Volvo AB Class A · OMXSTO:VOLV_A

Volvo AB Class A — Q4 2016 Earnings Presentation

32 slides from Volvo AB Class A's earnings presentation, 2017

  1. Slide 1: Volvo Group Fourth Quarter 2016

    Volvo Group FOURTH QUARTER 2016 MARTIN LUNDSTEDT PRESIDENT AND CEO Volvo Group Headquarters Fourth quarter 2016 1

  2. Slide 2: Fourth quarter highlights

    NET SALES VOLVO GROUP SEK bn 12 months 302 bn Fourth quarter highlights 79.6 82.6 Q4 Q1 Q2 Q3 Q4 ADJUSTED OPERATING MARGIN* 12 months 7.0% %  Continued improved profitability – adjusted operating margin* 6.9% 6.9% (5.7) 5.7%  Trucks’ adjusted operating margin* 8.7% (7.9) on 10% lower volumes  Pro

  3. Slide 3: Volume development in the fourth quarter

    VOLVO GROUP Volume development in the fourth quarter VOLUME -10% TRUCK DELIVERIES MACHINE DELIVERIES VOLUME +19% Units Units -5,709 Total Change 60,000 Total Change 50,000 Volvo 27,934 -2,267 6,869 +972 Volvo 40,000 +1,664 UD 5,245 +134 16,000 30,000 14,000 SDLG 3,726 +680 12,000 Renault HD/MD 9,145

  4. Slide 4: Service sales development

    VOLVO GROUP Service sales development SERVICE SALES 12 months 67.5 bn SEK bn +9% +3% ex FX Trucks Volvo CE 20 17.8 18 16.3 15.8 Buses 16 14 Volvo Penta 12 10 8 6 4 2 Excl FX 0 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Volvo Group Headquarters Fourth quarter 2016 4

  5. Slide 5: Trucks

    TRUCKS Volvo Group Headquarters

  6. Slide 6: Partnership with BSF Souakri Industrial Group in Algeria

    RENAULT TRUCKS Partnership with BSF Souakri Industrial  Truck market of >3,500 HD 2016 and growing  Renault Trucks has close to 40% market share Group in Algeria  Gradual build-up to 2,000 trucks Volvo Group Headquarters Fourth quarter 2016 6

  7. Slide 7: Launch of Mack ASIST mobile app

    MACK TRUCKS Launch of Mack ASIST mobile app Volvo Group Headquarters Fourth quarter 2016 7

  8. Slide 8: Market environment

    TRUCKS Market environment EUROPE NORTH AMERICA HD 400 HD 400 300 300 200 100 2016:~300’ 200 Forecast 2017: 300’ 2016: 243’ 0 100 Forecast 2017: 215’ 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 0 000102030405060708091011121314151617 1400 ASIA HD+MD 1200 2016: 962’ China Forecast 2017: 900’

  9. Slide 9: Market shares

    TRUCKS Market shares 2015 2016 HD%, FY2016 EUROPE NORTH AMERICA EU28 15,8 16,9 12,2 9,9 8,5 8,1 7,4 7,8 JAPAN Volvo Volvo Renault Mack 18,3 17,0 BRAZIL UD 20,1 18,9 SOUTH AFRICA AUSTRALIA 14,9 16,1 Volvo 12,2 14,0 9,4 8,7 9,3 9,4 2,1 2,0 Volvo UD Volvo Mack UD Volvo Group Headquarters Fourth quarter

  10. Slide 10: Orders and deliveries

    TRUCKS Orders and deliveries Orders +12% EUROPE Deliveries +7% NORTH AMERICA Orders -3% Deliveries -47% Orders Deliveries Orders Deliveries Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Orders +24% SOUTH AMERICA Orders +2% ASIA Deliveries 0% Deliveries -17% Orders +9% AFRICA & Deliveries +9%

  11. Slide 11: Construction Equipment

    CONSTRUCTION EQUIPMENT Volvo Group Headquarters

  12. Slide 12: Service offer helps win large key account deal in Mexico

    CONSTRUCTION EQUIPMENT Service offer helps win large key account deal in Mexico Volvo Group Headquarters Fourth quarter 2016 12

