STOCKHOLM, July 17, 2020 /PRNewswire/ -- (NYSE: ALV) and (SSE: ALIV.Sdb)
Q2 2020: Adapting to weak but improving LVP
Financial highlights Q2 2020
$1,048m net sales
48% organic sales decline*
(22.3)% operating margin
(16.4)% adjusted operating margin*
$(2.00) EPS - a decrease of $3.25
$(1.40) adjusted EPS* - a decrease of $2.78
Full year 2020 indications
No indications will be provided until effects of COVID-19 pandemic can be better assessed
Key business developments in the second quarter of 2020
- Organic sales declined* 2.6pp more than global light vehicle production declined, with the negative regional mix offsetting our outperformance within each of the regions. April sales declined Y-o-Y organically by 65%, May by 55% and June by 20%. Order intake in the first half year was in line with last year and supportive of prolonged sales outperformance.
- Profitability and cash flow negatively impacted by customer plant closures and a volatile industry ramp up, and by continued high engineering activity preparing for future model launches. Our liquidity position remains strong with $1.7bn in cash and committed, unused loan facilities. Operating cash flow was $128m negative in Q2, but it turned positive in June.
- Substantial cost reductions with short- and long-term effects includes reduction of personnel costs by 25% vs. Q1, and launching Structural Efficiency Program phase II, which targets additional annual employee cost reductions of around $65m. Further potential structural cost reductions, including footprint, remain under evaluation.
*For non-U.S. GAAP measures see enclosed reconciliation tables. All change figures in this release compare to the same period of previous year except when stated otherwise.
Comments from Mikael Bratt, President & CEO
The challenges we managed in the second quarter were unprecedented. The COVID-19 pandemic is first and foremost a human crisis, where safeguarding health and safety is our first priority and our global Smart Start Playbook has been instrumental to us in safely restarting our operations. I am proud that we have a solid organization that managed to reduce costs, safely restart operations while continue to execute on our long-term strategy.
The pace and scope of the demand decline coupled with a volatile ramp-up had a significant impact on our financial performance in the quarter. Our largest markets Americas and Europe were virtually standing still in April, followed by a restart and ramp-up in May and June. Daily adjustments were needed to respond to a low and volatile customer demand, including headcount reductions of 3,700 since March, furloughing personnel and significant reductions in capex and discretionary spending.
We must balance the cost reduction responses against the need for capacity to manage the recovery that started mid-quarter and continues in the first weeks of July. We also need to preserve capacity for the new normal market demand and our expected outgrowth. I am confident that the actions implemented and planned are positioning Autoliv well to benefit from any demand recovery.
Our sales declined slightly more than global LVP, which almost halved in the quarter vs. a year ago. Our organic sales development was better than LVP in all regions but because high safety content markets declined more than low safety content markets, sales mix was unfavorable.
Encouragingly, operating cash flow turned positive in June. It is also positive that our customers' sourcing activities and model launch plans are close to unchanged. Our engineering support for these activities remain high, even though there are some limited new model launch delays. I am also pleased that order intake for the first half year was in line with last year.
The Structural Efficiency Program (SEP) was close to complete at the end of Q2. We now launch SEP2 as the next step. We also continue the strategic initiatives and structural improvement projects outlined at our CMD in 2019. The ambition is to ensure that we have an adequate cost structure supporting our medium-term profitability targets also in a reduced LVP environment, although the additional challenge could mean that more time is needed to reach our targets.
Inquiries: Investors and Analysts
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This information is information that Autoliv, Inc. is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the VP of Investor Relations set out above, at 12.00 CET on July 17, 2020.
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