Q4 2024 Autoliv Inc Earnings Call
Speaker Change: Good day and thank you for standing by. Welcome to the Outerleave Inc. fourth quarter and full year 2024 financial results conference call and webcast.
Speaker Change: I am very happy to present, a record breaking quarter. This is a testament to our employees' hard work dedication and commitment.
Speaker Change: Want to thank them for their outstanding contributions.
Speaker Change: For consistently driving our success forward.
Speaker Change: Meeting our full year guidance, despite accelerated market headwinds showcases the companies adopt adapted.
Speaker Change: Adaptability and resilience.
Speaker Change: Driven by our diverse product portfolio and strong customer relationships.
Speaker Change: This achievement not only highlights our current success, but also lays a solid foundation for 2025, we had continued margin expansion.
Speaker Change: Despite light vehicle production mix deterioration, leading to lower sales will reach new record highs in the quarter for operating profit operating margin and earnings per share.
Speaker Change: For the full year, we also had a record high operating cash flow.
Speaker Change: I am also pleased that we generated an exceptional level of return on our capital employed.
Speaker Change: Our strong performance was mainly a result of strict cost control our structural cost reduction program enabled us to reduce our indirect workforce by 1400 since Q1 'twenty two 'twenty three.
Speaker Change: We managed to accelerate our operating efficiency improvements, partly supported by the improved customer call off accuracy.
Speaker Change: Which contributed to a reduction of direct head count by 4500 in the year in one year, which is a reduction of almost 90%.
Speaker Change: These strong results were also supported by agreement, we reached with all major customers on excess inflation compensation.
Speaker Change: Cash flow continued to be strong supporting a high level of shareholder returns in.
Speaker Change: In the quarter, we repurchased shares for $100 2 million U S dollar and retired 3 million shares.
Speaker Change: The board of Directors has approved an expansion of the share repurchase program.
Speaker Change: Until the end of 2025.
Speaker Change: Under the extended repurchase program 480 million U S dollar remains.
Speaker Change: Our belief was rated triple B, plus with a stable outlook by Fitch ratings in November.
Speaker Change: Looking now on financials in more detail on the next slides.
Speaker Change: Okay.
Speaker Change: Sales in the fourth quarter decreased by 5% year over year for several market related reasons.
Speaker Change: This includes negative effects from currency translation.
Speaker Change: LBP development as well.
Speaker Change: Regional and customer mix development.
Speaker Change: Despite this the adjusted operating income for Q4 increased by 5% to $349 million.
Speaker Change: From $334 million last year.
Speaker Change: The adjusted operating margin was 13, 4% a record for the company.
Speaker Change: Operating cash flow was a solid 420 million U S dollars.
Speaker Change: Looking now on the next slide.
Speaker Change: We continue to generate broad based improvements.
Speaker Change: Our direct labor productivity continues to improve.
Speaker Change: We reduced our direct production personnel by 4500 year over year.
Speaker Change: This is supported by the implementation of our strategic initiatives, including automation and digitalization.
Speaker Change: Our gross margin was 21%.
Speaker Change: The increase of 180 basis points.
Speaker Change: Year over year.
Speaker Change: The improvement was mainly the result of direct labor efficiency and head count reductions.
Speaker Change: Partly offset by lower sales.
Speaker Change: And our supplier supplier settlement.
Speaker Change: Communicated in the previous quarter.
Speaker Change: As a result of our structural efficiency initiatives the positive trend for all D and E and SG&A from the beginning of the year continued.
Speaker Change: Combined with the gross margin improvement this land to the substantial improvement.
Speaker Change: Improvement in adjusted operating margin.
Looking now on the market development in the fourth quarter on the next slides.
Speaker Change: According to S&P Global total global light vehicle production for the fourth quarter increased by 40 basis points.
Speaker Change: Exceeding the expectation from the beginning of the quarter by over four percentage points.
Speaker Change: Most of this improvement was driven by local Oems in China.
Speaker Change: Supported by the scrap being a replacement subsidy policy as well as higher growth in South America.
Speaker Change: Key markets in North America, and Europe performed in line with expectations.
Speaker Change: This resulted in a more unfavorable regional light vehicle production mix over around four.
Speaker Change: Basis points in the quarter significantly impacting our outperformance negatively.
Speaker Change: In the quarter, we did see call of volatility improving both from the third quarter and year over year.
Speaker Change: We will talk about the market development more in detail later in the presentation.
Speaker Change: Looking now on our sales growth in more detail on the next slide.
Speaker Change: Our consolidated net sales were $2 6 billion U S dollars.
Speaker Change: This was $136 million lower than a year earlier, driven by lower light vehicle production.
Speaker Change: Negative currency translation effects and lower out of period cost compensation.
Speaker Change: The negative currency translation effects FX reduced sales by almost 2% in the quarter.
Speaker Change: After a period cost compensation contributed with approximately $24 million in the quarter.
Speaker Change: This was $21 million lower than in the same period last year.
Speaker Change: Our top period compensations are retroactive price adjustments and other compensations that mainly related to the first three quarters.
Speaker Change: Were settled in the fourth quarter.
Speaker Change: Looking on the regional sales split.
Speaker Change: It reflects the high growth automotive market in Asia, and our strong market position there.
China accounted for 23% Asia, excluding China accounted for 20%.
Speaker Change: Erica is 30%, 40% and Europe for 27%.
Speaker Change: We outlined our organic sales growth compared to light vehicle production on the next slide.
Speaker Change: Our quarterly sales were robust, but slightly below our expectations.
Speaker Change: Primarily due to a more unfavorable regional and customer mix.
Speaker Change: We continued to outperform light vehicle production significantly in Japan rest of Asia and in Europe.
