Analyst’s Disclosure:I/we have a beneficial long position in the shares of ALV either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or se ...

Core Insights - Autoliv reported record net sales of $2.7 billion in Q2, a 4% year-over-year increase, with adjusted operating income rising 14% to $251 million and adjusted operating margin improving by 80 basis points to 9.3% [1] - The company increased its quarterly dividend to $0.85 per share and reaffirmed its annual stock repurchase plans of $300 million to $500 million [1] Financial Performance - The company estimates its tariff exposure will double to around $200 million, with 80% of tariff costs recovered in Q2, limiting the operating margin impact to 35 basis points [2][3] - Adjusted operating margin reached 9.3%, up 80 basis points year over year, with gross margin improving by 30 basis points to 18.5% due to efficiency gains from a reduction of 3,200 direct production staff and investments in automation [4][5] Market Position and Growth - Autoliv achieved 16% growth in sales to domestic OEMs in China and maintained a 60% market share in India, contributing an additional $100 million to sales in 2025 [6][8] - The company expects continued positive sales trends in China as mix effects improve, despite challenges in North America and Western Europe [7][8] Future Outlook - Management projects 2025 organic sales growth of around 3%, an adjusted operating margin of approximately 10% to 10.5%, and operating cash flow of around $1.2 billion, despite anticipated declines in global light vehicle production [9]

Core Insights - Autoliv, Inc. reported revenue of $2.71 billion for the quarter ended June 2025, reflecting a 4.2% increase year-over-year and a surprise of +3.36% over the Zacks Consensus Estimate of $2.63 billion [1] - The company's EPS for the quarter was $2.21, up from $1.87 in the same quarter last year, resulting in an EPS surprise of +6.76% compared to the consensus estimate of $2.07 [1] Financial Performance Metrics - Organic change in Airbags, Steering Wheels, and Other products was 3.1%, exceeding the average estimate of 0.4% from two analysts [4] - Total organic change was reported at 3.4%, significantly higher than the 0.4% estimated by two analysts [4] - Organic change in Seatbelt Products and Other was 4%, compared to the average estimate of 1.9% from two analysts [4] Regional Sales Performance - Net Sales in the Americas reached $891 million, surpassing the average estimate of $855.27 million, but showing a -0.2% change year-over-year [4] - Net Sales in Europe were $828 million, exceeding the average estimate of $751.53 million, with a year-over-year increase of +8.8% [4] - Net Sales in Asia excluding China were $519 million, above the average estimate of $499.63 million, reflecting a +7.5% year-over-year change [4] - Net Sales in China amounted to $477 million, slightly below the average estimate of $488.36 million, with a +1.9% year-over-year change [4] Product Category Sales - Net Sales for Seatbelt Products and Other reached $902 million, exceeding the average estimate of $839.37 million, with a year-over-year change of +5.1% [4] - Net Sales for Airbags, Steering Wheels, and Other products were $1.81 billion, surpassing the average estimate of $1.76 billion, reflecting a +3.7% year-over-year change [4] Stock Performance - Autoliv's shares have returned +5.9% over the past month, outperforming the Zacks S&P 500 composite's +5.4% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section provides the company's financial statements and management's discussion and analysis for the reported period [Financial Statements](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements for the quarterly period ended June 30, 2025, including statements of income, balance sheets, cash flows, and equity, along with notes detailing accounting policies and contingent liabilities [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income%20(unaudited)) This table presents the unaudited consolidated statements of income, detailing revenues, expenses, and net income for the specified periods Consolidated Statements of Income Highlights (Unaudited) | (In millions, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $2,714 | $2,605 | $5,292 | $5,220 | | **Gross profit** | $501 | $475 | $980 | $917 | | **Operating income** | $247 | $206 | $502 | $400 | | **Net income attributable to controlling interest** | $167 | $138 | $334 | $265 | | **Net earnings per share – diluted** | $2.16 | $1.71 | $4.31 | $3.23 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(unaudited)) This table presents the unaudited condensed consolidated balance sheets, outlining assets, liabilities, and equity at specific dates Condensed Consolidated Balance Sheet Highlights (Unaudited) | (In millions) | As of June 30, 2025 | As of December 31, 2024 | | :--- | :--- | :--- | | **Total current assets** | $3,929 | $3,483 | | **Total assets** | $8,476 | $7,804 | | **Total current liabilities** | $4,235 | $3,633 | | **Total liabilities** | $5,997 | $5,518 | | **Total equity** | $2,480 | $2,285 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(unaudited)) This table presents the unaudited consolidated statements of cash flows, summarizing cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows Highlights (Unaudited) | (In millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $355 | $462 | | **Net cash used in investing activities** | ($208) | ($286) | | **Net cash used in financing activities** | ($170) | ($269) | | **Decrease in cash and cash equivalents** | ($94) | ($90) | [Note 8. Contingent Liabilities](index=14&type=section&id=Note%208.%20Contingent%20Liabilities) This section details the company's contingent liabilities, including ongoing legal proceedings and potential financial exposures - The company faces a civil litigation in Germany from BMW, which filed a complaint claiming damages of **€63 million** plus interest (totaling approx. **€95 million**) related to a past EC investigation, with a possible loss range of **€0** to **€95 million**, but no accrual has been made[75](index=75&type=chunk) - Autoliv is a defendant in a class action lawsuit regarding ARC airbag inflators, and NHTSA issued an initial decision to recall approximately **52 million** ARC and Delphi inflators, some supplied by Autoliv, for which the company has not made an accrual and cannot estimate a range of potential loss[81](index=81&type=chunk)[82](index=82&type=chunk) - In Q2 2025, Stellantis initiated a recall of approximately **250,000** U.S. vehicles equipped with Autoliv's side curtain airbags, with an estimated potential loss range of **$0** to **$385 million**, a substantial portion of which is expected to be covered by insurance, and no accrual has been made[83](index=83&type=chunk) [Note 10. Revenue Disaggregation](index=17&type=section&id=Note%2010.