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After missing its organic growth guidance in the second quarter, Autoliv (NYSE:ALV) buckled in to try to make up some lost ground in the third quarter. It did so by beating its guidance expectations. That is after organic sales -- which adjusts for mergers and acquisition and currency impacts -- rose 6.1% and was ever so slightly ahead of its guidance for organic sales growth of around 6%. That said, due to customer call-offs, fourth-quarter organic sales growth will be flat, though Autoliv is still sticking with its full-year guidance.

Autoliv results: The raw numbers


Q3 2016 Actuals

Q3 2015 Actuals

Growth (YOY)


$2.5 billion

$2.2 billion


Operating income

$191.1 million

$157.8 million


Adjusted earnings per share (EPS)




Data source: Autoliv. YOY = year over year.

What happened with Autoliv this quarter?

Autoliv's organic growth and margins topped expectations.

  • Autoliv's key airbag segment was solid with revenue up 5.3% to $1.3 billion as foreign exchange rates added 0.2% to top line growth. Adjusting for this impact, organic sales increased 5.1%, driven primarily by steering wheels in Europe and inflatable curtains in Japan and China.
  • Seatbelt sales were strong, up 5.8% to $631 million. That said, foreign exchange rates cut 1% off the top line, which after adjusted, resulted in organic sales growth of 6.8%. Strong growth in China and Europe drove seatbelt sales, offsetting weakness in South Korea.
  • Sales of passive safety electronics were robust, up 9.4% to $240 million. Because foreign exchange rates buoyed that number by 1.4%, organic sales growth moderated to 8%, propelled by airbag control modules and remote sensing sales in China.
  • Active safety products sales were also robust, up 11.6% to $138.5 million. However, acquisitions boosted sales by 3.4% while currencies negatively impacted results by 0.4%. The net effect after adjustments was 8.6% organic sales growth, led by radar and camera sales in Europe, primarily to Mercedes and BMW.
  • Finally, the company's brake control systems segment added $138.5 million to the top line due to the second-quarter start-up of the ANBS joint venture.
  • In addition to the stronger-than-expected organic sales growth, Autoliv reported a better-than-predicted adjusted operating margin of 8.1%, well above its 7.5% guidance.

What management had to say

About the quarter, Autoliv CEO Jan Carlson said:

The third quarter developed slightly better than our expectations. Growth was in line with our guidance and operating margin was higher than expected. I am particularly pleased with the strong growth in Europe and China. Regionally, the light vehicle production growth in China was stronger than expected. In the U.S. market the monthly vehicle sales figures continue to indicate a slowdown in the market, while Europe continues to see high vehicle production levels. Autoliv currently has a healthy product mix in Europe and we outperformed the European vehicle production growth in the quarter by double digit levels.

As Carlson notes, the global auto market is in a state of flux. Several international markets are strong, while the U.S. market is weakening. Those trends are certainly playing out in the recent third-quarter reports of automakers. Ford (NYSE:F), for example, reported its best pre-tax profit in Europe since 2007 while delivering record third-quarter profit in Asia-Pacific, driven by strong sales in China. On the other hand, Ford's North American sales and profitability slid. Likewise, Fiat Chrysler (NYSE:FCAU) reported higher volumes in Europe during the quarter. That helped offset weaker shipments in the U.S., allowing Fiat Chrysler to announce stronger profitability and increase its full-year guidance. The strengthening European auto market is unquestionably helping both automakers and Autoliv to mute the weaker American market.

Looking forward

Despite the strong European auto market, Autoliv sees its fourth-quarter organic revenue growth fattening out year over year due to customer call-offs. Still, the company's recent M&A transactions should drive a 6% overall improvement in revenue while it expects its operating margin to be more than 9%. That  projected weakness in organic sales notwithstanding, Autoliv is sticking with its full-year outlook to deliver organic sales growth of around 7% and adjusted operating margin of more than 8.5%.

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