Q2 2025 Autoliv Inc Earnings Call
Unknown Executive: Thank you for joining us for the 2025 financial results conference call and webcast.
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Good day, and thank you for standing by, welcome to the to leave Inc. Second quarter, 2025 Financial results conference call and webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session to ask a question during the session. Please press star 1 and 1 on your telephone, you will then hear an automated message, advising your hand is raised to withdraw your question.
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Anders Trapp: I would now like to turn the conference over to your speaker, Mr Anders Trapp, Vice President of Investor Relations. Please go ahead, sir. Thank you, Rob.
Speaker Change: Please note that today's conference is being recorded, I would now like to the conference, serve it to your speaker Mr. Anders trap, vice, president of investor relations. Please go ahead sir.
Anders Trapp: Welcome everyone to our second quarter 2025 earnings call. On this call, we have our President and Chief Executive Officer, Mika Bratt. Our Chief Financial Officer, Fredrik Westin, and me, Anders Trapp, VP Investor Relations.
Mika brat: Thank you, ra welcome everyone to our second quarter 2025 earnings call on this call, we have our president, and chief executive officer, Mika brat.
Anders Trapp: During today's earnings call, we will cover several key topics, including our record sales and earnings for the second quarter, an update on the market development and tariffs that are affecting the automotive industry, as well as how our strong balance sheet and asset returns provide financial resilience and the support for a continued high level of shareholder return. Following the presentation, we will be available to answer your questions. As usual, the slides are available on autoliv.com. Turning to the next slide.
our Chief Financial Officer 3, Christine, and me on the top VP investor relation
Mika brat: To earning school. We will cover several key topics, including our record sales and earnings for the second quarter.
Mika brat: An update on the market development and terrorists that are affecting the automotive industry as well as how our strong balance sheet and asset returns provide Financial resilience.
And the support, uh, for a continued high level of shareholder returns.
Mika brat: Following the presentation, we will be available to answer your questions as usual. The sites are available on how to live.com.
Anders Trapp: We have the Safe Harbor Statement, which is an integrated part of this presentation and includes the Q&A that follows. During the presentation, we will reference non-U.S. GATT measures. The reconciliations of historical use-gap to non-use-gap measures are disclosed in our quarterly earnings release. available on autoliv.com and in the 10Q that will be filed with the FDA.
Mika brat: Turning to the next slide.
We have the Safe Harbor statement, which is an integrated part of this presentation and includes the Q&A that follows.
Mika brat: During the presentation, we will reference non us gaap measures.
The reconciliations of historical use Gap to non-use Gap, measures or disclosed in our quarterly earnings release.
Anders Trapp: Lastly, I should mention that this call is intended to conclude at 3 p.m. Central European time, so please follow a limit of two questions per person.
Available uh on how to live.com and in the 10q that we will be filed with the SEC.
Mikael Bratt: And I'll hand it over to our CEO, Mikael Bratt. Thank you, Anders. Looking on the next slide. I am proud to present a record second quarter highlighting our company's resilience and strong marketplace. Fueled by strong customer relationships and our culture of continuous improvement. This achievement lays a solid foundation for the rest of the year. However, we remain cautious about the rest of the year as we navigate the complexities of tariffs and other challenging economic factors. It is encouraging that we, based on light vehicle production data from July, outperformed global light vehicle production despite continued significant headwinds from mixed ships.
Mika brat: Lastly, I should mention that this call is intended to conclude the 3 pm Central European Time. So please follow a limit of 2 questions per person.
I now hand it over to our CEO.
Speaker Change: Thank you and looking on the next slide.
Speaker Change: I am proud to present the record second quarter, highlighting our company's resilience and strong Market position.
Speaker Change: Fueled by strong customer relationships, and our culture of continuous Improvement.
Speaker Change: This achievement lays a solid foundation for the rest of the year.
Speaker Change: However, we remain cautious about the rest of the year as we navigate the complexities of tariffs and other challenging economic factors.
Mikael Bratt: In China, we saw a clear improvement with the gap between our sales growth and light vehicle production growth narrowing compared to the previous quarter. This positive development was driven by recent product launches with Chinese OEMs. Notably, our sales in June outpaced the growth of the Chinese light vehicle production. And we expect this positive trend to continue through the reminder of the year. We significantly improved our operating profit and operating margin compared to a year ago. This strong performance was primarily driven by well-executed activities to improve efficiency and cost. We successfully recovered approximately 80% of the tariff costs incurred during the second quarter and expect to recover most of the remaining portion later this year.
It is encouraging that we based on likely production data from July outperformed, Global light vehicle production, despite continued significant headwinds from mixed ships.
Speaker Change: In China, we saw a clear improvement with the gap between our sales growth and likely in production growth, narrowing compared to the previous quarters.
Speaker Change: These positive development was driven by recent product, launches with Chinese, oems notably, our sales in June outpaced. The growth of the Chinese light vehicle production.
Speaker Change: And we expect these positive trend to continue to reminder of the year.
Speaker Change: We significantly improved our operating profit and operating model compared to a year ago.
Speaker Change: This strong performance was primarily driven by well-executed activities to improve efficiency and costs.
Mikael Bratt: The combination of not yet recovered tariffs and the dilutive effect of the recovered portion resulted in a negative impact of approximately 35 basis points on our operating margin in the quarter. We also achieved record earnings per share for a second quarter. Over the past five years, we have more than tripled our earnings per share, mainly driven by strong net profit growth, but also supported by a reduced share count. Our cash flow remains strong despite higher receivables driven by robust sales and tariff compensations late in the quarter. Our solid performance, combined with a healthy debt leverage ratio, supports continuous strong shareholder returns.
During the second quarter and expect to recover. Most of the remaining remaining portion. Later this year, the combination of not yet recovered tariffs and the dilutive effects of the recovered portion resulted in a negative impact of approximately 35 basis points, on our operating margin in the quarter.
Speaker Change: We also achieved record earnings per share for a second quarter.
Speaker Change: Over the past 5 years, we have have we have more than tripled our earnings per share, mainly driven by Strong net profit growth, but also supported by A reduced share count.
Speaker Change: Our cash flow remained strong, despite higher receivables, driven by robust sales and tariff compensations late in the quarter.
Mikael Bratt: We remain committed to our ambition of achieving 300 to 500 million US dollars annually in stock repurchase. as outlined during our capital markets day in June. Additionally, we are increasing our third quarter dividend to $0.85 per share, reflecting our confidence in our continued financial strength and long term value trade.
Speaker Change: Our solid performance combined with a healthy debt, leverage ratio, supports continuous, strong shareholder return.
Speaker Change: We remain committed to our ambition of achieving 300 to 500 million US dollars, annually in stock repurchases, as outlined during our Capital markets Day in June.
Mikael Bratt: Looking now on the next slide. Second quarter sales increased by 4% year over year, driven by strong outperformance relative to light vehicle production. in several regions, along with favorable currency effects and tariff related compensation. This growth was partly offset by an unfavorable regional and customer mix. The adjusted operating income for Q2 increased by 14%. to 251 million U.S. dollars from 221 million U.S. dollars last year. The adjusted operating margin was 9.3%, 80 basis points better than in the same quarter last year. Operating cash flow was a solid 277 million US dollars, despite temporary working capital build up from higher sales and tariff compensation.
Speaker Change: Additionally, we are increasing our third quarter dividend to 85 cents per share reflecting our confidence in our continued Financial strength, and long-term value creation.
Speaker Change: Looking now on the next slide.
Second quarter sales increased by 4% year-over-year driven by strong outperformance relative to light vehicle production in several regions along with favorable currency effects and tariff. Related compensations,
Speaker Change: This growth was partly offset by an unfavorable Regional and customer mix.
Speaker Change: The adjusted operating income for Q2 increased by 14%.
Speaker Change: To 251 million US dollars from 2121 million US Dollars last year.
Speaker Change: The adjusted operating margin was 9.3%.
Speaker Change: 80 basis points better than in the same quarter last year.
Mikael Bratt: Looking now on to the next slide. We continue to generate broad-based improvement. Our positive direct labor productivity trend continues as we reduce our direct production personnel by 3,200 year over year. This is supported by the implementation of our strategic initiatives, including automation and digitalization. Our gross margin was 18.5%, an increase of 30 basis points year-over-year. The improvements was mainly the result of direct labor efficiency and headcount reduction. As a result of our structural efficiency initiatives, the positive trend for our DNA continues. Combined with the increased gross margin, this led to 80 basis points improvement in adjusted operating margin.
Speaker Change: Operating cash flow was a solid 277 million us despite temporary working capital buildup from higher sales and tariff compensations.
Looking now on to the next slide.
Speaker Change: We continue to generate broad-based improvements.
Our positive direct labor productivity Trend continues. As we reduce our direct production Personnel by 3,200 year obvious year.
Speaker Change: This is supported by the implementation of our strategic initiatives, including Automation, and digitalization.
Speaker Change: Our gross margin was 18.5% an increase of 30 basis points year over year.
Speaker Change: The improvements was mainly the result of direct labor, efficiency and headcount reductions.
Speaker Change: As a result of our structural efficiency initiatives, the positive trend for our DNA continued,
Mikael Bratt: Looking now on the market development in the second quarter on the next slide. According to S&P Global data from July, global light vehicle production for the second quarter increased 270 basis points, exceeding the expectations from the beginning of the quarter by 200 basis points. Supported by the Scrapping and Replacement Subsidy Policy, we continue to see strong growth for domestic OEMs in China, while light vehicle production in higher CPV markets in North America and Western Europe declined by around 3% each year. This resulted in an unfavorable regional light vehicle production mix of around 2.5 percentage points in the quarter.
