road transport market status - rementum · right chart shows capacity balance in europe plotted...

Road Transport Market Status

European market intelligence

22-01-2018

Facts – Actions – Results

DISCLAIMER

• This presentation has been prepared by Rementum Research & Management AB for information purposes only and should be viewed solely in conjunction with the oral presentation provided by Rementum. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Rementum AB staff are not permitted to invest in securities issued by companies mentioned in the presentation.

• Copyright (2018) Rementum Research & Management AB (corporate id no. 556841-0491). All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.

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European road freight market – main trends, January:

MORE OF THE SAME

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• FREIGHT VOLUMES

• DIESEL PRICES

• FREIGHT RATES

• FINANCING

• COMBINED

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European road freight - conclusions

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• Freight volume growth still strong; ~2.5% in 2016 , +4% 2017 (preliminary)

• Stock markets experience renewed momentum

• Freight growth rate sufficient to maintain need for capacity increase

• Question marks around UK. Eastern Europe keeps slowing from exceptional levels

• Capacity balance trend still supporting road freight rates, but costs rising

• Road carrier FY 2018 earnings outlook remains benign, but more challenging

Road freight growth healthy - still above long-term trend

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Left chart shows y/y % growth in commercial truck traffic at >40 observation points in EU28 and EFTA.

Right chart shows diesel deliveries growth in a 70% sample of the European markets .

Sources: Rementum, Petroleum industry organisations, road authorities and corporations

Weekly freight flash index; rising demand in tight market

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• No obvious weak spots in European markets at the moment

• Freight volumes in Eastern Europe still growing above average

Left chart shows truck traffic reported weekly on the Southern and Northwestern European continent.

Right chart shows the monthly TimoCom freight spot market barometer of available shipments v provided bids from carriers

Sources: Rementum, road authorities and corporations, TimoCom

European economy; manufacturing softer, construction growth accelerating

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• 2017 car sales 3.4% growth. ‘16; 7%, ‘15: 9%, ‘14: 6%

• 2017 construction 3.4% YTD. ‘16: 1.5%, ‘15: 1%, ‘14: 2%

Left chart shows y/y growth in monthly car registrations in EU + EFTA .

Right chart shows indexed levels of construction activity (EU) and Caterpillar dealer sales (EMEA).

Sources: Rementum, ACEA, Caterpillar, Eurostat

High confidence in freight activity among forwarders and carriers

– maybe tentative signs of a softening ahead. Data inconclusive

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Left chart shows indexed level of Nordic carriers experienced demand and business confidence.

Right chart shows indexed level of the Danske Bank road freight forwarding index (6 month average).

Sources: Rementum, Nordic statistical agencies, Danske Bank

• Sentiment strongly influenced by macro-political situation

• Divergence between general confidence and expectations

Freight capacity tightening continues – nominal rates volatile

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Left chart shows indexed monthly balance between capacity (trucks >16t) and road freight in EU28 + EFTA.

Right chart shows capacity balance in Europe plotted against monthly carrier freight rates survey data.

Sources: Rementum, ACEA, Eurostat, road authorities and corporations

• probable continuation as 2007-08 trucks up for scrapping/export

• Long-term average balance = 0, but cycles are 10-15 years long

Neutral effect on real rates from rising fuel prices;

Negative impact on carrier earnings growth expected in 2018

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• Stronger EUR lessens immediate oil price effect

• Jump in 2016-17 crude prices loking less like ”dead-cat bounce”

Left chart shows indexed level of Nordic carriers experienced pricing power and profitability.

Right chart shows average weekly prices of Brent crude oil and diesel at the pump in all major European markets (w/ and w/out tax).

Sources: Rementum, Nordic statistical agencies, EIA, European Commission

2016-18E – Generally positive carrier earnings environment

Volumes provide continuos earnings boost – rates, diesel currently neutral

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The charts show indexed level of reported Dutch, German and Nordic carrier profitability (LHS)

and the level of commercial truck (>3.5t) registrations in EU28 + EFTA by quarter.

Sources: Rementum, Carrier organisations, ACEA

Early-2017 expectations Mid-2017 expectations

• Freight volumes +2% q/q. Diesel +10%. Freight rates +1% in Q4 ’17E

• Freight volumes -5% q/q. Diesel -7%. Freight rates +2% in Q3 ’17P

Carrier bankruptcies rising slightly y/y

High credit availability and still healthy road freight economics

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Left chart shows y/y (%)growth in number of Nordic carriers filing for bankruptcy per month.

Right chart shows y/y (%)growth in quarterly OE financial services credit losses.

Sources: Rementum, UC, MAN, Paccar, Scania, Volvo.

• Increase in transport bankruptcies 2011-12; banks and economy weak.

• Decrease in 2013-H1’14; lower financial stress and economy improving.

