FOURTH QUARTER 2017 Martin Lundstedt, President and CEO
Volvo Group FOURTH QUARTER HIGHLIGHTS Net sales +11% (+16% excl. currency) Continued improved profitability for the Group - Trucks adjusted operating margin 9.5% (8.7) - Construction Equipment s adjusted operating margin 10.9% (3.8) Highest Net sales and Operating income so far for a Q4 NET SALES SEK bn 82.6 12 months 335 bn 91.7 Q4 Q1 Q2 Q3 Q4 ADJUSTED OPERATING MARGIN* % 6.9% Q4 Q1 Q2 Q3 Q4 *Adjustments, see note 6 in Q4 report: Q4 2016: Gain on sale of real estate SEK 1,371 M Q4 2017: No adjustments 12 months 8.9% 8.0% 2
Volvo Group VOLUME DEVELOPMENT IN THE FOURTH QUARTER TRUCK DELIVERIES Units HD/MD 60,000 50,000 12 months 186,294 +8,597 +19% MACHINE DELIVERIES Units 12 months 64,127 +5,216 +49% Total Change Volvo 34,293 +6,359 UD 5,597 +441 Renault Trucks 9,949 +804 Mack 5,112 +993 40,000 30,000 20,000 10,000 0,000 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0,000 Total Change Volvo 8,749 +1,880 SDLG 7,060 +3,334 3
Volvo Group SERVICE SALES DEVELOPMENT SERVICE SALES SEK bn +3% +8% ex FX 12 months 71.7 bn 20 18 16 14 12 10 8 6 4 2 0 16.3 17.8 18.3 CONSTRUCTION TRUCKS BUSES VOLVO PENTA EQUIPMENT 4
Trucks Good demand Stretched supply chain New trucks in NA well received production change-over underway Sales start of mediumduty electric trucks in 2019 5
Trucks GREAT RECEPTION OF THE NEW TRUCKS IN NORTH AMERICA - CHANGE-OVER IN PRODUCTION UNDERWAY Volvo VNL North America Mack Anthem North America 6
Trucks MARKET ENVIRONMENT NORTH AMERICA HD 400 300 200 100 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 BRAZIL HD 200 100 0 2017: 244 Forecast 2018: 280 2017: 32 Forecast 2018: 45 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 400 300 200 100 0 1 600 1 400 1 200 1 000 800 600 400 200 0 2017: ~307 Forecast 2018: 310 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 China India EUROPE HD ASIA HD+MD Japan 2017: 1 346 Forecast 2018: 1 150 2017: 334 Forecast 2018: 340 2017: 96 Forecast 2018: 85 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 7
Trucks MARKET SHARES HD% 2016 2017 NORTH AMERICA EUROPE EU28, YTD NOVEMBER 16,9 16,8 JAPAN 9,9 8,3 7,8 7,3 8,0 8,6 17,0 19,0 Volvo Renault Trucks Volvo Mack UD BRAZIL 18,9 18,4 AUSTRALIA Volvo SOUTH AFRICA 14,0 15,3 8,7 10,3 16,1 15,4 Volvo 9,4 8,5 Mack 2,0 3,3 UD Volvo UD 8
Trucks HD/MD: ORDERS +28% AND DELIVERIES +19% NORTH AMERICA EUROPE Orders Deliveries SOUTH AMERICA Orders +84% Deliveries +28% AFRICA & OCEANIA Orders Deliveries ASIA Orders +22% Deliveries +14% Orders Deliveries Orders +100% Deliveries +33% Orders Deliveries Orders -14% Deliveries -1% Orders Deliveries Orders -16% Deliveries +24% 9
Construction Equipment Market growth across all regions Orders up 48% and deliveries up 49% Transformation program continues to yield result 10
Construction Equipment NEW RANGE OF VOLVO BRANDED RIGID HAULERS 11
