Traton SE

Hello and welcome to Trayton's 2025 Annual Results presentation. My name is Ursula Caret and I am Head of Investor Relations. This morning, we have published our 2025 Annual Report together with our investor presentation. In the next roughly 45 minutes, we will dive deeper into the key financials included in that presentation. We will also discuss the main drivers of our 2025 performance and share how we are positioning ourselves towards 2026. Therefore, our CEO Christian Levin and our CFO and CHRO Dr. Michael Jagstein are here with me on the stage. Welcome, Christian and Michael.

Thank you.

Christian, as a global commercial vehicle manufacturer, we are on a transformation journey where we constantly adjust to changing market conditions. 2025 was especially challenging in that sense. We had to deal not only with declining truck markets, but also frequently changing influence factors.

and especially from second quarter onwards. Starting from tariff uncertainty, this led to quite a lot of customer hesitation, which as a consequence marked our 2025 financial figures. Despite the headwinds, some of our figures came down in better than expected, which was why we had to release the ad hoc at the end of January. So unit sales fell by 9% to 305,000 units in 25, But revenues held up a bit better, thanks especially to vehicle services and financial services, ending up 7 percent minus to a total of 44.1 billion euros. Our declining volumes plus negative currency effects and tariff costs were the main reasons for a lower adjusted return on sales, coming in at 6.3 percent in comparison to 9.2 last year. Consequently, our earnings per share also declined significantly. Our trade on operations net cash flow also declined significantly, down 1.2 billion euros to a total of 1.6 billion euros. As a positive ending of our results overview 2025, our vehicle order intake came in stronger and was up 7% year over year to a total of 281,000 units.

And there are many more positive signs when looking at the operational highlights that define 2025. Some are also featured in our highlights video, which we published on our website this morning. From your perspectives, which events stood out in 2025 from the group standpoint and the brands? Christian, maybe you can begin.

Absolutely. So from a group perspective, I would say the creation of the one R&D organization. That's clearly one of the top highlights of the year. It was the logical consequence following on the establishment of a Trayton group a few years ago. First, our four brands joined forces, and now the absolute majority of the respective R&D experts have come together as one team. With each of these steps, we're driving more innovation, we are improving our efficiency, which in turn strengthens our competitiveness in the market. And Michael, our carve-out required quite a significant effort from an organizational point of view.

Indeed, to transfer around 9,000 colleagues from the R&D departments of Scania, MAN International and Volkswagen Truck & Bus into a new group function, agreements had to be reached with the Works Council and the Unions and also work contracts had to be revised. In addition, software systems had to be aligned and new collaborative work methods had to be implemented. As I explained with our Q3 results for financial reporting, we defined a mechanism to allocate the joint costs of the development work to the participating brands. This was implemented from Q3 2025 onwards and led to a restatement of our brand's past return on sales figures starting from the first quarter 2024.

Heavy effort, but it was certainly worth it. And this achievement is key for the further development of the Trayton modeler system. For our group R&D, one modeler system enables streamlined collaboration across all of our brands. So we are transforming into one development process and we stepwise develop our entire vehicle architecture into the one TMS, the one Trayton Modulary System. This will significantly accelerate product development, meaning increased customer value, but also reduced costs across all brands.

By the way, this accelerated product development also involves our new industrial hub in China, a project led by Scania.

Indeed, the original decision to create this third industrial hub was taken more than five years ago. After identifying the right license to acquire and after a rather tricky pandemic period, we could then break ground in the middle of 2022. And finally, after a record short period of three years, we could finally, on the 15th of October last year, celebrate the plant opening in Rugao in the Jiangsu province.

The total investment to set up this new location amounted to 1.7 billion euros, so below the projected 2 billion euros. In 2025, we spent 700 million, of which 400 million were directly expensed. You recall, at our Capital Markets Day in October 2024, we communicated our ambition to achieve margin-neutral operations for the China Hub starting from 2029. So for 2026, our goal is to sell 10,000 units. The maximum production capacity of the plant is 50,000. We anticipate reaching breakeven by 2028. Therefore, there will still be some margin dilution ahead of us.