• 2015- experiencing lending growth in Europe.

Financial markets see no clouds (rate rises) on the horizon

How long will ECB hold off on tighter policies?

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• ECB establishing credibility, but…

• …markets seem to believe unorthodox measures soon over…

• ..as higher headline inflation..

• ..has supported the EUR vs the USD from the summer.

Left chart shows absolute levels of the CBOE Volatility Index and the Spreads between US and European Overnight- vs 3-month market interest rates.

Right chart shows absolute level of aggregated share prices for 14 carriers/forwarders and 3 commercial vehicle OEMs.

Sources: Rementum, Bloomberg, Financial Times, Global-Rates, US Federal Reserve

EU bank credit growing; important support for construction output

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• ECB not likely to choke recovery, despite rising inflation

• Yield curve trend fluctuating month to month in the US

• Emerging market FX-, inflation-, capital worries reduced

The left chart shows a combined index of the VIX, selected credit spreads and the US treasury yield curve (10y – 3m).

The right chart shows y/y growth (%) in lending from commercial banks to non-financial corporations in the US and EU.

Sources: Rementum, Bloomberg, ECB, Financial Times, Global-Rates, US Federal Reserve

Truck capacity investments - conclusions

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• Rising trend in EU + EFTA >6t truck registrations: ~ 34,000 units/month. (31,000 in Q1-Q3; 31,000 in FY16; 28,000 in FY15).

• Russia saw 16,000 units increase in 2017. Turkey may actually end up +/-0% (H1: -20%) for the year.

• FY’16 >6t delivery volume (EU28+EFTA+RCIS+Turkey): +6% vs. ’15

FY’17E >6t volume: +4% vs. ’16

FY’18E >6t volume: -4% vs. ’17

• Outlook for 2018-19 uncertain due to carrier earnings headwinds, but still good chance of continued credit expansion fueling growth.

Key indicators; estimated truck registrations December

– ACEA data 25 January

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• Estimated ”build” includes Russia/CIS (Western makes), Turkey (see p. 30)

• ”Non-core” Europe clearly facing less headwind factors for ’18E demand

Estimated annualised registrations Europe, 2016/2017 >6t GVW

Jun Jul Aug Sep Oct Nov Dec ( p )*

EU 27 + EFTA >16tonnes 27,138 23,255 18,581 26,254 29,216 27,422 24,500

Seasonal factor 9% 8% 6% 9% 9% 8% 8%

Annualised >16tonnes 315,689 291,057 290,654 280,939 315,632 325,159 311,888

Add 6-16 tonnes 388,297 358,001 357,505 345,555 388,227 399,946 383,623

Annualised build >6tonnes 423,297 393,001 392,505 380,555 423,227 434,946 418,623

Est. YTD build >6tonnes 209,791 241,311 267,082 302,292 341,977 380,290 415,841

* 75% of Europe reported

Key indicators; estimated annualised >6t truck build, YTD

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Late-2017 expectationsLate-2016 expectations

425k 6t build/yr. requires appr. 25k >16t EU+EFTA regs./month (~ 25,500 in 2017)

The charts show estimated annualised levels of deliveries (>6t) in the EU28 + EFTA + Russia and Turkey

Sources: Rementum, ACEA, OSD

Steady, but moderate, truck tyre aftermarket growth since Q1 ’15.

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Replacement demand reflects road freight activity, and leads… …OE build by normally 3-6 months

Left chart shows indexed level of truck (>6t) aftermarket deliveries of tyres in EU + EFTA + Turkey and Russia.

Right chart shows indexed level of truck (>6t) OE deliveries of tyres in EU + EFTA + Turkey and Russia as well as average

quarterly deliveries of trucks (>6t) in EU + EFTA + Turkey and Russia

Sources: Rementum, Tyre companies, Commercial Vehicle OEMs.

Truck OEM market shares, Europe (through December and Q3)

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Medium term Long term

Left chart shows 6-month average of trucks market shares (%, >6t). EU28+EFTA+Russia

Right chart shows quarterly trucks market shares (%, >6t) EU28 + EFTA + Turkey and Russia

Sources: Rementum, Automotive industry organisations, Commercial Vehicle OEMs

• Volvo brands stabilizing at slightly higher level. Daimler still struggling.

Truck OEM market shares, Brazil (through December)

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Medium term Long term

*= >15t

Left chart shows quarterly trucks market shares (%, >15t) Brazil

Right chart shows annual truck market >15t Brazil.

Sources: Rementum, ANFAVEA, Commercial Vehicle OEMs

• Daimler and Scania head-to-head. DAF catching up with Iveco

Truck OEM market shares, North America (through September)

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Long term

*= >7t

Left chart shows quarterly trucks market shares (%, >7t), North America

Right chart shows annual truck market >15t, North America.

