<a href="/v5/viewer/files/Default_s.aspx?gKey=r0q0ps78&gInitPage=1">Scania Value - nr 3 - 2009 - EN 1 A MAGAZINE FOR S</a> CANIA’S SHAREHOLDERS QUARTER 3 2009 20 % Operating margin 16 12 8 4 0 -08 Q3 -07 Q4 -08 Q1 -08 Q2 -08 Q3 -08 Q4 -09 Q1 -09 Q2 -09 Q3 Report. Operating margin up in third quarter. > PAGE 2 Interview. Martin Lundstedt on Scania’s product development strategy. > PAGE 3 Finance. Capital Markets Day focuses on the state of the economy. > PAGE 6–7 Timely innovations 24% A stronger product portfolio as the economy rebounds. > PAGE 4–5 FIGURES IN FOCUS: Scania’s market share for heavy trucks in Brazil, fi rst nine months of 2009.
<a href="/v5/viewer/files/Default_s.aspx?gKey=r0q0ps78&gInitPage=2">Scania Value - nr 3 - 2009 - EN Sida 2 FIRST NINE </a> MONTHS IN FIGURES Order bookings and deliveries by region, 9 months (number of vehicles) CENTRAL AND EASTERN EUROPE Order bookings WESTERN EUROPE Order bookings 8,988 -53% Deliveries 13,504 -51% LATIN AMERICA Order bookings 7,951 -30% Deliveries 6,751 -26% Net sales SEK m. 25 000 OTHER MARKETS Order bookings 2,331 -28% Deliveries 2,851 +28% Net sales by product segment, 9 m Used vehicles 5.9% 20 000 Services 24.2% 15 000 10 000 Engines 1.2% 5 000 0 Buses and coaches 12.9% Rolling 12 months Key fi gures (SEK m unless otherwise noted) Net sales, Scania Group Operating income, Vehicles and Services Operating income, Financial Services Operating income Income before taxes Net income for the period Operating margin, percent Return on equity, percent Return on capital employed, Vehicles and Services, percent Earnings per share, SEK Cash fl ow, Vehicles and Services Number of employees, 30 June Order bookings (Units, trucks and bus chassis) Deliveries (Units, trucks and bus chassis) 2009, 9 m 43,714 1,124 -82 1,042 366 307 2.4 8.3 11.5 0.38 3,017 32,085 24,918 29,690 2008, 9 m 66,319 10,089 366 10,455 10,270 7,369 15.8 43.3 50.5 9.21 3,638 36,226 48,611 55,818 Change, in % -34 -89 - -90 -96 -96 - - - - - - -49 -47 Q3 IN BRIEF: OPERATING MARGIN declined to 2.4% in the fi rst nine months and to 3.9% in the third quarter. DELIVERIES fell by 47% to 29,690 vehicles in the fi rst nine months. ORDER BOOKINGS declined by 49% in the fi rst nine months and by 6% in the third quarter. 2 SCANIA VALUE • Q2/2009 www.scania.com 4 0 1 000 0 Trucks 55.3% Other 0.5% % 20 Operating income, SEK m. Operating margin, percent 16 12 8 4 000 3 000 2 000 ASIA Order bookings 4,101 -36% Deliveries 4,382 -28% Operating income and margin SEK m. 5 000 1,547 -82% Deliveries 2,202 -80% 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3
<a href="/v5/viewer/files/Default_s.aspx?gKey=r0q0ps78&gInitPage=3">Scania Value - nr 3 - 2009 - EN Sida 3 INTERVIEW S</a> cania’s principle is to continuously work with improvements that quickly provide customers with better performance, says Martin Lundstedt. text: göran lind photo: dan boman Product development continues In September, Scania launched the new R-series amid intensive media coverage. But this launch is actually only part of a continuously ongoing process. Martin Lundstedt, Executive Vice President and Head of Franchise and Factory Sales, explains the strategy behind Scania’s product development. With the world economy moving at slow speed, Scania has chosen to launch both a new version of an existing truck series and a new coach for the global market. Wouldn’t it have been better to wait until demand takes off? We are continuing to develop our product portfolio regardless of what phase of the economic cycle we are in. We are convinced that continuous improvements that more quickly provide customers with better performance and operating economy are the best way to retain our competitiveness in both good and bad times. Why are continuous improvements in small steps better than working with fewer but larger model changes? One reason is that we can more quickly introduce product improvements. When something is www.scania.com fully developed, we can get it out into the market immediately. Another reason is that it is easier to ensure a high level of quality with smaller, more numerous changes where we don’t change more than the customer actually demands. It sounds good. Does it also work in practice? Yes, since we changed our approach to product development some years ago, we have achieved all the advantages that we sought: Improvements reach our clients much faster, and we benefit from more efficient capital utilisation, lower technical risk and better training in the service network, which ensures a good level of service in all Scania markets. How is the potential for product improvements affected by Scania’s modular product system? (Vehicle and engine components can be tailored to customer needs). The modular system is the foundation of our continuous improvement work. Since parts and