Volvo Ab Class A · OMXSTO:VOLV_A
Volvo Ab Class A — Investor Day (May 2018)
79 slides from Volvo Ab Class A's investor day presentation, May 17, 2018
Slide 1: Volvo Group Investor Day
Volvo Group Investor Day May 17, 2018
Slide 2: Agenda
AGENDA Growing demand for sustainable Martin Lundstedt, President and CEO transports and infrastructure Well invested with strong assets Martin Lundstedt, President and CEO to build on Improving financial performance Jan Gurander, Deputy CEO & CFO Improving operational performance Martin Lundstedt,
Slide 3: Growing demand for sustainable transports and infrastructure
Growing demand for sustainable transports and infrastructure Martin Lundstedt PRESIDENT AND CEO Volvo Group Investor Day 3 May 17, 2018
Slide 4: Growing demand for sustainable transports and infrastructure
Growing demand for sustainable transports and infrastructure Rapid global Rapid population urbanization growth Growth in Middle class e-commerce growth Sources: Volvo Group Rapid global population growth: http://esa.un.org/unpd/wpp/Publications/Files/World_Population_2015_Wallchart.pdf Rapid urbaniz
Slide 5: Efficiency and sustainability gap in emerging markets
Efficiency and sustainability gap in emerging markets LOGISTICS COSTS AS PERCENTAGE OF GDP 25% 20% 20% 18% 15% 15% 13% 11% 10% 9% 9% 8% 8% 7% 6% 5% 0% Denmark Sweden Norway USA Australia Germany South India Brazil China Russia Africa Source: Logistics Barometer 2016 South Africa Volvo Group Investor
Slide 6: Large improvement potential in the logistics systems
Large improvement potential in the logistics systems Used ~25% of the time over ~60% of total length theoretically 5-10% of total fuel consumed the life cycle available for more cargo is used to move goods ~7% of all accidents in Europe involve trucks: ~17% for fatal accidents Source: Mckinsey Volvo
Slide 7: Driving prosperity through transport solutions
Volvo Group mission Driving prosperity through transport solutions Volvo Group Investor Day 7 May 17, 2018
Slide 8: Well invested with strong assets to build on: the journey
Well invested with strong assets to build on THE JOURNEY Acquisition- Transformation Improving driven growth to close the gap performance Volvo Group Investor Day 8 May 17, 2018
Slide 9: Truck sales network and market shares 2017
Well invested with strong assets to build on TRUCK SALES NETWORK AND MARKET SHARES 2017 Sales and service points China North 615 EU 28 13.2% America North America South 25.5% 208 15.6% America Japan Europe 1452 India, MD 19.8% South Africa 57 South America 32.2% India 438 16.9% South Africa China 96
Slide 10: Volvo CE sales network and market shares 2017
Well invested with strong assets to build on VOLVO CE SALES NETWORK AND MARKET SHARES 2017 NORTH AMERICA EUROPE CHINA Sales and service points 27% 60% North 5% 230 America 11% 28% SDLG Excavators 4% South 92 America 7% 16% 18% Europe 483 ASIA SOUTH AMERICA AFRICA & OCEANIA 46% Africa & 65% 122 Ocean
Slide 11: Addressing a broad spectrum of customer segments
Well invested with strong assets to build on ADDRESSING A BROAD SPECTRUM OF CUSTOMER SEGMENTS Volvo Group
Slide 12: Segment and application excellence
Well invested with strong assets to build on SEGMENT AND APPLICATION EXCELLENCE Admin Repair & Fuel maintenance DISTRIBUTION France MINING Indonesia CONSTRUCTION US Vehicle LONG-HAULAGE Europe Driver Volvo Group Investor Day 12 May 17, 2018
Slide 13: Positioned to capture opportunities in China, India and beyond
Well invested with strong World truck market 2017 units assets to build on POSITIONED TO CAPTURE OPPORTUNITIES IN CHINA, INDIA AND BEYOND China: Dongfeng Commercial Vehicles India: VE Commercial Vehicles Growing demand for Volvo Trucks along with e-commerce trend in China Volvo CE leveraging
Slide 14: Our JVs are geared for profitable growth
