Anders Trapp - IR Mikael Bratt - President and CEO Mats Backman - CFO.

Rich Kwas - Wells Fargo Securities Hampus Engellaut - Handelsbanken Victoria Greer - Morgan Stanley Chris McNally - Evercore ISI Brian Johnson - Barclays Capital Erik Karlsson - Industrial Equity Partners Vijay Rakesh - Mizuho Securities David Leiker - Robert W. Baird Joseph Spak - RBC Capital Markets Viktor Lindeberg - Carnegie Investment Bank.

Good day, and welcome to the Autoliv Second Quarter 2018 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Anders Trapp, Vice President, Investor Relations. Please go ahead, sir..

Thank you, Varghai [ph]. Welcome everyone to our second quarter 2018 earnings presentation. Here in Stockholm, we have our new President and CEO, Mikael Bratt; our Chief Financial Officer, Mats Backman; and myself, Anders Trapp, Vice President of Investor Relations.

During today's earnings call, our CEO will provide a brief overview of our second quarter results and outlook as well as provide an update on our general business and market conditions. Following, Mikael, our CFO, Mr. Mats Backman will provide further details and commentary around the Q2 '18 financial results and outlook for full-year '18.

At the end of our presentation, we will remain available to respond to your questions, and as usual, the slides are available through a link on the homepage of our corporate Web site. Turning the next page, we have the Safe Harbor statement, which is an integrated part of this presentation and includes the Q&A that follows.

The result herein presents the performance of Autoliv continuing operations, meaning that the historical financial results of Veoneer are reflected as discontinued operations. The exception to this is cash flows, which are presented on the consolidated basis or both continuing and discontinued operations.

During the presentation, we will reference some non-U. S. GAAP measures. The reconciliations of historical U.S. GAAP to non-U.S. GAAP measures are disclosed in our quarterly press release and the 10-Q that will be filed with the SEC. Lastly I should mention that this call is intended to conclude at 3:00 PM Central European time.

So please follow a limit of two questions per person. I now hand it over to our Chief Executive Officer, Mikael Bratt..

China, India, Japan [ph], and South America, with China leading the way by growing organically by 18%. Compared to last year, these growth markets increased the overall share of our sales by three percentage points to 24%. In China, both global OEM and particularly local OEM contributed to the strong performance.

Growth with newly-introduced models from Geely, including their luxury brand, Lynk & Co as well as Great Wall have been significant contributors. Local OEMs now account for quarter of our sales in China, compared to less than 22% a year ago.

Driven by previous quarter's product launches mainly from SG&A, Honda, Nissan, and Tesla, our sales in North America grew by close to 12% organically in a market with a 2% decline in LVP. Despite negative effects on light vehicle product from transportation strikes in Brazil, our sales in South America grow organically by 34%.

In Europe, we have been affected by weaker demand for certain models that we supply in part related to the temporary product cost connected to the new EU emission testing regulation, WLTP implementation on the September 1, 2018.

Looking to our key growth vehicle models for 2019 on the next page; here you see some of the key models which are launched in 2018. These models accounted for large share of our organic sales growth during first-half of 2018.

Despite some of these models contributing slightly less than expected particularly in Q1 of 2018, we continue to anticipate that they will contribute around $0.50 billion of organic sales growth during full-year 2018. Annually, these models represent more than 10% of sales where our content per vehicle is in a range of $100 to more $400.

Looking now to our product launches; our strong momentum continues. We continue to see the ramp up of product launches of business awards in 2015 and 2016 as illustrated by the shot. The ramp up of growth is developing according to plan after some delays in the first quarter 2018.

The number of product launches in the second quarter of 2018 increased by 72% compared to a year earlier. We expect these to result in a step-up in organic growth in the second-half of the year compared to the first-half of the year, and a strong performance versus our market and entity in subsequent quarters.

As the number of launches is stabilizing, we believe we can gradually focus more on productivity improvements through operation excellence while our launch-related costs gradually decline.

Looking to our underlying market conditions on the next slide; despite continued strong global light vehicle sales, the outlook for major light vehicles market had become increasingly more uncertain due to potential trade tariffs and regulatory changes.