Speaker Change: Combined with the increased gross margin. This led to 80 basis points Improvement in adjusted operating module.
Speaker Change: Looking now on the market development, in the second quarter on the next slide.
Speaker Change: According to S&P global data, from July Global light vehicle production, for the second quarter, increased 270 basis points. Exceeding, the expectations from the beginning of the quarter by 200 basis points.
Supported by the scrapping and replacement subsidy policy. We continue to see strong growth for domestic oems in China while light vehicle production and higher cpv markets in North America and Western Europe declined by around 3% each
Mikael Bratt: A significant negative impact on our overall outperformance. In the quarter, we did see call-off volatility continuing to improve year over year, and sequentially from the first quarter.
Speaker Change: this resulted in an unfavorable Regional light vehicle production, mix of around 2.5%, this points in the quarter,
Speaker Change: A significant negative impact on our overall outperformance.
Mikael Bratt: We will talk about the market development more in detail later in the presentation.
Speaker Change: Cool off. Volatility continuing to improve year over year. A sequentially and sequentially from the first quarter.
Mikael Bratt: Looking now on our sales growth in more detail on the next slide. Our consolidated net sales were over 2.7 billion US dollars, the highest for the second quarter so far. This was almost 110 million higher than last year, driven by price, volume, positive currency translation effect, and 27 million from tariff-related compensation. Excluding currencies, our organic sales grew by more than 3%, including tariff cost compensation. China accounted for 18% of our group sales. Asia, excluding China, accounted for 19%. America is for 33% and Europe for slightly more than 30%.
Speaker Change: We will talk about the market development more in detail, in the later, in the presentation. Looking now, on our sales growth, in more detail, on the next slide.
Speaker Change: Our our Consolidated net sales were over 2.7 billion US Dollars the highest for a second quarter so far.
Speaker Change: This was almost 110 million higher than last year.
Driven by Price, volume percent positive, currency translation effects, and the 27 million from tariff related compensation.
Speaker Change: Excluding currencies, our organic sales grew by more than 3%, including tariff cost compensations.
China accounted for 18% or group sales.
Speaker Change: Asia, excluding China accounted for 19%.
Mikael Bratt: We outline our organic sales growth compared to light vehicle production on the next slide. Our quarterly sayings were robust and slightly exceeded our expectations. driven by strong performance across most regions, particularly in Europe and India. Based on light vehicle production data from July, we outperformed light vehicle production in all regions except Japan and China, fueled by product launches and tariff compensation. In Japan, we were negatively affected by an unfavorable light vehicle production mix, resulting from last year's production stop at Daihatsu due to homologation issues. Nevertheless, we outperformed the market by over two percentage points in the first half of the year.
Speaker Change: America's for 33% and Europe was slightly more than 30%.
Speaker Change: We outline our our organic sales growth compared to like your production on the next slide.
Speaker Change: Our quarterly saints were robust and slightly exceeded our expectation.
Speaker Change: Driven by strong performance across most regions, particularly in Europe and India.
Speaker Change: Based on light vehicle production data from July.
Speaker Change: We out to found night, big production in all regions except Japan and China.
Speaker Change: Fueled by product launches and tariff compensations.
Mikael Bratt: In China, our sales to domestic OEMs grow more than 16%, aligned with their LVP growth. Our growth for the global customers in China was two percentage points higher than their LVP. While the ongoing light vehicle production mix shifts continue to impact our overall performance in China, we saw a clear improvement with the gap between our sales and light vehicle production narrowing compared to the past three quarters.
Speaker Change: In Japan, we were negatively affected by an unfavorable light. Vehicle production, mix resulting from last year's production stop at theetu due to homologation issues. Nevertheless, we output performed. The market by over, 2% this points, in the first half of the year
Speaker Change: In China, our Saints, to domestic, oems grow more than 16% aligned with their lvp growth. Our growth for the global customers. In China was 2% this points higher than their likely to production.
Mikael Bratt: On the next slide, we show some key model launches. As shown on this slide, the second quarter of 2025 saw a high number of new launches, primarily in Asia, including China. While some of these new launches in China remain undisclosed here, due to confidentiality, they reflect a strong momentum for Autoliv in this important market. The models displayed here feature Autoliv content for vehicles from close to $100 to over $500. We're also pleased to have launched seatbelts on two key small Japanese vehicles known as K-cars. This is a meaningful step forward as Autoliv has historically had limited exposure to this segment in Japan.
Speaker Change: While the ongoing lightweight production, mix shift continues to impact our overall performance in China. We saw a clear improvement with a gap between our science and light vehicle production, narrowing compared to the past 3 quarters.
Speaker Change: On the next slide. We show some key model launches.
Speaker Change: As shown on this Slide, the second quarter of 2025 saw a high number of new launches primarily in Asia including China.
While some of these new launches in China, remain undisclosed here, due to confidentiality they reflect a strong momentum for how to live in this important Market.
The models displayed here feature, how to delete content per vehicle from close to 100 to over, 500 US dollars.
Mikael Bratt: In terms of Autoliv's same potential, the D-PAL S09 from Shanghai and the Honda new mid-size electrical crossover JP7 are the most significant. Higher CPV is driven by front center airbags on six of these vehicles as well as knee airbags.
Speaker Change: We're also pleased to have launched seat belts on 2, key small, Japanese Vehicles known as Kors. This is a meaningful step forward as outlined has historically, had limited exposure to these segments in the Japan.
Speaker Change: In terms of how to live Saints retention, the deepal so9 from Champs and the Honda new midsize electrical. Crossover yp7 are the most significant.
Speaker Change: higher cpv is driven by front center airbags on 6 of these vehicles as well as the
Speaker Change: Now, looking on the next slide.
Fredrik Westin: I will now hand over to Fredrik. Thank you, Mikael. I will talk about the financials more in detail now in the next...
Fredrik Westin: Return to the next slide. This slide highlights our key figures for the second quarter of 2025 compared to the second quarter of 2024. Our net sales were approximately $2.7 billion, representing a 4% year-over-year increase. Gross profit increased by $27 million and the gross margin increased by 30 basis points. The adjusted operating income increased from $221 million to $251 million, and the adjusted operating margin increased by 80 basis points to 9.3%. The adjusted earnings per share diluted increased by 33 cents. where the main drivers were $0.27 from higher operating income and $0.10 from lower number of shares.
Speaker Change: I will now hand over to Freddy. Thank you, Mika. I will talk about the financials more in detail now in the next few slides. So if you turn to the next slide,
Freddy: This slide highlights, our key figures for the second quarter of 2025 compared to the second quarter of 2024.
Freddy: Our net sales were approximately 2.7 billion representing a 4% year-over-year, increase
gross profit increased by 27 million and the gross margin increased by 30 basis points.
Freddy: The adjusted operating income increased from 221 million to 251 million and the adjusted operating margin increased by 80 basis points to 9.3%.
Freddy: Share diluted increased by 33 cents.
Fredrik Westin: Our adjusted return on capital employed was a solid 24%. And our adjusted return on equity was a 28%. We paid a dividend of 70 cents per share in the quarter and we purchased shares for 51 million US dollars and retired 0.5 million shares.
Speaker Change: Were the main drivers for 27 cents from higher operating income and 10 cents from lower number of shares?
Speaker Change: Or adjusted return on Capital employed was a solid 24% and our adjusted return on Equity was a 28%.
Fredrik Westin: Looking now on the Adjusted Operating Income Bridge on the next slide. In the second quarter of 2025, our adjusted operating income increased by 30 million. Operations contributed with $35 million, mainly from higher organic sales and by execution of operational improvement plans supported by better call-off volatility. The net currency effect was 12 million positive, mainly from revaluation. The impact from raw materials was around 4 million negative. Out of period, cost compensation was $6 million lower than last year. The combination of unrecovered tariffs and the dilutive effect of the recovered portion resulted in a negative impact of approximately 35 basis points on our operating margin in the quarter.
Speaker Change: We paid a dividend of 70 cents per share in the quarter and we purchased shares for 51 million us and retired 0.5 million shares.
Speaker Change: Looking now on the adjusted operating income bridge on the next slide.
Speaker Change: In the second quarter of 2025 or adjusted operating income increased by 30 million.
Speaker Change: Operations contributed with 35 million. Mainly from higher organic sales and by execution of operational Improvement, plans supported by better Koloff volatility.
Speaker Change: The net currency affect was 12 million positive. Mainly from revaluation effects.
Speaker Change: The impact from raw materials was around 4 million negative.
Speaker Change: Out of period cost compensation was 6 million lower than last year.
Fredrik Westin: Looking now at the cash flow on the next. Operating cash flow for the second quarter of 2025 totaled $277 million, a decrease of $63 million compared to the same period last year, despite a $29 million increase in net income. The decline was primarily driven by higher receivables, reflecting strong sales and tariff compensations toward the end of the quarter. Capital expenditures net decreased by $32 million. Capital expenditures net in relation to sales was 4.2% versus 5.6% a year earlier. The lower level of capital expenditures net is mainly related to lower footprint CapEx in Europe and America and less capacity expansion in Asia.
Speaker Change: The combination of unrecovered terrorists, and the dilutive effects of the recovered portion resulted in a any negative impact of approximately 35 basis points on our operating margin in the quarter.
