scania value q2 2012

Interview. Xxxx xxx xxxxxx xxx xx xxxxxx xxxx xxxx xxx xxxxxx xxx. > SID 3

Stock market. Xxxx xxx xxxxxx xxx xx xxxxxx xxxx xxxx xxx xxxxxx.> SID 6–7

Report. Xxxx xxx xxx xxx xxx xxx xxx xx xxx.> SID 2

FIGURES IN FOCUS:

XXXXxxxxx xxx xx

xxxx xxxx xxxxx xxx xxxx xxxxx xx.

8

11

14

17

20% Rörelsemarginal

-06Kv4

-07Kv1

-07Kv2

-07Kv3

-07Kv4

-08Kv1

-08Kv2

-08Kv3

-08Kv4

Xxxxx xxxx xxxxxxxx xx x xxxxxx xxxxx. > SID 4–5

Interview. Focusing on service at Scania in Latin America.> PAGE 3

Finance. Incentives and sport will get Brazil moving again.> PAGE 6–7

Report. Lower delive-ries and higher costs pulled down the mar-gin. > PAGE 2

FIGURES IN FOCUS:

4.06Earnings per share (SEK) in the

first six months

Scania’s broad efforts to reduce environmental impact. > PAGE 4–5

Lower emissions

0

4

8

12

16

20%

-12 Q2

-10 Q2

-10 Q3

-10 Q4

-11 Q1

-11 Q2

-11 Q3

-11 Q4

Operating margin

-12 Q1

A MAGAZINE FOR SCANIA’S SHAREHOLDERSQUARTER 2 2012

0

5,000

10,000

15,000

20,000

25,000

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

0

4

8

12

16

20

2012

Q2

2010

Q2

2010

Q3

2010

Q4

2011

Q1

2011

Q2

2011

Q3

2011

Q4

2010

Q2

2010

Q3

2010

Q4

2011

Q1

2011

Q2

2012

Q2

2011

Q3

2011

Q4

Trucks 61%

Other 2%Used vehicles 6%

Services 21%

Engines 2%

Buses and coaches 8%

%SEK m. SEK m.

2012

Q1

2012

Q1

Operating income, SEK m.Operating margin, percent

euRope

Order bookings

8,150 -14%Deliveries

7,020 -20%

euRASIA

Order bookings


1,736 -11%

LATIN AMeRICA

Order bookings

4,669 +6%Deliveries

3,234 -42%

ASIA

Order bookings


2,841 -28%

AFRICA AND oCeANIA

Order bookings

989 -6%Deliveries

963 -6%

First six months in brief:DELIVERIES fell by 21 percent to 32,032 fordon.

OPERATING INCOME fell by 36 percent to SEK 4,257 m.

CASH FLOW amounted to SEK 1,769 m.

First six months in Figures

order bookings and deliveries by region, Q2 (number of vehicles)

(SEK m. unless otherwise noted) 2010, H1 2009, H1 Change in %

Net sales, Scania Group 39,338 43,665 -10

Operating income, Vehicles and Services 3,944 6,414 -39

Operating income, Financial Services 313 238 32

Operating income 4,257 6,652 -36

Income before taxes 4,275 6,828 -37

Net income for the period 3,249 4,947 -34

Operating margin, % 10.8 15.2

Return on equity, % 23.1 35.0

Return on capital employed, Vehicles and Services, % 29.2 44.2

Earnings per share, SEK 4.06 6.18 -34

Cash flow, Vehicles and Services 1,769 3,218 -45

Number of employees, 30 June 37,802 36,941

Order bookings (units, trucks and buses) 35,395 42,103 -16

Deliveries (units, trucks and buses) 32,032 40,300 -21

2 SCANIA VALUE • Q2/2012 www.scania.com/se

Net sales by product segment* Net sales operating income and margin

Key figures

*Refers to first half of 2012

www.scania.com • SCANIA VALUE 3Q2/2012

Scania stands strong in Latin AmericaLatin America is not only Scania’s second biggest region but also an important region of the world, with different countries presenting different demands and conditions. Martin Ståhlberg, head of Scania’s Latin American operations, is focusing on service.

