volvo cars 2019 results presentation/media/files/v/volvo-cars-ir/results... · volvo car group...

Volvo Cars

2019 Results PresentationCarla De Geyseleer

Volvo Car Group Results Presentation January – December 2019

DISCLAIMER


By accepting this document, the person to whom it is provided (the “Recipient”) agrees to be bound by thefollowing obligations and limitations.This document has been prepared and issued by Volvo Car AB (together with its subsidiaries, “Volvo Cars”).The information contained in this document is derived from sources that have not been independentlyverified. Except in the case of fraudulent misrepresentation, no responsibility or liability is accepted by VolvoCars 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 informationmade available by Volvo Cars in connection therewith or any data which any such information generates, orfor any loss whatsoever arising from or in connection with the use of or reliance on this document and anysuch liability is expressly disclaimed. Analyses and opinions contained herein may be based on assumptionsthat, if altered, can change the analyses or opinions expressed. This document speaks as of the date hereofand in providing this document, Volvo Cars gives no undertaking and is under no obligation to provide theRecipient with access to any additional information or to update this document or to correct anyinaccuracies in it which may become apparent. Volvo Cars’ past performance is not necessarily indicative offuture results and nothing contained herein shall constitute any representation or warranty as to futureperformance of Volvo Cars or any security, credit, currency, rate or other market or economic measure. Nordoes this document constitute a recommendation with respect to any securities.

2


2.Financial

review

4.Outlook

1.2019

Highlights

3.Sustainable

actions

3


A YEAR OF STRONG PERFORMANCE AND TRANSFORMATION

Strong growth and market share gains

• 700,000 cars sold, 6th

consecutive all time high

• Market share gains in US, EU and China

• Production start of XC40

and S60 in China

Financial targets achieved

• Continued growth in sales and revenue

• Improvements from cost efficiency measures

• Improved profit and EBIT margins in 2nd half

• Strong cash flow

Milestone in electrification and connectivity

• Two BEV´s launched

• Battery capacity secured

• World´s first integrated Android infotainment system

4


2.Financial

review

4.Outlook

1.2019

Highlights

Full year 2019 global sales & financial performance

EBIT

Balance sheet

Cash flow

Quarter 4 2019

Financial summary

5

3.Sustainable

actions


STRONG REVENUE GROWTH AND IMPROVED FINANCIAL PERFORMANCE

Revenue (MSEK)

Retail sales (k units)

EBIT / margin (MSEK/%)

642705

2018 2019

9.8%

2018 2019

252,700274,100

8.5%

14,200

20192018

14,300

+0.8%

Cash flow from operating andinvesting activities

(MSEK)

2018 2019

11,573

4,705

146.0%

5.6% 5.2%

2019 HIGHLIGHTS

6


14%

63%

23%

7%

62%

31%

74 70 70 77 95 101

56 70 83 8298 10882 82 91 114131

155

254282

291299

318

341

20192014 2015

504

20172016

572

2018

642

466

535

705

CAGR+8.6%

+9.8%

PHEV +23%

Diesel -5%

Petrol +18%

XC +24%

V -13%

S +2%

Europe China OtherUS

2224

53

56

64 Sweden

BeLux*

Italy

UK

Germany

% change YoY

% change YoY

GROWTH AMBITIONS DELIVERED

2019 SALES GROWTH BY MARKET, CARLINE AND POWERTRAIN

Model range distribution

Powertrain distribution

* BeLux: Belgium & Luxembourg 7

(MSEK) 2019 2018 Change (%)

Revenue 274,100 252,700 8.5

Cost of goods sold -222,000 -203,300 9.2

Gross income 52,070 49,331 5.6

Gross margin 19.0% 19.5%

Operating income (EBIT) 14,303 14,185 0.8

EBIT margin 5.2% 5.6%

Net income 9,600 9,800 -2.0


FINANCIAL PERFORMANCE IN LINE WITH GUIDANCE

2019 FINANCIAL HIGHLIGHTS

8


OtherRevenue 2018

10,670

Volume, sales mix

and pricing

252,653-894

Sales of licenses

8,533

Foreign exchange

rates

3,155

Revenue 2019

274,117

MSEK 21,464+8.5%

15%

48%

22%

16%

SOLIDLY OUTGROWING THE OVERALL MARKET ACROSS ALL REGIONS

2019 REVENUE GROWTH COMPOSITION (MSEK)

USEurope China Other

GLOBALLY BALANCED REVENUE DISTRIBUTION

9

Key objectives

Increase profitability by focusing on margins, variable and fixed costs

Ongoing review of resource allocation

2019 activities

Cost efficiency measures are targeting to lower fixed cost run rate in H1 2020 by SEK 2bn through