Medium to long term, however, I am convinced that this is an excellent strategic investment. By being in China, we get access to advanced technology capabilities through our local R&D, our local procurement, making us stronger, not just in China, but globally, especially in the areas like electrification, digitalization, automation and connectivity. Plus, we learn and benefit from the famous China speed. i.e. methods for super fast innovation and super fast industrialization. But we're also strengthening our regional supply chains and thereby boosting our global resilience. The market response so far is really good. After unveiling the NextEra product in November, we immediately received a thousand pre-orders. and in February we started delivery of the first NextEra vehicles to dealers for demonstration and now in March to final customers. I am eagerly awaiting the feedback from these customers in the next couple of weeks. Next Era is a tractor series for long haulage applications equipped with our 13-litre engine derived out of the common base engine and targeting the Chinese B-plus segment. As the Next Era is based on the TMS principles, I can proudly say this is our very first Trayton Modular System product to hit the roads. So the next era targets the long haul high volume market in China. It then complements the Scania super premium offering in the market, which focuses on customized high specification solutions for really demanding customers in China, but also in other Asian export markets.

Let's travel back from China to Germany now. The next highlight features MAN's production plant in Munich, where we started serious production of electric heavy-duty trucks in June.

Right you are. And electric plus diesel trucks are now built on one integrated production line in our Munich plant. This setup increases flexibility in capacity deployment and it improves our capital efficiency. Until today, MIN has invested roughly 400 million euros to adapt its vehicles for battery electric drivetrains, covering a very broad range from urban distribution to long haulage applications. And as from June last year, MIN started serious production of its heavy duty ETGX and ETGS models. The medium duty ETGL used for urban and regional distribution will follow in the second half of this year. Parallel to the vehicle production, MAN also expanded battery industrialization. The Nuremberg site now produces battery packs using a modular assembly system that can handle multiple variants and can scale as it's needed. Customers are beginning to place larger, also multi-year orders confirming market readiness for BEVs. One example is the framework agreement that we signed in June 25 for up to 1,000 vehicles with the customer Duvenbeck, including electric trucks, in place throughout 2027.

In contrast, in the US, BEF demand has noticeably cooled down.

Yes. And in response to that, we unfortunately had to postpone our US BEV R&D efforts for now. But regardless of the political or the regulatory developments, we remain committed to our long term course of transformation. The goal is to offer innovative, efficient and ever lower emission transport solutions worldwide because it makes sense from both a profitability and a sustainability point of view. with the S13, which is based on a common base engine. International currently has one of the cleanest and most fuel-efficient 13-litre engine offerings in the entire North American market. Its market penetration increased sharply in 2025. Almost every second-class A-truck sold by International was equipped with a state-of-the-art driveline. And in January this year, International announced that the S13 is now also available to meet the EPA 27 standards. The updated engine meets the new NOx limits without additional after-treatment complexity. So we are well prepared, but nevertheless expect only a limited EPA 27 pre-buy this year due to the US market uncertainties.

Do you actually know what happens with EPA 27 with regards to the recent repeal of the endangerment finding by the Trump administration?

Well, to our best understanding, while this may remove the EPA's authority to regulate greenhouse gases under the Clean Air Act, this action does not affect criteria pollutants like NOx. So we believe that the EPA 27 low NOx remain unchanged.

OK. On the other hand, in South America, support for greenhouse gas reduction seems to remain in place, leading to various electric vehicle initiatives, especially in large cities such as Sao Paulo.

Right you are. And biofuels are more and more requested. Volkswagen Truck & Bus is doing a great job adapting to and driving demand for sustainable solutions. For instance, with the e-Folks bus. After a successful trial period on the streets of Sao Paulo, Volkswagen Truck & Bus started to deliver the first batch of 100 buses in December. And the e-buses will soon be available in more Brazilian cities. The development of this product was significantly supported by the lessons learned from the e-delivery, the very first fully electric truck designed and produced by Volkswagen Truck & Bus in and for Latin America. Our sustainability efforts also include the E-Dutra project, Brazil's first green highway corridor connecting the cities of Rio de Janeiro and Sao Paulo. Presented together with Scania at the COP30 in Belém, this initiative aims to accelerate zero-emission trucks by reducing the investment risk in charging infrastructure. And talking about investments, I also see a remarkable potential in the EU Mercosur Free Trade Agreement. It could unlock new EU investments in Brazil and boost long-term industrial cooperation between our regions. And more short-term, the so-called Move Brazil program, which Volkswagen Truck & Bus and Scania joined in January, is stimulating demand. It supports fleet owners and even more so owner-drivers with affordable financing to help them to upgrade their vehicles.