Speaker Change: By product launches and pricing.
Speaker Change: The outperformance in rest of Asia were driven by India, and South Korea.
Speaker Change: We expect a continued strong outperformance in 2025 in India from a number of launches.
Speaker Change: In China, we underperformed as the light vehicle production growth mix continued to be tilted towards lower CTV models.
Speaker Change: Chinese domestic Oems.
Speaker Change: In Americas, we underperformed light vehicle production by three percentage points, mainly as a result of dealer inventory reductions by major customers strong South American growth.
Speaker Change: Among the primary growth drivers for the company this quarter.
Speaker Change: Five were Chinese Oems and to worry of ponies.
Speaker Change: Underscoring the significance of the Asian market and its customers.
Speaker Change: On the next slide we have the organic sales growth for the full year 'twenty 'twenty four.
For the full year, we outperformed global light vehicle production by around two percentage points.
Speaker Change: We estimate that the regional light vehicle production mix was two to three percentage points worse than expected in the beginning of the year.
Speaker Change: We outperformed in Japan by 13 percentage points.
Speaker Change: Rest of Asia by 10 percentage points.
Speaker Change: In Europe by six percentage points.
Speaker Change: Our sales to domestic Chinese Oems grow by 24% and they accounted for more than 37% or China things up from 28% in 2023.
Speaker Change: Even so the negative market mix still resulted in an underperformance of seven percentage points in China.
Speaker Change: We expect this to improve in 'twenty quantify as our strong order intake with Chinese Oems should result in a record number of new launches in 2025.
Speaker Change: Leading to significantly better sales performance.
Speaker Change: To light vehicle production in China.
Our global market position is strong and we are the market leader in all regions and product categories.
Speaker Change: In 2024, our global market share was around 44%.
Speaker Change: These exclude sales of components subset and factors.
Speaker Change: This is almost five percentage points higher than in 2018.
Supported by new launches, especially with Chinese Oems and CPD grow we expect sales to outperform light vehicle production by two to three percentage points in 2025.
Speaker Change: On the next slide we see some key model launches from Q4.
We saw a record number of significant launches in 2024.
Speaker Change: With 2025, we also anticipate the high number of launches, especially with Chinese Oems.
Speaker Change: In this slide three, albeit modest art on the Chinese OEM and three from Oems in India.
Speaker Change: This highlights our growing position with Chinese Oems and our success in capturing growth in the Indian market.
Speaker Change: The model is shown here have an alternate content per vehicle from around 100 to over 400 U S dollars.
Speaker Change: In terms of hourly sales potential that your four runner as Luke we desire.
Speaker Change: The most significant.
Speaker Change: This is the first time, we have a model in India with the highest sales potential.
Speaker Change: The long term trend to higher CTV is supported by front center airbags on six in all six of these models now.
Now looking on the next slide.
Speaker Change: In 2020 for the industry's sourcing of new business was at the lower level lowest level since 2018.
This was driven by technological and geopolitical uncertainties.
Speaker Change: Causing the sourcing of several large platforms to be postponed until 2025.
Speaker Change: In addition, modern life time is shortening as Chinese Oems share of the order book increase.
Speaker Change: Modern from Chinese Oems typically have an average lifetime.
Speaker Change: <unk> is a couple of years shorter.
Speaker Change: In order intake market share with the rapidly growing Chinese Oems exceeded 40%.
Speaker Change: A significant improvement compared to our current market share of close to 25% with this group.
Speaker Change: Looking on the order intake more in detail on the next slide.
Speaker Change: In 2024 order intake for new auto makers, mainly in the North America, and China accounted for almost one third of our order intake.
Speaker Change: We won multiple awards supporting new markets and industry talent like Foldable stealing wins for self driving vehicles, including a new type of driver add backs that deploys from the dashboard or ceiling.
Speaker Change: Our belief has successfully secured.
Speaker Change: Business in the commercial vehicle sector bolstering, our mobility safety solutions business.
Speaker Change: This expansion not only strengthens our market position, but also enhances our ability to deliver innovative safety solutions to a broader range of customers.
Speaker Change: We also won airbags contracts featuring low carbon cushion material.
Speaker Change: A significant step towards sustainability in automotive safety.
Speaker Change: This innovative airbags not only reduce the environmental impact, but also lower the cost of the airbag module.
Speaker Change: Thanks to robust order intake in recent years, we anticipate that the number of product launches in 2025 to be on a similar level as in 2024.
Speaker Change: This progress supports our long term success.
Speaker Change: Let's now look at the sustainability program during 2024 on the next slide.
Speaker Change: Sustainability is an integral part of our business strategy and an important driver for market differentiation and stakeholder value creation.
Speaker Change: Our sustainability approach is based on four focus areas.
Speaker Change: We have clear ambitions and targets defined for each area.
Speaker Change: During 2024, we initiated and concluded a number of activities will be within this area.
Speaker Change: For example, we continued to expand our addressable users but.
Speaker Change: By expanding testing, including diverse body shapes ages and genders.
Speaker Change: Through collaborations we addressed protection for vulnerable road users.
Speaker Change: We significantly improved our recordable incident rate.
Speaker Change: Greenhouse gas emissions in own operations were reduced by 15% compared to 2023.
Speaker Change: And the share of renewable electricity increased to 30%.
Speaker Change: On a positive environment and financial Okay.
Speaker Change: We conducted our annual supplier clients already.
Speaker Change: First the readiness for our net zero supply chain goes and we also integrated climate performance into supplier selection and launched our climate accelerator program to support them.
Speaker Change: Turning the slide.
Speaker Change: I will now hand, it over to <unk>.
Speaker Change: Thank you Miguel I will talk about the financials more in details of the next two slides so turning to the next slide.
