Volvo Ab Class A · OMXSTO:VOLV_A

Volvo Ab Class A — Q4 2018 Earnings Presentation

33 slides from Volvo Ab Class A's earnings presentation, Jan 30, 2019

  1. Slide 1: Fourth quarter 2018

    Fourth quarter 2018 Martin Lundstedt, President and CEO

  2. Slide 2: Fourth quarter highlights

    NET SALES SEK bn 12 months 391 bn Volvo Group 91.6 105.8 FOURTH QUARTER HIGHLIGHTS  Net sales +SEK 14.2 bn, up 16% (+10% excl. currency)  Adjusted operating income increased to Q4 Q1 Q2 Q3 Q4 SEK 10.6 bn (7.1) ADJUSTED OPERATING MARGIN* % 12 months 10.4%  Trucks’ adjusted operating margin 10.9% 1

  3. Slide 3: Volume development in the fourth quarter

    Volvo Group VOLUME DEVELOPMENT IN THE FOURTH QUARTER TRUCK DELIVERIES MACHINE DELIVERIES Units HD/MD 12 months 207,951 Units 12 months 82,654 +1,889 +3% 60,000 +3,728 +24% 50,000 30,000 40,000 25,000 30,000 20,000 15,000 20,000 10,000 10,000 5,000 0,000 0,000 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q

  4. Slide 4: Service sales development

    Volvo Group SERVICE SALES DEVELOPMENT SERVICE SALES 12 months: 79.0 bn +12% SEK bn +6% ex FX 25 18.3 20.5 17.8 20 15 10 5 0 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 CONSTRUCTION TRUCKS BUSES VOLVO PENTA EQUIPMENT Volvo Group Fourth quarter 2018 4 2019-01-30

  5. Slide 5: Trucks

    Trucks  Good demand in key regions  Order intake decreased 14%  Increased deliveries with 3% despite Dongfeng Trucks new HD tractor stretched supply chain, in particular in North America  Dongfeng Trucks launch new generation of HD and MD trucks in China  UD Trucks introduced a captive 8-liter

  6. Slide 6: Trucks: Volvo Trucks autonomous solution

    Trucks VOLVO TRUCKS  Volvo Trucks signed a landmark agreement with Brønnøy Kalk AS in Norway, to provide its first commercial autonomous transport solution  Tests of this solution have been carried out successfully 2018 and will be to become fully operational by the end of 2019  The autonomous Vo

  7. Slide 7: Trucks: Market environment

    Trucks MARKET ENVIRONMENT NORTH AMERICA HD JAPAN HD 2018: 48’ 400 75 Forecast 2019: 45’ 300 50 200 25 0 100 2018: 311’ 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Forecast 2019: 310’ 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 1 400 ASIA HD+MD China BRAZIL HD 1 200

  8. Slide 8: HD/MD quarterly orders and deliveries

    Trucks HD/MD: QUARTERLY ORDERS -14% AND DELIVERIES +3% NORTH AMERICA EUROPE Orders Deliveries Orders Deliveries Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Orders -24% Orders -13% Deliveries +35% Deliveries -2% SOUTH AMERICA AFRICA & OCEANIA ASIA Orders Deliveries Orders Deliveries Orders

  9. Slide 9: North American industry demand and supply

    Trucks NORTH AMERICAN INDUSTRY DEMAND AND SUPPLY 484,000  Net order intake accelerated in 2018 ~330,000 est.  Industrial capacity estimated to 295,000 approximately 330,000 units  18Q4 order slow-down expected – Order quality is in focus – 2019 basically sold out Net orders Production Backlog 201

  10. Slide 10: Trucks: Market shares

    Trucks MARKET SHARES EUROPE EU28, YTD Nov NORTH AMERICA 16.8 16.0 JAPAN YTD Dec YTD Dec 19.0 18.0 8.6 8.8 10.3 8.3 7.3 6.7 Volvo Renault Trucks Volvo Mack UD BRAZIL AUSTRALIA YTD Dec YTD Dec SOUTH AFRICA 18.4 20.1 15.4 14.9 YTD Nov 8.5 7.9 18.5 15.3 3.3 3.7 10.3 10.0 Volvo Volvo Mack UD HD% 2017 201

