Autoliv, Inc.

Good day and thank you for standing by. Welcome to the Autoliv fourth quarter 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automatic message advising your hand is raised. To answer your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Anders Trapp, Vice President, Investor Relations. Please go ahead.

Thank you, Sandra. Welcome, everyone, to our fourth quarter and full year 25 earnings call. On this call, we have our President and Chief Executive Officer, Mikael Bratt, our Chief Financial Officer, Fredrik Kristine, and me, Anders Trapp, VP, Investor Relations. During today's earnings call, we will highlight several key areas, including our record-breaking sales, cash flow, and earnings per share. We also provide an update on the latest market development. And finally, we will outline the expected margin improvement in 2026 and how our strong balance sheet and after returns will support the continued high level of travel returns. Following the presentation, we will be able to answer your questions. As usual, the slides are available on autoliv.com. Turning to the next slide. We have the Safe Harbor Statement, which is an integrated part of this presentation, and it includes the Q&A that follows. During the presentation, we will reference non-use gap measures. The reconciliations of historical use gap to non-use gap measures are disclosed in our quarterly earnings release available on autoliv.com and in the 10-K that will be filed in the SEC. or at the end of this presentation. Lastly, I should mention that this call is intended to conclude at 3 p.m. Central European time, so please follow the limit of two questions per person. I now hand it over to our CEO, Mikael Bratt.

