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DATE

  • Friday, July 18, 2025, at 12 a.m. EDT

CALL PARTICIPANTS

  • President and Chief Executive Officer — Mikael Bratt
  • Chief Financial Officer — Fredrik Westin

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RISKS

  • Management stated, "We remain cautious about the rest of the year as we navigate the complexities of tariffs and other challenging economic factors," highlighting explicit concerns about ongoing external risks.
  • The company stated, "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 Q2 2025," making tariff timing a present profitability headwind.
  • Operating cash flow declined by $63 million versus the prior year, driven primarily by higher receivables, despite a $29 million increase in net income.
  • "Contrary to the past three years, we do not anticipate a gradual quarter-by-quarter adjusted operating margin increase. ... the fourth quarter of 2025 is anticipated to be the strongest of the year, while the third quarter is expected to be the weakest in the end," marking a sequential margin risk pattern due to seasonality and macro effects.

TAKEAWAYS

  • Net Sales: Approximately $2.7 billion in net sales, up 4% year over year, with organic sales growth of more than 3% excluding currency impact and including $27 million in tariff-related compensation.
  • Gross Margin: 18.5% gross margin, up 30 basis points year over year, attributed mainly to direct labor efficiency and headcount reductions.
  • Adjusted Operating Income: Adjusted operating income increased from $221 million to $251 million year over year, with an adjusted operating margin of 9.3%, an improvement of 80 basis points.
  • Operating Cash Flow: Operating cash flow was $277 million, down by $63 million due to higher receivables, despite robust sales and tariff compensations occurring late in the quarter.
  • Free Operating Cash Flow: $163 million free operating cash flow, compared to $194 million in Q2 2024, with the decline alleviated by lower net capital expenditures, which dropped by $32 million.
  • Trade Working Capital: Increased by $105 million year over year, driven by $251 million in higher accounts receivables, $21 million in higher inventories, offset by $87 million in higher payables, with the ratio to sales rising from 11.2% to 12.5% compared to Q2 2024.
  • Leverage Ratio: Remained stable at 1.3 times, below the 1.5 times target, despite $550 million returned to shareholders in the past twelve months.
  • Tariff Impact: Approximately 80% of tariffs paid were recovered; unrecovered and dilutive recovered tariffs together reduced operating margin by 35 basis points.
  • China Performance: Sales to domestic OEMs grew over 16%, aligning with local light vehicle production; Improvement was noted as the gap between company sales and local light vehicle production growth in China narrowed versus recent quarters.
  • India Growth: The company holds approximately 60% market share in India, with 2025 sales in India expected at around $100 million, or about 5% of group sales.
  • Dividend and Share Repurchases: The Q3 2025 dividend will increase to $0.85 per share; $51 million in shares repurchased and 0.5 million shares retired, reaffirming the annual share repurchase target of $300 to $500 million.
  • 2025 Outlook: Organic sales growth is expected at around 3% for full year 2025, adjusted operating margin targeted at 10%-10.5%, and full-year 2025 operating cash flow is forecasted at approximately $1.2 billion, assuming a global light vehicle production decline of 0.5% for full year 2025 and stable currency translation effects on sales.

SUMMARY

Autoliv's (ALV -4.28%) earnings call presented a mix of record quarterly performance and explicit short-term caution, with management emphasizing substantial improvements in adjusted operating income, gross margin, and cost structure despite tariff and mix headwinds in Q2 2025. Executives explained that while tariff cost recoveries covered about 80% of expenses in Q2 2025, the remaining burden, coupled with timing lags, directly constrained margin performance and introduced visibility risk for sequential profitability.

  • Strategic comments explicitly outlined continued prioritization of efficiency initiatives, operational automation, and regionalized manufacturing, with particular focus on mitigating ongoing macroeconomic and tariff uncertainties.
  • Mikael Bratt said, "We are fully committed to what we have stated there to have around $300 to $500 million in annual repurchase level," directly restating the capital return policy despite interim buyback pacing variability.
  • Management reaffirmed expectations for a Q3 2025 margin trough and Q4 2025 improvement, explaining an anticipated Q3 2025 drop in global light vehicle production of approximately one million units, which may compress earnings before year-end recovery.
  • Company-specific demand momentum was strongest in China and India, with disclosed market share gains in previously weaker vehicle segments as well as record group sales driven by regional product launches.
  • Multiple executives described their operational "resilience," but stressed explicit caution due to trade policy volatility, weaker light vehicle production forecasts for the second half, and unreliable quarter-end tariff recovery timing that may complicate forecasting and working capital management.

