be at the end of the quarter. SMP can mention here before we do see that at the moment, the volumes seem to be picked up, also to find some of the competitors. They are not unionized by UAW. So it's still a very fluid environment here that we need to monitor throughout the quarter.

You see demand abating a bit.

Also are there backlog is shrinking going into 2024 and the color you could provide to us when you stick to your customers in Europe in regards to their production planning.

Yes, I think.

Speaker 11: Yeah, I think, you know, I mean, the problem we have here is that the

Yeah.

The problem, we have here is that the.

Even if we have visibility.

Speaker 11: Even if we have visibility, the pickups is deteriorating, so it's in a short.

The pickup Suez.

The deteriorating so it's in the short.

Speaker 11: So our perspective where we have the challenges here, I mean within the week here, otherwise I think when it comes to the overall production planning, that is nothing indicating that we are looking at the weaker European market. I think what is happening is, of course, that after all these years of

So our perspective, where we have the challenges within the week or otherwise I think when it comes to the overall production planning there is nothing indicating that we are looking at the weak European market.

Giulio Pescatore: Okay, thank you. And you're also not assuming a big pick up after the end of the strike, a big pick up in volumes. Yeah, could mean I think some pick up if it goes through into basically things giving. And then pick up then to recover some with that volume in the fourth quarter, but again, it's very fluid and it remains to be seen here how the overall volumes also develop.

Giulio Pescatore: Okay, thank you.

I think what is happening is of course that.

After all this.

Years of.

Backlog buildup that is now normalizing.

Speaker 13: backlog build up that is now normalizing. So I would say from a consumer point of view we have nothing indicating that we should have lower volume due to that. I think we are seeing more normalization of backlog and volatility coming from the supply and component issues that we talked about earlier. So that's otherwise we don't see anything. Thank you.

So so I would say from a consumer point of view, we have nothing indicating that we should have lower volume due to that.

Nika Drapp: Then the second question on the article. Is it fair to say that for you stand to benefit more than the way more than you stand to lose out of this recall? I mean, both in terms of the potential replacement impact and in terms of the long term implication, where regards to pricing, if one of your competitors. What's the suffer and that's the first part of question and the second part is, can you maybe help us quantify the potential opportunity for you on the replacement side because it feels like it's very significant.

We are seeing.

More normalization on backlog and volatility coming from the supply.

Component issues that we have talked about doing this.

To us we don't see anything.

Thank you.

Thanks.

Thank you.

Okay.

We will now take the next question.

Nika Drapp: It's over the course of 10 years, of course, but let's say that, you know, the 52 million recall does materialize. I mean, it's a fact to say that you might have 50% share of that recall and you can just help us understand the opportunity here if recall does go into effect. I think it's too premature to speculate in that. I mean, as we all know, it's not in that stage yet. And there is work with NITSA and of course ARC and the customer said that it's ongoing. So we are standing by and willing to support our customers if needed, but it's too early to start to talk about any numbers or potentials and so forth in this. We just have to wait.

From the line of Bruce <unk> from Handelsbanken. Please go ahead.

Speaker 5: from the line of hump, and gala from handless wankin, please go ahead.

Nika Drapp: Thank you.

Thank you very much two questions for me.

Speaker 15: Thank you very much. Two questions from me. First, Mike, you could maybe talk to you about the development in China with the local Williams. Quite a few growth there. How much is this driven by a battery-neclic car coming to the market and exports on how much is driven by, I guess, more competition in China on being more safe?

First Mike if you could maybe talk a little bit about the development in China with local Oems.

And of course as to growth how much of it is driven by.

Battery electric cars coming into the market then.

And exports and how much is driven by.

Yes.

More competition in China, Hong Kong being more safe.

Speaker 15: Second I go ahead and epison take I.

Yes.

Okay.

So I'll take the second.

Yes quickly on.

Speaker 11: Oh yeah, quickly on the phone. I don't think I have a number for it to give you the breakdown what is driven by water, but...

No.

I don't think I have a number for it to give you the breakdown what is driven by work there, but as I said I mean, we see.

Speaker 11: As you said, I mean, we see export growth for Chinese OEM.

Export growth.

Chinese OEM.

Speaker 11: increasing quite quite significantly to mainly China, Asian countries, you could say, but also to Europe there.

Increasing quite quite significantly.