components are interchangeable, they can be continually developed and placed in production without new model launches. Among other things, this means that engines can be upgraded continuously and that this is not connected to development of the cab or gearboxes. The modular system also limits the number of components, yielding economies of scale in development, production and services. What improvements get highest priority? Everything is based on customer needs. What drives development is giving vehicles characteristics that enable our customers to boost their productivity and profitability. The new R-series (see page 4) is an excellent example of this, since it includes a number of improvements that reduce fuel consumption and thereby enhance the customer’s overall operating economy. Q3/2009 • SCANIA VALUE 3
<a href="/v5/viewer/files/Default_s.aspx?gKey=r0q0ps78&gInitPage=4">Scania Value - nr 3 - 2009 - EN Sida 4 FOCUS: PROD</a> UCT DEVELOPMENT The cab environment of the new R-series makes it easier to recruit the best drivers, thereby helping to lower fuel costs, among other things. NewR-series iswell tim Sooner or later, the recession will ease. When that happens, Scania will be well equipped. During the spring and an intensive autumn, the company has launched new industrial engines, a new coach and the new R-series trucks. The new R-series offers both lower fuel consumption and a better driver environment. It will secure Scania’s leading position in the important long-haulage truck segment. The launch is also timely because the new R-series will give hard-pressed customers better total operating economy. The R-series can be described as Scania’s flagship – its biggest and most costly cab series. During the five years it has produced the R-series, the company has delivered more than 200,000 such trucks to markets all over the world. In September, Scania launched its new R-series, with a new look both inside and out. There was heavy media interest − around 200 motor journalists visited the test track to get a preview of the new series. 4 SCANIA VALUE • Q3/2009 “The launch is occurring at a time when cus- tomers are going through very tough challenges. They are working hard to keep costs down, and we must be able to demonstrate clearly that a new truck is a profitable long-term investment. The R-series is well timed, since our trucks and our service network will help the customer boost productivity and lower operating costs,” says Henrik Henriksson, Senior Vice President Trucks. A crucial point in this context is fuel cost, which normally accounts for more than one third of the operating cost of a truck, including the driver’s salary. Margins are often small, so even a few percent lower fuel costs can signify a profit instead of a loss. Skilled drivers mean lower fuel costs The new R-series lowers fuel cost in several ways. A sharper new exterior features improved aerodynamics and cooling capacity. Another innovation is Scania Driver Support, which gives drivers real-time feedback in the form of continuous tips on how they can refine their driving style. The system is based on parameters that are recognisable from Scania Driver Training and that have a major influence on both road safety and operating economy. Also available in the R-series is a new fully automated version of the Scania Opticruise www.scania.com
<a href="/v5/viewer/files/Default_s.aspx?gKey=r0q0ps78&gInitPage=5">Scania Value - nr 3 - 2009 - EN Sida 5 text: mats </a> falck photos: carl-erik andersson, stefan almers, dan boman The Scania Touring coach, designed for occasional service, is a new member of a global bus and coach family. Strategic partnership leads to new coach October 2009 saw the launch of the new Scania Touring coach, the result of a strategic partnership with Chinese bus builder Higer. This is a vital step in Scania’s strategy of increasing industrialisation and service content in its bus and coach business. med gearchanging system, which makes driving easier and reduces fuel consumption. Another innovation is that fuel tank volume has been expanded, giving trucks a substantially longer operating range and making it easier for drivers to refuel where this is cheap. But truck characteristics are not all that deter- mines how much fuel a vehicle consumes. Who is driving the truck is also of great importance. In the new R-series, the cab interior has undergone extensive changes that mean a better environment for work and rest. The new interior has many carefully crafted details, including a dashboard that features new styling and materials that improve its look and feel. “Keeping the driver happy makes it easier to recruit the best drivers, which is a vital factor in achieving good fuel economy, road safety and low operating costs,” Henriksson says. www.scania.com In the new