Despite strong light vehicle sales in April and May in China, light vehicle inventory levels increased during quarter and is now above what has historically been considered to be healthy levels. During the second quarter, the inventory levels declined year-over-year in the U.S.

due to relatively strong sales with what seems to be disciplined production volume. In Europe, the light vehicle production increased around 4% year-over-year in the quarter as vehicle registration continue to increase near record levels in the region.

For the third quarter overall, global light vehicle production is expected to be quite strong with an increased year-over-year of around 3% according to latest IHS forecast figures. Asia is expected to increase by around 2% in the third quarter.

This assumes light vehicle production will increase year-over-year in China by around 3%, with rest of Asia remaining unchanged and Japan expecting to increase by around 2%.

In North America, the light vehicle production is expected to increase year-over-year around 6%, and South America is expected to remain strong and increase around 14% for the third quarter. However, we have seen a reduction in near-term forecast volumes, particularly in Europe, but to some extent also in North America.

The reduction in Europe, we believe are mainly related to the WLTP as light vehicle sales have been strong in the region, reaching near record levels. These reductions are now slightly weather than anticipated sales in Q2 2018 are the main reasons why we reduce our full-year 2018 organic sales indication.

Moving now to trade and regulatory updates on the next slide; Autoliv continue to monitor the trade and regulatory environment. In general, we continue to work on mitigating these risks through geographical diverse supply chain. Renegotiations of NAFTA may have significant impact on the North America automotive industry as a whole.

We produce a substantial amount of airbag modules and inflators in the U.S., and have a large footprint for high-labor content production in Mexico. We estimate that our next export to the U.S. from other NAFTA countries is less than 15% of our total North American sales.

Most of pour production in Mexico is picked up by the OEMs for assembly into vehicles in Mexico, the U.S. and elsewhere. Looking at import and exports between China and U.S., we have a limited direct exposure; thanks to the investment in China for vertical integrations over the past year. However, China tariffs on import vehicles from the U.S.

may affect output of certain vehicle models with high safety content. In September 2018, the EU will switch to more rigorous emission testing procedure WLTP, which means that all brand model engine and transmission combination and configuration must be individually tested.

OEMs has acknowledged that they will not be able to fully execute the required volume of testing by the deadline, and have temporarily reduced that output of certain models in the second-half of 2018. I will now hand over to our CFO, Mats Backman, to speak about the financials..

Thank you, Mikael. Looking at our financials on the next page, where we have our three figures for the second quarter, including positive currency translation effects of around 80 million and organic sales growth of about 145 million, our consolidated net sales reached 2.2 billion for the quarter. Our gross margin declined year-over-year.

The net operating leverage on the higher sales is offset by higher commodity cost net currency effects and cost-related to ramp up of recent launches. Our adjusted operating margin of 10.4$ declined year-over-year, mainly due to higher RD&E net and lower gross margin, partly offset by lower cost per SG&A in relation to sales.

Our adjusted earnings per share of $2.22 improved year-over-year by $0.72. Our adjusted return on capital employed and return on equity were 21% and 25% respectively. Looking now on the next slide; our adjusted operating margin of 10.4% was 50 basis points lower year-over-year.

As illustrated by the chart, operating leverage from the organic sales growth improved margin by about 20 basis points. This improvement was more than offset by higher raw material cost of about 30 basis points, and a net currency headwind of 40 basis points.

The leverage was negatively impacted by R&D&E expenses net, which increased compared to the same quarter in prior year, mainly as a result of lower engineering income and the significant increase of product launches in the quarter.

We expect the headwind for raw materials to continue throughout 2018, and to be close to a 30 million higher year-over-year, due to higher cost for non-ferrous metal, steel, and iron [ph]. This is almost twice as high as expected at the beginning of the quarter.

We anticipate the currency effects on the operating margin for the full-year '18 to be close to neutral. Looking now for our cash flow on the next slide; our operating cash flow including discontinued operations amounted to 47 million, compared to 179 million in the same quarter of 2017.