Speaker Change: Looking now at the cash flow on the next slide.
Speaker Change: Operating cash flow for the second quarter of 2025 totaled 277 million.
Speaker Change: A decrease of 63 million compared to the same period last year.
Speaker Change: Despite a 29 million increase in net income.
The decline was primarily driven by higher receivables, reflecting strong sales and tariff compensations toward the end of the quarter.
Capital expenditures, net decreased by 32 million.
Speaker Change: Capital capital expenditures, net in relation to sales was 4.2% versus 5.6% a year earlier.
Fredrik Westin: The free operating cash flow was $163 million compared to $194 million in the same period in the prior year, as the lower operating cash flow was partly offset by lower The cash conversion in the last 12 months, defined as free operating cash flow in relation to our net income, was around 65%, somewhat below our target of $8 billion.
Speaker Change: The lower level of capital expenditures net is mainly related to lower footprint, capex in Europe and Americas and less capacity expansion in Asia.
Speaker Change: The free operating cash flow was 163 million compared to 194 million in the same period of the prior year.
Speaker Change: As the lower operating cash flow was partly offset by lower capex.
Speaker Change: The cash conversion in the last 12 months. Defined as free operating cash flow in relation to our net income.
Fredrik Westin: Now looking at our trade working capital development on the next Our trade working capital increased by $185 million compared to the prior year, where the drivers were $251 million in higher accounts receivables and $21 million in higher inventory Partly mitigated by 87 million in higher accounts paid. In relation to sales, the trade working capital increased from 11.2% to 12.5%. We view the increase in trade working capital as temporary as our multi-year improvement program continues to deliver results. Additionally, enhanced customer call of accuracy can enable a more efficient inventory management.
Speaker Change: Was around 65% somewhat below our Target of 80%.
Now, looking at our trade working capital development on the next slide.
Speaker Change: Our trade working capital increased by 185 million compared to the prior year.
Speaker Change: Where the drivers were 2555, 2551 million in higher accounts receivables.
Speaker Change: And 21 million in higher inventories, partly mitigated by 807 million in higher accounts. Payables
Speaker Change: In relation to sales, the trade working, capital increase from 11.2% to 12.5%.
Speaker Change: Review the increase in trade working capital as temporary as our multi-year Improvement program continues to deliver results.
Fredrik Westin: Now looking on our debt leverage ratio development on the next. Autoliv has consistently prioritized maintaining a balanced 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 to deliver value to stakeholders over time. In the quarter, we refinanced a 3 billion SEK loan from Swedish Export Credit Corporation with a new one year 2 billion SEK loan. Our leverage ratio remains strong at 1.3 times, well below our target limit of 1.5 times. and has remained stable compared to both the end of the first quarter and the same period last year.
Additionally, enhanced customer call of accuracy. Can enable a more efficient Inventory management.
Speaker Change: Now looking on our debt leverage ratio development on the next slide.
Speaker Change: How to leave has consistently prioritized, maintaining a balanced leverage ratio reflecting or prudent financial management and commitment to a strong balance sheet.
Speaker Change: This approach has enabled the company to navigate economic fluctuations, invest in Innovation, and continue to deliver value to stakeholders over time.
Speaker Change: In the quarter we refinanced 3 billion SEK loan from Swedish export Credit Corporation with a new 1 year. 2 billion SDK loan.
Fredrik Westin: This comes despite returning 550 million U.S. dollars to shareholders over the past 12 months. Our net debt decreased by $31 million while the 12-month trailing adjusted EBITDA increased by $34 million in the quarter.
Speaker Change: Or leverage ratio remains strong at 1.3 times. Well below our Target limit of 1.5 times and has remained stable compared to both the end of the first quarter and the same period last year.
This comes despite returning, 550 million US dollars to shareholders over the past 12 months.
Fredrik Westin: Now looking at the terrorist situation on the next... We are closely monitoring the evolving tariff situation. Thanks to our well-diversified customer portfolio and strong manufacturing footprint across the USMCA region, we are well-positioned to navigate these challenges. Customers and duties have long been a part of doing business, even before the current wave of tariffs. Last year, we paid approximately 100 million US dollars in such costs on a global level, and they are reflected in the sales Currently, we estimate that our total gross exposure to tariffs could roughly double to around 200. However, we are actively engaging with our customers to mitigate the impact through measures such as adjusting shipping points, enhancing USMCA compliance, and exploring compensation mechanisms. In the second quarter, due to timing, customer compensation booked during the quarter covered approximately 80% of the tariffs paid.
Our net debt decreased by 31 million while the 12-month trailing adjusted ebta, increased by 35 34 million in the quarter.
Speaker Change: now, looking at the tire situation on the next slide,
Speaker Change: We are closely monitoring the evolution. The evolving tariff situation.
Speaker Change: Thanks to our well, Diversified customer portfolio and strong manufacturing footprint across the usmca region.
We are well positioned to navigate these challenges.
Customs and duties have long been a part of doing business, even before the current wave of tariffs.
Speaker Change: Last year we paid approximately 100 million US dollars in such costs on a global level and they are reflected in the sales price.
Speaker Change: Currently, we estimate that our total gross exposure to tariffs could roughly double to around 200 million.
Speaker Change: However, we are actively engaging, with our customers to mitigate the impact through measures such as adjusting shipping points enhancing usmca compliance, and exploring, compensation mechanisms.
Fredrik Westin: Most of the remaining charges are expected to be recovered later in the year. Despite the uncertainty, we continue to believe that the net effect on our adjusted operating income for 2025 will be around 20 basis points on our operating margin due to the dilution effect.
In the second quarter due to timing customer compensation booked during the quarter covered Approximately 80% of the tariffs paid.
Speaker Change: Most of the remaining charges are expected to be recovered later in the year.
Fredrik Westin: We remain vigilant, particularly in assessing how these developments may influence end customer demand in the U.S.
Speaker Change: Despite the uncertainty we continue to believe that the net effect on our adjusted operating income for 2025 would be around 20 basis points on our operating margin due to the dilution effect.
Mikael Bratt: With that, I hand it back to you.
Speaker Change: With the main Vigilant, particularly in, assessing how these developments May influence and Custer demand in the US.
Mikael Bratt: Thank you, Fredrik. On to the next slide. The outlook for global light vehicle production in 2025 continues to be uncertain, with regional variations influenced by tariffs slowing economic growth and other factors. S&P now forecast global light vehicle production to grow by 0.4% in 2025, following growth of over 3% in the first half of the year. However, their outlook for the second half has weakened considerably, with light vehicle production now expected to decline by more than 2%. In North America, the production outlook has been significantly downgraded due to the trade risks and higher vehicle prices from import tariffs, especially for the fourth quarter.
Speaker Change: With that, I hand it back to you, m.
Thank you Frick on to the next slide.
Speaker Change: The outlook for Global light vehicle production, in 2025 continues to be uncertain.
Speaker Change: With regional variations influenced by tariffs slowing economic growth and other factors.
Speaker Change: SMP. Now, for cast globalized vehicle production to grow by 0.4%. In 2025, following growth of over 3%, in the first half year, half of the year.
Speaker Change: However, their outlook for the second half has weakened considerably. We'd like to make reproduction now, expected to decline by more than 2%.
Mikael Bratt: This reduction is likely to affect vehicles produced in Mexico and Canada more severely. In Europe, production in the first half of the year continued to exceed expectations, leading to the overall upgrade by S&P's full-year forecast. However, the outlook for the second half of 2025 remains unchanged, as S&P expects. Inventory reductions to take effect after a strong first half of production versus production versus rather subdued vehicle sales. China is also growing, driven by government policies supporting the new energy vehicle market and relaxed auto loan policies. Japan and South Korea are potentially facing declines due to the impact of lower exports to the US.
Speaker Change: in North America, the production Outlook has been significantly downgraded due to the trade risks and higher vehicle prices from import tariffs, especially for the fourth quarter,
Speaker Change: This reduction is likely to affect the kills produced in Mexico and Canada more severely.
In your in your, in Europe production. In the first half of the Year, continue to exceed expectations leading to the overall upgrade by smps full year forecast.
However, the output for the second half of 2025 remains unchanged as SMP expects.
Speaker Change: Inventory reductions to take effect after a strong first half of production versus production versus roers subdued vehicle sales.
Speaker Change: China is also growing driven by government policies supporting the new and energy vehicle market and relaxed outdoor loan policies.
Mikael Bratt: Overall, while some regions are still expecting growth, the global auto industry remains cautious, navigating the complexities of tariffs and other economic impacts.
Speaker Change: Japan and South Korea, or potentially facing declines due to the impact of lower exports to the US.
Mikael Bratt: Now looking on our way forward on the next slide. At our Capital Market Day in June, we outlined our strategic roadmap for sustainable growth and long term value creation. We emphasize our medium and long term growth opportunities, particularly through deepening partnerships with leading global and Chinese OEMs, positioning Autoliv as the clear market leader also in the future. We showcased innovations across our core safety systems, airbags, seatbelts and steering wheels, as well as new mobility safety solutions. Global growth outlook for automotive safety overall is supported by light vehicle production growth driven by positive GDP trends in emerging markets and by continued increases in safety content per vehicle.
Speaker Change: Overall, while some regions are still expecting growth, the Global Auto industry remains cautious navigating the complexities of tariffs and other economic factors.
Speaker Change: Now, looking on our way forward on the next slide.
