Financial Report July – September 2021

Financial highlights Q3 2021

$1,847m net sales

12% organic sales decline*

5.4% operating margin

5.6% adjusted operating margin*

$0.68 EPS - a decrease of $0.44

$0.73 adjusted EPS* - a decrease of $0.75

Full year 2021 indications

Around 11% net sales growth

Around 8% organic sales growth

Around 8% adjusted operating margin

•

Significant organic sales decline* as global LVP declined by 20% vs. Q3 last year (according to IHS Markit Oct 2021). Sales decreased organically by 12%, yet outperformed global LVP by almost 8pp, mainly due to product launches and positive vehicle mix effects and despite negative geographical mix effects. All regions outperformed LVP by 6-16pp.

•

Profitability declined due to the lower sales and higher raw material costs. Adjusted operating margin* declined by 4.5pp to 5.6%. Return on capital employed declined to 10.5% and return on equity declined to 9.3%.

•

Strong balance sheet and leverage ratio well within target range. Operating cash flow of $188 million and free cash flow* of $77 million support continued balance sheet improvement. A dividend of $0.62 per share was declared and paid in the quarter. Net debt* declined, resulting in a leverage ratio* of 1.1x.

(Dollars in millions, except per share data)

Q3 2021

Q3 2020

Change

9 M  2021

9 M  2020

Change

Net sales

$1,847

$2,037

(9.3)%

$6,111

$4,931

23.9%

Operating income

$99

$175

(43.2)%

$500

$75

564%

Adjusted operating income¹⁾

$103

$206

(49.7)%

$506

$170

197%

Operating margin

5.4%

8.6%

(3.2)pp

8.2%

1.5%

6.7pp

Adjusted operating margin¹⁾

5.6%

10.1%

(4.5)pp

8.3%

3.5%

4.8pp

Earnings (loss) per share, diluted^{2, 3)}

$0.68

$1.12

(39.4)%

$3.65

$(0.02)

n/a

Adjusted earnings per share, diluted^{1, 2, 3)}

$0.73

$1.48

(50.7)%

$3.72

$0.95

291%

Operating cash flow

$188

$352

(46.6)%

$437

$380

15.0%

Return on capital employed⁴⁾

10.5%

18.7%

(8.2)pp

18.1%

2.7%

15.4pp

Adjusted return on capital employed ^1,5)

10.9%

21.7%

(10.8)pp

18.3%

6.1%

12.2pp

1) Excluding costs for capacity alignment and in 2020 antitrust related matters. 2) Assuming dilution when applicable and net of treasury shares. 3) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from the EPS calculation. 4) Annualized operating income and income from equity method investments, relative to average capital employed. 5) Annualized operating income and income from equity method investments, relative to average capital employed. Non-U.S. GAAP measure, see reconciliation table.

Comments from Mikael Bratt, President & CEO

Despite the challenging environment, our leverage ratio* remains well within our target range and we declared and paid a dividend of $0.62 per share in the quarter.

Through successful mitigation efforts, the raw materials headwind in the third quarter was slightly lower than expected. However, we see new raw material headwinds, including higher magnesium and resin costs, which means we still expect a full year operating margin headwind from raw materials of around 130 basis points. We expect supply disruptions to continue to impact LVP negatively in the fourth quarter, and although there are some indications of moderate improvement in semiconductor availability in Asia and North America, visibility remains poor.

We are planning and implementing stricter measures to mitigate the current adverse business headwinds, including capacity alignments in Europe and the US. However, as a result of the significantly reduced LVP outlook for the year, we are adjusting our full year indication. Based on an assumption of around 0% global LVP growth for the full year 2021, we expect an organic sales growth of around 8%, and an adjusted operating margin of around 8%.

With our relentless focus on quality and execution as well as mitigating near term headwinds, we continue to drive forward towards our medium term targets. This and more will be explored at our virtual CMD on November 16, 2021.

The adverse business trends from earlier in the year accelerated in the third quarter. Supply shortages of semiconductors and other components led to a third quarter global LVP decline of 20% vs. a year earlier, which was 17pp lower than what was expected at the beginning of the quarter (according to IHS Markit, October 2021).

The decline in LVP, unpredictable changes in customer call-offs and higher raw material costs resulted in reduced profitability despite significant cost control measures, including headcount reductions.