coach, Higer is providing the bodybuilding expertise and Scania the chassis and experience of international customer demands. “Customers want more complete transport solutions. This coach model enables us to offer not only a very competitive product, but also service and parts through our global network,” says Melker Jernberg, Senior Vice President Buses and Coaches. The coach is built on its own assembly line at Higer’s factory in China, thus assuring quality and efficient production. Today there are two parallel bus and coach lines at Higer’s Melker Jernberg factory with a paint shop, staffed by specially selected fitters who build only Scania Touring or other Scania models for exports to other parts of Asia as well as Africa, the Middle East and Russia. There is sufficient capacity to handle an expansion that will include additional new Scania bus and coach models over the next several years. “At the Higer factory, a great deal of work has gone into bringing together our two production cultures. One main purpose has been to build up confidence in each other,” Jernberg says. The Scania Touring adds another member to Scania’s global bus and coach product family, which includes the Scania OmniCity, Scania OmniLink and Scania OmniExpress. One cornerstone of Scania’s long-term strategy for its bus and coach operations is to create global bus and coach makes that are supported by its whole organisation from factory to dealer. “For a customer who has chosen a vehicle from this global bus and coach family, there should never be any doubt that he has chosen a Scania vehicle,” Jernberg says. Scania second largest Another increasingly common customer demand is a chance to buy a fully built vehicle from one supplier. The trend from being a chassis builder to being a total supplier started in Europe but is affecting the whole bus and coach world. “Offering first-class chassis is no longer enough,” says Jernberg. “Customers want complete buses from a single supplier. If Scania will continue being one of the largest global bus and coach makes, we have to fulfil this total supplier role.” During 2008 Scania was the second largest bus and coach make among European and Japanese manufacturers, behind Mercedes Benz but ahead of both Volvo and MAN including Neoplan. Scania constantly works to boost its profitabil- ity in building complete buses and coaches. It has achieved good results by applying the principles of continuous improvement from its chassis production. Q3/2009 • SCANIA VALUE 5
<a href="/v5/viewer/files/Default_s.aspx?gKey=r0q0ps78&gInitPage=6">Scania Value - nr 3 - 2009 - EN Sida 6 FINANCE The</a> state of the economy was a major focus of Scania’s heavily attended Capital Markets Day. Banking system crucial Despite no clear signs of better times, Scania will stand well prepared when the turnaround comes − that is how the mood at the company’s Capital Markets Day can be summarised. “How quickly demand rebounds will depend to a very large extent on developments in the financial system. The question is whether the liquidity now being pumped into the system will stay in the banks or whether it will make its way out into the real economy,” President and CEO Leif Östling told the audience at Scania’s heavily attended Capital Markets Day, which was held in Södertälje, Sweden on September 17. Just over one year has passed since the global recession began in earnest with the Lehman Brothers bankruptcy, a period that Östling described as “the worst downturn I have ever seen − the market disappeared in the space of three weeks.” But today most observers, including the Executive Board of Scania, seem to agree that the bottom has been reached. So the only 6 SCANIA VALUE • Q3/2009 question is when demand will rebound. Östling painted two conceivable scenarios: One that is similar to what happened after the early 1980s slump, when it took about four years to return to normal levels. And another in which the situation improves within only a couple of years, as occurred in the mid-1990s. “We don’t know which scenario is more prob- able. But we must continue to be cautious about the prospects for 2010. The financial system is in bad shape, and before this is resolved the real economy will not get moving,” Östling said. One fundamental problem is that many of Scania’s customers among small and mediumsized companies in Europe still have difficulty in obtaining financing. This is especially true of Central and Eastern Europe, where companies are more often newly established and highly leveraged. In addition, they are suffering from a price squeeze on transport. “Although the downturn has levelled off, activity among our customers remains low,” Östling said. But there are major geographic differences: The problems are largely connected to Europe, where such markets as the Nordic countries are nevertheless performing decently. In other parts of the world, such as Asia and South America, there is higher activity than in Europe. “There is continued strong demand in Bra- zil,” said Martin Lundstedt, Scania’s Head of Franchise and Factory Sales. “In addition, we have boosted our market share in that country. We lacked the capacity to deliver enough trucks in Brazil during 2007 and 2008 and our market share fell below 20 percent. But now we have increased it to between 23-25 percent,” . In Asia, levels are admittedly lower than a www.scania.com