Martin Ståhlberg was appointed head of Scania’s Latin American operations in September 2011. Prior to this, he had served as head of Scania in France and Sweden and as Managing Director of Scania’s dealerships in Stockholm. In his cur-rent role, he is in charge of one of Scania’s most important regions.

“Latin America today represents about 20 per-cent of Scania’s vehicle deliveries and the region has accounted for reasonably stable growth in recent years, despite the economic downturn dur-ing 2008 and 2009,” says Ståhlberg.

Aside from Brazil, Scania has a strong presence in several other countries where the company has

to meet the specific demands of each market. “We have a strong brand in all the markets

we operate in. In Mexico, we have a 65 percent market share for intercity buses. In Peru, there is strong potential for mining applications but also for intercity buses. In Venezuela, we have very successfully launched our industrial engines. In Colombia and Chile, we have developed our Bus Systems by Scania concept, in which buses occupy dedicated lanes in a system that resembles rail-bound service.”

Distribution segment is importantYet Brazil is the country to which Ståhlberg is devoting the greatest attention.

“In Brazil, we are currently focusing on the local distribution segment but we are also very strong in long-haulage, in products for the agricultural industry and in off-road solutions for the con-struction and mining sectors,” he says.

One important factor that is reducing demand in Brazil this year is the transition to the new Euro 5 emission standard. But according to

Ståhlberg, Scania has been able to take advantage of having been well prepared for the change-over.

“Scania has good experience of the Euro 5 technology since it is already available in Europe. Our customers here are happy with what we can deliver since they can enjoy the same benefits as the previous technology in terms of fuel economy and productivity,” he says, while pointing out that during the first five months of 2012 Scania captured the largest market share when it comes to sales of Euro 5 vehicles. Overall, the heavy truck market shrank by 32 percent during the first half of the year. Demand was strong in both 2010 and 2011.

When it comes to future expansion in Latin America, Ståhlberg believes that the primary focus must be on service.

“We are focusing on continued improvement of our service network and service offering. We believe that knowledge of our customers’ busi-ness and of our customers’ customers means that not only can we understand, but also predict what needs our customers will have. In this way we can help improve their business.”

interview text: erik aronsson photo: dan boman

Service must be a major focus of Scania’s future expansion in Latin

America, says Martin Ståhlberg.

4 SCANIA VALUE • Q2/2012 www.scania.com

For a long time, there have been regulations which prescribe limits for discharges of particulates and nitric oxide. Many countries have introduced the Euro emission standards, and the Euro 5 standard currently applies in the European Union, Brazil and elsewhere. The next stage in Europe will be the Euro 6 standard, which enters into force within the EU and certain neighbouring coun-tries on 31 December 2013 for all new vehicles that are sold.

Scania’s early euro 6 launchAs early as March 2011, Scania launched its first Euro 6 engines in order to give far-sighted hauli-ers the opportunity to be one step ahead before the new emission standard go into effect.

An acknowledgement of the successful launch

came when Scania’s R 480 Euro 6 tractor model recently received the “Green Truck 2012” award from the respected German trade magazines Verkehrsrundschau and Trucker. “The good results achieved by the Scania R 480 Euro 6 in these press tests confirm that Scania’s engineers have done an excellent job in developing the engines,” says Scania’s Managing Director for Germany and Austria, Alexander Vlaskamp.

The Euro 6 standard means about one fifth of the emissions of nitric oxide and particulates compared to Euro 5. Lower carbon dioxide emissions is an area that is in constant focus since lower fuel consumption is of great

importance to Scania’s customers. However, there are still no actual regulations regarding emissions of carbon dioxide for commercial vehicles. There are many opportunities to reduce climate impacting emissions aside from impro-ving the efficiency of the traditional diesel engine. Alternative fuels are one method.

focus: environment

Meeting environmental challenges

Scania is working on a broad front and in cooperation with customers to help reduce the environmental impact related to carbon dioxide and other substances. Demands for reduced emissions from the transport sector are increasing while economic growth means that transport volume is growing. This represents a great challenge for vehicle manufacturers and transport companies.