Talking about financing, Brazil also plays an important role in Trayton's financial services business. It was one of the 14 markets included in the initial expansion phase of our captive financial services offering. This step built on an already existing financial services footprint, which serves customers in 65 markets globally.

Yes, and the successful integration of the 14 markets in June last year is certainly a key milestone for us. Trayton Financial Services has established a common backbone that supports all of our brands while maintaining a brand specific customer interface. So looking ahead, trade and financial services continues its geographical expansion and thus so opportunistically. In the second half of last year, MAN financial services was added to the Czech Republic and to Denmark. Also, we will see Belgium coming in in Q1 this year and Lithuania and Morocco are currently in preparation.

A larger footprint and a larger portfolio also result in a more complex risk landscape. In the fourth quarter last year, trade and financial services saw increased bad debt expenses, mainly due to Brazilian customers facing challenging market conditions after the 2024's record financing.

Besides the market challenges in Brazil, the European truck market was also down in 2025, and North America performed particularly poorly. With our Q2 results, we lowered our North American market outlook to a midpoint of minus 12.5%. Christian, can you explain the main factors that shaped market conditions in 2025?

Yes, I can give it a try. Let's start with Europe. It was clear that European registrations would continue to fall in 2025 after the pent-up demand from previous years was delivered throughout both 2023 and 2024. So, European above-six-ton truck registrations declined by 8% to 336,000 units, with heavy-duty trucks down 6% to 296,000, merely covering replacement demand. We had a very promising start into 2025, expecting increasing order momentum over this year, going beyond just the replacement demand. However, this positive trend was disrupted with the US tariff announcement early April. Then promising order activity only began to reappear from October and registrations improved slowly and especially towards the end of the year. In the US, the market continued to suffer from the freight recession that started back in 22. On top of this, several uncertainties related to the announced tariffs, their impact on truck pricing and their unclear impact on the US economy overall further hit customer confidence. Nevertheless, we saw signs of improvements in December and January order data A bit hard to understand, but most plausible explanations being improved truck load spot rates and a bit more certainty around the tariffs and around EPA 27. We can only hope that the renewed tariff discussion will not disrupt this positive progress. The Mexican market underperformed even more due to pull forward sales in 24 ahead of the ending of the Euro 5 emissions regulations, which led to significant decline during 25. In addition, US tariffs also had a substantial negative impact on the market. So the whole North American truck market was deeply affected by customer hesitancy. Registrations across the region, including US, Canada and Mexico, landed at the bottom end of our total market forecast, a decline of minus 15%. Class A tracks even a bit more, minus 16% to 259,000 units. Then looking at South America, the situation was also challenging, mainly due to the biggest market, Brazil. Here, the truck market decreased by 8% in 25. The heavy part of the market even more, minus 11%. This was then offset by growth, and in some cases strong growth, in track registrations in countries surrounding Brazil like Peru, Argentina, Chile, Colombia, resulting in an overall South American market growth of plus 5%, then ending up at the upper end of our outlook range.

Let's see how Trayton performed on the back of this market development in 2025. Our book-to-bill ratio, which was above one in the first quarter before the tariff uncertainties kicked in, approached equilibrium again towards year end. Correct.

And the uptick in Q4 order intake was mainly driven by improved European track orders at both Scania and MAN. October and November were the highest months of the year. But globally, Q4 saw the slowest order intake growth of the year with a 21% year-over-year increase. And the German track orders never returned to their peak back from March. Early 2025, before the April tariffs announcement, there was initial optimism that the German fiscal stimulus would trigger track demand. This optimism faded as ongoing trade disputes, the Ukraine war and slow peace negotiations, plus other geopolitical challenges dominated the rest of the year. M.I.N. especially suffered from lower fixed cost absorption because of their strong dependency of the Dakh region. There we had anticipated a higher capacity utilization. As the German government now starts to commit more funding to specific infrastructure projects, we're seeing renewed optimism for industry, which is now reflected in our European 26 market outlook and more details on that a bit later. With January order intake at MIN and Scania matching the high levels of October and November levels, we have an initial proof point to support our outlook. The uptick in Q4 orders was also driven by the mentioned promising signs in the US. For international, October and December were the strongest order intake months of the year, albeit on a historically lower level. International January order index so far confirmed the promising signs in North America, but also here we must say on a low absolute level. Global deliveries in Q4 were 9% below the prior year level, although European truck sales accelerated towards the end of the year, finishing on a plus 12 up in Q4. In addition, MAN reported a remarkable return to growth of 95% in bus deliveries in Q4. But this was not enough to offset our declines in the North and the South of Americas.

