Jan Carlson - Chairman, President and CEO Mats Wallin - CFO Thomas Jonsson - Group VP, Corporate Communications.

Hampus Engellau - Handelsbanken Capital Markets Anders Trapp - SEB Enskilda Pat Nolan - Deutsche Bank Victoria Greer - Morgan Stanley Joseph Spak - RBC Capital Markets Bjorn Enarson - Danske Bank Matthew Stover - Susquehanna International Group David Lim - Wells Fargo Securities Chris McNally - Evercore ISI Richard Hilgert - Morningstar Agnieszka Vilela - Carnegie Investment Bank Erik Golrang - Nordea Markets Joe Vruwink - Robert W.

Baird Ryan Brinkman - JPMorgan Brett Hoselton - KeyBanc Capital Markets Brian Johnson - Barclays Capital.

Good day and welcome to the Quarter One 2016 Autoliv Incorporated Earnings Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Mr. Thomas Jonsson. Please go ahead, sir..

Thank you very much, Anna, and welcome everyone to our first quarter 2016 earnings presentation. Here in Stockholm, we have our Chairman, President and CEO, Jan Carlson, our Chief Financial Officer, Mats Wallin, and myself Thomas Jonsson, Group Vice President for Corporate Communications. It’s a bit of a special earnings call today.

It’s the last one for Mats as CFO, and I’d just like to take a brief second and extend my personal thanks for great cooperation during the years here. Before we move on with the call, so thank you very much Mats for that.

During today’s earnings call, our CEO will provide a brief overview of our overall Company performance, as well as an update on general business conditions, while our CFO will provide further commentary around the financial results and outlook. Then at the conclusion of our presentation, we will remain available to respond to your questions.

And as usual, slide deck is available through a link on the homepage of our corporate Web site. We intend to keep this call around one hour timeframe and I will give a notice when we’ve time for one to two additional questions.

Turning the page, here we have the Safe Harbor statements, which is an integrated part of this presentation and includes the Q&A that follows. During the presentation, we will reference some non-U.S. GAAP measures. The reconciliations to U.S. GAAP are disclosed in our quarterly press release and the 10-Q that will be filed with the SEC.

I’ll now turn it over to our CEO, Jan Carlson. Jan, please..

Thank you, Thomas. Taking a look on our quarterly highlights by turning the page. We have another quarter of exceptional sales growth along with solid financial performance. Our 14.7% organic sales growth was close to 5 percentage points better than expected due to strong growth in Europe, North America, and China.

This strong growth drove our better than expected adjusted operating margin of 9.1% and a year-over-year adjusted earnings per share increase of 17% to $1.66. Our adjusted return on capital employed of 23%, return on equity of 16%, and strong operating cash flow show our strategies are creating shareholder value.

We’re also creating shareholder value through acquisitions net of $227 million and return a $49 million in dividends to shareholders during quarter one. During the quarter, we declared a new record quarterly dividend of $0.58 per share which will be paid in second quarter.

In Active Safety, we had a 39% organic sales growth and as we mentioned last quarter including four new key technologies which we launched on the new Mercedes E Class. Once again, thank you to the Autoliv team for our solid financial performance, while delivering quality and operational excellence.

Looking now to our M&A activities as shown on the next page. We are pleased to have successfully closed the Autoliv-Nissin Brake Systems joint venture at the end of the first quarter. For a 51% controlling interest, the purchase price was approximately $265 million.

This joint venture strengthened our product portfolio towards autonomous driving with current and next-generation braking systems and provides a solid base of technical and manufacturing confidence. Within our electronic segments, we consolidated the ANBS balance sheet at the end of the first quarter.

For our full-year 2016 outlook, this joint venture is expected to contribute in the range of $400 million to $450 million in sales. Also for the full-year 2016, integration costs and purchasing accounting effects are expected to be in the range of $20 million to $30 million combined.

Turning the page, we have our delivery figures for the first quarter, which includes the three extra working days in the quarter. We had another strong quarter where we grew faster than the light vehicle production in all product areas. High value-added seatbelts, side airbags, and electronic control unit continued to show exceptional growth.

In addition, Active Safety products were boosted by the MACOM Automotive acquisition. Overall, this performance illustrates our investments for growth continue to pay off. Looking into our model mix on the next page. We’ve highlighted some of the key models that contributed to our strong organic growth.

During the first quarter, these models contributed significantly to our overall organic sales growth and once again our electronics products are on all of these models, except the Toyota Prius. On an annualized basis, these models represent around 10% of our group sales.

Turning the page again, during the first quarter we continued to see a strong rebound in China from this sharp drop in third quarter 2015. However, the light vehicle inventories have been seasonally trending up over the last three months as the market adjust to the government incentive introduced last fall.

We continue to monitor the situation closely as we believe the light vehicle production in China could remain volatile for some time, as the market normalizes to underlying demand and incentives. Our sales in China was a new first quarter record due to strong organic growth with both Chinese OEMs and global OEMs.

Overall, our organic sales growth in China of more than 16% was roughly 3x better than light vehicle production. Looking ahead, we expect our strong performance in China to continue this year due to our strong model and launch mix with both local and global OEMs. Turning the page, we’ve the macro market conditions.

The most recent figures from IHS for full year 2016 indicate the global light vehicle production will grow year-over-year by around 3%, roughly unchanged from January.