The decrease was primarily driven by cash flow impact on discontinued operations, including cost of about 80 million for separating our business segments, and also increased operating working capital driven mainly by increased sales growth.

Of the total $165 million capital expenditures, $125 million is related to continued operations, which is about 5.7% in relation to sales. For the full-year 2018, we expect capital expenditures to remain in the range of 5% to 6% of sales.

From 2019 we expect the cap expenditures to sales ratio to begin to normalize towards the historical range of 4% to 5%. Looking at continued operations for the full-year '18, excluding any discreet items, we expect our operating cash flow to be on about the same level as in 2017, which was $870 million.

Looking out our earning per share, on the next slide, in second quarter '18 the adjusted earnings per share increased by 48% to $2.22 compared to the $1.50 for the same period one year ago. The main driver behind the increase is the lower tax rate comparing to a year ago, explaining about $0.58, and the remaining $0.12 from higher operating income.

Looking out on returns, on the next slide, we are pleased that the returns are improving in the new corporate structure. Return on capital employed and return on equity for continued operations for the quarter is above what we have recorded in the full-year 2015 to 2017 in the old structure.

We increased the dividends return to shareholders in the quarter to $54 million, and we distributed the Veoneer share to a shareholder as well in the quarter. Turning to the balance sheet and the financial policy on the next slide, we have, as you know, a long history of a prudent financial policy.

After the spin our balance sheet focus and shareholder-friendly capital allocation policy remains unchanged. The third quarter '18 dividend was set at an unchanged level of $0.62, which of course means a significant increase in dividend yield after the spin. At the time of the spin we provided $1 billion of cash liquidity for Veoneer.

Standard & Poor's have confirmed the long-term credit rating A minus with a stable outlook even after the cash injection. Autoliv's policy is to maintain a leverage ratio of around one times net debt to EBITDA, and to be within a range of 0.5 to 1.5. As of June 30, 2018, the company had a leverage ratio of 1.6 times.

Our strong free cash flow generation allows a fourth deleveraging, and should allow continued returns to shareholders while providing for flexibility. As a result, we're aiming to reach out target level of one times in 2019, and that is excluding any discreet item. Turning the page, we have our maturity structure of long-term debt.

In June, Autoliv issued a five-year bond offering of €500 million in the Eurobond market. The bonds carry a coupon of 0.7%. And Standard & Poor's has assigned the bond a rating of A minus. The Eurobond market provides diversification of funding sources for Autoliv going forward.

And as can be seen from the chart Autoliv has a very well-balanced debt maturity profile going forward. Looking out to our financial outlook on the next slide, where we have summarized our full-year 2018 indications.

Full-year '18 indications assumes mid-July exchange rates prevail and excludes costs for capacity alignment, antitrust related matters, and costs related to the spin of Electronics segments.

Our full-year '18 indication is an organic sales growth of about 8%, and a positive currency translation effect of about 2%, resulting in consolidated net sales growth of about 10% for 2018. The 8% organic sales growth indication is slightly lower than the earlier indication of more than 10%.

As we have noted, some near-term reductions in forecast volumes, and especially in Europe. The net operating leverage on this sales growth is expected to drive an improvement in operating margin, leading to an adjusted operating margin of more than 11% for the full-year 2018.

The projected tax rate excluding discreet items is expected to be around 27% for the full-year 2018. The projected operating cash flow for continuing operations excluding any discreet items is expected to be on a similar level as in 2017, which was $870 million.

The projected capital expenditures for continuing full-year '18 is expected to be in the range of 5% to 6% of sales. I will now hand back to Mr. Trapp..

Thank you, Mats. Turning the page, this concludes our formal comments for today's earnings call. And we would like to now open up the line for questions. And I will now hand it back to you, Varghai..

Thank you, sir. [Operator Instructions] We will now take our first question from Rich Kwas of Wells Fargo Securities. Please go ahead..

Hi, good morning everyone. Just wanted to follow-up on -- you addressed the tariffs in some qualitative detail.