Well invested with strong assets to build on OUR JV’S ARE GEARED FOR PROFITABLE GROWTH 2017 FY 2017 FY 2017 FY Position (China) No 4 Position (India) No 3 Position (WL China) No 2 Volume 172,100 units Volume 60,100 units Volume 26,000 units Sales SEK 49.6 bn Sales SEK 12.4 bn Sales SEK 10.5 bn Op. m
Slide 15: Common Architecture and Shared Technology system (CAST)
Well invested with strong assets to build on LEVERAGING 15 YEARS OF CREATING A COMMON ARCHITECTURE AND SHARED TECHNOLOGY SYSTEM (CAST) Volvo Group Investor Day 15 May 17, 2018
Slide 16: Key take aways
Well invested with strong assets to build on KEY TAKE AWAYS Strong customer base and rolling fleet Well performing sales and service networks Well invested industrial backbone Fifteen years of investments into CAST Segment and application excellence Scale where it matters People/talent
Slide 17: Improving financial performance
Improving financial performance Jan Gurander DEPUTY CEO AND CFO Volvo Group Investor Day 17 May 17, 2018
Slide 18: Targeting >10% operating margin over a business cycle
Improving financial performance TARGETING >10% OPERATING MARGIN OVER A BUSINESS CYCLE Adjusted operating margin, Adjusted return on capital, Volvo Group Industrial Operations % % 12 40 Adjusted Operating Margin, % 34.5% 10 Adjusted Operating Margin, 12MM, % 9.3% 30 8 6 20 4 10 2 0 0 Volvo Group Inve
Slide 19: R&D at ~5% to sales and capex down to depreciation
Improving financial performance R&D AT ~5% TO SALES AND CAPEX DOWN TO DEPRECIATION Group R&D Group capital expenditures (PPE) SEK bn SEK bn 20 7% 9 160% 18 8 140% 6% 16 7 120% 14 5% 6 12 100% 4% 4.5% 5 10 80% 8 3% 4 89% 60% 6 2% 3 4 2 40% 1% 2 1 20% 0 0% 0 0% 2013 2014 2015 2016 2017 2013 2014 2015
Slide 20: Strengthened financial position – net cash of SEK 27.5 bn
Improving financial performance STRENGTHENED FINANCIAL POSITION – NET CASH OF SEK 27.5 BN (excl. pensions) Operating cash flow (12MM), Financial position, excl. pensions Industrial Operations Industrial Operations SEK bn SEK bn 27.5 30 28.3 30 25 20 20 10 15 0 10 2013 2014 2015 2016 2017 Q1-2018 -10
Slide 21: Profitability per truck brand and region
Improving financial performance PROFITABILITY PER TRUCK BRAND AND REGION 2016 2017 NORTH AFRICA & SOUTH EUROPE ASIA WORLD AMERICA OCEANIA AMERICA 61% 15% 13% 11% TRUCKS 100% NET 46% 24% 17% 7% 6% 100% SALES Good performance Medium performance Lower performance Volvo Group Investor Day 21 May 17, 201
Slide 22: Profitability in Volvo CE well balanced
Improving financial performance PROFITABILITY IN VOLVO CE WELL BALANCED Net sales Operating income NORTH NORTH AMERICA AMERICA 18% 21% ASIA ASIA 38% 38% EUROPE EUROPE 35% 30% OTHER OTHER MARKETS MARKETS 9% 11% Volvo Group Investor Day 22 May 17, 2018
Slide 23: We continue to review performance and take action
Improving financial performance WE CONTINUE TO REVIEW PERFORMANCE AND TAKE ACTION Develop Operating Review income High frequency follow-ups Business segments Exit Products and variants Markets In-house/source Services Examples Shares in Deutz divested Volvo CE dealer divestment in the
Slide 24: Financial targets
Financial targets >10% Operating margin over a business cycle 12-15% RoE in Financial Services Net Industrial Operations, excluding pensions cash Volvo Group Investor Day 24 May 17, 2018
Slide 25: What we want to achieve
What we want to achieve IMPROVING PERFORMANCE AND INVESTING FOR THE FUTURE Gradual and Reduced Discipline Continuous consistent volatility in capital investments earnings in earnings and allocation/ in innovation and improvement cash flow investments new technologies Volvo Group Investor Day 25 May
Slide 26: Improving operational performance
Improving operational performance Martin Lundstedt PRESIDENT AND CEO Volvo Group Investor Day 26 May 17, 2018
Slide 27: Strategic priorities