During the second quarter, the light vehicle production in China is expected to continue its rebound to grow 8% year-over-year, while Japan and rest of Asia are expected to increase by roughly 5% and 1% respectively. In the Americas, the outlook remains mixed.

In North America, the light vehicle production is expected to grow approximately 4% in second quarter, driven by a stable U.S SAAR, while inventories remained relatively low around 65 days. In South America, the weak demand is expected to continue in second quarter, resulting in a little vehicle product decline of 16% year-over-year.

In Europe, the overall light vehicle production continued its recovery and is now expected to increase approximately 5% year-over-year for the second quarter. However, the mix remain different where Western Europe is expected to increase by 7%, while Eastern Europe is expected to be roughly flat year-over-year.

To conclude, the full year 2016 light vehicle production outlook according to IHS, remain stable with an underlying growth year-over-year of approximately 3%. This assumes a mid single-digit growth rate in China along with a stable North America and a steady recovery in Europe. I’ll now turn it over to you, Mats, our CFO, for the financials.

Mats go ahead..

Thank you, Jan. Looking now on the next slide, we’ve our key figures for the first quarter. Our record sales with $2.4 billion for the first quarter was driven by strong organic sales growth, with volume makers in Europe, non-US OEMs in North America, China, Active Safety products and the inflator replacement business.

As we mentioned back in January, the Q1 ’16 organic growth was boosted by five percentage point due to three additional working days. This calendar effect will swing back in Q4 ’16. Our consolidated net sales increased by close to 12% despite negative currency translation effect of around $8 million.

Our gross margin improvement is mainly due to high organic sales product mix and commodity cost savings. Our adjusted EPS of $1.66, while 17% better than the same quarter last year. This improvement is mainly due to strong growth and the improved profitability.

Despite investments for vertical integration, inflator replacement capacity, and acquisitions, our adjusted return on capital employed and return on equity improved to 23% and 16%, respectively as a result of our higher earnings. Looking now at our operating margin development on the next slide.

Our adjusted operating margin of $9.1 was 60 basis points better than our guidance. Looking on the chart to the left, our margin improvement for this guidance was mainly due to better than expected organic sales growth.

Compared to prior year as illustrated by the chart on the right, our adjusted operating margin was 20 basis points better than last year.

The benefit from organic sales and commodity costs was partially offset by higher investments in RD&E net of 150 basis points due to support our future growth, and other net which primarily includes launch costs and our investments for growth including vertical integration.

Looking now on the next slide, we achieved $201 million of operating cash flow, our best ever for Q1, which was mainly due to higher net income and timing in working capital. We estimate an operating cash flow of $0.8 billion for full year ’16 excluding any discrete item. This remains unchanged from our previous indication.

CapEx net of 3.1% of sales for Q1 was lower than expected mainly due to timing of expenditures. However, due to increasing our inflator capacity to supply up to an additional 10 million inflators during 2017 and ’18, we now expect CapEx net to be in the range of 5% to 6% of sales for full-year ’16.

During the quarter, we expensed $14 million for capacity alignment activities and had a cash outlay of $18 million. Despite this somewhat high level in Q1, we still expect our capacity line activities to be around 30 basis points on sales for full-year ’16.

The capacity alignment and commodity cost savings in quarter were around $5 million and $14 million, respectively. For full-year ’16, the capacity alignment savings are now expected to be $25 million and commodity cost savings are estimated to be $30 million. Looking now to our segment reporting on the next slide.

We’ve summarized our segment reporting for the first quarter. In Passive Safety, organic sales growth of close to 13% was primarily driven by strong growth in Europe, North America, and Japan, in particular air bags. High value-added seatbelts and the inflator replacement business. This growth was impacted by negative 4% currency translation effect.

Consequently net consolidated sales effect was a total sales increase of $158 million to $2 billion in Passive Safety. In Passive Safety, high organic sales of positive product mix and favorable commodity costs were partially offset by higher RD&E and capacity alignment costs, resulting in an operating margin of $9.6.

In the same quarter last year, the Passive Safety operating margin was negatively impacted by the antitrust related settlements. In electronics, the strong organic sales growth of around 27% was primarily driven by new model launches and higher customer take rates in Active Safety, while the acquisition benefit was 5%.

This strong growth was negatively impacted by 2% currency translation effect which resulted in a consolidated net sales of close to $0,5 billion for the segment. The 2.6% operating margin for electronics segment was negatively affected by the planned higher RD&E net. Looking now to our guidance on the next slide.

We have our guidance for the second quarter which includes the Autoliv-Nissin Brake Systems joint venture. Based mainly on customer call offs, our organic sales are expected to increase year-over-year around 10% mainly due to strong growth in all major regions in Active Safety.

In addition, acquisitions are expected to add 6% year-over-year in the quarter. Sequentially, our consolidated sales are expected to increase by more than 8% mainly due to the ANBS joint venture. As a result, we expect to achieve an adjusted operating margin of around 8.5% for the second quarter.

Year-over-year, the benefit from high organic sales, commodity costs, and currencies are offset by higher RD&E net and costs related to the ramp-up of capacity and new technologies for growth. Along with integration costs and purchase accounting effect related to the ANBS of around $10 million.

