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    ALV
    Earnings call· Jun 2026(Q2 FY26)

    AUTOLIV Q2 FY26 earnings call ALV

    Jul 17, 2026 Source

    Executive summary

    Autoliv Q2 FY26 — Record Sales and Adjusted Operating Income Despite Challenged Market

    Autoliv delivered a robust second quarter, achieving record sales and adjusted operating income, driven by strong market outperformance in Asia and effective cost management. The company is navigating geopolitical challenges and raw material headwinds, with profitability expected to be back-end loaded in the year due to timing of customer compensations and engineering income. Strategic agreements with Chinese OEMs position Autoliv for continued growth in key markets.

    Highlights

    5

    • Delivered record second quarter sales of over $2.8 billion and adjusted operating income of $270 million, with adjusted operating margin increasing by 30 basis points to 9.6%.

    • Achieved record operating cash flow of $434 million, an increase of $157 million year-over-year, supporting shareholder returns.

    • Outperformed global light vehicle production by over 1 percentage point, with significant outperformance in Asia, including China (>7 percentage points) and India (~20 percentage points).

    • Improved leverage ratio to 1.2x from 1.3x despite repurchasing $200 million in shares and paying $64 million in dividends.

    • Signed strategic cooperation agreements with Great Wall Motor and XPENG, strengthening position with leading Chinese vehicle manufacturers.

    Concerns

    4

    • Gross margin decreased by 30 basis points to 18.2% due to a supplier compensation reversion and asset impairments related to Turkey restructuring.

    • Anticipates a gross headwind from raw materials of approximately $110 million for the full year 2026, with inflationary pressures from geopolitical developments.

    • Global light vehicle production is expected to decline by 2.5% for the full year 2026, a downward revision primarily due to weaker outlook in China (-5%).

    • Q3 adjusted operating margin is expected to be similar to H1 levels, with significant profitability step-up weighted towards Q4, similar to prior years.

    Guidance & targets

    9
    CategoryTargetConfidence
    Full-year 2026 Organic Sales
    flat
    high materiality
    High
    Full-year 2026 Global Light Vehicle Production Decline
    around 2.5%
    high materiality
    High
    Full-year 2026 Adjusted Operating Margin
    around 10.5% to 11%
    high materiality
    High
    Full-year 2026 Gross Raw Material Headwind
    approximately USD 110 million
    medium materiality
    High
    Full-year 2026 Operating Cash Flow
    around USD 1.2 billion
    high materiality
    High
    Full-year 2026 Capital Expenditures Net as % of Sales
    below 5%
    medium materiality
    High
    Full-year 2026 Effective Tax Rate
    around 30%
    low materiality
    High
    Q3 FY26 Adjusted Operating Margin
    similar to the first half year level
    medium materiality
    High
    Q4 FY26 Profitability
    significant step-up
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    China
    Strong growth with Chinese OEMs, which are increasing their share of light vehicle production. New launches primarily in China, reflecting strong momentum.
    Sales as % of total: 19%Sales to Chinese OEMs as % of China sales: 55% (vs 40% last year)Outperformance vs. market: >7 percentage points
    		—outperformed LVP by >40 percentage points with Chinese OEMs——
    Asia (excluding China)
    Driven by continued strong sales growth in India due to increased safety content. Japan and South Korea also contributed to outperformance.
    Sales as % of total: 19%India organic sales growth: 36%India outperformance vs. market: ~20 percentage points
    		—outperformed market by 6 percentage points——
    Americas
    Partly attributed to lower tariff compensation following IEEPA refund and unfavorable mix driven by strong LVP growth in lower content South American market.
    Sales as % of total: 32%
    		—negative performance——
    EMEA
    Company is discontinuing manufacturing operations in Turkey, transferring production to other EMEA facilities (Tunisia, Romania) to optimize footprint.
    Sales as % of total: 30%
    		————

    Operational metrics

    37
    Adjusted Operating Income
    $270 millionincreased by 7%
    Q2 FY26

    Record second quarter adjusted operating income.