Improving operational performance STRATEGIC PRIORITIES Reinforce Volvo as a global premium HD truck brand and regain position and 1 market shares of Renault Trucks, Mack and UD as regional high-end truck brands Capture Asia growth through JV’s and Group Trucks Asia in a separate value chain – 2 and
Slide 28: Reinforce Volvo as a global premium HD truck brand: North America
Reinforce Volvo as a global premium HD truck brand and 1 regain position and market shares of Renault Trucks, Mack and UD as regional high-end truck brands NORTH AMERICA New product line-up for Volvo and Mack Uptime excellence through connectivity Volvo VNL Good Financial Service operation N
Slide 29: Reinforce Volvo as a global premium HD truck brand: Renault Trucks
Reinforce Volvo as a global premium HD truck brand and 1 regain position and market shares of Renault Trucks, Mack and UD as regional high-end truck brands RENAULT TRUCKS New range with higher used truck values Improving network performance Critical mass in targeted markets Engagement for th
Slide 30: Reinforce Volvo as a global premium HD truck brand: UD Trucks
Reinforce Volvo as a global premium HD truck brand and 1 regain position and market shares of Renault Trucks, Mack and UD as regional high-end truck brands UD TRUCKS New and broader UD Quon range Driving retail excellence Critical mass in targeted markets Engagement for the brand Backbone
Slide 31: Capture Asia growth through JVs and Group Trucks Asia
Capture Asia growth through JV’s and Group Trucks Asia in a 2 separate value chain – and leverage in other emerging markets DFCV (Dongfeng) Strengthening the product portfolio Engine range preparation for CN6 Industrial footprint streamlining VECV (Eicher) Growing HD market shares in India a
Slide 32: Secure robust profitability through R&D, quality, purchasing and manufacturing
Secure robust profitability through leading R&D, quality, purchasing 4 and manufacturing operations using Volvo Production System Agility and flexibility in production volumes Common Architecture and Shared Technology Continuous introductions Quality Brand and regionalized Volvo Production System va
Slide 33: Untapped potential in existing population of 2.8 million vehicles
Establish brand specific sales operations with focus on 5 retail excellence and a growing service business UNTAPPED POTENTIAL IN EXISTING POPULATION OF 2.8 MILLION TRUCKS, BUSES AND MACHINES REVENUE PER OFFERING, ILLUSTRATIVE VOLVO TRUCKS, PARTS PER VEHICLE IN OPERATION, % Sweden ~200% UK Belgium Up
Slide 34: Untapped potential in existing population: service contracts and connected vehicles
Establish brand specific sales operations with focus on retail 5 excellence and a growing service business UNTAPPED POTENTIAL IN EXISTING POPULATION OF 2.8 MILLION TRUCKS, BUSES AND MACHINES SERVICE CONTRACT PORTFOLIO, NUMBER OF CONNECTED VOLVO TRUCKS EUROPE TRUCKS, BUSES AND MACHINES 150% Index 145
Slide 35: Leverage Group assets: Volvo CE
Leverage Group assets in our non-truck 6 Business Areas, creating additional profits, synergies and technology leadership Volvo CE *Adjustments, see note 7 in Q1 report: Volvo Group Q1 2017: No adjustments Investor Day Q1 2018: No adjustments 35 May 17, 2018
Slide 36: Leverage Group assets: Volvo Penta
Leverage Group assets in our non-truck 6 Business Areas, creating additional profits, synergies and technology leadership Volvo Penta NET SALES ADJUSTED OPERATING MARGIN* SEK bn 12 months 11.6 bn % 12 months 13.2% 3.1 15.6% 15.5% 16.2% 2.7 2.3 16Q1 16Q2 16Q3 16Q4 17Q1 17Q2 17Q3 17Q4 18Q1 Q116Q216Q31
Slide 37: Leverage Group assets: Volvo Buses
Leverage Group assets in our non-truck 6 Business Areas, creating additional profits, synergies and technology leadership Volvo Buses NET SALES & OPERATING MARGIN • Profitability focus SEK bn 30 10% • Improved commonality with Group 25 8% modular system (CAST) 20 6% • European leader in electric bus