But just curious in terms of if there's any distinct financial impact in the second-half of the year under 301 in terms of imported components, et cetera, that may come through indirectly?.

So, I think what we are saying here is that we are very well positioned in general when it comes to tariffs with our localization strategy. And in the U.S., as we saw on the slide here we actually also received exemption from the U.S. authorities here.

So in terms of impact in the quarter, I would really say that it's more as a consequence on the raw material side that hits Autoliv, so to speak, and what we also described here..

Okay, all right..

So I would say from this perspective we are in a good position..

Okay. And then just a quick follow-up on that, I know we've got a little bit of a respite from 232 Auto for the time being.

But any just broad thoughts on impact there that could emerge?.

So, on our side I will say there is no -- I can't guide you there. I mean its process really all about making sure that we are agile and can adjust according to how the landscape looks like. I think right now the impact of the potential exposure in that area is really on the effect of the LVP side, the various controversy.

So nothing there in the trade -- import duties as such for us..

Okay, great. All right, thank you very much..

Thank you..

Thank you. We will now move to our next question from Hampus Engellaut of Handelsbanken. Please go ahead..

Thank you very much. I have a question on China. If you could maybe talk a little about your discussions, the new China and Japan domestically in stake rates, and you highlighted domestically it's being one-third of your sales now. Previously, I think it's been happening around 25.

Is this on the back of seeing a higher content value per existing customer or are you also seeing new customers coming to Autoliv? Those are my questions..

Actually, we see both. I would say, of course, that the relevant growth is really coming from our existing customers growing with them, also growing content per vehicle there. But we also see increased activities on the broader perspective here, and new customers coming through here.

I think when you look at Chinese OEMs per say has definitely saw that content per vehicle is going up in general, and we have a broader customer base..

Is it a broadly spread or could you already now talk about maybe seeing an A team and B team in China? The A team more going for similar tax rate of, say, the foreign OEMs and maybe looking at exporting cost, [indiscernible] increasing tax rate..

I think if you look at -- let's call it the premium Chinese brands here, they have content per vehicle that is more in the magnitude of around $200 for the [indiscernible].

And if you then expect the broader, let's call it the CUMs [ph], its $120 per vehicle, so there is a difference in content vehicle between the [indiscernible] more premium and the volumes are my concern..

All righty. Thank you..

Thank you. We will now take our next question from Victoria Greer of Morgan Stanley. Please go ahead..

Hi, there. Yes, just a couple please. And first of all, on the full-year and change in the guidance and I think I saw you comment somewhere that this is really just on production changes.

Did you talk a bit more about what you are seeing there, you mentioned WLTP a bit but I don't remember probably all of it and could you, how much is the WLTP impact and how much is what you are seeing elsewhere and then on the margins and you've mentioned some startup costs in Q2, could you tell us sort of how much that has been obviously it makes sense thinking about how much your product launches have been up year-over-year in Q2.

How much of cost did you had in Q2 that probably isn't going to repeat for H2, really just trying to get to what are the drivers of a stronger margin for H2, which is implied in the full-year guidance of being over 11%? Thank you..

Starting with the first question here around, just with the indication for the organic growth for full-year; as we correctly stated there it is 100% contributed to the underlying LVP. But the reason for the underlying LVP change, I would say it's a little bit of a mixed target depending on which region you are talking about.

So I think Europe, the WLTP is one contributor, I think also the Q2 effect we saw here also we have a mix effect in our own portfolio, so to speak between the different customers and how they develop in the quarter that oppose carries on an impact that the full-year number here.

And then, we have some uncertainty in North America and I think you have seen here also some of our customers here coming out, yes recently talking about the full-year for them. So when we of course look in our own systems here and see the call offs from them, it makes a standard estimates we are doing here.

So I think it's difficult to single out on a specific major part here, it comes from different root causes so to speak here..

And when it comes to the margin and comparing the first half and the second half, I think you need probably to divide it into different part, looking at above gross and the lower gross profit and starting with lower gross profit we have a higher than normal or R&D&E in the quarter I think about 5.3%, year-to-date 5.1% and we are expecting a lower level in the second half of the year, partially driven by the higher end engineering income in the fourth quarter, but also a lower relative underlying R&D&E cost, so that will be one of the drivers now.

