Volvo Car AB (publ.)

Good morning and welcome to the presentation of VolvoCast full year 2022 and fourth quarter 2022 financial results coming to you from our headquarters in Gothenburg. My name is Ron and I'm joined this morning by our President and Chief Executive Jim Rowan and our Chief Financial Officer Johan Ekdal. At the start, Jim and Yuan will walk us through our performance, and thereafter we'll throw it open for a live Q&A. You can participate in two ways. Either you can send in your questions via the chat window that you should be able to see at the bottom of your screen, in which case I will then read out the questions, your questions to Jim and Yuan, or you can also participate by using the phone lines. So please follow the link at the bottom of your screen or simply just use the QR code. But I'll come back with more information on how you can participate at the start of the Q&A. But for now, the floor, Jim, is all yours.

Thanks, Ron. And welcome, everyone, to the fourth quarter and full year review 2022 for Volvo Cars. 2022 was an acceleration of our strategy and navigating some challenges. And we made some good headway. 2022 fully electric share of sales rose to 11% versus 4% in last year. If we isolate the fourth quarter, that rose to 18% versus 6% in Q4 2021. And of course, we had the global reveal of the Volvo EX90, our first fully designed electric platform car. We divested the rest of our assets in Oro Bay to allow us to fully focus on our electrification journey. And the battery plant and engineering joint venture with Novo Northvolt was announced for here in Gothenburg. Our new fully electric assembly plant in Slovakia was also announced. And of course, Polestar, our affiliate, was listed on the NASDAQ exchange in New York. But it was also a year filled with challenges. Energy crisis and rising inflation, higher cost for raw materials, semiconductor shortages forcing spot buys, and logistic disturbances. The year started with this terrible war in the Ukraine, which of course is still with us today and likely to cause disruption going forward. The continued COVID related lockdowns primarily in China in 2022 forced plant closures and shortages of some key components. And those were really the key challenges that we faced through that year. If we take a quick look at our full financial, full year financial results, and Jorn will take us through this in a lot more detail just shortly. But if we start with retail sales, they were down by 12%. Yet, because of our high pricing and also the car mix, our revenue was up by 17%. EBIT margins compared to 2021 were up at 22.3 billion versus 20.3 billion in 2021. And of course, we remain fully focused on our mid-decade ambitions. We aim to be at 1.2 million cars sold run rate. as well as 50% electric sales, 50% online sales, 8 to 10% EBIT margins, and a 40% CO2 reduction when compared with our baseline in 2018. We remain fully dedicated and focused on those mid-decade ambitions. Perhaps one of the most important things that we saw in 2022 was the validation of our electrification strategy. and that sharp rise in recharge and BEV sales. If we isolate this to Q4, we can see that BEV sales at 18% are the highest ever and total recharge sales at 41%, again, the highest ever in the history of the company. And in fact, if we isolate just December as a month, we can see that BEV sales actually increased to 20% over total sales. And this bodes well for the future because we start to see that now emanate out towards some markets across the world, from Latin America to Southeast Asia and to here in Europe. We've listed here the top 10 markets across the world where we see a high adoption of recharge, and that includes BEV as well as obviously our plug-in hybrids. And I think that bodes well for us as well in terms of the future and the investment strategies that we've made as we start to see more and more of those countries move higher into that electrification journey. With that, I will hand over to Johan who will take us through the financials and some more details.