I am pleased that we outperformed the global LVP by almost 8pp, significantly reducing the impact of the 20% drop in LVP.  We had a record number of new launches in the quarter and expect a full year record as well. This includes products to a large number of electrified vehicles, a market that amounted to around 10% of our total sales last year. We expect an almost doubling of sales to this market in 2021.

I am also pleased with our order intake for the first nine months of the year and that we continue to implement the projects and actions needed to support our growth opportunities and our journey to reach the next level of profitability as expressed by our medium term targets.

Financial Report July – September 2021

Full Year Indication

Full Year Indication

Net sales growth

Around 11%

Tax rate²⁾

Around 30%

Organic sales growth

Around 8%

Operating cash flow³⁾

Around USD 700m

Adjusted operating margin¹⁾

Around 8%

Capex, net % of sales

Below 6%

R,D&E, net % of sales

Around 5%

Organic growth vs LVP growth

Around +8pp

Financial Report July – September 2021

Sales Development by region

Adj. operating income and margin*

Capex and D&A

Operating Cash Flow excl EC antitrust payment*

Return on Capital Employed

Cash Conversion*

Financial Report July – September 2021

Selected Balance Sheet items

Third quarter

(Dollars in millions)

2021

2020

Change

Trade working capital¹⁾

$1,421

$1,418

0.2%

Trade working capital in relation to sales²⁾

19.2%

17.4%

1.8pp

Receivables outstanding in relation to sales³⁾

21.3%

19.8%

1.5pp

Inventory outstanding in relation to sales⁴⁾

12.5%

8.8%

3.7pp

Payables outstanding in relation to sales⁵⁾

14.6%

11.2%

3.4pp

Cash & cash equivalents

$903

$1,477

(38.8)%

Gross Debt⁶⁾

$2,051

$3,033

(32.4)%

Net Debt⁷⁾

$1,165

$1,573

(25.9)%

Capital employed⁸⁾

$3,738

$3,686

1.4%

Return on capital employed⁹⁾

10.5%

18.7%

(8.2)pp

Total equity

$2,573

$2,113

21.7%

Return on total equity¹⁰⁾

9.3%

19.4%

(10.1)pp

Leverage ratio¹¹⁾

1.1

2.4

(51.2)%

1) Outstanding receivables and outstanding inventory less outstanding payables. 2) Outstanding receivables and outstanding inventory less outstanding payables relative to annualized quarterly sales. 3) Outstanding receivables relative to annualized quarterly sales. 4) Outstanding inventory relative to annualized quarterly sales. 5) Outstanding payables relative to annualized quarterly sales. 6) Short- and long-term interest-bearing debt. 7) Short- and long-term debt less cash and cash equivalents and debt-related derivatives. Non U.S. GAAP measure. See reconciliation table. 8) Total equity and net debt. 9) Annualized operating income and income from equity method investments, relative to average capital employed. 10) Annualized net income relative to average total equity. 11) Net debt adjusted for pension liabilities in relation to EBITDA. Non U.S. GAAP measure. See reconciliation table.

Selected Cash Flow items

Third quarter

First 9 months

(Dollars in millions)

2021

2020

Change

2021

2020

Change

Net income (loss)

$60

$99

(39.3)%

$322

$(1)

n/a

Changes in operating working capital

$35

$138

(74.6)%

$(179)

$163

(209)%

Depreciation and amortization

$98

$93

6.0%

$297

$268

10.7%

Other, net

$(5)

$23

(123)%

$(3)

$(51)

(94.3)%

Operating cash flow

$188

$352

(46.6)%

$437

$380

15.0%

Capital expenditure, net

$(112)

$(76)

46.1%

$(301)

$(229)

31.7%

Free cash flow¹⁾

$77

$276

(72.2)%

$136

$152

(10.1)%

Cash conversion²⁾

128%

279%

(151)pp

42.3%

n/a

n/a

Dividends paid

$(54)

–

n/a

$(109)

$(54)

101%

Cash dividend paid per share

$(0.62)

–

n/a

$(1.24)

$(0.62)

100%

Capital expenditures, net in relation to sales

6.0%

3.8%

2.3pp

4.9%

4.6%

0.3pp

1) Operating cash flow less Capital expenditures, net. Non U.S. GAAP measure. See enclosed reconciliation table. 2) Free cash flow relative to Net income. Non U.S. GAAP measure. See reconciliation table.  