And looking above the gross profit on a contribution level, I mean, first of all we will have less impact from currencies in the second half comparing to the first half. Raw material is above the same level, I mean looking at the total FX for the full-year.

But we also have some inefficiencies in the system as well driven by the very, very high amount of launches in the second quarter.

I mean, we have more than 70% increases in launches in the second quarter year-over-year and that is also driving some efficiency -- inefficiencies in the system as well that we or can say that we can improve them in the second quarter..

Okay, so the -- yes, I was much asked with the RD&E as well, we should think about that as being sort of unusually high level in Q2 partly because of the lower engineering contribution and comes to end for the second half, if I'm right?.

Yes, yes. It's partly the higher engineering income but also over the lower engineering income in the second quarter but also related to the high number of revenue launches as well. So you have two different components in that..

Thank you.

And then, just a couple of housekeeping ones, could you talk about the full-year expectation for the tax rate and for the interest cost rate?.

Yes, I mean in terms of -- I know that I'm just talking continued operations, so we are expecting, what we are targeting tax rate of about 27% for the full-year. So that's the kind of the full cost for the tax rate [indiscernible] around that..

Interest cost..

I mean some -- I mean, it will not be a significant effect in the remainder of the year than as we have the -- I mean, the Euro bond we start kind of kicking in, now starting the third quarter but I mean you can make the match on that one otherwise there are no changes..

Okay, great. Thank you..

Thank you. We will now move to our next question from Chris McNally of Evercore. Please go ahead..

Good afternoon gentlemen. Thanks so much for taking the questions. Maybe we just dive into the step-up in the second half.

So it sounds like from a production guidance roughly in line with IHS around 2%, I guess I would imply that something like a 12% outgrowth before 2% pricing to take hit the 12% organic in second half and if I just use that 12% on last year's $4 billion, I get to a number that approaches $500 million.

I mean new launches just for the half and you mentioned $500 million for a full-year on launches.

So can you just help bridge the math what it seems like I wouldn't imagine at a 100% of your new launches were all in the second half?.

So that's correct. The $500 million is what we contribute to this certainly you need to identify more deals. Then of course we have an organic growth that comes from the, let's call it the orderly course of this business that is not directed to this third team, the third team more debts.

So I think that there you have the difference between what you see in the numbers and what we reference to the $500 million. What we have said is that and what we are saying is that these $500 million is roughly delivered year-to-date roughly delivered half, so we have another half to go here in 2018..

Okay, and then is it fair to really say that this -- the large amount of launches that you had in Q2 that obviously the production and maybe the mix can move around from that 2%.

But that outgrowth, that extra 10%, do you have that visibility now locked for the next six months, so essentially the only changes would be actual production meaning that there is not anymore launches.

The majority of launches are pretty much known by the summer for Q3?.

I mean, we have a very good visibility of the launches we have in front of us and that's what we say I think it's going according to plan and we are expecting that to deliver its' share of the organic growth here. So yes, if you have changes it's mainly related to the underlying light vehicle production in the market..

Okay, great. Thank you so much..

Thank you..

Thank you. We will now take our next question from Brian Johnson of Barclays. Please go ahead..

Yes, good morning and good afternoon. My question is around really the interaction of pricing contracts and the cost pressures from commodities and perhaps tariffs. One can you just maybe remind us the level of indexing at any -- in your contracts.

Two; assuming there is not indexing, what have the discussions been with the OEMs on pass-throughs and three is that factoring into the annual price down discussions that you are having with the OEMs because I have talked years to Jan Carlson about it just doesn't seem fair that your Autoliv consistently delivers the highest quality in the airbag business but consistently gets pushed for price downs by OEMs?.

I mean, just to come start with your question on the index here and related to raw materials that there is no in general any atomization I will say in that pass -- that there is a pass-through for us on that type of cost.