Speaker Change: This slide highlights our key figures for the fourth quarter of 2024 compared to the fourth quarter of 2023.
Speaker Change: The net sales exceeded $2 6 billion, representing nearly a 5% decrease.
Speaker Change: Gross profit increased by $20 million and the gross margin increased by one eight percentage points.
Speaker Change: The adjusted operating income increased from $334 million up to $349 million.
The adjusted operating margin increased by 120 basis points to 13, 4%.
Speaker Change: Our reported operating income of $353 million was 4 million higher than the adjusted operating income thanks to a positive impacts from reversal of capacity alignment accruals.
Speaker Change: Adjusted earnings per share diluted decreased by 70 cells were the main drivers were 90 cents from higher taxes, and 10 cents from higher financial and non operating items, partly compensated by 11 four from higher operating income and 19 from lower number of shares.
Speaker Change: The adjusted return on capital employed was a solid 35% and our adjusted return on equity was 41% driven by share buybacks impacting total liquids.
Speaker Change: We paid a dividend of 70 cents per share in the quarter and we repurchased shares for around 102 million U S dollars and retired 3 million shares.
Speaker Change: Looking now on the adjusted operating income bridge on the next slide.
Speaker Change: In the fourth quarter of 2024, our adjusted operating income increased by $16 million despite market headwinds from lower light vehicle production.
Speaker Change: Operations contributed with 67 million, mainly from improved quality accuracy and higher operational efficiency as well as lower recall costs.
Speaker Change: The largest offsetting factor.
Speaker Change: The increase was lower net sales.
Speaker Change: The net currency effect was 1 million negative as the positive effects, mainly from the Mexican peso versus the U S dollar was offset.
Speaker Change: Translation effects and negative transaction effects from the Mexican peso versus the euro.
Speaker Change: Japanese yen versus the Thai baht in the U S dollar versus the Korean won.
Speaker Change: The impacts from raw materials was around 6 million negative.
Speaker Change: Out of period cost composition compensation of $24 million was $21 million lower than last year.
Speaker Change: Costs for SG&A and <unk> net increased slightly on higher costs for SG&A personnel, despite the offset from higher engineering income.
Speaker Change: The impact of the supplier settlement and as Ken mentioned earlier was around $10 million in the fourth quarter.
Speaker Change: Looking now at the full year results on the next slide.
Speaker Change: <unk> 24 was again impacted by labor and supply cost inflation.
Speaker Change: Lower and volatile that vehicle production and customer price negotiations.
Speaker Change: Our net sales were $10 4, billion% to 1% decline of negative currency translation effects.
Speaker Change: Adjusted operating income increased by.
Speaker Change: Nine 5% to over $1 billion the.
Speaker Change: The adjusted operating margin was nine 7% compared to our guidance of around nine 5% to 10%.
Speaker Change: The operating cash flow was $1 1 billion in line with the guidance <unk>.
Speaker Change: Adjusted earnings per share increased to $832 per share partly as a result of the share repurchases.
Speaker Change: Dividends of $2 74 per share were paid.
Speaker Change: Despite market headwinds and lower sales adjusted operating profit operating cash flow as well as the earnings per share were all the highest we have ever achieved.
Speaker Change: Looking now at the cash flow in more detail on the next slide.
Speaker Change: For the fourth quarter of 2020 for the operating cash flow decreased by 27 million to $420 million compared to the same period last year, mainly due to a less favorable working capital developments.
Speaker Change: Capital expenditures net decreased by $18 million compared to the same period the previous year.
Speaker Change: Capital expenditures net in relation to sales was five 4% versus sorry, five zero percent versus five 4% a year earlier.
Speaker Change: The free operating cash flow was positive $288 million compared to positive $297 million in the same period prior year.
Speaker Change: For the full year 2020 for operating cash flow increased by $77 million to $1 1 billion, mainly on higher net income was.
Speaker Change: The free operating cash flow was almost <unk> 5 billion.
Speaker Change: Capital expenditures net decreased by $6 million.
Speaker Change: Capital expenditures net in relation to sales was unchanged at five 4%. This level is slightly above what we expect for the long longer term due to investments in capacity, mainly in Asia and our footprint optimization.
Speaker Change: The cash conversion in 2024 defined as free operating cash flow in relation to net income was around 77% in line with our target of 80%.
Speaker Change: Now looking at our trade working capital development or the next slide.
Speaker Change: Trade working capital decreased by $117 million compared to the same period last year were the main drivers were $204 million and lower accounts receivables $179 million and lower accounts payables and $91 million and lower inventories.
Speaker Change: In relation to sales trade working capital decreased from 11, 2% to 10, 7% improvement.
Speaker Change: The improvement in trade working capital as a result of our multiyear working capital improvement program and an improvement in customer call offs accuracy, enabling a more efficient inventory management.
Our capital efficiency program aims to improve working capital by $800 million, but to date, we have achieved around $700 million.
Speaker Change: Now looking at our shareholder returns on the next slide.
Speaker Change: Okay.
Speaker Change: Over the years <unk> has demonstrated its capability to generate solid cash flow across different market conditions.
Speaker Change: During 2024, we returned over $775 million to shareholders through dividends and share buybacks setting a new record for the company.
Speaker Change: Over the last five years, we have significantly reduced our net debt, while returning $1 9 billion U S dollars directly to shareholders. This includes stock repurchases totaling over $1 billion.
Speaker Change: Since initiating the current stock repurchase program in 2022, we have reduced the number of outstanding shares by over 12%.
Speaker Change: We're executing the program, we consider several factors, including our balance sheet, the cash flow outlook, our credit rating and the general business conditions as well as the debt leverage ratio.