So.

Agnieszka Vilela: We will now take the next question from the line of Agnieszka Vilela from Nordea. Please go ahead. Perfect. Thank you. Starting with the EBIT bridge, I note that probably for the first time in nine quarters you reported positive impacts from raw materials, a moderate one but still positive. Could you please maybe talk about some deflation that you see in your cost input and what it is related to? That's my first question.

Mainly in China.

Asian countries, you could say, but also to Europe there.

Speaker 11: And also the overall ambition from the Chinese OEMs here to increase the safety content. And I would say the dynamic market here were their requests for new...

And also.

The overall ambition from the Chinese Oems here to increase the safety content and I would say quite dynamic dynamic market here where were there.

Requests for new innovations.

Speaker 11: to get with us to improve content.

Together with us to improve.

Content is.

It's a great growth opportunity for us here and good.

Speaker 11: a great opportunity for us here and good collaboration here with our Chinese OEMs here. So a strong position for us in China.

Good collaboration here with our Chinese Oems here so.

Agnieszka Vilela: Correct. It's the first time in a long time here that we see positive effect of raw materials. We have guided for a flat development for the full year, which means that we should see an even stronger positive development also in the fourth quarter. So yes, we do see that raw materials prices are coming or costs are coming down for us. So far it's been mainly driven by non-ferrous materials, especially magnesium that has come down from the peaks, but also steel has been favorable.

Long position for us in China altogether there.

Fair enough.

Speaker 11: for a turn up. Maybe a lot of customers are meant for me. In this process of the optimization and digitalization of the production, would it be possible for you to maybe just come back on where you are in that process? How much? How far have you come in a month?

Last question for me.

In this process.

My assumption and the utilization of the production would it be possible for you to.

Maybe I should ask him back on where you are in that process, how much how far have you come and how much left.

Speaker 11: I think we invested in here in the, we had the picture or slide there showing, I don't have it in front of me here now, but, but there you saw that we have come, can, uh, in sort of, of our product families here, but still, uh, let of opportunity to live.

Yes, I think.

In the Investor day here in June .

<unk>.

Slide.

Showing I don't have it in front of me here now but.

Agnieszka Vilela: But we have seen still some increases this year, especially on the textile side, but we also expect that this should be more favorable going forward. Then on what this means for next year, as we said before, we have this six to nine months time lag between where both prices or indices are moving until that manifests itself in our cost structure. So we are monitoring very closely what that means, but we'll talk more specifically about that then with the guidance for next year.

You saw that we have come.

The amount.

In certain of our product families here, but still.

Lots of opportunities left.

Speaker 3: So, I mean, we have plenty of opportunities to continue this year. And I think in some of the product families, maybe we are 30%, 40% of the potential. So, yeah, plenty of room to capitalize on optimization and digitalization.

So I mean, we have plenty of opportunities to continue this year on year I think in some of the.

Product families. Maybe we are in a 30 or 40%.

The potential so plenty of room to two <unk>.

Capitalize on on optimization digitalization going forward.

Speaker 13: But I can refer to that slide in the presentation that's from the yesterday that I can see more detail. Thank you.

Can I referred to that.

A slide in the presentation deck on the Investor day that I can see more detailed.

Agnieszka Vilela: Great. Thank you. Just to understand a follow up on that. Will your customers require them price decreases because of lower input costs for you or how should we think about it? Yeah, we do expect that we will then also give some of that those price decreases back to our customers. And then we have a higher level of path through closest with the customers now. So yes, when raw material costs come down, we then also just are prices accordingly.

Thank you.

Thank you.

Thank you.

Okay.

We will now take the next question.

From the line of Rod Lache from Wolfe Research. Please go ahead.

Speaker 5: from the line of road, large from wall research. Please go ahead.

Hi, everybody.

Speaker 16: Hi, everybody. I'd like to understand what your Q4 implied margin, your guidance of 11 and a half to 12%.

I I'd like to understand.

Agnieszka Vilela: But I mean, that should have a favorable impact on the margin because it was margin diluted on the way up, and then it should be somewhat a creative on the way down. Perfect. Thank you. And then my second question, I think Michael, you mentioned that the car production in Europe so far is secured by backlog, but you see demand abating also order backlogs shrinking going into 2024. And if the color you could provide to us when you speak to your customers in Europe in regards to their production planning.