Sources: Rementum, Commercial Vehicle OEMs, JD Power

• US remains a success story for Daimler. Volvo/Mack back in last place

Medium term

Truck OEM European order intake – 2017/18E

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• Q1-3 ’17 truck orders largely as expected

• Recent order surveys indicate ~+/-0% y/y in Q4

• Still sensing an element of overheating in parts of value chain

Annualised OEM orders Europe, 2017/18 >6t GVW6m average

Q3P Q4E Q1E Q2E Q3E order pace 6m avg x 4 FY Industry (run rate)*

Scania 13,360

Volvo 23,296

Daimler EU30 18,968

Daimler + Eurasia (estimate) 22,973

MAN (seasonal estimate) 20,000

Total orders 79,629 93,632 91,252 89,720 72,447 85,017 340,067 453,423

% chg. y/y 12.5 3.6 2.6 - 0.8 - 9.0 - 94,568

Accumulated industry (estimate)* 472,093 499,371 493,025 488,186 462,735 * Adding 25% for Iveco and DAF

Order growth stil robust – Tendency to overheating Q4 ’16/Q1 ’17

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*=incl. DAF and Iveco estimates

The charts show reported index levels of order intake and production volumes in Swedish facilities (blue and red

graphs), as well as growth y/y (%) in actual reported orders in EU 28 + EFTA + Russia and Turkey (green graph)

Sources: Rementum, Konjunkturinstitutet, Commercial Vehicle OEMs

November December

• +11% y/y order growth in Q2 (124k units*). Q1: +5% (120k*) Q3P: +13% (105k*)

OEM European deliveries – 2017/18E

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• Deliveries in Q2 ´17 somewhat below expectations

• Minor changes in OE build rates announced as of December 2017

Annualised OEM deliveries Europe, 2017/18 >6t GVW

Q3P Q4E Q1E Q2E Q3E Run rate pr Q Run rate x 4 FY Industry (run rate)*

Scania 11,553

Volvo 22,301

Paccar 12,400

Daimler EU30 20,874

Daimler + Eurasia (estimate) 24,879

MAN (seasonal estimate) 22,500

Total deliveries 93,633 106,406 91,548 97,186 84,982 93,633 374,532 420,822

% chg. y/y 6 2 3 4 - 9 -

Accumulated industry (estimate)* 314,661 434,219 101,720 209,705 304,129 * Adding 11% for Iveco

Fleet age still supportive for capacity demand – particularly rigid trucks

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The chart shows estimated average fleet age for heavy trucks (>16t) in EU28 + EFTA.

Sources: Rementum, ACEA

Used 4x2 tractor inflow may have peaked, but...

Second-hand prices volatile

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• Most markets recovering; historically low supply of low-milage used 4x2 tractors

• Prices should stay firm; as more Euro VI vehicles coming off lease in 2018

Left chart shows quarterly price index for used heavy tractors (4x2, grey bars, RHS) in Europe, as well as growth y/y (%) in the index (blue line, LHS)

Right chart shows weekly supply index for used heavy tractors (4x2, grey bars, RHS) in Europe, as well as growth y/y (%) in the index (blue line, LHS).

Sources: Rementum, used vehicle dealers

Maintained 2017-18 EU+EFTA freight volume forecasts

Unchanged 2017-18 EU+EFTA >16t trucks registration forecasts

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• Base case: freight volume growth rate of 4% in 2017 • +/-0% change in total truck (>16t and >6t) population

• 2% increase in EU28+EFTA >16t registrations expected

• -5% decrease in 2018 registrations expected

European capacity simulation (Base) 2012 2013 2014 2015 2016 2017E 2018E

Growth Fleet -0.1 0.6 -1.1 -0.2 0.2 -0.6 -0.9

Growth Freight -3.9 1.7 3.8 4.8 2.5 4.0 2.5

Capacity balance End of year 117 118 112 107 105 100 97

Fleet end of year 2,478,114 2,493,248 2,466,125 2,461,727 2,467,299 2,451,957 2,429,762

Freight end of year 2,126,949 2,112,922 2,193,213 2,298,487 2,355,949 2,450,187 2,511,442

Rates end of year (2007=100) 88 90 93 96 96 97 95

Diesel end of year 76 71 67 53 42 48 51

Profitability end of year 61 65 70 75 78 76 74

Removal (EU28+EFTA, >16t) 228,124 224,083 252,415 270,950 294,227 320,342 312,195

Registrations (EU28+EFTA, >16t) 221,838 239,217 225,292 266,552 299,799 305,000 290,000

Registrations (EU28+EFTA, >6t) 279,365 291,845 279,637 324,352 365,167 363,322 356,413