%20Revenue%20Disaggregation) This section provides a detailed breakdown of the company's net sales by product category and geographical region Net Sales by Product and Region (in millions) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | **By Product** | | | | Airbags, Steering Wheels and Other | $1,812 | $1,747 | | Seatbelt Products and Other | $902 | $858 | | **Total Net Sales** | **$2,714** | **$2,605** | | **By Region** | | | | Americas | $891 | $893 | | Europe | $828 | $761 | | China | $477 | $468 | | Asia excl. China | $519 | $483 | | **Total Net Sales** | **$2,714** | **$2,605** | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=18&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management analyzes the company's financial performance for Q2 and H1 2025, highlighting record sales and profitability driven by organic growth, cost reductions, and tariff compensations, while detailing operational results, liquidity, cash flow, and updated full-year guidance [Executive Overview](index=19&type=section&id=EXECUTIVE%20OVERVIEW) Autoliv achieved record Q2 sales, operating income, margin, and EPS, driven by strong sales and cost reductions, outperforming global LVP, and announced a new **$2.5 billion** share repurchase program and a **21%** dividend increase, while raising full-year organic sales growth guidance to around **3%** Q2 2025 Financial Highlights (vs. Q2 2024) | Metric | Value | Change | | :--- | :--- | :--- | | Net Sales | $2,714 million | +4.2% | | Organic Sales Growth | 3.4% | - | | Operating Margin | 9.1% | - | | Adjusted Operating Margin | 9.3% | - | | Diluted EPS | $2.16 | +27% | | Adjusted Diluted EPS | $2.21 | +18% | - The company successfully passed on most tariff costs to customers, recovering around **80%** in Q2, which limited the negative impact on operating margin to about **35 basis points**[107](index=107&type=chunk)[111](index=111&type=chunk)[114](index=114&type=chunk) - Shareholder returns were enhanced with the announcement of a new share repurchase program of up to **$2.5 billion** through 2029 and a **21%** dividend increase for Q3 to **$0.85** per share[108](index=108&type=chunk) [Results of Operations (Q2 2025 vs Q2 2024)](index=22&type=section&id=RESULTS%20OF%20OPERATIONS%20-%20Q2%202025) Q2 2025 net sales increased **4.2%** to **$2.714 billion**, with **3.4%** organic growth outperforming global LVP, while operating income rose **20.1%** to **$247 million**, and operating margin expanded to **9.1%** due to improved efficiency and lower costs Q2 2025 Organic Sales Growth vs. LVP | Region | Autoliv Organic Growth | LVP Growth | Outperformance/(Underperformance) | | :--- | :--- | :--- | :--- | | Americas | 4.1% | (0.9)% | 5.0 pp | | Europe | 3.3% | (1.6)% | 4.9 pp | | China | 1.7% | 8.8% | (7.0) pp | | Asia excl. China | 3.8% | 2.5% | 1.3 pp | | **Global** | **3.4%** | **2.7%** | **0.7 pp** | - Gross profit improved by **$27 million**, driven by operational efficiencies in labor, freight, and logistics, which offset negative effects from un-recovered tariff costs[133](index=133&type=chunk) - Diluted EPS increased by **27%** to **$2.16**, primarily driven by higher operating income (**$0.39**) and a lower share count (**$0.10**)[131](index=131&type=chunk)[138](index=138&type=chunk) [Results of Operations (Six Months 2025 vs 2024)](index=25&type=section&id=RESULTS%20OF%20OPERATIONS%20-%20Six%20Months%202025) For the first six months of 2025, net sales increased **1.4%** to **$5.292 billion** with **2.8%** organic growth, while operating income grew **25%** to **$502 million**, and operating margin improved to **9.5%** due to higher gross profit and reduced RD&E costs Six Months 2025 Organic Sales Growth vs. LVP | Region | Autoliv Organic Growth | LVP Growth | Outperformance/(Underperformance) | | :--- | :--- | :--- | :--- | | Americas | 2.7% | (2.0)% | 4.7 pp | | Europe | 2.6% | (3.1)% | 5.7 pp | | China | 0.1% | 11.4% | (11.3) pp | | Asia excl. China | 5.8% | 3.2% | 2.6 pp | | **Global** | **2.8%** | **3.1%** | **(0.3) pp** | - In China, LVP for global OEMs declined **4%** while it increased **21%** for domestic OEMs, with Autoliv's sales to domestic OEMs growing **17%**, and performance is expected to improve in the second half of 2025 due to a record number of new launches[144](index=144&type=chunk) - Diluted EPS for the six-month period increased by **34%** to **$4.31**, with higher operating income contributing **$0.92** and a lower share count adding **$0.24**[146](index=146&type=chunk)[154](index=154&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Operating cash flow for the first six months of 2025 was **$355 million**, down from **$462 million** due to increased working capital, while net debt rose to **$1.752 billion** with a leverage ratio of **1.3x**, remaining within the target range Cash Flow Summary (Six Months Ended June 30) | (In millions) | 2025 | 2024 | | :--- | :--- | :--- | | Operating cash flow | $355 | $462 | | Capital expenditure, net | ($208) | ($286) | | **Free operating cash flow (Non-GAAP)** | **$147** | **$176** | - Net debt was **$1,752 million** as of June 30, 2025, an increase of **$172 million** from the prior year, mainly because shareholder returns (dividends and repurchases) exceeded free operating cash flow[161](index=161&type=chunk) - The leverage ratio (Net debt + Pension liabilities / Adjusted EBITDA) was **1.3x**, compared to **1.2x** a year ago, remaining within the company's target range of **0.5x** to **1.5x**[163](index=163&type=chunk)[179](index=179&type=chunk)[181](index=181&type=chunk) [Full Year 2025 Guidance](index=32&type=section&id=Full%20year%202025%20guidance) Autoliv updated its full-year 2025 guidance, raising organic sales growth forecast to around **3%** and reiterating adjusted operating margin of **10-10.5%** and operating cash flow of about **$1.2 billion**, based on an assumed **0.5%** decline in global LVP Full Year 2025 Guidance and Assumptions | Metric | Guidance/Assumption | | :--- | :--- | | **Guidance** | | | Organic sales growth | Around 3% | | Adjusted operating margin | Around 10-10.5% | | Operating cash flow | Around $1.2 billion | | **Assumptions** | | | LVP growth | Around -0.5% | | Tax rate (excl. unusual items) | Around 28% | [Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As of June 30, 2025, there have been no material changes to the company's quantitative and qualitative disclosures about market risk since its 2024 Annual Report on Form 10-K - There have been no material changes to the information related to market risk since the company's 2024 Annual Report on Form 10-K[194](index=194&type=chunk) [Controls and Procedures](index=34&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures are effective as of the end of the reporting period[195](index=195&type=chunk) - No material changes were identified in the company's internal control over financial reporting during the fiscal quarter[195](index=195&type=chunk) [PART II - OTHER INFORMATION](index=35&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section contains additional information including legal proceedings, risk factors, equity sales, and other disclosures [Legal Proceedings](index=35&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section incorporates by reference detailed disclosures on the company's ongoing legal proceedings and contingent liabilities from Note 8 in Part I of this report - Information regarding ongoing legal proceedings is incorporated by reference from Part I, Item 1, "Financial Statements, Note 8 Contingent Liabilities"[196](index=196&type=chunk) [Risk Factors](index=35&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company reports no material changes to its risk factors from the 2024 Form 10-K, except for an updated risk concerning international operations, highlighting increased exposure to geopolitical instability, trade policies, and tariffs - The risk factors are largely unchanged from the 2024 Form 10-K, except for an update to the risks related to international operations[197](index=197&type=chunk) - The updated risk factor emphasizes exposure to unexpected changes in laws, trade policies, tariffs, and geopolitical turmoil, noting recent U.S. tariffs on imports from China and retaliatory actions[198](index=198&type=chunk)[200](index=200&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) During Q2 2025, the company repurchased **510,361** shares, and a new stock repurchase program authorizing up to **$2.5 billion** in common shares was approved, effective July 1, 2025, through December 31, 2029 Common Stock Repurchases (Q2 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share (USD) | | :--- | :--- | :--- | | April 1-30, 2025 | 112,339 | $90.79 | | May 1-31, 2025 | 270,911 | $100.26 | | June 1-30, 2025 | 127,111 | $106.82 | - A new stock repurchase program was approved, authorizing up to **$2.5 billion** in share repurchases between July 1, 2025, and December 31, 2029[206](index=206&type=chunk) [Other Information](index=37&type=section&id=ITEM%205.%20OTHER%20INFORMATION) An executive adopted a Rule 10b5-1(c) trading plan to sell shares acquired upon vesting in February 2026, primarily to cover associated taxes - An executive, Staffan Olsson, adopted a Rule 10b5-1(c) trading plan for the future sale of company stock to cover vesting taxes[209](index=209&type=chunk) [Exhibits](index=38&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents, debt agreements, officer certifications, and interactive data files - The report includes various exhibits, such as the company's Restated Certificate of Incorporation, By-Laws, debt agreements, and certifications by the CEO and CFO[211](index=211&type=chunk)

Financial Data and Key Metrics Changes - The company reported record sales and earnings for the second quarter of 2025, with net sales increasing by 4% year over year to approximately $2.7 billion [11][21] - Adjusted operating income rose by 14% to $251 million from $221 million in the previous year, with an adjusted operating margin of 9.3%, an increase of 80 basis points [11][21] - Earnings per share for the second quarter reached a record high, with a significant increase over the past five years, primarily driven by strong net profit growth and a reduced share count [9][21] Business Line Data and Key Metrics Changes - The company achieved a gross margin of 18.5%, an increase of 30 basis points year over year, driven by direct labor efficiency and headcount reductions [12][21] - Direct labor productivity improved as the company reduced its direct production personnel by 3,200 year over year, supported by automation and digitalization initiatives [12][21] Market Data and Key Metrics Changes - Global light vehicle production increased by 2.7% in the second quarter, exceeding initial expectations, while production in North America and Western Europe declined by around 3% each [13][14] - In China, the company saw a significant improvement, with sales to domestic OEMs growing more than 16%, aligning with light vehicle production growth [17][21] Company Strategy and Development Direction - The company emphasized its commitment to sustainable growth and long-term value creation, focusing on deepening partnerships with leading global and Chinese OEMs [32][34] - Strategic initiatives include enhancing operational efficiency, automation, digitalization, and maintaining a healthy leverage ratio not exceeding 1.5 times [33][34] Management's Comments on Operating Environment and Future Outlook - The management expressed caution regarding the remainder of the year due to complexities from tariffs and economic factors, while remaining optimistic about performance in China [6][30] - The outlook for global light vehicle production in 2025 is uncertain, with expectations of a decline in the second half of the year [30][31] Other Important Information - The company plans to increase its third-quarter dividend to $0.85 per share, reflecting confidence in its financial strength [10] - The company is committed to annual stock repurchases of $300 million to $500 million, despite a slower pace in the first half of the year [10][97] Q&A Session Summary Question: Regarding performance in China - The company noted that it is closing the gap in performance with Chinese OEMs and expects to continue outperforming the market in the latter half of the year [41][42] Question: On product volume fluctuations - The management explained that variations in product volumes are influenced by mix dynamics and launch activities [44][45] Question: On tariff recovery - The management clarified that the slower recovery in Q2 was due to timing effects and expressed confidence in recovering the remaining tariffs by the end of the year [50][51] Question: On margin guidance and raw material costs - The management indicated that raw material costs have slightly improved, with a headwind expected to be around $20 million, down from $40 million previously anticipated [54][55] Question: On pricing dynamics - The company continues to negotiate prices in light of tariffs and inflation, maintaining a historical pricing model [104][105] Question: On market share in India - The company reported a 60% market share in India and expects it to contribute around 5% to group sales for the full year [72]