Slide 38: Revitalize the Volvo Group culture
Revitalize the Volvo Group culture 7 WITH FOCUS ON CUSTOMER SUCCESS, TRUST, PASSION, CHANGE AND PERFORMANCE Clear leadership, entrepreneurship and profit & loss responsibility for each brand Those closest to the customer are empowered to make the right decisions More regionalized value-chain a
Slide 39: Strategic priorities
Improving operational performance STRATEGIC PRIORITIES Reinforce Volvo as a global premium HD truck brand and regain position and 1 market shares of Renault Trucks, Mack and UD as regional high-end truck brands Capture Asia growth through JV’s and Group Trucks Asia in a separate value chain – 2 and
Slide 40: Building a strong North American truck business
Building a strong North American truck business Dennis Slagle EVP VOLVO GROUP AND PRESIDENT MACK TRUCKS Volvo Group Investor Day 40 May 17, 2018
Slide 41: The foundation is in place
The foundation is in place Proprietary driveline Strengthened dealer Used trucks/ Uptime/connectivity New products penetration networks remarketing leadership Volvo Group Investor Day 41 May 17, 2018
Slide 42: Proprietary driveline penetration
Proprietary driveline penetration SERVICE BUSINESS FULLY ABSORBING SALES AND MARKETING COSTS Captive Captive Parts per Engines Transmissions Vehicle in for Volvo (AMT) Operation 100 94% 100 90% 90 80 80 132% 70 87% Volvo 60 60 50 I-Shift 40 40 36% 30 Mack mDRIVE Parts per VIO 20 20 10 (highway) 0 Tr
Slide 43: Strengthened dealer networks
Strengthened dealer networks CONTINUED INVESTMENT AND EXPANSION • 74 additional outlets since 2010 • USD 680 M+ in private investment • 55% increase in bay capacity • 124% more technicians • 65% increase in service capacity • 248% increase in master technicians • 60% more sales people Volvo Group In
Slide 44: New TEC dealership in Fontana, CA
Strengthened dealer networks NEW TEC DEALERSHIP IN FONTANA, CA 199,000 square feet on 14 acres USD 25 M investment 77 service bays Parking for more than 400 trucks Volvo Group Investor Day 44 May 17, 2018
Slide 45: Used trucks and remarketing
Used trucks and remarketing ARROW IS LARGEST USED TRUCK OPERATION IN THE U.S. • 18 locations, all makes • Builds dealer competence • Profitable through downturn • In-house financing optimizes retail values • Capacity to handle large trades • Concept expanding to Europe Volvo Group Investor Day 45 Ma
Slide 46: Uptime/Connectivity Leadership: Certified Uptime Centers
Uptime/Connectivity Leadership CERTIFIED UPTIME CENTERS – A SUCCESS STORY 143 Certified Uptime Centers • Reduced diagnostic times by an average of 70 % • Reduced repair times by an average of 21% • Increased shop efficiency by 24% • Reduced ‘check-in’ time by over 40 minutes Volvo Group Investor Day
Slide 47: Volvo remote programming and Mack over the air
Uptime/Connectivity Leadership VOLVO REMOTE PROGRAMMING AND MACK OVER THE AIR Updates performed through telematics: • Updated software for powertrain components • Revised vehicle parameters for duty cycle optimization Customers update based on their schedules Available on all 2018 model year Volvo a
Slide 48: Remote programming results since October 2017
Uptime/Connectivity Leadership VOLVO REMOTE PROGRAMMING AND MACK OVER THE AIR Since October 2017: Since October 2017: • 20 customers; • More 3,500 than 6,000 vehicles vehicles • Performed • Performedmore than nearly 600380 updates updates • Average 2323minutes • Average minutes • More • More than 50
Slide 49: The final pieces…
The final pieces… Volvo Group Investor Day 49 May 17, 2018
Slide 50: Leveraging Financial Services
Leveraging Financial Services Scott Rafkin PRESIDENT VOLVO FINANCIAL SERVICES Volvo Group Investor Day 50 May 17, 2018
Slide 51: Strong position to support >90% of Group sales