Sequentially, the adjusted operating margin decline is mainly due to acquisition aspect. Looking now upon our full-year ’16 on the next slide. Our full-year indication includes the ANBS joint venture. Organic sales growth indication for full year ’16 is now expected to be more than 7%.

This more than 2% improvement from previous indication of 5% is mainly due to better-than-expected first quarter, an increased growth in Western Europe and our inflator replacement business. The growth coming from acquisitions for full-year ’16 is expected to be around 5%, mainly due to the ANBS joint venture.

Based on mid-April FX rate, we expect a negative year-over-year translation effect of 1%. Our adjusted operating margin of more than 9% for full-year remains unchanged since our higher organic sales growth is offset by the integration costs, purchase accounting, and mix FX related to the ANBS joint venture.

Year-over-year, the positive margin of FX from organic sales, commodity costs, and currencies are more than offset by higher RD&E investments and costs related to the ramp-up of capacity and new technologies for growth and acquisition FX.

In summary, full-year ’16, these estimates indicate a strong growth with an operating margin at the high-end of our long-term range. Despite higher RD&E net acquisitions and higher CapEx to support future growth. On the next slide. We have summarized our outlook which excludes cost for capacity alignment and antitrust related matters.

It assumes mid April exchange rates and includes the ANBS joint venture. Our consolidated sales growth for Q2 is expected to be 15% mainly due to our strong organic sales growth and acquisitions, which were slightly offset by negative currency translation effect.

Our full-year ’16 indication for consolidated sales is now for an increase of more than 11%. This is an increase of 9 percentage points from more than the two in January.

This improvement is due to high organic growth or more than 2% -- 2 percentage points, 5 percentage points from acquisitions, and 2 percentage points from less negative currency translation effects. Based on these sales assumptions, we expect an adjusted operating margin of around 8.5% for Q2 and more than 9% for the full-year ’16.

Assuming our present currency mix and mid-April exchange rates, we believe the positive transaction effect excluding revaluation effects could neutralize the unfavorable translation effect on EPS for full-year ’16. Lastly, we still expect the tax rate of around 29% excluding any discrete item for full-year ’16.

Turning the page, I will now hand it back to Jan for some closing comments before the Q&A..

Thank you, Mats. To summarize, we’re pleased with our strong start of the year which provides a solid base for a sales growth of more than 11% and an adjusted operating margin of more than 9% for full-year 2016 as we execute towards our end of decade targets. This concludes the formal part and comments for today's earnings call.

But before we open up for Q&A, I’d first of all like to extend a sincere thank you to you Mats for our friendship, for your dedication and service to Autoliv and our business as Group CFO and as Corporate Controller over the last 55 quarterly reports. I wish you all the very best in your endeavor in the future, Mats. Thank you..

Thank you, Jan. After 14 great years with Autoliv, I’d like to extend my sincere thanks to Autoliv and to Jan. But I also would like to give my sincere thanks to all of you being on these call for the great cooperation over the years..

Thank you, Mats. With this, I’d like now to open it up for questions. And so I turn the floor back to you Anna. Please go ahead..

Thank you, sir. [Operator Instructions] Our first question is from Hampus Engellau from Handelsbanken. Please go ahead. Your line is open..

Thank you very much. I have three questions, if I may.

Starting off more an integrated question on the first quarter, if it would be possible for you to provide how much of the $13 million was related to acquisitions in the quarter? Second question is more on how much capacity in terms you’re investing in for this increase in inflators, and given that we’re facing maybe even a larger recall on these inflators, what would you say would be more invested for you if that were the case? And then lastly, if you could talk a little bit about new vision systems and if we should expect any new platform launches from your customers before summer? Thanks..

You said $13 million, what was you meant in the first question?.

In the P&L, in first quarter, you said that you had $13 million increase in costs reported which was related to acquisition costs..

Yes, what we’ve seen in the first quarter and maybe we can help out, but of course we have some costs related to the M&A activities in our SG&A. And I estimate them to be close to $3 million. The $13 million number, I don't ….

No, you said -- part of it was with $3 million I was looking for..

Yes, okay..

Okay. If you look to the vision systems we have launched a whole sensor suite with the Mercedes E Class and we will continue to progress on that sensor suite. And as you know that this is a very solid base for our business in the Active Safety going forward.

We are planning to further develop the vision part of this into AEB for Mono Vision in too, but that will come in 2017. The Mono Vision camera will come as a part of the sensor suite already now, but that is not for AEB.

If you look to your big question regarding inflators, and speculations around further recall, if we have further recalls of other types of inflators, we will have to look into that at that time. That has been figured out mentioning 85 million units being potential to be recalled. We will have to see how that is looking when that is coming.

And that would probably suggest it would need further investments too, but that's too early to say. Additional investments that you see mainly related to the inflator and the increase from the up to 20 to up to 30, its coming in the increased CapEx range.

We had the CapEx range of 4 to 5 in the higher end of the range and now we have the CapEx range of 5 to 6. So that is mainly related to that increase in the inflator business..

10 million, that is from 20 million to 30 million inflators, is this additional 10 million -- is that a new OEM or is it the existing ones?.

We don’t comment on specific OEMs on this one. We can say that these additional 10 million inflators is mainly almost solely coming 2017 and ’18. And to be able to give you a flavor of between ’17 and ’18, its very difficult. We refrain from doing that.

This has been or still is a changing material and it is in ’17 and ’18 as it looks today, but we can't give you any color on where between the two years..

