scania value q2 2013

FIGURES IN FOCUS:

XXXXxxxxx xxx xx

xxxx xxxx xxxxx xxx xxxx xxxxx xx.

Finance. Effects of a weak economy and strong krona. > PAGES 6–7

Report. Stronger SEK pulled down margins. > PAGE 2

FIGURE IN FOCUS:

22%First half 2013 order bookings +22% compared to H1 2012.

Interview. Harald Ludanek on Scania’s R&D work. > PAGE 3

0

4

8

12

16

20% Operating margin

-13 Q2

-11 Q2

-11 Q3

-11 Q4

-12 Q1

-12 Q2

-12 Q3

-12 Q4

-13 Q1

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

Turkey on the riseBooming economy boosts demand for transport services > PAGES 4–5

A MAGAZINE FOR SCANIA’S SHAREHOLDERSquarter 2 2013

europe

Order bookings

10,306 +26%Deliveries

8,047 +15%

eurASIA

Order bookings

2,074 -14%Deliveries

1,973 +14%

LATIN AMerICA

Order bookings


7,325 +126%

ASIA

Order bookings

2,453 -27%Deliveries

2,581 -9%

AFrICA AND oCeANIA

Order bookings


1,116 +16%

H1 IN brIeF:Deliveries rose by 19 percent to 37,980 vehicles

net sales rose by 7 percent to SEK 42,139 m

earnings per share decreased by 15 percent to SEK 3.47

first 6 months in figures

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

(SEK m. unless otherwise noted) 2013, 6 mo 2012, 6 mo Change in %

Net sales, Scania Group 42,139 39,338 7

Operating income, Vehicles and Services 3,669 3,944 -7

Operating income, Financial Services 302 313 -4

Operating income 3,971 4,257 -7

Income before taxes 3,914 4,275 -8

Net income for the period 2,771 3,249 -15

Operating margin, % 9.4 10.8

Return on equity, % 18.0 23.1

Return on capital employed, Vehicles and Services, % 21.3 29.2

Earnings per share, SEK 3.47 4.06 -15

Cash flow, Vehicles and Services 744 1,769 -58

Number of employees, 30 June 40,116 37,802

Order bookings (units, trucks and buses) 43,351 35,395 22

Deliveries (units, trucks and buses) 37,980 32,032 19

2 SCANIA VALUE • Q2/2013 www.scania.com

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

Key figures

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

0

4

8

12

16

20

2013

Q2

2011

Q2

2011

Q3

2011

Q4

2012

Q1

2012

Q2

2012

Q3

2012

Q4

2011

Q2

2011

Q3

2011

Q4

2012

Q1

2012

Q2

2013

Q2

2012

Q3

2012

Q4

Trucks 64%

Other 3%Used vehicles 5%

Services 20%

Engines 1%

Buses and coaches 7%

%SEK m. SEK m.

2013

Q1

2013

Q1

Operating income, SEK m.Operating margin, percent

*Refers to first half of 2013

Several paths towards lower emissions

text: conny hetting, per-ola knutas photo: kjell olausson

One of Scania’s challenges is to reduce carbon dioxide emissions from heavy haulage. Harald Lu-danek, Scania’s Head of R&D, points out that there are a number of possibilities.

What is your background?“I spent 20 years in research and development

at the Volkswagen Group, where I became Head of Coordination of Volkswagen’s global research centres. For the last five years I was Head of Vehi-cle Development at Volkswagen AG. My team in the prototype workshop focused on projects such as the Touareg, Jetta and Beetle in Mexico; the Passat in the US and the sixth generation of the Golf. A special project was the 1-liter car VW-XL1, which features a special lightweight construction and body using carbon-fibre material.”In your first ten months at Scania, what has been your focus?

“Throughout my career I have strived to look, listen and understand before I start to

change and improve. One of the first things I did upon moving here was to drive a Scania truck from Wolfsburg, Germany, to Södertälje, Sweden, to experience driving and living in a truck. In meetings and test drives with my new colleagues, I’ve learned about the truck busi-ness and I’ve also been able to give some advice about improvements. When I tried out as a truck test driver, I learned a lot, so I have a great respect for durability testing work.”How can the transport sector decrease its carbon dioxide emissions?

