Autoliv's (NYSE:ALV) financial results for the first quarter came in about as expected, with organic sales increasing less than 1% and an operating margin of around 9%. That sales growth, while meager, was enough to push sales and gross profit to record levels, especially when factoring in some positive impacts from foreign exchange. Because of that, the company remains on pace to hit its full-year targets, as well as to complete the spinoff of its electrics segment into a standalone company to be called Veoneer in the third quarter.

Autoliv results: The raw numbers

Metric

Q1 2018

Q1 2017

Year-Over-Year Growth

Revenue

$2.8 billion

$2.6 billion

7.8%

Adjusted operating income

$246.8 million

$220.3 million

12%

Adjusted EPS

$1.66

$1.65

0.6%

Data source: Autoliv. EPS=earnings per share.

A seat belt in a car with the sun shining in.

Image source: Getty Images.

What happened this quarter?

Results came in about as expected.

  • Heading into the first quarter, Autoliv anticipated that organic sales growth would be "less than 1%," which it just managed to achieve. While total sales jumped nearly 8% versus the year-ago quarter, changes in foreign exchange rates drove the bulk of that increase -- organic sales grew by a meager 0.1%. Meanwhile, its adjusted operating margin was 8.8, which roughly matched its forecast that it would be "around 9%."
  • The company's passive safety segment drove the bulk of the growth during the quarter: Sales rose 9.7%, 1.4 percentage points of which was organic. The biggest contributor was the seatbelt business, which delivered 6.4% organic sales growth due to increasing use of advanced and higher-valued seatbelt systems around the world. That strong performance helped offset a 1% organic drop in airbags sales -- a decline attributed to lower side airbag sales in Europe and the Americas.
  • Sales in Autoliv's electronics segment rose 1.8% overall, though they declined 4.1% organically. While sales of active safety components like radars and cameras rose 6% on an organic basis, that wasn't enough to offset double-digit percentage declines in both brake systems and restraint control systems (mainly airbag control modules and remote sensing systems).
  • The higher revenue and solid margins drove gross profit up to a record $579.2 million, and helped power the strong showing in adjusted operating earnings. Adjusted earnings per share, however, barely budged due in part to higher taxes.
  • Operating cash flow, on the other hand, plunged nearly 90% to $15.6 million, due mainly to unfavorable timing.

What management had to say

Said Autoliv CEO Jan Carlson:

The first quarter 2018 was a solid quarter with record sales and record gross profit. Adjusted operating margin was in line with guidance and I am pleased that it improved year-over-year for the second consecutive quarter. Operating cash flow is seasonally lower in the 1st quarter but the quarter was also effected by unfavorable timing effects. On a full year basis, excluding separation effects, we expect operating cash flow to be on the same level as last year.

As Carlson noted, the quarter essentially met expectations, though the results did lean toward the lower end of guidance. Further, he pointed out that while cash flow was down during the quarter, the company views it as being about level with last year after adjusting for the additional costs of spinning out Veoneer.

Looking forward

Due to the spinoff coming down the road, Autoliv is not providing any guidance for the second quarter. However, it did repeat its full-year forecast for both segments. In passive safety, the company expects organic sales to rise by 10%, while in electronics, it predicts a decline of around 3%. The company did say that it would update its guidance after it completes the spinoff.