    Adjusted Operating Margin
    9.6%30 basis points higher
    Q2 FY26

    Record second quarter adjusted operating margin.

    Leverage Ratio
    1.2ximproved from 1.3x
    Q2 FY26 end

    Improved despite repurchasing over 1.6 million shares for USD 200 million and paying a dividend of USD 64 million.

    Turkey Restructuring Charges
    $142 million
    Total

    Related to the decision to gradually discontinue manufacturing operations in Turkey.

    Turkey Restructuring Cash Out
    $129 million
    Total

    Expected with limited impact on 2026 cash flow.

    Turkey Restructuring Annual Pretax Savings
    $40 million
    Annual

    Expected from the discontinuation of manufacturing operations in Turkey.

    Organic Sales Growth
    1%
    Q2 FY26

    Excluding currencies, organic sales grew $27 million.

    FX Translation Effects on Sales
    $62 millionpositive
    Q2 FY26

    Contributed to consolidated quarterly net sales exceeding $2.8 billion.

    Tariff-related Compensations (Net)
    -$5 millionlower
    Q2 FY26

    Partly offset positive currency effects on sales, mainly due to an IEEPA-related refund of $9.6 million.

    Global Market Outperformance
    >1 percentage point
    Q2 FY26

    Based on the latest light vehicle production data from S&P Global.

    Asia (excluding China) Market Outperformance
    6 percentage points
    Q2 FY26

    Driven by continued strong sales growth in India.

    India Organic Sales Growth
    36%
    Q2 FY26

    Reflecting mainly the spend of increased safety content in vehicles.

    China Market Outperformance
    >7 percentage points
    Q2 FY26

    Supported by strong sales growth with Chinese OEMs.

    Chinese OEMs Share of China Sales
    55%compared to 40% last year
    Q2 FY26

    As a result, the Chinese OEMs accounted for 55% of our sales in China in the quarter.

    Gross Margin
    18.2%decreased by 30 basis points
    Q2 FY26

    Mainly due to the reversion of a supplier settlement and asset impairments related to the Turkey restructuring, which combined reduced gross margin by almost 80 basis points.

    SG&A as % of Sales
    4.9%improved by 40 basis points
    Q2 FY26

    SG&A decreased by $7 million, mainly due to reverse estimate of credit loss reserves, partly offset by negative FX translation effects.

    US Tariff Recovery Rate (Q2)
    83%
    Q2 FY26

    Excluding IEEPA-related recovery.

    US Tariff Recovery Rate (YTD)
    78%
    YTD FY26
    Capital Expenditures Net as % of Sales
    3.4%versus 4.2% year-on-year
    Q2 FY26

    Lower level mainly related to lower footprint optimization and less capacity expansion.

    Cash Conversion (LTM)
    119%exceeding our target of at least 80%
    LTM
    Net Debt Decrease
    $75 million
    Q2 FY26

    While the 12-month trailing adjusted EBITDA increased by $33 million.

    Global Light Vehicle Production Decline (S&P Global)
    0.3%0.3% better than expected in April
    Q2 FY26

    Stronger-than-expected performance in North and South America, Europe, India, and South Korea helped offset softer production levels in China.

    Global Regional LVP Mix
    60 basis points unfavorable
    Q2 FY26

    Primarily driven by stronger light vehicle reduction in lower content markets relative to other markets.

    Global Light Vehicle Production Decline (S&P Global FY26)
    2.3%almost 2 percentage point downward revision from its general forecast
    FY26

    The downgrade is primarily driven by lower production expectations in China and Middle East.

    Europe Light Vehicle Production Decline (S&P Global FY26)
    nearly 1%
    FY26

    Affecting on growing affordability challenges and increasing competition from Chinese imports.