Speaker Change: We always strive to balance what is best for our shareholders in both the short and long term.
Speaker Change: Now looking at all our debt leverage ratio development on the next slide.
Speaker Change: Also leave has consistently prioritized maintaining a strong leverage ratio, reflecting our prudent financial management and commitment to a strong balance sheet.
This approach has enabled the company to navigate economic fluctuations invest in innovation and continue delivering value to its stakeholders.
Speaker Change: While investing in our footprint and returning over $770 million to shareholders. During 2024, our leverage ratio was unchanged at one two times.
Speaker Change: Compared to the third quarter, our debt leverage ratio decreased by 0.2 times as our net debt decreased by $227 million, while the 12 months trailing adjusted EBITDA increased by $17 million.
Speaker Change: With that I'll hand, it back to you with that.
Fredrik: Thank you fredrik onto the next slide.
Speaker Change: As we enter 2025, the full year outlook for the global light vehicle production by S&P Global stand at the minus six.
Fredrik: <unk>, 5%.
Fredrik: The light vehicle production outlook is factoring in regional specific influences, particularly the recent expansion of the vehicle.
Fredrik: Rapids and replacement policy in China.
Fredrik: Eastern headwinds in Europe, and North America, and North America, and a slower EV other patient growth.
Fredrik: The latest forecast indicates LDP decline of almost 2% for the first quarter versus last year.
Fredrik: <unk> in China, it's predicted to increased 4% in the fourth quarter following a particularly strong performance in the fourth quarter of 2024.
Fredrik: Ongoing trend of global Oems, losing market share is expected to persist.
Fredrik: But to moderate in the following quarters.
Fredrik: The forecast for North America first quarter LBP.
Fredrik: It's minus 6%. The main reason is the continued need for more vehicle inventory correction.
Fredrik: The light vehicle production in Europe is expected to dropped 9% for the first quarter, mainly due to inventory adjustments.
Fredrik: From the fourth quarter to the first quarter global LBP is projected to decline by 14%.
Fredrik: <unk> of over 3 million vehicles. This drop is significantly higher than what we have observed over the past three years, where it has averaged around 7%.
Fredrik: Based on S&P, globals forecast and our own analysis.
Fredrik: Our 2025 guidance is built on our global light vehicle production decline of around.
Fredrik: 5%.
Fredrik: And the regional mix in line with S&P's forecast for the full year.
Fredrik: Now looking on the business outlook for.
Fredrik: On the next slide.
Fredrik: We expect 2025 to be a challenging year for the automotive industry.
Fredrik: LBP declining and geopolitical risks remain.
Fredrik: However, our continued efficiency focus is expected to support further improvement of our profitability.
Fredrik: We expect to significantly improve our sales performance in China and that the continued strong cash flow and balance sheet sets a solid foundation for our continued commitment to a high level of shareholder returns and our our financial targets.
Fredrik: We expect cost pressure from inflation to moderate in 'twenty five, but we still expect some pressure coming mainly from labor, especially in Europe and the America.
Fredrik: We expect call of volatility by 'twenty five.
Fredrik: On average to be slightly lower than it was in 2024, but remaining higher than the pre pandemic level.
Fredrik: We also anticipate the challenging fourth quarter in terms of operating margin, which should gradually improve throughout the year similar to the question development as we seen in the past few years with a relatively weak fourth quarter and gradual improvement throughout the year.
Fredrik: Turning to the next slide.
Fredrik: In closing to summarize our 'twenty quantified outlook, we expect continued things outperformance versus light vehicle production in.
Fredrik: Improved profitability compared to quantify before this improvement is primarily supported by structural cost reduction and strategic initiatives.
Fredrik: Higher sales as well as favorable currency effects.
Fredrik: We remain we remain mindful of the risk of deteriorating economic conditions and potential tariffs, but I am confident that our leading position. The work we have done to become more resilient and our experience and agility will enable us to manage future challenging.
Fredrik: Yes.
Fredrik: Now looking on the 20 <unk> guidance in detail on the next slide.
Fredrik: This slide shows our full year, 2025 guidance, which excludes effects from capacity alignment antitrust related matters and other discrete items.
Fredrik: Our full year guidance is based on a global light vehicle production decline of around.
Fredrik: Half a percent a tax rate of around 28%.
Fredrik: The net currency translation effects on sales will be around minus 2%.
Fredrik: Based on this we expect our organic sales to increase by around 2%.
Fredrik: The guidance for adjustment.
Fredrik: The guidance for adjusted operating margin is around 10% 10, 5%.
Fredrik: Operating cash flow is expected to be around one 2 billion U S dollar.
Fredrik: Our positive cash flow trend and a strong balance sheet supports our continued commitment to a high level of shareholder returns.
Fredrik: The guidance for 2025 does not include any new or increased tariffs.
Fredrik: Or other trade limitation, which may impact our operation.
Fredrik: We are monitoring the situation closely and are prepared to be a John as possible to adjust to any such developments.
Fredrik: Looking on the next slide.
Fredrik: This concludes our formal comments for today's earnings call and we would like to open up the line for questions from analysts and investors.
Fredrik: Ill hand, it back to operator right.
Speaker Change: Thank you Sir.
Speaker Change: As a reminder to ask a question you will need to press star one and one on your telephone and wait for your name to be announced still withdraw. Your question. Please press star one and one again once again, please press star one and one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one and one again thank you.
Speaker Change: We are now going to proceed with our first question.
Colin Langan: Two questions come from the line of Colin Langan from Wells Fargo. Please ask your question.
Colin Langan: Oh, great. Thanks for taking my questions.
Speaker Change: Maybe if you could just start with maybe framing some of the puts and takes when we think about the margins year over year.
Colin Langan: I think you mentioned.
