Scania Value Quarter 3 2010

8/7/2019 Scania Value Quarter 3 2010

1/8

Interview

We have maintained

cost discipline rom

the fnancial crisis.> PAGE 3

Finance

Why growth will

continue in South

America.> PAGES 67

ReportOperatingmargin record-high 18%.> PAGE 2

A MAGAZINE FOR SCANIAS SHAREHOLDERS

QUARTER 3 2010

FIGURES IN FOCUS:

110%Increase in order bookings

frst nine months 2010.

Scania helps hauliers become greener. > PAGES 45

Eco focus pays off

0

4

8

12

16

20

%

-08

Q3

-08

Q4

-09

Q1

-09

Q2

-09

Q3

-09

Q4

-10

Q1

-10

Q2

Operating margin

-10

Q3


2/8

(SEK m. unless otherwise noted) 2010, 9 m 2009, 9 m Cang in, %

Net sales, Scania Group 55,663 43,714 27

Operating income, Vehicles and Services 8,930 1,124 -

Operating income, Financial Services 91 -82 -Operating income 9,021 1,042 -

Income beore taxes 8,757 366 -

Net income or the period 6,103 307 -

Operating margin, % 16.2 2.4

Return on equity, % 28.1 8.3

Return on capital employed, Vehicles and Services, % 32.3 11.5

Earnings per share, SEK 7.63 0.38

Cash fow, Vehicles and Services 8,388 3,017

Number o employees, 30 september 34,592 32,085

Order bookings (units, trucks and buses) 52,452 24,918 110

Deliveries (units, trucks and buses) 43,549 29,690 47

Od booking and dlivi by gion, Q3 (nmb o vicl)

N al by odc gmn*N al Oaing incom and magin

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

Trucks 57%

Other 3%

Used vehicles 6%

Services 22%

Engines 1%

Buses and

coaches 10%

%SEK m.

SEK m.

Operating income, SEK m.

Operating margin, percent

2008

Q3

2008

Q4

2009

Q1

2009

Q2

2009

Q3

2009

Q4

2010

Q1

2010

Q2

2008

Q3

2008

Q4

2009

Q1

2009

Q2

2009

Q3

2009

Q4

2010

Q1

2010

Q2

2010

Q3

2010

Q3

Ky fg

westerN eurOpe

Order bookings

5,251 +62%Deliveries

4,758 +28%

CeNtrAL ANDeAsterN eurOpe

Order bookings


1,336 + 95%

LAtIN AMerICA

Order bookings


4,881 +109%

AsIA

Order bookings


3,252 +121%

Other MArKets

Order bookings

876 +29%Deliveries

1,001 +23%

FIRST nIne monThS In FIGUReS

9 MONths

IN BrIeF:Operating margin

rose to 16.2 percent (2.4).

Order bOOkings

increased by 110 percentto 52,452 vehicles.

Cash flOw

or Vehicles and Servicesincreased to SEK 8,388 m(3,017).

*Rolling 12 months

Q3/2010 www.scania.com2 SCANIA VALUE


3/8

In 2010 the third quarter was stronger than

usual for Scania. What is the reason?

Beore the nancial crisis, Europe accounted

or 65-75 percent o our sales. Today its share

is down to around 50 percent, mainly because

South America represents a larger slice o the

pie. As a result, we are not as strongly aected

by the European summer holiday period as in

previous years, when we essentially had three

months o costs but only two months o rev-

enue. In South America, the summer holiday

period is around Christmas.

Brazil, the companys biggest market

today, has a history of economic and politi-

cal instability.Does this mean that Scania

is also more unstable?

No, I dont think so. Politically and economi-

cally, Brazil today is a much more stable mar-

ket than previously. And the increased role

o South America means that Scania has two

strong legs to stand on Europe being the oth-

er one and this reduces volatility. Europe and

South America dont always ollow exactly the

same economic cycle, as the most recent crisis

demonstrates well.