Financial Data and Key Metrics Changes - The company reported record sales and earnings for Q2 2025, with net sales of approximately $2.7 billion, representing a 4% year-over-year increase [10][21] - Adjusted operating income increased by 14% to $251 million from $221 million last year, with an adjusted operating margin of 9.3%, an improvement of 80 basis points [10][21] - Earnings per share for Q2 reached a record high, with a year-over-year increase of $0.33, driven by higher operating income and a reduced share count [8][21] Business Line Data and Key Metrics Changes - The company achieved a gross margin of 18.5%, an increase of 30 basis points year-over-year, primarily due to direct labor efficiency and headcount reductions [11][21] - Direct labor productivity improved as the company reduced direct production personnel by 3,200 year-over-year [11] - The company successfully recovered approximately 80% of the tariff costs incurred during Q2 and expects to recover most of the remaining portion later in the year [8][29] Market Data and Key Metrics Changes - Global light vehicle production for Q2 increased by 2.7%, exceeding expectations, while production in North America and Western Europe declined by around 3% each [12][30] - In China, the company outperformed light vehicle production growth, with sales to domestic OEMs growing more than 16% [16][30] - The company’s sales in June outpaced the growth of Chinese light vehicle production, indicating a positive trend expected to continue [7][30] Company Strategy and Development Direction - The company emphasized its commitment to achieving $300 million to $500 million annually in stock repurchases and increasing its dividend to $0.85 per share [9][34] - The strategic roadmap focuses on sustainable growth through partnerships with leading global and Chinese OEMs, innovations in safety systems, and operational improvements [33][34] - The company aims to navigate the complexities of tariffs and economic factors while maintaining a strong balance sheet and shareholder returns [29][34] Management Comments on Operating Environment and Future Outlook - Management expressed caution about the remainder of the year due to complexities from tariffs and economic factors, despite a strong Q2 performance [6][30] - The outlook for global light vehicle production in 2025 remains uncertain, with expectations of a decline in the second half of the year [30][34] - The company anticipates a challenging 2025 for the automotive industry but expects significant improvement in sales performance in China [34] Other Important Information - The company’s cash flow remained strong despite higher receivables, driven by robust sales and tariff compensations [9][24] - The trade working capital increased by $185 million compared to the prior year, attributed to higher accounts receivables and inventories [25] - The company’s leverage ratio remains strong at 1.3 times, well below the target limit of 1.5 times [26] Q&A Session Summary Question: Performance in China - The company indicated that it is closing the gap in performance with Chinese OEMs and expects to continue outperforming the market in China towards the end of the year [41][43] Question: Product Volume Dynamics - The company explained that the fluctuations in product volumes are due to mix effects and launch activities, which can lead to significant variations [44][45] Question: Tariff Recovery - Management clarified that the slower recovery of tariffs in Q2 was due to timing effects and expressed confidence in recovering the remaining tariffs by the end of the year [49][51] Question: Margin Guidance - The company expects Q3 to be the weakest quarter due to a projected drop in light vehicle production, with Q4 anticipated to be the strongest [56][78] Question: Pricing Dynamics - The company continues to negotiate pricing in light of tariffs and inflationary impacts, maintaining a historical pricing model [104][105] Question: EV and ICE Dynamics - The company noted that the EV component has not significantly impacted its gross operating margin in the Americas, and tariffs create uncertainty regarding new model launches [108][109]

Company Performance - Autoliv, Inc. reported quarterly earnings of $2.21 per share, exceeding the Zacks Consensus Estimate of $2.07 per share, and up from $1.87 per share a year ago, representing an earnings surprise of +6.76% [1] - The company posted revenues of $2.71 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 3.36%, compared to $2.61 billion in the same quarter last year [2] - Over the last four quarters, Autoliv has surpassed consensus EPS estimates three times and topped consensus revenue estimates three times [2] Stock Performance - Autoliv shares have increased approximately 24.5% since the beginning of the year, significantly outperforming the S&P 500's gain of 7.1% [3] - The current consensus EPS estimate for the upcoming quarter is $2.34 on revenues of $2.6 billion, and for the current fiscal year, it is $9.09 on revenues of $10.4 billion [7] Industry Outlook - The Automotive - Original Equipment industry, to which Autoliv belongs, is currently ranked in the bottom 29% of over 250 Zacks industries, indicating potential challenges ahead [8] - The performance of Autoliv's stock may be influenced by the overall outlook for the industry, as research indicates that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [8]