Colin Langan: FX transaction I mean, I think in 23 that was like $60 million of a drag that kind of the framework of the good news that we should be thinking about.
Colin Langan: And then does the labor inflation is that offsetting 100% through the year with recoveries or is that maybe a net negative.
Colin Langan: And then maybe any framing of the restructuring how we should be expecting.
Colin Langan: Yes.
Colin Langan: I would refrain from a guidance when it is included in obviously.
Speaker Change: We have here on the BARDA side.
Speaker Change: But I don't want to give them what they expect from from different currency pairs yet to contribute.
Speaker Change: A contributor but the.
Speaker Change: Pacer should continue to be a positive for us.
Speaker Change: And then on the contribution of restructuring we expect.
Speaker Change: I've said before around 50 million incremental savings in 2025.
Speaker Change: We had 50 million of savings in line with expectations in 2024.
Speaker Change: And other than that.
Speaker Change: Yes.
Speaker Change: The.
Speaker Change: The headwinds are from <unk>.
Speaker Change: Inflation.
It's.
Speaker Change: The headwind from a supplier cost inflation is higher than what we're expecting from labor cost inflation.
Speaker Change: Labor cost efficient continues to come down and.
Speaker Change: We've seen a gradual improvements.
Speaker Change: And we're talking now about fairly small percentage <unk> versus.
Speaker Change: Whereas in excess of inflation versus.
Speaker Change: When this all came together.
Speaker Change: And then we are expecting to offset that by commercial recoveries from our customers, but it will be throughout the year. We have also had.
Speaker Change: Some settlements last year, although the majority was PS price agreements.
Speaker Change: But some of them not fall away in the first quarter already.
Speaker Change: And then we need to replace them.
Speaker Change: Gradually throughout the year, but the ambition is to have a full offset for the graduate inflation that is hitting us.
Speaker Change: Got it that's very helpful.
Speaker Change: Obviously, a lot of headlines these days around tariffs, particularly.
On goods from Mexico to the U S can you help us frame if the tariffs in place.
Speaker Change: How much of an impact that would be and how you think you might be able to offset and work with customers to offset that.
Speaker Change: No I think.
Speaker Change: If four when tariffs would be implemented there and for US It's Matt most of the question.
Speaker Change: Mexico U S tariffs.
Speaker Change: Of course.
Speaker Change: Yes.
Speaker Change: Pass on to the customer that is necessarily so.
Speaker Change: That would start immediately to be a discussion with our customer because there is no reason at all why we ask the suppliers should absorb and of course like that.
Speaker Change: Ultimately it will be.
Speaker Change: <unk> cost for vehicles sold in the U S.
Speaker Change: And we are all my questions preparing ourselves for that as soon as that my thumb. So that would start immediately that discussion.
Speaker Change: Okay, great. Thanks.
Speaker Change: We are now going to proceed with our next question.
Speaker Change: Okay.
Speaker Change: The question comes from the line of Edison you from Deutsche Bank. Please ask your question. Your line is open.
Edison: Thank you for taking our questions first off on the on the outlook I am curious what kind of impact are you embedding from mix in 2025 is that going to actually be a positive going forward relative to 2024.
Speaker Change: We expect around a one percentage point of negative mix in 2025 versus 2024.
Edison: So we.
Edison: It should be better than it was in 'twenty.
Edison: Four.
Edison: So there we had a negative mix as we said brown with between two and three percentage points.
Edison: And then the 25 that should improve to around one percentage point.
Edison: And maybe one correction I think in the presentation before we set four basis points negative mixed in Q4 that would be four percentage points in Q4.
Edison: Understood understood.
Edison: And then on the order intake.
Edison: I know you have this.
Edison: Slide showing a decline.
Speaker Change: Called out a couple of big programs, a couple of big platforms can you give us a sense of what happened there and when you expect those.
What kind of impact you would expect on the growth if any.
Speaker Change: Yes.
Speaker Change: Have seen as we saw him in the lowest sourcing activity from our customers.
Speaker Change: Since we spun off the electronics business.
Speaker Change: It is rather unusually lower sourcing what it was.
Speaker Change: Unusually lower sourcing activity, which continued to come down throughout the year.
Speaker Change: What we see is that I mean.
Speaker Change: There's been a lot of discussions around that Oems are delaying sourcing.
Speaker Change: Projects due to uncertainties on the drivetrain side.
But what you also see on top of that there's also uncertainty to location of production elsewhere.
Speaker Change: Should they would start.
Speaker Change: Which locations with <unk>.
Speaker Change: <unk> a certain platform.
And that's had a significant impact on the overall market development in 2024 and more than we had expected going into the year.
Speaker Change: We also said here that there are a couple of touch points that we are the incumbent that have also been delayed into 2025 and.
Speaker Change: And the expectation here is that that sourcing should come in during the first half of this year.
Speaker Change: Got it thank you.
Speaker Change: Thanks.
Speaker Change: We are now going to proceed with our next question.
Speaker Change: Our question comes from the line of Chris Mcnally from Evercore. Please ask your question.
Speaker Change: Okay.
Speaker Change: Thanks, so much.
Speaker Change: Actually just wanted to follow up on Ashley's question and think about mix in a different way.
Speaker Change: I don't think you you, obviously don't guide by region, but when I think about plus 2% organic at the midpoint I was wondering if you could just take a shot at sort of ranking from strongest organic weakest sort of across your four.
Speaker Change: Regions, non Asia, China, North America and <unk>.
Speaker Change: Europe, just sort of where we may see the highest allowance.
Speaker Change: No I think.
Speaker Change: Have indicated here I mean, we see the strongest.
Speaker Change: Growth opportunities and growth in Asia.