Thanks very much..

Thank you..

Our next question is from Anders Trapp from SEB Enskilda. Please go ahead. Your line is open..

Yes, hi there. I have two questions.

First of all, I wonder in your full-year guidance on volumes or organic growth rather, what type of consideration you’ve made if any to the [indiscernible] in production in Japan following the earthquake? And my second question is, you’re now changing that your wording and phrasing on basically saying now that you’re gaining long-term market share or long-term contract at least as an effect of the disturbances in the recall market, so to speak.

You’re also showing very good growth figures, higher than expected, etcetera.

Would you say that you’re getting it slightly closer to the stretch target of $15 billion sales by 2019 through the recent events?.

We will start with the first question. Regarding the earthquake, we’re seeing as of today roughly around a sales impact of $5 million to $6 million. That is as it looks today. So, that is essentially the impact of the earthquake effect that we can see.

If you look to the market shares and the impact of long-term business, we talked about order in takes and we talked about contracts and we’ve seen also not only replacement business, but also sustainable business coming our way. To revise the target from 12 to the ambition of 15 as of today, its too early.

We will see how this will evolve and we haven’t seen the effects out of a strong start and a strong year and see how that will effect, but that’s too early to say. So, no change of today..

Thank you very much..

Thank you..

Our next question is from Rod Lache from Deutsche Bank. Please go ahead. Your line is open..

Good morning, everyone. It’s actually Pat Nolan on for Rod..

Good morning..

Good quarter, first off..

Thank you..

A couple of questions on the full-year guidance.

Could you maybe just give us a color on the above 9% margin that’s similar to I think what you said previously for the full-year, should we interpret that as conservatism or is there higher R&D costs or kind of footprint costs related to the higher inflator business?.

This is our best estimate that we can give you here. So this is -- that to the best of our knowledge we can see when we factor in all the different parameters here.

What is worth mentioning here is that we maintained more than 9% margin guidance despite we are seeing $20 million to$30 million of costs related to the Nissin Kogyo joint venture related to purchase accounting integration etcetera. We're also seeing less of a tailwind of commodities. The tailwind is left with $11 million.

So compared to January we are seeing an increase costs here between $30 million and $40 million and we are maintaining the margin. So I think this has given the fact of a strong execution under strong momentum for the time being despite the cost increase we maintain the margin..

That’s helpful. Thank you. And on the CapEx guidance for this year, it’s pretty clear that’s going up, because of the higher inflator business.

Do you expect that to come back down to the around 5% or sub 5% level in 2017 and beyond or remain elevated?.

We haven’t talked about ’17, but we’ve a sort of indicated that over the long-term it sort of should come back to the levels we’ve seen between 4% and 5%, but for the moment we’re in investment period. So that’s why we see 5% to 6%..

Thank you. Good luck, Mats..

Our next question is from Victoria Greer from Morgan Stanley. Please go ahead. Your line is open..

Afternoon, and just a couple please, mostly on organic growth. You mentioned a couple of product launches and drove organic growth, particularly in airbags.

Can you just flag some of the key ones to us there? And then, secondly on China, what’s the organic -- what’s the mix of the organic growth between local OEMs and the foreign JVs? And can you just remind us what your mix is now between the local and the foreign JVs there? Thanks..

We’ve a series of important launches. We stay out of upcoming launches until cars are launched. So we don't talk about future launches. We talked about launches that we’ve had during the quarter. We have had a number of important launches also here. But for future stuff we will comment on that when we are arriving to it. If you look ….

Sorry, I was looking -- I was wanting the ones that had helped the organic growth in the quarter. Sorry..

We have had major launches. Of course, the E Class is an important launch for us. We’ve had other important launches where we have also radar business and Active Safety like the Chrysler Pacifica, and we have Kia Cadenza, we have Cadillac XTS, Jaguar F-Pace, etcetera.

So there are very many important launches with delivery values up to over $500 in average and then the peak value is even higher. So, there'll have been important launches during the quarter that had contributed to it.

If you look to the Chinese mix and how it split between domestic and global OEMs, we have outperformed the production numbers in both domestic and global OEMs. Significantly we had a 25% organic growth to the local OEMs and light vehicle production increase there was close to nine. So two and half times out performance.

When you look to the global OEMs we had an organic growth of close to 14% and the light vehicle production increased there off almost two. So, close to 7% out performance. So that had been a good mix between the two..

Great, thank you..

Thank you..

Our next question is from Brett Hoselton from Keybanc Capital Markets. Please go ahead. Your line is open. Please state your question. [Operator Instructions] I will move to our next question. Our next question is from Joseph Spak from RBC Capital Markets. Please go ahead. Your line is open..

Thanks. Good afternoon, everyone. Congrats on the quarter and congrats, Mats. First question is with respect to the new guidance. I didn’t see any updated language on RD&E or D&A for the combination. And the prior commentary was I think for RD&E 6.5%.

Is that still the right range even with the Nissin JV in there?.

We still believe that it is between 6% and 6.5% and maybe its still in the higher end of it..

Okay.

And then, do you have a D&A forecast, because I guess how much of ….?.

Yes, I have. We said in the earnings call that we expect the D&A for the full-year to have an impact of 60 basis points and we remain with that excluding the ANBS impact..