    North America Light Vehicle Production Decline (S&P Global FY26)
    only 1%outlook upward
    FY26

    Market continues to display resilience despite uncertainty related to the conflict in the Middle East and the higher fuel prices.

    China Light Vehicle Production Decline (S&P Global FY26)
    5%lowered by 4 percentage points since January
    FY26

    Reflects a challenging demand environment, driven by reduced government incentives, ongoing macroeconomic headwinds and increasingly cautious consumer sentiment despite continued strength in vehicle export.

    Japan Light Vehicle Production Decline (S&P Global FY26)
    only 1%outlook upward
    FY26

    Improved outlook reflects strengthening exports to the U.S. and Europe, supported by robust demand for fuel-efficient hybrid electric vehicles.

    South Korea Light Vehicle Production Decline (S&P Global FY26)
    2%outlook upward
    FY26

    Improved outlook reflects strengthening exports to the U.S. and Europe, supported by robust demand for fuel-efficient hybrid electric vehicles.

    India Light Vehicle Production Increase (S&P Global FY26)
    9%
    FY26

    Driven by a reduction in purchase taxes on new vehicles, which benefit smaller and lower-priced models.

    Adjusted Return on Capital Employed
    25%
    Q2 FY26

    Solid performance.

    Adjusted Return on Equity
    28%
    Q2 FY26

    Solid performance.

    RD&E Net Change
    increasedyear-over-year
    Q2 FY26

    Primarily on negative currency translation effects, higher personnel costs and lower engineering income due to timing of specific customer development projects.

    Unrecovered Tariff and Dilutive Effects Impact
    around 20 basis points negativepositive impact of around 15 basis points compared to last year (last year negative 35 bps)
    Q2 FY26

    The combination of unrecovered tariff and the dilutive effects of the recovered portion.

    Net Debt
    decreased by around $75 million
    Q2 FY26

    While the 12-month trailing adjusted EBITDA increased by $33 million.

    Share Repurchases
    $200 million
    Q2 FY26

    Over 1.6 million shares repurchased.

    Dividend Paid
    $64 million
    Q2 FY26

    Paid a dividend of $0.87 per share.

    Industry KPIs

    9
    MetricValueDetails
    EPS$2.43USD
    Revenue$2.8 billionUSD
    Gross margin18.2%%
    Free cash flow$340 millionUSD
    Sg a OPEX ratio4.9%% of sales
    Operating income EBIT$270 millionUSD
    Tariff impact mitigation$110 millionUSD
    Share buyback capital return$264 millionUSD
    Regional international performanceChina outperformed LVP by >40 percentage points with Chinese OEMs; India organic sales grew 36% (outperformed by ~20 percentage points); Asia (ex-China) outperformed market by 6 percentage points.%

    Deals & partnerships

    2
    Great Wall Motorstrategic cooperation agreement

    Agreements mark important milestones in strategy to expand with leading Chinese vehicle manufacturers and further demonstrate competitiveness of safety solutions.

    XPENGstrategic cooperation agreement

    Agreements mark important milestones in strategy to expand with leading Chinese vehicle manufacturers and further demonstrate competitiveness of safety solutions.

    Risks & headwinds

    4
    Geopolitical developments in and around Persian Gulfsecond half of the year

    potential implications for energy prices, consumer sentiment, supply chain stability, raw material availability and overall industry volumes

    Mitigation: closely monitoring; evaluating multiple scenarios; assuming gross raw material headwind of approximately USD 110 million

    Raw material cost volatilityfull year 2026

    particularly higher helium prices; gross headwind from raw materials is around USD 110 million for FY26

    Mitigation: well-executed activities to improve efficiency and costs; internal work to drive efficiency and cost improvement; price discussions with customers for adjustments

    Downward revision of global light vehicle productionfull year 2026

    expected to decline by around 2.5% for FY26; China LVP lowered by 4 percentage points since January, now expects a 5% decline in 2026