  13. Slide 13: Market environment

    CONSTRUCTION EQUIPMENT Market environment EUROPE 250 200 150 CHINA 450 100 400 350 50 NORTH AMERICA 250 300 Forecast 2017: 0% to +10% 0 250 200 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 200 150 150 100 100 50 Forecast 2017: 5% to +15% 50 0 Forecast 2017: -5% to +5% 01 02 03 04 05 06 07 08 0

  14. Slide 14: Orders and deliveries

    CONSTRUCTION EQUIPMENT Orders and deliveries Orders +46% EUROPE Deliveries +13% Orders +35% NORTH AMERICA Deliveries +1% Orders Deliveries Orders Deliveries Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Orders +29% ASIA Orders +2% SOUTH AMERICA Deliveries +28% Deliveries -20% Orders +25% AFR

  15. Slide 15: Buses

    BUSES  Mixed market development  Deliveries declined by 6% but sales increased by 10%  More than 3,000 hybrid buses sold  174 hybrid buses to Arriva Volvo Group Headquarters

  16. Slide 16: Volvo Penta

    VOLVO PENTA  Continued strong sales growth within marine diesel and off-road engines  Order increase by 20%  IBEX innovation award for easy drain solution  New customers in agriculture segment Volvo Group Headquarters

  17. Slide 17: Volvo Group Fourth Quarter 2016 - CFO

    Volvo Group FOURTH QUARTER 2016 JAN GURANDER DEPUTY CEO AND CFO Volvo Group Headquarters Fourth quarter 2016 17

  18. Slide 18: Net sales per market

    VOLVO GROUP Net sales per market NET SALES SEK bn Currency +3.9 bn +4.0 -5.0 +1.2 82.6 +2.5 79.6 +0.1 Q4 2015 Europe North South Asia Africa & Q4 2016 America America Oceania Volvo Group Headquarters Fourth quarter 2016 18

  19. Slide 19: Adjusted operating income per business area

    VOLVO GROUP Adjusted operating ADJUSTED OPERATING INCOME* income per Currency +336 M SEK M 5,660* business area +685 -28 +16 +33 +1 +380 4,573* Q4 2015 Trucks Volvo CE Buses Volvo Financial Group Q4 2016 Penta Services Functions & Other *Adjustments, see note 6 in Q4 report: Q4 2016: Gain on sale of

  20. Slide 20: Adjusted operating income contributors

    VOLVO GROUP Adjusted operating ADJUSTED OPERATING INCOME* Currency +336 M income SEK M contributors +1,464 +34 -408 -169 +251 -85 5,660* 4,573* + Service business + Earnings in Construction Equipment + Market mix – high volumes in Europe + Lower material cost - Lower volumes and capacity utilization

  21. Slide 21: Cash flow - Industrial Operations

    VOLVO GROUP – INDUSTRIAL OPERATIONS Cash flow OPERATING CASH FLOW NET INVESTMENTS IN PPE CASH FLOW EFFECT FROM SEK bn SEK bn CHANGES IN WORKING CAPITAL 12 months SEK 3.5 bn 12 months SEK 3.6 bn SEK bn 14.7 5.0 10.6 2.6 2.3 2.0 0.4 4.8* -0.1* -2.7 -4.5 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2

  22. Slide 22: Operating cash-flow bridge

    VOLVO GROUP – INDUSTRIAL OPERATIONS Cash flow OPERATING CASH-FLOW BRIDGE SEK bn 1.9 0.4 -1.0 14.7 -0.7 13.9 -0.1 -4.0 -0.8 0.4 0.1 -1.9 -0.1 -0.2 8.7 -6.5 2.6 4.8 Inventory Other capital non-cash working Invest. EU invest- Sale of Op. Inc. Deprec. Financial Receiv. outcome in arbitration items Taxes

