Traton SE

Good morning, everyone. Welcome to the Trayton 9 Months 2023 Interim Statement Results Conference Call. Thank you for joining us today. Before we start, let me first make you aware of the disclaimer. As always, you can find all relevant documents on our 9 months and third quarter performance on our website, trayton.com.ir, including the slides of today's presentation. Together with me are Christian Levine, our CEO, and Michael Jagstein, our CFO and CHRO. I'm also joined by Camilla Devonen, head of profit relations. Christian will start with an overview. Michael will then explain the financial performance in the third quarter in more detail before we conclude the presentation with a full year outlook. After the presentation, we look forward to answering your questions. We will start with questions from analysts and investors. And in the final minutes of our call, we will open the floor for questions from the media as well. With that, I hand it over to Christian.

Excellent. Thank you very much, Thomas. And thanks, everyone, for being with us this morning. So, yeah, let's have a look at the third quarter of this year. Evidently, we are in a tricky geopolitical environment. Macroeconomics are not particularly in favor anymore. We see weakening trends in global economy, and as a result, we start to see lowered transport activities, but not in all markets as we're coming back to. Despite that, we still have a robust demand. We, of course, live partly from the high pent-up demand, but we also see a decent transport activity in most of the markets. So you could say that we're returning to something that could look like more of a normal situation after these last years of ups and downs. In this challenging environment, I think we have performed an excellent performance in Q3. We see a lower order intake on three of our brands at least, but still on a high comparable level and with a very strong order book with reduced lead times, but still too long lead times to be really where we want them. Unit sales are up. We continue to increase our production volumes with the exception of Volkswagen Truck & Bus in Brazil. Thanks to improved supply chain situation. So we still see an upside here as we are working hard to decrease the order book. So sales revenues continue to increase. We have higher volumes. We have a positive mix. We see really good price realization. and as a result a very solid and also to the result a very solid vehicle services business so all in all if we summarize we are achieving a 955 million euro which in adjusted terms return on sales takes us to 8.4 percent so SEO I'm happy with the result in our first nine months and what we're now doing is that We of course have full focus on continuing to deliver towards our full year guidance. And of course for next year, trying for the first time ever to achieve our strategic target. On the next page, let's also have a few looks at the perhaps not direct financial results, but other other positive developments in the group so far this year and a few highlights first of all looking at the financial services side where you're well aware that we have grouped all the brands under trade and financial services umbrella and we went live now in north america with navistar financial services meaning that we are coming back in the market with a captive financial services organization which is so important in the overall services business where we can make tailor-made solutions for customers and by that grabbing a bigger part of their wallets on top of that this is of course a way to leverage our our competencies and our systems and and you can call that of course synergies On the sustainability journey, I think many of you noticed that we opened up a new battery assembly plant in Södertälje, where we will assemble the cells, the unique cells coming from Northvolt, where we have also seen fantastic results, bringing lifetime up to 1.5 million kilometers. We have also stopped the line of assembly in Södertälje throughout summer. And as we're speaking, we're just restarting in order to adapt it to full serial production of a mix and actually any mix between zero, 100, 0% BEVs and ICE vehicles. We also in Volkswagen truck and bus brand delivered our first full BEV, 100% BEV in Argentina to Express Logistics. It was an e-delivery. uh with the higher tonnage the 14 ton version with the range up to 250 kilometers and that's of course an important market of oxfam truck and bus uh their biggest export market and we're seeing then finally ambitions also in argentina to go with electrification another immobility adoption is the first delivery of an mi e-bus outside of europe where we in South Africa are delivering the first e-bus. Also Navistar joining in on the pathway towards sound space targets have now signed with UNGO Global Compact, which is underlining that we as a group are all in on the sustainability journey that started many years ago in Scania. Finally, I think worth noticing that the super power train continue its long straight of winning press tests this time the so-called european track challenge which is a multi-magazine multinational test run out of germany and we did that with quite a distance in terms of fuel consumption to the next brand and That is, of course, extremely promising for the ongoing launch in the United States with the so-called S13, which is the same engine in international products. On next page, we look a little bit more into our figures and seeing the incoming orders at 64,400 units, which, yes, it is a decline to the very high prior year level and it's giving us a book to build ratio of 0.8 at the same time we managed to increase quarter to quarter to quarter last year q3 to q3 our unit sales uh another two percent up to eighty one thousand four hundred uh and as i said we're doing that despite still challenging market environment but also challenges in the supply chain yes it's better We see a further stabilization, but we have disruptions, and especially in the United States, where the supplier market is extremely stretched, we do continue to experience regular bottlenecks. With that, we were then able to shorten down delivery times. So we are going towards normalization, but we still in most of our brands experience a six months waiting time for customers, meaning that we're very well into 2024 and in some cases all the way up to next summer for new orders, which leads me into the next page. Where you then see that overall demand remains on a high level. Europe is weakening, there's no doubt about it. We've previously talked about markets bordering to Russia, but now we see a general weakening throughout most of the markets in Europe and especially the big and important market of Germany is seeing a more pronounced decline. Why is this? Well, obviously, we have grown the rolling fleet already, and we have, of course, the interest rates that are making financing more expensive, and on top of that, very high diesel prices. MIN being more exposed to the European market is here experiencing a tougher situation than Scania. Scania having a very good run in Latin America, where we In the segments where Scania is present, see a strong recovery. Means in, for instance, this important agricultural segment, but also mining and forestry. And therefore, as a result, you actually see Scania overall order intake continuing to grow in the third quarter. In North America, we see a gradual normalization of the demand and i'm sure we will come back to this in the questions and answer session but on navistar we see then a rather sharp decline in order intake remember we still have the long order book we have the biggest challenges to deliver vehicles but at the same time and perhaps a paradox we see market shares for international continuing to grow and according to plan South America, we've talked about that in previous quarters, is affected by the challenges after the elections, the Konoma P8, the new emission legislation, and overall economic weakness but good news we see on the heavy end and as i went into specific segments of stabilization and actually even an increase whereas in the medium duty and latter duty segments we still are on lower level which is reflected in the order intake and delivery results from Volkswagen truck and bus. So that was the quick fly in. And with that, I will leave over to Michael to go more into the financial outcome on this third quarter. And then I'm coming back to you in a moment. Michael, please.