Financial Report July – September 2021

Financial Report July – September 2021

Sep 30

Jun 30

Sep 30

2021

2021

2020

Headcount

62,000

64,500

65,300

Whereof:  Direct employees in manufacturing

44,200

46,400

47,300

                 Indirect employees

17,900

18,000

18,000

             Temporary personnel

7.7%

9.1%

8.8%

Financial Report July – September 2021

Financial Report July – September 2021

Financial Report July – September 2021

(Dollars in millions, except per share data)

Third quarter

First 9 months

Latest 12

Full Year      

(Unaudited)

2021

2020

2021

2020

months

2020

Airbag and Other products¹⁾

$1,199

$1,332

$3,973

$3,188

$5,609

$4,824

Seatbelt products¹⁾

647

706

2,139

1,743

3,019

2,623

Total net sales

$1,847

$2,037

$6,111

$4,931

$8,628

$7,447

Cost of sales

(1,546)

(1,638)

(4,968)

(4,186)

(6,983)

(6,201)

Gross profit

$301

$400

$1,143

$745

$1,645

$1,247

Selling, general & administrative expenses

(101)

(92)

(319)

(284)

(425)

(389)

Research, development & engineering expenses, net

(98)

(102)

(311)

(292)

(394)

(376)

Amortization of intangibles

(2)

(2)

(8)

(8)

(10)

(10)

Other income (expense), net

(1)

(29)

(5)

(86)

(9)

(90)

Operating income

$99

$175

$500

$75

$807

$382

Income from equity method investments

(0)

1

2

1

3

2

Interest income

1

1

3

4

4

5

Interest expense

(14)

(21)

(46)

(53)

(66)

(73)

Other non-operating items, net

1

(7)

(3)

(13)

(14)

(25)

Income before income taxes

$87

$149

$456

$13

$734

$291

Income taxes

(27)

(50)

(135)

(14)

(224)

(103)

Net income (loss)

$60

$99

$322

$(1)

$511

$188

Less: Net income attributable to non-controlling interest

0

1

1

1

2

1

Net income (loss) attributable to controlling interest

$60

$98

$320

$(2)

$509

$187

Earnings (loss) per share^{2, 3)}

$0.68

$1.12

$3.65

$(0.02)

5.81

$2.14

1) Including Corporate and other sales. 2) Assuming dilution when applicable and net of treasury shares. 3) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from EPS calculation.

Financial Report July – September 2021

Sep 30

Jun 30

Mar 31

Dec 31

Sep 30

(Dollars in millions, unaudited)

2021

2021

2021

2020

2020

Assets

Cash & cash equivalents

$903

$893

$1,254

$1,178

$1,477

Receivables, net

1,575

1,719

1,846

1,822

1,616

Inventories, net

922

901

856

798

714

Prepaid expenses

242

230

183

164

179

Other current assets

68

60

260

307

52

Total current assets

$3,710

$3,804

$4,399

$4,269

$4,037

Property, plant & equipment, net

1,813

1,833

1,810

1,869

1,779

Operating leases right-of-use assets

123

133

137

141

137

Goodwill

1,389

1,393

1,392

1,398

1,390

Intangible assets, net

9

11

14

14

15

Investments and other non-current assets

467

462

457

466

476

Total assets

$7,511

$7,636

$8,210

$8,157

$7,833

Liabilities and equity

Short-term debt¹⁾

$364

$363

$291

$302

$1,026

Accounts payable

1,076

1,125

1,215

1,254

912

Accrued expenses

1,096

1,066

1,323

1,270

1,011

Operating lease liabilities - current

38

39

38

37

36

Other current liabilities

237

260

321

284

237

Total current liabilities

$2,811

$2,852

$3,188

$3,147

$3,221

Long-term debt¹⁾

1,687

1,712

2,039

2,110

2,007

Pension liability

231

239

239

248

239

Operating lease liabilities - non-current

85

94

100

103

102

Other non-current liabilities

125

125

123

126

151

Total non-current liabilities

$2,127

$2,170

$2,501

$2,587

$2,499

Total parent shareholders’ equity

2,558

2,600

2,507

2,409

2,100

Non-controlling interest

15

15

14

14

14

Total equity

$2,573

$2,615

$2,521

$2,423

$2,113

Total liabilities and equity

$7,511

$7,636

$8,210

$8,157

$7,833

1) As of September 30, 2020, $600 million of the revolving credit facility loan was classified as short-term debt since it was repaid on October 2, 2020.

