STOCKHOLM - Sweden's Autoliv posted record second-quarter sales and profits on Thursday, but its shares eased as it forecast further profitability gains would be tough because of rising raw material prices.
The world's biggest maker of seat belts and air bags said pretax profits were up 23 percent at $135 million, against analysts' average forecasts of $122 million and up from $107.8 million in the same period the previous year.
Sales rose 16 percent to $1.6 billion, beating the company's own earlier estimates, analysts' forecast of $1.5 billion and $1.36 billion in the same period in 2003.
Sales to European customers were up 20 percent, despite flat light-vehicle production in the region. Sales in North America rose 2 percent.
"It is an excellent quarter, but they are saying that the third-quarter margins are going to be down and that the raw material prices are going to be a problem," said Max Warburton, analyst at Goldman Sachs.
The firm's operating margin in the second quarter was 9 percent, in line with the company's own forecasts. But the company warned of high raw material costs affecting future operating margins.
"Given the high spot prices for raw materials, it will become increasingly difficult to continue to improve operating margins compared to prior year's quarters," company said in a statement.
Chief Executive Lars Westerberg said higher raw material prices -- mainly steel -- would add about $6.0 million dollars to costs in both the third and fourth quarters.
Third-quarter sales would rise about 10 percent from a year earlier, the company said.
Autoliv, which makes about 80 percent of its sales in Europe and North America, has embarked on a cost-cutting program and has been shifting production to Tunisia and Mexico.
In May, it said it would switch more procurement to low-cost countries further to cut expenditure. Around half Autoliv's revenue is eaten up by procurement costs.