Volvo AB Class A · OMXSTO:VOLV_A

Volvo AB Class A — Q4 2015 Earnings Presentation

23 slides from Volvo AB Class A's earnings presentation, Feb 5, 2016

  1. Slide 1: Volvo Group Fourth Quarter 2015

    Volvo Group FOURTH QUARTER 2015 MARTIN LUNDSTEDT Volvo Group Headquarters Fourth quarter 2015 1

  2. Slide 2: Fourth quarter highlights

    VOLVO GROUP Fourth quarter highlights NET SALES SEK bn 12 months 313 bn 77 80  CONTINUED IMPROVED PROFITABILITY ON FLAT VOLUMES – UNDERLYING OPERATING MARGIN AT 5.7%  OPERATING CASH FLOW OF SEK 14.7 BN (10.6) Q4 Q1 Q2 Q3 Q4  STRENGTHENED FINANCIAL POSITION – NET CASH OPERATING MARGIN* SEK 0.3 BN

  3. Slide 3: Trucks Europe: Improving demand

    ORDERS & DELIVERIES TRUCKS EUROPE Book-to-bill Q4: 99% Improving demand 26’ 26’ Orders Deliveries  Total market increased by 19% in 2015 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4  Market shares 2015: - Volvo 15.7% (-0.9) TOTAL MARKET (heavy-duty) - Renault Trucks 8.1% (0.3) 2015: 270’ trucks Forecast: 2016: 280’

  4. Slide 4: Trucks North America: Declining from high levels

    ORDERS & DELIVERIES TRUCKS NORTH AMERICA Book-to-bill Q4: 68% Declining from high levels  Total market increased by 12% in 2015 15’ 10’  Market shares 2015: - Volvo 12.2% (+0.3) Orders Deliveries - Mack 7.4% (-0.8) Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4  Net order intake decreased by 58% in Q4 - Market corre

  5. Slide 5: Trucks South America: Continued weak economic development in Brazil

    ORDERS & DELIVERIES TRUCKS SOUTH AMERICA Book-to-bill Q4: 74% Continued weak economic development in Brazil 3’ 2’ Orders Deliveries Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4  Total heavy-duty truck market in Brazil TOTAL MARKET, BRAZIL (heavy-duty) Forecast: declined by 55% in 2015 2015: 42’ trucks 2016: 35’  Ma

  6. Slide 6: Trucks Asia: Mixed market development

    ORDERS & DELIVERIES TRUCKS ASIA Book-to-bill Q4: 84% Mixed market development 9’ 7’ Orders Deliveries Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4  China’s medium- and heavy-duty market down 24% in 2015 MARKET OUTLOOK medium- & heavy-duty  Many markets impacted by Chinese slow-down Forecasts: China India  Gaining

  7. Slide 7: Construction Equipment: Continued headwind in BRC

    ORDERS & DELIVERIES CONSTRUCTION EQUIPMENT Book-to-bill Volvo Q4: 115% Continued headwind in BRC 10’  Markets YTD November: 9’ - Europe: -6% (excl. Russia 3%) Orders Deliveries - North America: +1% - China: -48% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4  Deliveries down by 26% mainly due to low demand in China,

  8. Slide 8: Buses and Volvo Penta

    BUSES VOLVO PENTA  Industrial engines - Stable mature markets and declining emerging markets  Continued good demand in North America, recovery in Europe and weak demand in Brazil  Marine engines – flat markets  Deliveries up 9%, orders up 24% in Q4  Net order intake decreased by 8% in Q4  Laun

  9. Slide 9: Volvo Group Fourth Quarter 2015

    Volvo Group FOURTH QUARTER 2015 JAN GURANDER Volvo Group Headquarters Fourth quarter 2015 9

  10. Slide 10: Sales growth in North America and Europe

    VOLVO GROUP Sales growth in North America and Europe - partly offset by decline in South America and Africa NET SALES FX impact: +3 bn SEK bn +3.1 -2.9 +3.7 -0.4 -1.4 79.6 77.5 Q4 2014 Europe North South Asia Other Q4 2015 America America markets Volvo Group Headquarters Fourth quarter 2015 10

  11. Slide 11: Earnings improvement driven by Trucks and Buses

    VOLVO GROUP Earnings improvement driven by Trucks and Buses OPERATING INCOME* FX impact: +1.201 M SEK M +809 5,382 +351 +50 +62 -1 4,573 + Trucks +1,126 -36 + Buses +4,450 3,021 + Customer Finance + Penta - Volvo CE – China credit provision of SEK 158 M -1,429 Q4 One- Q4 Trucks Volvo Buses Volvo Cus