What your Q4 implied margin.

Guidance of 11, 5% to 12% suggests for the run rate of margin if we adjusted for seasonality.

Speaker 16: just for the run rate of margin if we adjusted for seasonality. Because we know that Q4 is typically, I think at least 100 basis points above average due to seasonality of recoveries. Maybe a few other factors. Is that the case? Is that roughly the magnitude?

We know that Q4 is typically I think at least 100 basis points above average due to seasonality recoveries, maybe a few other factors is that the case.

Is that roughly the magnitude.

Speaker 16: that we should be thinking about it, and if we're thinking about a run rate. And then you also, you reiterated the 12% margin objective at an 85 million unit, LVP as long as it's stable. So S&P is already there.

That we should be thinking about it if we're thinking about a run rate and then.

You also.

You reiterated the 12% margin objective at an $85 million.

Agnieszka Vilela: Yeah, I think you know, I mean, the problem we have here is that even if we have visibility, the pickups is deteriorating, so it's in a short term perspective where we have the challenges. I mean, within the week here, otherwise, I think when it comes to the overall production planning, that is nothing indicating that we are looking at the weaker European market. I think what is happening is, of course, that after all these years of.

As long as it's stable.

S&P has already there could you quantify what the magnitude is of that inefficiency.

Speaker 16: You quantify what the magnitude is of the inefficient.

Speaker 16: due to instability that you're experiencing.

Due to instability that youre that.

You are experiencing right now.

Speaker 4: Yeah, Rod, so the seasonality in the Q4 is not different this year than in other years. So it's around 110 basis points that we also expect this year, and then most of that is related to the engineering income, but it's seasonally higher in the fourth quarter. The rest of the margining to increase is from the structural cost initiatives we're putting in place and then the further development on the commercial recovery.

Yeah, Rob so the.

The seasonality in Q4 is not different this year than other years.

It's around 100 110 basis points that we also expect this year and then most of that is related to the engineering income.

Seasonally higher in the fourth quarter.

The rest of the margin increase is some of the structural cost initiatives, we're putting in place and then the further.

Agnieszka Vilela: Backlog build up. That is now normalizing. So I would say from a consumer point of view, we have nothing indicating that we should have lower volume due to that. I think we are seeing more normalization of backlog and volatility coming from the supply and component issues that we talked about earlier. So that, otherwise, we don't see anything. Thank you. We will now take the next question.

Development on the commercial recoveries with our customers.

Speaker 4: And then on to the the margin walk up. Yeah, I think we have to come back on that. It nothing has changed from what we have said earlier as the investor day or in other discussions. It is the same logic that still applies to what we see.

And then on.

Okay.

The margin walk up.

I think we have to come back on that.

Nothing has changed from what we have said earlier.

The Investor day or.

In other discussions it is.

This is the same logic that still applies to what we've said before.

Speaker 16: Yeah, I understand. I was just hoping you might just give us a sense of the burden that auto leave is incurring right now from that inefficient.

Yeah, I understand I was just hoping you might just give us a sense of the burden that auto leave us.

Is incurring right now from that inefficiency.

Nika Drapp: From the line of Hampus Engellau from Handels Wanken, please go ahead. Thank you very much to questions from me. First, Michael, if you could maybe talk a little bit about the development in China with the local VMs, of course, has to grow. How much is this driven by battery and electric cars coming into the market and exports on how much is driven by, I guess, more competition in China on being more safe.

I don't think we've given a number before and I don't want to do that even now.

Speaker 4: I don't think we've given a number before and I don't want to do that either now, but but I've got to make it said before is here is that we actually saw that in some parts of the world, especially Europe , the call of reliability went backwards in Q3. Yeah, it was in a good track throughout the year and in say all other regions it continued to improve. But unfortunately, Europe it went backwards.

Okay.

We said before.

We actually saw that in some parts of the world, especially in Europe .

The call of our liability went backwards in Q3, yes.

And a good track throughout the year.

All other regions continued to improve.

But unfortunately European went backwards.

Speaker 4: And then it has very, very different types of how that manifests itself in order in efficiency. So it's very difficult to give a number. That's why I want to like to refrain.

And then it has very very different types of how that manifests itself in our inefficiency. So it's very difficult to give a number that's why I want to would like to refrain from it.