“There is no single innovation for lower-ing carbon dioxide emissions, so Scania will continue to develop the different technologies we already have, such as biofuels, hybrid pow-ertrains and electrically powered vehicles that use electrical transmission through an overhead cable or via induction through the roadway.

“Other promising areas for more efficient transport services include development of increasingly computer-based vehicles; the connection between vehicle, driver, office and

workshop; and the improvement of waste-heat recovery in the powertrain.

“Since our customers are willing to pay more for engines with better fuel efficiency and hence lower carbon dioxide emissions, this is entirely in line with Scania’s business model.”Scania ranks among the world’s 100 most innovative companies. How will you main-tain and develop an innovation culture with-in the company?

“To retain an innovation-friendly work-ing atmosphere, it’s important to build on our strong values and qualities. We will continue to analyse problems and find solutions in an open way, while maintaining the high competence level among engineers and technicians at our Technical Centre in Södertälje. We also need to cooperate and share knowledge in order to remain successful, so we will continue to col-laborate with universities, research institutions, suppliers and customers. I also see great possi-bilities arising from Scania’s access to Volkswa-gen’s global development network.”

INTERVIEW

Harald Ludanek has been Scania’s Head of Research and Development since 2012. He has a positive view of the areas Scania is concentrating on in order to reduce carbon dioxide emissions.

• SCANIA VALUE 3Q2/2013www.scania.com

“We will continue to analyse problems and find solutions

in an open way.”Harald Ludanek, Head of Research and Development


In the legendary city of Istanbul with its 13.6 million inhabitants, cranes and skyscrapers are now reflected in the waters of the Bospho-rus, next to 1,000-year-old minarets. Located where Europe meets Asia, Turkey serves as a springboard towards the Middle East, North Africa and Central Asia. From the Maslak busi-ness district in the European part of Istanbul, a growing number of domestic and international companies have a panoramic view of 1.5 billion customers in Europe, the Middle East and Asia.

The Turkish economy has displayed steady growth in recent years averaging 7 percent annually, and the country’s GDP level more than tripled during the period 2002-2011. There are ambitious plans for the future in a country that is increasingly called Europe’s China.

“Robust economic growth is expected to con-tinue in Turkey, as both domestic demand and exports to Europe gain momentum. A young and growing population, combined with eco-

New attractive segments in expanding TurkeyOne of the world’s fastest grow-ing economies, Turkey aims to become Europe’s largest economy by 2050. Scania’s ambition is to broaden its operations in this market by strengthening relation-ships with domestic hauliers and by entering new segments.

nomic growth and improvement in living stand-ards, make Turkey an attractive country with great long-term potential,” says Annika Lind-blad, macroeconomic analyst at Nordea bank.

Turkey is already an important market for Scania: during the record year 2011, it was Sca-nia’s seventh largest market with 2,900 sold vehicles (compared to 800 in 2009 and 1,700 in 2012).

“Our ambition is to become the leading importer,” explains Oscar Jaern, country man-ager for Scania in Turkey.

Help from local partnersThe total market for trucks in the heavy haul-age segment is about 30,000 annually and is comparable in size to France and Great Britain. The combined transport and logistics sector in Turkey tripled in value between 2002 and 2008, when it was estimated to be worth USD 59 bil-lion with a service market of a further USD 22 billion. The forecast for 2015 is USD 120 billion.

Scania is currently receiving strong assistance from its distributor Doğuş Otomotiv, which operates 21 service points across Turkey and is a part of one of the country’s largest conglomer-ates: Doğuş Group. Doğuş is the leading premi-um player in the vehicle industry offering pas-senger cars from VW, Audi, Porsche and Škoda, among other companies, in its portfolio.

“Doğuş is a qualified and experienced part-ner, which we entered into partnership with as early as 1994,” says Jaern, who is working on a number of quality improvements that will strengthen Scania’s market position.

