Autoliv Misses, Profits Fall - Analyst Blog
01 November 2011 - 2:55AM
Zacks
Autoliv
Inc. (ALV) recorded a decline in
profit to $138.4 million or $1.48 per share in the third quarter of
2011 from $140.1 million or $1.51 per share in the same quarter of
2010. The company has missed the Zacks Consensus Estimate by a
penny.
Consolidated
sales appreciated 16% to $2.02 billion reflecting a boost of 6% due
to currency translation. Organic sales rose by 9% during the
quarter.
The
company’s sales were highly influenced by recent vehicle launches
and a favorable vehicle mix, particularly with Hyundai/KIA
and General
Motors (GM),
Ford
Motor (F) and Chrysler. These apart,
strong demand for side airbags for chest protection as well as for
electronics (both passive electronics and active safety systems),
and the continued global trend of upgrading seatbelt systems with
pretensioners led to the sales growth.
Gross profit
increased 10% to $411 million. However, gross margin declined to
20.4% from 21.5% due to higher raw material prices and negative
currency revaluation effects.
Operating
income increased by $3 million to $205 million. However, operating
margin decreased to 10.2% from 11.6% due to antitrust
investigations.
Performance by
Segments
Sales
of Airbag
Products escalated 15% to $1.32
billion, with an 8% rise in organic sales. The increase in
sales was attributable to strong demand for side airbags for chest
protection, passenger airbags and for passive safety electronics,
particularly by Hyundai/KIA, Chrysler, GM, and Ford.
Sales
of Seatbelt
Products grew 16% to $659 million,
with a 9% growth in organic sales. The growth was driven by new
business, mainly in Europe and China, especially from GM, Ford,
Hyundai/KIA and Nissan.
Sales
of Active Safety
Products went up 78% to $40 million,
with a 75% growth in organic sales. The increase was attributable
to new radar business with Chrysler and higher optional take-rates
at Daimler’s
(DDAIF) Mercedes.
Financial
Position
Autoliv had
cash and cash equivalents of $630.7 million as of September 30,
2011 compared with $487.2 million in the corresponding period a
year ago. Total debt reduced to $702 million from $836.2 million as
of September 30, 2010.
Consequently, long-term debt to capitalization ratio declined to
17.6% as of September 30, 2011 from 23% in the year-ago period.
Gross interest-bearing debt increased by $8 million to $702 million
during the quarter.
Autoliv aims to maintain a leverage ratio that is significantly
below 3.0X and an interest-coverage ratio that is significantly
above 2.75X. At the end of the quarter, the company’s leverage
ratio was 0.1X, while interest coverage ratio was
14.9X.
In the first nine months of the year, the company’s cash flow
from operations decreased to $465.1 million from $598.1 million a
year ago, due to unfavorable changes in operating assets and
liabilities. Capital expenditures (net) increased to $256.6 million
from $142.1 million in the prior-year period.
Guidance
For full
year 2011, Autoliv expects consolidated sales to grow more than 15%
to $8.3 billion, backed by an organic sales growth of more than 9%.
However, given the uncertainties due to the flooding in Thailand,
the company has slightly lowered its operating margin guidance to
11% from over 11%.
Our
Take
Autoliv has
a stable market share in both airbag modules and seat belts in
North America, Europe and Asia. The company has continuously
expanded in low-cost countries, including Romania and China, in
order to meet local demand and to consolidate manufacturing from
high-cost countries.
However, it
faces significant customer concentration risks. The company’s top-5
represent about 59% of sales and the top 10 represent 74% of
sales.
Due to these
factors, the company retains a Zacks #3 Rank on its stock, which
translates to a Hold rating for the short term (1 to 3 months). We
have reiterated a Neutral recommendation on the stock for
the long term (more than 6 months).
AUTOLIV INC (ALV): Free Stock Analysis Report
DAIMLER AG (DDAIF): Free Stock Analysis Report
FORD MOTOR CO (F): Free Stock Analysis Report
GENERAL MOTORS (GM): Free Stock Analysis Report
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