I would say that in the cases where we have good reasons to go to the customer in specific case, it becomes commercial negotiation and of course depending where we are in the negotiations in general it comes into the annual price discussions there. So it's a pure commercial negotiation.

I would say in general of course there is no changes in the dynamics in our market here I think there is a lot of focus, continued focus for sure on the price competitiveness from our customers here towards us and that additional change to that compared to I've seen in the past..

Okay, any sense of how are you having those commercial negotiations or do you plan to have them towards the end of the year to true up the recoveries if any?.

If we have specific circumstances suppose that's something we'll bring out for the customer but on a general note, it's nothing I can say that we are expecting to see any contribution from..

Okay, thank you..

Thank you. We will now take our next question from Erik Karlsson of Industrial Equity Partners. Please go ahead..

Thank you, my first question is on organic growth in the first quarter your organic growth was a bit below expectations and you called out certain models slipping a little bit there in terms of launch schedule, I was wondering if these models have now caught up and we are back on track there?.

Yes, I mean those models are catching up to large extent. So but of course there are some spillover effect into the second quarter here but to a large extent they are tracking towards our expectations here..

Good.

And just as a follow-up on that, what is the uncertainty around the $500 million contribution, the stat you have kept intact both at the full-year and in the first two quarters here? So, how much we can remiss that in the $500 million for the full-year at this stage?.

Now this is the moment that's our -- what we have stated here before and what's remaining for the full-year is the best estimate we have at hand and we have no reason to state anything differently here. So we don't know that..

Okay, very good. And just on the margin improvement that you expect during the second half of the year, for the full-year you guided for 20 basis points or greater improvement and the first half was minus 30 basis points. So maths tells us second half will be up at least 70 basis points year-on-year roughly.

Can you just help us understand if that is equally weighted between Q3 and Q4?.

No, I mean we haven't seen for now in openly looking on the financial performance between the quarters. So we are normally the best quarter is the fourth quarter where we're getting a lot of engineering income and some other kind of positive items coming in.

So if you're looking at the kind of the sequential development, it is we have the normal seasonality with the strong quarter being in the fourth quarter. So that's kind of this sequential development and with seasonality.

But then again looking at -- we are I mean we're not there as that happy with the leverage in the second quarter and we talked about the number of launches and so forth.

So we can see an underlying improvement in the second half and as I answered Victoria as well when it comes to the leverage in the second quarter, it's also driven by RD&E development where we're expecting to have a lower RD&E in relation to sales than in the third and more importantly in the fourth quarter.

So it's many different kind of factors contributing to the leverage in the second half..

I understand that but just to understand, so we should think about it as Q3 improving on a year-on-year basis but the biggest improvement on a year-over-year basis is really Q4 weighted, is that a fair assumption?.

Yes, I mean having the strongest quarter in the fourth quarter and also looking in particular when you are in a situation with high growth as well we have the natural kind of sequential seasonal difference between the third quarter and fourth quarter and if they actually might be almost little if they get this year due to their development of the goals and the ramp up..

Good and one more question if I may you have upgraded raw material headwind here throughout the first half, so I'm just wondering do you have now all the raw materials basically thought for the second-half of the year, or is there still some uncertainty around the $30 million?.

Yes, I mean there are still some uncertainties around the $30 million depending on what will happen out there. But that the absolute best kind of estimate we have today is that $30 million or 30 bps on the full-year..

Very clear, thank you so much..

Thank you..

Thank you. We will now take our next question from Vijay Rakesh of Mizuho. Please go ahead..

Yes, hi guys. Just a question here on your content, I know you called out in China I must $200 of the premium and $100 at the volume level.

With the new end cap regulations where do you see content going on the passive safety side in China?.

Yes, I mean I can't give you a number here but I mean if we have limited to before I mean we see the content could be increasing I mean both in the premium segment as well as in the volume car segment here, where you see more and more components coming and so I think we are on track, when it comes to..

Got it, and with all the issues, are you seeing a better order uptake in back to safety in China versus other regions are it's pretty much similar actually look globally?.