I think its also worth pointing out here that we have this increase of 80 basis points in RD&E. We have the 60 basis point increase in D&A and we have approximately a 30 basis points as I mentioned earlier, included in the more than 9% margin compared to last year..

Right..

So that’s a significant impact also to the margins..

Okay. And then, I can appreciate that the incremental 10 million units we’re not quite clear on the timing yet and that’s something to obviously monitor.

Can you help us though understand how many units you’ve already satisfied of that and then maybe how many you’re anticipating at least for this year?.

It will ballpark the -- it will be probably less than a half after this year or ballpark the half when this is over after this year..

Okay.

And then, last quick one, the implied guidance shows decelerating organic growth in the back half, is that mostly the tougher comps from anniversarying some of the inflator launches in ’15?.

I didn’t get your question, sorry..

Yes, so given what you did in organic growth in the first and the guidance for the second and the -- first quarter, and the guidance for the second quarter, the full-year would imply a little bit of a slowdown.

Is that because you start to get some of the tougher comps and also some of the giveback of the extra days from the first quarter?.

You’re absolutely spot on. You would have the givebacks in fourth quarter and that is affecting the comparison first half to second half. We have the effect of almost 2% organic growth in first quarter related to the inflator replacement sale. And that means that for the year the organic growth on replacement business is virtually zero.

So that is a tougher comp on second half..

Okay. Thanks a lot and congrats again..

Thank you..

Our next question is from Bjorn Enarson from Danske Bank. Please go ahead. Your line is open..

Thank you. Yes, two questions. First of all on your radar business on the Mercedes E Class, if you can talk a little bit about the take up rate versus your expectations and also talk a little about your capacity utilization there.

And second question is, first you’re gearing, you’re now already back at the very low-end of your targeted gearing ratio of 0.5 to 1.5. Would you allow yourself those short-term go below this or how would you treat that? Thanks..

On the E Class, on the take rate, its just in the ramp up phase. We see good take rates as of so far. But its only in the initial ramp up phase still.

So, its too early to say it see how its playing out, but as normal, I think you see a lot of highly specified and highly equipped cars as you normally see when you launch vehicles like this, this is not an exception. So, it’s a good take rate on that. The capacity is also following the path of a build up launch.

So we are in a good place there and we’re having a quite high utilization there on the capacity. I leave that gearing question to you, Mats..

Yes. So, regarding the gearing, now we’re ending the quarter with 0.5 in the gearing, which is within the range. We’ve been talking about the 0.5 and 1.5, and we believe that this range gives us the right flexibility for the future to grow the Company, but also to manage future uncertainties..

But would you allow yourselves to go below that range or are you’re very strict to keep within that range?.

Our target is to be, of course, to be within that range. Now we’re within the range and -- but how we will end will play out in the details remain for the future..

I don’t think you could exclude to go on with the range. I think it’s a lot of depending on how the macro situation is developing, and what you are building up for. But our targeted range is to be within 0.5 to 1.5 and that is what we are -- where we are today and where we should be.

But to just say we would never go below I think is just to say too much..

Cool. Thank you..

Thank you..

Our next question comes from Matt Stover from SIG. Please go ahead. Your line open..

Can you hear me? Hello..

Hello..

Okay. Thank you very much. I apologize. I wanted to clarify the guidance is it related to the incremental inflator volume of 10 million units, that being over ‘17 and ‘18. I guess, by rough math, you’ve been looking for underlying inflator volume of around 7 million units-ish based on your previous guidance in ‘17.

So would this be an incremental 10 million annualized or 10 million total?.

It’s a total number. This is up to a 30 million total number..

Okay.

And that would not take into account increases reflected from recent broad industry recalls?.

This is -- you know the best estimate that we have today in our discussions with customers et cetera, and this will be an impact of what has been recalled and what has been discussed and is out there. I think there might be more because there have been very high numbers communicated.

But that I believe is also including inflator types not yet recalled and speculations around other types of inflators being recalled, and thereby this number could be revised. But this is the only speculations as of today, and these are the numbers that are related to the already announced recalls..

And Jan, just so I clarify my own understanding of it.

I don't believe that any side bag inflators have been recalled, is that correct? And in Takeda's case, they used the same compound in those inflators as they did in passengers and drivers?.

What we’re talking about here and up to 30 million on replacement side is front layer bags, its frontal inflators and frontal products. When you talk about sustainable business and talking about other resourcing it may also include side systems..

Okay. Thank you very much..

Thank you..

Our next question comes from David Lim from Wells Fargo Securities. Please go ahead. Your line is open..

Hi, good afternoon. So I wanted to go back to the inflators. It went from 20 million to 30 million, and I want to say that the 10 million is going to hit in ‘17 to ‘18.

How does the 20 million sort of flow through? Can you just sort of -- sort of provide us with the history of the flow through of how the 30 million all together is going to flow out for the next couple of years?.

Well, I gave an indication before and I said maybe less or up to a half being produced last year and this year. I think that is very -- the best estimate that we have today and a very, very rough figure for it.

This is so volatile and we have been talking about, you remember we started to talk about up to 25 million and then we lowered it with 20 million and now we’re up to 30 million. This is what it is. It is a volatile situation and we pushed in the last call volumes into 2017, and in the quarter later we come back and then we up the total volume.

So it is very difficult to give you no more exact numbers as what we have already given you..

So just to be sure, just so that I understand.