Today’s electric vehicles are often powered by batteries, but such vehicles have a limited driving distance due to their low storage capacity. Scania is therefore evaluating various alternatives for transferring electricity between roadway and vehicle, including inductive power transfer.

For more than 20 years, Scania has worked with bioethanol as an alternative fuel. Today bioethanol is the most widely used biofuel in transport services. It is also the fuel which has the best prospect of being supplied in large and enduring quantities in the future, and it offers the highest cost efficiency and best operational range of the renewable fuels available at present.

A major advantage is that bioethanol is avail-able in liquid form and in commercial quantities all over the world. It is easy to produce from a variety of different raw materials – such as sugar cane, beets and cellulose – and it is used both as pure fuel and as an additive to traditional fuels.

Scania is the only vehicle manufacturer to offer a number of heavy haulage products that can be powered by bioethanol – for example buses, trucks and refuse collection vehicles. Scania’s engines for bioethanol fuel have the same energy efficiency as a standard diesel engine and meet the Euro 5/EEV emission standards.

“Of course many people want to rely on future technology, but there is so much we can do even today. Bioethanol can deliver up to 90 percent lower CO2 emissions compared to ordinary die-sel,” says Urban Wästljung, Manager, Sustainable Transport at Scania.

Scania is also working on solutions to reduce CO2 emissions which as yet are only in the experimental stage. Some time ago, the car industry launched electric cars of different kinds. A major challenge in the case of commercial vehicles is the limitation in battery technol-ogy, which for example cannot provide enough capacity for a truck carrying a 25 tonne payload, driven very long distances.

electric motorways – a future possibilityHowever, if a vehicle can obtain electric power from the roadway itself, the potential will be much greater. It may sounds a bit like science fic-tion, but it is a field where Scania even today is involved in several different projects.

A future system of electrified motor-ways has a number of advantages: there is less environmental impact from operation of vehicles, elec-tric engines are more efficient than ordinary internal combus-tion engines and power can be supplied to the vehicles without needing to use heavy batteries.

Several interesting projects relating to electrified roads are underway in Sweden. One example is Scania’s coopera-tion with Siemens regarding electric truck operation on the road between Pajala and the iron mine at Svappavaara in far northern Swe-den. There, trucks containing iron ore will drive

round-the-clock for reloading to the Iron Ore Line, a railway that will carry the ore to a port on the Atlantic coast of northern Norway. In a recent report, the Swedish Transport Administra-tion (Trafikverket) stated that electrically-pow-ered trucks are a realistic alternative. Power sup-plied by overhead cables is probably also the best solution for this service, since the road is built on bogs and moves up and down.

“Development of our electrified vehicle has to take place on a step-by-step basis,” explains Johan Lindström, Expert Engineer at Hybrid Systems Development, Scania.

“We are using electrified gearboxes developed in hybrid projects, but then a large electrical motor must be added to the powertrain to drive 90 tonnes of payload entirely by electricity.”

However, some problems would have to be resolved in order to adapt such a system to enable both heavy vehicles and ordinary cars to obtain power from aerial lines.

Scania is therefore also examining solutions where vehicles obtain their power supply from the roadway through induction or some other technique. This will deliver a more flexible solu-

tion where all vehicles can use the system and thus share the large investment cost to rebuild the road network. A feasibility study from the Svenska Elvägar (“Swedish Electric Roads”) pro-ject shows that electrification of heavy road traf-fic in Sweden would make it possible to reduce CO2 emissions by 4.2 million tonnes, equivalent to 9 percent of national fossil fuel emissions.

Together with Volvo Powertrain, Bombardier, Alstom and other companies within the trans-port industry, Scania has applied for funding from the government-backed Strategic Automo-tive Research and Innovation (FFI) research pro-gramme, for a study on electric road transport systems, which is expected to be completed in early 2013.