Speaker Change: At our Capital Market Day in June, we outlined our strategic roadmap for sustained, sustainable, growth, and long-term value creation. The emphasized, our medium and long-term growth opportunities. Particularly through deepening Partnerships with leading Global and Chinese OMS positioning how to live as the clear market leader also in the future.
Speaker Change: We showcased Innovations across our core, Safety Systems, airbags seat belts and steering wheels as well as new Mobility, Safety Solutions.
Mikael Bratt: Our strong performance culture is driven by clear key behaviors to guide us, a clear mandate and expectations end to end. Continuous Improvement Mindset Partnerships across the value chain, both with customers and suppliers. Operationally, we demonstrated progress that contributes to improved profitability. especially through productivity improvement. Automation and Digitalization, Footprint Optimization and Commercial Excellence.
Speaker Change: Global growth outlook for Automotive. Safety overall is supported by light vehicle production. Growth driven by positive GDP Trends in the module markets, and buy continued increases in safety content per vehicle.
Speaker Change: our strong performance culture is driven by clear key behaviors to guide us
Speaker Change: Continuous Improvement mindset.
Speaker Change: Partnerships across the value chain both with customers and suppliers.
Speaker Change: Operationally with demonstrated progress that contributes to improved profitability.
Speaker Change: Especially through productivity improvements.
Mikael Bratt: We reaffirmed our commitment to strong shareholder return with an ambition of 300 to 500 million US dollars in annual stock repurchases and maintaining a healthy leverage ratio not above 1.5 times.
Automation, and digitalization footprint of the message and Commercial excellence.
Mikael Bratt: Now looking on the business outlook on the next slide. We expect the second half of 2025 to be challenging for the automotive industry with lower light vehicle production year over year. However, our ongoing focus on efficiency is expected to further enhance our profitability. We anticipate a significant improvement in our sales performance in China. Additionally, our strong cash conversion and solid balance sheet. provide financial resilience and a robust foundation for maintaining higher shareholder high shareholder return. We successfully navigate the new tariff environment in the first half of the year. This gives us confidence that it is possible to continue on that course, but there is significant uncertainty.
Speaker Change: We reaffirmed our commitment to strong sharers return within ambition of 3, to 500 million US dollars in annual stock repurchases and maintaining a healthy leverage ratio, not above 1.5 times.
Speaker Change: Now, looking on the business, outlook on the next slide.
Speaker Change: We expect the second half of 2025 to be challenging for the automotive industry with lower light vehicle production year. We are
Speaker Change: However, our ongoing focus on efficiency is expected to further, enhance our profitability.
We anticipate a significant improvement in our sales performance in China.
Additionally, our strong cash conversion and solid balance sheet.
Speaker Change: Provide Financial resilience and a robust foundation for maintaining. Higher shareholder, High shareholder returns.
Mikael Bratt: Contrary to the past three years, we do not anticipate a gradual quarter-by-quarter adjusted operating margin increase as the inflationary environment differs from recent We expect a cadence more in line with our historic normal seasonality, with the fourth quarter anticipated to be the strongest of the year, while the third quarter is anticipated to be the weakest quarter in For more information visit www.FEMA.gov Notably, global light vehicle production is expected to drop by 1 million units, or nearly 5% in Q3, making the weakest quarter of the year.
Speaker Change: We successfully navigate the new tariff environment in the first half of the Year. This gives us confidence that it is possible to continue on that course, but there is significant uncertainty
Speaker Change: Contrary to the past 3 years, we do not anticipate the gradual quarter by quarter adjusted operating model increase as the inflation environment differs from recent years.
Speaker Change: We expect Cadence more in line with our historic normal seasonality with the fourth quarter, anticipated to be the strongest of the Year. While the third quarter, is anticipated to be the weakest quarter in the year.
Mikael Bratt: Turning to the next slide.
Speaker Change: Notably Global light vehicle production is expected to drop by 1 million units or nearly 5% in Q3 making the week is quarter of the year.
Speaker Change: Turning to the next slide.
Mikael Bratt: This slide shows our full year 2025 guidance, which excludes effects from capacity alignment, antitrust related matters, and is based on no material changes to tariffs or trade restrictions that are in effect as of July 10, 2025. as well as no significant changes in the macroeconomic environment or changes in customer call of volatility or significant supply chain disruptions. Based on the strong first half year performance and the impact from tariff compensation, we expect our 2025 organic sales to grow around 3%. We expect an adjusted operating margin of around 10 to 10.5%. Operating cash flow is expected to be around 1.2 billion US dollars.
Speaker Change: This slide shows our full year 2025 guidance, which excludes effects from capacity alignment?
Speaker Change: Antitrust, related matters.
Speaker Change: And is based on no material changes to tariffs or trade restrictions that are in effect as of July 10 2025.
Speaker Change: as well as no significant changes in the macroeconomic environment to change in customer call of volatility or significant supply chain disruptions
Speaker Change: Based on a strong first, half year performance, and the impact from tariff compensation. We expect our 2025 organic sales to grow around 3%,
Speaker Change: We expect an adjusted operating margin of around 10 to 10.5%.
Mikael Bratt: Our positive cash flow and strong balance sheet supports our continued commitment to a high level of shareholder return.
Speaker Change: Operating cash flow is expected to be around 1.2 billion US dollars.
Mikael Bratt: Our full year guidance is based on a global light vehicle production decline of around negative 0.5 percent. a tax rate of around 28% and that the net currency translation effects on sales will be around 0.
Speaker Change: Our positive cash flow and strong balance sheet supports, our continued commitment to a high level of shareholder returns.
Our full year guidance is based on a global light vehicle production decline of around negative 5%.
Speaker Change: A tax rate of around 28%.
Mikael Bratt: We are monitoring the situation closely and we are prepared to be as agile as we can to adjust to any changes.
Speaker Change: And that the net currency translation effects on sales will be around zero.
Mikael Bratt: Looking on the next slide.
Speaker Change: We are monitoring the the situation closely and we are prepared to be as agile as we can to adjust to any changes.
Mikael Bratt: This concludes our formal comment for today's earnings call.
Speaker Change: Look on the next slide.
Unknown Executive: And we would like to open the line for questions from analysts and investors.
Unknown Executive: And I will now hand it back to Raz. Thank you sir.
This concludes our formal comments for today's earnings call and we would like to open a line for questions from analysts and investors.
Unknown Executive: As a reminder to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Once again, please press star 1 and 1 for any questions and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Thank you.
And I will now hand it back to Ras.
Tom Narayan: We are now going to proceed with our first question. And the questions come from the line of Tom Narayan from RBC. Please ask your question. Your line is open. Oh, yes, thank you for taking my question. I have two. The first one is on the China domestic performance. I think in your prepared remarks, you said that you performed with the market in the second quarter, but then June, it looks like you outpaced the market. Just curious how we should think about the progression here. Is that something that you think continues to outpace the market? Or is this specific to June?
Ras: Thank you, sir. As a reminder to ask a question. Please press star. 1 and 1, and your telephone and wait for your name to be announced 2 weeks ago. Your question. Please press star 1 and 1. Again once again, please press star 1 and 1 for any questions and wait for your name to be announced to withdraw your question. Please press star 1 and 1 again. Thank you. We are now going to proceed with our first question.
Ras: Please ask your question, your line is opened.
Ras: Ah yes. Thank you for taking my question.
Ras: um,
to the
Ras: performance. I think in your prepared remarks, you said that you performed with the market um in the second quarter but then June it looks like you outpaced the market just curious how we should think about the progression here. Um is that something that you think continues to outpace?
Tom Narayan: I know you mentioned this China was potentially helping drive your expectation for improvement in H2. So that's my first question.
Tom Narayan: I have a follow up. Okay, thank you.
Ras: Um, the market or is it specific to June? I know you mentioned this. China was potentially helping drive your expectation for improvement in H2. So that's my first question on the follow up.
Mikael Bratt: Yes, I think what we're trying to say here with our description on the development in China is that we are progressing in line with what we have indicated before that through the growth of our business with the Chinese OEMs, we are closing the gap that we have seen over the last couple of quarters here. And I would say that towards the end of the quarter, we saw this, I would say, turning the corner here and starting to catch up the underperformance that we have seen over the last three quarters here. So, we feel that we are on the right track and we expect this to continue and that we should be in an outperformance situation in China towards the end of this year.
Ras: Okay, thank you. Um yeah. So I think yeah, 1 of what we are trying to say here with our description on the development in China is that we all progressing in line with what we have indicated before that through through the growth of um our business with the Chinese oems we are closing the the Gap that we have seen over the last couple of quarters here. And um I will say that towards the end of of uh, of the quarterly we saw this.
Ras: I would say, turning the corner here, on, on starting to, to catch up the, the, the, the, the performance that we have seen over the last 3 quarters here. So,
We, we feel that we are on the right track and we expect this to continue and that we should be in an outperformance situation in China for uh, towards the end of this year.
Tom Narayan: Okay, thank you.
Mikael Bratt: And my second one might be a somewhat naive question, so apologies. There's a slide that has product volumes, I think it has like knee airbags down 9% versus LVP chest side up 8%. My sense is this just might be lumpy based on mix, just seeing more big kind of swings. Just curious how that works, why there would be such big swings that just a function of launch activity and mix dynamics. Yeah, it is, it is that. So even if it is one of these product categories here, the sales price can still be quite different. So yeah, it is the mix effect within there that that can sometimes look disconnected from the sales development of if you then take airbag and steering wheels combined or seat belts.