Strong position to support >90% of Group sales VFS • Over 1,400 employees • Offering financial solutions in 46 countries around the world • Serving all Volvo Group brands • Financing approximately 25% of Volvo Group products in markets served Market expansion (past 3 years) • India (owned) • South A
Slide 52: Good portfolio growth
Good portfolio growth Organic retail growth Dec-2017 Wholesale +40 SEK 132 bn growth +4 Geographic expansion +3 • +23 Group deliveries • +16 Capital cost/ inflation • 70% North America • +13 Penetration • 30% UK • - 12 Syndication • Baltics • India Dec-2010 • South Africa Cumulative productivity of
Slide 53: Supporting sales with profitable growth
Supporting sales with profitable growth 15,0% 12,0% 137 132 132 124 119 105 9,0% 6,0% 3,0% 0,0% 2013 2014 2015 2016 2017 2018 Q1 Operating Income SEK bn 1.5 1.7 2.0 2.1 2.2 0.6 Volvo Group Investor Day 53 May 17, 2018
Slide 54: Opportunities for improvement
Opportunities for improvement Underperforming markets Commercial effectiveness New markets Operational leverage Volvo Group Investor Day 54 May 17, 2018
Slide 55: Focus on growing services/solutions
Focus on growing services/solutions 88% OVERALL CUSTOMER SATISFACTION 85% REPURCHASE RATE Integration prior to point-of-sale Drive total offer sales approach 83% RECOMMEND VFS Create value for the Volvo Group Lifecycle management to increase loyalty Volvo Group Investor Day 55 May 17, 2018
Slide 56: Digital innovation to meet new demands and business models
Digital innovation to meet new demands and business models Artificial Emerging Blockchain Telematics Mobility Intelligence Payments • Identity management • Connected • Predictive analytics • WeChat (China) • zApps Fintech • Payments insurance • Customer service • Digital marketplace / partnership •
Slide 57: Leveraging Financial Services
Leveraging Financial Services Center of expertise for solution sales Vital to the customer’s experience and loyalty towards the Group Instrumental in providing solutions for changing customer demands and business models Continued focus on profitable growth and commercial performance Volvo Gr
Slide 58: Lead in technology
Lead in technology Lars Stenqvist CHIEF TECHNOLOGY OFFICER VOLVO GROUP Volvo Group Investor Day 58 May 17, 2018
Slide 59: New technologies transforming the transport system
New technologies transforming the transport system Volvo Group Investor Day 59 May 17, 2018
Slide 60: Balancing well-known and new technologies
Balancing well-known and new technologies Mack MP8 Turbo Volvo 13L Turbo Compound engine Compound engine Wave piston Volvo Group Mack Anthem Volvo VNL
Slide 61: New technologies transforming the transport system
New technologies transforming the transport system Volvo Group Investor Day 61 May 17, 2018
Slide 62: Common Architecture and Shared Technology
Common Architecture and Shared Technology SOFTWARE, ELECTRICS/ ELECTRONICS ARE KEY FOR NEW TECHNOLOGIES Volvo Group Investor Day 62 May 17, 2018
Slide 63: Electrification: competence and capabilities built over time
ELECTRIFICATION We have built competence and capabilities over time CONTINUOUS COMMERCIALIZATION OF FULLY ELECTRIC VEHICLES ONGOING Battery electric vehicles (BEV) Plug-in hybrid electric vehicles (PHEV) Hybrid electric vehicles (HEV) Volvo Group Investor Day 63 May 17, 2018
Slide 64: Electrification: meeting customers' demands in various regions
ELECTRIFICATION Meeting customers’ demands in various regions and segments Volvo FL - Electric Renault Trucks - Electric UD Quon Vision - Electric Volvo EX2 - Electric Volvo Group Volvo FE - Electric Mack LR Waste - Electric Articulated Volvo Bus - Electric Volvo LX1 - Electric
Slide 65: Electrification: modular system serving many segments