Speaker 16: And just lastly, if the recall happens as NITSA suggesting, it obviously makes sense that AutoLeave would participate in some way supporting your customers with replacement modules. Could you just at a very high level talk about what typically happens?

Nika Drapp: I don't think I have a number for it to give you the breakdown of what is driven by what there, but as I said, we see export growth for Chinese OEM increasing quite significantly to mainly China, Asian countries, you could say, but also to Europe there. Also, the overall ambition from the Chinese OEMs here to increase the safety content, and I would say quite dynamic market here where there are requests for new innovations to get it with us to improve content is a great growth opportunity for us here and good collaboration here with our Chinese OEMs here. So strong position for us in China all together there.

And just lastly, if if the recall happens as knits are suggesting it obviously makes sense that that auto.

Auto leaf wood.

Participate in some way supporting your customers with replacement.

Modules.

Could you just at a very high level talk about what <unk>.

Typically happens in advance of something like that do your customers ask for engineering work kind of ahead of time.

Speaker 16: in advance of something like that. Do your customers ask for engineering work kind of ahead of time? If this were to happen, what would you guess would be the earliest that you could accommodate the industry? And how long would the process of supporting the industry to do something of that magnitude take?

If this were to happen what would you guess would be the earliest that you could accommodate the industry and how long would the.

The process of supporting the industry to do something of that magnitude take.

I think it's I mean, it's.

Speaker 3: I mean, the process would be that the customer engaged in request us to quote for such an activity and of course, then work with any engineering management needed from our side. I mean, the specific details are difficult to answer because it's unique by customer and it's depending on our own.

To start with I mean, the process would be that we.

Customer engaged in.

In our request us to quote four four.

As such this option activity in Boston work with any engineering adjustment needed from our side.

Nika Drapp: Maybe a lot of questions from me is in this process of the optimization and digitalization of the production, would it be possible for you to maybe transfer back on where you are in that process? How far have you come and how much is left? Yeah, I think we invested in here and we had the picture or slide there showing, I don't have in front of me here now, but there you saw that we have come far among in certain of our product families here, but still a lot of opportunities left.

I mean, the specific details there it's difficult to answer because it is unique by by customer and its depending on on our own.

Portfolio product portfolio here and what needs to be done there. So so that's a unique case, but I think we have shown in the past that we are capable of.

Speaker 11: product portfolio here and what we've done there. So that's the unique case. But I think we have shown in the past that we are capable of supporting our customers in quite significant recall situations there.

Supporting our customers in quite significant recall situations there so.

Speaker 11: I expect us to be able to do that fairly quick here. If this would happen

<unk> us to be able to do that fairly quickly.

If this would happen.

Here as well.

Okay. Thank you.

Nika Drapp: So I mean, we have plenty of opportunities to continue this year and I think in some of the product families maybe we are 30-40% of the potential, so yeah, plenty of room to capitalize on optimization and digitalization. But I can refer to a slide in the presentation that's one of the best data I can see in more detail. Thank you.

Speaker 5: Thank you. I will now like to turn the conference back to Michael Bradford Pilsing remark.

Thank you I would now like to turn the conference back to Michael Bradshaw for closing remarks.

Speaker 3: Thank you, Sandra. I'm confident that we will deliver a substantial increase in sales operating cash flow and adjusted operating income in fourth quarter. We continue to advance of our structural cost reduction initiatives and we see an improving position with fast growing OEMs as well as continued gradual stabilization of supply chains.

Thank you Sandra.

I am confident that we will deliver a substantial increase in sales operating cash flow on adjusted operating income in the fourth quarter.

We continue to advance all of our structural cost reduction initiatives and we see an improving position with fast growing Oems as well as continued gradual stabilization of supply chain.

Speaker 3: This forms a strong foundation for continued strong development in the years to come.

This forms a strong foundation for continued strong development in the years to come.

Rod Lache: We will now take the next question from the line of Rod Lache from World Research. Please go ahead. Hi everybody. I'd like to understand what your Q4 implied margin, your guidance of 11 and a half to 12 percent suggests for the run rate of margin if we adjusted for seasonality because we know that Q4 is typically, I think at least a hundred basis points above average due to seasonality of recoveries. Maybe a few other factors.

Speaker 3: that the support are midterm targets. How to lead continues to focus on our vision of saving more lives, which is our most important direct contribution to sustainable society.