Financial Report July – September 2021

Third quarter

First 9 months

Latest 12

Full Year

(Dollars in millions, unaudited)

2021

2020

2021

2020

months

2020

Net income (loss)

$60

$99

$322

$(1)

$511

$188

Depreciation and amortization

98

93

297

268

400

371

Other, net

(5)

23

(3)

(51)

61

13

Changes in operating working capital, net

35

138

(179)

163

(65)

277

Net cash provided by operating activities

$188

$352

$437

$380

$906

$849

Expenditures for property, plant and equipment

(113)

(78)

(303)

(232)

(415)

(344)

Proceeds from sale of property, plant and equipment

1

1

3

3

3

4

Net cash used in investing activities

$(112)

$(76)

$(301)

$(229)

$(412)

$(340)

Net cash before financing¹⁾

$77

$276

$136

$152

$494

$509

Increase (decrease) in short term debt

14

(56)

(278)

(198)

(320)

(240)

Repayment of long-term debt

–

–

–

–

(723)

(723)

Increase (decrease) long-term debt

(14)

0

(1)

1,091

86

1,177

Dividends paid

(54)

–

(109)

(54)

(109)

(54)

Common stock options exercised

0

0

2

0

3

1

Dividend paid to non-controlling interests

(1)

(1)

(1)

(1)

(2)

(1)

Net cash (used in) provided by financing activities

$(56)

$(57)

$(386)

$838

$(1,063)

$160

Effect of exchange rate changes on cash

(10)

34

(25)

42

(4)

64

Increase in cash and cash equivalents

$11

$253

$(275)

$1,032

$(573)

$733

Cash and cash equivalents at period-start

893

1,223

1,178

445

1,477

445

Cash and cash equivalents at period-end

$903

$1,477

$903

$1,477

$903

$1,178

1) Non-U.S. GAAP measure comprised of "Net cash provided by operating activities" and "Net cash used in investing activities". See reconciliation table.

Financial Report July – September 2021

Sep 30

Jun 30

Mar 31

Dec 31

Sep 30

(Dollars in millions)

2021

2021

2021

2020

2020

Receivables, net

$1,575

$1,719

$1,846

$1,822

$1,616

Inventories, net

$922

$901

$856

$798

$714

Accounts payable

$(1,076)

$(1,125)

$(1,215)

$(1,254)

$(912)

Trade Working capital

$1,421

$1,495

$1,487

$1,366

$1,418

Financial Report July – September 2021

Sep 30

Jun 30

Mar 31

Dec 31

Sep 30

(Dollars in millions)

2021

2021

2021

2020

2020

Short-term debt

$364

$363

$291

$302

$1,026

Long-term debt

1,687

1,712

2,039

2,110

2,007

Total debt

$2,051

$2,075

$2,330

$2,411

$3,033

Cash & cash equivalents

(903)

(893)

(1,254)

(1,178)

(1,477)

Debt issuance cost/Debt-related derivatives, net

18

18

39

(19)

17

Net debt

$1,165

$1,200

$1,115

$1,214

$1,573

Dec 31

Dec 31

Dec 31

Dec 31

(Dollars in millions)

2019

2018

2017

2016

Short-term debt

$368

$621

$20

$216

Long-term debt

1,726

1,609

1,311

1,313

Total debt

$2,094

$2,230

$1,330

$1,529

Cash & cash equivalents

(445)

(616)

(960)

(1,227)

Debt issuance cost/Debt-related derivatives, net

0

5

(3)

(3)

Net debt

$1,650

$1,619

$368

$299

Financial Report July – September 2021

Sep 30

Dec 31

Sep 30

(Dollars in millions)

2021

2020

2020

Net debt¹⁾

$1,165

$1,214

$1,573

Pension liabilities

231

248

239

Debt per the Policy

$1,396

$1,462

$1,812

Net income²⁾

$511

$188

$155

Income taxes²⁾

224

103

68

Interest expense, net^{2, 3)}

62

68

66

Other non-operating items, net²⁾

14

25

17

Income from equity method investments²⁾

(3)