ELECTRIFICATION Modular system serving many segments and applications CITY AND DISTRIBUTION CONFINED AREAS REGIONAL AND LONG-HAUL ELECTRIC MODULAR PLATFORM – HARDWARE AND SOFTWARE HEV, PHEV, BEV Electrified powertrains Batteries Power electronics Charging components Electrified auxiliaries Future in
Slide 66: Five levels of automation
AUTOMATION Five levels of automation LEVELS 4-5 ARE THE TRUE GAME CHANGERS IN THE TRANSPORT INDUSTRY NO DRIVER NO ATTENTION Full Automation NO EYES High Automation NO HANDS Conditional Automation NO FEET Partial Automation Driver Assistance LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5 Volvo Group Investo
Slide 67: Automation: competence and capabilities built over time
AUTOMATION We have built competence and capabilities over time CORNER-STONES FOR AUTOMATION IN PLACE AS COMMERCIALIZED SOLUTIONS DYNAMIC STEERING AUTOMATED MANUAL TRANSMISSION Volvo Group Investor Day AUTOMATED 67 May 17, EMERGENCY 2018 BRAKE SYSTEM ADAPTIVE CRUISE CONTROL
Slide 68: Demonstrating our research and technology development
AUTOMATION We have built competence and capabilities over time DEMONSTRATING OUR RESEARCH AND TECHNOLOGY DEVELOPMENT Volvo Group Investor Day 68 May 17, 2018
Slide 69: Demonstrating our research and technology development
AUTOMATION We have built competence and capabilities over time DEMONSTRATING OUR RESEARCH AND TECHNOLOGY DEVELOPMENT Volvo Group Investor Day 69 May 17, 2018
Slide 70: Demonstrating our research and technology development
AUTOMATION We have built competence and capabilities over time DEMONSTRATING OUR RESEARCH AND TECHNOLOGY DEVELOPMENT Volvo Group
Slide 71: Demonstrating our research and technology development
AUTOMATION We have built competence and capabilities over time DEMONSTRATING OUR RESEARCH AND TECHNOLOGY DEVELOPMENT Volvo Group Investor Day 71 May 17, 2018
Slide 72: Demonstrating our research and technology development
AUTOMATION We have built competence and capabilities over time DEMONSTRATING OUR RESEARCH AND TECHNOLOGY DEVELOPMENT Volvo Group Investor Day 72 May 17, 2018
Slide 73: Automation: modular system serving many segments
AUTOMATION AUTOMA TION Modular system serving many segments and applications DRIVER SUPPORT SYSTEMS CONFINED AND SEMI-CONFINED PUBLIC / ON-ROAD VOLVO GROUP AUTOMATION PLATFORM – HARDWARE AND SOFTWARE V2X Cyber Fleet & Mission Redundant vehicle with Sensors Perception communication security managemen
Slide 74: Connected ecosystem enabling business opportunities
CONNECTIVITY Connected ecosystem is enabling CONNECTED SAFETY business opportunities here and now Example of enabled capabilities: Uptime services Vehicle automation Vehicle-to-infrastructure communication Vehicle-to-vehicle communication Volvo Group Investor Day 74 May 17, 2018
Slide 75: Highly efficient and integrated transport system
Highly efficient and integrated transport system Volvo HX2 - Autonomous electric hauler SAFE, SUSTAINABLE AND EFFICIENT Volvo FMX - Autonomous Volvo EX1 - Electric excavator Volvo Group Investor Day 75 May 17, 2018 Volvo LX1 - Hybrid wheel loader
Slide 76: Summary and Q&A
Summary and Q&A Martin Lundstedt PRESIDENT AND CEO Volvo Group Investor Day 76 May 17, 2018
Slide 77: Exciting times ahead
Exciting times ahead • Growing demand for sustainable transports and infrastructure • Our strategy serves our customers and other stakeholders well • Well positioned: • Strong assets • Well invested • Still potential with continuous improvements • Lead in technology and innovation • Growing solution
Slide 78: Questions and answers
QUESTIONS AND ANSWERS Growing demand for sustainable transports and infrastructure Well invested with strong assets to build on Improving financial performance Improving operational performance Building a strong North American truck business Leveraging Financial Services Lead in technology Volvo Gro
Slide 79: Volvo Group
VOLVO VOLVO GROUP