Thank you, Anders. Looking on the next slide. I am very pleased to report another great quarter with strong development in sales, profitability, cash flow, and balance sheet. These achievements reflect the performance of the whole Autoliv team and the depth of our customer partnerships and our dedication to ongoing structural cost savings. We achieved record high sales for both the quarter and the full year, supported primarily by strong growth in India and with Chinese OEMs. Sales to rapidly expanding Chinese OEMs surged nearly 40% in the quarter, reinforcing our position in the industry's most dynamic markets. India again delivered exceptional growth, representing nearly half of our global organic growth. Looking ahead, we expect to continue to significantly outperform light vehicle production in both China and India in 2026. As we have guided for, adjusted operating income declined slightly in the quarter, mainly due to lower out-of-period compensation and lower customer RD&E reimbursement. We recovered close to 100% of tariff costs in the fourth quarter. We delivered record operating and free operating cash flow for both the quarter and for the full year. In 2025, We generated $734 million in free operating cash flow, an increase of over $230 million, driven by higher profitability and disciplined capital management. It is also important to note that we delivered record earnings per share for both the quarter and the full year. During the quarter, we returned $216 million to shareholders while reducing our debt leverage ratio to 1.1 times, reinforcing my confidence in our ability to continue delivering attractive shareholder returns. We also announced that Autoliv and Tensor have developed the first foldable steering wheel for the Tensor's Robocar, targeted for volume production in late 2026. This innovation enhances safety and design flexibility for autonomous vehicles and marks an important strategic step in expanding our role in the emerging autonomous vehicle ecosystem. Looking on the next slide. Fourth quarter sales increased by 8% year-over-year, driven by strong outperformance relative to LVP, along with favorable currency effects and tariff-related compensation. This growth was partly offset by an unfavorable regional and market light vehicle production mix. The adjusted operating income for Q4 decreased by 4% to 337 million compared to an exceptionally strong fourth quarter last year. The adjusted operating margin was 12%, 140 basis points lower than in the same quarter last year. Operating cash flow was 544 million U.S. dollars, an increase of 124 million U.S. dollars, or 30% compared to last year. Looking now on the next slide. We continue to deliver broad-based improvements with particularly strong progress in direct costs. Our positive direct labor productivity trend continues as we reduce our direct production personnel by almost 700. This is supported by the implementation of our strategic initiatives, including automation and digitalization. Gross profit increased by 22 million US dollars, while gross margin declined by 70 basis points year-over-year, but improved sequentially by 100 basis points compared with the third quarter. RD&E net costs rose year-over-year, primarily on lower engineering income due to timing of specific customer development projects. SG&A costs increased by 12 million US dollars, mainly due to higher cost for personnel as well as negative FX translation effects. Looking now on the market development in the fourth quarter on the next slide. Light vehicle production in the fourth quarter of 2025 reached its highest level for any quarter on record. This reflects strong demand across several major markets. The regional production mix has changed significantly in recent years, with a large share now coming from lower content per vehicle markets in Asia. According to S&P Global data from January, global light vehicle production for the fourth quarter increased 1.3%, exceeding the expectation from the beginning of the quarter by 4 percentage points. The stronger-than-expected market was primarily driven by China, where light vehicle production came in eight percentage points above expectations, supported by consumers taking advantage of scrapping and replacement subsidies before their expiration. India also contributed to better-than-expected light vehicle production growth, supported by significantly reduced taxes on new vehicles. Light vehicle demand and production in North America have held up better than expected, leading to a small decline in light vehicle production than anticipated. As many low-content markets grew in the quarter, the global regional light vehicle production mix was approximately 150 basis points unfavorable. This was more than 100 basis points worse than expected at the start of the quarter. During quarter, we experienced increased volatility driven by inventory adjustments in North America early in the period. In December, we also saw production adjustments in Asia, including China, in response to rising inventory levels. We view this volatility as temporary. and expect conditions to improve in 2026. We will talk about the market development more in detail later in the presentation. Looking now on our sales growth in more detail on the next slide. Our consolidated sales were over 2.8 billion, the highest for any quarter yet. This was around 200 million higher than last year. driven by volume and positive currency translation effect, and 27 million U.S. dollars from tariff-related compensation. Excluding currencies, our organic sales grew by 4%, including tariff cost compensations. China accounted for 23% of our group sales. Asia, excluding China, accounted for 20 percent, America for 30 percent, and Europe for more than 27 percent. We outline our organic sales growth compared to LVP on the next slide. Our quarterly sales growth was driven by strong performance across most regions, particularly in the rest of Asia and China. Based on the latest light vehicle production data from S&P Global, we outperformed the market by three percentage points globally, despite the unfavorable regional light vehicle production mix. We returned to outperformance in Europe and the Americas. In the rest of Asia, we outperformed the market by 11 percentage points. driven by continued strong sales growth in India, where we did outperform in more than 30 percentage points. Our sales to Chinese OEMs grew by almost 40%, exceeding the light vehicle production growth by 34 percentage points. Sales to global customers in China were eight percentage points below the light vehicle production development. On the next slide, we see some key model launches from the fourth quarter. The fourth quarter of 2025 saw a relatively high number of new launches, primarily in China, with both Chinese and other OEMs. These new China launches reflect strong momentum for Out2Leave in this important market. The models displayed here feature Out2Leave content for vehicles from $150 to over $400. IS-EPV is driven by Front Center Airbags on three of these vehicles produced in China. In terms of outer-lease sales potential, the Mercedes GLB and CLA combined are the most significant. The CLA was the highest scoring car by Euro NCAP in 2025. For 2026, we expect a record number of new product launches driven by Chinese OEMs. Now looking at the next slide. 2025 was a challenging year for the industry, marked by tariffs, ongoing supply chain disruptions, a slowdown in EV demand, shifts in the OEM landscape, and demand pressure due to concerns of vehicle affordability. Despite these headwinds, Autoliv delivered a record year. On the next slide, where we summarize the year. For the year, we met or exceeded all of our full year guidance matrix. Sales adjusted operating margin and cash flow. Our sales reached a new all-time record. Global light vehicle production surpassed 90 million units for the first time since 2018. However, the region mix has shifted significantly, with higher volumes in Asia and lower volumes in high-content markets, such as Western Europe and North America. We also reached several other significant milestones. Operating income exceeded $1 billion for the first time. Earnings per share rose about $9, and we paid more than $3 per share in dividends. During our capital market day in June, we reiterated our medium and long-term financial targets, and we initiated a new $2.5 billion US dollar share repurchase program. Another highlight of the year was the signing of the strategic agreement with Qatar, and we expand further into advanced automotive safety electronics. Now looking at the next slide. Indices sourcing of new business remained at a low level during 2025 as OEMs continued to reassess their product plans. Amid high geopolitical and technological uncertainty, our customers are reassessing both what and where to produce future models. At the same time, they are navigating a more dynamic and competitive industry landscape with many new players. We have also experienced notable market mix effects, as the shorter program lifecycle of Chinese OEMs reduce their average lifetime sales. With these OEMs now representing roughly one-third of global industry sourcing, the impact of this shift is increasingly pronounced. Despite these headwinds, our order intake remained robust, supporting our current market position. Chinese OEMs remained a strong contributor for us, accounting for over 30% of our global order intake. And importantly, we secured our first order with Chinese OEMs for vehicle production in Europe. Despite this, Looking on the order intake in more detail on the next slide. In 2025, about one-third of our total ordering came from new automakers, highlighting the growing importance of new mobility players. We won multiple awards tied to industry trends, such as autonomous driving, It includes solutions that protect occupants in the reclining seating position, addressing critical safety risks in next-generation interiors. We strengthen our mobility safety solution business by winning new orders for our advanced pyro safety switch, supporting the growing segment of 1,000-volt electrical vehicles. Awards including an occupant safety system development program from a major premium automaker, as well as wins for steering wheel switches with integrated ECUs and rear window inflatable curtain airbags. We continued to expand our safety offering in India with advanced systems such as seat cushion airbags and front center airbags. We licensed our human body model solution to our first customer, a leading automaker, enabling next level virtual crash testing and demonstrating the strength of our digital safety capabilities. Let's now look at the organic sales growth for the full year 2025. For the full year, we grow in line with global light vehicle production. Outperformance came in lower than anticipated earlier in the year, as the regional and market light vehicle production mix developed almost four percentage points less favorable than expected. We outperformed in rest of Asia by six percentage points, in the Americas by three percentage points, and in Europe by two percentage points. In China, our sales to Chinese OEMs grew by 23%, and they accounted for more than 44% of our China sales, double their share from three years ago. However, the unfavored market mix still resulted in a six percentage points underperformance in China overall. Our global market position remains strong with clear market leadership across all regions and product categories. In 2025, our global market share was around 44%, almost five percentage points higher than in 2018 following the billionaire spin-off. Supported by new launches, especially with Chinese OEMs and CPV growth, we expect sales to outperform nice vehicle production by around one percentage point in 2026. Now looking at the next slide. I will now hand over to Fredrik Vislin.