Reduction white collar employees and consultants

Reduction bought services


Achieved by December 31 2019

1.8

Other Employees

ONGOING COST EFFICIENCY MEASURES

TARGETING A LOWER FIXED COST BASE RUN RATE COST REDUCTION (BNSEK)

10


21,212

24,869

25,202

20,364

46,414

45,233

-1,181

4%US

Europe

75%

19%

China2%

Other

IMPROVED HEAD COUNT EFFICIENCY

2019 FTE* END OF PERIOD FULL TIME EMPLOYEESDISTRIBUTION BY REGION

Rest of Europe

Sweden26,800

5,109

1,973

33,882

Belgium

Blue collar White collar

11

*FTE includes both employees and agency personnel

45,233

December2018

December2019

Average FTE*for the year

45,871 +0.2% 45,965

Produced cars

669k +5.5% 707k


2.Financial

review

4.Outlook

1.2019

Highlights


EBIT

Balance sheet

Cash flow

Quarter 4 2019

Financial summary

12

3.Sustainable

actions


865

14,3031,308

EBIT 2018

-125

Volume, sales mix and pricing

-425

Sale of licenses Foreign exchange rates Other EBIT 2019Government grants

-1,505

14,185

MSEK 1180.8%

5.6% 5.2%

ROBUST EBIT DRIVEN BY VOLUME AND PRODUCT MIX

2019 EBIT GROWTH (MSEK)

5.2%

13


2.Financial

review

4.Outlook

1.2019

Highlights


EBIT

Balance sheet

Cash flow

Quarter 4 2019

Financial summary

14

3.Sustainable

actions


ASSETS (MSEK)

DECEMBER 2019

DECEMBER 2018

Intangible assets 32,790 29,630

PPE 69,740 61,210

Operating leases 3,240 2,520

Investments 7,410 7,000

Deferred taxes and other non-current assets 10,870 9,810

Total non-current assets 124,050 110,170

Inventories 38,910 35,160

Accounts receivable 13,240 13,700

Current tax assets and other current assets 9,830 10,450

Marketable securities and Cash and cash equivalents 55,530 41,750

Total current assets 117,510 101,060

TOTAL ASSETS 241,560 211,230

EQUITY AND LIABILITIES(MSEK)