I think I mean the way we have performed in the past, we don't see any changes. As we said we have continued strong order in taking in the quarter here without quantifying that and I would say that counts for all our different regions.

So yes I mean the business climate and our progress in that is well being in the past year, so no material changes that to report on..

Got it. Thanks..

Thank you..

Thank you. We will now take our next question from David Leiker of Baird. Please go ahead..

Yes, Hello everyone..

Hello?.

Hi, can you hear me?.

Yes, very good..

Okay, great.

Few things I want to kind of walk through service slide seven where you listen number of product launches if you extended that all to 2019 just directionally what would that look like?.

I mean we normally don't guide on product launches but I would say I mean 18 is that the peak years of this big. If you have those three years in the right I mean so in 2019 will be slightly lower but compared to where we have been it will be still be on relatively high level of probably want to hear but looks slightly lowered to….

Okay, thanks.

And then as we look at Europe at the WLTP, what's your sense of when we'll get back to some sort of a normalized production where that's not impacting that the build rates?.

As difficult to speculate I mean it's more a question for the way and to answer on that but I think what we have indicated in our number is that much as we see here about Yes, I don't think that can give you on a guidance that depends both under different OEMs here. So it's more a question for them to answer..

It is something you think can drag into Q4 and Q1 of next year?.

Hi. As I said, I mean we can't speculate here I think we have in our numbers what we have visible here I think impact for us is the I mean look together with other contributing factors as we're talked about here to present but I mean Q3, Q4 is actually yes but we have no major indications gone that no..

Okay.

And then that the last one is that if we look at the EBIT margin and you're just under 11% last year, you're guiding the above 11 this year and then at the Analyst Day you're talking about a 13% number for 2020 and if we look at that slope is that kind of evenly spread across that time period or is it more back-end weighted?.

I mean say difficult, we haven't really kind of guided about that kind of the sequential over the years when it comes to they have bit margin develop but I mean it's fair to assume I mean when we have this high number of launches that we have right now if kind of takes some time to fine tune everything in production in order to get the full effect in terms of leverage from the additional volumes, we see a gradual improvement from higher volumes but start kind of all that.

Stating something going into 2019 and 2020 I think that is difficult but if you're looking on from a sequential point of view quarter-by-quarter if that and at this all that we have bigger opportunities we have when it comes to leverage when we have fine tune production and we have the volumes in production that..

Okay, great. Thank you very much..

Thank you..

Thank you. We will now take our next question from Joseph Spak of RBC Capital Markets. Please go ahead..

Thanks.

Just to follow on the prior sort of WLTP discussion obviously there's some qualification and sort of capacity issues but what one of the other things that some of the automakers indicated was because of that they're delaying some new programs and I'm wondering if that impacts some of the your order intake that you sort of expected to come on as well or is this really just sort of is it both volume and launches or is it really just more volume?.

Is more volume from our side here what we look into the rest of the year here, so no pushes for right around the product launch at the thoughts, so that is following the plan, so for us in the second half of the you're is pure volume related.

And I can't said as we see anything related to WLTP comment that when it comes through the ordering I mean the new program I mean that's not folder out in time as well, so I would be surprised if that came into that..

Okay and then just may be any sort of high level comments on sort of a competitor environment with, you can enjoy some sort of maybe in a sort of coming together a little bit like what are you seeing in terms of the bidding and quoting process from a competitive nature?.

No, I think the dynamics in the market there have to have being we see no changes to that and I mean we look at because of all our competitors with retrospect and leading forward of I think every day here for our business here but no changes in the dynamics..

Okay, thank you..

Thank you. We will now take our next question from Anushka Delela of Nordea [ph]. Please go ahead..

Thank you. Could you just dive in on what happened in Europe during the quarter you did not have an intro in spite of the fact that at least the official production and which were positive and you mention that you had some negative mix impact there, can you just elaborate on this one and also tell us if that will prevail in the coming quarters.

Thanks..

I think in Europe is as we stated there mix question for us. I mean we don't have the wave as we have referred to the step up of launches in Europe as we have them mainly in North America and China. So we were not offsetting the mix effect with increased product launches that they we're not appearing in Europe there.