Construction Equipment MARKET ENVIRONMENT NORTH AMERICA 200 100 Forecast 2018: 0% to +10% 0 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 EUROPE 300 200 100 Forecast 2018: 0% to +10% 0 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 500 400 300 200 100 0 CHINA Forecast 2018: +10% to +20% 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 SOUTH AMERICA ASIA (excl. China) 300 100 Forecast 2018: 0% to +10% 200 100 0 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 0 Forecast 2018: 0% to +10% 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 12
Construction Equipment ORDERS +48% AND DELIVERIES +49% NORTH AMERICA EUROPE Orders Deliveries SOUTH AMERICA Orders +86% Deliveries +6% AFRICA & OCEANIA ASIA Orders Deliveries Orders +8% Deliveries +14% Orders Deliveries Orders +59% Deliveries +11% Orders Deliveries Orders +84% Deliveries +68% Orders Deliveries Orders +76% Deliveries +77% 13
Buses Mixed market development Order decrease by -28%, Order intake +34% delivery increase by 1% across regions 50 hybrid buses to Deliveries of the new 8- Singapore litre chassis platform for Asian Partnership markets to test started Largest electric autonomous order ever of complete buses in Singapore electric hybrid traffic solutions to Belgium 14
Volvo Penta Sales growth in both industrial and marine segments Order increase by 17%, delivery increase by 11% Good inroads into the agricultural segment Beet harvester powered by Volvo Penta 15
FOURTH QUARTER 2017 Jan Gurander, deputy CEO and CFO
Volvo Group NET SALES PER MARKET NET SALES SEK bn Currency -3.7 bn 82.6 +3.2 +2.0 +0.5 +3.5-0.0 91.7 Q4 2016 Europe North America South America Asia Africa & Oceania Q4 2017 17
Volvo Group ADJUSTED OPERATING INCOME PER BUSINESS AREA ADJUSTED OPERATING INCOME* SEK M 5,660* +1,042 +1,322 +22 +31 Currency -778 M +21-765 7,334* Q4 2016 Trucks Volvo CE Buses *Adjustments, see note 6 in Q4 report: Q4 2016: Gain on sale of real estate SEK 1,371 M Q4 2017: No adjustments Volvo Penta Financial Group ServicesFunctions & Other Q4 2017 18
Volvo Group ADJUSTED OPERATING INCOME CONTRIBUTORS ADJUSTED OPERATING INCOME* SEK M +1,655-203 -112-299 5,660* Currency -778 M +995 7,334* -362 + Truck and construction volumes - Higher selling and admin. cost - R&D - Stretched supply chain Q4 2016 Gross income Cash R&D R&D capitalization *Adjustments, see note 6 in Q4 report: Q4 2016: Gain on sale of real estate SEK 1,371 M Q4 2017: No adjustments Selling Admin. Other Q4 2017 19
Volvo Group Industrial Operations CASH FLOW OPERATING CASH FLOW SEK bn 12 months SEK 28.4 bn INVESTMENTS IN PPE SEK bn 12 months SEK 5.7 bn CASH FLOW EFFECT FROM CHANGES IN WORKING CAPITAL SEK bn 14.7 14.4 2.2 2.5 1.9 7.6 6.6 4.9-2.9 0.5 1.4 Accounts receivable Inventories Trade payables Other Total change 20
Trucks NET SALES NET SALES SEK bn 12 months 216.5 bn +12% 55.1 54.5 60.8 Delivered HD/MD trucks +19%: - North America +28% - Europe +14% Net sales currencyadjusted +16%: - vehicles +18% - services +9% Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 21
Trucks ADJUSTED OPERATING INCOME ADJUSTED OPERATING INCOME* SEK M ADJUSTED OPERATING INCOME* SEK bn 12 months 20.4 bn Currency -377 M 4.4 4.8 5.8 4,754 + Higher volumes 5,796 ADJUSTED OPERATING MARGIN* 12 months 9.4% % 8.7% 9.5% 7.9% - Selling cost - Higher R&D cost - Stretched supply chain *Adjustments, see note 6 in Q4 report: Q4 2016: Gain on sale of real estate SEK 71 M Q4 2017: No adjustments Q4 2016 Q4 2017 22
