Volvo Group THIRD QUARTER 2016 MARTIN LUNDSTEDT PRESIDENT AND CEO 1
VOLVO GROUP Third quarter highlights NET SALES SEK bn 12 months 299 bn 73.3 68.8 ADJUSTED OPERATING MARGIN* 12 months 6.7% % 6.9% 7.0% Maintained profitability despite lower volumes Adjusted operating margin* 7.0% (6.9) Trucks adjusted operating margin* 8.2% (7.2) on 13% lower volumes *Adjustments: 2016: Capital gain on sale of external IT operations and EU provision (190 in 2016) 2015: Restructuring charges in efficiency program (434 in 2015) 2
VOLVO GROUP Volume development in the third quarter VOLUME -13% TRUCK DELIVERIES Units -6,183 MACHINE DELIVERIES Units VOLUME 0% Total Change 60,000 Total Change Volvo 22,353-3,142 UD 4,919 +194 Renault Trucks 9,920-575 Mack 3,963-2,660 50,000 40,000 30,000 20,000 10,000 0,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0,000-23 Volvo 6,779-312 SDLG 2,902 +269 3
VOLVO GROUP Service sales development Trucks SERVICE SALES SEK bn +2% +1% ex FX 12 months 66.0 bn Volvo CE Buses 18 16 14 15.5 16.6 17.0 Volvo Penta 12 10 8 6 4 2 Excl FX 0 4
TRUCKS
VOLVO TRUCKS Automation in Boliden mine 6
VOLVO TRUCKS Awarded at IAA - Fehrenkötter test winner 2016 #1 Total cost of ownership #1 Fuel consumption #1 Overall winner 7
TRUCKS Market environment EUROPE NORTH AMERICA 400 HD 400 300 300 200 200 100 2015: 302 Forecast 2016: 240 Forecast 2017: 215 100 0 HD 2015: 270 Forecast 2016: 295 Forecast 2017: 280 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 000102030405060708091011121314151617 1400 1200 BRAZIL HD 200 1000 2015: 42 Forecast 2016: 30 Forecast 2017: 35 100 800 600 400 200 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 8 0 ASIA HD+MD China India Japan 2015: 751 Forecast 2016: 870 Forecast 2017: 870 2015: 278 Forecast 2016: 330 Forecast 2017: 390 2015: 90 Forecast 2016: 90 Forecast 2017: 90 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
TRUCKS Market shares 2015 2016 HD % NORTH AMERICA YTD September 12,0 9,6 Volvo EUROPE EU28 YTD August 16,0 16,7 8,0 8,0 7,3 7,8 JAPAN Volvo Mack YTD September 18,0 16,3 Renault BRAZIL UD YTD September 20,0 18,9 SOUTH AFRICA YTD August Volvo 13,4 15,0 AUSTRALIA YTD September 14,6 16,2 9,0 8,6 9,1 8,6 2,0 1,5 Volvo 9 UD Volvo Mack UD
TRUCKS Orders and deliveries NORTH AMERICA Orders +6% Deliveries +11% EUROPE Orders -37% Deliveries -46% Orders Orders Deliveries SOUTH AMERICA Orders Orders -4% Deliveries -3% ASIA Orders -24% Deliveries -11% AFRICA & OCEANIA Orders Orders +36% Deliveries -21% Orders 10 Deliveries Deliveries Deliveries Deliveries
CONSTRUCTION EQUIPMENT
CONSTRUCTION EQUIPMENT Innovations showcased at Xploration Forum Hybrid wheel-loader Autonomous battery-electric carrier 12
CONSTRUCTION EQUIPMENT Market environment 250 200 EUROPE 150 100 250 200 NORTH AMERICA 50 Forecast 2016: 0% to +10% Forecast 2017: -5% to +5% 0 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 150 100 50 Forecast 2016: -10% to 0% Forecast 2017: -10% to 0% 0 450 400 350 300 250 200 150 100 50 0 CHINA Forecast 2016: -10% to 0% Forecast 2017: 0% to +10% 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 250 ASIA EXCL. CHINA 200 150 100 50 Forecast 2016: -10% to 0% Forecast 2017: -5% to +5% 0 Total market size is Volvo CE estimation 13 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
CONSTRUCTION EQUIPMENT Orders and deliveries NORTH AMERICA Orders +6% Deliveries -24% Orders +1% Deliveries +9% EUROPE Orders Orders Deliveries SOUTH AMERICA Orders +53% Deliveries +2% Deliveries Orders Orders 14 Orders +24% Deliveries +2% ASIA Orders +69% Deliveries -6% AFRICA & OCEANIA Orders Deliveries Deliveries Deliveries
BUSES Order intake and deliveries decreased by 7% respectively, mainly driven by Asia and South America First order for Volvo 7900 Electric In focus at IAA fair: - Volvo Dynamic Steering - Pedestrian and Cyclist Detection - Energy efficiency focus
VOLVO PENTA Continued sales growth, driven by good product mix Service sales increased by 13% driven by higher marine leisure volumes Gaining new customers in off-road engine segment
Volvo Group THIRD QUARTER 2016 JAN GURANDER DEPUTY CEO AND CFO 17
VOLVO GROUP Net sales per market NET SALES SEK bn +2.1 73.3 2015 18 Europe Currency +0.3 bn -6.8 North America -0.3 0.7-0.3 68.8 South America Asia Africa & Oceania 2016