Scania has begun hiring again. Although

the world economy seems to be

rebounding, there are still many sourc-

es of concern, especially in southern

Europe. Are you expanding too fast?

During the nancial crisis, essentially hal our

market vanished during a one-year period. Cer-

tainly no one had thought it could happen. This

has made us cautious. Now that we are increas-

ing our stang, we are doing so in a fexible

way: new hires in our production network have

short-term contracts. Not increasing capacity as

ast as demand is also a risk. It is bad or earn-

ings to lose a 1,000 truck order to a competitor

just because we cant deliver in time.

One year after a deep crisis, Scania isenjoying record-high profitability. The

operating margin was 18.3 percent dur-

ing the third quarter. How is this possible?

A combination o stronger demand and high

cost consciousness pays o. Mentally, Scania

is still in the crisis. Everyone in the company

has become more cost-conscious. The last time

our industry underwent such a trial by re was

in the early 1990s. Ater a long period o good

earnings, all companies become a bit lazy and

there is potential to improve eciency. We have

cut costs in all parts o our operations, and the

our-day week showed that things can be made

more ecient.

Is it possible to improve efficiency else-

where in the company, aside from the pro-

duction network, where Scania has been

successful in such efforts for many years?

Absolutely. One example is service operations.

There are still major dierences in how service

is provided around the world. By applying

good practice and Scania Production System

principles in our sales and service network,

we can become even more ecient. None o

our competitors are using this proactive

approach today.

The crisis madeScania more eicient

text: granlind photo: carl-erikanderssoninterview

Efcient meetings. The our-day

week showed that things can be

made more efcient, says Scania

CFO Jan Ytterberg.

Scanias proit margin is at a record-high level, largely thanks to last

years eiciency-raising measures. The company has also succeeded inmaintaining much o its cost discipline rom the inancial crisis. As aconsequence, proitability has risen rapidly as demand has returned, saysChie Financial Oicer Jan Ytterberg in an interview with Scania Value.

www.scania.com SCANIA VALUE 3Q3/2010


4/8

FOCUS: Ecolution

A new greenertransportconceptToday many transport companies are grappling with environmen-

tal issues and demands that they should provide green transportservices. This is why Ecolution by Scania is now being launched. It isa new business concept that helps transport companies reduce carbondioxide emissions and operating costs.

The idea behind Ecolution by Scania is or

transport companies to partner with Scanias

experts and put together a transport solution

that includes products and services with the

smallest possible environmental impact. This is

basically a matter o combining existing tried

and tested, commercially viable solutions that

each help to lower uel consumption and there-by lower environmental impact.

Ecolution by Scania makes our extensive green

product portolio visible to customers, says Martin

Lundstedt, Head o Franchise and Factory sales in

charge o sales and marketing. He continues:

There is a lot we can do here and now. In

close cooperation with our customers, we can

help to optimise their operations, reducing both

uel costs and carbon dioxide emissions, while

boosting lie-time proftability.

Unique solution or each customerBecause the needs and circumstances o custom-

ers vary, each solution is unique individuallyadapted to specifc transport tasks. For urban

trafc, or example, Ecolution by Scania oers a

solution using ethanol trucks, which signifcantly

helps to lower carbon dioxide emission. For orest

and construction haulage, the solution involves

robust vehicles uelled with biodiesel. For most

types o long-distance haulage, diesel is still the

only realistic alternative. But with the right vehicle

specifcation, services and maintenance, carbon

dioxide emissions can be reduced while keeping

uel costs down.

Common to all these solutions is the opportuni-

ty to add a number o green options, or example:

Driver training courses operated by Scania

reduce uel consumption by an average o 10

percent or customers in long-haulage, even

with a skilled driver behind the wheel. The

training courses ocus on economy driving,

which may also lead to a reduction in wear and

tear as well as the risk o accidents.

