Autoliv expects to exceed a $12 billion sales target for 2019

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The near-collapse of Japanese airbag maker Takata has cleared the road for bigger rival Swedish rival Autoliv but higher orders have yet to translate into share price gains.

Autoliv argues it is on the cusp of accelerating growth just as the extra spending it needed to deliver on new orders tapers off, expecting to exceed a $12 billion sales target for 2019, reports Reuters.

But many investors remain skeptical. They have been more focused on muted sales growth and a squeeze on margins after the company took on more staff to meet demand.

Autoliv CEO Jan Carlson poses for a picture at company headquarters in Stockholm, Sweden

The Swedish company had $10.1 billion in sales last year and analysts have forecast $10.4 billion for 2017. Chief Executive Jan Carlson sees more rapid progress by 2019.

“When we look at these more than $12 billion, that is absolutely mostly based on the order book we have,” Carlson told Reuters in an interview, adding the precise final outcome would depend on car production and product mix.

Analysts are forecasting $11.8 billion in 2019 sales according to Thomson Reuters’ SmartEstimate. Part of the issue for Autoliv is down to timing. Lead times between orders and revenue are about two years in passive safety and three years in active safety, Carlson said.

The company sells radar products, vision systems and advanced driver assistance software in its active safety business. Airbags and seatbelts, standard issue for a number of years, are the top products in what is known as passive safety and which remains by far the largest contributor to sales.

Takata last month reported its third consecutive annual loss following a scandal over the recall of its potentially deadly airbag inflators.

Seeking to fulfill additional orders, Autoliv recruited an extra 1,000 engineers in the nine months to the end of March.

“The market has been big as well, with record order intake during two years. So that is, of course, a big reason for us investing this money,” Carlson said.

Underscoring market divisions over Autoliv’s prospects, Morgan Stanley upgraded its shares to “Overweight” in late May, calling the company “an overlooked safe haven”. Autoliv has taken half of the available passive safety orders since early 2015, compared with a market share of 39 percent on actual deliveries last year.

“Both 2018 and also 2019 will be big launch years for us,” Carlson said, adding Autoliv could keep a market share on new orders above historic levels of just under 40 percent. Autoliv grew active safety like-for-like sales by 3 percent in the first quarter and targets $1 billion in sales by 2020.

Carlson said Autoliv was confident its close links and long history with carmakers would help it to remain a top player in the rapidly expanding active safety business, even as new competition enters in the race toward self-driving cars.

It sees a new autonomous driving software joint venture with Volvo Cars, Zenuity, as a crucial part of that. Zenuity expects its first revenue in 2019 and plans to offer fully autonomous driving software by 2021. Carlson said he expects costs for research, development, and engineering to reach their peak relative to sales during the second half of 2017, and then begin falling.

Chip giant Intel’s $15 billion deal this year to buy Israel’s Mobileye, the market leader in camera-based monovision algorithms, highlighted the growth potential and heady valuations in the sector.

A move in 2014 to develop a stereo-vision camera saw Autoliv part company with Mobileye as a supplier. That left a gap in its product portfolio filled only in early 2016 when the latest Mercedes E-Class was launched with Autoliv’s new gear.


This article has been posted by a News Hour Correspondent. For queries, please contact through [email protected]
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