VOLVO CAR GROUP FY 2017 resultS Hans Oscarsson, Senior vice president finance & CFO Patrik Tolf, Deputy CFO & head of Group Finance Nils Mösko, vice president & Head of investor relations
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Financial Summary 2017 BNSEK 14.1 571,577 ebit 6.7% units Ebit margin 38,000 BNSEK 211 EMPLOYEES Revenue VOLVO CAR GROUP RESULTS PRESENTATION JANUARY-DECEMBER 2017 3
Volvo Car Group Sales Global growth +7.0% EUROPE +2.8% US – 1.5% China +25.8% Comparable period: Jan – Dec 2016 Europe is defined as EU + EFTA VOLVO CAR GROUP RESULTS PRESENTATION JANUARY-DECEMBER 2017 4
2017 highlights Torslanda plant - at full speed S90 - worldwide export from China Sales in China – first time over 100,000 XC40 - start of production in Gent Clear electrification strategy – T8 sales up 30 % Subscription model – Care by Volvo Complete SUV line up VOLVO CAR GROUP RESULTS PRESENTATION JANUARY-DECEMBER 2017 5
Complete SUV Lineup Fastest growing industry segment More than 50% of Volvo Cars’ revenue VOLVO CAR GROUP RESULTS PRESENTATION JANUARY-DECEMBER 2017 6
Financials VOLVO CAR GROUP RESULTS PRESENTATION JANUARY-DECEMBER 2017 7
Another year of strong growth Retail sales (Thousand) Net revenue (SEKbn) 7.1% 15.2% 250 572 211 600 534 503 +7.1% 466 181 200 +16.6% 164 138 400 150 100 200 Retail sales Net Revenue 50 CAGR CAGR 0 0 2014 2015 2016 2017 2014 2015 2016 2017 EBIT (SEKbn) Investments (SEKbn) +65% 14.1 40 15 32.3 +28.2% 11.0 30 25.2 9.7 10 18.9 18.6 6.4 6.6 Intangible investments 6.7% 20 6.1% % margin 4.7 5.2 16.6 4.0% 5 Tangible investments 12.7 EBIT 10 8.7 2.1 8.6 Non capitalised R&D CAGR 6.1 1.5% 5.5 6.0 4.8 0 0 2014 2015 2016 2017 2014 2015 2016 2017 VOLVO CAR GROUP RESULTS PRESENTATION JANUARY-DECEMBER 2017 8
Net revenue 2017 – 17% Organic growth MSEK +17% 8,000 211,000 7,500 14,500 181,000 FY 2016 Volume Sales Mix and Pricing Other FY 2017 VOLVO CAR GROUP RESULTS PRESENTATION JANUARY-DECEMBER 2017 9
Revenue by carline and region Revenue by carline FY 2016 Revenue by carline FY 2017 Retail sales (Thousand units) S S 17% 7,1% 13% 572 600 534 +7,1% 503 29% XC 58% V 500 466 XC 56% 27% V 400 300 Revenue by region FY 2016 Revenue by carline FY 2017 200 Other Other 100 14% 14% 0 US 2014 2015 2016 2017 17% US 17% 49% Europe 51% Europe Retail sales CAGR 18% 20% China China VOLVO CAR GROUP RESULTS PRESENTATION JANUARY-DECEMBER 2017 10
ebit 2017 – 28% improvement in transition year MSEK +28% 3,900 14,100 -300 -500 11,000 6.1% 6.7% EBIT EBIT margin margin 2016 Volume Sales Mix and Pricing Fixed cost, FX and Other 2017 VOLVO CAR GROUP RESULTS PRESENTATION JANUARY-JUNE 2017 11
Cash Flow – Investments financed Free cash flow from recurring MSEK business MSEK -900 -2,800 54,600 49,600 26,200 -24,300 15,200 6,300 4,700 500 4,000 -2,800 38,600 35,400 2016 FY Liquidity EBITDA Working capital* Operating Strategic Financing*** 2017 FY Liquidity investments** investments Undrawn credit facilities Marketable securities Cash * Change in inventories, accounts receivables and accounts payables, **Adjusted for interests and other items, *** Adjusted for exchange on cash VOLVO CAR GROUP RESULTS PRESENTATION JANUARY-DECEMBER 2017 12
Investments and R&D R&D Expenses (SEKbn) Investments (SEKbn) 15.3% 32.3 12 13.9% 13.6% 10.2 10.2 10 11.5% 9.7 25.2 8.8 8 7.2 6.4 18.9 18.6 5.6% 5.4% 6 5.2% 4.7 5.2 4.8% 16.6 12.7 4 8.7 8.6 2 6.1 6.0 5.5 4.8 0 2014 2015 2016 2017 2014 2015 2016 2017 % of Revenue Tangible investments % of Revenue R&D expenses Intangible investments Non capitalised R&D VOLVO CAR GROUP RESULTS PRESENTATION JANUARY-DECEMBER 2017 13
