Autoliv Absorbs 170 To 180 Basis Points Of Extra Costs, Narrows 2026 Margin Guidance To Around 10.5%
Management says mitigation offset most of the squeeze, but the full-year adjusted margin lands at the low end of its range.
Autoliv has taken on extra costs of roughly 170 to 180 basis points since its January outlook, CEO Mikael Bratt said on the company's third-quarter earnings call Friday, and the full-year adjusted operating margin is now guided to around 10.5%, the low end of the prior range of around 10.5% to 11%.
Costs the January guidance never assumed
Autoliv, which makes airbags, seatbelts, steering wheels and other passive safety systems for carmakers, set its original 2026 outlook assuming a far friendlier cost environment, Bratt said. Raw-material headwinds and higher logistics costs have since eaten into it.
The company answered with labor productivity gains, value engineering, SG&A cuts, raw-material recovery through customer negotiations and indexation, and supplier savings. Bratt said these should offset most of the added burden, leaving the net hit to the full-year margin limited.
Raw materials cost the company a gross $42 million in the quarter, CFO Monika Grama said, mostly from non-ferrous metals and oil-related components. Customer compensation covered more than 80% of tariff costs, yet tariffs still trimmed the adjusted operating margin by about 35 basis points.
Asked by an Evercore ISI analyst about logistics, Grama said some divisions face double-digit cost increases, especially in North America. She called it a cost very difficult to pass on, so the company is relying on mileage-cutting and other offsets.
The quarter and the 2027 question
Third-quarter adjusted operating margin was 9.7%, 30 basis points lower than a year earlier, on adjusted operating income of $262 million, down 3%. Net sales were $2.7 billion, a 0.5% decrease. Adjusted earnings per share fell $0.13 to $2.19.
Questioned by an RBC Capital Markets analyst on 2027, Bratt said the company expects raw materials to be "as challenging in 2027 as it has been in 2026," and described that as no headwind or tailwind. Answering a Deutsche Bank analyst, he said he expects the raw-material issue to continue as "some headwind." Detailed 2027 guidance comes with fourth-quarter results.
Bratt said the fourth quarter should strengthen on higher volume, more engineering income and customer compensation. Guidance is otherwise unchanged: flat organic sales, operating cash flow of about $1.2 billion, and capital spending now around 4% of sales, from less than 5%.
Buybacks and the next dates
Autoliv spent $150 million on buybacks in the quarter, Grama said, and about $1.9 billion remains under a $2.5 billion authorization. Shares traded at $115.52, down about 3%, in Friday trading, for a market value near $8.6 billion.
Autoliv's fourth-quarter call is set for Friday, January 29, 2027, and its investor day is April 26 and 27, 2027, in Shanghai.
Sources
- Autoliv, Inc. (ALV) Q3 Earnings and Revenues Miss Estimates — Yahoo Finance
- Autoliv (ALV) reports earnings tomorrow: what to expect — Yahoo Finance
- Autoliv Inc. (NYSE:ALV) : Ptab Cases :: Law360 — law360.com
- Why Autoliv (ALV) is Poised to Beat Earnings Estimates Again — Yahoo Finance
- Top Auto Suppliers: Deutsche Bank’s Picks Ahead of Third Quarter — Yahoo Finance