So it's really related to the respective customer we have that we sort of volume effect that so not seeing a clear picture in Europe here, so that's why we referred to the remaining..

And when you look at these then say important customers for you in Europe and outlook for production has to what do you see there should we expect still kind of negative performance versus the car production in Europe and your business?.

No, I think when it comes to the remaining of the year here I think we continue to see some challenges in Europe here when it comes to what the figures we see and what you may see from IHS where they have high numbers that is also the consequence that is probably because what we see with connected to the new emission standards here..

Okay, perfect, thank you. Yes and I think I have one question to Mats on the financial EBITDA a bit of nitty-gritty.

Before I look at your P&L and the line above the operating income, you have the line called other income expenses net of positive $9.6 million and when I look at my model usually, this kind of line correlates quite well with the one-offs that you're taking in the quarter, it's not much higher than that but in this quarter it was actually $10 million higher.

So the question is do you have any kind of undisclosed positive non-recurring items that you encountered during the quarter?.

No, I mean looking at I think it was $9.6 million or something like that looking at the second quarter and if you compare year-over-year, I think we had a little more than $8 million last year.

As just looking on the year-over-year development of these items, it contains a lot of smaller items that are kind of all they're summarizing up to the $9 million. So we don't have anything unusually in that one.

A good example of an item that is positive that's standing up in this one is for an instance government income that we might receive from China for an instance that are coming kind of regularly. So that is a part of this one, that is an example but it's nothing out of normal when it comes to other income this quarter..

Perfect, thank you..

Thank you..

Thank you. Ladies and gentlemen, we have time for one last question today. Viktor Lindeberg of Carnegie Investment Bank, please go ahead with your question..

Thank you. Just to understand when you now reiterated the margin outlook for 2018 and also 2020 and thinking about the headwinds that you experience on FX and also raw material summing up to some I think it was 70 bps.

So what is counteracting or mitigating is given that you more or less now reiterate the margins for both 2018 and also looking onto to 2020? Thank you..

We actually didn't have any margin guidance looking at 2018 to start with. I think the only thing we have stated was for the segment to be better year-over-year, so we didn't really give any guidance when it comes to 2018, so this is the first guidance as a standalone company for 2018.

And as I've said looking at the currencies for an instance, we see a very kind of limited, it goes to neutral effect for the full year, you are right about the raw materials, but to kind of consider that in target that is in 2020 I think is extremely difficult given the volatility we have seen both from raw materials and on currencies.

So the only thing we can do is to reiterate the target of the 13% looking at 2020 and now we have the new guidance for 2018 more than 11% and that's a new guidance and that is including the raw materials effect we see on the neutral currency..

Understood. Should we see maybe that you had a decent cushion in the numbers, you provided both on the 13% 2020 but also that margins for to expand year-over-year in 2018. So that's one of the things..

No, I wouldn't face but you always have positives and negatives along the road and so I mean what we are communicating it's our best estimate basically..

Okay.

And then just a follow-up question on the order intake, can you update us on if you have any data on the market shares year-to-date on your global order intake, you have been trending at 50% or 50% plus, it is something that you continue to see throughout 2018 so far?.

No, we are not giving any market share number on the order intake and what we stated here earlier in the call is that and we have it in report that we see continued strong new order intake. So that is what we keep it to..

All right, thanks, good luck with Q3..

Thank you..

Thank you..

Thank you. That's all the time we had for today's question. And now I would like to turn the call back to our speakers for any additional or closing remarks..

Very good. Thank you very much. But before we end today's call, I also would like to say that we continue to execute our growing business volumes and now new opportunities in more focused Autoliv with a never-ending focus on quality, innovation, and operational excellence.

I also should mention that our third quarter earnings call is scheduled for Friday, October 26, 2018. And by that, thank you everyone for participating on today's call. We sincerely appreciate your continued interest in Autoliv, and hope you have a great summer. Good-bye and thank you..

Thank you. That will conclude today's call. Thank you for your participation ladies and gentlemen. You may now disconnect..