Michael will dive deeper into the unit sales and revenue development on group and brand level shortly. Before that, could you briefly share your thoughts on recent trends in the BEV space? For example, what came out of the recent EU discussions?

Yes. So in the December 25 update of the so-called automotive dialogue, the EU Commission for the first time acknowledged specific needs for the truck industry and thereby introduced a targeted amendment to the CO2 rules. This includes a more flexible CO2 credit system for heavy duty vehicles, keeping the 2030 targets unchanged. but allowing additional credit collection in all the years leading up to 2030, which helps reduce penalties. This marks an important first step towards fairer compliance for our industry. Also in December, I handed over the presidency of the ASEA Commercial Vehicle Board to Karin Rodström at Daimler. I totally trust in her commitment to continue advocating for our industry with a clear goal of advancing both a sustainable and a competitive transport industry in Europe. Meanwhile, developments in the US are moving backwards. As communicated in Q3, we made the tough decision to write off a battery electric vehicle development project at International due to shifting market dynamics. Additionally, the funding freeze of the electric school bus initiative significantly impacted our BEV order intake figures in the US. Now, this is also the main reason for our declining BEV order intake in 2025. But good news is, since Scania transitioned to a new battery supplier, substituting Northvolt and solving the supply issues, order intake in Europe is on the rise. Same at MIN with the start of our series production of the heavy duty BEV trucks in June. and the Amman-Deutsche Bahn contract for over 3,000 buses from 2027 to 2032, many of which will be electric, will further improve our battery electric vehicle orders during 2026. And here let me be clear, we are taking our responsibility towards decarbonisation very seriously, and electrification of transportation is our industry's most important lever. our BEV deliveries increased 91% in Q4, with an impressive acceleration at both Scania and MAN. But as seen in order intake, international slowed us down. While our global BEV unit sales ratio reached 1.6% in Q4, the European ratio rose to 3.3% in the same quarter. So Michael, for our total unit sales, Europe was also the driving force.

That's correct, but not with particularly high torque. As you explained before, the European Truck Market stayed weak in 2025, further impacted by the US tariff announcement in April. Despite this, we saw our European Truck Market unit sales growing at increasing quarterly rates in 2025, with MAN and Scania both gaining market share. Total European unit sales in Q4 for trucks, buses and vans together increased by 11% year over year. However, this was not enough to compensate for the severe decline of international truck unit sales. Including buses, our North American unit sales fell by 36% in the fourth quarter year over year. Clearly, the extra market uncertainty brought by Section 232 in November, along with our own pricing and surcharge strategies, did not contribute positively. Also, International managed to maintain its market share in 2025. Moving to South America and South America, unit sales declined by 15% in the fourth quarter. And as a result, our trade and group revenue was down by 4% in the fourth quarter year over year and down by 7% on a full year basis. The stronger decline in new vehicle sales was partly compensated by a solid vehicle services business. The growing financial services business also supported the overall revenue development. On the back of that revenue development, we delivered an adjusted return on sales of 6.3% both in Q4 and for the full year, which was above the lower end of our guidance range, but 2.9 percentage points below 2024. The main driver of this decline was lower volumes, which also meant less fixed cost absorption. International recorded tariff costs of around 110 million euros in Q4 alone. Of this, roughly 60 million euros were due to the two months of Section 232 tariffs, applying a prudent US content approach. The remaining 50 million euros relate to IEPA and steel and aluminum tariffs. China project weighed on our Q4 income statement with an amount of around 125 million euros. I mentioned earlier that the full year China P&L effect was around 400 million euros. Foreign currency headwinds, especially from the Swedish krona and the US dollar, increased along the year and negatively affected Q4 results with around 120 million euros. And last but not least, trade and operations reported higher warranty costs and trade and financial services faced increased bad debt expenses. Positive effects came from higher R&D capitalization in connection with increasing maturity of major group projects. In addition, various cost efficiency measures helped reduce overhead costs. Now looking into 2026. Please note that while the construction of the Rugao plant has been completed, Scania will continue to incur ramp-up costs. We expect that such costs will affect the P&L to a similar extent as in 2025. Regarding the US tariff situation, I should add that in Q4, we recorded a receivable for approximately half of the US content we expect to recover. We intend to maintain this prudent approach until a final agreement is reached with the US administration. The stated tariff costs do not include price compensation.