Driver follow-up at agreed intervals helpsto ensure sustained savings. Ater the initial

driver training course, Scania sta maintain

contact with the drivers and provide personal

eedback on their perormance. The customer

also receives help in monitoring and analysing

uel consumption data.

An extended maintenance programme is

designed to keep carbon dioxide emissions and

uel consumption at their new, lower level.

Customers who choose the entire oering

receive an Ecolution by Scania certifcate.

The individual elements can also be pur-

chased separately.

Josefen Dusseljee o

Scania in the Netherlands

works at a haulier to

ollow up its drivers and

vehicles.

4 SCANIA VALUE Q3/2010 www.scania.com


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text: connyhetting photos: erikbakker

Joseien Dusseljee is employedby Scania in the Netherlands butspends all her working hoursat the transport company Post-Kogeko in order to help it becomegreener and more eicient.

Her business card says Team Leader Technical

Support Programme, but Josefen Duseljee is

equally oten called a coach or project manager.

She has the overall responsibility or a pilot

project that, within a ew years, may set the pat-

tern or how Scania will establish close workingrelationships with major customers.

Eight months ago, Dusseljee was oered a

job as a coach and head o a three-year project

in collaboration with Post-Kogeko, one o

Scanias largest customers in the Netherlands.

This amily-owned transport company has

400 trucks, 80 percent o them rom Scania.

Over the next three years, 114 new trucks will be

delivered. Scanias agreement with Post-Kogeko

includes carrying out a continuous ollow-up

o both drivers and vehicles, aimed at achieving

continuous improvements. The goal is to reduce

uel consumption, environmental impact andmaintenance costs as well as improve efciency.

During the early months o the project, Dus-

seljee has devoted a lot o time to documenting

and measuring how Post-Kogekos drivers work.

Right now we are measuring 17 dierent

parameters, or example how hard the drivers

brake and accelerate. Once all the fgures are

in place, Post-Kogeko and I will put together a

training and activity package that will reduce

the companys uel consumption and carbon

dioxide emissions.

Dusseljee oten rides with the drivers to

study in detail how driving style and uel con-

sumption go hand in hand.It is important to see what is behind the

enormous quantity o fgures we collect. The

very knowledge that the work o the drivers is

being measured causes them to improve their

driving.

The key individuals in the project are Post-

Kogekos mentor drivers. These are experi-

enced drivers who, among other things, help

train newly hired drivers.

Ater driver training, we will work a lot with

the right vehicle confgurations and service

programmes as additional ways o reducing uel

consumption.

Coaching the

customer



6/8

In mid-September around 60 investors and

analysts as well as a number o journalists rom

Europe, the United States and Latin America

attended Scanias Investor Day in So Paulo,

Brazil. Scania presented its strategy or prot-

able growth in Latin America, in which both

service operations and the companys fexible

production system are important components.

The act that Scania has had a presence or

more than 50 years, is a leader in the biggest

markets Brazil and Argentina and has a

ar-fung service network, along with a fexible

production system, means that the company

is well-positioned or protable growth, Sven

Antonsson, President o Scanias Latin Ameri-

can Operations, told the Investor Day audience.

The Brazilian truck market bounced backquickly ater the nancial crisis, and since

the third quarter o 2009 its growth has been

very strong. Robust demand in Latin America,

especially Brazil, is one important reason why

Scania emerged quickly rom the crisis and has

shown good protability so ar during 2010.

Brazil has a very strong economy. GDP is

expected to increase by over 7 percent this year

and unemployment is low, said Christopher

Podgorski, Vice President Franchise and Factory

Sales Latin America.

In nancial markets, there has thus been

great interest in Brazil. Analysts and investors

are wondering how long demand can remain at

its current high level.