Aged truck population tightens capacity, but at slowing rate

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European capacity simulation (Neg.) 2012 2013 2014 2015 2016 2017E 2018E

Growth Fleet -0.1 0.6 -1.1 -0.2 0.2 -1.0 -1.5

Growth Freight -3.9 1.7 3.8 4.8 2.5 3.5 0.5


Fleet end of year 2,478,114 2,493,248 2,466,125 2,461,727 2,467,299 2,441,957 2,404,762


Rates end of year (2007=100) 88 90 93 96 96 95 93



Removal (16t) 228,124 224,083 252,415 270,950 294,227 320,342 312,195

Registrations (16t) 221,838 239,217 225,292 266,552 299,799 295,000 275,000

Registrations (6t) 279,365 291,845 279,637 324,352 365,167 351,410 337,978

European capacity simulation (Pos.) 2012 2013 2014 2015 2016 2017E 2018E

Growth Fleet -0.1 0.6 -1.1 -0.2 0.2 -0.4 -0.3

Growth Freight -3.9 1.7 3.8 4.8 2.5 4.5 3.0


Fleet end of year 2,478,114 2,493,248 2,466,125 2,461,727 2,467,299 2,456,957 2,449,762


Rates end of year (2007=100) 88 90 93 97 99 99 99



Removal (16t) 228,124 224,083 252,415 270,950 294,227 320,342 312,195

Registrations (16t) 221,838 239,217 225,292 266,552 299,799 310,000 305,000

Registrations (6t) 279,365 291,845 279,637 324,352 365,167 369,278 374,848

(<)2% annual growth is long-term trend in >16t registrations

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• Sales level likely to remain above, trend through 2018

• 1999-2008 saw sales significantly above trend

• 2% growth, or less, is the 1970-2015 average

The chart shows reported and forecast registrations of heavy trucks (>16t) and estimated long-term trend in EU28 + EFTA.

Sources: Rementum, ACEA

Analyzing the regional mix in our deliveries forecast for Europe

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• Dealer inventory deliveries not included

• Russia usually the most volatile market (3,000 in 2010 – 30,000 in ’12)

• Also a time lag between vehicle deliveries and registrations

The chart shows reported registrations of medium- and heavy trucks (>6t) in four European regions/market segments

Sources: Rementum, ACEA, OSD, Autostat

Detailed regional forecasts* 2017 -’19E

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2012 2013 2014 2015 2016 2017E 2018E 2019E

>16t truck regs >16t truck units

Europe 221,838 239,217 225,292 266,552 299,799 305,000 290,000 270,000

North America 249,583 236,809 270,275 301,740 243,229 245,000 294,000 323,400

Brazil 87,429 103,829 92,664 41,603 29,664 30,000 50,000 57,500

growth growth (%)

Europe 8.9 - 7.8 5.8 - 18.3 12.5 1.7 4.9 - 6.9 -

North America 6.7 5.1 - 14.1 11.6 19.4 - 0.7 20.0 10.0

Brazil 21.6 - 18.8 10.8 - 55.1 - 28.7 - 1.1 66.7 15.0

>6t truck regs >6t truck units

Europe 279,365 291,845 279,637 324,352 365,167 369,518 349,158 326,878

North America 380,616 361,136 412,172 460,156 370,927 373,627 448,353 493,188

Brazil 132,624 149,056 133,088 67,851 47,045 46,500 74,735 85,577

growth growth (%)

Europe 9.8 - 4.5 4.2 - 16.0 12.6 1.2 5.5 - 6.4 -

North America 11.1 5.1 - 14.1 11.6 19.4 - 0.7 20.0 10.0

Brazil 19.6 - 12.4 10.7 - 49.0 - 30.7 - 1.2 - 60.7 14.5

>6t truck deliveries >6t truck units

Europe 367,539 384,442 346,690 392,598 416,453 433,518 414,158 391,878

North America 372,661 347,820 401,559 448,599 363,338 364,916 436,996 480,354

South America 178,363 210,437 162,331 91,005 80,746 72,511 116,540 133,446

growth growth (%)

Europe 9.5 - 4.6 9.8 - 13.2 6.1 4.1 4.5 - 5.4 -

North America 9.8 6.7 - 15.5 11.7 19.0 - 0.4 19.8 9.9

South America 22.4 - 18.0 22.9 - 43.9 - 11.3 - 10.2 - 60.7 14.5

European forecasts* summary 2014-’19E

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• Final data for 2014 >6t deliveries: 345,000 units (Euro VI hangover)

• Final data for 2015 >6t deliveries: 395,000 units

• Final data for 2016 >6t deliveries: 415,000 units

• Estimate for 2017 >6t deliveries ~ 430,000 units (unch.)



NEXT CONFERENCE CALL: 20 February

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Facts – Actions – Results

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