DECEMBER 2019

DECEMBER2018

Total equity 63,650 61,250

Provisions for post-employment benefits 12,580 8,430

Bonds and Liabilities to credit institutions 26,130 21,470

Other interest bearing liabilities 5,080 -

Other non-current liabilities and provisions 18,390 16,670

Total non-current liabilities 62,180 46,570

Accounts payable 44,880 43,630

Liabilities to credit institutions 4,110 2,180

Other interest bearing liabilities 1,070 -

Other current liabilities and provisions 65,670 57,600

Total current liabilities 115,730 103,410

TOTAL EQUITY & LIABILITIES 241,560 211,230

STRONG CONSOLIDATED BALANCE SHEET

15


2.Financial

review

4.Outlook

1.2019

Highlights


EBIT

Balance sheet

Cash flow

Quarter 4 2019

Financial summary

16

3.Sustainable

actions


IMPROVED EBITDA AND WORKING CAPITAL DRIVE STRONG CASH FLOW GENERATION IN 2019

2019 CONDENSED CASH FLOW

* Change in inventories, accounts receivable and accounts payable17

(MSEK) 2019 2018

EBITDA 29,851 27,398

Cash flow from other operating activities -4,978 -4,745

Adjustments -2,415 68

Net working capital * -403 -1,961

Other working capital 10,319 6,005

Cash flow from operating activities 32,374 26,765

Investments in tangible assets -11,807 -13,574

Investments in intangible assets -9,176 -7,283

Cash flow from other investing activities 182 -1,203

Total operating and investing cash flow 11,573 4,705

Net cash flow from interest bearing liabilities and bonds 4,673 -4,267

Investments in marketable securities -1,985 2,558

Dividends -2,897 -67

Other -622 1,033

Cash flow from financing activities -831 -743

Total cash flow for the period 10,742 3,962

-403

-4

-2

0

2

4

6

8

10

12

14

-5,000

-4,000

-3,000

-2,000

-1,000

0

1,000

2,000

3,000

4,000

2018

2.1%2.3%

2015

3,608

2016

-0.8%

2017

-2.1%

-0.2%

2019

-4,385

3,740

-1,961

254

69,108

13,330

1,580

13,593

40,170 51,997

2019 December Liquidity

2018 December Liquidity

FinancingOther** InvestmentsEBITDA

55,080

-403

3,518

Net working capital*

-20,801

29,8512,926

Undrawn credit facilities Marketable securities Cash

Volvo Car Group Results Presentation January – December 2019 * Change in inventories, accounts receivable and accounts payable ** Interest, tax and changes in other items

% of Revenue Net working capital

FREE CASH FLOW AMOUNTING TO 11.6 BN SEK

2019 LIQUIDITY (MSEK) CHANGE IN NET WORKING CAPITAL (MSEK)

MSEK11,573

18

10.0%

8.3%

20172014 2015

8.7%

2016

10.8%

12.3%

11.8

17.0

2018

7.7%

2019

13.8

4.7

13.9

19.3

25.7

20.9 21.0

13.1

8.6

5.2

9.2

6.2

8.7

13.6

7.39.2

Intangible investments% of Revenue Tangible investments


0

2

4

6

8

10

12

14

0

1

2

3

4

5

6

7

8

9

10

11

12

3.6%

2014 2019

5.3%

2017

5.9%

2015

5.7%

2016

4.3%

2018

4.2%

7.2

9.510.2 10.2

10.911.4

% of Revenue R&D expenses

BUILDING THE FUTURE THROUGH FOCUSED AND CONTROLLED INVESTMENTS

2019 ANNUAL CAPITAL EXPENDITURE (BN SEK)

2019 RESEARCH AND DEVELOPMENTEXPENSES (BN SEK)

19

4,100

5,200

3,0002,000

6,2005,200

200

3,500

2,400

2023

52,000

13,600

6,650

3,450

Liquidity December 31 2019

450

2020 2021

450

2022

5,850

2,450

450

2024

650

2025 2026

69,100

7,600


Undrawn credit facilities BondsCash & cash equivalentsMarketable securities Loans

30,300

STRONG NET CASH POSITION OF SEK 25.2BN SUFFICIENTLY COVERING UPCOMING MATURITIES

2019 MATURITY PROFILE AND SPLIT (MSEK)

28%

72%

Loans Bonds

Net cash

25,200

20


2.Financial

review

4.Outlook

1.2019

Highlights


EBIT

Balance sheet

Cash flow

Quarter 4 2019

Financial summary

21

3.Sustainable

actions

(MSEK) Q4 2019 Q4 2018 Change (%)

Revenue 79,200 73,000 8.4

Cost of sales -64,100 -59,000 8.5

Gross income 15,100 14,000 8.1

Gross margin 19.1 19.2

Operating income (EBIT) 5,300 4,500 17.5

EBIT margin 6.7 6.2

Net income 3,800 3,100 24.0


STRONG REVENUE GROWTH AND EBIT RECOVERY RESULTING FROM BETTER MIX AND IMPROVED EFFICIENCIES IN QUARTER 4 2019

QUARTER 4 2019 FINANCIAL HIGHLIGHTS

22


3,545 2,690

2,125

Volume, sales mix

and pricing

Revenue Q4 2019

Revenue Q4 2018

-2,190

Sales of licenses

Foreign exchange

rates

Other

73,025

79,195

MSEK 6,170 8.4%

15%

15%

49%21%

Europe US OtherChina

STRONG REVENUE GROWTH DRIVEN BY VOLUME AND MIX IN QUARTER 4 2019

QUARTER 4 REVENUE GROWTH COMPOSITION (MSEK)

23

GLOBALLY BALANCED REVENUE DISTRIBUTION


510

150

OtherGovernment grants

1,267

EBIT Q4 2019

-145

Sale of licenses

-995

Volume, sales mix and pricing

Foreign exchange rates

4,505

5,292

EBIT Q4 2018

MSEK 78717.5%

6.2% 6.7%

EBIT RECOVERY DRIVEN BY VOLUME & PRODUCT MIX ALONG WITH COST & OPERATIONAL EFFICIENCIES

QUARTER 4 2019 EBIT GROWTH (MSEK)