Speaker Change: Thank you. And um, my second 1 might be somewhat naive question. So apologies. There's a slide that has product volumes. Um, I think it has uh, like near are but near airbags down 9% versus LBT, chest Side Up, 8%. Um, my sense is this just might be lumpy based on mix, uh, just seeing where Jake kind of seems just curious how that, how that works. Uh, why they would be such a big swings is that just a function of launch activity and and mixed Dynamics. Thanks.
Tom Narayan: Got it.
Yeah, it is. It is that. Um, so even if it is, uh, 1 of these product categories here, the sales price can still be quite different. Um, so yeah, it is the mix effect within there. That steps it kind of somehow times. Look, disconnected from the sales development of if you then take airbag and steering wheels, combined or seat belts combined,
Tom Narayan: Thank you.
Tom Narayan: I'll turn it over. Thanks.
Colin Langan: We are now going to proceed with our next question. And the next questions come from the line of Colin Langan from Wales Fargo. Please ask a question. Oh, great. Thanks for taking my questions. Just to follow up on the tariff commentary, I mean, you recovered most of it in Q1. Any reason why only 80%? Yeah, actually, you had a few more months. It was actually pretty impressive in Q1 you got so much recovered. Any reason why it's a little slower in Q2? And just to be clear, you still expect by the end of the year to get 100% of all your tariff costs?
Speaker Change: Got it. Thank you. I'll turn it over. Thanks.
Speaker Change: Thank you. We are now going to proceed with our next question.
And the next questions come from the line of Colleen Langan from Wells, Fargo, please ask a question.
Colleen Langan: Oh, great, thanks for taking my questions. Um, just to follow up on the, the Tariff commentary. I mean, you, you recovered most of it in q1. Any reason, why only 80% yet actually you had a few more months. It was actually pretty impressive. In q1, you got so much recovered.
Fredrik Westin: I mean, or is it going to be a little bit of a lag that gets recovered? I think, I mean, as you said, I mean, we had some tariffs hitting us in the first quarter here, but it was really in March that started. And then, of course, we have a full quarter here now with We are accruing these every day when we ship the products. Of course, when you get towards the end of the quarter and the closing, you have some outstanding stuff that are still in negotiation mode. So it's a pure timing effect. And that's why we feel confident that we will regain that towards the end of next quarter here.
Colleen Langan: Any reason why it's a little slower in Q2 and just to be clear, you still expect by the end of the year to get 100% of all your tariff costs. I mean, or is it, is it going to be a little bit of a lag that gets recovered into next year?
Fredrik Westin: So it's a pure, I would say, calendar question here in my mind here. So, of course, Q1, lower amount, less of an impact. Q2, bigger. And with the pace we have on a daily day to day operations here, we have the timing towards the end of the quarter. Pretty straightforward one in that regard.
Colleen Langan: No, I, I think I mean, uh, as you said I mean, we we had some tariffs sitting else in in the first quarter here but it was really in March that, that that started. And then of course, we have a full quarter here now with the with yeah, higher level. And, uh, as we are growing this, every day when we ship the products, of course, when you get towards the end of the closed, uh, quarter and the closing you have some outstanding that that they're still in, in negotiating mode. Uh, so so it's a pure timing effect and, and, uh, that's why we feel confident that we will, uh, regain that towards the end and, and uh, uh, next quarter here. So it's, it's, uh, it's a pure. Uh, I would say a calendar question here.
Colleen Langan: in in in in
Colleen Langan: In in my, in my mind here. So, uh, of course, q1 lower amount, uh, less of an impact, uh, Q2 bigger. And, uh, with the pace we have on a daily day-to-day operations here, uh, we have the timing towards the end of the quarter, so
Colin Langan: Okay, got it. Um, and then just as we think about the guidance, the margin guides unchanged FX a little bit better, I would assume on a percent basis that doesn't affect the margin is usually FX converts at average margins. You also highlight the raw material costs. Is that worse? Any quantification of how much worse that is? And are there or what is the offset to kind of keep the percent margin guidance in check? Yeah, so, you know, on the guidance, the impact of tariffs, if that was your first part of the question, so that's the main reason for the increase in the organic growth from 2% to 3%.
Colleen Langan: Pretty straightforward Industrial.
Speaker Change: Okay, got it. Um and then just as we think about the the guidance the margin guides on changed FX a little bit better. Uh I would assume on a percentage basis that doesn't affect the. The margin is usually FX converts to an average margins. You also highlight the raw material costs. Uh, is that worse? Any quantification of of how much worse that is? And are there, or what is the offset to kind of? Keep the percent margin guidance and check.
Fredrik Westin: So that is the tariff component there that we expect to be able to pass on to the customer and then the impact of that on our top line. And then we expect a 20 basis point dilution effect on the full year from tariffs, which is a combination of the pure dilution effect that we have the composition on the sales line but we have no EBITD effect from it. That's one part of the dilution effect but we also expect that there will always be at the quarter here some cost that we need to absorb first before we can pass it onto the customer And then on your raw material question, we actually expect that the raw materials have improved, or we see that the raw materials situation has improved slightly versus Q1.
Speaker Change: Um, you know, on the guidance, the impact of terrorists if that was your first part of the question. So that's the main reason for the increase in the organic growth from 2% to 3%. So that is the Tariff component there that we expect to be able to pass on to the customer and then the impact of that on our Top Line. Um, and then we expect a 20 basis point dilution effect on the full year, uh, from uh, tariffs, which is a combination of
Um, just the pure delusion effect that we, you have the, the compensation on the, on the sales line but you have no e bit effects from it. Um, so that's 1 part of the dilution effect, but we also expect that there will always be at the quarter end. Some costs that we need to absorb first before we can pass it on to the, uh, the customer.
Colin Langan: So that we now expect a headwind of close to $20 million, which is then a drop from around $40 million that we were expecting after the first quarter. It has slightly improved actually, for this year. Okay, that's very helpful. All right. Thanks for taking my questions.
Speaker Change: Um, and then on your raw material question, uh, we actually expect that the raw materials have improved or we see that the raw material situation has improved slightly versus q1. Um, so that we now expect a headwind of uh, close to 20 million, uh, which is then a drop from around 40 million, uh, that we were expecting after the first quarter.
Speaker Change: So that it has slightly improved, actually huh for for this year, okay.
Unknown Executive: We are now going to proceed with our next question.
Speaker Change: Okay. Yeah, it's very helpful. All right, thanks for taking my questions. Okay.
Speaker Change: We are now going to proceed with our next question.
Edison Yu: And the next questions come from the line of Edison Yu from Deutsche Bank. Please answer your question. Hi, thank you for taking our questions. I wanted to, first of all, I want to come back on the margin. I know you're looking for 3Q to be the weakest. Can you just maybe walk us through the main drivers of that relative to the second quarter? It's basically the volume that Mikael mentioned during the presentation. If you look at S&P Global, that indicates a roughly 1 million unit drop between Q2 and Q3, which is not so different from a typical seasonality.
Speaker Change: And the next questions come from the line of Edison you from doe Bank, please answer your question.
Speaker Change: Hi. Thank you for taking our questions wanted to, to first off. I want to come back on the on the margin. I know you're looking for for 3 Q to be the weakest. Can you just maybe walk us through the the main drivers of that relative to the the second quarter?
Speaker Change: Yeah. It's, it's basically the volume that we indicate that we already or that making conventional during the presentation. Um, if you look at S&P Global, um
Edison Yu: Q3 is typically the weakest LVP quarter.
Edison Yu: And then we still continue to expect that the fourth quarter will be the strongest quarter, both in terms of volumes, but also then with a regular seasonality that we have higher engineering income in the fourth So more a return to the more traditional seasonality that we had pre-inflation. Understood, understood. And then just more generally, you know, we've seen reports that some of the big OEMs are, are trying to be a bit more stringent on some of the terms of the suppliers. Have you seen any of that come up in your discussions? Or at least any potentially any impact of that happening later in the year?
Speaker Change: That indicates a roughly 1 million units drop between Q2 and Q3 which is not so different from the typical seasonality, Q3 is typically the the week just lvp quarter, um, and then we still continue to expect that. The fourth quarter is it will be the strongest quarter both in terms of volumes. But also then, with the regular seasonality, that we have higher engineering income in the fourth quarter,
Speaker Change: So more more a return to the more traditional seasonality that we had pre-installed.
Mikael Bratt: I think, I mean, the terms and condition is, I would say, a regular business to go through and it's a negotiation around those also. So I wouldn't like to point out that as a specific topic here. I think it's a natural part of us interacting with our customers here. to negotiate around that as well. Great, thank you.
Speaker Change: Understood understood and then, and there's more generally, you know, we've seen reports that some of the, the big oems are are trying to be a bit more stringent on some of the terms of the suppliers. Um, have you seen any of that come up in your discussions or or at least, um, any potentially any impact of that happening later in the year?
Speaker Change: Thank you. I mean, the the terms and condition is um also a regular business to, to go through and uh, it's a negotiation around those also. So, so I, I wouldn't, uh,
Speaker Change: Like to point out that as a specific topic here, I think uh it's a natural.
Speaker Change: Part of, uh, us uh, interesting with, with our customers. Yeah. So
Speaker Change: it's a negotiation around that as well.
Speaker Change: Okay, thank you.