INDUSTRY GLOSSARY

  • CPV (Content per Vehicle): The average dollar value of a supplier's parts installed in each vehicle produced; used as a key indicator of supplier penetration and product mix value.
  • OEM (Original Equipment Manufacturer): Car companies that design, manufacture, and sell vehicles, who are the end customers for Autoliv's passive safety products.
  • LVP (Light Vehicle Production): The total number of passenger vehicles produced, often tracked for market and sales comparisons in automotive supply.
  • Call-off volatility: Fluctuation in order volume and timing from automaker customers, affecting supplier production plans and inventory management.

Full Conference Call Transcript

Mikael Bratt: Thank you, Anders. Looking at the next slide, I am proud to present the record second quarter, highlighting our company's resilience and strong market position, 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 likely production data from July, outperformed global light vehicle production despite continued significant headwinds from mix shifts. In China, we saw a clear improvement with the gap between our sales growth and light vehicle production growth narrowing compared to the previous quarters.

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 remainder 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 costs. 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.

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. We also achieved record earnings per share for the 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 return.

We remain committed to our ambition of achieving $300 to $500 million annually in stock repurchases, 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 creation. Looking now at 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. This growth was partly offset by an unfavorable regional and customer mix. Adjusted operating income for Q2 increased by 14% to $251 million from $221 million 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 despite temporary working capital buildup from higher sales and tariff compensations. Looking now at the next slide, 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 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 improvement was mainly the result of direct labor efficiency and headcount reductions.

As a result of our structural efficiency initiatives, the positive trend for R&D and E continued. Combined with the increased gross margin, this led to an 80 basis points improvement in adjusted operating margin. Looking now at 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 in domestic OEMs in China.

While light vehicle production in higher CPV markets in North America and Western Europe declined by around 3% each, this resulted in an unfavorable regional light vehicle production mix of around 2.5 percentage points in the quarter, 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. We will talk about the market development more in detail later in the presentation. Looking now at our sales growth in more detail on the next slide.

Fredrik Westin: Our consolidated net sales were over $2.7 billion, 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 the $27 million from tariff-related compensation. Excluding currencies, our organic sales grew by more than 3%, including tariff cost compensations. China accounted for 18% of our group sales, Asia, excluding China, accounted for 19%, Americas for 33%, and Europe was slightly more than 30%. We outlined our organic sales growth compared to light vehicle production on the next slide. Our quarterly sales were robust and slightly exceeded our expectation, 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 compensations. 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 2 percentage points in the first half of the year. In China, our sales to domestic OEMs grew more than 16%, aligned with the LVP growth. Our growth for the global customers in China was 2 percentage points higher than their light vehicle production.

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. 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 per vehicle from close to $100 to over $500.

We are also pleased to have launched seatbelts on two key small Japanese vehicles known as Kei cars. This is a meaningful step forward as we have historically had limited exposure to this segment in Japan. In terms of outlook, sales potential, the Deepal S09 from Shanghai and the Honda new midsize electrical crossover YAY, P7, are the most significant. Highest CPV is driven by front center airbags on six of these vehicles as well as the airbags. Now looking at the next slide, I will now hand over to Fredrik.

Fredrik Westin: Thank you, Mikael. I will talk about the financials more in detail now on the next few slides. If we turn 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 $0.33 where the main drivers were $0.27 from higher operating income and $0.10 from a lower number of shares. Our adjusted return on capital employed was a solid 24% and our adjusted return on equity was 28%. We paid a dividend of $0.70 per share in the quarter, and we purchased shares for $51 million and retired 0.5 million shares. Looking now at 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 effects. 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. Looking now at the cash flow on the next slide. 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 Americas, and less capacity expansion in Asia. 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 CapEx.

