financial update full year 2020 - volvo cars

Carla De Geyseleer, Per Ansgar, Therese Jandér2021-02-04

FINANCIAL UPDATEFull year 2020

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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

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Volvo Car Group Results Presentation January – December 2020 2

Highlights 2020 OutlookFinancial Review


Strong recovery

• Record-sales in second half of the year

• In China and the US, sales growth for the full-year

• In Europe, sales picked up in the second half-year

• Increased market shares in most markets

• Accelerated online sales

Accelerated transformation

• Recharge car sales more than doubled over the year

• 31% Recharge share of sales in Europe

• The leading plug-in premium brand in Europe (share of total volume)

• All-electric XC40 BEV and Polestar 2 rolled out to the markets

• Overperformance on EU CO2

emission targets

Financial performance

• Record revenue and EBIT in H2, partly offsetting Covid-19 effects

• Continued strong mix

• Cost efficiencies intensified

• Strong cash flow and liquidity

• First green bond issued


Highlights 2020 OutlookFinancial Review

Half Year 2020 Financial Performance

Full Year 2020 Financial Performance

Balance Sheet

Cash flow

Debt and Maturity profile

Financial Summary


2020 FINANCIAL PERFORMANCE

Revenue(BNSEK)

Retail sales (K UNITS)

EBIT / margin (MSEK/%)

269

392

661

H1 H2 FY

112

151

263

H2 FYH1 H2H1

-1,000

FY

9,5008,500

Cash flow from operating and investing

activities (MSEK)

-12,800

H2H1 FY

26,100

13,300

6.3%


3.2%

+7.4%YoY

+4.9%YoY

+8.0%YoY

+82.5%YoY

-20.8%YoY

-6.2%YoY

-14.1%YoY

-4.0%YoY

-117.9%YoY

-40.6%YoY

-364.0%YoY

+14.7%YoY

-0.9%


ACCELERATED RECHARGE VOLUMES LED TO EXCESS CO2 CREDITS

Volvo Car Group Results Presentation January – December 2020

“BEV only” (2021) XC90 BEV XC40 Recharge

>400km408hp

Polestar 2

470km408hp

and more...

Recharge % of total volume

17.4%

Recharge sales volume (k units)

46

115

2019 2020

+151%

Volvo Cars fleet CO2e decrease (WLTP, g/km EU Fleet)

157130

2019 2020

-17%

7


FINANCIAL PERFORMANCE

2020 H2 FINANCIAL HIGHLIGHTS

(MSEK) 2020 H2 2019 H2 Change (%)

Revenue 151,074 144,022 4.9

Cost of sales -122,333 -116,597 4.9

Gross income 28,741 27,425 4.8

Gross margin 19.0% 19.0% -

Operating income (EBIT) 9,505 8,784 8.2

EBIT margin 6.3% 6.1% -

Net income 8,959 6,205 44.4

REVENUE INCREASE FOLLOWING RECORD VOLUME DEVELOPMENT

2020 H2 REVENUE COMPOSITION (MSEK)

10,695

Revenue 2019 H2

4,087

Volume, sales mix and pricing

Used cars, P&A* and other

-7,730

Foreign exchange rates

Revenue 2020 H2

144,022

151,074

MSEK +7,052+4.9%

* P&A: parts & accessories



EBIT GROWTH FROM VOLUME AND EFFICIENCIES

2020 H2 EBIT (MSEK)

Volume, sales mix and pricing*

EBIT 2019 H2

8,784

1,425

2,946

Efficiencies and other

-3,650

Foreign exchange rates EBIT 2020 H2

9,505

MSEK +721+8.2%

*New car sales

6.1%6.3%


IMPROVED EBITDA AND WORKING CAPITAL DROVE STRONG CASH FLOW

2020 H2 CASH FLOW (MSEK)

CashJune 2020

EBITDA

13,844

16,146-7,781

Net working capital*

8,676

43,288

Other**

-12,581

Investments Financing*** CashDecember

2020

61,592

* Change in inventories, accounts receivable and accounts payable** Change in other current and non current assets and liabilities*** Including foreign exchange effects on cash (-2,760)

MSEK+26,085


Highlights 2020



Balance Sheet

Cash flow


Financial Summary

OutlookFinancial Review

RETURN TO PRE-PANDEMIC VOLUME GROWTH

2020 VOLUMES BY MARKET, CARLINE AND POWERTRAIN

70 70 77 95 101 97

70 83 8298 108 110

82 91 114131

155 167

282291

299

318

341 288

20162015

705

2017 2018 20202019

504535

572

642 662

CAGR+5.6% -6.1%

XC

V

S

Europe OtherChina US

1818

47

47

54

Italy

Germany

UK

Sweden

BeLux*

Model range distribution

* BeLux: Belgium & Luxembourg

71%

15%

14%


RECHARGE sales (k units)