Thank you, Jim, and good morning. Some more details then on the financials. In the fourth quarter, we saw an increase in retail sales volumes of 11%, which is then on the back of the improved production situation towards the end of the year where December actually was our best production month ever with more than 72,000 cars in production. Revenue with a solid growth of 31%, taking us to 105 billion in the quarter, also proving that we still see a good demand and have been able then to have a good mix of cars and healthy pricing. And on top of that, we've seen a tailwind on FX on revenue and also some contract manufacturing contributing to that growth of 31%. On the EBIT side, Volvo Core without Javis and Associates, we are at 3.9 billion or 3.7% for the quarter, which is not where we want to be, but we have had, which we will go into more detail later, still very elevated cost for raw material. We have been buying semiconductors still on the spot market, etc. So we are at a deteriorating margin compared to last year. Cash flow, 9 billion of free cash flow for the quarter, which is then on a very healthy level and almost on par with 2021. On revenue, a little bit more in detail, we see, of course, a positive effect from the increased volumes in the quarter. We do see still positive effects from mix and pricing. We have a very good tailwind on FX, which is then on revenue, especially on the US dollar. And we also have effects from our contract manufacturing of cars to Polestar, taking us then again 31% growth and 105 billion in revenue in the fourth quarter. On EBIT, we do see positive effects. We have increased volumes, we have good sales mix and pricing on the back of the continued healthy demand. On FX, it's actually slightly negative on EBIT due to the fact that we have Euro and other currencies on the cost side offsetting the effects on revenue from especially US dollar. And then we have the negative effects from the increased raw material Prices especially high on lithium still on our BEV cars, but also raw materials in general still at elevated levels. We see increased costs for freight. We're buying semiconductors to some extent still in the spot market, which then takes us to 3.9 billion or 3.7% in the quarter, including Javis & Associates, 3.4 billion or 3.3%. Our BEV margins still at lower levels at 6% compared to 5% the previous quarter. We have had some positive effects from sales of CO2 credits. We also see that we have a good development of the revenue per car in absolutes, an increase both in revenue and gross income per car compared to the third quarter, although still offset by then the elevated prices for lithium and raw material and also some effects from the high US dollar rates in the prices for the batteries. We are coming out into 2023 with a very solid liquidity level. We are at 84 billion, including undrawn facilities, on the back of the 9 billion positive free cash flow in the fourth quarter. We have been slightly positively impacted in the fourth quarter due to the fact that some of the so-called structural investments already announced in connection with the IPO, some investments, especially in China, have been pushed forward into 2023, awaiting regulatory approvals, etc. So there is a time-facing that has had a positive effect in the fourth quarter as well, although also the underlying operational cash flow is at a good level towards the end of the year, taking us to... very solid liquidity level. If we look at the full year, it's to a large extent the same story as in the fourth quarter. Volumes for the full year then down 12% as we saw previously, but Despite that, we've been able to increase revenue 17% to 330 billion, taking us for the first time in the history of the company above 300 billion in revenue, affected by then still good mixes, good pricing, FX and contract manufacturing, and we'll come back to some more details shortly. EBIT, Volvo Corp excluding JV and Associates, 17.9 billion for the full year, or 5.4%, including JV and Associates, 22.3 billion, but then also a large effect from the Polestar listing in the second quarter. Cash flow, minus 6 billion for the full year, almost on par with last year, and then again taking us to that we do have a healthy liquidity level at the end of the year. So, as Jim showed previously, we are really seeing a good increase in our share of electrified cars, 18% of full electric in the fourth quarter, 41% recharged cars, and then it's an important proof point towards our mid-decade ambition of a CO2 reduction of 40% per car a mid-decade whereby the increased BEV share will be the most important contributing factor due to the fact that the tailpipe emissions then will be reduced. So we are fully on track towards that ambition. Again, revenue for the full year, 330 billion, 17% increase despite lower volumes compared to the year before. Sales mix, pricing, again proving that we have seen a good demand during the year and been able to price our cars better. We have a positive FX effect, especially from the US dollar in revenue and then contract manufacturing on top of that, taking us then to the 330 billion. On EBIT we see also there positive effects from our mix of cars and our pricing, FX slightly positive, but again Euro and other currencies on the cost side offsetting to a large extent the positive revenue effects from the US dollar and then again the negative effects from the increased raw material prices, lithium especially, but also on a lot of other raw materials, spot purchases of semiconductors in order to save cars in production and increase freight costs. So even though we have been quite successful in our mix and pricing effects, not fully but to a large extent offsetting the increased cost but not to the full extent, taking us then to the 17.9 billion or 5.1% for the full year, 22.3% or 6.6% including Javis & Associates and the positive Polestar listing effects. So with that, I will leave back to Jim to take us through the final summary. Thanks, John.