Emmanuel Rosner: We are now going to proceed with our next question. And the questions come from the line of Emmanuel Rosner from Wolf Research. Please ask your question. Yes, thank you so much. Just on tariff again, just a quick point of maybe housekeeping or clarification. Would it be your expectation that in the third quarter you will therefore over-recover tariffs? So like you'll have the 20 percent under-recover from Q2 and then the full Q3 tariffs? Or that every single quarter will likely have a little bit of a lag and therefore you could also end the year not fully recovered?
Speaker Change: We are now going to proceed with our next question.
Speaker Change: And the questions come from the line of Emmanuel. Rosner. From World's research. Please ask your question.
Emmanuel Rosner: Yes, thank you so much. Um, just so I'm tired of again, just a quick point of maybe housekeeping or clarification. Would you be your expectation that, um, in the third quarter, you will therefore, uh, over recover tariffs. So, like, you'll have the 20% under recovery from Q2 and then the full Q3 tariffs or that every single quarter will likely have a little bit of a lag. And and therefore, you can also
Mikael Bratt: Yeah, I think and as Fredrik already mentioned here when it comes to the full year that we expect, of course, there'll be some calendar effects there that you have a spillover, so to speak, from what is not in a timely fashion being able to conclude before you close the books. So, I mean, the size of it, I wouldn't like to speculate, but you had some calendar effect there. But I guess that's also true from a quarter point of view as well, you don't expect to over-recover. No, no, that's my point. Every closing in the quarter, be it Q3, Q2, or Q4, ultimately you have this time effect.
Speaker Change: You know, end the year not fully recovered.
Speaker Change: Yeah, I think uh and as Freddy could already mentioned here, when it comes to the full year here uh that we expect of course there'll be some calendar effects there uh, that you you uh,
Speaker Change: Have, uh, spill over so to speak from, what's is not in a timely fashion being able to conclude before you close the books. So, uh, I mean, the size of it. Uh, I wouldn't like to speculate but of course that you had some calendar Factor as well.
Emmanuel Rosner: Understood. Thanks for clarification.
Mikael Bratt: And then I guess longer term, so you had your capital markets day recently, 12% margin is still very much the target. Holistically, you know, how much of the drivers to get there are things that are generally under your control, in terms of, you know, head count reduction, efficiencies, automation, etc. And how much of it is really, you know, things that would require essentially a more stable market or different industry conditions. I think we have tried to frame it here, I mean, around the stable and reasonable LVP level here, and we talked about the 85 million here and call of stability back to pre-pandemic here.
Speaker Change: Particularly um you know how much of the drivers to get, there are things that are generally under your control. Um in terms of you know, headcount reduction efficiencies automation, Etc. And how much of it is really uh you know, things that would require essentially a more more stable Market or different industry conditions.
Mikael Bratt: So I mean, that's still valid for sure. But as you can see here in the quarter here, we are delivering well on what is in our control. And I think that's really our focus here to make sure that we have good traction on our different levers that we have identified for our within our own controls. Got it.
Speaker Change: Yeah, I think we we have tried to frame it here. I mean around uh, the stable and and reasonable, uh uh lvp level here and we talk about 85 million here and uh uh call-ups stability back to to 3 pandemic here. Um, so, I mean that that's that's still valid for sure. And but as you can see here in the quarter here, we are delivering well on what is in our control. And I think that's really our Focus here to make sure that we we have good traction on our different levers that we have identified for our
Speaker Change: uh,
Speaker Change: within our own control to speak.
Mikael Bratt: Thank you.
Hampus Engellau: We are now going to proceed with our next question. And the questions come from the line of Hampus Engellau from Handelsbanken. Please ask your question. Thank you very much. Two questions from me. Just some clarification on China. Given the price competition we see there among the domestic OEMs, has that in any way changed your pricing situation as it becomes tougher for you guys in terms of negotiations? That's my first question. Second question is, if you maybe could update us on the situation in India, maybe market share, and also how much contribution of growth you have from India this year.
Speaker Change: Got it. Thank you.
Speaker Change: We are now going to proceed with our next question.
Speaker Change: And the questions come from the line of hampers Angelo from hers Bank. Can please ask your question.
Hampus Engellau: Thank you.
Hampus Engellau: Yeah, I can start with China and then Fredrik can jump in on India there. But I mean, I mean, first, I mean, as you know, I mean, automotive industry is very focused on cost and has always been. And I think we have shown that we we have the capability to be price competitive, wherever we are operating also in China, where we are the market leader in China. local market. What we have talked about here is the mixed effects that we have been impacted by, but we are regaining that. So so I would say my my view here and feeling here is that we are able to meet the the cost pressure that you have in the in the China market and also elsewhere here so Hence our focus here on continuing to drive efficiency and cost out in the whole system.
Thank you very much, 2 questions from me. Uh just just something clarification on China. Um how given the price competition was there? Among the domestic oems has that in in any way, changed the uh your your pricing situation as it become tougher for you guys in terms of negotiations, that's my first question. Second question is, is India if you maybe could offer some the situation in maybe market, share, and also how much contribution of growth you had from India this year. Thank you.
Speaker Change: Yeah, I I thought with China, and then for the can jump in on India there. But, uh, I mean, I mean, first, I mean, as you know, I mean, uh, of most of the industry is very focused on cost. And as always been and, uh, I think we have shown that we we have the, the capability to be price competitive. Uh, wherever we are operating also in China where we are, uh, the market leader, uh, in in the China, local market. Uh, what we have talked about here is the mix effects that we have been impacted by, but we are regaining that. So, so so, uh, I would say, my my view here and, uh,
Speaker Change: feeling here is that we are able to meet
Speaker Change: the the cost pressure that you have in the in the China market and also elsewhere here. So
Fredrik Westin: Yeah, and then your question regarding India. So we have significantly outperformed the underlying MVP growth in the first half of the year. And we have around 60% market share in India. For the full year 2025, we expect that India will make up around 5% of our group sales. That's Adding around a hundred million top line.
Hence, our Focus here on continuing to to drive efficiency. And, and I was like, host out in in the whole system here.
Speaker Change: Yep. And then, uh, I understand your question regarding India. Um, so we, we have significantly outperformed, uh, the underlying lvp growth, uh, in the first half of the year. Um, and we have uh, around 60% market share in India.
Speaker Change: For the full year 2025, we expect that India will make up around 5%.
Speaker Change: Of our group sales. That's
1100 million people running around but yeah, 100 million.
Top Line. Super, thank you very much.
Vijay Rakesh: We are now going to proceed with our next question. And the questions come from the line of Vijay Rakesh from Mizuho. Please answer your question. Yeah, hi, Mikael and Fredrik. Just a quick question. As you look at global GDP, you mentioned second half, you know, might be some risk with the tariff and pull-ins. Do you still expect to see the same seasonality as you go into December for you guys given some of The, you know, the overall market trends there on LVP and their follow up.
Speaker Change: Thank you.
Speaker Change: We are now going to proceed with our next question.
Speaker Change: And the questions come from the line of Vijay. Raage from Mizzou hope. Please ask your question.
Vijay Rakesh: So, sorry, could you repeat that? The line was a bit bad there. Given the second half risk in LVP with the pull-ins and tariffs, do you still expect the same seasonality in the December quarter for Autoliv? I mean, so we do expect that the second half will be weaker in relation to the first half. When you saw LVP in the first half was up 3.1% year over year. And S&P thinks it or says it will be down 2.3% year over year. So yeah, the impact on the end consumer has been limited in the first half and expectations that that will increase in the second half of the year.
Yeah. Hi uh, Mr. Just a quick question, and if you look at, um, Global LGBT you mentioned, she can have, you know, might be some risk with the Tariff and Poland's. Um, we still expect to see the same, um, season going to December for you guys to give us some of the, the, you know, the overall market trends there on lvp and the follow up
So sorry. Could you repeat that? The line was a bit better. Could you just give me the
Speaker Change: The risk.
Speaker Change: And Tennis you still expect the same seasonality in the December quarter, uh, for orderly.
Speaker Change: For me.
Speaker Change: yeah, I mean
Vijay Rakesh: But then in terms of that impact on us, it's then, as I explained before, that leads to a lower Q3 LVP by roughly 1 million sequentially quarter over quarter. And with that, we would expect the third quarter to be our weakest in the year in terms of profitability. And then the fourth quarter will have also due to seasonality, the highest LVP support. And then on top of that, the regular.
Speaker Change: So we we do expect that the second half will be weaker uh, in relation to the first half. I mean, you saw lvp in the first half was up spin, 0.1% year-over-year, and and SNP things. It was says it would be down to 2.3% year-over-year. So, yeah, the impact on, uh, say the end consumer has been Limited in the first half and uh, the expectations that that will increase in the second half of the year.
Vijay Rakesh: Okay, let's hear from the higher engineering income and the fourth. I hope that answers your question. Yeah, yeah, very good.
Speaker Change: In terms of I say that impact on us is then as I explained before that leads to a lower Q3 uh, lvp by roughly 1 million sequentially quarter per quarter. Um, and and and with that, we would expect the third quarter to be our weakest in the year in terms of profitability. Um, and then the fourth quarter, will have a, you know, also due to seasonality the highest lvp support. Uh, and then on top of that, the regular
Speaker Change: cada sales of the, the higher engineering income, and the fourth quarter.
Vijay Rakesh: And then on the EV versus ICE, what's the content on EV vehicles versus ICE? And I guess what's the mix for you now, EV versus ICE overall for your group sales? Thanks. I mean, it's not a large change. I mean, we are, as you said, I mean, our market share is pretty similar on EVs as it is on the regular ICE vehicles. And then we did not see any change on that here in the second quarter. Thank you. Thanks.