FY 2019 FY 2020

46

115

151%

Europe

China

US

Other

H2 Sales

53 5958 67

87101

167165

H2 2019 H2 2020

365392

+7.4%

FINANCIAL PERFORMANCE

14Volvo Car Group Results Presentation January – December 2020

2020 FINANCIAL HIGHLIGHTS

(MSEK) 2020 2019 Change (%)

Revenue 262,833 274,117 -4.1

Cost of sales -216,813 -222,047 -2.4

Gross income 46,020 52,070 -11.6

Gross margin 17.5% 19.0% -

Operating income (EBIT) 8,516 14,303 -40.5

EBIT margin 3.2% 5.2% -

Net income 7,788 9,603 -18.9

REVENUE DECLINE LESS THAN VOLUME

2020 REVENUE COMPOSITION (MSEK) REVENUE DISTRIBUTION BY MAIN MARKETS

Revenue 2019

-6,165

1,541

Volume, sales mix and pricing

262,833

Used cars, P&A* and other

-6,660


Revenue 2020

274,117

MSEK -11,284-4.1%

46%

15%

23%

15%

Europe OtherUS China

* P&A: parts & accessories


3.0

H1 H2 Total

3.2

6.2

Indirect Direct

COST REDUCTION 2020 vs 2019 (BNSEK)

DISCIPLINED COST EFFICIENCIES THROUGHOUT THE YEAR


• Direct cost efficiencies intensified during H2

• Indirect cost reduction continued in all areas throughout the year

• Continuous implementation of headcount efficiencies and competence shift

• Efficiency flow through paving the way for a more balanced cost structure

CONTINUOUSLY IMPROVED HEADCOUNT EFFICIENCY


2020 FTE* END OF PERIOD DISTRIBUTION BY REGION

Dec-18

-1,181

-1,771

Dec-19 Dec-20

43,462

46,414

45,233

-2,952

74%

4%

20%

China

Europe

US

Other

2%

*FTE: number of full time equivalents, includes both employees and agency personnelNo impact of technical unemployment included

43,462

EBIT IMPACTED BY VOLUME DECREASE AND FOREX

2020 EBIT (MSEK)

EBIT 2019

-4,580

-4,970

Volume, sales mix and pricing*

2,750

Governmental support related

to Covid-19


1,013

Efficiencies and other

EBIT 2020

14,303

8,516

MSEK -5,787-40.5%

*New car sales


5.2% 3.2%


Highlights 2020



Balance Sheet

Cash flow


Financial Summary


BALANCE SHEET REMAINS STRONG


ASSETS (MSEK)

DECEMBER2020

DECEMBER 2019

Intangible assets 37,168 32,786

Property, plant and equipment 57,453 69,738

Operating leases 4,490 3,243

Investments in JVs and associates 9,997 9,211

Deferred taxes and other non-current assets 14,371 10,878

Total non-current assets 123,479 125,856

Inventories 35,513 38,911

Accounts receivable 14,776 13,243

Current tax assets and other current assets 11,016 9,842

Marketable securities, Cash and cash equivalents 69,679 55,515

Assets held for sale 7,849 -

Total current assets 138,833 117,511

TOTAL ASSETS 262,312 243,367

ROIC 8.4% 14.5%

EQUITY AND LIABILITIES(MSEK)

DECEMBER2020

DECEMBER 2019

Total equity 70,418 63,648

Provisions for post-employment benefits 14,187 12,583

Bonds and Liabilities to credit institutions 26,832 26,132

Other interest bearing liabilities 4,815 5,076

Other non-current liabilities and provisions 19,706 19,947

Total non-current liabilities 65,540 63,738

Accounts payable 46,635 44,876

Bonds and liabilities to credit institutions 7,529 4,105

Other interest bearing liabilities 1,160 1,073

Other current liabilities and provisions 69,281 65,927

Liabilities held for sale 1,749 -

Total current liabilities 126,354 115,981

TOTAL EQUITY & LIABILITIES 262,312 243,367


Highlights 2020



Balance Sheet

Cash flow


Financial Summary


BUILDING A SUSTAINABLE FUTURE THROUGH CONTROLLED INVESTMENTS WITH FOCUS ON ELECTRIFICATION

ANNUAL CAPITAL

EXPENDITURE (BNSEK)

ANNUAL RESEARCH AND DEVELOPMENT

EXPENSES (BNSEK)

7.3

8.7%6.2

4.7

20.9

13.117.0

9.2

9.2

2015

10.8%

2016

12.3%

21.0

7.1%

9.7

2017

8.3%

13.6

2018

7.7%

11.8

2019

13.98.5

10.1

2020

19.3

26.7

18.6

% of Revenue Intangible investments Tangible investments

0

2

4

6

8

10

12

14

0

2

4

6

8

10

12

2016 20192015

5.9%

2018

4.9%5.7%

2017

4.3% 4.2% 4.3%

2020

9.510.2 10.2

10.911.4 11.4

% of Revenue R&D expenses


STRONG LIQUIDITY AT 94 BNSEK


2020 LIQUIDITY (MSEK) CHANGE IN NET WORKING CAPITAL (MSEK)

-403

2016

-4,385

2017 2018 2019 2020

-1,961

3,740

2,60024,700

EBITDA

94,379

-3,687

Net working capital*

8,395

InvestmentsOther**

-20,670

LiquidityDecember

2019

Financing***

8,087

LiquidityDecember

2020

13,593

22,965

51,997

3,518

69,108

61,592

2,592

Undrawn credit facilities Marketable securities Cash % of Revenue Net working capital