Working capital – in line with growth Cash conversion cycle – CCC** (days) Net working capital* (SEKbn & % of Revenue) 6.8 7 75 75 80 70 5.0% 6 70 64 59 5 58 60 4 2.9 2.8 57 50 3 1.4% 2 40 -0.3% 1 30 1.7% 20 20 18 0 17 20 -1 -0.6 7 18 5 10 3 2014 2015 2016 2017 0 % of Revenue Net working capital 2014 2015 2016 2017 • Increased sales Days inventory outstanding Days sales outstanding • New expanded manufacturing footprint Days payables outstanding CCC - Days • Working capital to stabilize with the Charleston factory up and running * Net Working Capital defined as Inventories + Accounts Receivable – Trade Payables ** Cash Conversion Cycle (Working capital days) are calculated as Balance Inventory/LTM Cost of sales *365 + Balance Accounts receivables/LTM Revenue *365 - Balance Accounts payable/LTM Cost of sales *365 VOLVO CAR GROUP RESULTS PRESENTATION JANUARY-DECEMBER 2017 14
Liquidity & debt – comfortable net cash position 54,600 MSEK Net cash position of SEK 12,5bn (2016 SEK18.9bn) 15,200 27,700 4,000 12,500 26,900 12,800 Undrawn Credit Facilities 35,400 Marketable Securities Cash & Cash Equivalents 7,400 Bonds Short-term Debt 6,700 Long-term Debt Liquidity Debt VOLVO CAR GROUP RESULTS PRESENTATION JANUARY-DECEMBER 2017 15
Balanced Amortisation schedule MSEK Funding by type 54,600 49% Bonds 51% Loans 7,000 6,700 1,200 1,800 4,900 3,000 3,000 5,800 4,900 1,450 2017 2018 2019 2020 2021 2022 2025 Dec 31 Liquidity Loans Repayment of CDB EUR loan Bonds VOLVO CAR GROUP RESULTS PRESENTATION JANUARY-DECEMBER 2017 16
Looking ahead VOLVO CAR GROUP RESULTS PRESENTATION JANUARY-DECEMBER 2017 17
Volvo Car Group Subscription Volvo Cars Polestar Zenuity Lynk & Co Business VOLVO CAR GROUP RESULTS PRESENTATION JANUARY-DECEMBER 2017 18
Outlook 2018 Further sales progress - complete SUV line up New disruption business opportunities Complete product portfolio renewal Truly global manufacturing footprint Continued strong growth and improved profits VOLVO CAR GROUP RESULTS PRESENTATION JANUARY-DECEMBER 2017 19
Questions VOLVO CAR GROUP RESULTS PRESENTATION JANUARY-DECEMBER 2017 20
Volvo Cars’ Transformation NEW ERA AS AN INDEPENDENT, STANDALONE COMPANY UNDER GEELY OWNERSHIP 2010 – 2015 2016-2020E PHASE I “STRATEGIC TRANSFORMATION” PHASE II “PROFITABLE GROWTH” 2010 2014 2017 2016 Volvo Cars unveils the all-new XC90 , First OEM to commit to fully Zhejiang Geely Holding Group Volvo Cars another record year of sales acquires Volvo Cars the first product on the SPA platform electrified fleet 534k and earnings SEK 11bn Launch new XC60 and XC40 (new segment entry) 2011 Enters into the debt capital markets 2015 30% stake in Lynk & Co Initiation of strategic repositioning Volvo Cars achieves new record unit sales of 503k and improved profitability New ways to consumers: 26.2 Commencement of the largest Care By Volvo subscription investment programme in the based ownership Company’s history 21.5 Launch Polestar – pure progressive performance 2013 16.0 Further footprint optimisation , Introduces new new plant in US generation powertrains 12.4% 11.9% 9.5 9.0 8.1 9.8% EBITDA margin, % 7.4% 6.9% 6.5% EBITDA, MSEK 2012 2013 2014 2015 2016 2017 VOLVO CAR GROUP RESULTS PRESENTATION JANUARY-DECEMBER 2017 21
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