Autoliv (ALIV) Q4 2008 earnings summary

Executive summary

• FY08 net sales fell 4% to $6.473B; operating income declined 39% to $306.5M and net income fell 43% to $164.7M amid collapsing vehicle production, cost inflation and restructuring.

• Q4 net sales were $1.193B; the quarter recorded a $46.6M pretax loss, a $38.4M net loss and diluted EPS of $(0.55).

• Cash generation remained strong, but management expected a weak 2009 start, negative early-year cash flow and substantial uncertainty from vehicle production and customer and supplier viability.

Financial highlights

• FY08 gross profit was $1.124B, down 16%; reported gross margin was 17.4%, versus 19.7% in 2007.

• FY08 income before taxes was $248.7M versus $446.2M; reported net margin was 2.5% versus 4.3%, and diluted EPS was $2.28 versus $3.68.

• Excluding $80M of severance and restructuring costs, 2008 operating income was reduced by $80M, net income by $55M and diluted EPS by $0.76.

• Operating cash flow was $613.6M; capital expenditures were $293.4M gross and $279M net, leaving $335M after net capital expenditures and before acquisitions.

Outlook and guidance

• FY09 global light vehicle production was forecast to fall 17%; North America and Western Europe were expected to decline 27% and 23%, respectively.

• Organic sales were expected to track or slightly outperform combined North American and Western European production; currency could reduce consolidated sales by 7% if mid-February rates persisted.

• Lower component costs were expected to benefit FY09 by ~$50M, mostly in H2; action-program savings were expected to increase, with restructuring costs possibly near 2008 levels.

• FY09 was expected to begin with negative cash flow; positive operating income excluding restructuring costs was considered possible later in the year, conditional on production and raw-material trends and no major customer defaults.

• Capital expenditures were expected to be $200M-$250M in 2009, below 2008 levels as capacity expansion slowed.