So roughly half of the 30 million in ‘15 and ‘16 and the other half in ‘17 and ’18, is it -- am I understanding you correctly?.

Ballpark, as I said this is very, very rough numbers. But you can say that is approximately what it is..

Sure, sure. Great, great. And then the other question is looking at your margin guidance. It looks like maybe the second half could be better than the first half.

Is there some sort of acceleration or flow through that we should be thinking about? And also when it comes to the content in general terms between cars versus trucks, what’s the content difference there?.

I can start talk little bit about margins in the first half and second half. Generally speaking in this Company, we are seeing more engineering income to come in the second half versus the first half..

Got you..

And that’s a contributing factor..

On the content part, cars versus truck, you have in some trucks you have a third row of seatbelts which gives you more content you have somewhat in a bigger side curtains which may give you a somewhat higher CPV. Apart from that there is not a lot of difference..

And just to clarify, is that maybe $100 or $200 more in general terms, or is that something that you haven't really disclosed?.

Its about 50% to 20%..

50% to 20%. Okay, great..

Yes..

Great. Thank you so much. I appreciate it..

Our next question is from Chris McNally from Evercore ISI. Please go ahead..

Good afternoon, gentlemen. Just a quick question on Electronics on the margin side. Obviously very good growth top-line and you’re spending a lot on R&D currently. I was curious if you could just give a sense for what incremental margins would be once R&D flattened out or if we ex the 30 basis points, I think you discussed in terms of increased R&D.

What sort of volume incremental margins we can see just from pure volume?.

Could you repeat the question again?.

Sure. It’s just around electronic incremental margins.

Obviously the margins are low now, but we’re curious what the margins would look like on a year-over-year basis once we ex out the R&D increase?.

Right. We have not discussed margins per se more than the over long-term, we should not see a different but a corporate average all around that on the electronic side for the longer haul. We said out also that targets are reaching corporate average on the electronics business by end of the decade of 8% to 9%.

And besides that we have not talked about the incremental margins that all gross margins for that sake on the electronics business..

Maybe said otherwise, could we expect margins to start to increase? Obviously you have a lot of launch costs this year with the E-Class.

Could margins start to go up next year, meaning the increase would start in ‘17 and move towards that target in 2020?.

We haven’t, as I said -- we haven’t and we aren’t guiding for margins next year. We will come back to guidance for the next year on the corporate side in January. We have set out to target to reach 8% to 9% by end of 2019, and that is what we have talked about.

You know it’s all very much related to the amount of investments for growth and we are seeing good growth numbers and we are continuing to invest. And that’s about as much as I can give you today, unfortunately..

Okay. Thank you very much..

Thank you..

We take our next question from Richard Hilgert from Morningstar. Please go ahead..

Thanks for taking my question. Good morning and good afternoon, everyone.

Can you hear me okay?.

Sure. We can hear you well..

Okay. Thank you..

Thank you..

Just a couple of questions please. First of all on your comments about retaining the full-year guidance for the 9% operating margin, one of the things that you said there was that the commodity cost comparison was going to get less favorable for you.

In the first quarter, the cost of goods sold was on a percentage basis much lower than the first quarter a year ago, but where we are really seeing the difference is showing up in the RD&E, a little bit in the SG&A.

So, I’m wondering as the year progresses, does the cost of goods sold percentage go up, and then RD&E and SG&A percentages kind of drop a little bit.

Or how should we be thinking about the way these different line items are going to be moving given your comments about leaving the margins the same at 9%?.

If you talk about the commodity costs, we are seeing more of a tailwind on commodity cost in the first half of the year -- year-over-year. The year-over-year affect on the commodities are better for the first half of the year. We had a $14 million tailwind in the first quarter and we are expecting to have a $10 million tailwind in second quarter.

And for the year now we’re seeing a total tailwind of $28 million compared to a tailwind of $39 million in January. So that is giving us less of a favorable commodity price of $11 million.

I don’t know if you have any other thing to add?.

I think it’s on that cost level, I think -- as I said earlier on that the biggest difference we see between first half and second half is normal engineering income. The other details are very difficult to comment on..

Okay. And then on the revenue guidance year-over-year, better than anticipated organic growth going on there. Geographically speaking, it looked like growth was strong pretty much across all of your segments. It seemed to me, and I was forecasting better European volume versus your original guidance.

But on a regional basis, does it look like things were much stronger in every region around the world? Obviously with the exception of South America, but Japan is still very strong, Europe is still very strong, North America looks like it’s doing pretty well.

Are there -- which regions were specifically a little bit more of a surprise for you in the quarter versus what your original expectations were?.

I think we did better in all regions actually, and I think as we said before, we had in North America we had new model launches and the new good progress with reasonably new launches like the S series, the Mercedes GLE et cetera. We had a favorable mix also with volume makers in Europe.

And as we commented earlier, we had a very good effect out of the launches. We talked several times about in China, we talked in 2015 we had a heavy launch second half of that year, and this we see now the effect of into 2016. And also in Japan, we have also there some good growth models.

But also in Japan the inflator replacement business had a favorable effect. So it was a part of the quarter overall, if you look to the quarter what went by. We believe in China, China is an important market that we continue to see strong growth also into second quarter, a lot based on the good model mix, good launches..

Okay. Very good. Thanks again for taking my questions..

Sure. Thank you so much..