Construction Equipment NET SALES NET SALES SEK bn 11.0 13.1 12 months 66.5 bn +28% 16.7 Delivered machines +49%: - Volvo +27% - SDLG +89% - large and medium +51% - compact +41% Net sales currencyadjusted +34%: - machines +39% - services +11% Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 23
Construction Equipment ADJUSTED OPERATING INCOME ADJUSTED OPERATING INCOME* SEK M 12 months 7,917 M Currency -324 M ADJUSTED OPERATING INCOME* SEK M 1,816 ADJUSTED OPERATING MARGIN* % 12 months 11.9% 10.9% 1,816 + Higher volumes 494 494 + Capacity utilization 3.8% -191-1.7% Q4 2016 Q4 2017 *Adjustments, see note 6 in Q4 report: Q4 2016: No adjustments Q4 2017: No adjustments 24
Buses NET SALES & ADJUSTED OPERATING INCOME NET SALES SEK bn 7.3 8.0 12 months 26.1 bn 7.0 ADJUSTED OPERATING INCOME* SEK M 12 months 928 M Currency -89 M 294 288 266 Net sales currencyadjusted -8%: - vehicles -11% - services +8% Adjusted operating income: + service sales + operational efficiency - S&A *Adjustments, see note 6 in Q4 report: Q4 2016: Gain on sale of real estate SEK 41 M Q4 2017: No adjustments Adjusted operating margin* 4.1% (3.3) 25
Volvo Penta NET SALES & ADJUSTED OPERATING INCOME NET SALES SEK bn 12 months 11.1 bn ADJUSTED OPERATING INCOME* SEK M 12 months 1,439 M Currency -30 M Net sales currencyadjusted +14%: - engines +17% - services +6% 2.2 2.4 2.7 140 156 *Adjustments, see note 6 in Q4 report: Q4 2016: No adjustments Q4 2017: No adjustments 187 Adjusted operating income: + Higher sales + Product mix Adjusted operating margin* 7.0% (6.5) 26
Financial Services NEW FINANCING AND PROFITABILITY ADJUSTED OPERATING INCOME* SEK M 12 months 2,192 M NEW FINANCING SEK bn 12 months 57.9 bn ROE 1 12 months, % 534 567 588 14.9 15.6 17.1 13.4% 13.7% 14.3% 1) Excluding positive revaluation effect in Q4 2017 of SEK 897 M related to new tax rates in USA. Reported ROE including revaluation effect was 22.6%. 27
Full Year 2017
Volvo Group ADJUSTED OPERATING INCOME FY2017 ADJUSTED OPERATING INCOME* SEK M +9,855-502 -965-1,715 21,094* Currency -362 M -521 +2,681 29,928* + Higher volumes in Volvo CE + Higher truck volumes + Higher service sales + JV profitability - Higher S&A expenses - R&D - Stretched supply chain FY2016 Gross income Cash R&D 29 R&D capitalization Selling Admin. Other FY2017 *Adjustments, see note 6 in Q4 report: 2016: Gain on sale of IT operation 885, Provision for EU investigation -2,524, Gain on sale of real estate SEK 1,371 M 2017: Capital gain on sale of shares in Deutz SEK 400 M
Volvo Group FY2017 HIGHLIGHTS Highest Net sales and EBIT so far: - Net sales: SEK 335 bn - EBIT: SEK 30 bn NET SALES SEK bn 335 ADJUSTED OPERATING MARGIN* % 8.9% Operating cash flow: SEK 28 bn 273 3.4% Net cash position: SEK 26 bn Proposed dividend of SEK 4.25 (3.25) 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 *Adjustments, see note 6 in Q4 report 2017 and 2016 annual report. 30