Volvo Car AB (publ.)

Hello and welcome to this presentation of Volvo Cars financial results for the first quarter. With me here today to walk you through the numbers, we have Jim Rowan, our Chief Executive and Björn Anvall, our Chief Financial Officer. Following the presentation, there will of course be an opportunity to ask questions and you can do that either by dialing in or typing in your question in the online function, in the online function, chat function online, sorry. If you want to ask your question over the phone, then please remember to dial star one. But with that, I leave the floor to Jim.

Thank you. And welcome and thank you for joining us here today. So I guess the underlying narrative for the quarter is that it's been a stable EBIT margin in a very unstable environment. EBIT has come in at 8.1%. We're seeing a strong order intake for our products. And the pandemic in China continues to provide high uncertainty for the future. So that's really the backdrop to this quarter. We remain fully committed to our mid-decade business ambitions, which is 1.2 million units sold, that we will move our business to 50% in electric vehicles, that we will move the commercial channels to 50% online sales, and we'll increase our margins in the region between 8% and 10% EBIT. At the same time, our commitment to reduction of CO2 remains set at 40%. Obviously, with the 1.2 million units and the lack of supply this year provides a steeper gradient for us to hit that 1.2 million units sold by our ambitions of 2025. And we as a management team are working hard on how to increase those growth rates. The transformation journey remains. We are seeing surge in demand for BEV, which is strong and very much in line with our long-term strategic ambitions. Recharge sales at 34%, with fully electric sales now at 8%, which has doubled within the space of two quarters. And we will see us in very solid double digit numbers on fully electric vehicles by the end of this year. CO2 emissions, as far as CO2 reductions, now stand at 13.4%. And again, that is tracking to a plan of 40% by 2025. Strong demand in online sales, 13% now in the markets that we're in, and we're in limited markets around the world, we're only in six markets, and we see 13% as an average of those markets that we've launched in. However, we should note that that's really only launched on the B2B channel, whereas the B2C channel, whereas the B2B channel, if you like fleet sales, which are particularly important in markets like the UK, will come on stream a little bit later on this year and should further increase that percentage of online sales. We're seeing continued progress in the transformation of investments. The battery factory here in Gothenburg now has all the permits in place and very soon will go to the planning phase of that factory itself. Plant investments for the next generation BEVs, including merit casting, again, is well underway and has been planned out well into the future. And of course, our global software talent is ramping up with our stock home office ramping from 300 software to 700 positions to support our endeavors in the commercial strategy of building that channel to the B2C customer base. And the full electric share, as alluded to earlier, has increased in Q3 last year from 4% to 8% this year and we'll see that continue to increase through the course of this year. This is particularly encouraging for us because it validates our strategy that strong demand will be there for our BEV vehicles and our desire to be a 100% electric company by 2030 is a good backdrop towards these increasing numbers. Finally, we're starting to see some of the markets now change to fully recharge. Maybe some markets, less surprisingly, like Norway, who has a good foothold already in BEV and rechargeable models. But maybe a bit more surprisingly, we're seeing in different parts of the world, like Brazil and Thailand, are also now 100% of our sales, and those regions are now our chargeable models. And again, that's very encouraging for the direction of travel that meets our strategy to be 100% electric car company by 2030. With that, I'll hand over for the Q1 Financials to Bjorn.