Yeah, thank you very much, Christian. And also a good morning from my side. As Christian said, let's dive into our financial performance. On slide 10, you can see our sales revenue development. Sales revenue increased by 7% to 11.3 billion euros compared to a high prior year basis. This development was mainly driven by the growth of new vehicle sales and favorable mix effects. In addition, we continued to benefit from the successful realization of higher vehicle prices. Another factor continuing to support our top line is the vehicle services business. Demand for spare parts and repair and maintenance service remains high given aged fleets and strong utilization. Moving on to slide 11 and the bottom line performance. As you can see, the trading group continued its strong earnings momentum, both in absolute and relative terms, even though slightly not reaching the Q2 level. The adjusted operating result again came close to the 1 billion euro mark. This corresponds to a strong adjusted return on sales of 8.4% up by 320 basis points year over year compared to an admittedly low comparison base in the prior year quarter. The positive development was in particular due to the higher utilization of our production capacities, higher vehicle deliveries, and the associated better fixed cost absorption. In addition, thanks to the successful execution of pricing initiatives for new vehicles across all our brands over the last quarters, we're able to compensate for the significantly increased prices for energy, raw materials, labor costs and bought-in components. Not to forget our strong focus on cost management. A side note. In the third quarter, we had adjustments of 59 million euros for the provisions for civil lawsuits against Scania and MAN in connection with the EU truck cases in individual countries. These were recognized as a consequence of the update remeasurement of risks. overall another strong quarter which impressively underlines that the trading group is on track towards the strategic adjusted return on sales target of nine percent by 2024. let us now have a closer look at the performance of our brands and segments In the third quarter, all brands except for Volkswagen truck and bus benefited from robust volumes and therefore good production capacity utilization. Sales revenues in the vehicle service business continued to expand at both Scania and MAN, while Navistar recorded a decline mainly due to the sale of MWM in late 2022. Another common theme across all our brands with different dynamics was successful pricing initiatives, which helped to compensate for strong input cost pressures. On a brand level, Scania achieved 11.5 ROS, clearly up year over year, but weaker than the exceptionally strong H1 figures. Scania was influenced by the typical vacation effects and a different market mix, as the proportion of the European unit sales went down quarter over quarter, and South America, where the penetration of the new Scania Super is lower, went up. After an already strong first half, MAN truck and bus recorded another impressive step up to an adjusted return on sales of 7.8% in the third quarter. despite the usual production pause in the summer. One more proof point that MAN is on track with the execution of their realignment program. Navistar showed a robust performance at a return on sales of 7.3%, outgrowing the margin levels achieved in the past quarters. Better pricing as well as better cost control gained traction and helped to increase return on sales, despite lower unit sales compared to the third quarter last year. Within the group, Navistar was most affected by supply chain constraints, which limited their ability to deliver higher volumes. Volkswagen truck and bus continuously facing challenging market conditions, however, recorded a remarkably strong return on sales of 10.1%, despite significantly lower unit sales. This is another proof of the brand's ability to master stormy markets with its highly flexible business model. Finally, trade and financial services recorded a double-digit percentage growth on the back of an expansion of its portfolio and increased interest income. Higher funding costs and lower spreads had a counteracting effect on profitability. This leads me to our net cash flow development on the next page, page 13. Trayton Operations recorded a strong net cash flow of 649 million euros in the third quarter bringing the nine months figure to plus 2.4 billion euros excluding the special effects highlighted in the first and second quarter net cash flow of Trayton Operations amounted to 1.5 billion euros in the first nine months reflecting the strongly improved operating performance Nevertheless, net cash flow is still held back by an increase in working capital. 1.4 billion euros cash was tied up in the nine month period because of the strong expansion of production volumes and ongoing logistics shortages. This also ensures that we can keep our delivery promises to our customers. On a positive note, in the third quarter, the negative effect of working capital was much less pronounced. with 0.2 billion euros and cash conversion has been gradually improving quarter over quarter this year. A note on this, with adjusted operating profit nearly unchanged from first quarter, we were able to almost double our net cash flow, excluding special effects in the third quarter compared to the first quarter. Optimizing working capital and reducing our net debt position remains a key priority for us. Which brings me to the next page. During the first nine months, we were able to reduce the net financial debt of trade and operations, including corporate items, by about 1.1 billion euros to 6.6 billion euros as per end of September. In the third quarter alone, we were able to reduce net debt by more than 400 million euros. The main driver was the strongly improved operating performance, partly compensated by the just mentioned working capital development. While the net debt position benefited from the 400 million euro proceeds from the sale of Scania Finance Russia early in the year, the impact from the intragroup transfer of Scania Financial Services was neutral. Also important to notice that we paid out the dividend for fiscal year 2022, amounting to a cash out of 350 million euros in the second quarter. With that, back to you, Christian.