Slide 1: Volvo Group Third quarter 2014
Volvo Group Third quarter 2014 OLOF PERSSON, CEO Volvo Group Headquarters
Slide 2: Improved earnings in a mixed economic environment
VOLVO GROUP NET SALES OPERATING INCOME* Improved earnings in a mixed SEK bn SEK bn economic environment 67 2.9 65 2.5 • Slow global economic recovery • Structural cost reductions clearly Q3-13 Q3-14 Q3-13 Q3-14 visible in the result TRUCK ORDERS & DELIVERIES • New initiatives for further cost Units,
Slide 3: Trucks Europe: Europe moving sideways
ORDERS & DELIVERIES TRUCKS EUROPE Book to bill: Q3 104% Europe moving sideways – increased uncertainty 17’ 16’ • Increased uncertainty in European demand Orders Deliveries - Economic development in Europe - Development in Russia/Eastern Europe Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 • Good reception of the new V
Slide 4: Trucks North America: Good momentum
ORDERS & DELIVERIES TRUCKS NORTH AMERICA Book to bill: Q3 127% Good momentum 18’ 14’ • Strong market continues Orders Deliveries • Improved prize realization & customer mix Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 • Success for integrated drivelines - AMT now standard on Mack highway TOTAL NA MARKET 2013: 236’ tr
Slide 5: Trucks South America: Slow demand across the continent
ORDERS & DELIVERIES TRUCKS SOUTH AMERICA Book to bill: Q3 93% Slow demand across the continent 5’ • Weaker economies due to lower Orders Deliveries commodity prices & weak mining Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 • Industry overcapacity and elevated inventories resulting in pricing pressure TOTAL MARKET, B
Slide 6: Trucks Asia Pacific: Mixed market development
ORDERS & DELIVERIES* TRUCKS ASIA PACIFIC Book to bill: Q3 103% Mixed market development 14’ Orders Deliveries • Continued good demand in Japan from Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 infrastructure investments • Slow demand in South East Asia MARKET OUTLOOK MD & HD • Recovering demand in India Forecast: • M
Slide 7: Volvo Construction Equipment: Accelerated decline in China
ORDERS & DELIVERIES VOLVO CONSTRUCTION EQUIPMENT Book to bill Volvo: Q3 88% Accelerated decline in China – production cuts in Q4 13’ 12’ • Total market in China continued the Orders Deliveries rapid decline, deliveries declined by 38% in Q3 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 • Good demand in North America a
Slide 8: Buses and Volvo Penta
BUSES VOLVO PENTA • Market demand continue at low levels in both marine- and industrial engines • Increased uncertainty in Europe – tenders • Continued success in Marine segment delayed thanks to innovation – capturing new • Improving demand in North America customers • Launch of Volvo 7900 Electric
Slide 9: Good growth in North America partly offset by decline in South America and Asia
VOLVO GROUP Good growth in North America partly offset by decline in South America and Asia NET SALES SEK bn +3.8 -1.0 67.2 -0.8 -0.3 +0.7 64.9 Q3 2013 Europe North South Asia Other Q3 2014 America America markets Volvo Group Headquarters Third quarter 2014 9
Slide 10: Volvo Group - Jan Gurander, CFO
Volvo Group Third quarter 2014 JAN GURANDER, CFO Volvo Group Headquarters Third quarter 2014 10
Slide 11: Improvements in all Business areas
VOLVO GROUP Improvements in all Business areas OPERATING INCOME* SEK M FX impact: + 485 M +125 +88 + Trucks +152 +214 2,908 + Buses +300 2,502 -472 + Volvo CE + Volvo Penta + Customer Finance - Corporate & other - EPA litigation 422 M Volvo Group Headquarters * Excluding restructuring charges Third
Slide 12: Good earnings improvement from increased traction in cost savings
VOLVO GROUP Good earnings improvement from increased traction in cost savings OPERATING INCOME* SEK M FX impact: +485 M + Price realization on new 2,908 Volvo truck ranges +322 +80 2,502 +247 + Lower selling & admin +201 -92 +363 expenses -422 + North American trucks -293 + Lower cash R&D spending +
Slide 13: Trucks: Earnings improvement but still not on targeted level
TRUCKS Earnings improvement – but still not on targeted level SALES TREND OPERATING INCOME* OPERATING MARGIN* SEK bn SEK bn % 12 months 189 bn 12 months 9.1 bn 12 months 4.8% Currency: + 353 M R&D am/cap: - 195 M 44 45 43 2.2 5.4% 4.9% 2.4 4.4% 1.9 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Slide 14: Trucks: Price realization and NA improvements offset by South America
TRUCKS Price realization on Volvo range and improvements in NA partly offset by development in South America OPERATING INCOME* + Price realization on new Volvo ranges OPERATING INCOME* SEK M + North America, improved margins & SEK M volume 2,193 + Aftermarket 1,893 + Reduced operating expenses + Cur
Slide 15: CE: Sales flat, market headwind accelerating
