Autoliv Inc. ( ALV ) shares are trading lower after the company reported worse-than-expected second-quarter FY24 earnings and lowered the outlook.

The company reported a second-quarter FY24 sales decline of 1.1% year-on-year to $2.605 billion, missing the analyst consensus estimate of $2.74 billion.

The company said it underperformed in the Americas and China, mainly due to lower light vehicle production with certain key customers, as a consequence of weaker sales and inventory reductions.

Adjusted operating margin for the quarter was 8.5% versus 8% last year. Adjusted operating income increased 4.4% to $221 million.

Return on capital employed expanded to 1,150 basis points to 21%. 

Gross profit for the quarter increased 6.2% Y/Y to $475 million with a gross margin of 18.2%.

“We remain on track with our strategic and structural initiatives to sustainably strengthen our footprint and operations. However, light vehicle production with certain key customers following weaker sales and inventory adjustments were lower than expected in the quarter, especially in June. The lower than expected sales impacted our profitability with an operating leverage at the high end of our normal 20%-30% range,” said President and CEO Mikael Bratt.

“It is encouraging that customer production plans for the third quarter are normalizing, indicating that the June weakness should be temporary.”

Adjusted EPS of $1.87 missed the analyst consensus estimate of $2.23.

Operating cash flow totaled $340 million for the quarter, with a free cash flow of $194 million. The company held cash and equivalents of $408 million as of June-end.

Net debt at the end of the second quarter amounted to $1.58 billion.

Outlook: Autoliv ( ALV ) lowered its FY24 organic sales growth outlook from 5% to around 2%.

The company also lowered adjusted operating margin guidance from 10.5% to around 9.5% – 10%. Autoliv ( ALV ) expects $1.1 billion in operating cash flow.

Price Action: ALV shares are trading lower by 7.52% at $100.42 during the pre-market session on Friday.