From having mainly acted as a supplier to international companies with a presence in Turkey, for some time Doğuş and Scania have aimed at strengthening relationships with domestic hauliers and new market segments.

“This is an exciting challenge,” says Jaern. “Of course international customers often have clear specifications based on their operations. But domestic hauliers have highly varied needs and concentrate on solutions in which various types of cargo can be shared. One day the payload may be fruit and vegetables and the next day building materials.”

Since establishing a presence in the country in 1945, Scania has sold 20,000 trucks in Turkey, of which a large proportion are still on the road. Scania’s existing service network maintains high standards that are superior to normal standards

Focus: Turkey

“Our ambition is to become the leading importer.”

Oscar Jaern, country manager for Scania in Turkey

• SCANIA VALUE 5Q2/2013

text: mattias andersson photos: alp esin, kjell olausson, istockphoto

From left to right: Drivers Mustafa Saylar, Metin İşcan and Şener Çağlayan from Çalışkan Lojistik. They transport building chemicals and raw materials in Turkey, Georgia, France, Albania and Kosovo.

Strong partnerDoğuş Otomotiv represents Scania in Turkey and is the country’s leading distributor of imported cars and trucks, with a large network for sales, service and financing solutions. This automotive business is part of Doğuş Group, founded in 1951 and today one of Turkey’s largest companies with over 30,000 employees. The Group also has operations in bank-ing and finance, media, construction, energy and tourism.

Population: 75 millionGDP per capita (2011): USD 11,840 (pur-chasing power parity, PPP: USD 15,910) Main export markets: Germany, France, the UK, Italy, IraqImport countries: Russia, Germany, China, the US, Italy, FranceTransport services: Road transport services are the dominant means of transport, accounting for 95 percent of passenger services and 90 percent of goods haulage.Market for heavy trucks: About 30,000 vehicles/year.Sources: IMF, TurkStat and the Investment Support and Promotion Agency of Turkey.

Turkey and the truck market

One of Scania’s custom-ers in Turkey is Çalışkan Taşımacılık Otomotiv ve Sanayi Ticaret A.Ş., which

has operated in the transport business since 1998. Today the company has 70 trucks, all from Scania, and provides both international and domestic haulage of

building chemicals as well as logistics solu-tions. The company’s goal is to become the largest player in Turkey in its industry.

“I appreciate the fact that Scania helps us to keep down the company’s costs through fuel savings, among other things,” says Muzaffer Uğurlu, the haulage com-pany’s owner.

Aims to become the largest in the industry

in the region, offering good prospects for further growth. The next item on the agenda for Jaern and his colleagues is to concentrate on the parts mar-ket, where Scania has a comparatively low market share today. Another important piece in the jigsaw puzzle is Scania’s own finance company – Scania Tüketici Finansmanı (STF).

Strong performance in sight“The view of Turkey from a European hori-

zon can sometimes be a little prejudiced, but for instance some parts of the banking sector today are more modern and stable than in many other European countries,” Jaern says, mentioning the simplicity and transparency of credit reports as an example.

He spends a lot of his working time in Tur-key and is very optimistic about the future:

“If we continue to focus on having satisfied customers I expect a very strong performance.”

Muzaffer Uğurlu

www.scania.com


The importance of the krona rate for Swed-ish export industry is not a new phenomenon. Ever since the krona was fl oated in 1992, hav-ing been previously tied to other currencies, we have seen very large fl uctuations in exchange rates. Normally, weak economic conditions have meant a fl ight to the dollar and euro while the Swedish krona weakened. However, dur-ing the current downturn, centred around the euro crisis, this long-standing connection has not applied; now the krona has remained strong while the economy has weakened.

For Scania, this means that the company must handle weaker demand in Europe, increased production costs in Sweden and lower revenue from international sales when converted into kronor.

“Scania has coped somewhat worse than its competitors since a large share of its produc-tion takes place in Sweden, but the effect of the

FINANCE: CURRENCY RATE EFFECTS

stronger krona could have been even greater,” says Kenneth Toll Johansson, analyst at Carne-gie, an investment bank. The company has been very successful in steering its purchasing costs towards euros in order to match sales.