Speaker Change: Of course.
Speaker Change: China, where we also taking.
Speaker Change: Market share, we did with the Chinese Oems here that continue to strengthen our already leading market position there.
Speaker Change: And of course in the rest of Asia also you have.
Speaker Change: The strong contribution from from from India, where are we.
Speaker Change: We not only see the LDP growing but also the content is growing there and then of course, we have I would say.
Speaker Change: Europe.
Speaker Change: China challenging.
Speaker Change: Situation.
Speaker Change: Also although I would say North America here.
Speaker Change: When we look at.
Speaker Change: LBP.
Speaker Change: In general there so.
Speaker Change: Yes, I think its little bit the same picture as we have seen in this year. So the trend continue model.
Speaker Change: Super.
Speaker Change: I know, it's hard to quantify but it's nice that your China towards the towards the top of it sort of implies at growth over market. There is turning back positive and you mentioned that.
Speaker Change: Second second question.
And some of the weakness in North America and Europe.
Speaker Change: Where the OEM mix also is.
Speaker Change: Yes, it's sort of that when you mentioned the minus one where we should think about the impact the most.
Speaker Change: Independent forecasters.
Speaker Change: To the Detroit three down sort of.
Speaker Change: Low to mid single digits.
Speaker Change: The German three in Europe, it's going to be probably a tougher year given anyway.
Speaker Change: <unk> again is there less secular across the North American Europe or is it really more a mix issue.
Speaker Change: For 2025 and in those two regions.
Speaker Change: I think I mean.
Speaker Change: It's very much related to I would say the overall.
Speaker Change: <unk> situation in those regions.
Speaker Change: So I mean, it's the LDP.
Speaker Change: Production per se that is the biggest challenge there.
So no nothing.
Vic: This is Vic there on.
Vic: On on.
Vic: On an OEM level I would say is more related to what was mentioned here before around uncertainty on driveline from the end consumer the overall affordability from the end consumer and so forth so holding it down.
Vic: And of course, when it come to export out of its regions also the competitiveness if woodside.
Vic: We are now going to proceed with our next question.
Speaker Change: The question has come from the line of Vijay Rakesh from Mizuho. Please ask your question.
Vijay Rakesh: Hi, just a quick question now when you look at that.
Vijay Rakesh: A question on organic growth just wondering what youre embedding in terms of any potential status.
Vijay Rakesh: Like coming down the pipe here in Canada.
Vijay Rakesh: On the Mexico side on how that.
Vijay Rakesh: Impact.
Vijay Rakesh: Two the <unk> highway VP uneven Navy mandated piece, but how do you.
Vijay Rakesh: What what are you embedding in that assumption. Thanks.
Vijay Rakesh: And.
Vijay Rakesh: Yes, no I would say I mean, there is no tariff assumptions include any.
Vijay Rakesh: Guidance for for 2025 here.
Vijay Rakesh: Basically for a reason, it's very difficult to have a.
Vijay Rakesh: You want it.
Vijay Rakesh: Many different scenarios you can.
Vijay Rakesh: You can think about the level of Paris, the length of the terrorists.
Vijay Rakesh: As an example, so so that is not included in the outlook here.
Vijay Rakesh: Something we are following very closely and as we said here.
Vijay Rakesh: In terms of our own impact potentially there.
Vijay Rakesh: We will start negotiating with the customer immediately about passing that on and then the impact it may have on the demand from the end consumer we have no no.
Vijay Rakesh: Detail around at this point in time.
Got it and then in China definitely encouraging to see that.
Vijay Rakesh: We are focusing on that when you look at the CPB.
Vijay Rakesh: Traditionally for the approximately where does it average out and just wondering how much of a step up you would see on the average CPE, let sian can you clarify thanks.
Vijay Rakesh: Actually the CPD in China went down year over year 2023 to 2024 slightly.
Vijay Rakesh: That was mostly due to the.
Vijay Rakesh: The market mix that we saw whereas we said before this scrappage premiums.
Vijay Rakesh: And so on have favored more say lower end vehicles.
Vijay Rakesh: So with that we have.
Vijay Rakesh: So that's the overall content per vehicle in the China market went down.
Vijay Rakesh: Year over year, but we expect this to reverse in 2025.
Vijay Rakesh: And the trend in the market.
Vijay Rakesh: Of course.
Vijay Rakesh: Gradually increase.
In India, because India.
In the different segments here so.
Vijay Rakesh: And that will tell us.
Vijay Rakesh: More of a temporary nature as a result of the shift in.
Vijay Rakesh: And when the OEM mix so to speak.
Speaker Change: Got it thank you.
Vijay Rakesh: Okay.
Vijay Rakesh: We're now going to proceed with our next question.
Speaker Change: Two questions come from the line of Henderson Jello from Handelsbanken. Please ask your question.
Vijay Rakesh: Thank you very much two questions for me.
Speaker Change: Just wanted to come back on the MVP is just that.
Speaker Change: When you look at your outlook.
Speaker Change: Is it based on what your talks with your Oems or or or.
Speaker Change: S&P because I think this EPS included $10 compared to the U S and at the same time, we have a lot of ongoing in Europe.
Speaker Change: Maybe a nascent program on all sides, so battery electrics and also.
Speaker Change: Changing the regulation or not cutting penalties directly on the OEM side for sale on the 19th.
Speaker Change: <unk> six Mg.
Speaker Change: And maybe having that measured over three years and average it'd just be interesting to hear youre moving parts.
Speaker Change: And being on par with.
Speaker Change: As compared with <unk> five equity. That's my first question second question is more on if you could talk a little bit about content per vehicle in India I know you have.
Speaker Change: It's a market share.
Speaker Change: What's happening with us.