Michael, you just mentioned various Q4 effects weighing on the trade and group P&L. China project costs and foreign currency effects for Scania, US tariff costs for international and bad debt expenses for trade and financial services. What about MAN?

As you know, MAN has a strong focus on Europe and especially Germany. Combined with its full liner approach, the brand is currently well positioned. The strong European auto momentum from the first half of the year drove sales volumes in the second half. So sales revenue in the fourth quarter for MAN was up 15%. Besides trucks, this reflects a sharp rise in bus sales. BEV sales have also significantly improved with serious production for trucks in place. And in addition, MAN clearly stood out in Q4 margin improvement compared to the other brands and TFS. The adjusted ROS rose by 2.6 percentage points to 8.4%. Main reasons were the positive volume effect in Q4 resolved the fixed cost absorption issue. A high portion of bus sales, especially in Germany, had also a positive margin impact. And ongoing cost management measures, in addition, helped to ease pressure on the P&L. Now, turning to Scania, where the top line was held back by lower volumes in Brazil despite increased unit sales in Europe. So, Scania's revenue decreased by 4% in the fourth quarter, which also weighed on the margin. On the other hand, the margin benefited from a reduced production capacity and organizational cost cuts in the HR and commercial teams, which had been announced already in September 2025. So, despite the ongoing cost pressure from foreign currency and China, Scania achieved an adjusted ROAS of 11% in the fourth quarter and with that also delivered a double-digit full-year margin of 10.7%. In contrast, International delivered a negative adjusted RRS in the fourth quarter as expected and a break-even result on a full year basis. Sales revenue dropped sharply by 31% and tariffs added a heavy cost burden. Volkswagen truck and buses adjusted RS fell by 2.9 percentage points to 8.9% in the fourth quarter. This was mainly due to the market weakness in Brazil, although other South American markets, as Christian was into before, provided some support. Trayton Financial Services delivered an 8% return on equity on the lower end of their margin guidance. Sales revenue increased, driven by a growing portfolio. But ramp-up costs are still a drag on the P&L. In Q4, the already mentioned bad debt expenses also weighed on results.

So, although we saw some encouraging signs on brand level in 2025, the overall market conditions led to lower trade and operations sales revenues in Q4 and for the full year. This decline also affected our net cash flow. But how come we pre-released a net cash flow above our guidance range this January?