  11. Slide 11: Construction Equipment

    Construction Equipment  Good demand in key regions  Order intake increased 9% and deliveries increased 24%  Volvo CE and Skanska test with electric, autonomous and connected machines concluded: ~ 98% reduction in carbon emissions ~ 70% reduction in energy costs ~ 40% reduction in operator costs I

  12. Slide 12: Electric compact equipment launch

    Construction Equipment ELECTRIC COMPACT EQUIPMENT LAUNCH  Volvo CE is the first manufacturer to commit to an electric future for its smaller compact machine range  Launching fully electric compact wheel loaders and compact excavators mid-2020  Stopping diesel engine development for these models V

  13. Slide 13: Construction Equipment: Market environment

    Construction Equipment MARKET ENVIRONMENT NORTH AMERICA EUROPE 500 CHINA 250 150 400 200 100 150 300 100 200 50 Forecast 2019: 0% to +10% 50 Forecast 2019: -5% to +5% 100 0 0 Forecast 2019: -10% to 0% 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 01 02 03 04 05 06 07 08 09 10 11 12 13 14

  14. Slide 14: Quarterly orders +9% and deliveries +24%

    Construction Equipment QUARTERLY ORDERS +9% AND DELIVERIES +24% NORTH AMERICA EUROPE Orders Deliveries Orders Deliveries Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Orders -24% Orders +2% Deliveries +45% Deliveries +18% SOUTH AMERICA AFRICA & OCEANIA ASIA Orders Deliveries Orders Deliverie

  15. Slide 15: Buses

    Buses  Good demand across key regions and net order intake increased by 56%  Deliveries declined by 13% mainly due to the UK and North America  Important order of 700 units for Bogotá Bus Rapid Transport (BRT) system Volvo Group Fourth quarter 2018 15 2019-01-30

  16. Slide 16: Volvo Penta

    Volvo Penta  Sales growth continues, especially for industrial off-road engines  Pre-buy in Europe due to EU Stage V implementation Jan 1, 2019  Order intake decreased by 19% while deliveries increased by 47%  Inboard Performance System (IPS) test on 94 foot yacht reducing fuel consumption by ap

  17. Slide 17: Financial Services

    Financial Services • Record quarterly new business volume 2017 across most major markets 2018 • First construction equipment finance company in China to offer direct payment solutions via WeChat • Launched fintech start-up accelerator iLabX Volvo Group Fourth quarter 2018 17 2019-01-30

  18. Slide 18: Fourth quarter 2018 - CFO

    Fourth quarter 2018 Jan Ytterberg, CFO

  19. Slide 19: Net sales per market

    Volvo Group NET SALES PER MARKET NET SALES Currency +5.4 bn SEK bn +1,4 105,8 +7,8 +0,8 +0,2 +4,0 91,6 Q4 2017 Europe North South Asia Africa and Q4 2018 America America Oceania Volvo Group Fourth quarter 2018 19 2019-01-30

  20. Slide 20: Adjusted operating income per business area

    Volvo Group ADJUSTED OPERATING INCOME PER BUSINESS AREA ADJUSTED OPERATING INCOME* Currency +1,225 M SEK M +967 10,597* +337 +5 +306 +17 +1,860 7,105* Q4 2017 Trucks Volvo CE Buses Volvo Financial Group Q4 2018 Penta Services Functions *Adjustments, see note 7 in Q4 report: & Other Q4 2017: No adjus

  21. Slide 21: Adjusted operating income contributors

    Volvo Group ADJUSTED OPERATING INCOME CONTRIBUTORS ADJUSTED OPERATING INCOME* Currency +1,225M SEK M +4,310 -434 +855 -632 +170 -777 10,597* + Vehicle volumes + Service sales + Capacity utilization 7,105* + R&D capitalization - Selling expenses - Cash R&D Q4 2017 Gross Cash R&D Selling Admin. Other

  22. Slide 22: Cash flow

    Volvo Group – Industrial Operations CASH FLOW OPERATING CASH FLOW INVESTMENTS IN PPE CASH FLOW EFFECT FROM SEK bn 12 months SEK 26.6 bn SEK bn 12 months SEK 7.0 bn CHANGES IN WORKING CAPITAL SEK bn 6.1 +4.9 14.4 15.5 2.5 2.6 +1.4 1.9 +0.1 4.8 -0.3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

