Strong growth outlook. Leif Östling, President and CEO

Transcription

1 Strong growth outlook Leif Östling, President and CEO 1

2 Disclaimer 2 This presentation contains forward-looking statements that reflect management's current views with respect to certain future events and potential financial performance. Such forward-looking statements involve risks and uncertainties that could significantly alter potential results. These statements are based on certain assumptions, including assumptions related to general economic and financial conditions in the company's markets and the level of demand for the company's products. This presentation does not imply that the company has undertaken to revise these forward-looking statements, beyond what is required under the company's registration contract with the Stockholm Stock Exchange, if and when circumstances arise that will lead to changes compared to the date when these statements were issued.

3 Agenda 3 Market environment Scania s position Future outlook

4 Western European market 4 Strong economic growth driving demand Impact of integrated Europe Increased freight due to higher consumption of Western European goods in CEE Shortage of transport capacity Vehicle volume units 400, , CAGR (1) of 3.8% 200, , Note: (1) Compounded annual growth rate

5 Central and Eastern European market 5 Rapid economic growth Investments in infrastructure Western consumption patterns Increased freight due to relocation of production Local competition has disappeared 40,000 30,000 20,000 10, Vehicle volume units CAGR (1) of 18% Note: (1) Compounded annual growth rate

6 Russian and Ukrainian markets 6 Rapid economic growth Investments in infrastructure Western consumption patterns Growing global demand for base elements Local competition disappearing 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Vehicle volume units CAGR (1) of 29% Note: (1) Compounded annual growth rate

7 High potential in emerging markets Penetration of global truck brands 7 Russia ~ 7% India ~ 2% China ~ 2% Source: The Russian Automotive Industry, heavy commercial vehicles

8 World market potential next decade Heavy trucks 8 North America 300, ,000 Latin America 75,000 80,000 Africa 20,000 17,000 Europe 385, ,000 North East Asia 400, ,000 Middle East and India 200, ,000 South East Asia 30,000 20,000 Next decade 2005 actual Australia 10,000 10,000

9 World market potential next decade Heavy buses and coaches 9 North America 8,000 6,500 Latin America 27,000 28,000 Africa 4,000 3,500 Europe 33,000 30,000 Middle East and India 80,000 40,000 North East Asia 60,000 50,000 South East Asia 4,000 3,000 Next decade 2005 actual Australia 1,

10 Scania positioned for growth 10 Significant volume upside Well positioned in key growth markets Improving position in distribution and construction No North American exposure Strong and captive sales & service network Customer finance well placed for further expansion Further capacity within existing production structure

11 Capacity to support growth 11 Scania vehicle production capacity 150, , ,000 65,000 70,000 75,000 90, ,000 50, /10 "Stretched" Base capacity of 100,000 units with limited additional capex Stretched capacity of 130,000 units with some additional capex Productivity improvements of 6-8% (1) per annum set to continue Scania will benefit from volume upside and continued productivity improvements with limited additional capex Note: (1) Based on average year-on-year (YTD)

12 12 Track record of productivity improvement Vehicles per employee Vehicle volume Personnel Production and Procurement, direct and indirect , ,000 Forecast 100, Target ,800 46, ,700 12,800 11,300 10,600 10,

13 Flexible production cost structure 13 Valueadded 30% Sourced material and components 70% More flexible cost structure over the past 10 years Further improvements in progress Significant operational leverage

14 Improved production structure Ongoing projects 14 Falun Södertälje Sibbhult Opglabbeek Over SEK 300 m. in annual cost savings: starting 2007, full effect from 2009 Rationalisation From 3 plants to 1 From 2 logistics centres to 1 Less overhead Outsourcing From 1,800 to 1,000 employees within axles and gearboxes

15 R&D and technology 15 Scania well prepared for future legislation: Technology already in place for Euro 6 Cross functional working methods Joint development with Cummins and Hino: Leveraged know-how of two companies Knowledge and best practice Cost sharing Ahead of competition

16 Sales & service opportunities 16 Scania s network Significant revenue potential Substantial increase in rolling fleet (800,000 by 2010) Broader service offering More efficient parts sales Over SEK 500 m. in annual cost savings in captive network: IS/IT systems Purchasing Centralised back office Shared marketing Starting in 2006, full effect in 2009 Good potential in captive service network Captive dealers Non-captive dealers

17 Best in class EBIT margin vs peers 17 Percent Volvo Paccar Scania MAN DC Q2

18 Long term financial performance s 1980s 1990s Yearly sales growth (%) 19,7 10,4 10,0 7,6 Yearly EBIT growth (%) 23,2 7,5 6,7 10,0 EBIT (%) 13,7 15,5 10,6 9,7 Yearly inflation (%) 9,3 7,6 2,3 1,5 Adjusted EBIT (%) (1) 4,4 7,9 8,3 8,2 Yearly growth of earnings per share (%) -1,3 (2) 10,6 Yearly growth in R&D (%) 10,1 9,2 R&D average (%) 4,0 4,0 Note: (1) Adjusted for inflation (2) 1996 to 2000

19 Future outlook Outlook Revenue, % growth per annum (1) 10.2 ~ 10 EBIT margin, % of revenues Capex (incl. R&D (2) ), % of revenues R&D (2), % of revenues 4.1 < 4 EPS, % growth per annum (1) 17.0 > 17 Note: (1) Compounded annual growth rate over the period (2) Total R&D expenditures (capitalised and expensed)

20 MAN s offer substantially undervalues Scania 20 The earnings outlook for Scania standalone is significantly above current market consensus MAN s announced synergies materially underestimate the true synergy potential of a combination The Board of Scania has rejected MAN s offers

21 21 To Scania, consolidation is an opportunity, not a necessity

22 Integration opportunities 22 Economies of scale Sourcing One management. Cooperation on non-differentiating parts. Purchasing power. R&D Cooperation on non-differentiating parts. Appx. 30% common projects. Sales & Services Common administration and back office. Cooperation on parts distribution. Strengthened service network with broader offer. Customer Finance One management. Common administration and systems. Administration and IS/IT Common head office, systems and joint projects.

23 Integration opportunities 23 Economies of skills R&D Sharing of know-how, i.e. XPI. Production Transfer of best practice. Productivity 6.0 vehicles a year/employee 30% productivity gap. Customer Finance Systems and practice. Improved market-share and risk differentiation. Sales & Services Integrated service offer, parts logistics, road side assistance, Improved customer offer rental vehicles, Improved customer offer vehicle range.

24 Integration risks 24 Loss of market-share Failure to safeguard brand differentiation Short term increased funding costs Failure to integrate cultures Internal focus on costs instead of focus on customer value

25 Market shares truck registrations Volvo-Renault in France Percent Volvo + Renault 40 Renault Volvo

26 Market shares truck registrations Volvo-Renault in Spain Percent Volvo + Renault Renault Volvo

27 Market shares truck registrations MAN-ERF in UK Percent ERF + MAN ERF 5 MAN

28 Market shares truck registrations DAF/Leyland in UK Percent DAF + Leyland

29 Market shares truck registrations MAN-Steyr in AT Percent MAN + Steyer MAN Steyer

30 Market shares truck registrations Iveco-Pegaso in Spain Percent Iveco-Pegaso 10 Iveco Pegaso

31 Conclusions 31 Scania has a positive standalone outlook There is an industrial rationale for consolidation Maximising value requires constructive environment Scania is focused on shareholder value creation To Scania, consolidation is an opportunity, not a necessity

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