Speaker Change: I hope that answers your question. Yeah, yeah, yeah, very good. And then on the EV, uh, EV versus I see once the content on EV Vehicles versus ice and, um, I guess what's the mix for you now? E versus Ice overall for your group sales. Thanks.
Speaker Change: Um, yeah, I mean it's not a large change. I mean, we we are
Speaker Change: I mean, as you said in our market share is is pretty similar on EVS as it is on on the regular ice vehicles. Um, and then we did not see any change on that here in the in the second quarter.
Speaker Change: Thank you.
Michael Aspinall: We are now going to proceed with our next question. And the questions come from the line of Michael Aspinall from Jefferies. Please ask your question. Thanks, Katie, Mikael, Fredrik and Anders. Just to kind of follow up on Tara's, can you give us some context as to the competitive positioning of some of the other safety providers in terms of production in the US? Now, I think we are well, I would say, well positioned to to navigate through this. First of all, we are very regionalized. So the different regions are taking care of its own value chain to a very large extent.
Speaker Change: Thanks.
Speaker Change: We are now going to proceed with our next question.
Speaker Change: And the questions come from the line of Michael aspinall from Jeffrey's please ask your question.
Speaker Change: and and is, um,
Speaker Change: Contacted to the competitive positioning of some of the other safety providers in terms of production in the US.
No. I I think uh, we are well, I would say.
Speaker Change: well, positioned to to navigate through this, I mean, first of all, uh we are very realized so the different regions are
Michael Aspinall: Of course, America is one region here. So for us, it's Then primarily a question about the US-Mexico tariff that is in place there. But also there we have a very strong industrial footprint relative to industry and competition here with our five plants in Utah. And in all this we're working with our customers, of course, to see how we can leverage and optimize our footprint in the best possible way there in the short term. So, yeah, I think we're in a good position there. Okay. And then it's kind of a related question. Outside of the discussions you're obviously having with your customers about recovering tariffs, is there any kind of – has the conversation changed with your customers?
Speaker Change: Taking care of its own value chain to a very large extent. Uh, of course, Americans is 1 reading here. So for us it's uh,
Michael Aspinall: Because I could imagine with that local footprint, I mean, they may be coming to you, although they probably don't want to pay the tariffs, and asking you to kind of help them with it. More volumes, say. Yeah, I think I mean, of course, we are working with them, as I mentioned here to find the solution in both activities short term that can limit the impact there, but but I mean, long term, we can do a lot of things here. But I think what we need to do, or have in order to take next steps here is to have clarity on how tariffs actually will play out here.
Speaker Change: Then primarily a question about the US Mexico, Mexico, tariffs, that is in place there but also there we have a very strong industrial footprint relative to our industry and and competition here with our 5 plants in in in Utah. And in all this we're working with our customers of course to see how we can leverage uh and optimize our footprint in the best possible way there in the short term. Um, so yeah, I think we have been in a good position there, okay? And then I kind of it's kind of a a related question outside of the discussions. You're obviously having with your customers about recovering tariffs can, is there any kind of has this has a conversation changed with your customers because I could imagine you know, with that local place.
Speaker Change: Blueprint. I mean they may be coming to you although they probably don't want to pay the tariffs and asking you to kind of help them with
Speaker Change: more volume say, for example,
Michael Aspinall: I mean, at what level and that they are there for, you know, foreseeable future. I mean, nothing is forever here, but you need to have some until further notice, at least in place sustainably in order to take any potential CapEx decisions in all that. But right now, it feels like we are some time away from that point.
Speaker Change: Yeah, I think I mean of course we are working with them as a mention here, to find the solution, both and activities short-term that can limit the impacts there. But but I mean long-term, uh, we can do a lot of things here, but I think what we need to do and I have in order to take next steps here is to have Clarity on how tariffs actually will play out here. I mean, at what level and and that they are there for, you know, foreseeable future, I mean nothing is forever here. But we need to have some until further notice at least in place uh, sustainably in order to take any potential capex decisions in in all that. But right now, it feels like we are
Unknown Executive: Okay, thank you.
Speaker Change: Sometime away from that point.
Mattias Holmberg: We are now going to proceed with our next question. And the next questions come from the line of Mattias Holmberg from DNV Carnegie. Please ask your question.
Speaker Change: Okay, thank you.
Speaker Change: We are now going to proceed with our next question.
Mattias Holmberg: Thank you. Just a quick follow-up on the 10-10.5% margin guidance in the context of the 20-bit Tariff Dilution. Should we think of the underlying performance as absorbing this tariff headwind? In other words, that there is some underlying improvement, and that the tariff drag is what's effectively holding back, you know, what would be a very small upgrade. I'm just trying to understand how best to frame the guidance in relation to that. managed the headwind that we see and this is definitely a handwind that we have to absorb within the guidance here.
Speaker Change: And the next question is coming from the line of Matias Holmberg from dnv County, can you please answer your question?
Speaker Change: Thank you. Uh, just a quick follow-up on the 10 to 10 and a half percent margin guidance. In the context of the 20 bits, uh, terrorist dilution, should we think of the underlying performance as absorbing this, uh, terrorist headwind. In other words, that there is some underlying Improvement and, uh, that the Third
Speaker Change: Charges what's effectively holding back? You know what would be a very small upgrade. I'm just trying to understand how best to frame the guidance in relation to this impact.
Speaker Change: No, I think, I mean, absolutely right. The, the Tariff impact that critic mentioned before is included in, in our, our guidance and and we are working uh, as I said here, very hard to to improve and take out costs Etc to to
Speaker Change: Manage the the headwind that we see and this is definitely and, and win that we have to have. So, all within the in within the, uh, guidance here.
Unknown Executive: We are now going to proceed with our next question.
Speaker Change: We are not going to proceed with our next question.
Agnieszka Vilela: And the next questions come from Zolana Agnieszka Vilela from Nodia. Please ask your question. Perfect. Thank you so much.
Agnieszka Vilela: I have two questions. So starting with the capital distribution at the CMD, you said that you have the ambition to return 300 to 500 million through buybacks, but now you're running at about 50 million buyback per quarter in the last two quarters. So can you tell us what is the reason behind the somewhat smaller buyback pace and also what should we expect for the remainder of the year? I mean, first of all, we are fully committed to what we have stated there to have around 300 to 500 million in annual repurchase level. So that's correct.
Speaker Change: And the next questions come from the line of aneska Villa from nordea. Please ask your question. Perfect, thank you so much. I have 2 questions. So, starting with the capital distribution. Uh, at the same day you said that you have the ambition to return 300 to 500 million through BuyBacks. But now you're running at about 50 million, uh, buyback per quarter in the last, uh, 2 quarters. So can you tell us what is the reason behind the somewhat smaller buyback? Pace? And also, what should we expect for the remainder of the year?
Mikael Bratt: Then of course, we can't guide on how and when that will be distributed and so on. But that still holds. And I think, I mean, why has it only been 50 per quarter so far? I would say, I mean, it's The discussion we have been here internally on what level to place ourselves and I mean it has been quite a volatile first half year here and I think some prudence is always good when you enter into a new period here. So nothing dramatic in that, it's just a part of the overall assessment from time to time but our commitment still holds absolutely.
Uh, I mean, first of all, we are fully committed to what we have stated their uh to have around 3 to 500 million in in annual uh repurchase level. Uh, is that correct? Uh uh then of course we can't
Speaker Change: Guide on how and when that will be distributed and so on. But uh that that that still holds and I think I mean, why is it only being 50 per per quarter so far? I would say, I mean it's it's uh it's
Speaker Change: Discussion we have been here, internally on how, what, level to to to place ourselves. And, I mean, it has been quite the volatile first, half year here, and I think some some Prudence, uh, is always good when you enter into to, to new period here. So nothing dramatic in. That is just a part of the overall.
Agnieszka Vilela: Great, thank you for the caller.
Speaker Change: Assessments from from time to time but what our commitment, still holds. Absolutely.
Fredrik Westin: And then the second question I guess it's to Fredrik. Currency supported your EBIT in the quarter with 13 million. Assuming the current currency rates, could you help us to understand what impact could we expect for H2 when you look at the translation and transaction effects for EBIT? So, as we indicated, the main positive effect we had was revaluation effects from the balance sheet through the P&L. That was around 7 million. The transactional effects impact was around 3 million positive. And then the translation effect was around 2 million positive in the quarter. And the main currency pairs that impacted this was on the positive side was the Mexican peso versus the U.S.
Speaker Change: Great, thank you for the caller. And then the second question, I guess it's to Frederick uh, currencies supported your ebit in the quarter with 13 million. Assuming the current currency rates. Could you help us to understand what uh impact could we expect for H2 when you look at the translation and transaction uh, effects for you?
Fredrik Westin: dollar on a year-by-year basis and also the euro against the Turkish lira. So, those were the two most favorable currency pairings for us at that moment. And then this was offset on the negative side by the peso against the euro as we import euro-denominated products into Mexico. And then also the appreciation of the SEC against the U.S. dollar was a negative hit for us. And the only thing I can say on the guidance is that we expect that the translation effect for the full year will be around zero. Thank you.
Um so the the as as we indicated the main uh positive uh effect we had was uh revaluation effect from the balance sheet through the pnl. Um that was around 7 million. Um the transactional effects impact was around 3 million positive and then the translation effect was around 2 million positive. Um, in the in the quarter and the main currency pairs that impacted. This was um, the mix the up on the positive side was, the Mexican Pierce versus the US Dollar on a year-over-year basis, um, and also the Euro against the Turkish laira. Uh, so those were the most the 2, most favorable currency pairings for us or the movements and then this was offset on the negative side.