For the past couple of years, Scania has cho-sen not to hedge coming fl uctuations via futures contracts and derivatives. After the 2009 fi nan-cial crisis, the company devoted a lot of energy to ensuring stable and short lead-times from order to delivery in order to boost fl exibility. Shorter exposure between order and delivery also reduced the need to hedge currency fl ows. Scania’s ambition is to have a holistic view of all orders, so that component purchases are steered to the right production unit as far as possible in order to match sales.

Open currency exposureThis means that Scania now has totally open currency exposures, of which the largest are in Brazilian reais, US dollars, Russian roubles, British pounds and Norwegian kroner. The very weak market in southern Europe in recent years has meant that the effect of the euro rate has become less signifi cant. During the fi rst half of 2013, the negative currency rate effect on Scania’s operating income was approximately SEK 1 billion.

Krona and economic cycle a challenge for Scania

“As we know, currency rate changes in rela-tion to the Swedish krona have an impact in both directions,” says Toll Johansson. “Of course when the krona was weak in 2010, Scania reported very good profi ts. Working actively with hedging via futures contracts and derivatives only delays the effect of currency fl uctuations.”

Hampus Engellau, analyst at Handelsbanken, says that Scania’s greatest problem historically when it comes to currency exposure has been related to the Brazilian market and fl uctuations in the real. Although Scania has large domestic production in Brazil, due to high deliveries in that country a large part of negative currency rate effects in the fi rst half of 2013 are attribut-able to a weaker real.

Alternative suppliers“Another problem is rigidity in supplier prices, where many only change their price lists twice a year, regardless of the market trend,” says Engellau. Unlike many other truck manufac-turers, which often just have one component supplier, Scania always has at least two. This means that the company can be more proactive about buying from the right suppliers from an exchange rate perspective.

Both analysts agree that the trend towards a stronger krona that is adversely impacting Sca-nia’s earnings will persist in the near term – as long as the debt crisis in Europe and the slow recovery in the US economy continues.

“The big challenge for Scania ahead will be to balance two economies: Europe, where demand is weak, versus Brazil, where the market is over-heated. It’s a matter of managing the strong order bookings in Brazil and producing a suffi cient number of trucks, while keeping costs in check and being able to generate profi ts,” says Engellau.

Export companies in Sweden are being challenged by an unusual combination of a weak economy, particularly in Europe, and a strengthening Swedish krona. But the negative effect on Scania could have been even greater, say analysts.

“The company has been very successful in steering its

purchasing costs towards euros to match sales.”

Kenneth Toll Johansson, analyst at Carnegie.

Frederik Ljungdahl

“Matching of individual currencies, active

choices of invoicing currency and no hedging.

This is a summary of

how Scania’s currency

strategy looks today,

says Frederik Ljungdahl,

Head of Scania Group

Treasury.

The basic philosophy

for managing the effects

of the Swedish krona

exchange rate on Sca-

nia’s earnings is to match

sales flows with production costs in each indi-

vidual currency. Both Scania’s truck sales and

purchasing of production materials occur on

a continuous basis. By reducing the net flow

in each individual currency, the currency rate

effect on the final margin will decrease.

“Scania’s sales of products to its own sub-

sidiaries are made in the subsidiaries’ own

currency. This means that the currency risk

arising in the sales chain is centralised to

Group Treasury, while subsidiaries don’t need

to manage currency risk but can concentrate

on their core business.

Centralised currency risk“Combined with centralised purchasing of

components for production units, this means

that Group Treasury can easily monitor

Scania’s net exposure in a given currency. By

actively working with net exposure, purchas-

ing can be carried out centrally in another

currency whenever possible in order reduce

the net exposure in a given currency,” says

Ljungdahl.

“By analysing Scania’s currency mix, a new

invoicing currency can be introduced where

possible, so that the overall basket of cur-

rencies will be more stable in relation to the

krona trend,” he continues.

“Historically, the Swedish krona has dis-

played stronger movements against certain

currencies, while weakening against others.

We can reduce this impact by actively

choosing what currency Scania will invoice

in, in those markets where such an option is

offered,” Ljungdahl concludes.

