Vivian Lewis: Auto Safety from Sweden

08/29/2003 12:00 am EST


Vivian Lewis

Editor and Publisher, Global Investing

We are happy to welcome Vivian Lewis to the list advisors covered by the Digest. Vivian is a leading global analyst, speaking seven languages and maintaining insider industry contacts throughout the world. She focuses not only on foreign securities, which also trade in the US. Here's the latest addition to her model portfolio.

"We are adding a Sweden-based company to our model portfolio. Autoliv (ALV NYSE), which is a full ADR that trades in New York, as well as in Stockholm. Autoliv is a world leader in auto safety equipment such as airbags, inflatable curtains, seat belts, safety seats, inflators for car gas generators, and auto electronics. It operates in 30 countries or more, with about 40% of its sales are in the US.

"The auto industry has been in the doldrums, yet Autoliv has been producing steadily rising sales and earnings of late. Part of the reason is that it is cash rich, and has been undertaking acquisitions, many of which are its former suppliers and licensees. When and if a world recovery takes place, the auto market will pick up. But which car company is going to win is not easy to determine.

"We would note that because of its acquisitions and its share buybacks, its share and earnings data are not comparable from year to year. With these caveats aside, net income rose 36% to $71 million in the second quarter despite a 6% fall in worldwide light vehicle production. Earnings for the quarter rose 42%, topping $0.75 a share. This was not a fluke. In the first quarter, sales rose 21% and earnings rose 35%. In fact, Autoliv has reported increased earnings and cash flow for seven quarters in a row.

"Why is the company doing so well? One reason is that auto safety is a hot trend. New regulations are being considered all the time. In June, the US Commerce Committee introduced new regulations to reduce the risk of occupant ejection from motor vehicles that go into effect by 2008. Similar laws are being considered worldwide. In Asia, sales–net of currency effects–rose 67%, as Koreans buy seats belts and frontal airbags for their cars. And while off a low base, growth in China was 100%, year over year. Buy at prices up to $30 a share."

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