In Scania’s view, different solutions will be required in different markets to make such systems commercially viable in meeting future emission challenges. This is due to varying access to alternative fuels and also depends on how developed the electrical infrastructure will be in the future. Scania has a good starting posi-tion, given its extensive experience of a modular product range.

“ Bioethanol can deliver up to 90 percent lower Co2 emis-sions compared to ordinary diesel.”

text: erik aronsson foto: scania

6 SCANIA VALUE • Q2/2012 www.scania.com

Technology shift in Scania’s largest market

Demand for heavy trucks in Brazil has been at a very high level in recent years, but the transi-tion to the Euro 5 emission standard during the first half of 2012 has had a negative impact on demand. Buyers of new trucks have been hesitant about assuming the cost implied by an investment in the new trucks. The shift from the Euro 3 emission standard to Euro 5 means that vehicles gain exhaust purification technol-ogy which has not been used in Brazil to date.

Meanwhile the generally weaker economic conditions have reduced demand throughout the Brazilian economy, which has also affected demand for vehicles. The Brazilian government has tried to get growth moving again through various incentives and the central bank has reduced interest rates in several stages. In April, Brazil’s finance minister Guido Mantega introduced a package including tax cuts, in-centives to local industry through government procurement and better financing measures for export companies.

Reduced growth forecasts“So far, this has not had a significant effect but as decisions regarding support are moved out to a

local level we should see a greater effect. Seasonal-ly adjusted, I think we may start to see a sequential recovery during the summer even though we do not expect that registrations and production will increase compared to last year,” says Björn Enar-son, analyst at Danske Bank.

Mantega has had to reduce the growth out-look on several occasions and in mid-July Reuters reported that the GDP forecast had been cut to 2.5 percent for 2012. In 2011, growth was 2.7 percent.

However, in the longer term, analysts believe that there are factors that point towards a good performance in Brazil. Infrastructure investments connected to the football World Cup in 2014 and the 2016 Olympic Games in Rio de Janeiro com-bined with the demographic trend and the above-mentioned incentive measures imply a good out-look for the entire automotive industry.

“We predict a strong rebound in demand and production of heavy trucks in early 2013 in light

of the recovery within the industrial and the agricultural sectors, acceptance of new rules for fuels and engines, and better access to govern-ment incentive measures,” writes the US invest-ment bank JP Morgan in an analysis.

High average age of truck fleet JP Morgan also points out in its analysis that the Brazilian truck fleet, which is estimated to num-ber about a million trucks, still has a high aver-age age, suggesting a large replacement need. The same applies in the bus and coach market.

Transport needs in particular will be in focus for the two gigantic sporting events that are planned in Brazil in the next few years. Ahead of the World Cup in 2014, there are plans for a number of infrastructure investments and the government is also hoping for greater economic activity during the event in the form of tourism and increased private consumption.

“We believe that the World Cup will have some positive effect on the market, particu-larly as regards construction equipment, thanks to all of the planned building projects,” says Enarson.

The 2016 Olympic Games in Rio de Janeiro will also require extensive infrastructure invest-ments. In March 2012, Brazil’s President Dilma Rouseff and Rio de Janeiro’s Mayor Eduardo Paes announced plans for bus and light rail transport solutions in Rio that are expected to cost approximately USD 1 billion, the equiva-lent of SEK 8 billion. However, this is a minor factor when compared to the World Cup.

“The positive effect from the Olympics will not be as significant since there is only one city involved,” says Enarson.

finance: scania in brazil

Brazil’s finance minister, Guido Mantega, hopes to get the country’s economy moving again.

Brazil

The transition to a new emission standard and generally weaker economic conditions have reduced demand for heavy trucks in Brazil. But the Brazilian government is now making an effort to get the economy moving again, however, so far the measures have not had an effect.


text: erik aronsson photos: göran wink and vanessa carvalho/getty images

Facts Brazil AReA: 8,514,877 km², the world’s fifth largest country popuLATIoN: About 192 million, the world’s fifth most populous country GDp: +2.7 percent (2011) CuRReNCy: Real (100 reais= about 50 US dollars)CApITAL: Brasilia(Sources: IMF, oeCD, CIA World Factbook)

The World Cup in 2014 and the 2016 olympics in Rio de Janeiro

will require investments in Brazil’s infrastructure.