The cash conversion in the last twelve months, defined as free operating cash flow in relation to our net income, was around 65%, somewhat below our target of 80%. Now looking at our trade working capital development on the next slide. Our trade working capital increased by $105 million compared to the prior year where the drivers were $251 million in higher accounts receivables and $21 million in higher inventories, partly mitigated by $87 million in higher accounts payables. In relation to sales, 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-off accuracy can enable more efficient inventory management. Now looking at our debt leverage ratio development on the next slide. 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 its 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. This comes despite returning $550 million to shareholders over the past twelve months. Our net debt decreased by $31 million while the twelve months trailing adjusted EBITDA increased by $35.4 million in the quarter. Now looking at the tariff situation on the next slide.

Mikael Bratt: 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. Duties and tariffs have long been a part of doing business, even before the current wave of tariffs. Last year, we paid approximately $100 million in such costs on a global level, and they are reflected in the sales price. Currently, we estimate that our total gross exposure to tariffs could roughly double to around $200 million. 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. 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 will be around 20 basis points on our operating margin due to the dilution effect. We remain vigilant, particularly in assessing how these developments may influence end customer demand in the US. With that, I hand it back to you, Mikael.

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 forecasts 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.

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 output 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 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.

Overall, while some regions are still expecting growth, the global auto industry remains cautious, navigating the complexities of tariffs and other economic factors. Now looking at 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 emphasized 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, and airbags, seat belts, and steering wheels, as well as new mobility safety solutions.

The global growth outlook for automotive safety overall is supported by light vehicle production growth driven by positive GDP trends in the emerging market and by continued increases in safety content per vehicle. 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 improvements, automation and digitalization, footprint optimization, and commercial excellence. We reaffirmed our commitment to strong shareholder return with an ambition of $300 to $500 million in annual stock repurchases and maintaining a healthy leverage ratio not above 1.5 times.

Now looking at 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 high shareholder returns. We successfully navigated 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.

Contrary to the past three years, we do not anticipate a gradual quarter-by-quarter adjusted operating margin increase as the inflation environment differs from recent years. 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 the end. Notably, global light vehicle production is expected to drop by one million units or nearly 5% in Q3, making it the weakest quarter of the year. Turning to the next slide.

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 change in customer call-off 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. Our positive cash flow and strong balance sheet support 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 0.5%, a tax rate of around 28%, and that the net currency translation effects on sales will be around zero. We are monitoring the situation closely, and we are prepared to be as agile as we can to adjust to any changes. Here on the next slide. This concludes our formal comments for today's earnings call. We would like to open the line for questions from analysts and investors. And I will now hand it back to Rob.

Operator: Thank you, Mikael. Thank you. We are now going to proceed with our first question.

Emmanuel Rosner: And the questions come from the line of Emmanuel Rosner from Wolfe Research. Please go ahead.

Emmanuel Rosner: Yes. Thank you so much. Just on tariff again, just a quick part of maybe housekeeping or clarification. It be your expectation that in the third quarter, you will therefore over recover cash. So, like, you'll have the 20% 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, you know, end the year not fully recovered.

Mikael Bratt: Yeah. I think and as Fredrik already mentioned here, when it comes to full year here, that we expect, of course, there'll be some calendar effects there. That you have spillover, so to speak, from what is not in a timely fashion being able to conclude before you close the book. So, I mean, the size of it, I wouldn't like to speculate, but, for today, you had some calendar effect there as well.

Emmanuel Rosner: But I guess that's also true from a quarter point of view as well. You don't necessarily expect to overrecover.

Mikael Bratt: No. No. No. No. That's my point. So it's I mean, every closing in the quarter, I mean, be it Q3, Q2, or Q4, ultimately. Have this time effect. Yes. Understood.

Emmanuel Rosner: Thanks for the clarification. 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?

Mikael Bratt: In terms of, you know, headcount reduction, efficiencies, automation, etcetera. And how much of it is really, you know, things that would require essentially a more stable market or industry conditions.

Mikael Bratt: Yeah. I think we have tried to frame it here, I mean, around stable and reasonable LVP level here and about 85 million here. And call-offs, the stability back to pre-pandemic here. 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 identified for our within our own control switch.

