VOLVO CAR GROUP results presentation Third quarter and first nine months 2018 Nils Mösko, vice president & Head of investor relations Patrik Tolf, Deputy CFO & head of Group Finance
DISCLAIMER By accepting this document, the person to whom it is provided (the “Recipient”) agrees to be bound by the following obligations and limitations. This document has been prepared and issued by Volvo Car AB (together with its subsidiaries, “Volvo Cars”). The information contained in this document is derived from sources that have not been independently verified. Except in the case of fraudulent misrepresentation, no responsibility or liability is accepted by Volvo Cars or by any of its respective officers, employees, affiliates or agents in relation to the accuracy, completeness or sufficiency of any information contained herein or any other written or oral information made available by Volvo Cars in connection therewith or any data which any such information generates, or for any loss whatsoever arising from or in connection with the use of or reliance on this document and any such liability is expressly disclaimed. Analyses and opinions contained herein may be based on assumptions that, if altered, can change the analyses or opinions expressed. This document speaks as of the date hereof and in providing this document, Volvo Cars gives no undertaking and is under no obligation to provide the Recipient with access to any additional information or to update this document or to correct any inaccuracies in it which may become apparent. Volvo Cars’ past performance is not necessarily indicative of future results and nothing contained herein shall constitute any representation or warranty as to future performance of Volvo Cars or any security, credit, currency, rate or other market or economic measure. Nor does this document constitute a recommendation with respect to any securities. VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018 2
Volvo car group Highlights q3 2018 Retail sales +14% Production start in Charleston, US Net revenue +17.6% V60 cross country launched Operating income SEK 1.8bn Polestar stand-alone Product launch costs, higher tariffs and AD concept revealed license sales effects VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018 3 3
retail Sales Q3 2018 Strong global growth Global growth +14% EUROPE +8.3% US +15.1% 69,318 units China +14.1% 26,307 units 34,712 units Comparable period: July – Sep 2017 Europe is defined as EU28 + EFTA VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018 4
Retail sales q3 2018 Retail sales up 14% Retail sales by carline Q3 2018 Retail sales by region Q3 2018 Retail sales (units) S Other 14% 14% 16% 154,900 Europe 135,800 45% US 17% XC 25% V 61% 22% China Retail sales by region Q3 2017 Retail sales by carline Q3 2017 Other S 14% 18% XC US Europe 17% 47% 52% 30% V 22% Q317 Q318 5 China VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018
Financials VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018 6
Key Financial Developments Q3 and 9 months Continued strong development Retail sales (units) Net revenue (MSEK) Investments (MSEK) +14% +22% -10% 472,600 179,600 22,900 20,700 413,500 147,700 +14% +18% +11% 154,900 56,800 135,800 6,800 48,300 6,100 Q317 Q318 YTD17 YTD18 Q317 Q318 YTD17 YTD18 Q317 Q318 YTD17 YTD18 EBIT (MSEK) Free cash flow (MSEK) Net income (MSEK) -7% -8% 10,400 9,700 7,300 6,700 -49% -56% 3,700 -4,400 7.1% 5.4% 2,500 1,900 -5,800 1,100 -6,600 7.6% 3.2% -7,500 Q317 Q318 YTD17 YTD18 Q317 Q318 YTD17 YTD18 Q317 Q318 YTD17 YTD18 VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018 7
NET REVENUE WALK q3 2018 Net revenue mainly driven by volume and mix MSEK 3,100 1,800 56,800 6,200 Revenue increased in all main • -2,600 48,300 regions Volume, carline mix and • pricing mainly driven by XC models and S90 License sales in 2017 impacts • the net revenue comparison Q3 2017 Volume, Foreign Licences Other Q3 2018 sales mix exchange and pricing rates VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018 8
EBIT walk q3 2018 EBIT impacted by a decrease in sold licenses MSEK 300 1,100 EBIT margin influenced by: • 3,700 product launch costs • higher tariffs • -2,600 license sales effects • 7.6% 1,900 EBIT -600 margin 3.2% EBIT margin Q3 2017 Volume, Foreign Licences Cost and Q3 2018 sales mix exchange Other and pricing rates VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018 9
Cash Flow movements Q3 2018 Cash flow Reflecting the Cycle MSEK 52,900 Free cash flow MSEK -6 600 Working Capital development • 45,300 5,100 13,600 mainly related to seasonal 0 closing of European factories 400 13,400 -6,900 500 -4,800 -900 Investments mainly related to • production ramp up, new car 38,900 models and technologies 31,400 2018 Q2 EBITDA Working Investments Other** Financing*** 2018 Q3 Liquidity capital* Liquidity Undrawn credit facilities Marketable securities Cash * Change in inventories, accounts receivables and accounts payables, ** Interest, tax and changes in other items, *** Adjusted for exchange on cash VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018 10
Investments and R&D Investments decrease due to completion of Charleston R&D Expenses (SEKbn) Investments (SEKbn) 15.7% 10.2 10.2 12.7% 9.7 32.7 9.5 14.3% 30.5 13.6% 9.7 11.5% 25.6 7.2 10.1 5.9% 6.4 5.7% 19.4 18.6 5.2% 4.9% 4.7 5.2 4.0% 17.0 15.0 13.1 9.2 8.6 6.1 6.0 5.5 5.4 4.8 2014 2015 2016 2017 LTM Q3 2014 2015 2016 2017 LTM Q3 2018 2018 % of Revenue Tangible investments % of Revenue R&D expenses Intangible investments Non capitalised R&D Note: Investments impact on cash flow; R&D expenses impact on P&L VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018 11
Liquidity & debt Stable and Positive net cash position 45,300 MSEK Net cash position of SEK 7.4bn (Q2 2018 SEK14.4bn) 13,400 20,800 500 7,400 24,500 2,100 31,400 Undrawn Credit Facilities 22,400 Marketable Securities Cash & Cash Equivalents Short-term Debt Long-term Debt Liquidity Debt VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018 12
Balanced Amortisation schedule balanced and comfortable amortization schedule MSEK Funding by type 45,300 Loans 44% 7,510 56% Bonds 2,350 5,580 420 3,530 3,420 420 1,970 5,160 5,160 3,000 640 540 420 210 2018 2018 2019 2020 2021 2022 2023 2024 2025 2026 Sep 30 Liquidity Loans Bonds VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018 13
Looking ahead VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018 14
2018 - outlook Continued strong growth Strong growth and continued strong profits Upside from renewed product portfolio Strong foundation for our longer term ambitions VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018 15
Volvo car group Longer term ambitions Direct consumer relationships >5 million Subscription with recurring revenue 50% Pure electric cars 50% Autonomous cars 30% Naturally hedged global production Superior growth Premium OEM profitability VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018 16
Volvo car group A new structure for the future Human-centric Truly global Synergies Embracing disruption Pioneering partnerships Care by VOLVO (50%) (30%) (50%) A market leading Fastest growing My car always My car sometimes Spearheading New brand AD/ADAS SW premium OEM 1 electrification going global Recurring revenues Urban focused provider Robotaxi Wholesale Direct consumer Strategic business business affiliates PEOPLE MAKE THE DIFFERENCE VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018 17
VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018 18
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