Financial Performance - Record Q2 sales of $2714 million, compared to $2605 million in Q2'24[10] - Adjusted operating income increased to $251 million from $221 million in Q2'24[10] - Adjusted operating margin improved to 93% from 85% in Q2'24[10] - Share repurchases amounted to $51 million in Q2'25[8] Sales and Market Dynamics - Organic sales grew by 34% despite a negative regional Light Vehicle Production (LVP) mix[23] - Europe and India were strong sales drivers, along with tariff compensations[8] - The company successfully recovered approximately 80% of tariffs incurred during the quarter[8] - Global Light Vehicle Production (LVP) is expected to decline by around 05% in 2025[60] Cost Management and Efficiency - Substantial cost improvements were achieved through direct labor productivity and other operational efficiencies[12] - The company is progressing with structural cost reduction activities[8] Future Outlook - The company anticipates average annual share repurchases between $300 million and $500 million through the end of 2029[8] - Full year 2025 guidance includes an organic sales increase of around 3% and an adjusted operating margin of around 10 to 105%[75]

Financial Performance - In Q2 2025, the company reported net sales of $2,714 million, representing a 4.2% increase compared to Q2 2024 [1][3] - Organic sales growth was 3.4%, outperforming the global Light Vehicle Production (LVP) increase of 2.7% [4] - Operating income rose by 20% to $247 million, while adjusted operating income increased by 14% to $251 million [3][4] - The operating margin improved to 9.1%, and the adjusted operating margin was 9.3% [3][4] - Diluted earnings per share (EPS) increased by 27% to $2.16, with adjusted diluted EPS rising by 18% to $2.21 [1][3] Guidance and Future Outlook - The company expects around 3% organic sales growth for the full year 2025, with an adjusted operating margin target of approximately 10-10.5% [1][9] - Operating cash flow is projected to be around $1.2 billion for the year [1] - The company anticipates improved sales performance in China in the second half of 2025 due to a record number of new product launches [4][6] Cost Management and Efficiency - The company successfully executed cost reduction measures, resulting in a 5% decrease in total headcount [4][7] - Approximately 80% of tariff costs were recovered in Q2 2025, with expectations to recover most of the remaining costs later in the year [7] - The leverage ratio was reported at 1.3x, below the target limit of 1.5x [4] Shareholder Returns - A dividend of $0.70 per share was paid, and 0.5 million shares were repurchased and retired [4] - The company announced a new share repurchase program of up to $2.5 billion until the end of 2029 and a 21% increase in the dividend to $0.85 per share for the third quarter [8]

[Financial Highlights and CEO Commentary](index=2&type=section&id=Financial%20Highlights%20and%20CEO%20Commentary) The section provides an overview of the company's strong Q2 2025 financial performance and the CEO's strategic commentary on market outperformance and shareholder value initiatives [Q2 2025 Financial Highlights](index=2&type=section&id=Q2%202025%20Financial%20Highlights) The company reported record Q2 2025 results for sales, operating income, margin, and EPS. Net sales grew 4.2% to $2,714 million, with organic growth of 3.4%. Operating margin reached 9.1%, and diluted EPS increased by 27% to $2.16. However, operating cash flow declined by 18% to $277 million due to less favorable working capital changes compared to the prior year Q2 & 6M 2025 Key Financial Figures (vs. Prior Year) | Key Figures (Dollars in millions, except per share data) | Q2 2025 | Q2 2024 | Change | 6M 2025 | 6M 2024 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net sales | $2,714 | $2,605 | 4.2% | $5,292 | $5,220 | 1.4% | | Operating income | 247 | 206 | 20% | 502 | 400 | 25% | | Adjusted operating income | 251 | 221 | 14% | 506 | 420 | 21% | | Operating margin | 9.1% | 7.9% | 1.2pp | 9.5% | 7.7% | 1.8pp | | Adjusted operating margin | 9.3% | 8.5% | 0.8pp | 9.6% | 8.0% | 1.5pp | | Earnings per share - diluted | 2.16 | 1.71 | 27% | 4.31 | 3.23 | 34% | | Adjusted earnings per share - diluted | 2.21 | 1.87 | 18% | 4.36 | 3.45 | 27% | | Operating cash flow | 277 | 340 | (18)% | 355 | 462 | (23)% | - Organic sales growth of **3.4%** outperformed global Light Vehicle Production (LVP) growth of **2.7%** by **0.7 percentage points**, despite a negative **2.5 percentage points** impact from regional and customer LVP mix[11](index=11&type=chunk) - Profitability improved significantly due to organic growth and cost reductions, with total headcount decreasing by **5%**. The negative impact from U.S. tariffs on operating margin was limited to approximately **35 basis points**[11](index=11&type=chunk) - Operating cash flow was lower than Q2 2024, which was boosted by positive timing-related working capital effects. In Q2 2025, **0.5 million shares** were repurchased and a dividend of **$0.70 per share** was paid[11](index=11&type=chunk) [CEO Commentary](index=2&type=section&id=CEO%20Commentary) The CEO highlighted a record-breaking second quarter despite a turbulent market, driven by strong sales and successful cost reduction and tariff compensation efforts. The company outperformed the market in the Americas, Europe, and Asia (ex-China) and expects significant improvement in China in the second half of the year. Shareholder returns are being increased through a new $2.5 billion share repurchase program and a 21% dividend increase for Q3 - The company achieved record Q2 sales, operating income, margin, and EPS, outperforming global LVP despite headwinds from mix shifts, particularly in China[7](index=7&type=chunk) - Focus on operational efficiency led to a **6%** reduction in direct headcount while organic sales grew **3%**, contributing to a **27%** increase in EPS[8](index=8&type=chunk) - The company successfully recovered around **80%** of tariff costs in Q2 and expects to recover most of the remainder later in the year[8](index=8&type=chunk) - A new share repurchase program of up to **$2.5 billion** until the end of 2029 was announced, along with a **21%** dividend increase for Q3 to **$0.85 per share**[9](index=9&type=chunk) [Full Year 2025 Guidance and Assumptions](index=3&type=section&id=Full%20year%202025%20guidance) This section outlines the company's financial projections for the full year 2025, including sales growth, profitability targets, and underlying market assumptions [Full Year 2025 Guidance](index=3&type=section&id=Full%20year%202025%20Guidance) The company has raised its full-year 2025 organic sales growth guidance to around 3% and reiterates its adjusted operating margin target of 10-10.5%. Operating cash flow is expected to be approximately $1.2 billion. This guidance is contingent on current customer call-offs and no further material changes to tariffs or the macroeconomic environment Full Year 2025 Guidance | Metric | Guidance | | :--- | :--- | | Organic sales growth | Around 3% | | Adjusted operating margin | Around 10-10.5% | | Operating cash flow | Around $1.2 billion | | Capex, net, % of sales | Around 5% | - The guidance is based on assumptions including customer call-offs, achievement of cost compensations for new tariffs, and no significant changes in the macro-environment or supply chain disruptions[12](index=12&type=chunk) [Full Year 2025 Assumptions](index=3&type=section&id=Full%20year%202025%20Assumptions) The full-year guidance is based on key assumptions including a slight negative LVP growth of around 0.5%, a neutral foreign exchange impact on net sales, and an effective tax rate of approximately 28% Full Year 2025 Assumptions | Metric | Assumption | | :--- | :--- | | LVP growth | Around 0.5% negative | | FX impact on net sales | Around 0% | | Tax rate (excluding unusual items) | Around 28% | [Business and Market Condition Update](index=4&type=section&id=Business%20and%20market%20condition%20update) This section details the company's operational environment, including supply chain dynamics, inflationary pressures, and the impact of geopolitical risks and tariffs [Supply Chain](index=4&type=section&id=Supply%20Chain) In Q2 2025, global LVP grew by 2.7%. While call-off volatility improved slightly, it remains above pre-pandemic levels and continues to impact production efficiency. The company expects this volatility to be slightly lower for the full year 2025 compared to 2024, but uncertainties around tariffs could worsen the situation - Global LVP increased by **2.7%** YoY in Q2 2025[15](index=15&type=chunk) - Call-off volatility, though slightly improved, remains higher than pre-pandemic levels and negatively impacts production efficiency[15](index=15&type=chunk) [Inflation](index=4&type=section&id=Inflation) Inflationary pressures from labor and other costs continued in Q2, though to a lesser degree than in 2024. Most of this pressure was offset by price increases and customer compensations. For the full year 2025, the company expects moderating inflation but anticipates continued pressure from labor costs and potentially tariffs - Most inflationary cost pressure in Q2 was offset by price increases and customer compensations[16](index=16&type=chunk) - Raw material costs are expected to be slightly higher in 2025 than in 2024. Cost pressure from general inflation is expected to moderate but remain from labor and potential tariffs[16](index=16&type=chunk) [Geopolitical Risks and Tariffs](index=4&type=section&id=Geopolitical%20risks%20and%20tariffs) The company successfully passed on most new tariff costs to customers in Q2, limiting the negative impact on operating income to around $7 million. The dilutive effect on operating margin was about 35 basis points. For the full year 2025, the margin dilution from tariffs is expected to be around 20 basis points, though significant uncertainty remains - The company recovered approximately **80%** of tariff costs in Q2 2025[17](index=17&type=chunk) - The impact of unrecovered tariffs on operating income was a negative **$7 million** in the quarter. Including the dilutive effect of recovered tariffs, the total negative impact on operating margin was around **35 basis points**[17](index=17&type=chunk) - For the full year 2025, the expected tariff dilution on operating margin is projected to be around **20 basis points**[17](index=17&type=chunk) [Sales Performance Analysis](index=6&type=section&id=Sales%20Performance%20Analysis) This section analyzes the company's sales development in Q2 and the first six months of 2025, detailing performance by product, region, and key vehicle launches [Consolidated Sales Development - Q2 2025](index=6&type=section&id=Consolidated%20sales%20development%20-%20Second%20quarter%202025) In Q2 2025, total net sales increased 4.2% to $2,714 million, with organic growth of 3.4%, outperforming global LVP by 0.7 percentage points. Growth was driven by Airbags, Steering Wheels, and Seatbelt products. Regionally, the company saw strong performance in the Americas, Europe, and Asia ex-China, but underperformed in China due to LVP mix favoring domestic OEMs with lower safety content. However, performance in China showed significant improvement over recent quarters Q2 2025 Sales by Product and Region (in millions) | Consolidated sales | 2025 | 2024 | Reported change | Organic change* | | :--- | :--- | :--- | :--- | :--- | | Airbags, Steering Wheels and Other | $1,812 | $1,747 | 3.8% | 3.1% | | Seatbelt Products and Other | 902 | 858 | 5.1% | 4.0% | | **Total** | **$2,714** | **$2,605** | **4.2%** | **3.4%** | | Americas | $891 | $893 | (0.2)% | 4.1% | | Europe | 828 | 761 | 8.7% | 3.3% | | China | 477 | 468 | 1.9% | 1.7% | | Asia excl. China | 519 | 483 | 7.4% | 3.8% | - Global organic sales growth of **3.4%** outperformed global LVP growth of **2.7%**. The company outperformed LVP in Americas (**+5.0 percentage points**), Europe (**+4.9 percentage points**), and Asia ex-China (**+1.4 percentage points**), but underperformed in China (**-7.0 percentage points**)[34](index=34&type=chunk) - In China, LVP for global OEMs declined by **4%** while it increased by **16%** for domestic OEMs. Autoliv's sales growth with domestic OEMs matched this at **16%**, indicating a significant improvement over recent quarters[35](index=35&type=chunk) [Consolidated Sales Development - First Six Months 2025](index=7&type=section&id=Consolidated%20sales%20development%20-%20First%20six%20months%202025) For the first six months of 2025, net sales grew 1.4% to $5,292 million, with organic growth of 2.8%. This was slightly below the global LVP growth of 3.1%, primarily due to a significant negative LVP mix effect in China. The company outperformed LVP in all regions except China, where sales to domestic OEMs grew 17% against a 21% LVP increase for those OEMs. A strong order book and new launches are expected to improve China's performance in H2 6M 2025 Sales by Product and Region (in millions) | Consolidated sales | 2025 | 2024 | Reported change | Organic change* | | :--- | :--- | :--- | :--- | :--- | | Airbags, Steering Wheels and Other | $3,565 | $3,528 | 1.0% | 2.4% | | Seatbelt Products and Other | $1,727 | $1,692 | 2.1% | 3.6% | | **Total** | **$5,292** | **$5,220** | **1.4%** | **2.8%** | | Americas | $1,742 | $1,786 | (2.5)% | 2.7% | | Europe | $1,592 | $1,531 | 4.0% | 2.6% | | China | $924 | $928 | (0.5)% | 0.1% | | Asia excl. China | $1,034 | $975 | 6.1% | 