<a href="/v5/viewer/files/Default_s.aspx?gKey=r0q0ps78&gInitPage=7">Scania Value - nr 3 - 2009 - EN Sida 7 text: göran</a> lind photo: stefan bohlin Voices from Capital Markets Day Magnus FrÖBLOM senior Portfolio Manager, riksbankens Jubileumsfond What are your main impressions from scania’s Capital Markets Day? “I appreciated hearing how Scania and the industry have dealt with the large volume downturns during the crisis and to hear that inventory adjustment in Europe is largely completed. Having gained market share and adjusted its production costs, Scania is well equipped to defend its ‘best in class’ position in terms of profitability. The average age of trucks in Europe is beginning to approach its historical peaks of 5½-6 years. Then it will start being profitable for operators to order new trucks, since they will save so much on the lower fuel consumption of the newer engines.” What is your view of scania? “Due to expected higher production and stable deliveries over the next several quarters, Scania will gradually achieve improved earnings, but the question remains: When will final demand take off? This applies especially to such important emerging economies as Russia, where there is little transparency. One good sign, though, is that used truck prices in Europe have stabi- lised and sales have increased. The challenge for Scania during the coming year will be to handle increasing customer financing as a consequence of the crisis. Despite price hikes on such commodities as oil, demand has not yet improved in eastern Europe. This is especially true of Russia, where some inventory adjustment certainly remains to be done.” PEtEr thELIn Partner, Brummer & Partners What are your main impressions from scania’s Capital Markets Day? “I think it was interesting to hear the Scania Executive Board’s perspective on the current economic situation, how they have managed the downturn, how Scania views the future and how it is moving towards outsourcing more production to sub-contractors.” What is your view of scania? “Scania’s management know what they are doing. When the economy turns around, I believe Scania will regain its profitability, perhaps even at a higher level than before. I have a positive attitude towards the company. What may seem a bit uncertain is the ownership question, but not much can be done to influence that.” to turnaround year ago, but Lundstedt was still able to single out a number of bright spots. Scania’s concept of focusing on overall operating economy has been successful in the city bus segment, and activity has increased in certain economic sectors in Asia, among them the mining industry. There were other positive signals at the Capi- tal Markets Day. Scania’s CFO, Jan Ytterberg, said that inventory reduction is now largely completed. “On the whole, there is still surplus inventory only in Russia,” he said. Many deliveries during the first half of 2009 consisted of trucks from the company’s inventories and this led to very low production levels, especially during the second quarter. Because today most markets have no surplus inventories to deliver from, this means that Scania expects its production rate to be higher than in the second quarter. Meanwhile demand remains at a low level, and the third quarter is seasonally weak www.scania.com due to the holiday period in many of Scania’s markets. The speakers also commented on the market for used trucks, which has now stabilised. Those used trucks that Scania receives are largely being sold immediately. Scania is well equipped for the next phase of the upturn. Large-scale training programmes during the past year have further boosted employee skills at production units, and the system of short working weeks and employee time banks will enable the organisation to shift to a higher production rate relatively quickly and cost-effectively. Meanwhile the company is continuing to launch new products. The new R-series will ensure Scania’s leading position in the important long-haulage truck segment by offering customers better operating economy. “This will provide a great opportunity for prof- itable growth when the market turns around,” Leif Östling said. “In the long term, globalisation will lead to an increased need for goods