• SCANIA VALUE 7Q2/2013

text: susanna hjertonsson photos: istockphoto, kjell olausson

Scania chooses invoicing currency

150

149

130

120

110

100

0+ 0 Q32008

Q12009

Q32009

Q12010

Q32010

Q12011

Q32011

Q12012

Q32012

Q42008

Q22009

Q42009

Q22010

Q42010

Q22011

Q42011

Q22012

Q42012

Q12013

Source: The Riksbank

Swedish krona trendThe TCW index stands for Total Competitive-ness Weights and is calculated by the Interna-tional Monetary Fund, IMF. The TCW index is a weighted average of several different currencies that measures the value of the Swedish cur-rency against a basket of other currencies. A currency’s weight is based on Sweden’s volume of trade with the country in relation to the other countries. The index shows that the Swedish krona has strengthened significantly in relation to the TCW since 2009. But if you take a long-term view, the Swedish krona is not exception-ally strong. A low index value means that the krona’s value has strengthened – the basket of currencies has become cheaper to buy with Swedish kronor.

TCW index

Based on 2012 revenue and expenses

in foreign currencies, a one percentage

point change in the value of the Swed-

ish krona against other currencies,

excluding currency hedges, would have

an impact on Scania’s operating income

of about SEK 281 m. on an annual basis.

Scania’s currency risk

www.scania.com

ADAC Postbus will connect 30 large German cities using new Scania coaches.

UPCOMING EVENTS19 September 2013Capital Markets Day

23 October 2013Interim Report January-September 2013

29 January 2014Year-end Report 2013

IN BRIEF editor: cecilia vinell photos: scania, fredrik persson, peggy bergman

Coaches for new German bus routes

Experts in lower carbon dioxide emissions

Anders Gustavsson, Managing Director of Scania’s Transport Laboratory.

Along with 19 other large Swedish companies, Scania participated in a roundtable discussion to draw up concrete measures for sustainable global development. The discussion was organised by Sida, the Swedish International Development Cooperation Agency. The purpose of the roundta-ble was to pinpoint areas in which Swedish busi-ness can collaborate to develop effective solutions for sustainable development and build partner-ships between business and the public sector.

“At Scania, we are convinced that a strong sus-

The Swedish government has set a goal of creat-ing a sustainable and resource-efficient energy system without net greenhouse gas emissions by 2050. This is far more ambitious than the EU target for the transport sector.

Scania is represented in several expert groups that will contribute to the government inquiry.

“We’re focusing on energy efficient transport services: how we can utilise energy better in the existing structure, here and now. We’re not con-cerned with types of energy but rather how we can transport goods and people in the most effi-cient manner,” says Anders Gustavsson, Manag-ing Director of Scania’s Transport Laboratory.

Sustainable development discussion

ADAC Postbus is starting intercity coach ser-vices in Germany and has selected Scania as its supplier of coaches and service-related prod-ucts. The new bus company will be jointly oper-ated by Deutsche Post and the large German automobile organisation ADAC.

By spring 2014, ADAC Postbus will connect 30 of the largest German cities using 63 Scania coaches. The new intercity coach service will be gradually expanded to cover the entire country.

“Scania’s unique modular system enables us to deliver several attractive vehicle specifica-tions and gives us the flexibility to meet cus-tomer demands,” says Frank Koschatzky, Sales Director, Scania Deutschland Österreich.

tainability focus will help create growth for com-panies in existing markets as well as new ones, and we believe that partnerships are crucial in this,” says Martin Lundstedt, Scania’s President and CEO. “One example of how we integrate sustain-ability into our business model is Ecolution by Scania, a service concept that optimises fuel effi-ciency and minimises carbon dioxide emissions for our customers. Another example is Bus Rapid Transit, (BRT) a solution for sustainable mobility in urbanised areas.”

Scania’s President and CEO Martin Lundstedt at the Sida roundtable discussion.

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: Göran Wink

ContactScania Investor Relations SE-151 87 Södertälje, SwedenTel: +46 8 553 81 000E-mail: [email protected]

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