6.7%

24


IMPROVED EBITDA AND WORKING CAPITAL DRIVE STRONG CASH FLOW GENERATION IN QUARTER 4 2019

QUARTER 4 2019 CONDENSED CASH FLOW

25* Change in inventories, accounts receivable and accounts payable

(MSEK) Q4 2019 Q4 2018

EBITDA 9,338 7,860

Cash flow from other operating activities -1,149 -1,123

Adjustments -1,514 2,386

Net working capital * 9,275 4,189

Other working capital 2,125 2,764

Cash flow from operating activities 18,075 16,076

Investments in tangible assets -3,410 -3,440

Investments in intangible assets -2,473 -2,118

Cash flow from other investing activities 164 -32

Total operating and investing cash flow 12,356 10,486

Net cash flow from interest bearing liabilities and bonds -1,810 -708

Investments in marketable securities -1,797 -1,077

Dividends - -

Other -890 -144

Cash flow from financing activities -4,497 -1,929

Total cash flow for the period 7,859 8,557

3,518

2019 Q4 Liquidity

13,905

-5,419

51,997

FinancingOther**

-5389,275

45,060

2019 Q3 Liquidity

63,165

69,108

EBITDA Working capital*

-5,719

Investments

4,200

9,338

13,593

Undrawn credit facilities Marketable securities Cash

Volvo Car Group Results Presentation January – December 2019 * Change in inventories, accounts receivable and accounts payable ** Interest, tax and changes in other items

FREE CASH FLOW REACHING HISTORICAL LEVEL IN QUARTER 4

QUARTER 4 2019 LIQUIDITY (MSEK)

MSEK 12,356

26


2.Financial

review

4.Outlook

1.2019

Highlights


EBIT

Balance sheet

Cash flow

Quarter 4 2019

Financial summary

27

3.Sustainable

actions


FINANCIAL SUMMARY

Revenue growth

of 8.5% reaching SEK 274bn, driven by volume growth and mix

Record EBIT

of 14.3bn, driven by volume and product mix, combined with cost

and operational efficiencies

Cost optimisation measures

successfully implemented achieving 1.8bn lower cost run

rate

Increased profit and margin improvement

in the 2nd half of the year, outperforming last year

Historically strong cash flow

of SEK 11.6bn resulting in a net cash position of 25.2bn

28


2.Financial

review

4.Outlook

1.2019

Highlights

29

3.Sustainable

actions

YYYY.MM.DD Presentation title, Full name, Security Class: Proprietary 3030

Supply chain

Operations

Car

40 % reduction of carbon footprint

Every model has plug-in version – 20% of sales

Recharge– chargeable electric cars

XC40-first all electric car

We plan to meet new EU CO2 emission target

SUSTAINABLE ACTIONS

2020 2025

-25%

-25%

-50%


2.Financial

review

4.Outlook

1.2019

Highlights

31

3.Sustainable

actions


OUTLOOK 2020

32

Sales and revenue growth

Increased profit

Similar level of investments

Continued strong cash flow

32


A YEAR OF STRONG PERFORMANCE AND TRANSFORMATION

Strong growth and market share gains

Financial targets achieved

Milestone in electrification and connectivity

33


APPENDIX

35


SEK DEPRECIATION DURING 2019 VS 2018

36

GBP

6,3%

EUR USD CNY

2,0%

PLNJPY NOK CHF KRW RUB

9,5%

2,7%

3,9%4,1%

8,1%

0,4%

2,1%

5,3%

Change %

FINANCIAL DEVELOPMENT


68 101 98 9964 69

198 185 161168 170

273 359 445

203 254

2019

642

42

2015 2016

705

2017 2018

503535

572

+8.8%+9.8%

Other

SUV

Estate

Sedan

RETAIL SALES

164181

209

253274

201820172015 2016 2019

+13.7% +8.3%

REVENUE

0

2

4

6

8

10

12

14

0

5

10

15

20

25

30

2019

27.4

2015

26.2

2016 2017

16.0

2018

21.5

29.8

EBITDA

EBITDAmargin, %

EBITDA

2327

2527

32

20162015 2017 2018 2019

OPERATING CASH FLOW

37

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