Trayton Operations net cash flow came in at 1.6 billion euros, which was above our forecast and also analyst consensus. That's why we had to go for a so-called ad hoc release. The outperformance mainly came from MAN and Scania for the following reasons. Working capital management in the fourth quarter was better than planned, supported by increased factoring and higher incoming payments. Capital expenditures in the fourth quarter were lower than expected, including for the China project. And some investments were postponed in response to the weak market conditions. Despite this year end rally, the full year net cash flow of Trayton Operations was not sufficient to cover the 2025 dividend payout and other outflows, mainly relating to holding costs, IFRS 16 leasing and a cash injection for Trayton Financial Services. Hence, our industrial net debt increased by 259 million euros, rising from 4.9 billion euros at the end of 2024 to now 5.2 billion euros at the end of 2025. Nevertheless, we remain committed to reducing industrial net debt to zero by the end of the decade. This will be tough if the truck cycle remains in its current weak state. At least, there are some encouraging signs in Europe. While focusing on cash flow and net debt reduction, we must continue to invest in our transformation. Key areas are the trade modular system, battery electric vehicles and autonomous driving. In 2025, Capex and R&D together remained almost stable compared to 2024. Investing cash flow in both years amounted to 2.7 billion euros. You may have noticed that we sold a 2.1% stake in Sinotrack in January with gross sales proceeds of roughly 170 million euros. The transaction was executed opportunistically, taking advantage of favorable capital market conditions. The CNOTRUX shares are held in corporate items, so sales proceeds do not benefit the trade and operations cash flow. Nevertheless, the sale supports our ambition to reduce net debt. In contrast, a dividend payout counteracts our debt reduction ambition, as shown earlier. In 2025, for all the reasons we explained earlier, our adjusted operating result decreased substantially by 37%. Before adjustments, the operating result declined even more by 42%. In 2025, the adjustments were higher than the year before, mainly due to the BEF-related write-off at International and higher reorganization expenses at Scania. Increased EU truck case expenses also contributed to this. After deducting the financial result and income tax, our 2025 net profit was 1.5 billion euros, down 45% from the previous year. It should be no surprise that our dividend payout will decrease accordingly. Our dividend strategy is clearly documented with a payout ratio of 30 to 40% of net profit. We decided on a 30% rate last year, resulting in a dividend distribution of €850 million for the fiscal year 2024 and a dividend per share of €1.70. This year, 30% brings us to a dividend proposal of €465 million for the fiscal year 2025, resulting in a dividend per share of €0.93. Of course, we would like to offer a higher dividend to our shareholders, but our net reduction path is equally important. And ultimately, that also creates shareholder value.

I think this well explains that we're aiming for a balanced approach here. Let's move to our last agenda point, the outlook section, to see how the chances are for an improved dividend in 2026. To put our outlook into perspective, we should first have a look at the expected market development in our key regions. Christian, you described the influence factors of the 2025 truck markets earlier. What will persist in 2026? And where do you see the major changes, chances and risks?

Yeah, what will clearly persist, I would say, and maybe now with new reasons, is the high degree of uncertainty in the North American market and with that potential ripple effects on the rest of the world. Therefore, we think a wider outlook range for the North American market about six ton from a minus five to a plus ten is our best estimate to date. At the lower end with minus five signaling ongoing customer hesitancy and no real recovery of freight rates, whereas the upper end of the plus 10% would suggest that the freight recession has ended. Lower interest rates and government incentives such as tax breaks would of course help to boost truck replacement in the US. In the growth scenario, we have also factored in some EPA 27 pre-buy. However, even at the upper end of the range, the total class 8 registrations across the US, Canada and Mexico would remain below 300,000 units. In South America, we believe that persistent challenges continue to limit growth, reflected in our outlook range of minus 10 to zero. In contrast, we have increasing indications that Europe may be emerging from the throat of the cycle. We have seen good order momentum in the first quarter of 25, as well as in October and November. This suggests that factors like an aging fleet, New CO2 rude pricing, infrastructure investments potentially spurred by a German stimulus and defense expansion may boost fleet renewal and truck demand. This potential is then reflected in our EU 27 plus 3 outlook. with a range of minus 2.5 to a plus 7.5 for trucks above 6 tons, with a midpoint then of plus 2.5. For heavy duty trucks this would suggest that volumes could be well exceeding the 300,000 unit mark. So overall, in our most important markets or regions, the EU 27 plus three, the North American and the South American markets, we expect a stable development in 2026 with some positive tendencies hopefully coming from Europe.

Actually, with the opening of our new industrial hub in Rugao, we are now also providing a forecast for the Chinese truck market, which ranges from minus 10% to plus 5% for 2026.

Yeah, and 26 will then be the first full year of industrial presence in China. Our ambition, as Michael alluded to, is 10,000 units this year, which admittedly represents just a smaller share of the world's largest truck market. However, taking that midpoint of our range, we expect to see around 725,000 heavy-duty trucks registered in China in 26.

Michael, Christian just mentioned that uncertainty remains high in the North American market. At January investor meetings, we were asked how we intend to plan for the tariff costs and refund uncertainties in our 2026 guidance. So what's your response to that? Hmm.