Speaker Change: Commitment by the Oems. Thank you.
Anne: Thank you Anne.
Speaker Change: On the LPT.
Speaker Change: Outlook and what we based upon.
Speaker Change: As always we are in the short.
Speaker Change: The next coming weeks months.
Speaker Change: Adjusted maybe.
Speaker Change: We adjusted our own insights there, but when I look at the total.
Speaker Change: Year here on the point to five negative that we are mentioning here, it's I would say mainly based on the law.
Speaker Change: It is based on S&P globals here. So we have not as I mentioned beforehand made our own judgment on potential impacts on tires themselves. So index thing.
Speaker Change: No.
Speaker Change: In the S&P is there, but we have not muscle watched it on our side here. So.
Speaker Change: But just that we don't have a better crystal ball here.
Speaker Change: And anybody else and I think when it comes to India.
Speaker Change: Sure.
Speaker Change: We see that continue to improve.
Speaker Change: Overall in 2024, it was around $120 for next year, we expect it to raise to close to $140 and onwards here. So even 116 in sight here. So.
Speaker Change: What we have alluded to before here about the growth opportunities in India.
Speaker Change: We see both MVP CPB contributing today and.
Speaker Change: And with our 60% market share in India, we are are well positioned to capture it.
Speaker Change: Okay.
Speaker Change: And it's 4%.
Speaker Change: It sounds from 4% of our sales, which is basically equal to the south Korean market there.
Speaker Change: The perpetual much.
Speaker Change: Thank you.
Speaker Change: We're now going to proceed with our next question.
Speaker Change: And the question is come from the line now.
Speaker Change: Good question.
Speaker Change: Okay.
Speaker Change: Hello, Michael Your line is open.
Michael: Great, Hey, Hi, Jaime Cal Fredric, Thanks for taking my questions as well.
My first question would be great. If you could share more specific reading on the exit rate for call of accuracy in Q4, it looks like it ticked up quite nicely.
Michael: How that compares to the level that is built into the 25 guidance.
Michael: And then my second question just goes back to the point unfavorable Forex transactional FX.
Michael: You don't want to give out.
Michael: Specific guide on that but does that does that imply that you see a net tailwind at an EBIT level or is.
Michael: You're just referring to some kind of an offset against the topline Rx headwinds that youre expecting.
Michael: Yes, so on the exit rate in terms of color for stability. So we as you've seen the graph there we worked around 94% in the fourth quarter.
Michael: A good development in.
Michael: Sure.
Michael: Europe America and also in rest of Asia with China continues to be.
Michael: Lower reliability levels.
Michael: As we indicated here, we believe that 2025 on average should be at a better level than 2004 on average.
Michael: So that it continues to be somewhere between 90 and 95% range.
Michael: We believe that I think is encouraging.
Speaker Change: And Mike can you ask your second question again.
Mike: Yes, sure. Thanks for that just back to the points on transactional FX for Forex.
Mike: Does that statement or that guide imply that you'll see a net tailwind at an EBIT level from transactional effects or is it meant to be just an offset against the topline forex headwind that you've seen.
Mike: I mean, as I said I don't want to guide on the transactional effect for the full year.
Mike: But with what we saw in the fourth quarter was a very positive development, obviously on the U S dollar to Mexican peso development with our cost base.
Mike: So that had around 12 million <unk>.
Positive transaction for us, but then that was offset by.
Mike: I already mentioned that the currency pairings with the Japanese yen against the Thai baht.
Mike: Against the Korean won and then that we're importing.
Mike: Were denominated products into Mexico, and they're all roughly had about a $4 million of negative effect.
Mike: That's almost completely offset the positive effect, we saw from the peso.
Mike: Okay and then.
Mike: So it's.
Mike: Depending on how these currency moves till you have the assumptions are.
Mike: Our guidance slide what we're basing our forecast on it and we will have to see where the FX rates end up.
Speaker Change: Okay. Thank you for you if I could just sneak in one final one just in terms of your expectations around the same thing of improved outperformance in China. I think previously you were a little more confident that you could start to see some outperformance already at the beginning of 2025 is that still the case or is it more an HQ situation.
Mike: No I think what we've said here is that it will gradually improve here.
Mike: <unk>.
Mike: It's always difficult to be exact on the timing here due to as we said I mean here, we are seeing a real push due to the incentives that are in place.
Mike: But.
Mike: We feel comfortable confident.
Mike: Our confidence about the shift in trend here as a result of the increased <unk>.
Mike: Share of the orders that we are taking so we underwrite traction.
Mike: I have to go back on the exact details there.
Mike: That's the place to come through.
Mike: Okay. Thank you very much.
Mike: We are now going to proceed with our next question.
Speaker Change: Our question comes from the line of George Kelly is from Goldman Sachs. Please ask your question.
Speaker Change: Yes, good afternoon, and thank you for taking my questions I had two questions. If I may the first one just related to order intake on slides 11 and 12.
Speaker Change: It's very helpful on slide 12 to see the share of orders.
Speaker Change: <unk>, which is occurring to new.
Speaker Change: But if I apply that to the dollar order amounts on slide let then it would seem to imply that the absolute order intake from OE Adams was down year over year.
Speaker Change: Is that correct and if yes could you perhaps explain why that is is it because of the new Oems also reconsidering product offerings or is it related to the point you make around some of the Chinese Oems, having short lifetimes for that program.
Speaker Change: The second question I had was with respect to shareholder returns I appreciate the current buyback mandate and what is outstanding.
Speaker Change: The implied EBIT forecast for this year it was tied to guide on cash flow.
Speaker Change: It reasonable to expect that pocket shareholder returns once more in 2025, if we look at the last three years I think on average the step up has been around $200 million per annum is there any reason not to assume that the stimulus desktop might be possible. This year.
