Autoliv Inc. (ALV) raised its quarterly dividend payment by 8% to 43 cents per share for the second quarter of 2011. The company hiked its dividend for the third time in less than a year, reflecting its strong financial position and rapid recovery from the economic recession. The dividend will be payable on June 2, 2011 to shareholders of record on the close of business on May 5, 2011.
Last year, Autoliv raised its dividend by 17% to 35 cents per share for the fourth quarter and then by 14% to 40 cents per share for the first quarter of this year. The first quarter dividend will be paid on March 3, 2011 to shareholders of record as on February 3, 2011.
The dividend of 43 cents even exceeds the highest dividend of 41 cents per share paid by the company before the financial crisis. The new dividend will bring the total dividend payment to $38 million, a 30% increase from the highest amount paid before the economic crisis, primarily due to a 24% rise in the number of shares outstanding.
Autoliv suspended its dividend payment since the third quarter of 2009 in the light of a decline in global light vehicle production due to economic recession. The company resumed its dividend payment of 30 cents per share in the third quarter of 2010.
Autoliv showed about threefold increase in profit of $177.5 million or $1.89 per share in the fourth quarter of 2010 from $61.3 million or 68 cents per share in the same quarter of 2009. The profit far exceeded the Zacks Consensus Estimate by 21 cents per share. The increase in profit was attributable to higher sales (especially in the Rest of the World region) and restructuring measures.
Consolidated sales grew 14% to $1.91 billion reflecting a boost of 9% due to acquisitions, offset partially by a negative currency translation effect of 1% and a negative impact of 5% related to reversal of three more production days in the first quarter. Consequently, organic sales rose by 12% during the quarter.
The company’s sales were affected by favorable vehicle mix from General Motors (GM), Ford Motor (F), Chinese manufacturers and Chrysler as well as strong sales growth in Japan.
Operating income increased by $133 million to $243 million (12.7%) from $110 million (6.6%) in the prior-year quarter. This was attributable to a rise in gross profit by $80 million and a decline in restructuring charges by $70 million, offset partially by a rise in research, development and engineering expenses by $15 million.
Autoliv anticipates consolidated sales growth of 20% in the first quarter of 2011, backed by an organic sales growth of 10%. The company expects consolidated sales growth of more than 10% for full year 2011 based on the organic sales growth expectation of 6%. The company also expects an operating margin of at least 11.5% both for the first quarter and for the full year 2011.
Despite the improved results, strong financial position and promising outlook, Autoliv faces considerable customer concentration risks. Moreover, sluggish production in Western Europe may continue to adversely affect the company’s results. This caused the company to retain a Zacks #3 Rank (Hold) on its stock for the short term (1 to 3 months) and we have recommended the shares of the company as “Neutral” for the long term (more than 6 months).
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