  23. Slide 23: Trucks: Net sales

    Trucks NET SALES  Delivered HD/MD trucks +3% - North America +35% - Europe -2%  Net sales currency-adjusted +7%: - Vehicles +8% - Services +5% 12 months 250.4 bn +13% NET SALES SEK bn 68.5 54.5 60.6 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418 Volvo Group Fourth quarter 2018 23 2019-01-30

  24. Slide 24: Trucks: Adjusted operating income

    Trucks ADJUSTED OPERATING INCOME ADJUSTED OPERATING INCOME* ADJUSTED OPERATING INCOME* ADJUSTED OPERATING MARGIN* SEK bn 12 months 26.4 bn SEK M 7,450 % 12 months 10.5% Q4: currency +841 M + Vehicle sales + Service sales 5,590 + Capacity utilization + R&D capitalization 7.5 10.9% 9.2% 5.6 8.7% 4.8 -

  25. Slide 25: Construction Equipment: Net sales

    Construction Equipment NET SALES 12 months 84.2 bn NET SALES SEK bn +21%  Delivered machines +24%: 20.3 – Volvo +11% 16.7 – SDLG +39% 13.1 – Large and medium +16% – Compact +50%  Net sales currency-adjusted +16%: – Machines +19% Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418 – Services +3% Volvo Gro

  26. Slide 26: Construction Equipment: Adjusted operating income

    Construction Equipment ADJUSTED OPERATING INCOME ADJUSTED OPERATING INCOME* ADJUSTED OPERATING INCOME* ADJUSTED OPERATING MARGIN* SEK M 12 months 11,306 M SEK M % 12 months 13.4% Q4: currency +155 M 2,157 10.6% 10.9% + Equipment sales 2,157 + Service sales 1,820 1,820 3.8% 494 - Production costs - S

  27. Slide 27: Buses: Net sales and adjusted operating income

    NET SALES Buses SEK bn 8.0 12 months 25.8 bn NET SALES & ADJUSTED OPERATING 7.1 7.5 INCOME  Net sales currency-adjusted 1%: - Vehicles +/- 0% - Services +5% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 ADJUSTED OPERATING  Adjusted operating income: INCOME* SEK M 12 months 765 M + Product mix Q4: currency +112 M 261

  28. Slide 28: Volvo Penta: Net sales and adjusted operating income

    NET SALES Volvo Penta SEK bn 12 months 13.7 bn 3.8 NET SALES & ADJUSTED OPERATING 2.7 2.4 INCOME  Net sales currency-adjusted +37%: - Engines +46% - Services +7% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4  Adjusted operating income: ADJUSTED OPERATING INCOME* 12 months 2.3 bn SEK M + Higher sales Q4: currency +94

  29. Slide 29: Financial Services: Credit portfolio and profitability

    Financial Services CREDIT PORTFOLIO AND PROFITABILITY ADJUSTED OPERATING CREDIT PORTFOLIO, NET ROE INCOME* 12 months, % Europe SEK M 12 months 2,411 M 3% North America Currency +24 M 7% 6% South America 588 605 44% 567 Asia 15.1% 13.7% 14.3% Africa & 40% Oceania 149 SEK bn 130 130 Q4Q1Q2Q3Q4Q1Q2Q3Q4

  30. Slide 30: Full year 2018

    VOLVO VOLVO GROUP

  31. Slide 31: Adjusted operating income FY2018

    Volvo Group ADJUSTED OPERATING INCOME FY2018 ADJUSTED OPERATING INCOME* Currency +1,590 M SEK M +14,839 -1,467 +1,666 -2,308 -156 -1,192 40,660* + Vehicle volumes + Service sales 29,278* + Capacity utilization + R&D capitalization - Selling expenses - Cash R&D Q4 2017 Gross Cash R&D Selling Admin. O

  32. Slide 32: FY2018 highlights

    Volvo Group FY2018 HIGHLIGHTS • Highest net sales and adjusted NET SALES ADJUSTED OPERATING MARGIN* operating income so far: SEK bn % • 391 - Net sales: SEK 391 bn 10.4% - Adjusted op. inc. SEK 40.7 bn 283 • Operating cash flow: SEK 26.6 bn 4.1% • Net cash position: SEK 43.8 bn (excl. pension liabil

  33. Slide 33: Volvo Group Capital Markets Day, Gothenburg June 18, 2019

    Volvo Group Capital Markets Day Gothenburg June 18, 2019

Volvo Group — Q4 2018 Earnings Presentation on 6ix