Overview of the Company’s Financial Performance

Autoliv, Inc. is a leading global supplier of automotive safety systems, primarily passive safety products like airbags and seatbelts. In 2024, the company faced a number of challenges, including volatile customer call-offs, elevated cost inflation, and shifting regional light vehicle production (LVP) trends. Despite these headwinds, Autoliv delivered solid financial results, with operating income increasing 42% to $979 million and earnings per share (EPS) rising 40% to $8.04.

The company’s organic sales growth (excluding currency effects) was 0.4% in 2024, outperforming the 1.2% decline in global LVP. This was driven by new product launches and some pricing improvements, partially offset by unfavorable changes in regional and model mix. Autoliv’s market share decreased slightly from around 45% in 2023 to 44% in 2024, mainly due to faster growth of lower content domestic Chinese OEMs.

Revenue and Profit Trends

Autoliv’s consolidated net sales declined 0.8% in 2024 to $10.39 billion, with the organic sales growth of 0.4% offset by a 1.2% negative currency impact. Sales of airbags, steering wheels and other products decreased 0.5%, while seatbelt product sales declined 1.6%.

Regionally, sales were mixed - increasing 2.4% in Europe and 2.2% in Asia excluding China, but declining 2.9% in the Americas and 4.5% in China. The differences in regional LVP growth rates, with China and other lower content regions outperforming, diluted Autoliv’s global safety content per vehicle (CPV).

Gross profit increased 5.8% to $1.93 billion, with the gross margin improving 1.2 percentage points to 18.5%. This was mainly due to better operational efficiency from improved customer call-off accuracy, as well as some benefit from lower material costs. Operating income rose 42% to $979 million, with the operating margin expanding 2.8 percentage points to 9.4%. The increase was driven by lower restructuring costs compared to 2023.

Net income attributable to Autoliv increased 33% to $646 million, while diluted EPS grew 40% to $8.04. The effective tax rate rose to 26.0% in 2024 from 20.1% in 2023, as the prior year benefited from certain discrete tax items.

Strengths and Weaknesses

A key strength for Autoliv is its diversified global footprint, with a balanced regional sales mix. The company has been able to adapt to the geographic shift in automotive production, with timely investments and capability building in growth markets like China and India. This has helped offset declines in more mature regions.

Autoliv also benefits from its strong customer relationships, supplying products to over 1,300 vehicle models and 100 car brands. The company’s high win rates for new platforms, including with new OEMs, have added to its already substantial order book. In 2024, nearly one-third of order intake was from new automakers, mainly in China and North America.

However, Autoliv remains exposed to the inherent pricing pressure in the automotive supplier industry. The company has had to engage in extensive negotiations with customers to secure compensation for cost inflation, especially in labor. Its ability to rapidly implement productivity improvements and cost reduction initiatives is critical to maintaining profitability.

Another potential weakness is the company’s dependence on a relatively small number of large customers, with the top 5 and 10 customers accounting for 44% and 71% of sales respectively in 2024. The loss of a major customer or a bankruptcy could have a material adverse impact.

Outlook and Future Prospects

Looking ahead to 2025, Autoliv expects organic sales growth of around 2%, with an adjusted operating margin in the range of 10-10.5%. The company forecasts a 0.5% decline in global LVP, with a 2% negative impact from foreign currency translation.

Key assumptions underlying the 2025 guidance include:

• Continued gradual offset of cost inflation, especially in labor, through pricing actions
• Achieving targeted productivity improvements and cost savings from restructuring initiatives
• No material changes to tariffs or trade restrictions

The company believes the more stringent crash test requirements and consumer demand for safety features will enable the global automotive safety market to grow 1-2 percentage points faster than LVP in the medium to long term, excluding price increases.

Autoliv’s strong order intake in recent years, including high win rates with new OEMs, provides good visibility on future sales growth. However, the company remains cautious about the potential impact of geopolitical and technological uncertainties on OEM sourcing activity.

To enhance shareholder value, Autoliv continues to focus on operational excellence initiatives, including the Autoliv Production System, product and process standardization, and increased automation and digitalization. The company also maintains a disciplined approach to capital allocation, targeting a leverage ratio of around 1.0x.

Conclusion

Despite the challenging operating environment in 2024, Autoliv delivered solid financial results, demonstrating the resilience of its business model. The company’s diversified global footprint, strong customer relationships, and focus on operational improvements position it well to navigate the industry’s evolving landscape.

Looking ahead, Autoliv’s guidance for 2025 reflects cautious optimism, with expectations for modest organic sales growth and margin expansion. The company’s ability to offset cost inflation, drive productivity gains, and capitalize on emerging safety trends will be critical to sustaining its competitive edge and creating long-term shareholder value.