The market has enjoyed support rom sub-

sidies, both through lower taxes and avourable

nancing, but there is a risk that demand willbe lower i these subsidies disappear at the end

o this year, Antonsson said. At the same time,

he added that owing to new emission rules that

enter into orce in 2012, the market may take the

opportunity to buy trucks in 2011 beore the

new rules go into eect.

Improved productivityScania is aiming at a global production capacity

o 150,000 vehicles per year at the next peak in

the economic cycle, which would imply 30,000

vehicles in the Lat in American system. One key

actor behind the companys ability to increase

Continued robustgrowth in BrazilThe conditions are good forcontinued growth in LatinAmerica. That was the messagewhen Scania held its Investor

Day in Brazil.

We are well-positioned for con-

tinued growth, Sven Antonsson,

President, Latin American Opera-

tions told the audience at Scanias

Investor Day in Brazil.

finance

6 SCANIA VALUE Q3/2010 www.scania.com


7/8

production quickly when demand took o is

Scanias leadership philosophy that involves

striving or continuous improvement, coupled

with its global product and production system.

We strengthened our eciency during the

downturn, among other things by means o

employee training, and we are now ocusing on

maintaining short lead times. Today we are more

ecient than beore the crisis, so we dont needto build new actories to be able to grow, said

Stean Palskog, head o production and devel-

opment in Latin America.

Major potential in miningIn many Latin American countries, the mining

business is important. Scania sees major poten-

tial here.

There are a number o advantages in using

Scania trucks instead o traditional heavy

dumpers. For example, the customer achieves

greater fexibility, lower repair costs and lower

investment costs, Antonsson maintained.

Because a growing number o trucks operate in

the mining industry, Scania can also increase its

parts sales.

Scania has an extensive service network. In

Brazil it consists o 99 workshops, which sell

more than just parts.

Customers are requesting feet management

services, driver training and servicing o trailers

as well as other superstructures. We have majorpotential to boost our sales. The transport sector

is becoming increasingly advanced, with just-in-

time thinking, and this means greater demands or

ast, high-quality service, Podgorski said.

Aside rom Scanias ocus on vehicles or the

mining sector, its product range in Latin Amer-

ica is being broadened to include trucks with 9-

and 11-litre engines.

We have previously ocused on the very

heaviest trucks, but within the ramework o

our existing engine range and modular product

system, we can reach a bigger market in a cost-

eective way, Podgorski explained.

Scania has major potential forcontinued strong growth in Bra-zil, though competition will prob-

ably get tougher, say analystsafter Scanias Investor Day in SoPaulo.

Scania has an impressively strong market posi-

tion. Although MAN is now launching a truck

in the same segment (the heaviest), it will take

time or the company to establish itsel in the

market, says Kenneth Toll Johansson, analyst

at the Swedish investment bank Carnegie.

There are various short-term actors that

might slow growth, including the expiration o

government subsidies during 2011 and the new

emission standards that take eect in 2012.But it is a antastic market right now and

appears set to remain so or the next 5-10 years.

GDP growth looks strong and there will be

major inrastructure investments, which beneft

Scania specifcally. As you know, Brazil will be

organising both the 2014 ootball World Cup

and the 2016 Olympics, says Anders Trapp,

analyst at SEB Enskilda.

On the demand side it is difcult to oresee

any serious threats. It is more a question o

whether Scania can expand its production

capacity at the same pace as market growth,

Johansson says. He adds that today there is a

broad economic base in Brazil, with numerous

commodities and a growing middle class that is

boosting domestic demand.

Brazil is attracting additional challeng-

ers, though. Trapp points out that not only is

MAN moving into the market, but Mercedes is

launching a new model and Paccar-DAF is also

on the oensive. But i the market grows by

10 per cent a year, which seems to be the con-

sensus, there will be room or everyone. Next

year will be an exception, however. We expect

essentially zero growth, as a reaction to the

rapid increase o recent years and the phase-out

o subsidies.