8 SCANIA VALUE • www.scania.comQ2/2012

upCoMING eveNTS22 October 2012Interim Report, Jan-Sep 2012

Week starting 29 OctoberScania Value Quarter 3, 2012 (on www.scania.com and as a printed version)

Would you like to subscribe?For a free subscription, visit www.scania.com/scaniavalue

in brief editor: erik aronsson photos: scania

Scania Production Slupsk, in Poland, is issuing redundancy notices to 142 employees due to continued weak demand for buses and coaches for public transport in the most important mar-kets for Scania’s fully-built buses in the Omni range. Various support programmes have been developed in consultations between the com-pany and the trade unions that for instance will offer the affected employees the possibility of early retirement and redundancy payment.

“The economic situation in our most impor-tant markets is showing no sign of improve-ment, which means that we expect continued weak demand for public transport buses in the coming year. Therefore, we have to adjust pro-duction to significantly lower volume,” says Klas Dahlberg, Senior Vice President, Scania Buses & Coaches.

The facility in Słupsk, with close to 700 employ-ees, is the hub of Scania’s European production of fully-built (bodied) buses for public transport. The Scania OmniCity and OmniLink models are bodyworked here. Chassis for the Scania OmniC-ity are also assembled in Słupsk. These chassis are also delivered to other, independent bus body-builders in Europe, Africa and Asia.

Weak demand for buses and coaches

First euro 6 municipal vehicle

The Board of Directors of Scania has appointed Martin Lundstedt the new President and Chief Executive Officer of Scania AB. He takes up his new position on 1 September 2012 and succeeds Leif Östling, who has been appointed a member of the Board of Management of Volkswagen AG.

Martin Lundstedt, born in 1967, has a Master of Science degree in Industrial Engineering and Management and is currently Scania’s Executive Vice President and Head of Franchise and Factory Sales. He joined the company in 1992 and has held various senior positions including head of Scania’s industrial operations in France from 2001 to 2005 and Senior Vice President, Trucks until 2007, when he assumed his current position.

Scania is well positioned, and Lundstedt sees no reason to change the path Scania has cho-sen in recent years.

“We shall continue to be the Scania that our customers appreciate, a small big company working tightly together with them, always keeping it simple and straightforward.”

The company’s core values remain in place and the same goes for Scania’s strategies.

“We shall continue to be the premium choice for all customers in the transport and engine sectors all over the globe. And we will do that by building on our strong portfolio of products and services, in our modular system, and with a strong emphasis on the sales and services network.

“Being the premium choice means that we are working as partners with our customers, always providing the best return on their invest-ments over the life cycle of these products.”

Scania exhibited the world’s first fully equipped Euro 6 sewer cleaner vehicle at the IFAT ENTSORGA trade show, held in Munich, Germany in May. Scania’s modu-lar product system made the design possible, also showing that Scania’s Euro 6 engines can be specified for virtually any application on the market.

“Assembling such a complicated super-structure on Scania’s Euro 6 chassis was really easy,” says Brian Stage, CEO of Danish-based bodybuilder J Hvitved Larsen A/S. “The superstructure is identical to the one we use for Euro 5 vehicles, which is a major benefit from a cost- and lead-time standpoint.”

Martin Lundstedt named new Ceo

Scania value is published by Scaniaand targeted to Scania shareholders.

publisherPer Hillström, [email protected]@scania.comproject [email protected] Art Director [email protected] Publishing Groupwww.appelberg.comprinting: Trosa TryckeriCover photo: Dan Boman

ContactScania Investor Relations 151 87 Södertälje, SwedenTel: 08-553 81 000E-mail: [email protected]

Martin Lundstedt has been appointed new

president and Ceo of Scania AB.