(2)

(1)

Depreciation and amortization of intangibles²⁾

400

371

359

Costs for capacity alignments and antitrust related matters²⁾

10

99

108

EBITDA per the Policy (Adjusted EBITDA)

$1,217

$852

$771

Leverage ratio

1.1

1.7

2.4

1) Short- and long-term debt less cash and cash equivalents and debt-related derivatives. 2) Latest 12 months. 3) Interest expense including cost for extinguishment of debt, if any, less interest income.

Financial Report July – September 2021

Third quarter

First 9 months

Latest 12

Full Year

(Dollars in millions)

2021

2020

2021

2020

months

2020

Net income (loss)

$60

$99

$322

$(1)

$511

$188

Changes in operating working capital

35

138

(179)

163

(65)

277

Depreciation and amortization

98

93

297

268

400

371

Other, net

(5)

23

(3)

(51)

61

13

Operating cash flow

$188

$352

$437

$380

$906

$849

Capital expenditure, net

(112)

(76)

(301)

(229)

(412)

(340)

Free cash flow¹⁾

$77

$276

$136

$152

$494

$509

Net cash before financing

$77

$276

$136

$152

$494

$509

Cash conversion²⁾

128%

279%

42.3%

n/a

96.7%

270%

1) Operating cash flow less Capital expenditures, net. 2) Free cash flow relative to Net income.

Full year

Full year

Full year

Full year

(Dollars in millions)

2019

2018¹⁾

2017¹⁾

2016¹⁾

Net income

$463

$184

$303

$562

Changes in operating assets and liabilities

47

(229)

(0)

(78)

Depreciation and amortization

351

397

426

383

Goodwill impairment charges

–

–

234

–

Other, net⁴⁾

(220)

239

(27)

2

Operating cash flow

$641

$591

$936

$868

EC antitrust payment

(203)

–

–

–

Operating cash flow excl antitrust

$844

$591

$936

$868

Capital expenditure, net

(476)

(555)

(570)

(499)

Free cash flow²⁾

$165

$36

$366

$370

Free cash flow excl antitrust payment⁵⁾

$368

$36

$366

$370

Acquisitions of businesses and other, net

-

(73)

(128)

(227)

Net cash before financing

$165

$(37)

$239

$142

Cash conversion³⁾

35.6%

19.5%

121%

65.8%

Cash conversion excl antitrust⁶⁾

79.4%

19.5%

121%

65.8%

1) Including Discontinued Operations. 2) Operating cash flow less Capital expenditures, net. 3) Free cash flow relative to Net income. 4) Including EC antitrust non-cash provision 2018 and EC antitrust payment 2019. 5) For 2019, Operating cashflow excluding EC antitrust payment less Capital expenditures, net. 6) For 2019, Free cash flow excluding EC antitrust payment relative to Net income.

Financial Report July – September 2021

Third quarter  2021

Third quarter  2020

(Dollars in millions, except per share data)

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Operating income

$99

$4

$103

$175

$31

$206

Operating margin

5.4%

0.2%

5.6%

8.6%

1.5%

10.1%

Income before taxes

$87

$4

$91

$149

$31

$180

Net income attributable to controlling interest

$60

$4

$64

$98

$31

$129

Return on capital employed²⁾

10.5%

0.4%

10.9%

18.7%

3.0%

21.7%

Return on total equity³⁾

9.3%

0.6%

9.9%

19.4%

5.3%

24.7%

Earnings per share^{4, 5)}

$0.68

$0.05

$0.73

$1.12

$0.36

$1.48

1) Costs for capacity alignment and in 2020 antitrust related matters. 2) Annualized operating income and income from equity method investments, relative to average capital employed. 3) Annualized income relative to average total equity. 4) Assuming dilution and net of treasury shares. 5) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from the EPS calculation.