5.8% | - Global organic sales growth of **2.8%** was **0.3 percentage points** below global LVP growth of **3.1%**, with an estimated **3 percentage points** negative impact from regional and model LVP mix, particularly in China[41](index=41&type=chunk) - In China, LVP for global OEMs declined **4%** while it grew **21%** for domestic OEMs. Autoliv's sales to domestic OEMs increased by **17%** in the first half[42](index=42&type=chunk) [Key Product Launches - Q2 2025](index=8&type=section&id=Key%20launches%20in%20the%20second%20quarter%20of%202025) The company supported several key vehicle launches in the second quarter of 2025, supplying a range of safety products including airbags, seatbelts, and steering wheels. Notable launches include models from Deepal, Honda, Nio, Nissan, Changan, Chery, Renault, Suzuki, Lynk & Co, and Mitsubishi, as well as two confidential EV launches with Chinese OEMs - Key vehicle launches supplied by Autoliv in Q2 2025 include the Deepal S09, Honda Ye P7, Nio Firefly, Nissan Roox, Changan Avatr 06, and Chery Fengyun A9[46](index=46&type=chunk) - The company also supplied products for the Nissan Leaf, Renault 4, Suzuki eVitara, Daihatsu Move, Lynk & Co 900, and Mitsubishi XFORCE[46](index=46&type=chunk) - Two key EV launches with Chinese OEMs were also supported but remain confidential[46](index=46&type=chunk) [Financial Performance Analysis](index=10&type=section&id=Financial%20Performance%20Analysis) This section provides a detailed analysis of the company's income statement, cash flow, balance sheet, and headcount trends for the reporting period [Income Statement Analysis](index=10&type=section&id=Income%20Statement%20Analysis) In Q2 2025, operating income rose 20% to $247 million, and net income increased 21% to $168 million. The improvement was driven by higher gross profit from operational efficiencies and organic growth, coupled with lower R,D&E expenses. This resulted in a 27% increase in diluted EPS to $2.16, aided by a lower share count. The six-month trend was similar, with operating income up 25% and diluted EPS up 34% Condensed Income Statement (Q2 & 6M 2025 vs 2024, in millions) | (Dollars in millions) | Q2 2025 | Q2 2024 | Change | 6M 2025 | 6M 2024 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net sales | $2,714 | $2,605 | 4.2% | $5,292 | $5,220 | 1.4% | | Gross profit | 501 | 475 | 5.7% | 980 | 917 | 6.8% | | Operating income | 247 | 206 | 20% | 502 | 400 | 25% | | Net income | $168 | $139 | 21% | $335 | $266 | 26% | | Earnings per share - diluted | $2.16 | $1.71 | 27% | $4.31 | $3.23 | 34% | - Q2 gross profit increased by **$27 million**, driven by improved operational efficiency (lower labor, freight, and scrap costs) and organic sales growth, partly offset by un-recovered tariff costs[51](index=51&type=chunk) - Q2 R,D&E, net costs decreased by **$9 million**, mainly due to higher engineering income and positive FX effects, improving as a percentage of sales from **4.5%** to **3.9%**[52](index=52&type=chunk) - The **$0.46** increase in Q2 diluted EPS was driven by **$0.39** from higher operating income and **$0.10** from a lower number of outstanding shares[56](index=56&type=chunk) [Cash Flow and Balance Sheet Analysis](index=12&type=section&id=Selected%20Cash%20Flow%20and%20Balance%20Sheet%20Items) Operating cash flow for Q2 2025 decreased 18% to $277 million, primarily due to less favorable working capital changes compared to the prior year. Capital expenditures were lower, resulting in a free operating cash flow of $163 million. Net debt increased by 11% year-over-year to $1,752 million, mainly because shareholder returns exceeded free cash flow. The leverage ratio remained stable at 1.3x, well within the company's target Selected Cash Flow Items (Q2 & 6M 2025 vs 2024, in millions) | (Dollars in millions) | Q2 2025 | Q2 2024 | Change | 6M 2025 | 6M 2024 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Operating cash flow | 277 | 340 | (18)% | 355 | 462 | (23)% | | Capital expenditure, net | (114) | (146) | (22)% | (208) | (286) | (27)% | | Free operating cash flow | $163 | $194 | (16)% | $147 | $176 | (16)% | Selected Balance Sheet Items (as of June 30) | (Dollars in millions) | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Trade working capital | $1,354 | $1,169 | 16% | | Cash & cash equivalents | 237 | 408 | (42)% | | Net Debt | 1,752 | 1,579 | 11% | | Total equity | 2,480 | 2,311 | 7.3% | | Leverage ratio | 1.3 | 1.2 | 0.0 | - The decrease in Q2 operating cash flow was mainly due to a smaller positive impact from working capital changes (**$15 million** in Q2'25 vs. **$128 million** in Q2'24)[65](index=65&type=chunk)[66](index=66&type=chunk) - Net debt increased by **$172 million** YoY because dividends paid and share repurchases over the last twelve months were higher than free operating cash flow[70](index=70&type=chunk) [Headcount](index=13&type=section&id=Headcount) As of June 30, 2025, total headcount was 65,100, a decrease of 5.2% (or 3,600 employees) from the previous year, despite a 3.4% increase in organic sales. The reduction was primarily in the direct workforce, which decreased by 6.2%, reflecting improved operational efficiency Headcount Trend | Headcount | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | | :--- | :--- | :--- | :--- | | Total Headcount | 65,100 | 65,900 | 68,700 | | Direct headcount | 48,000 | 48,800 | 51,100 | | Indirect headcount | 17,100 | 17,100 | 17,500 | - Total headcount decreased by **5.2%** year-over-year, with direct workforce down **6.2%** and indirect workforce down **2.3%**[76](index=76&type=chunk) [Other Corporate Developments](index=14&type=section&id=Other%20Items) This section highlights significant corporate events and announcements, including awards, partnerships, and key personnel changes [Key Corporate Events and Announcements](index=14&type=section&id=Key%20Corporate%20Events%20and%20Announcements) During the quarter, Autoliv received an innovation award for its Bernoulli™ Airbag Module, partnered with the Formula E World Championship, and presented its Omni Safety™ system. At its Capital Markets Day, the company announced a new $2.5 billion share repurchase program and a 21% dividend increase for Q3. Additionally, the CFO announced his resignation, effective by year-end 2025 - Announced a new share repurchase program of up to **$2.5 billion** through December 2029 and a **21%** dividend increase for Q3 to **$0.85 per share**[78](index=78&type=chunk) - Fredrik Westin, Chief Financial Officer, will