Slide 1: Third quarter 2012
Third quarter 2012 AB Volvo 1
Slide 2: Slowing demand and lower earnings driven by one-offs and under-absorption
VOLVO GROUP Slowing demand and lower earnings driven by one-offs and under-absorption SALES TREND 12 months 318 bn OPERATING INCOME 12 months* 25 bn SEK bn SEK bn 73 69 64 5.8 4.9 4.0* Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2011 2012 2010 2011 2012 * Excluding restructuring in UD
Slide 3: Challenging third quarter with volatile macro conditions
VOLVO GROUP Challenging third quarter with volatile macro conditions OPERATING NET SALES MARGIN INCOME VOLVO GROUP 69 bn 2,927 M 4.2% 5.8%* TRUCKS 44 bn 1,695 M 3.8% 6.2%* VOLVO CE 13 bn 650 M 4.9% BUSES 4.3 bn -58 M - 1.4% VOLVO PENTA 1.7 bn 147 M 8.5% VOLVO AERO 1.6 bn 227 M 14.3% FINANCIAL SERVIC
Slide 4: Growth in North America off-set by lower sales in other regions
VOLVO GROUP Growth in North America off-set by lower sales in Western Europe, Asia and South America MARKET DEVELOPMENT* VOLVO GROUP* SALES Q3 SEK bn % South America Decline of 6%, -4% excl currency North America 10 24 Asia 72 15% 2% 9% 67 - 12% -23% 22 -14% 7 28 8 Eastern Europe Western Europe Othe
Slide 5: Production cut-backs affecting payables (-7.4 bn)
VOLVO GROUP Production cut-backs affecting payables (-7.4 bn) OPERATING CASH FLOW* INVESTMENTS* SEK bn SEK bn 12 months 1.1 bn 4.8 3.7 2.3 2.2 -1.9 - 7.2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2011 2012 2010 2011 2012 Leasing Tangibles Intangibles * Industrial operations AB Volvo
Slide 6: Capital efficiency – CCC at 28 days
VOLVO GROUP Capital efficiency – CCC at 28 days Inventory levels are being addressed CASH ROC* CONVERSION CYCLE* % Days 28% 23% 31 28 22 11% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2011 2012 2010 2011 2012 Inventories CCC-days Target * Industrial operations AB Volvo Third quarter
Slide 7: Trucks in Q3
TRUCKS Trucks in Q3 SALES TREND SALES BRIDGE SEK bn 12 months 201 bn Decline SEK bnof 7%, -4% excl currency 44 47 14% 47 4% 44 41 -11% - 22% -9% Q3Q4Q1Q2Q3Q4Q1Q2Q3 2010 2011 2012 OPERATING INCOME OPERATING MARGIN, % SEK bn 12 months 15.3* bn Currency - 81 M 8.4% 4.0 6.2*% 6.6% 2.7 2.8* Q3Q4Q1Q2Q3Q4Q
Slide 8: Trends and actions in Q3 – Trucks
TRUCKS Trends and actions in Q3 – Trucks Trends in Q3 Actions implemented in Q3 • Declining demand outside Brazil • Lowered production rates for • Weak order intake in September engines and components, (10- 20%) • Increasing inventory levels in Renault Trucks • Lowered production rates for Volvo in
Slide 9: Slow orders in September drives low production in December
TRUCKS Slow orders in September drives low production in December Production adjusted to meet expected demand in 2013 ORDERS Q3-12 YoY QoQ BtB ORDERS AND DELIVERIES Book to bill: 90% Europe 16 091 -28% -25% 89% - Volvo 8 358 -31% -29% 92% - Renault 7 733 -24% -20% 86% North America 7 929 -33% -2% 74
Slide 10: Markets expected to move sideways in 2013
TRUCKS Markets expected to move sideways in 2013 Units, thousands 400 Total market 2011 Act 2012 F Europe 29 242,000 230,000 (unchanged ) 350 North America 216,000 250,000 (unchanged ) Brazil 112,000 90,000 (unchanged ) Japan 25,000 30,000 (unchanged ) 2013 Forecast 300 North America 250’ 250 (slow
Slide 11: Construction Equipment in Q3
VOLVO CE Construction Equipment in Q3 SALES TREND SALES BRIDGE SEK bn 12 months 67 bn SEK bnof 9%, -8% excl currency Decline 15 41% 15 -16% 20% 13 -11% 13 13 -25% Q3 Q4 Q12011 2010 Q2 Q3 Q4 Q1 Q2 Q3 2012 2010 2011 2012 OPERATING INCOME OPERATING MARGIN, % SEK bn 12 months 7.1 bn Currency +149 M 10.5
Slide 12: Trends and actions in Q3 – Volvo CE
VOLVO CE Trends and actions in Q3 – Volvo CE Trends in Q3 Actions implemented in Q3 • Weakening construction • Production in Q3 35% lower market and rapid slow-down than Q3 last year in mining • Reduction of pipeline • Price pressure inventory for five consecutive • Order book down by 24% in months
Slide 13: Markets expected to move sideways in 2013
VOLVO CE Markets expected to move sideways in 2013 Units, thousands 450 Market forecasts 2011 Act 2012 F 2013 Forecast 400 Europe + 33% 0 to -10% (+/-0) North America + 39% +15 to 25% (unchanged) South America + 20% + 0 to 10% (unchanged) 350 Asia, excluding China + 27% +0 to 10% (unchanged) China +
Slide 14: Third quarter summary
VOLVO GROUP Third quarter summary • Slow truck orders in September • Flat inventories in Q3 despite weakening market • September fallback to impact production in Q4 • Given 2013 market forecasts, we will have the right production capacity in place. If orders should deteriorate we will adjust product
Slide 15: High speed in the implementation of the strategic objectives
VOLVO GROUP High speed in the implementation of the strategic objectives Launch of the new- generation Volvo FH New sales and marketing organization for Trucks in Europe, Middle East and Africa – restructuring costs of SEK 900 M from Q4 Right-sizing of UD Trucks in Japan – 950 employees less as of J
Slide 16: VOLVO
VOLVO
Slide 17: APPENDIX
APPENDIX AB Volvo Third quarter 2012 17
Slide 18: Guidance
Guidance Market forecast Capex PPE 2012 Heavy-duty trucks 2012 2013 - Europe 29 230,000 230,000 Ind. Operations ~10 bn - North America 250,000 250,000 - Brazil 90,000 95,000 Tax rate 2012 ~30% - Japan 30,000 30,000 CE 2012 2013 - Europe 0 to -10% -15 to -5% - North America +15 to 25% -5 to +5% - Sou
Slide 19: Currency effects – On operating income
Currency effects – On operating income SEK M Q3-12 vs Q3-11 Trucks - 81 Volvo CE + 149 Buses + 79 Volvo Penta - 37 Volvo Aero + 146 Group functions and other + 338 Volvo Group + 594 AB Volvo Third quarter 2012 19
Slide 20: Upcoming events
Upcoming events Q4 REPORT Feb 6 Stockholm INVESTOR DAY Nov 5 New York ANNUAL REPORT March AGM April 4 Göteborg www.volvogroup.com/IR AB Volvo Third quarter 2012 20