But then we have to see also then how the peso develop here and others.Emmanuel Rosner Okay. And then I was hoping to get a little bit more color from you on the characterization of operating conditions in Europe. I think you’ve qualified them as still challenging. Obviously, latest IHS suggests that at least in absolute volume terms, things sort of like play that’s meaningfully better than maybe expected just sort of like a few months ago at the start of the quarter. So maybe quite a bit more volume than expected. Can you just maybe just describe – I understand the inflation piece. Just curious about what you’re seeing in terms of the choppiness of schedules and the sequential improvement in volume?Mikael Bratt Yes, as we said here, I mean, [indiscernible] I expect 300,000 vehicles more increase here.
We are maybe under more cautious side there. And the reason for that is we continue to see some volatility here. It has improved, but it’s far from over and behind us here. So that is still a factor. And of course, that in combination with the inflationary environment and challenges also on the labor side here, it is operate here, but we are moving in the right direction. But I would say the overall environment has some way to go before we are out on the other side.Emmanuel Rosner Okay, thank you. Operator We’re now going to proceed with our next question. And the questions come from the line of Rod Lache from Wolfe Research. Please ask your question. Rod Lache Hello everybody. Firstly, the quarter itself benefited from stronger-than-expected production and obviously stronger-than-expected revenue.
Can you talk about whether that production part itself actually converted at its historical rate? I’m not talking about the new business side. And if it did, what were the negative variances versus what you expected at the start of the year? Is it largely currency? Or are there any other developments that you would count as negatives?Fredrik Westin No, I mean, as we indicate, it’s not at the level that we would want it to be, the leverage ratio. And it’s – predominantly, it’s still the call of volatility and the impact that, that has on our ability to operate efficiently in our plants where we are – have issues to pull through at the historical leverage rates that we could – we will expect. But then on top of that, as you already mentioned, there is a significant contribution here from new launches, market share gains.
And of course, that does not have the same margin impact or leverage rate as just the floating with LVP. And that also then is a contributing factor to the somewhat lower leverage in the quarter.Rod Lache Okay. But relative to your expectations, you’re suggesting that it’s – it was a bit more volatile, it sounds like.Fredrik Westin No, I wouldn’t say it is more volatile than we had expected. I mean we had indicated around 5%. That’s where we come in. I think the top line is also very much or very close to our expectations. So at least for us, there are no big surprises in the quarter.Rod Lache Okay. Okay. Can you just give us a little bit more insight into the drivers of this margin improvement from the low 5s to the low double digits, which would be implied by your full year guidance?
It seemed that you would get there by late this year. How much of that is the internal savings that you anticipate? How much do you need to recover of costs that you’ve been absorbing?Fredrik Westin The factors are, I mean we still expect top line growth also from sequentially the quarter. So that will be a contributing factor. Then of course, the price adjustments that we are taking here to be able to negotiate and then come through with here starting in the second quarter. And then it’s – the third one is the stabilization component, which I already mentioned. It’s difficult to now give a split of those three, but those are the main factors here that we expect to contribute to the margin improvement sequentially.Rod Lache Have you defined the automations and digitization savings for this year?
And what your objectives are? It sounded like those are bigger than what you had originally planned two or three years ago.Fredrik Westin No, we haven’t given a specific number for that and not on a yearly basis here, but of course, that’s the support of our overall journey here towards the midterm targets. But I think for this year, it is really all about the work that we are doing now to negotiate price adjustments for the inflationary components and then continue with our strict cost control and improvement work here to support the leverage that we have discussed here before.And I mean, as we have guided for this year, we are then indicating two percentage points improvement basically around two percentage points improvement year-over-year.
And we are starting now the Q1 with two percentage point’s improvement, Q1 versus Q1. So that set us off to a good start for the full year in line with our plan and expectations.And as we have also said here, we expect a sequential improvement quarter-by-quarter similar to the way we saw it in 2022. And that, of course, that comes to, that 2023 is very much the same as 2022 in terms of inflationary pressure hitting us first then we are going through the price negotiations with our customers, and they are trickling in gradually here throughout the year, in combination with what is also a normal seasonality that we have the productivity coming through throughout the year while price down [indiscernible] is happening in the beginning of the year.And instead of price downs here, we are talking about the inflationary pressure.
But this analysis is the same.Rod Lache Right. Thank you.Operator We are now going to proceed with our next question. And the questions come from the line of Philipp Konig from Goldman Sachs. Please ask your question, your line is opened.Philipp Konig Yes, hi guys, and thanks for taking my questions. My first question is just on the SG&A which stepped up quite meaningfully in absolute terms compared to sort of the previous quarters. I know that you are top line and there is inflation in the system, but where there may be some agreements that you had including one time payments that sort of weighed on to your SG&A in the first quarter, or do you expect that to sort of remain in above 5% of sales in the coming quarters?And then my second question is just Mikael on the point that you just touched on earlier is that you mentioned sort of 2% ahead of last year is what you need to get to the guidance that you set up for the year.
If we sort of now think about the second quarter, you mentioned better leverage, obviously higher volumes and better recoveries. Is it fair to say that maybe in the second quarter we could see maybe an even better step up compared to the first quarter given that you should have quite a few tailwinds? Any color there? Pretty much appreciate it. Thank you.Mikael Bratt Thank you. Three questions. Maybe I start there on Q2 and Fredrik take the SG&A question there. I mean, as you know, we are not guiding by quarters here, but I think, what we are saying here is that you should expect the similar pattern as last year. And with the two percentage points improvement around two percentage points in the first quarter, which also sort translates throughout the year to get to the around 8.5 to 9.
And this is said here that in terms of, let’s call it [indiscernible] improvement here, it’s more geared towards the second half also I would say in line with how last year developed.So, I think that is as much commentary I can give regarding the sequential development on the quarters to come here in 2023.Fredrik Westin Yes, and on the SG&A question you can see from our headcount development that are indirect headcount is up around 4.5%. And that’s also the case on the SG&A side. And that is to support business here that has grown by 21% year-over-year. That’s one factor. Then of course, we have the inflation component also moving into our SG&A cost. It’s both on the labor side but also on the indirect spend. And then we had in this quarter maybe a somewhat higher project-related cost.
But for the future, our ambition is to also get the right leverage also on our support cost structure. Meaning that we aim to keep the SG&A as lean as possible. And then with the top line growth see a more favorable ratio going forward.Philipp Konig Thank you very much.Operator We are now going to proceed with our next question. And the questions come from the line of Hampus Engellau from Handelsbanken. Please ask your question.Hampus Engellau Thank you very much. It will be interesting if you guys could maybe give us a flavor on how the production at your customers been during the quarter – I mean your call of during the quarter, have they been lumpy or more stable? And how should you think about that going forward?And then on your outlook Mikael the 50% organic growth outlook, is that based on a more conservative number for Europe and the plus 7% that I just got to ask?