MSEK13,282

2.1%

-2.1%

-0.8%-0.1%

1.0%

* Change in inventories, accounts receivable and accounts payable** Change in other current and non current assets and liabilities*** Including foreign exchange effects on cash (-2,853)


Highlights 2020



Balance Sheet

Cash flow


Financial Summary


STRONG NET CASH POSITION


2020 MATURITY PROFILE AND SPLIT (MSEK)

200

24,700

7,100

5,000

Liquidity 2020

8,100

7,4006,400

2021

61,6002,100

5,000

4,400

3,000

2022

400

2,000

2023

400

6,000

600

2025 2026 2027

94,400

5,000

2,400

5,600

2024

Undrawn credit facilities Cash & cash equivalents

Marketable securities Loans

Bonds

Green bond

34,500 24%

61%

15%

Loans

Bonds

Green bond

Net cash

35,200

GREEN FINANCING FUNDING ALIGNED WITH OUR SUSTAINABILITY STRATEGY

First Green bond successfully issued in October 2020

• Aligns our sustainability strategy with financing opportunities

• Cicero Second Party Opinion with a Dark Green shading

• Use of proceeds:

• Zero emission vehicles, new electric powertrain and platform

technology

• Increased BEV production capacity and

battery assembly

• Investments into Polestar to spearhead

electrification


Refinancing Revolving Credit Facility in January 2021 with terms linked to sustainability targets


Highlights 2020



Balance Sheet

Cash flow


Financial Summary


Strong recovery

in volume, revenue and EBIT during H2

Market share gains

in most markets with strong sales mix

PHEV sales increase

more than double share of sales outperforming CO2-targets

Disciplined cost efficiencies

showing effect and paving the way for balanced cost structure

Strong cash flow

liquidity above 2019 level witha net cash position of 35bn

Green financing

with successful Green Bond issue and a sustainability linked RCF

FINANCIAL SUMMARY


CEO Håkan Samuelsson OutlookFinancial Review


Assuming market conditions continue to normalise, we anticipate:

• Continued growth in sales volume and revenue

• Improved profitability to pre-corona levels

• Investments in new technologies and new products – similar level of capital expenditure

• Cash flow to remain strong

• Reduction in overall CO2 emissions per car

OUTLOOK

Appendix



SEK APPRECIATION DURING H2 2020 VS H2 2019

34

CNY

1.4%

USD

3.2%

KRWEUR JPYGBP

9.9%

CHF PLN NOK

30.5%

CAD

9.0%

TWD TRY AUD RUB

5.6% 5.5%6.6% 6.2%

6.9%

8.8%

3.0%3.9%

21.9%

Yearly average change %

(+ Appreciation – Depreciation)


SEK APPRECIATION DURING 2020 VS 2019

35

-2.0%

GBPEUR

-3.0%

USD JPY NOKCNY KRW RUBCHF PLN CAD

20.3%

TWD TRY AUD

0.9%

2.7% 2.2% 2.6%

0.7%

3.7% 4.1%

8.9%

3.8% 3.6%

12.4%

Yearly average change %

(+ Appreciation – Depreciation)

2020 H2 KEY FIGURES

STRONG SECOND HALF FINANCIAL PERFORMANCE

Revenue(BNSEK)



365392

2019H2

2020 H2

+7.4%

144151

2019H2

2020 H2

+4.9%

2019H2

9,500

2020 H2

8,800

+8.0%


activities (MSEK)

14,300

2019H2

2020 H2

26,100

+82.5%

6.1% 6.3%


2020 KEY FIGURES

2020 FULL YEAR FINANCIAL PERFORMANCE IMPACTED BY COVID-19

Revenue(BNSEK)



705662

20202019

-6.1%

274263

2019 2020

-4.0%

2019 2020

8,500

14,300

-40.6%


activities (MSEK)

13,300

2019 2020

11,600

+14.7%

5.2%

3.2%


FINANCIAL DEVELOPMENT


101 98 99 98

198 185 161170

273 359 445469254

2016

6994

42

20202017 2018 2019

705

535 572642 661

+5.4%

-6.2%

Sedan

SUV

Estate

Other

181209

253274 263

2016 2017 202020192018

+9.8%-4.0%

0

5

10

15

0

10

20

30

20182017

12.1% 10.9%

2016

12.5%10.8%

2019

8.7%

2020

21.526.2 27.4

29.9

23.0

EBITDAmargin, %

EBITDA

27 25 2732

35

20172016 2018 2019 2020

RETAIL SALES REVENUE

OPERATING CASH FLOWEBITDA

financial update full year 2020 - volvo cars

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