Volvo AB Class A · OMXSTO:VOLV_A
Volvo AB Class A — AB Volvo — Q1 2008 Earnings Presentation
36 slides from Volvo AB Class A's earnings presentation, Apr 25, 2008
Slide 1: First Quarter 2008 Press Conference
First Quarter 2008 Press Conference, April 25, 2008
Slide 2: Group Highlights
Group Highlights First Quarter • Business environment – Europe – slower growth – North America weak and Japan pre-buy – Strong development in Asia and other international markets • Strongest quarter so far – Sales growth 26% – Operating income up 22% – Improved earnings in truck operations and Volvo
Slide 3: Net sales
Net sales Net sales SEK bn • Net sales > 300 bn last 12-months • Strong sales growth, up 26% – Western Europe +17% – Eastern Europe + 37% – Asia +134% (27% organic) Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 – South America +18% Quarter 61,0 71,4 68,4 84,6 76,7 12 Mth. rol. 257,1 260,6 268,5 285,4 301,1 • Strong
Slide 4: Operating income
Operating income Operating income SEK M + Margin improvement based on price and productivity in Europe & International + Truck operations in Europe + Volvo CE - operating income up 38% - Truck operations in US - Net R&D Amortization SEK 429 M - US strike 250 M, Bus restructuring 120 M Q1 07 Q2 07 Q3
Slide 5: Trucks
Trucks Net sales – SEK bn Operating income – SEK M Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Quarter 39,2 46,3 45,4 57 50,8 Quarter 3 711 3 831 3 507 4 144 4 432 12 Mth. rol. 168,9 170,3 175,9 187,9 199,5 12 Mth. rol. 14 882 14 587 14 624 15 193 15 914 Margin 9,5% 8,3% 7,7% 7,3% 8,
Slide 6: Heavy-duty truck market - Europe
Heavy-duty truck market - Europe (EU members + Switzerland and Norway) Units, Thousands (heavy trucks) Forecast -08 400 +10% Modification of definition In 1991 (East Germany) and 329 in 2000 (new member states) 350 In 2006 (new member states) 300 256 300 250 200 178 229 150 100 116 50 0 90 91 92 93
Slide 7: Heavy-duty truck market – North America
Heavy-duty truck market – North America Units, Thousands (heavy trucks) 400 349 350 308 300 250 Forecast -08 225 flat 200 194 208 150 171 100 122 50 0 90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07 '08 AB Volvo First quarter 2008 7
Slide 8: Volvo Trucks
Volvo Trucks • Substantial order book – sold out for 2008 in Europe and International • Deliveries - Europe +22% - Asia +29% - South America +32% - North America -32% • Margin improvement based on price and productivity • Field testing of hybrid refuse trucks - improved fuel economy - lower emission
Slide 9: Hybrid refuse truck
Hybrid refuse truck AB Volvo First quarter 2008 9
Slide 10: Renault Trucks
Renault Trucks • Strong order book - Sold out for 2008 on several markets - Order books for delivery in 2009 not opened in Q1 • Good industrial productivity • Step change in product quality and performance - strengthening brand image - improved margins • Further improved financial performance AB Vol
Slide 11: Nissan Diesel
Nissan Diesel • Japanese market still affected by pre- buy effects and softer economy. • Market forecast Japan: medium and heavy trucks down 10-15% in 2008. • Deliveries in the first quarter was 13,489, up 1% • Integration work - distribution - suppliers - product plans/R&D - components - IS/IT AB V
Slide 12: Mack Trucks
Mack Trucks • Business environment - Weakening US economy/freight volumes - Soft US construction market - Rising diesel prices • Deliveries down 23% • Order intake up 38% • UAW-negotiations • Introduction of the new prestige truck Titan - 16-liter Mack MP10 engine AB Volvo First quarter 2008 12
Slide 13: Titan by Mack
Titan by Mack AB Volvo First quarter 2008 13
Slide 14: Construction Equipment
Construction Equipment Net sales Operating income SEK bn SEK M Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Quarter 946 1 398 839 1 035 1 301 Quarter 11 14,1 13 15,5 15,1 12 Mth. rol. 4 141 4 263 4 230 4 218 4 573 12 Mth. rol. 43,4 46,1 49,3 53,6 57,8 Margin 8,6% 9,9% 6,5% 6,7% 8,6% H
Slide 15: Construction Equipment
Construction Equipment Hybrid wheel loader shown at ConExpo AB Volvo First quarter 2008 15
Slide 16: Buses
Buses Net sales Operating income SEK bn SEK M Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Quarter 90 122 -73 93 -122 Quarter 3,7 4,1 3,6 5,2 3,7 12 Mth. rol. 664 585 350 231 19 12 Mth. rol. 16,7 16,2 16 16,6 16,5 Margin 2,4% 3,0% -2,0% 1,8% -3,3% Highlights In Focus z Increased order
Slide 17: Volvo B7RLE buses to Bangalore, India
Volvo B7RLE buses to Bangalore, India Prévost • Volvo – Prévost synergies • 20% market share • US-manufactured 13-liter engine • 100% fully owned since 2004 • High class coaches and motor homes • Yearly volume 600-700 vehicles AB Volvo First quarter 2008 17
Slide 18: Volvo Penta
Volvo Penta Net sales Operating income SEK bn SEK M Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Quarter 293 444 258 177 318 Quarter 2,9 3,2 2,7 2,9 3,2 12 Mth. rol. 1 151 1 220 1 221 1 173 1 198 12 Mth. rol. 10,9 11,2 11,5 11,7 11,9 Margin 10,0% 13,8% 9,5% 6,2% 10,0% Highlights In Fo
Slide 19: Volvo Penta product news
Volvo Penta product news TAD1650VE AB Volvo First quarter 2008 19
Slide 20: Volvo Aero