    Mitigation: strong outperformance of light vehicle production in both China and India; positive mix with how the market is developing; good growth with Chinese customers

    Back-end loaded profitability in 2026Q3 and Q4 FY26

    Q3 adjusted operating margin to be similar to the first half year level; significant step-up in profitability in the fourth quarter

    Mitigation: customer compensation engineering income, other litigation initiatives are expected to be weighted towards the fourth quarter

    Q&A highlights

    7

    Why is the margin cadence now back-end loaded (requiring ~15% in Q4 for midpoint guidance) when it was previously linear? Is the Q4 spike driven by raw material recovery?

    Mikael Bratt explained that the change is due to upward inflationary pressure from geopolitical developments (Persian Gulf) and the time lag in negotiating price adjustments with customers. He confirmed that the company has established processes for internal efficiency, supplier negotiations, and customer price adjustments, making him comfortable with retaining the full-year guidance. He clarified that it's a combination of self-help and price adjustments, not 100% raw material recovery.

    “I mean, when we started this year, our expectation was that we should see more of a, let's say, normal traditional sequence of how the quarter played out in the year. And now we're talking about the more back-end loaded. And the reason and why it's more back-end loaded is because we see the inflationary pressure here in the value chain as a result of the Persian Gulf.”

    asked by Colin Langan · answered by Mikael Bratt

    2 min read6 chapters

    Detailed Narrative

    01

    Record Q2 Performance and Market Outperformance

    Autoliv achieved record sales exceeding $2.8 billion and adjusted operating income of $270 million in Q2 FY26, with adjusted operating margin improving to 9.6%. This performance was driven by strong outperformance relative to light vehicle production, particularly in Asia. The company outperformed the global market by over 1 percentage point, with significant contributions from China and India.

    02

    Strategic Cost Reduction in EMEA

    The company announced a decision to gradually discontinue manufacturing operations in Turkey, affecting approximately 2,200 employees, with full closure by H1 2028. This initiative is expected to generate total restructuring charges of $142 million ($90 million recognized in Q2 FY26) and annual pretax savings of $40 million, with benefits starting in 2027 and full run rate in 2028. Production will be transferred to existing facilities in EMEA to optimize the manufacturing footprint.

    03

    Navigating Geopolitical and Raw Material Headwinds

    Autoliv effectively navigated geopolitical developments, supply chain disruption🌐s, and raw material cost volatility, including higher helium prices. The company anticipates a gross raw material headwind of approximately $110 million for FY26. Management noted that the major mitigating impacts from recoveries and self-help are expected in Q4, leading to a back-end loaded⚖️ profitability profile for the year.

    04

    Strong Growth with Chinese OEMs and India

    Sales momentum in Asia continued, with China outperforming light vehicle production by over 40 percentage points, driven by strong growth with Chinese OEMs, which now account for 55% of sales in China (up from 40% last year). In India, organic sales grew 36%, reflecting increased safety content in vehicles. Strategic cooperation agreements were signed with Great Wall Motor and XPENG to further expand with leading Chinese manufacturers.

    05

    Cash Flow and Shareholder Returns

    Operating cash flow reached a record $434 million in Q2, an increase of $157 million year-over-year, primarily due to positive working capital impact. The company repurchased 1.6 million shares for $200 million and paid $64 million in dividends, while improving its leverage ratio to 1.2x. The strong cash flow and balance sheet support continued commitment to high shareholder returns.

    06

    Updated Global LVP Outlook

    S&P Global's July data revised the global light vehicle production outlook for 2026 downward to a 2.3% decline (Autoliv uses 2.5%), primarily due to a weaker outlook in China (-5%). Despite this, North America's outlook improved to a 1% decline, and India is expected to increase by 9%. The company is closely monitoring potential impacts from escalating political tensions in the Persian Gulf on supply chains and raw material costs.

    AI-generated summary of the company’s earnings call. Not investment advice.