First 9 months 2021

First 9 months 2020

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Operating income

$500

$6

$506

$75

$95

$170

Operating margin

8.2%

0.1%

8.3%

1.5%

2.0%

3.5%

Income before taxes

$456

$6

$462

$13

$95

$108

Net income (loss) attributable to controlling interest

$320

$6

$326

$(2)

$85

$83

Capital employed

$3,738

$6

$3,744

$3,686

$85

$3,771

Return on capital employed²⁾

18.1%

0.2%

18.3%

2.7%

3.4%

6.1%

Return on total equity³⁾

16.9%

0.3%

17.2%

0.0%

5.4%

5.4%

Earnings (loss) per share^{4, 5)}

$3.65

$0.06

$3.72

$(0.02)

$0.97

$0.95

Total parent shareholders' equity per share

$29.25

$0.06

$29.31

$24.05

$0.97

$25.02

1) Costs for capacity alignment and in 2020 antitrust related matters. 2) Annualized operating income and income from equity method investments, relative to average capital employed. 3) Annualized income relative to average total equity. 4) Assuming dilution when applicable and net of treasury shares. 5) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from the EPS calculation.

Latest 12 months

Full year 2020

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Operating income

$807

$10

$818

$382

$99

$482

Operating margin

9.4%

0.1%

9.5%

5.1%

1.4%

6.5%

1) Costs for capacity alignment and in 2020 antitrust related matters.

Full year 2019

Full year 2018

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Operating income

$726

$49

$774

$686

$222

$908

Operating margin

8.5%

0.6%

9.1%

7.9%

2.6%

10.5%

1) Costs for capacity alignment and antitrust related matters and separation of our business segments.

Financial Report July – September 2021

Full year 2017

Full year 2016

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Reported
U.S. GAAP

Adjust-ments¹⁾

Non-U.S.
GAAP

Operating income

$860

$40

$899

$831

$35

$866

Operating margin

10.6%

0.5%

11.1%

10.5%

0.4%

10.9%

1) Costs for capacity alignment and antitrust related matters.

Items included in Non-U.S. GAAP adjustments

Third quarter  2021

Third quarter  2020

Adjustment
Million

Adjustment
Per share

Adjustment
Million

Adjustment
Per share

Capacity alignment

$4

$0.05

$31

$0.36

Antitrust related matters

-

-

$0

$0.00

Total adjustments to operating income

$4

$0.05

$31

$0.36

Tax on non-U.S. GAAP adjustments¹⁾

$0

$0.00

$(0)

$(0.00)

Total adjustments to net income

$4

$0.05

$31

$0.36

Average number of shares outstanding - diluted²⁾

87.6

87.4

Annualized adjustment on return on capital employed

$17

$124

Adjustment return on capital employed

0.4%

3.0%

Annualized adjustment on return on total equity

$18

$124

Adjustment return on total equity

0.6%

5.3%

1) The tax is calculated based on the tax laws in the respective jurisdiction(s) of the adjustment(s). 2) Annualized average number of outstanding shares

Items included in Non-GAAP adjustments

First 9 months 2021

First 9 months 2020

Adjustment
Million

Adjustment
Per share

Adjustment
Million

Adjustment
Per share

Capacity alignment

$6

$0.06

$94

$1.08

Antitrust related matters

-

-

$0

$0.01

Total adjustments to operating income

$6

$0.06

$95

$1.09

Tax on non-U.S. GAAP adjustments¹⁾

$(0)

$(0.00)

$(10)

$(0.12)

Total adjustments to net income

$6

$0.06

$85

$0.97

Average number of shares outstanding - diluted²⁾

87.6

87.4

Annualized adjustment on Return on capital employed

$8

$126

Adjustment Return on capital employed

0.2%

3.4%

Annualized adjustment on Return on total equity

$7

$113

Adjustment return on total equity

0.3%

5.4%

1) The tax is calculated based on the tax laws in the respective jurisdiction(s) of the adjustment(s). 2) Annualized average number of outstanding shares

Financial Report July – September 2021

(Dollars in millions, unaudited)