Speaker Change: By the PSO against the Euro as we import your denominated products into Mexico and then also the appreciation of the SEC against the US dollar was was a negative hit for us. Um, and the only thing I can say on on the guidance is that, uh, we we expect that there's translation effect. For the full year, will be around zero.
Speaker Change: Thank you.
Unknown Executive: As a final reminder, to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced.
Speaker Change: Thank you.
Unknown Executive: To withdraw your question, please press star 1 and 1 again.
Dan Levy: Thank you. We are now going to proceed with our next question. And the questions come from the line of Dan Levy from Barclays, please ask your question. Thank you. Thank you for taking the questions. Um, first question is just on the pricing dynamics, because if we look at the bridge, you are still getting implied positive year over year pricing. So wondering if you could talk to the ongoing trajectory of pricing and how that is, if any way impacted by your ongoing care I think, I mean, the pricing, I mean... Of course, we continue with our price negotiations when it comes to the tariffs, no doubt about that, and that's what we have talked a lot about today here.
Speaker Change: Have a final reminder to ask a question. Please press star. 1 and 1, and your telephone, and wait for your name to be announced 2 with your question. Please press star 1 and 1 again. Thank you.
We are now going to proceed with our next. Next question.
Speaker Change: And the questions come from the line of Dan Levy from Barclays. Please ask your question.
Speaker Change: Thank you. Uh, thank you for taking the questions. Um, first question is just on the pricing Dynamics because if we look at the bridge uh you are still getting its implied, positive year-over-year pricing. So wondering if you could talk to the ongoing trajectory of pricing and how that is, if any way impacted by your ongoing care negotiation,
Speaker Change: yeah, I think I mean the the the pricing
I mean.
Mikael Bratt: Then, of course, we still have some inflationary impacts, even though significantly smaller than what we have seen in the past years, but it's still over and above what we have as normal. So that's dynamic there. And then, of course, we get new price points when we have new products and new businesses there.
Mikael Bratt: But other than that, it's still the same dynamics here when it comes to expectation of a price down of the 2-4% that we have had historically here on running programs. No change when it comes to, I would say, the model and the dynamic. Okay, thank you. Yeah, yeah, yeah, thank you.
Speaker Change: Of course, we we continue with our price negotiations when it comes to the tariffs, no doubt about that. And that's what we have talked a lot about today here. Then, of course, we still have some inflationary uh, impacts even though significantly smaller than what we have seen in the in in the past years. But it's still over and above what we have as normal. So, that's Dynamic there. And then of course, we get new price points when we have new products and new new new businesses there. But other than that it's still the same Dynamics here. When it comes to expectation, of the price down of the 2 to 4% that we have had historically here uh on running programs. So uh,
Speaker Change: No change. When it comes to, I would say the the the model and the dynamic stuff.
Speaker Change: Question.
Mikael Bratt: Second question is around the GOM dynamics. And specifically, I think we've seen strong GOM in America and Europe. But in America, specifically, we do have tariffs, I think there is some question on launch activity going forward. There's clearly a question on EV uptake. So maybe you can remind us, to what extent your, your GOM in in America has been impacted by has been driven by by EVs. And to what extent any slowdowns in launch activity EV uptake could impact GOM for you in the second half and into 2020? I would say in America, the EV component has not been Significant.
Speaker Change: Yeah, yeah, yeah, yeah, thank you. Um, second question is around, uh, the GM Dynamics and, and specifically, I think we've seen strong Gom in, uh, America's and Europe. Uh, but in America, specifically we do have tariffs. I think there is some question on launch activity, going forward. Uh, there's clearly a question on EV uptake, so maybe you can remind us to what extent your, uh, your goom in, in America's has been impacted by, um,
Speaker Change: has been driven by by EVS. Uh, and to what extent any slowdowns and launch activity, EV uptake, uh, could impact, uh, GM for you, uh, in the second half and it's a 2026
Mikael Bratt: It's very minor. So I don't see that impacting our position at all, actually. And tariffs, any other launches that are at risk because of tariffs for you? I think I mean, the tariffs as such, of course, is a part of creating uncertainty about the outlooks here when it comes to people's willing to invest and affordability and those kinds of questions. And of course, I think you can see and we have seen that that that The activities for RFQs for new models is pushed out in time. Please see the video description for more information. General, regardless if it's EV or not.
Speaker Change: no, I would say in in, in America as the the EV component has not been, uh,
Speaker Change: Significant. Uh it's very minor so so uh I don't see that the impacting our position at all actually.
Speaker Change: Nice.
Speaker Change: and tariffs is is any other launches that are at risk because of of terrorists for, you know, I I think I mean the, the tariffs as such, of course, uh, is a part of creating uncertainty about the outlooks here when it comes to people's willing to invest and affordability and those kind of questions and of course I think you
Speaker Change: Can see. And we have seen that that uh that um,
Speaker Change: The activities for rfqs for new. Uh, new models is pushed out in time and um, as we indicated here also we see a little bit lower numbers than than expected and and uh, more in line with last year here. So I think, um, in short the uncertainty, uh, in general and, of course, terrorist important. Part of that is creating uncertainty and how, where, to invest with new models Etc. So, so we see more the, the existing models running longer and, uh, new models being pushed out in time in general, regardless, if it's easy or not,
Mikael Bratt: Great, thank you.
Unknown Executive: We will now take our last question.
Speaker Change: Great. Thank you.
Speaker Change: We will now take our last question.
Karl Bockfith: And the last questions come from the line of Karl Bockfith from ABG Central Collier. Please ask your question. Thank you. Good afternoon. Just a question on the comments regarding an expectation of getting into outperformance in China during the second half. I understand this is fully including, you know, both the effect of volume, but despite the negative mix headwinds. So the question is. If you expect this outperformance, for how long do you think that the mix will still be a headwind? I mean that's very difficult to have a very clear answer on. I think so far we have seen of course that you have the low-end vehicle, if we call them that, being the main driver of the volume in China so far.
Speaker Change: And the last question is come from the land of call boxes from ABG Central Colour, please ask your question.
Speaker Change: Afternoon, just a question on the comments regarding in in expectation of getting uh, into outperformance in in China during the second half. Uh, I understand this is
Speaker Change: Full fully including, you know, both effects of volume, but despite the negative mix headwinds. So the question is,
Speaker Change: If you expect this outperformance for how long do you think that the mix will still be a headwind?
Speaker Change: I mean, that that's a very difficult to have a very clear answer on, uh, I think so far. Uh,
Mikael Bratt: I think it goes hand in hand also a little bit with the overall economic situation as such, but I think the important thing here is that we are gaining market share with that segment where we maybe have been a little bit underrepresented in the past and that gap is closing and we expect to outperform going forward. That depends on the model mix effect, which is very hard to... have a clear opinion about more speculation. Understood. That was all from my side. Thank you.
Speaker Change: we see we have seen of course that you have the low end vehicle, if we call them that, uh, uh, being the main driver of the volume in in China, uh, so far. And I think it goes hand in hand. Also a little bit with the overall economic situation as such. But uh, I think the important thing here is that we are gaining market share with that segment where we maybe have been a little bit under represented in the past and that Gap is closing and we we expect to to outperform going forward.
Speaker Change: can be discussed but uh, that depends on this more model meets, uh, effect which is very hard to
Have a clear opinion about uh more speculation in that case.
Unknown Executive: This concludes the question and answer session.
Understood. That was all from my side. Thank you. Thank you.
Mikael Bratt: I would like to hand back to Mr Michael Bratt for closing remarks. Thank you, Rath. Before we conclude today's call, I want to emphasize our commitment to achieving our financial target. Our focus remains on structural cost reductions, innovation, quality, sustainability, and on tariff mitigation efforts. Despite significant market challenges in key markets, we expect to continue to perform stronger. We remain vigilant about the risks associated with tariffs and geopolitical challenges, which could impact our cost structure and market dynamics. Navigating these complexities, as well as we did in the first half of the year, will be instrumental in maintaining our momentum throughout.
This concludes the question and answer session. I will lie hand back to Mr. Michael Brad for closing remarks.
Michael Brad: Thank you Ras. Uh before we conclude today's call, I want to emphasize our commitment to achieving our financial targets. Our Focus remains on our structural cost, reductions Innovation, quality sustainability and on tariff mitigation efforts despite significant mortgage challenges. In key markets, we expect to continue to perform strongly
We remain Vigilant about the risks associated with tariffs and your political challenges.
Michael Brad: Which could impact our cost structure and market dynamics.
Mikael Bratt: Finally, our products helped save an estimated 37,000 lives and reduced around 600,000 injuries last year, underscoring our vision of saving more lives.
Navigating these complexities as well. As we did in the first half of the year. We'll be instrumental in maintaining our momentum throughout the years.
Mikael Bratt: Our third quarter call is scheduled for Friday, October 17th, 2025. Thank you for your attention. Until next time, stay safe.
Michael Brad: Save an estimate of 37,000 lives and reduce around 600,000 injuries. Last year, underscoring our vision of saving more lives
Michael Brad: Our third quarter call is scheduled for Friday. October 17th 2025, thank you for your attention until next time. Stay safe.
Unknown Executive: This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.
Michael Brad: This concludes today's conference call. Thank you all for participating. You may now, disconnect your lines. Thank you.