That does support our mid term targets ultimately continues to focus on our vision of saving more lives, which is our most important direct contribution to a sustainable society.

Speaker 3: Our fourth quarter earnings call is scheduled for Friday, January 26th, 2024.

Rod Lache: Is that the case? Is that roughly the magnitude that we should be thinking about, if we're thinking about a run rate, and then you also reiterated the 12 percent margin objective at an 85 million unit, LVP as long as it's stable. So S&P is already there. Could you quantify what the magnitude is of the inefficiency due to instability that you're experiencing right now? Yeah, Rod. So the seasonality in the Q4 is not different this year than in other years.

Our fourth quarter earnings call is scheduled for Friday January 26 2024.

Speaker 3: Thank you everyone for participating in today's call. We sincerely appreciate your continued interest in Outer League. Until next time, stay safe.

Everyone for participating in today's call. We sincerely appreciate your continued interest in ultimate until next time.

This concludes today's conference call. Thank you for participating you may now disconnect.

Speaker 5: This concludes the desk conference call. Thank you for participating. You may know this connect.

Okay.

[music].

Rod Lache: So it's around 110 basis points that we also expect this year. And then most of that is related to the engineering income, but it's seasonally higher in the fourth quarter. The rest of the margining to increase is from the structural cost and issues we're putting in place and then the further development on the commercial recoveries with our customers. And then on the margin walk up, I think we have to come back on that.

Yes.

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Rod Lache: Nothing has changed from what we have said earlier at the investor day or in other discussions. It is the same logic that still applies to what we've said before. Yeah, I understand. I was just hoping you might just give us a sense of the burden that Otto Levy is incurring right now from that inefficiency. I don't think we've given a number before. And I don't want to do that either now, but as I said before, here is that we actually saw that in some parts of the world, especially Europe, the call of reliability went backwards in Q3.

Rod Lache: Yeah. It was in a good track throughout the year and in all other regions, it continued to improve. But unfortunately, Europe went backwards. And then it has very, very different types of how that manifests itself in our inefficiency. So it's very difficult to give a number. That's why I want to like to refrain from it. Okay. And just lastly, if the recall happens as Nitz is suggesting, it obviously makes sense that that Otto Levy would participate in some way supporting your customers with replacement modules.

Rod Lache: Could you just at a very high level talk about what typically happens in advance of something like that? Do your customers ask for engineering work kind of ahead of time? If this were to happen, what would you guess would be the earliest that you could accommodate the industry and how long would the process of supporting the industry to do something of that magnitude? to take? I think it's, I mean, to start with, I mean, the process would be that we, the customer engaged in, in a request asked to, to, to quote for, for such, such an activity and, and for some work with any engineering management needed from our side.

Speaker 17: And.

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Rod Lache: I mean, the specific details are, it's difficult to answer because it's unique by, by customer and it's depending on, on, on our own, product portfolio here and what needs to be done there. So, so that's the unique case. But I think we, we have shown in the past that we are capable of supporting our customers in quite significant, recall situations there. So, I expect us to be able to do that fairly quick, if this would happen here as well. Thank you.

Nika Drapp: I will now like to turn the conference back to Michael Bradford Pilsen remarks. Thank you, Sandra. I'm confident that we will deliver a substantial increase in sales, operating cash flow and adjusted operating income in fourth quarter. We continue to advance of our structural cost reductions initiatives and we see an improving position with fast growing OEMs as well as continued gradual stabilization of supply chains. This forms a strong foundation for continued strong development in the years to come.

Nika Drapp: That's the support our midterm targets. Out of the lead continues to focus on our vision of saving more lives, which is our most important direct contribution to sustainable society. Our fourth quarter earnings call is scheduled for Friday, January 26th, 2024. Thank you, everyone, for participating in today's call. We sincerely appreciate your continued interest in outer leaves. Until next time, they say. This concludes today's conference call. Thank you for participating. You may know this connect.

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Nika Drapp: . [inaudible] AceShowbiz-Answer is on air at 8 p.m. [inaudible]m, on Thursday, July 2, 2018 AceShowbiz-Answer is on air at 8 p.m. [inaudible] AceShowbiz-Answer is on air at 8 p.m. [inaudible]m. [inaudible][inaudible] I don't know. I don't know. [inaudible] I don't know. I don't know.

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