Thank you, Jim. So let me run through some of the numbers in more detail before we go back to the Q&A. And we have a number of things that we feel good about in this result. Clearly, I mean, despite having lower production and therefore also lower retail deliveries, we had an increased revenue. The revenue was up 8%. We get a lot of questions around the direct impact on Volvo cars on this tragic war in Ukraine. And one should know that Volvo, we don't have any production in neither Russia nor Ukraine. We don't have any major suppliers in any of the countries. And the total sales going to Russia and Ukraine was around 1.5% last year. We have totally suspended our operations in Russia. So we don't ship any cars, we don't ship any spare parts, we don't sell any of it. We have taken down our national sales company staff to an administrative minimum. And we don't foresee any business in Russia for the foreseeable future. And we're going to come back to more long-term solutions for that. But the financial direct impact on Volvo is not material at all from this situation. What is material though is how, and that Jim was talked about, how the Ukrainian war has further accelerated the inflationary pressures that we see in our environment. Raw material prices, freight costs, energy costs is continuing to rise. That's the more material effect for Volvo's reality here. So we see the production volumes still being the restraining factor for us and the restraining factor for the growth we would like to have and the restraining factor for us in order to serve our customers. The waiting time for a Volvo car is very long, nine months, 12 months, which is unfortunate and that's a consequence of the supply situation we're in right now. We see that the underlying kind of the big hampering factor has been the semiconductor shortage. And there we see week by week, month by month, how that has gradually but slowly improved, but with a particular setback related to one supplier and one specific semiconductor that hit us in March and will be a limiting factor during quarter two. But we do see that for H2, this will be less of a hampering factor for us. As already talked about, in this quite uncertain environment and very unstable environment, we then delivered a very stable result of 8.1% EBIT margin. And also, as you can find in our interim report, we are now in a very transparent way separating out the profitability on our BEV cars, compared with the non-BEV cars and also separating out how much of our investments that goes into our full electric future compared with the non-full electric business that we have. And you can see that those margins, while slightly lower than the non-BEV cars, are still solid and it's a good foundation for us to build on as we go into a full electric company. If we then take just quickly some of the highlights, so as we said, retail sales, retail deliveries is down 20%, but revenue was up around 8%. This is driven clearly by a continued increase in pricing for our cars, and also partly as we are doing contract manufacturing for Polestar, and clearly their sales volume and their production volumes is also ramping up. But the major factor is really stronger pricing. And worth mentioning then, despite everything that's happening in our environment and despite us increasing prices, we don't see any negative effect on our order intake as a consequence of that as we speak right now. The EBIT margin 8.1%. If you look at the full EBIT, if you look at EBIT excluding Javis & Associates, 7.9%. And let's break that down, the EBIT margin. So if we take the walk from quarter one last year, last year we made 8.4 billion in the quarter or 12.3%. But almost 3 billion out of that came from one-timers related to Senuity, as that was finally closed as an entity, and the private placement in Polestar. So that was transaction-related one-offs. That takes us to an EBIT also. If you then take away all the results from the Javis & Associates, you come down to, we had 5.5 billion. Then during this year, negative volume, in the quarter and that has been fully compensated for with a better sales mix and primarily higher pricing. That's the big thing that has happened during the quarter if you compare with quarter one last year. And if you then look forward a bit, we are seeing continued very, very strong demand for our products. And as I said, despite the price increases, we don't see any hampering on the demand. And it's worth noting that this demand is particularly strong for electrified vehicles, so the full electric cars and the plug-in hybrids. The full electric cars, the order pace is now already at where we will be from a capacity point of view after summer, where we will be at an annual capacity of around 150,000 cars. So we feel comfortable that we will deliver this solid double digit share of BEVs for the full year. The semiconductor situation is improving and we see how this hiccup for the specific semiconductor will be resolved during this quarter. The more worrying aspect is the COVID shutdowns in China, where eastern parts of China, we had a lot of lockdowns in Shanghai and the surrounding provinces. That means our production right now is standing still in China. There are a lot of suppliers in China that are in lockdown, and that affects the Chinese production. And over time, that will also have effects on the global production, as there are some components from Chinese production that goes also into our European factories. The positive thing is that the incident rates in Shanghai is now improving, so there is some light in the tunnel, but a prolonged lockdown in China clearly would have a negative impact on Volvo Cars and the whole industry and many industries. So that's the one thing to watch out for going forward, how that develops. The indirect effect was mentioned also of this raw material price increases. That didn't impact us too much, the Ukrainian war effect in quarter one. It will have some effect in quarter two. There's a time lag before it hits us and most of this comes in quarter three and quarter four. And we are taking pricing actions to largely offset this raw material and other inflation pressures on the cost side. But worth mentioning, and maybe an obvious statement at this point, it's an environment with an extreme high uncertainty, both on the supply chain, on the cost side, and then eventually also what happens to consumer demand. But right now, it's very, very strong. So that summarizes the quarter where we are right now. So back to you, Kristina.