Speaker Change: And if it is can you give us any insight into the split it looks like the dividend has remained flat at around 220 Mark.
Speaker Change: Should we expect any step up to be more focused on buybacks and dividend. Thank you.
Speaker Change: Let me start and then thank you and let me start with the order intake there.
Speaker Change: I mean, the factors here when you look at the.
Speaker Change: Value of order intake.
Speaker Change: The factors we mentioned here.
Speaker Change: We see.
Speaker Change: Many mainly in the let's call it the western World here pushing out in time.
Speaker Change: The launches of new vehicle and thereby also the RF skus.
Speaker Change: And when it comes to the Chinese Oems.
Speaker Change: That was a there the shortening lifetime.
Speaker Change: Those two main factors that is adding up to the difference there I feel that.
Speaker Change: We have an order intake here.
Speaker Change: In order to support our.
Speaker Change: <unk> here.
Speaker Change: Safeguarding the market share that we have which is around 45% as we move forward.
Speaker Change: By encouraging all in all this is that we also see the strong.
Speaker Change: Growth we have.
Speaker Change: In the Chinese Oems here that we have also described in detail here. So so this is more reflecting the dynamic dynamics in the industry right now and everything else.
Speaker Change: When it comes to the return to the shareholders here.
Speaker Change: No.
Speaker Change: We cant communicate anything around.
Speaker Change: What we might do or not do in this regard what we have said in the past and that is that.
Speaker Change: We have a very strong.
Speaker Change: Be sure to be shareholder friendly company by returning liquidity to our shareholders.
Speaker Change: I think in the last couple of years here shows that we are serious.
Speaker Change: That.
Speaker Change: And what we also have indicated about the ability to generate liquidity going forward.
Speaker Change: It's also I would say something that supports that statement going forward.
Speaker Change: We have demand that we have today.
Speaker Change: How and when we are using that.
Speaker Change: We have to report afterwards.
Speaker Change: We post on our homepage there.
Speaker Change: On a weekly basis.
Speaker Change: On the free with frequent.
Speaker Change: A frequent silver weekly basis.
Speaker Change: Under direct dividend, we have the ambition to have a stable and increasing dividend and debt. So so yes, I think that there's as much we can say around that.
Speaker Change: Thank you.
Speaker Change: We are now going to proceed with one last question.
And our question comes from the line of <unk> <unk> from Nordea. Please ask your question.
Speaker Change: Perfect I have two questions. If I may starting with your market share. It was 44% in contact center for Nordson Martin on lower than in 2003 and can you just say what was the reason for that and also do you expect further decline in the market share and 25.
Speaker Change: No. Thank you.
Speaker Change: I feel comfortable with the order book, we have to support our market share of around 45.
Speaker Change: Difference you see.
Speaker Change: Between.
Speaker Change: 'twenty three 'twenty four is very marginal.
Speaker Change: And the main.
Speaker Change: So for us it's actually that we have.
Speaker Change: The strong growth of BYD in China, where we and no one else is selling to them is to have the in house.
Speaker Change: In house.
Speaker Change: Manufacturer of safety product, but we are selling.
Speaker Change: For example, if later to them and that's not included in our market share in but I will say, it's a meaningful volume to them. So if you would count that would look different but.
So in my book here, we all standing stable around the 45.
Speaker Change: Understood Fair point, and then also you mentioned that Q1 will be a challenging quarter in terms of the operating margin.
Speaker Change: We look at your previous performance gives us the margin decreased by some four to five percentage point.
Speaker Change: In Q1.
Speaker Change: Should we expect to kind of a similar decrease now or may be even more pressure due to somewhat weaker Q on Q card production.
Speaker Change: I don't want to guide to a specific on the first quarter, but if you looked at what had been the drivers for the margin decline in the past couple of years, where it's been around five percentage points from Q4 to Q1.
Speaker Change: The lower MVP as we mentioned during the presentation.
Speaker Change: <unk> over the last three years, a decline of 7% sequentially quarter over quarter.
Speaker Change: But now we're seeing a decline of 14% so twice that number and that of course would also have a higher impact on our operating leverage and also the operating income.
Speaker Change: It's the.
Speaker Change: The very traditional or typical seasonality that we have on the engineering income side thats not going to be any different this year than it's been in previous years and then also what we've seen in the last just a combination of say the fall away of lump sum recoveries that we then need to re and states throughout the year and inflation coming in and that combined effect is lower.
Speaker Change: This year than it has been in previous years, but if you take all of the three combined.
Speaker Change: Maybe that's not so dissimilar to what Youre seeing.
Speaker Change: Previously because of the larger LDP decline.
Speaker Change: Thank you so much.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: The Q&A session is now closed I will now hand back to Jimmy Brad for closing remarks.
Speaker Change: Thank you Ross and I am pleased to invite you to our capital markets day on June 3rd Party classifier.
Speaker Change: I'm looking forward to sharing with you how we see our way forward more details to be announced shortly.
Speaker Change: Before we conclude today's call I want to emphasize our commitment to achieving our target of around 12% adjusted operating margins our focus remains on structural cost reduction.
Speaker Change: Innovation quality and sustainability, despite significant market challenges, such as fluctuating demand and lower LPT.
Speaker Change: Important markets, we continued our strong performance.
Speaker Change: Positive trend in our cash flow and balance sheet reinforce our dedication to delivering strong shareholder return our first quarter call is scheduled for Wednesday April 16 2025.
Speaker Change: You all for joining today's call we truly value. Your continued interest in ultimate on till next time drive safely.
Speaker Change: This concludes today's conference call. Thank you all for participating you may now disconnect your lines. Thank you.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].