Autoliv Hikes Dividend by 6%

Zacks

Autoliv Inc. (ALV) raised its quarterly dividend by 6% to 50 cents per share for the fourth quarter of the year from 47 cents, which will be paid on September 6, 2012. The new dividend is 43% higher than the highest dividend paid before the financial crisis in 2008-2009. It is payable on December 6 to shareholders of record as of November 21 this year.

Autoliv resumed its dividend in the second quarter of 2010. The dividend of 30 cents per share was paid in the third quarter of 2010. It has since been raised in the subsequent four quarters. Last year, the company paid a quarterly dividend of 45 cents per share.

Autoliv, a Zacks #3 Rank (Hold) stock, posted a 14% drop in profits to $1.33 per share in the second quarter of the year from $1.54 a year earlier, due to weak markets in Europe and South America as well as higher raw material prices. The company also missed the Zacks Consensus Estimate by 6 cents. In absolute terms, profits fell 13% to $126.4 million from $145.0 million a year ago.

Consolidated sales increased 1% to $2.09 billion, lower than the Zacks Consensus Estimate of $2.13 billion. Excluding negative currency effects of 6% and a small divestiture, organic sales went up roughly 8%, outperforming its own guidance of 7% due to a better performance in North America that more than offset lower sales in China and Western Europe.

Operating income declined to $190 million (9.1% of sales) from $205 million (10.0%) in the second quarter of 2011. The declines were driven by an increases in research development and engineering expenses by $9 million and in capacity alignment costs by $4 million.

Autoliv’s anticipates organic sales to grow about 4% in the third quarter of the year. However, consolidated sales are expected to decline 3% in the quarter due to negative currency effects of 6% and the effect from the divestiture of Autoliv Mekan.

Given the forecast of a 5% increase in light vehicle production (:LVP) from IHS Inc. (IHS), Autoliv expects organic sales to improve 6% for the full year 2012.. Meanwhile, consolidated sales are expected to increase marginally by 1% due to currency effects (4%) and divestiture of Autoliv Mekan. The company expects operating margin to be 10% for the third quarter and the same for the full year.

In order to outperform global LVP, capital expenditures are expected to maintain at a high level of 4.5% of sales in 2012. Operations are expected to continue to generate a strong cash flow in the magnitude of $700 million for the full year 2012, excluding payments for antitrust investigations.

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