VOLVO GROUP Adjusted operating income per business area ADJUSTED OPERATING INCOME* SEK M +25-105 5,087* +141 +42 +27 Currency -45 M -371 4,846* 2015 Trucks Volvo CE Buses *Adjustments: 2016: EU provision (190) 2015: Restructuring charges in efficiency program (434) Volvo Penta Financial Services Group Functions & Other 2016 19
VOLVO GROUP Adjusted operating income contributors + Market mix high volumes in Europe + Lower S&A expenses + Lower material cost + Service business + Higher R&D capitalization ADJUSTED OPERATING INCOME* SEK M 5,087* -1,082 +47 +161 +85 Currency - 45 M +460 4,846* +88 - Lower volumes and capacity utilization 2015 Gross income Cash R&D R&D capitaliz. Selling Admin. Other 2016 *Adjustments: 2016: EU provision (190) 2015: Restructuring charges in efficiency program (434) 20
VOLVO GROUP INDUSTRIAL OPERATIONS Cash flow OPERATING CASH FLOW SEK bn 12 months SEK 13.3 bn INVESTMENTS IN PPE SEK bn 12 months SEK 5.5 bn CASH FLOW EFFECT FROM CHANGES IN WORKING CAPITAL SEK bn 1.6 0.9-3.3 2.1 1.4 1.3 1.1-1.1-1.6-1.4-2.4 Accounts receivable Inventories Trade payables Other Total change 21
TRUCKS Net sales NET SALES SEK bn 12 months 201.2 bn -9% 45.1 50.2 45.7 Delivered trucks -13%: - North America -46% - Europe +11% Net sales currency-adjusted -10%: - vehicles -13% - service -1% 2014 2015 2016 22
TRUCKS Adjusted operating income ADJUSTED OPERATING INCOME* SEK bn 12 months 17.1 bn Currency 189 M 2.2 3.6 3.8 ADJUSTED OPERATING INCOME SEK M 3,615* + Positive market mix high volumes in Europe + Lower S&A expenses + Lower material cost + Service business + Higher R&D capitalization 3,756* 2014 2015 2016 ADJUSTED OPERATING MARGIN* % 12 months 8.5% 8.2% 7.2% 4.9% - Lower volumes and capacity utilization in NA 2014 2015 2016 2015 2016 *Adjustments: 2016: EU provision (190 in 2016) 2015: Restructuring charges in efficiency program (368 in 2015), arbitration case and capital gain on Eicher shares 2014:Restructuring charges in efficiency program, EU provision and gain on real estate sale 23
CONSTRUCTION EQUIPMENT Net sales NET SALES SEK bn 12 months 48.6 bn -3% 12.6 11.9 11.5 Delivered machines 0%: -Volvo-4% -SDLG +10% Net sales currency-adjusted -2%: - machines -2% - service -1% 2014 2015 2016 24
CONSTRUCTION EQUIPMENT Adjusted operating income ADJUSTED OPERATING INCOME* SEK M 12 months 1,561 M Currency -104 M ADJUSTED OPERATING INCOME SEK M 576* 601 648 601 576 2014 2015 2016 + Lower credit losses China ADJUSTED OPERATING MARGIN* % 12 months 3.2% - Negative product mix - Currency 5.1% 4.8% 5.2% 2015 2016 2014 2015 2016 *Excluding restructuring charges in efficiency program for comparison periods 2014-2015 25
BUSES Net sales & adjusted operating income NET SALES SEK bn 4.6 12 months 24.7 bn 5.5 5.4 2014 2015 2016 Net sales currency-adjusted 0% - vehicles -1% - service +1% Adjusted operating income: + lower costs - lower volumes - currency - product & market mix Adjusted operating margin* 4.3% (6.1) ADJUSTED OPERATING INCOME* SEK M 12 months 897 M Currency -138 M 337 50 232 2014 2015 2016 * Excluding restructuring charges in efficiency program for comparison periods 2014-2015 26
VOLVO PENTA Net sales & adjusted operating income NET SALES SEK bn 2.0 2.3 12 months 9.7 bn 2.5 2014 2015 2016 Net sales currency-adjusted +5% - engines +1% - service +14% Adjusted operating income: + favorable product mix Adjusted operating margin* 14.5% (13.5) ADJUSTED OPERATING INCOME* SEK M 12 months 1,253 M Currency 16 M 358 316 253 2014 2015 2016 * Excluding restructuring charges in efficiency program for comparison periods 2014-2015 27
FINANCIAL SERVICES New financing and profitability NEW FINANCING SEK bn 12 months 53.9 bn 13.6 13.3 13.4 ADJUSTED OPERATING INCOME* SEK M 12 months 2,053 M 528 501 452 ROE* 12 months, % 11.8% 13.4% 13.3% 2014 2015 2016 2014 2015 2016 2014 2015 2016 * Excluding restructuring charges in efficiency program for comparison periods 2014-2015 28
VOLVO GROUP Third quarter highlights NET SALES SEK bn 12 months 299 bn 73.3 68.8 ADJUSTED OPERATING MARGIN* 12 months 6.7% % 6.9% 7.0% Maintained profitability despite lower volumes Adjusted operating margin* 7.0% (6.9) Trucks adjusted operating margin* 8.2% (7.2) on 13% lower volumes *Adjustments: 2016: Capital gain on sale of external IT operations and EU provision (190 in 2016) 2015: Restructuring charges in efficiency program (434 in 2015) 29
Volvo Group THIRD QUARTER 2016 30