We take the next question from Agnieszka Vilela from Carnegie. Please go ahead. Your line is open..

Yes, thank you. Coming back to Japan and your very good organic growth there, I just wonder if you have already seen some effects in your kind of regular business, Passive Safety business that you’re winning market share from your competitor..

No, I cannot see that really as of sales, because that has not yet transpired. The sales that we are seeing now is coming out of order intake some years ago, so we can't say that, that has been an effect on the sales side.

It is a good result out of the models that we have there is some of the Toyota models there that has been doing well, but also there as I said the inflator replacement business has been doing well inside Japan..

Perfect. Thank you.

And then if you could comment on your order intake, do you see kind of the same levels that you’re winning right now, or do you think that you’re gaining more or less?.

We are continuing to see a strong order intake, and that is what we commented about in -- the first quarter we talked about between 40% and 50% or 45%.

But we have also said that, we believe it is better to come back on an annual basis to speak about order intake because it has to take a year or two or maybe even longer to move the needle on the global market shares from strong order intake. One or two strong quarters won't make the global market shares to move.

So therefore we continue -- we commented -- our comment today is we continue to see strong order intake in Passive Safety in general. But that’s what we have for today..

Thank you..

Thank you..

We take our next question from Erik Golrang from Nordea. Please go ahead. Your line is open..

Thank you. But all my questions have been asked at least. Thank you..

Thank you, Eric..

I’ll now open the line for David Leiker from Baird. Please go ahead. Your line is now open..

Hello. This is Joe Vruwink, for David..

Hello..

With the raw material tailwind in the quarter, if I strip that out and look at maybe the incremental volume or the incremental contribution on volume, is that running at a level you would like it to be at or are some of your footprint actions still taking that, let's call it pure organic contribution below target?.

If you look to the footprint or the vertical integration or investments for growth that is not in full effect, and that will still take some years before that is in full effect. You can't see the full effect out of that only until towards the end of the decade when everything is in place and up and running.

So if that is the answer to your question that is not fully contributing yet..

Okay, it was. Thank you. And then, I’m wondering on your seatbelt growth, have the last two quarters been particularly strong for new launches? I think it makes sense, the other segments would be growing double digits, but it’s less intuitive to me at least that seatbelts would be so far above the underlying market? Thank you..

Well it is. If you look to the seatbelt side it’s mainly related to active seatbelt and pretensioners and a more advanced type of seatbelts and it’s related to the mix and the success we’ve had in investing in new technology and capitalizing on the technology investments also from a relatively mature product..

Great. I will leave it there..

Thank you..

[Operator Instructions] We’ll now take a question from Ryan Brinkman from JPMorgan. Please go ahead. Your line is open..

Hi. Thank you for taking my question.

Can you say to what extent the stronger organic growth outlook for the full-year is driven by higher than expected take rates of Active Safety products? And if it is helped by better take rates, is there any particular product or application that is driving the incremental improvement?.

There is of course a strong quarter one behind it. We all have seen in quarter one also a stronger inflator replacement business and also the visibility that we are seeing into quarter two with a very strong growth in second quarter organic growth of around 10% that is costing us to update also the full year guidance.

We also see a -- have seen in the first quarter a very strong organic growth on the Active Safety side..

Are you seeing increased penetration for your radar assist products?.

We have seen an increase take rate, and we are seeing increasing take rates. And that has also been valid for the first quarter, and in Active Safety take rates have been going up. Yes..

Okay. I appreciate it. Thank you..

Thank you..

Our next question comes from Brett Hoselton from KeyBanc Capital Markets. Please go ahead..

Good afternoon, gentlemen..

Good afternoon or good morning, rather..

Thank you. I apologize for not connecting earlier. Couple of questions here for you.

First of all, kind of a typical question, Active Safety or Electronics as you’re calling it, growing by 30% year-over-year in the first quarter, so I kind of think about your longer-term growth rate, and I’m wondering what your longer-term growth rate might look like, because obviously 30% is pretty impressive in the quarter..

But we have no more information to give you than what we gave you in the capital market day, and you have seen our outlook there for the end of the decade, targets of -- of around $3 billion of our Electronics business combined. We have seen strong -- a strong quarter now. We have also a strong year behind us.

But you know also that growth of that level is hard to keep all the time and we have also communicated, we would see slower growth more towards in line with the market. So I have no more color to give you on that one. On the contrary you are seeing higher take rates than we have seen.

But the longer term targets that we say where this -- what we said in the capital market day..

And let me ask you this, Jan, and maybe just kind of directionally. It seems like based on your comment regarding the take rates which is consistent with what we’re hearing from other folks as well as a lot of the information we see in the news media, et cetera..

It seems as though we’re seeing a very -- I would almost call it an aggressive acceleration of the adoption of these technologies relative to where we were maybe a year or even two years ago.

Is that a fair assessment or is it -- is that a fair assessment?.

Well, aggressive or not aggressive, I think it’s hard for me to judge here. We are seeing higher take rates and we are very pleased with that.

As I commented earlier also the -- the cars here that we launched here on the E-Class here is, a very sophisticated vehicle with a lot of equipment and in the beginning at least it traditionally has a lot of stuff on the vehicles being shipped. So it remains to be seen what it will be going down the road.

But so far it looks good and so far we have also seen generally higher take rates. And then I don’t want to say if it’s aggressively or not..

