Autoliv(US:ALV)2025-07-18 13:20PART I - FINANCIAL INFORMATION This section provides the company's financial statements and management's discussion and analysis for the reported period Financial Statements 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 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 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 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 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 made75 - 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 loss8182 - 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 made83 Note 10. Revenue Disaggregation 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) 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 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 points107111114 - 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 share108 Results of Operations (Q2 2025 vs Q2 2024) 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 costs133 - Diluted EPS increased by 27% to $2.16, primarily driven by higher operating income ($0.39) and a lower share count ($0.10)131138 Results of Operations (Six Months 2025 vs 2024) 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 launches144 - 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 $0.24146154 Liquidity and Capital Resources 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 flow161 - 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 1.5x163179181 Full Year 2025 Guidance 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 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-K194 Controls and Procedures 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 period195 - No material changes were identified in the company's internal control over financial reporting during the fiscal quarter195 PART II - OTHER INFORMATION This section contains additional information including legal proceedings, risk factors, equity sales, and other disclosures Legal Proceedings 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 Risk Factors 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 operations197 - 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 actions198200 Unregistered Sales of Equity Securities and Use of Proceeds 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, 2029206 Other Information 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 taxes209 Exhibits 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 CFO211