transport,” says President and CEO Leif Östling. “Long-term trends favour scania” Long-term market trends favour Scania, whose plans to sell 150,000 vehicles per year remain in place, said President and CEO Leif Östling at the Capital Markets Day. “The normal economic cycle in our indus- try is ten years. This would mean that we have seven years of growth ahead of us and that the next peak will occur some time in 2017 or 2018,” Östling said. He maintained that in the long term, globali- sation will lead to an increased need for goods transport, especially in emerging economies. “Today 70 percent of all transport services are by road, and there is no reason to believe that this will change.” Östling also foresees favourable conditions for vigorous long-term growth in the company’s buses and coaches business.“There are major advantages, especially in environmental terms, in moving urban transport from cars to buses. “We aim at reaching our plans for 150,000 vehicles yearly with an unchanged workforce. We will also streamline our production further within the framework of SPS and increase our outsourcing. At the peak of the next economic cycle, 75 percent of chassis materials and components will be outsourced,” Östling said. Q3/2009 • SCANIA VALUE 7
<a href="/v5/viewer/files/Default_s.aspx?gKey=r0q0ps78&gInitPage=8">Scania Value - nr 3 - 2009 - EN Sida 8 IN BRIEF Sc</a> ania continues to invest in eastern emerging markets Scania has inaugurated its first distributor and service facility in Kazakhstan and opened a new head office and affiliated service workshop in Ukraine. “A professional service network is an important ele ment of Scania’s growth strategy in new markets,” says Urban Erdtman, Executive Vice President, Sales and Services Management. Kazakhstan is the hub of Scania’s commitment to the markets of central Asia. The newly inaugurated sales and service facility − the company’s first of its own in the region − is located in Almaty, southern Kazakhstan. It also houses the head office of Scania Central Asia, which was established in 2007. The demand for western Euro- President and CEO Leif Östling (centre) helped inaugurate the new head office in Ukraine. pean vehicles in the region is limited today but is increasing as the central Asian economies grow and as road transport between Southeast Asia, Russia and Europe expand. Kazakhstan plays a vital role as a transit country for these transport services. The service facility in Ukraine is one of Scania’s largest in eastern Among most widely owned companies With close to 120,000 shareholders, Scania is among the companies listed on the NASDAQ OMX Nordic Exchange Stockholm with the largest number of owners. According to Euroclear Sweden, on 30 September 2009 Ericsson topped the list with 705,700 shareholders, followed by TeliaSonera with 643,729 and Swedbank with 346,197. Scania occupied ninth place with 119,879 shareholders, ahead of Handelsbanken, Nordea and Atlas Copco. A main supplier to DHL in Europe Scania has signed a pan-European delivery agreement with the transport and logistics company DHL, which recommends Scania as a supplier of heavy trucks to the hauliers that act as contractors to DHL. “The agreement opens the way for sales of about 1,000 new trucks per year,” says Urban Erdtman, Executive Vice President, Sales and Services Management. Transport companies that act under the DHL PartnerStore programme are guaranteed access to trucks that meet DHL’s requirements and needs, such as vehicles’ cargo capacity, equipment level and environmental performance. The agreement is available to the hauliers that DHL relies on for transport services in Germany, France, Belgium, the Netherlands, Luxembourg, Denmark, Finland, Norway, Sweden, Spain, Portugal and Italy. In Britain, a separate agreement applies to truck purchases for DHL’s own fleet. Xxxxxxxxx 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 0 Number of shareholders in selected Swedish listed companies Europe. It will also include a training centre for service technicians, drivers and others as well as a central warehouse for the Ukrainian market. Upcoming financial events 3 February 2010 Year-end Report for 2009 28 April 2010 Interim Report, JanuaryMarch 2010 6 May 2010 Annual General Meeting 23 July 2010 Interim Report, JanuaryJune 2010 Scania Value is published by Scania and distributed to Scania shareholders. Publisher Per Hillström ir@scania.com Editor-in-chief Conny Hetting conny.hetting@scania.com Project Manager goran.lind@appelberg.com Art Director magdalena.taubert@appelberg.com Production Appelberg Publishing www.appelberg.com Printing: Trosa Tryckeri Cover photo: Stefan Bohlin Address Scania Investor Relations SE-151 87 Södertälje, Sweden Tel: 08-553 81 000 TeliaSonera Ericsson Swedbank H&M Handelsbanken Scania Atlas Copco Nordea