VOLVO CE Sales flat, adjusted for currency – Market headwind accelerating SALES TREND OPERATING INCOME* OPERATING MARGIN* SEK bn SEK M % 12 months 54 bn 12 months 2.3 bn 12 months 4.3% Currency: + 125 M 12 13 13 4.5% 4.0% 5.1% 496 648 602 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q
Slide 16: CE: Earnings improvement in Q3, lower capacity utilization in Q4
VOLVO CE Earnings improvement in Q3 – lower capacity utilization in Q4 OPERATING INCOME* OPERATING INCOME* SEK M SEK M + 125 M in currency effect + Positive product mix in Europe - Lower volumes and margins in China 648 496 - Lower industrial capacity utilization - Capital gain from divestment of de
Slide 17: Buses and Volvo Penta
BUSES VOLVO PENTA SALES TREND SALES TREND SEK bn 12 months 18 bn SEK bn 12 months 8 bn 3.7 4.6 2.0 4.1 1.7 1.8 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 OPERATING INCOME* OPERATING INCOME* SEK M 12 months 206 M SEK M 12 months 710 M Currency: +63 M Currency: +65 M 50 253 144 165 -64 -164
Slide 18: Customer Finance: Strong new business volume
CUSTOMER FINANCE Strong new business volume NEW FINANCING OPERATING INCOME* ROE SEK bn SEK M 12 months, % 12 months 53.5 bn 12 months 1,641 M 13.6 452 11.1 11.1 327 12.6% 11.8% 384 10.9% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Volvo Group Headquarters * Exclu
Slide 19: Positive cash flow trend and reduced investments
VOLVO GROUP Positive cash flow trend and reduced investments OPERATING CASH FLOW* INVESTMENTS IN PPE* CASH-FLOW EFFECT FROM SEK bn, SEK bn, CHANGES IN WORKING CAPITAL* 12-months SEK 6.2 bn 12-months SEK 6.1 bn SEK bn +2.7 2.2 2.1 0.9 1.4 -0.1 -0.1 -1.5 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 -2.9 -1.9 Total chan
Slide 20: Reduction of white-collar employees and consultants according to plan
VOLVO GROUP Reduction of white-collar employees and consultants according to plan WHITE COLLAR EMPLOYEES & CONSULTANTS* Reduction target of 4,400. The majority to be implemented in 2014 57,675 2,136 net white collar reduction, including consultants, achieved group wide up until Q3 2014 of which
Slide 21: Structural cost reductions clearly visible in the result
VOLVO GROUP Structural cost reductions clearly visible in the result SELLING EXPENSES ADMIN EXPENSES CASH R&D EXPENSES REALIZED SAVINGS SEK bn, 12-months 27.8 SEK bn, 12-months 5.5 SEK bn, % 12-months 15.4 2014 VS 2013 SEK M 6.5 6.8 6.5 3.9 3.5 1,614 3.3 1.3 1.5 1.1 770 563 281 Q3Q4Q1Q2Q3Q4Q1Q2Q3 Q3
Slide 22: Transforming the Group to realize our full potential
15 months to go VOLVO GROUP Transforming the Group to realize our full potential 1999-2011 2012-2015 2016 ACQUISITION-DRIVEN TRANSFORMATION INCREASED PROFITABILITY GROWTH 2012 Reorganization & strategy 2013 Extensive product renewal 2014 Drive organic growth and execute efficiency program 2015 Del
Slide 23: Key decisions - under execution
15 Key decisions – under execution months to go Overall efficiency Industrial optimization Reduction of 4,400 white-collar employees & consultants Optimize European industrial footprint - HD assembly lines 6→5 R&D reduction - Cab assembly from Umeå to Gothenburg, Sweden - MD truck assemb
Slide 24: New structural cost reduction activities added
15 months to go VOLVO GROUP New structural cost reduction activities added Initiative Key activities Further cost reduction activities in – Right size cost structure Construction equipment – Address product profitability Reorganization of sales and marketing – One joint Sales & Marketing organizatio
Slide 25: Strategic program 2013-2015 - changed format for follow-up
15 months to go VOLVO GROUP Strategic program 2013-2015 – changed format for follow-up ONGOING PROFIT Old format of follow-up IMPROVEMENT PROGRAM • Trucks focus • Market/mix/volume dependent FOCUS ON STRUCTURAL COST • Increase gross profit margin • Progress difficult REDUCTION • Reduce standard cost
Slide 26: Strategic program 2013-2015 - increased scope
15 months to go VOLVO GROUP Strategic program 2013-2015 – increased scope NEW SCOPE OF STRATEGIC NEW INITIATIVES PROGRAM 2013-2015 3.5 10 bn STRATEGIC PROGRAM 2013-2015 ONGOING STRUCTURAL COST REDUCTION INITIATIVES 6.5 STRUCTURAL COST TO BE REDUCED BY 10 BN – IMPLEMENTED BY END 2015 WITH FULL-YEAR E
Slide 27: Structural cost to be reduced by 10 bn by end 2015
15 months to go VOLVO GROUP Structural cost to be reduced by 10 bn – implemented by end 2015 with full-year effect in 2016 SEK bn Targeted reduction 2012 2013 Q3 2014* 2016 vs 2012 Structural reduction in Gross Income - -0.7 Cash R&D 16.9 15.9 15.4 Selling expenses 27.9 28.5 27.8 Admin expenses 5.6
Slide 28: Third quarter summary
VOLVO GROUP Third quarter summary POSITIVE FACTORS NET SALES Good growth and improved profitability in North America SEK bn 12 months 282 bn As planned, increased momentum in cost savings 65 67 Successful new Volvo truck ranges Positive cash flow trend NEGATIVE FACTORS Q3 Q4 Q1 Q2 Q3 Accel
Slide 29: VOLVO
VOLVO