Autoliv's price increases help Q4 core earnings top expectation

By Marie Mannes

STOCKHOLM (Reuters) -Sweden's Autoliv reported fourth-quarter core earnings above analyst forecasts on Friday having restored profitability by passing higher costs on to its customers, sending its shares up almost 8%.

Cost inflation related to high raw material prices have squeezed car suppliers for some time now, and chief executive Mikael Bratt said in a statement that the cost inflation seen by Autoliv in 2022 was the worst in three decades.

Despite this the Swedish company has been able to meet or exceed analysts estimates in the past quarters as it has continued to negotiate price hikes with its clients which includes OEM manufacturers.

The Swedish company delivers its equipment - which includes seatbelts, airbags and other safety solutions - across broad swathes of the auto industry.

Chief Financial Officer Fredrik Westin told Reuters that the price hikes had been across all its products and regions, though the United States and Europe were areas of particular worry.

Westin said he expected further price hikes would be needed in 2023 as well, particularly in Europe.

"In 2023 it will be more about the inflationary components that are not raw material related, so more about labour, logistics and energy," the CFO said.

The company were already in talks with customers to be able to pass costs related to that, he added.

Despite the company's track record of being able to handle turbulence, it has been vulnerable to volatile light vehicle production (LVP) as well as sudden lockdowns in China.

Westin said Autoliv had struggled at the end of the fourth quarter with the reopening of China hurting its sales in the fourth quarter, with the impact continuing in first quarter before it is expected to ease.

The Sweden-listed shares rose over 6.5% at 1118 GMT following its result after being flat ahead of the report

The world's largest producer of airbags and seatbelts said its adjusted earnings before interest and taxes (EBIT) rose to $233 million from $177 million a year earlier, beating estimates by analysts who had expected $224.8 million.

Inflation has also hit Autoliv's employees, with Westin saying the company had to support some of its workforce in specific countries within Eastern and Western Europe as well as in North America.

The CFO said he expects this to continue and that he expected the first quarter to yield a lower profitability compared to the other quarters as ongoing bargaining agreements, minimum wage increase and overall labour cost inflation continued to put a strain on the company.

(Reporting by Marie Mannes, additional reporting by Agata Rybska, editing by Terje Solsvik and Angus MacSwan)