Yeah, well, the answer is broader forecast ranges, along with additional quarterly input to give better guidance as the situation evolves, especially regarding ongoing talks with the U.S. administration on the final handling of the Section 232 tariffs and now also on potential alternative IEPA tariff instruments. So for the full year 2026, we expect unit sales and sales revenue for the trading group to come in between minus 5% and plus 7%. The lower end of this range reflects a scenario where ongoing tariff debates would not only hurt our US operations, but would also reduce renewed optimism in Europe, potentially undermining the positive impact of increased infrastructure investments. On the other hand, the upper end accounts for a scenario where Europe's positive momentum, including German stimulus, effects are realized, while the US truck market also grows, ideally supported by some EPA 27 pre-buy tailwinds.

The optimistic scenario also assumes that we're able to sell the 10,000 trucks produced at our new China plant and that the Brazilian market does not further deteriorate. We're also factoring in a resilient service business, the continued ramp up of our financial services business and an increased number of battery electric vehicles with higher sales prices.

Exactly. So building on this top line guidance, we forecast an adjusted operating return on sales between 5.3% and 7.3% for the trading group. You may have noticed that the midpoint of 6.3% aligns with the adjusted hours we achieved in the last year, 2025, because Our clear ambition is to deliver at least the same margin as last year, despite facing a full-year tariff burden compared to half a year of AIPA and steel and aluminum and just two months of Section 232 tariffs in 2025. So we plan to offset these additional costs as much as possible through mitigation and cost measures, and this across the entire group, not just at international. But please be patient. These measures will only take effect gradually throughout the year. And as a result, we anticipate that our RRS in the first quarter of 2026 will likely fall below the lower end of the full year range. We expect recovery once we reach an agreement on U.S. content and receive the respective refunds from the U.S. fiscal government. We've also considered ongoing costs for the ramp up of the China hub, as I mentioned before. Nevertheless, there are downside risks that could push us towards the lower end of our RRS forecast. They mainly come from the volume risks we just discussed, but there are potential additional cost risks, such as if our US content negotiations end up below our expectations. We have mentioned in investors' meetings that we see US content recognition clearly above 50%. For trade and operations, we expect the margin to range between 6.1% and 8.1%. That's 0.8 percentage points above the group. Deducting assumed flat holding costs and adding an improved financial services result, we arrive back at the group RRS. Regarding the industrial net cash flow, much like in last year, we anticipate a back-end loaded inflow. That's not only due to the typical seasonal working capital development, but also because we expect US government refunds for Section 232 not to materialize until the second half of the year. We are taking a slightly more conservative approach with cash flow than with ROS, given higher volatility in working capital and timing of investment projects, issues we saw in 2025. While last year brought positive surprises, we want to be prepared for potential negative surprises as well. Therefore, the lower end of the cash flow guidance is at 900 million euros, the upper end at 1.7 billion. For the trade and financial services business area, we forecast a return on equity between 8 and 11%.

Before we wrap it up, let me point you to the disclaimer that applies to our guidance. As we've said, our outlook is based on a tariff situation prevailing at the end of 2025. It remains subject to geopolitical risks we cannot foresee, as well as any unexpected impacts from US trade policy. But let's rather look ahead with optimism. Christian and Michael, the motto of our 2025 annual report is committed. So what are you both of you committing to when you look into 2026?

So we are committing to advancing the TMS, the Trader Modeler System development in 2026. Basically the China Industrial Hub is the first good proof of this concept. We now produce two different brands leveraging one modeler system with standardized interfaces for the same need we use identical solutions and we adhere to well-defined performance steps for different customer use cases. Also, the new body production plant that MIM is planning in Poland will follow the same TMS principles. The first Scania and MIM products based fully on the TMS are then expected to hit the market by the end of this decade.

A main goal of both the Joint R&D Organization and the Trade Modular System is to leverage group-wide efficiencies. Short-term, in 2026, cost efficiency will be a clear focus area. We are committed to offsetting a significant portion of the additional tariff costs incurred by international. To address this, we have implemented several internal cost management projects, both at the brand level and in our group functions. Provided that the truck markets play along, we should at least achieve margins on prior year level, ideally more. And, as I mentioned earlier, we remain firmly committed to our net debt reduction path. in a well-balanced approach that includes investment in our transformation and delivering shareholder returns.

Finally, we continue to push ourselves and our industry on our sustainability promise, because this is not a fair weather ambition, but a core part of how we lead Trayton into the future. Transforming transportation together for a sustainable world remains at the heart of everything that we do.

And with this strong statement, we conclude today's annual results presentation. Thank you for your attention and goodbye.