  12. Slide 12: Earnings improvement on slightly lower volumes

    VOLVO GROUP Earnings improvement on slightly lower volumes OPERATING INCOME* FX impact: +1.201 M SEK M +809 5,382 +713 +121 -9 -434 4,573 +1,282 -121 + Higher R&D capitalization +4,450 3,021 + Lower selling expenses + Europe and North America earnings + Currency - Lower volumes - Lower earnings in B

  13. Slide 13: Trucks: Profitability improvement trend continues

    TRUCKS Profitability improvement trend continues - on flat volumes NET SALES OPERATING INCOME* OPERATING MARGIN* SEK bn SEK bn % 12 months 214 bn 12 months 16.2 bn 12 months 7.6% Currency: +2.1 bn Currency: +679 M 4.4 7.9% 52 54 55 3.0 3.2 6.0% 5.7% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

  14. Slide 14: Trucks: Improved earnings in Europe and North America

    TRUCKS Improved earnings in Europe and North America OPERATING INCOME OPERATING INCOME SEK M SEK M 5,146* EU + Higher R&D capitalization 4,374** provision + Lower selling expenses Arbitration +3,790 3,248** case + Europe and North America -772 + Currency SEK +679 M - Negative product mix - Brazil -5

  15. Slide 15: Construction Equipment: Adapting to declining sales volumes

    CONSTRUCTION EQUIPMENT Adapting to declining sales volumes NET SALES OPERATING INCOME* OPERATING MARGIN* SEK bn SEK M % 12 months 51 bn 12 months 2.1 bn 12 months 4.1% Currency: +0.6 bn Currency: +148 M 13 12 11 2.1% -6.6% -1.7% 272 -815 -191 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4

  16. Slide 16: Construction Equipment: Improved product and market mix

    CONSTRUCTION EQUIPMENT Improved product and market mix, partly offset by volume drop OPERATING INCOME OPERATING INCOME SEK M + Favorable product and market mix SEK M China + Reduced operating expenses credit + Currency SEK +148 M provision +660 -33** -155** China -191* - Lower volumes, deliveries do

  17. Slide 17: Buses and Volvo Penta

    BUSES VOLVO PENTA NET SALES NET SALES SEK bn 12 months 24 bn SEK bn 12 months 9 bn Currency: +0.4 bn Currency: +0.1 bn 7.3 2.2 5.5 5.9 1.8 2.0 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 OPERATING INCOME* OPERATING INCOME* SEK M 12 months 882 M SEK M 12 months 1,102 M Currency: +269 M Curr

  18. Slide 18: Customer Finance: Continued profitability improvement

    CUSTOMER FINANCE Continued profitability improvement NEW FINANCING OPERATING INCOME* ROE SEK bn SEK M 12 months, % 12 months 55 bn 12 months 2,006 M 534 16.2 472 13.4% 15.0 14.9 397 12.1% 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 Volvo Group Headquarters

  19. Slide 19: Improved cash flow

    VOLVO GROUP – INDUSTRIAL OPERATIONS Improved cash flow OPERATING CASH FLOW INVESTMENTS IN PPE CASH FLOW EFFECT FROM SEK bn, SEK bn, CHANGES IN WORKING CAPITAL 12 months SEK 18.3 bn 12 months SEK 5.9 bn SEK bn 9.8 14.7 2.4 2.3 10.3 10.6 2.0 5.0 2.2 1.3 1.3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1

  20. Slide 20: Structural cost to be reduced by SEK 10 bn

    VOLVO GROUP Structural cost to be reduced by SEK 10 bn – facing currency-headwind SEK bn Targeted reduction 2016 vs 2012 2013 2014 2015 2012 Structural cost reduction in Gross Income - - -1.0 -2.5 Cash R&D 16.9 15.9 15.2 14.8 Selling expenses 27.9 28.5 27.4 27.7 Administrative expenses 5.6 5.9 5.4 5

  21. Slide 21: Earnings improvement in FY 2015

    VOLVO GROUP Earnings improvement in FY 2015 OPERATING INCOME* 2015: SEK M Sales 313 bn Op. Margin* 6.5% FX impact: +5.1 bn +5,417 25,652 +891 -246 -361 -1,173 2014: +8,925 +397 20,235 Sales 283 bn Op. Margin* 4.2% +3,409 11,802 8,393 2014 One- 2014 Gross Cash R&D Selling Admin. Other 2015 One- 2015

  22. Slide 22: Summary

    VOLVO GROUP Summary  FOUNDATION LAID IN 2015 - Earnings improvement - Improved cash flow - Strengthened financial position  NEW ORGANIZATION IN 2016 TO DRIVE ORGANIC GROWTH AND FURTHER IMPROVE PROFITABILITY Volvo Group Headquarters Fourth quarter 2015 22

  23. Slide 23: Volvo Group

    Volvo Group Fourth quarter 2015 Volvo Group Headquarters Third quarter 2015 23

Volvo Group — Q4 2015 Earnings Presentation on 6ix