resign from his position by December 31, 2025. A search for his successor has been initiated[78](index=78&type=chunk) - In Q2, the company repurchased and retired **0.5 million shares** at an average price of **$99.81 per share**, completing its 2022-2025 program[78](index=78&type=chunk) [Consolidated Financial Statements](index=17&type=section&id=Consolidated%20Financial%20Statements) This section presents the company's unaudited consolidated income statements, balance sheets, and cash flow statements for the specified periods [Consolidated Statements of Income](index=17&type=section&id=Consolidated%20Statements%20of%20Income) This section provides the unaudited consolidated income statement for the second quarter and first six months of 2025 and 2024, along with trailing twelve months and full-year 2024 data. It details revenues, costs, and profits, leading to net income and earnings per share Consolidated Statements of Income (unaudited) | (Dollars in millions, except per share data) | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :--- | :--- | :--- | :--- | :--- | | Total net sales | 2,714 | 2,605 | 5,292 | 5,220 | | Gross profit | 501 | 475 | 980 | 917 | | Operating income | 247 | 206 | 502 | 400 | | Income before income taxes | 221 | 183 | 453 | 356 | | Net income | 168 | 139 | 335 | 266 | | Earnings per share - diluted | $2.16 | $1.71 | $4.31 | $3.23 | [Consolidated Balance Sheets](index=18&type=section&id=Consolidated%20Balance%20Sheets) This section presents the unaudited consolidated balance sheets as of June 30, 2025, and for the four preceding quarters. It details the company's assets, liabilities, and equity, providing a snapshot of its financial position at each period end Consolidated Balance Sheet Highlights (unaudited, in millions) | (Dollars in millions) | Jun 30, 2025 | Dec 31, 2024 | Jun 30, 2024 | | :--- | :--- | :--- | :--- | | Total current assets | 3,929 | 3,483 | 3,703 | | Total assets | 8,476 | 7,804 | 8,010 | | Total current liabilities | 4,235 | 3,633 | 3,785 | | Total liabilities | 5,997 | 5,518 | 5,698 | | Total equity | 2,480 | 2,285 | 2,311 | [Consolidated Statements of Cash Flow](index=19&type=section&id=Consolidated%20Statements%20of%20Cash%20Flow) This section provides the unaudited consolidated statements of cash flow for the second quarter and first six months of 2025 and 2024. It breaks down cash movements from operating, investing, and financing activities Consolidated Statements of Cash Flow Highlights (unaudited, in millions) | (Dollars in millions) | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :--- | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | 277 | 340 | 355 | 462 | | Net cash used in investing activities | (114) | (146) | (208) | (286) | | Net cash used in financing activities | (227) | (362) | (170) | (269) | | Decrease in cash and cash equivalents | (86) | (161) | (94) | (90) | | Cash and cash equivalents at period-end | $237 | $408 | $237 | $408 | [Reconciliation of U.S. GAAP to Non-U.S. GAAP Measures](index=20&type=section&id=RECONCILIATION%20OF%20U.S.%20GAAP%20TO%20NON-U.S.%20GAAP%20MEASURES) This section provides detailed reconciliations of non-GAAP financial measures to their most directly comparable U.S. GAAP equivalents, enhancing transparency and comparability [Reconciliation of Profitability](index=23&type=section&id=Reconciliation%20of%20Profitability) The company provides reconciliations for several non-GAAP profitability metrics to exclude items like capacity alignments and antitrust matters, which management believes improves comparability. For Q2 2025, adjusted operating income was $251 million (9.3% margin) compared to the GAAP figure of $247 million (9.1% margin). Adjusted diluted EPS was $2.21, compared to GAAP EPS of $2.16 Reconciliation of Operating Income (in millions) | (Dollars in millions) | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :--- | :--- | :--- | :--- | :--- | | Operating income (GAAP) | $247 | $206 | $502 | $400 | | Non-GAAP adjustments | 4 | 15 | 5 | 20 | | Adjusted Operating income (Non-GAAP) | $251 | $221 | $506 | $420 | Reconciliation of Earnings per share - diluted | | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :--- | :--- | :--- | :--- | :--- | | Earnings per share - diluted (GAAP) | $2.16 | $1.71 | $4.31 | $3.23 | | Total non-GAAP adjustments | 0.04 | 0.17 | 0.05 | 0.22 | | Adjusted Earnings per share - diluted (Non-GAAP) | $2.21 | $1.87 | $4.36 | $3.45 | [Reconciliation of Cash Flow (Free Operating Cash Flow & Cash Conversion)](index=22&type=section&id=Reconciliation%20of%20Cash%20Flow%20(Free%20Operating%20Cash%20Flow%20%26%20Cash%20Conversion)) Management uses 'free operating cash flow' (Operating Cash Flow less Capex, net) to analyze cash generation available for strategic use. For Q2 2025, free operating cash flow was $163 million. 'Cash conversion' (Free Operating Cash Flow / Net Income) is used to measure efficiency. For Q2 2025, cash conversion was 97%, down from 140% in the prior year due to lower free cash flow and higher net income Reconciliation to Free Operating Cash Flow (in millions) | (Dollars in millions) | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :--- | :--- | :--- | :--- | :--- | | Operating cash flow | 277 | 340 | $355 | $462 | | Capital expenditure, net | (114) | (146) | (208) | (286) | | Free operating cash flow | $163 | $194 | $147 | $176 | | Net income | $168 | $139 | $335 | $266 | | Cash conversion | 97% | 140% | 44% | 66% | [Reconciliation of Debt (Net Debt & Leverage Ratio)](index=21&type=section&id=Reconciliation%20of%20Debt%20(Net%20Debt%20%26%20Leverage%20Ratio)) The company reports 'Net Debt' (Total Debt less Cash and adjusted for debt-related derivatives) and a 'Leverage Ratio' (Net Debt adjusted for pensions / Adjusted EBITDA) as key non-GAAP metrics for analyzing its debt position. As of June 30, 2025, Net Debt was $1,752 million, and the Leverage Ratio was 1.3x, which is below the company's target of 1.5x Reconciliation to Net Debt (in millions) | (Dollars in millions) | Jun 30, 2025 | Jun 30, 2024 | | :--- | :--- | :--- | | Total debt | 2,051 | 1,996 | | Cash & cash equivalents | (237) | (408) | | Debt issuance cost/Debt-related derivatives, net | (62) | (8) | | Net debt | $1,752 | $1,579 | Leverage Ratio Calculation (in millions) | (Dollars in millions) | Jun 30, 2025 | Jun 30, 2024 | | :--- | :--- | :--- | | Net debt per the Policy | $1,919 | $1,720 | | EBITDA per the Policy (Adjusted EBITDA) | $1,483 | $1,380 | | Leverage ratio | 1.3 | 1.2 |