Volvo Car AB (publ.)

Hello and welcome to our fourth quarter and full year financial results for 2024. While we are coming to you from our headquarters in Gothenburg right now, those visuals that you just saw comes from the north of Sweden, where more than 100 media from around the world are at this moment in time testing out our cars, including the EX90 in pretty rough conditions. We are calling it the Great Winter Escape. My name is Ron Banerjee, and as always for this earnings call, I'm joined by our Chief Executive Jim Rowan and our Chief Financial Officer, Yuwan Egdad. During the Q&A round, we'll also be joined by Anders Bell, our Chief Engineering and Technology Officer. We wanted to offer everyone on this call an opportunity to hear directly from him on the technologies underpinning our cars and the progress we've been making around that. He, along with Jim and Yuan, are here to take all your questions. But I'll come back with more information as to how you can join the call. But for now, let me invite Jim to walk us through our performance. Jim.

Thanks, Rowan. Good morning and welcome to our fourth quarter full financial results for 2024. It's been another solid year of performance in a very challenging environment. Let me walk you through some of the highlights from last year. We delivered over 763,000 cars to our customers in 2024, the highest ever, and a reported growth of almost 8%, meeting our sales guidance for the year. Our performance was particularly strong in Europe, where our market share reached 2.6%, with 12 European markets recording all-time high sales figures. Our electrified cars represented 46% of our total sales, with the share of fully electric cars at 23%. This share was the highest amongst our legacy premium peers. We also lowered our CO2 footprint per car by 26%, up from 20% in 2017, of 2018, giving us a surplus of carbon credits last year. And now, on to the financials. We reported record revenues of 400 billion sec, a gross margin for the year increased from 19.8% from 19.4% in 2023, thereby validating that you can both increase BEV sales and improve gross margins at the same time. We delivered a record core EBIT of 27 billion SEC, up from 25.6 billion SEC in 2023, an increase of 6%. We also delivered a positive cash flow of 1.1 billion SEC for the year, exceeding our guidance. Johan will walk us through the financials in a lot more detail shortly. 2024 was another strong year in terms of our products and our technology roadmap. We ramped up production of the EX30 and it took a leadership position in BEVs in Europe. We also started production of our first software-defined vehicle, the EX90, at our Charleston plant in the USA, making us the first European car company to have successfully harnessed corporate technology. This also helped us win the Software Defined Innovators Award at CES recently. And we also entered the premium electric segment in the MPV with the start of the production and delivery of the EN90 in China. Last year, our customers also got behind the wheels of the new updated version of our iconic XC90 hybrid SUV. It's a longstanding stalwart of our portfolio and we've sold over a million of those cars since it launched. it remains a crucial part of our lineup. In 2024, we also adjusted our business ambitions for longer term. Outgrow the premium car market, generate 78% core EBIT margins with strong free cash flows from 2026 onwards. I'll come back to this again during my presentation, but these adjustments ensure that we remain ambitious in our plans while staying pragmatic in a very volatile environment. And finally, In 2024, we also took a few important strategic operational decisions. We made some notable divestments to provide strategic clarity around the company structure. We distributed 63% of our shares on Polestar and now hold an 18% stake. We also announced the decision to divest our entire stock holding in Lincoln Co, which is up for shareholder approval later today. and we took financial control from an accountancy perspective of our Novo joint venture. Operationally, we continued to optimize our organizational structure, designed to increase simplicity, collaboration, and most importantly, speed. We flattened our structure in the commercial part of our business by removing an entire management layer, thereby enhancing the responsibilities of the regions. We also merged manufacturing supply chain into one organization providing end-to-end view of our total value chain, increasing flexibility, which will be a crucial currency in today's environment. We remain very disciplined in our cash management and actively adapted sales and production plans to ensure reductions in inventory, especially during the second half of the year. And with almost 14 billion second of cash flows being generated in the fourth quarter alone, the result is a free positive cash flow for the whole year. And we also took a focused cost action streamline approach to a fixed cost and variable cost line in relation to our revenues. This will remain a priority for us in the years ahead. Overall, we made significant strides across our entire business in 2024, which has laid strong foundations for the years ahead. We've been making strategic investments in electrification for many years. and fully V's. Shares of the fully electric cars reached 23%, the highest amongst our legacy premium competitors. Our electrified performance was particularly strong in Europe, where the EX30 emerged as the third best-selling BEV in Europe, while the XC60 remained the best-selling KEF. This strong performance and our growing share in this space comes at a time when growth in the overall EV sales has slowed down, and it demonstrates that our customers in the premium segment are willing to embrace the transition to electrification, and we're in a leadership position in that regard. Even if 2025 will not grow at the same pace as previous years, our strong BEV and PHEV lineup positions us well in the market when it picks up again. With that, Let me hand over to Johan, who will walk us through in more detail the financials. I'll be back shortly to go through the outlook and our game plan for 2025 in the future.