Emmanuel Rosner: Got it. Thank you.

Operator: Thank you. 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.

Hampus Engellau: Thank you very much. Two questions for me. Just to just to some clarification on China. How given the price competition with the larger domestic OEMs, has that in any way changed 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 update us on the situation in India. Maybe market share and also how much contribution of growth you had from India this year. Thank you.

Mikael Bratt: Yeah. I can talk with China and then Fredrik can jump in on India there. But I mean, first, as you know, the automotive industry is very focused on cost and has always been. And I think we have shown that we have the capability to be price competitive wherever we are operating, also in China where we are the market leader in the China local market. What we have talked about here is the mix effect that we have been impacted by, but we're regaining that. So I would say my view here and feeling here is that we are able to meet the cost pressure that you have in the China market and also elsewhere here.

So hence our focus here on continuing to drive efficiency and also cost out in the whole system.

Fredrik Westin: Yeah. And then answer your question regarding India. So we have significantly outperformed the underlying LVP growth in the first half of the year. And we have around 60% market share in India. The full year 2025, we expect that India will make up around 5% of our group sales. That's adding around $100 million top line.

Hampus Engellau: Super. Thank you very much.

Operator: We are now going to proceed with our next question. And the questions come from the line of Vijay Rakesh from Mizuho. Please ask your question.

Vijay Rakesh: Yeah. Hi, Mikael. I'm sorry. Is this a quick question. I mean, if you look at mobile IP, you mentioned you can have, you know, maybe some risk with the tariff and pull-ins. Do you still expect to see the same seasonality? I can go ahead and give you some work for you guys during some of the, you know, the overall market trends there. On LVP and then follow-up.

Mikael Bratt: So sorry. Could you repeat that the line was a bit better. Could you

Vijay Rakesh: Just given the given the risk second half risk in LVP with the pull-ins and tariffs, you still expect the same seasonality in the December quarter? For orderly?

Mikael Bratt: Yeah. 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 so the end consumer has been limited in the first half. And expectations of that will increase in the second half of the year. But then it's also and then in terms of, I'll say, that impact on us is then, as I explained before, that leads to a lower Q3 volume LVP by roughly one 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 cadence of the higher engineering income in the fourth quarter.

Vijay Rakesh: Okay. Got it. I 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 the group sales? Thanks.

Mikael Bratt: Yeah. 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.

Vijay Rakesh: Thank you.

Operator: We are now going to proceed with our next question. And the questions come from the line of Michael Jacks from Jefferies. Please ask your question.

Michael Jacks: Thanks. Good morning, Mikael, Fredrik, and Anders. Just a kind of follow-up on tariffs, can you give us some context as to the competitive positioning some of the other safety providers in terms of production in the US?

Mikael Bratt: No. I think we are well I would say, well positioned to navigate through this. I mean, first of all, we are very regionalized. So the different regions are taking care of its own value chain to a very large extent. Of course, America is one region here. So for us, it's then primarily a question about the US-Mexico tariffs that's just in place there. Also there, we have a very strong industrial footprint relative to our industry and competition here. With our five plants in Utah. And in all this, we're working with our customer support 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.

Michael Jacks: Okay. And then I kinda it's kind of a related question. Outside of the discussions you're obviously having with your customers about recovering tariffs, and is there any kind of as a the conversation changed with your customers? Because I could imagine, you know, with that local footprint, I mean, they may be coming to you although they probably don't wanna pay the tariffs, and asking you to kinda help them with more volume, say. Example.

Mikael Bratt: Yeah. I think, I mean, of course, we are working with them, as I mentioned here, to find this solution both, and then activities short term that can limit the impact there. But, I mean, long term, 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 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 case sustainably in order to take any potential CapEx decisions and all that. But right now, it's that we are some time away from that point.

Michael Jacks: Okay. Thank you.

Operator: We are now going to proceed with our next question. And the next question is coming from the line of Mattias Holmberg from DNB Carnegie. Please ask your question.