  23. Slide 23: Trucks net sales

    TRUCKS Net sales NET SALES 12 months 200.1 bn SEK bn -1% 55.1 54.5 53.8  Delivered trucks -10%: - North America -47% - Europe +7% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4  Net sales currency-adjusted -6%: 2014 2015 2016 - vehicles -9% - services +2% Volvo Group Headquarters Fourth quarter 2016 23

  24. Slide 24: Trucks adjusted operating income

    ADJUSTED OPERATING INCOME* TRUCKS Adjusted SEK bn 12 months 17.5 bn Currency 246 M 4.8 operating 4.4 3.2 income Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 ADJUSTED 2014 2015 2016 OPERATING INCOME SEK M 4,754* ADJUSTED OPERATING MARGIN* 4,374* + Service sales % 12 months 8.7% + Positive market mix – high volumes in

  25. Slide 25: Construction Equipment net sales

    CONSTRUCTION EQUIPMENT Net sales NET SALES 12 months 50.7 bn SEK bn +20% 13.1 12.3 11.0  Delivered machines +19%: - Volvo +16% - SDLG +22%  Net sales currency-adjusted +15%: Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 - machines +18% 2014 2015 2016 - services +2% Volvo Group Headquarters Fourth quarter 2016 25

  26. Slide 26: Construction Equipment adjusted operating income

    ADJUSTED OPERATING INCOME* CONSTRUCTION EQUIPMENT SEK M 12 months 2,246 M Adjusted operating income Currency 136 M 494 -815 -191 ADJUSTED 494 OPERATING INCOME Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 SEK M 2014 2015 2016 + Product mix + Higher volume + Lower credit losses China ADJUSTED OPERATING MARGIN* % 12 mon

  27. Slide 27: Buses net sales & adjusted operating income

    NET SALES 12 months 25.4 bn BUSES SEK bn Net sales & adjusted 8.0 7.3 operating income 5.9 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015 2016 ADJUSTED OPERATING INCOME* SEK M 12 months 870 M Currency -3 M 294 266  Net sales currency-adjusted +8% - vehicles +8% - services +7% -58  Adjusted operating income:

  28. Slide 28: Volvo Penta net sales & adjusted operating income

    NET SALES 12 months 9.9 bn VOLVO PENTA SEK bn Net sales & adjusted 2.2 2.4 operating income 2.0 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015 2016 ADJUSTED OPERATING INCOME* SEK M 12 months 1,269 M Currency 50 M  Net sales currency-adjusted +3% - engines +3% - services +2% 156  Adjusted operating income: 9

  29. Slide 29: Financial Services: new financing and profitability

    FINANCIAL SERVICES New financing and profitability NEW FINANCING ADJUSTED OPERATING INCOME* ROE* SEK bn SEK M 12 months, % 12 months 54.6 bn 12 months 2,086 M 534 567 16.2 15.6 472 13.4% 13.7% 14.9 12.5% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015 2016

  30. Slide 30: Earnings improvement full year 2016

    VOLVO GROUP Earnings ADJUSTED OPERATING INCOME* Currency -443 M improvement SEK M full year 2016 20,235* -1,550 +639 +827 +648 +197 21,094* +98 + Market mix – high volumes in Europe + Lower S&A expenses + Service business + Higher R&D capitalization Sales 313 bn Sales 302 bn Adj op. margin* 6.5 % Ad

  31. Slide 31: Fourth quarter highlights

    NET SALES VOLVO GROUP SEK bn 12 months 302 bn Fourth quarter highlights 79.6 82.6 Q4 Q1 Q2 Q3 Q4 ADJUSTED OPERATING MARGIN* 12 months 7.0% %  Continued improved profitability – adjusted operating margin* 6.9% (5.7) 6.9% 5.7%  Trucks’ adjusted operating margin* 8.7% (7.9) on 10% lower volumes  Pro

  32. Slide 32: Volvo Group Fourth Quarter 2016

    Volvo Group FOURTH QUARTER 2016 Volvo Group Headquarters Fourth quarter 2016 32

Volvo Group — Q4 2016 Earnings Presentation on 6ix