Johan. Thank you, Jim, and good morning. Let's start with the key financial highlights from the fourth quarter. We saw an increase in retail sales volumes for the quarter, in line with our previous guidance. We also had a corresponding increase in revenue for the quarter, with contributions from contract manufacturing being more or less flat year on year. In core EBIT, excluding JVs and associates, we reported a 5.6% margin or 6.3 billion SEC in absolute EBIT. A slight decline compared to the same period last year, and I will come back with more details on this in the following slides. Our EBIT insured in Javison Associates came in at 3.9 billion ZEC, or 3.4% for the quarter. And the result from Javison Associates in Q4 was affected by a one-time non-cash impairment charge related to the Norwood Joint Venture ahead of the acquisition. And I will share more details on this just shortly. A highlight for the quarter is green hour cash flow, which which is really a result of our emphasis on focused cash flow actions. This led to our full year positive cash flow, despite the somewhat lower EBIT in the second half of the year. So, if we look at the revenues for the quarter in detail, contribution from contract manufacturing, as I said, was essentially flat. So focusing on revenues excluding contract manufacturing, volume effects were fairly flat, while sales mix and pricing was slightly negative. And that's due to a sequential increase in pricing competition in the market towards the end of the year. And in this walk now, we have combined deferred revenues and used cars. Previously, we had deferred revenue as an explanatory item period over period, but during the second half of 2024, that revenue, mainly from rental channels, has normalized on a year-over-year basis. And since our rental sales have increased, we also have more used cars coming back, which increases sale of used cars. And combined, both these factors in the fourth quarter contributed positively to the revenue. Others is mainly defined by two things, revenue from parts and accessory sales and also sale of subscription cars to external financing partners as part of our cash management effort. Both contributed positively towards taking our revenue to 109.1 billion SEK for the quarter, excluding contract manufacturing. Moving to the EBIT for the quarter. Excluding JVs and associates, volume effects were slightly negative, and that is despite revenues and that evens out over time. Sales mix and pricing was slightly negative due to illustrating the increased challenge in market equation but also due to that the volumes of EX13 2024 being a smaller car at the lower price point comes with slightly lower absolute profit. Coming to other, this is a very low net number but may be worth mentioning here. This includes on the positive side used cars and accessories business We also had a positive effect in the form of a negative goodwill in connection with the acquisition of the Norway joint venture. On the negative side this includes a sequentially increased depreciation and amortization during the quarter and also a number of non-recurring items such as certain costs for the wind down of the subscription car operations and change of financing solutions related to that as well as some changes in provisions And on a total net basis, the effects from non-recurring items offset each other. And that's why our EBIT of 6.3 billion SEC or 5.6% is a fair reflection of the underlying operational performance of the company during the quarter. I would also like to point out that gross margin for the quarter has been affected by both the sale of subscription cars, grossing up revenue and cost of sales, as well as the large decrease of inventory with costs previously absorbed in stock. Both being part of our cash management efforts during the quarter and as such, gross margin in the quarter is somewhat lower than the current operational run rate. If you look at EBIT, including Javis & Associates, it was impacted by 2.5 billion SEC during the quarter. This is due to a few non-recurring items, of which the largest being a negative impairment of certain assets related to the Novo joint venture. That was made before the acquisition. And the write-down was driven by the fact that we will no longer continue the operations together with Northvolt. We also had two other one-offs for the quarter, one from Lincoln Co., as well as a catch-up effect from previous periods related to Polestar. Both are non-recurring in nature. And regarding Polestar, for clarity, this one-off effect does not change the fact that we no longer recognize any operational results from Polestar, since this effect refers to adjustments from previous periods. And these non-recurring transactions negatively impacted our group EBIT, which came in at 3.9 billion SEC or 3.4% for the quarter. So, looking at the full year, we saw an 8% increase in volumes, clearly outgrowing the premium market. This took our yearly revenues to above 400 billion SEC for the first time in the company's history, despite the fact that the contract manufacturing business actually decreased somewhat year over year. On core EBIT, which was at 6.8%, or 27 billion SEC, was also the highest ever recorded in the history of this company. And if you look at cash, we previously guided on single-digit negative for the full year. However, due to successful and focused cash actions taken during the quarter, driving a very strong free cash flow for the fourth quarter, we managed to deliver positive free cash flows for the year of around 1 billion SEC. This reflected a 10 billion set improvement year over year and demonstrating our ability to manage cash flows in a very good way under also increasing challenges in the market. So if you look at total revenue for the year in detail, excluding contract manufacturing, which has decreased quite a bit year over year, we see a big contribution from increased volumes. There's also negative effects from mix and pricing, which impacted revenues. And this is also due to the fact that a significant portion of the growth in 2024 was driven by the EX30, which is a lower-priced car, and therefore you do not get the one-to-one effect from the volume growth. For the full year, we also saw a negative effect from deferred revenue and used cars combined, mostly from the first half of the year. full year, it's still a negative item from a year-over-year comparison. Then on other, essentially the same as in the fourth quarter, mainly driven by parts and accessories as well as sales of subscription cars during the fourth quarter as one important part of our focus on balance sheet and cash management. If you look at the full year EBIT, excluding Javis and Associates, we had some positive effects on sales volumes. Of course, with volumes driven by the EX30, we do not get a one-to-one increase in the absolute EBIT. And also for the full year, we have an effect from deferred revenues and profit, and those effects evens out over time. Sales mix and pricing negatively impacted due to increased share of EX30, as previously mentioned, but also due to a sequential increase in price competition in the market, especially during the second half of the year. FX effects for the full year was essentially flat on EBIT. For other, it's more or less the same story as in the fourth quarter. It's used cars, it's parts and accessories, and some emission credits that contributed positively along with some effects from the acquisition of Novo. And that's offset then by increase in depreciation and amortization as well as other non-recurring items as described for the fourth quarter. So on a net basis, the positive other factors essentially consist of used cars and parts and accessories. On the EBITD intrude in Javis & Associates, it was in line with the fourth quarter with the addition of the negative results mainly coming from post-war during the first half of the year. So looking at liquidity, we are coming out of the year with a very strong liquidity position. We have 89 billion SEC in liquidity and 56 billion in gross cash. And this was really boosted by the strong cash flow of 14 billion SEC during the fourth quarter. And that's taken us to a positive free cash flow for the full year. And in addition, we have also strengthened our liquidity position by increasing our undrawn facilities with the new RCF signed during the fourth quarter. And that takes us to a solid liquidity position and a strong balance sheet going into 2025. And with that, I'll hand it over to Jim to conclude this presentation. Thank you. Thanks, Johan.