Volvo Aero Net sales Operating income SEK bn SEK M Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Quarter 92 93 148 196 136 Quarter 2,0 1,8 1,8 2 1,9 12 Mth. rol. 499 439 444 529 573 12 Mth. rol. 8,0 7,9 7,8 7,6 7,6 Margin 4,7% 5,0% 8,0% 9,8% 7,2% Highlights In Focus • Good growth in th
Slide 21: Volvo Aero
Volvo Aero Volvo Aero contributes to greener engines in Clean Sky, one of Europe's largest research programs ever AB Volvo First quarter 2008 21
Slide 22: Financial Services
Financial Services New retail financing Operating income and return on equity SEK bn SEK M Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Operating 395 421 455 378 381 Quarter 8.7 10.7 9.8 12.2 9.9 Income 12 Mth. rol. 36.2 37.3 39.3 41.4 42.6 ROE 13.1% 12.9% 14.1% 15.9% 16.2% Highlights
Slide 23: Financial Services
Financial Services Total managed assets Penetration on new financing Managed assets in: (SEK bn) (First Quarter isolated) Volvo Aero & Volvo Penta (SEK M) North W Europe International Volvo Volvo Volvo Renault America Mack CE Trucks Buses Trucks Volvo Aero Volvo Penta Q107 41 30 16 Q108 45 27 22 Q10
Slide 24: Key objectives
Key objectives • Support Business Areas • Maximize customer satisfaction • Stability in earnings over a business cycle • Controlled and profitable asset growth • Sound portfolio structure/asset diversification Financial Services 24
Slide 25: Volvo Financial Services Accomplishments/Development
Volvo Financial Services Accomplishments/Development BEST IN CLASS: Products, Diversification Building blocks towards our vision Customer Support & Profitable Growth Acquisition Integration Geographic Expansion Organic Growth Emerging Product & Employer of Integration Markets Service Choice with BA’
Slide 26: Our branded finance programs
26 Mack Trucks Financial Services Renault Trucks Volvo Trucks Volvo Buses Volvo Aero Volvo Penta Our branded finance programs Volvo CE Lingong
Slide 27: Customer offering
Customer offering Operational Operational Installment Installment Finance Finance Lease Lease Lease Lease Credit Credit Service Service & & Maintenance Maintenance Insurance Insurance Contracts Contracts Lease Lease & & Rental Rental Receivables Receivables Dealer Dealer Financing Financing Financin
Slide 28: Managed assets
Managed assets SEK bn By Region By Business Area 100 100 80 80 60 60 40 40 20 20 0 0 01Q4 04Q4 08Q1 01Q4 04Q4 08Q1 North America Europe International Volvo Trucks Renault Trucks Mack Trucks Volvo CE Volvo Buses Other Asset Mix Demonstrates Improved Diversification Financial Services 28
Slide 29: Financial development
Financial development SEK M Year over Year Quarter over Quarter 3,000 20% 20% 18% 700 18% 2,500 16% 600 16% 14% 14% 2,000 500 12% 12% 1,500 10% 400 10% 8% 300 8% 1,000 6% 6% 200 4% 4% 500 2% 100 2% - 0% - 0% 2005 2006 2007 07Q1 08Q1 Operating Income Credit Provisions Leverage Return on Equity Financ
Slide 30: Region North America portfolio
Region North America portfolio as of March 31, 2008 Portfolio by Country (SEK bn) United States 22.1 Canada 4.7 TOTAL 26.8 Portfolio by Product Company (SEK bn) End User Distributor Volvo Trucks 7.6 6.7 .9 Mack Trucks 6.1 4.9 1.2 Volvo Construction Equipment 11.2 5.5 5.7 Other * 1.9 1.8 .1 TOTAL 26.
Slide 31: Impact of credit correction and downturn in NA
Impact of credit correction and downturn in NA Dealer Financing Retail Credit North American Portfolio • Declining unit sales • Customer credit profiles • Delinquency increasing, as • Parts and service revenues weakening in expected remain firm construction, owner • Bad debt write-offs at • Dealers
Slide 32: Region North America - portfolio mix
Region North America - portfolio mix Portfolio Mix 100% C/D Downturn preparation 80% C/D • Process improvements from 60% last downturn 40% A/B • Hired additional experienced 20% A/B staff in credit and collections 0% 2001 2008 • Focused teams on CE & Truck Asset Composition – relationships strengthe
Slide 33: Profitable growth strategy
Profitable growth strategy Organic 1 Growth 2 Geographic Expansion 3 Acquisition Integration • North America & • Russia • Volvo Road Europe • Romania Machinery – Sales • Turkey • Lingong alignment • Nissan Diesel • Slovakia – Relevance • Hungary – Penetration • Chile • China Profitable growth is ess
Slide 34: Customer loyalty metrics
Customer loyalty metrics Will your experience with VFS positively influence your decision to… …Purchase Another …Consider Using VFS …Use Current Selling Volvo Group Product for Another Purchase Dealer for Another Purchase No, 19% No, 16% No, 22% Yes, 81% Yes, 78% Yes, 84% VFS provides a strong loyal
Slide 35: Summary
Summary Benefits provided to The Volvo Group • Sustainable profitability throughout the business cycle • Increased Business Area sales • Enhanced customer loyalty & retention • Strengthen brand recognition • Ongoing access to customers • Superior customer & dealer service • Sole focus on Volvo Group
Slide 36: Group Summary
Group Summary Earnings per share The first quarter 2008 SEK • Sales growth 26% • Asia – second largest market • Operating income up 22% • Improved industrial productivity Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 In focus 2008 Quarter 12 Mth. roll. 1,85 7,90 1,98 7,60 1,54 7,20 2,00 7,40 2,07 7,60 • Manage Euro