Mattias Holmberg: Thank you. Just a quick follow-up on the 10% to 10.5% margin guidance in the context of the 20 bps tariff dilution. Should we think of the underlying performance as absorbing this tariff headwind? In other words, 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.

Mikael Bratt: No. I think I mean, you're absolutely right. The tariff impact that Fredrik mentioned before is included in our guidance, and we are working as I said, here very hard to improve and take out cost, etcetera, to manage the headwind that we see, and this is definitely a headwind that we have to absorb within the guidance here.

Mattias Holmberg: Oh, yeah. Thank you.

Operator: We are now going to proceed with our next question. And the next question is coming from the line of Agnieszka Vilela from Nordea. Please ask your question.

Agnieszka Vilela: Perfect. Thank you so much. I have two questions. So starting with the capital distribution, 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 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?

Mikael Bratt: 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. 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 a discussion we have been hearing 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 to make 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.

Agnieszka Vilela: Great. Thank you for the color. 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 you?

Fredrik Westin: 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 FX 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 were the Mexican peso versus the US dollar on a year-over-year basis. And also the euro against the Turkish lira. So those were the two most favorable currency pairings for us, the movements. 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 SEK against the US dollar was a negative hit for us. And the only thing I can say on the guidance is that we expect that the cessation effect for the full year will be around zero.

Agnieszka Vilela: Thank you.

Operator: 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.

Dan Levy: Thank you. Thank you for taking the question. First question is just on the pricing dynamics. Because if we look at the bridge, you are still getting an 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 tariff negotiations?

Mikael Bratt: 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. Of course, we still have some inflationary impacts even though it's significantly smaller than what we have seen in the past years, but it's still over and above what we have as normal. That's dynamic there. And then, of course, we get new price points when we have new products and new businesses there.

But other than that, it's still the same dynamic here when it comes to expectation price down of the 2% to 4% that we have had historically here on running programs. So no change when it comes to, I would say, the model and the dynamics there.

Dan Levy: Okay. Thank you. I will then ask the question. Yeah.

Dan Levy: Yeah. Yeah. Yeah. Thank you. Second question is around the GOM dynamics. And specifically, I think we've seen strong GOM in Americas 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 maybe you can remind us to what extent your GOM in America is has been impacted by has been driven by EVs and to what extent any slowdown in launch activity, EV uptake, could impact, GOM for you in the second half and into 2026.

Mikael Bratt: I would say in America, as the EV component has not been significant. It's very minor. So I don't see that impacting our position at all actually.

Dan Levy: And tariffs? Is any other launches that are at risk because of tariffs for you?

Mikael Bratt: Oh, I think, I mean, the tariffs as such, of course, it's a part of creating uncertainty about the outlooks here when it comes to people's willingness to invest and affordability and those kinds of questions. And, of course, I think you can see and we have seen that the activities for or queues for new models are put out in time. And as we indicated here, also, we've seen with lower numbers than expected and more in line with last year here. So I think in short, the uncertainty in general and of course, a highly important part of that is creating uncertainty on how where to invest with new models, etcetera.

So we see more the existing models running longer and new models being put out in time. Yeah. Regardless if it's EV or not.

Dan Levy: Great. Thank you.

Operator: We will now take our last question. And the last question is coming from the line of Karl Bokfield from ABG Sundal Collier. Please ask your question.

Karl Bokfield: 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 then negative mix headwinds. So the question is, if you expect this outperformance, how for how long do you think that the mix will still be a headwind?

Mikael Bratt: 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 vehicles, if we call them that, being the main driver of the volume in China. So far. 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.

Can be discussed, but that depends on the more model mix effect, which is very hard to have a clear opinion about more speculation in that case.

Karl Bokfield: Understood. That was all from my side. Thank you.

Mikael Bratt: Thank you.

Operator: This concludes the question and answer session. I would like to hand back to Mr. Mikael Bratt for closing remarks.

Mikael Bratt: Thank you, Rob. 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 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 the year. Finally, our products save an estimate of 37,000 lives and reduced around 600,000 injuries last year, underscoring our vision of saving more lives.

Our third quarter call is scheduled for Friday, October 17, 2025. Thank you for your attention. Until next time, stay safe.

Operator: This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.