That is fair. And then with regard to the airbag situation, the inflator situation here. Can you somehow give us some sense of the impact on your new business wins going forward? I think in the past you’ve kind of talked about your historic win rates on maybe driver side airbags or side curtain airbags and so forth.

And then your most recent win rates increasing and so on and so forth.

Can you kind of give us some sense of, how is that potentially going to affect your new business growth rate in the out years?.

We commented this in our January call that we had a strong order intake. And as I said before, we may update this on an annual basis just to give it some time before we draw any type of conclusions of market share gains or so, one or the other quarter won't move the needle.

So it is a continued strong order intake after first quarter here on the Passive Safety side and we will have to monitor and see what it is going forward. And the replacement business that we see here is also then causing the CapEx increase, but that’s mainly related to the -- mainly related to the replacement business..

So -- sorry please go ahead..

No - no. Go ahead, Mats..

No, this is Thomas. I was just going to say that, as I said in the beginning of the call, we intent to keep the call around one hour, we’re running slightly behind an hour. So we have time for one more question on the call..

We’ll now take our next question so from Brian Johnson from Barclays. Please go ahead, sir..

Yes. Hi, good afternoon, management team..

Hi, there..

So one question for Jan, more strategic and then one question -- Mats, I will give you one more financial question. So hopefully it’s not too hard. But just trying to figure out the puts and takes on the operating cash flow guidance.

It looks like you’re still guiding to roughly $800 million yet you’ve consolidated the 51% stake in the Autoliv-Nissin JV which is expected to add $400 million to $450 million of revenue.

I guess just can you help us walk from call it the increase in organic growth, the acquisition of the Nissin JV, and then also the reaffirmed cash flow guidance of $0.8 billion?.

First of all the capital guidance, as we have said we talked about $0.8 billion in January, and we maintain that guidance. We also have to remember that we also have capacity alignment payments to go out also this year, so that’s also one factor.

For the operating cash flow, regarding the number for the acquisition impacts, I mean then we’re coming back then to the guidance again and where we had 5% I think acquisition impact for the full year in our growth guidance. So that’s of course a big part of that that’s related to the ANBS joint venture.

And as we have said earlier, the range of net sales of that joint venture is between $400 million to $450 million for the 2016 numbers..

Okay.

So if I read you correctly then a little bit of the organic bump for full year ‘16 is driven by the acquisition of the Nissin JV?.

Yes, that the acquisition part of it, on top of all the organic growth we have been talking about earlier on this call..

Right, I guess, I'm just trying to put the acceleration of organic growth overall and then also the consolidation of that. I would imagine there is some cash flows coming from that JV, so just trying to foot down to the reaffirmed $0.8 billion..

Yes, we reaffirmed its $0.8 billion including the ANBS..

Okay, so is there some additional costs from the walk from net income down to cash -- CFO that we’re missing?.

No. But we also have other aspects and for example you have seen that we have a quite high capacity alignment also now coming in Q1. So with our capacity alignment, cash out will increase. And we said earlier around -- that would be more than $90 million coming out of capacity alignment for full year ’16.

That is also factoring in into the operating cash flow..

And then -- Jan, just one for you around night vision. I understand it’s a fairly expensive option today. It’s production today in terms of potentially limiting customer adoption uptake in terms of cost right now. I think overall the market is fairly consolidated I should say.

So I just kind of to get your thoughts on call -- the potential for the cost curve to come down anytime soon driving potentially greater uptick across mid-level vehicles? And also just kind of remind us of the competitive landscape.

And then also lastly just, kind of how much roughly is this business within Active Safety, and where do you see that going over the next call it, three to five years?.

We are constantly looking to upgrade the technology and their major cost is in the night vision camera is the cost for the component in microbolometer and to try to achieve a new generation of that isn’t really easy. You need to have a good performance. You need to have technical performance.

You need to have a good deal on it to be able to make it more cost effective. But we have been doing that gradually since we came out with this more than 10 years ago. So that has been evolution of it, and we may also be able to take the cost down further. We are seeing and we are having activities on that path.

The competitive landscape I think we are, if not the only one we are the most successful one in the far-infrared technology. We are also combining this with near-infrared technologies. So we are offering both of the systems on to it.

And we believe it is a superior system for seeing in darkness and seeing pedestrian detection that if the cost situation as you are alluding to here would improve. It would be also a very important part for senses suite for autonomous drive. It remains to be seen and how successful that is going forward.

But it is a part we haven’t disclosed how big the different kind of products contribute to the Active Safety sales and to our ADAS sale. It is not the biggest part of it. The biggest part of the ADAS sales is the radar business..

Got you. Great. Thanks for taking the questions..

Thank you. With that, I would like to thank everyone for participating on today's call.

But before we thank you finally, I also would like to at this point extend a very warm welcome to Mats Backman [ph] who would -- will take over as Group CFO on May 2, 2016, and who also brings totally close to 20 years of experience with several European based industrial and financial companies. So most welcome Mats to the Autoliv team.

We sincerely appreciate everybody’s continued interest in Autoliv and that we look forward to our second quarter earnings call on Friday, July 22. And with that I would like to say goodbye for now and thank you very much all of you..

Thank you, sir. Ladies and gentlemen, this now concludes today's conference call. Thank you for your participation. You may now disconnect..