Scaniaimpressive

Visitors received a guided factory tour and had an

opportunity to test-drive Scania trucks.

text: granlindphotos: wagnermenezesandcelsoluizgonalves

Some 60 investors and analysts heard

Scanias management team for Latin

America present the companys ope-

rations.



8/8

UPCOMINGFINANCIAL EVENTS

2 December 2010Capital Market Day,Sdertlje, Sweden

2 February 2011Year-end report,January-December 2010

27 April 2011Interim report,JanuaryMarch 2011

Scania Value is published by Scania and

distributed to Scania shareholders.

Publisher

Per Hillstrm, [email protected]

Editor-in-chie

Conny Hetting, [email protected] Manager

[email protected]

Art Director

[email protected]

Production

Appelberg Publishing Group

www.appelberg.com

Print: Trosa Tryckeri

Cover photo: Eric Bakker

Address

Scania

Investor Relations

SE-151 87 Sdertlje, Sweden

Tel: 08-553 81 000

According to the agreement between Scania and Doosan Inracore, Doosan Moxy dumpers

will be ftted with Scania engines.

Scania has decided to build a wind tunnel at its re-

search and development centre in Sdertlje, Sweden.

The wind tunnel will be used or testing such vehiclecharacteristics as comort, road saety and environ-

mental perormance in dierent climates.

The acility, the only one o its kind in Europe, will

be completed in 2013. It represents a urther strength-

ening o the research and development department in

Sdertlje, which employs 2,700 people today.

It is time-consuming and requires large resources

to carry out testing o trucks and buses in dierent

climates, among other things or planning and vehicle

transport. A wind tunnel that can simulate realistic

environments, ranging rom dry Arctic cold to humid

tropical heat as well as various wind conditions, will

thus make Scanias development work more ecient

and fexible.

Scania and Doosan Inracore, one o the

worlds largest manuacturers o construction

equipment, have signed a memorandum o

understanding which means that Scania will

deliver engines or Doosans products or the

global market.

Deliveries to Doosan Inracore will total

an estimated 1,000 engines during the nextew years. The agreement gives Scania access

to the growing Asian market or construction

equipment.

The Scania engines being supplied are

equipped with SCR (Selective Catalytic

Reduction) emission control technology.

The engines satisy the requirements o

emission legislation that comes into orce

2011, and are prepared or the 2014 legislation,

Stage IV and Tier 4 Final.

Doosan Inracore is expected to require

about a thousand engines over the next ew

years.

In January, Scania also signed an agree-ment to supply engines to Terex Corpora-

tion, a leading manuacturer o construction

and industrial equipment based in North

America. As a result, Scania has a compre-

hensive global presence in the market or

construction equipment.

IN BRIEF photos: danbomananddoosaninfracore

Europes most talented young truck drivers aced o

during two tough days in October. The 18 nalists in

Scanias Young European Truck Driver competition

were tested in uel-ecient driving, adapting their

driving style to dierent situations, securing their

cargo and checking the vehicle beore driving. The nal

event, precision manoeuvring, took place beore thou-sands o enthusiastic spectators on a course outside

Scanias chassis assembly workshop in Sdertlje, Swe-

den. Ater a dramatic nal round, 26-year-old Swedish

driver Andreas Sderstrm emerged as the clear win-

ner. Aside rom being able to call himsel Europes best

young truck driver, as his rst prize he won a brand-

new Scania R-series truck, worth around a million kro-

nor (over EUR 100,000).

The Scania Driver Competitions, which were organ-

ised or the ourth time in 2010, are not only European.

Since they began in 2003, more than 110,000 drivers

rom ve continents have participated, making it the

worlds largest heavy vehicle driving competition. See a video rom the fnal: www.scania.com/yetd/live

Young Swedish driver

best in Europe

New opening or engines in Asia

Wind tunnel willsimulate climates

A joyul Andreas Sderstrm with the winners

trophy. His frst prize will be a new R-series truck.

Scania Value Quarter 3 2010

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