2020

2019

2018

2017

2016

Sales and Income

Net sales

$7,447

$8,548

$8,678

$8,137

$7,922

Airbag sales¹⁾

4,824

5,676

5,699

5,342

5,256

Seatbelt sales

2,623

2,871

2,980

2,794

2,665

Operating income

382

726

686

860

831

Net income attributable to controlling interest

187

462

376

586

558

Earnings per share (US$) – basic²⁾

2.14

5.29

4.32

6.70

6.33

Earnings per share (US$) – assuming dilution^{2, 3)}

2.14

5.29

4.31

6.68

6.32

Gross margin⁴⁾

16.7%

18.5%

19.7%

20.6%

20.6%

R,D&E net in relation to sales

(5.0)%

(4.7)%

(4.8)%

(4.6)%

(4.5)%

S,G &A net in relation to sales

(5.2)%

(4.7)%

(4.5)%

(5.0)%

(5.0)%

Operating margin⁵⁾

5.1%

8.5%

7.9%

10.6%

10.5%

Adjusted operating margin^{6, 7)}

6.5%

9.1%

10.5%

11.1%

10.9%

Balance Sheet

Trade working capital⁸⁾

1,366

1,417

1,396

1,444

1,245

Trade working capital in relation to sales⁹⁾

13.6%

16.2%

15.9%

16.7%

15.7%

Receivables outstanding in relation to sales¹⁰⁾

18.1%

18.6%

19.0%

19.6%

19.1%

Inventory outstanding in relation to sales¹¹⁾

7.9%

8.5%

8.6%

8.2%

7.7%

Payables outstanding in relation to sales¹²⁾

12.5%

10.8%

11.7%

11.1%

11.1%

Total equity

2,423

2,122

1,897

4,169

3,926

Total parent shareholders’ equity per share (US$)

27.56

24.19

21.63

46.38

41.69

Current assets excluding cash

3,091

2,557

2,670

2,598

2,269

Property, plant and equipment, net

1,869

1,816

1,690

1,609

1,329

Intangible assets (primarily goodwill)

1,412

1,410

1,423

1,440

1,430

Capital employed

3,637

3,772

3,516

4,538

4,225

Net debt⁷⁾

1,214

1,650

1,619

368

299

Total assets

8,157

6,771

6,722

6,947

6,565

Long-term debt

2,110

1,726

1,609

1,311

1,313

Return on capital employed^{13, 14)}

10%

20%

17%

n/a

n/a

Return on total equity^{14, 15)}

9%

23%

13%

n/a

n/a

Total equity ratio

30%

31%

28%

49%

48%

Cash flow and other data

Operating Cash flow¹⁶⁾

849

641

591

936

868

Depreciation and amortization¹⁶⁾

371

351

397

426

383

Capital expenditures, net¹⁶⁾

340

476

555

570

499

Capital expenditures, net in relation to sales¹⁶⁾

4.6%

5.6%

5.7%

5.5%

4.9%

Free Cash flow^{7, 16, 17)}

509

165

36

366

369

Cash conversion^{7, 16, 18)}

270%

35.6%

19.5%

121%

65.7%

Direct shareholder return^{16, 19)}

54

217

214

366

203

Cash dividends paid per share (US$)

0.62

2.48

2.46

2.38

2.30

Number of shares outstanding (millions)²⁰⁾

87.4

87.2

87.1

87.0

88.2

Number of employees, December 31

61,000

58,900

57,700

56,700

55,800

1) Including steering wheels, inflators and initiators. 2) Participating share awards with right to receive dividend equivalents are (under the two-class method) excluded from the EPS calculation. 3) Assuming dilution and net of treasury shares. 4) Gross profit relative to sales. 5) Operating income relative to sales. 6) Excluding costs for capacity alignment, antitrust related matters and separation of our business segments. 7) Non-US GAAP measure, for reconciliation see tables above. 8) Outstanding receivables and outstanding inventory less outstanding payables. 9) Outstanding receivables and outstanding inventory less outstanding payables relative to annualized fourth quarter sales. 10) Outstanding receivables relative to annualized fourth quarter sales. 11) Outstanding inventory relative to annualized fourth quarter sales. 12) Outstanding payables relative to annualized fourth quarter sales. 13) Operating income and income from equity method investments, relative to average capital employed. 14) The Company has decided not to recalculate prior periods since the distribution of Veoneer had a significant impact on total equity and capital employed making the comparison less meaningful. 15) Income relative to average total equity. 16) Including Discontinued Operations. 17) Operating cash flow less Capital expenditures, net. 18) Free cash flow relative to Net income. 19) Dividends paid and Shares repurchased. 20) At year end, excluding dilution and net of treasury shares.