Volvo Car AB (publ.)

Good morning and a very warm welcome to the presentation of VolvoCast's first quarter financial results for 2025 coming to you live from our headquarters in Gothenburg. My name is Ron. Those were, of course, images of the EX30 rolling off the production line in Ghent. We just started a few days ago. This morning for the earnings call, we have our president and chief executive, Håkon Samuelsson. We have our chief financial officer, Frederick Hansen. And at the top of this call, Håkon and Frederick will walk us through our performance. And thereafter, we'll throw it open for a question and answer round. Exactly how you participate in the Q&A round, it should be quite familiar to all of you by now, but I'll still come back closer to the Q&A session. But for now, Håkon, I leave the floor to you.

Thank you, Ron. So good morning to all of you. We will tell you today what has happened during the quarter one and also very importantly, what are we acting on to counteract these results. So first, snapshot of the environment. It's very challenging. I think you can read that every day in the papers. We have a combination of three factors. The volume has dropped slightly, especially on the wholesale side. You will learn more about that. That's negative, of course. Pricing also pressured from new competition. A lot of new electric players on the market, but they're also influencing pricing generally. And on top of that, tariffs moving every day, new ideas. very negative of course for the sentiment on the market but also extra costs so these three factors are are behind the result which we will go into more in detail later sales is down to present revenues down also and of course the result of this drop in ebit from close to 5% down to 2.3%. And the cash flow also down, but not that much. We had also there a one-timer with the sales of Link and Co. All of this Fredrik will talk more about. But with this result as a background, we have launched then a program addressing three areas. It is profitability, We launched a package worth 18 billion of free cash flow, will be mainly effective in 2026, but we're also addressing direct cost and indirect cost. We are seeing a more tailored approach giving the autonomous more autonomy more empowerment to the regions to react faster for for local conditions and local customer preferences this will happen to china we will do it also in america i will come back to that and the third area we are working with is electrification where we are quite sure about the future of this company as an electric, full electric company, but we are also the bridging solution selling plug-in hybrids. And the share of electrified vehicle was 43% in quarter one, and that's one of the absolute highest among premium competitors. So it's a very good movement into direction of electrification. With that, I leave the word to you, Fredrik, and I take the opportunity also to introduce Fredrik Hansson, our new CFO, since a couple of days. And you will be leading us through these difficult times and looking into further cost action. So welcome, Fredrik.

Thank you, Håkan. So let's jump into the financials, starting with a quick overview. So retail sales, as you see, 172,000 cars, down 6% year on year. But importantly, wholesale volumes, which is really what's driving our financials, is down a full 19%. That's also why we're showcasing it here on the page and this is on the back of both a very strong q1 in the last year where we had a ramp up of the ex60 basically filling the pipeline at dealers with wholesales of the sorry ex30 and also from on the back of a strong q4 which is now hitting back a bit in q1 so This wholesale drop translates also to revenues, which is down 12% at 83 billion, and EBIT at a disappointing 2.3%, both including and excluding JVs. This is then largely explained by the wholesale volumes we talked about, but importantly also one of effects in FX from the very strong silk. Cash flow seasonally down in Q1 as it usually is, but we are 6 billion better than last year. This is of course helped by the cash from the Lincoln Co transaction, but it's still a resilient cash flow, especially given the lower sales and profit. Double-clicking a bit on revenues, you again see the volume here has the big drop with 15 billion down, explained by the wholesales. Used cars up 1.6 billion, basically as the rental channel is now back to normal. FX in the quarter was actually up. SEC in the quarter. But as you know, it ended with a very, very strong SEC appreciation that has continued since. So in total, we landed revenues excluding contract manufacturing at 80.9 billion, which is a 12% drop year on year. Turning to EBITs, and we focus on the core EBIT, excluding JVs and Associates, you can here see that the volumes had a material effect, 3.5 billion down on the result. We also had negative effects from sales mix and pricing, which is largely driven by an increased price pressure in the past 12 months. This was, however, more than offset with material cost reductions and other items. But we unfortunately had this very negative FX effect in the end of the quarter. of 1.9 billion. And here, 1.7 of the 1.9 billion is more of a one of nature. It's basically a balance sheet revaluation at the end of the quarter where the SEC was very, very strong. So in all, this takes us to an EBIT of 1.9 billion or 2.3, both on a core and group EBIT. If we turn to liquidity, we started the year at 56 billion in cash, 89 billion total liquidity. EBITDA then contributed with 8 billion, whereas networking capital was down due to a normal seasonal build-up of inventory with 11 billion. Investments of 4 billion and then some reduction in financing, but this is also largely a currency effect of the strengthening sick. So we're ending the quarter at a very, very strong liquidity position of 73 billion in total, where 47 billion is in cash. So we stand with a very strong balance sheet. But as Håkan alluded to, there is a lot of uncertainty and near-term headwinds, which is impacting both cash and EBIT. US tariffs have started and will kick in with full force very, very soon. We have started to take countermeasures against that, but more measures are needed. We have the EX30 in Ghent, which started production just last week, but that production is also ramping up and coming to full speed only in the second half. And it's also only in the second half of the year where we get help from a further strengthened product lineup with two new products being launched and going into production and also the already launched ES90 going into production. So in light of this turbulence and that this turbulence likely stretches beyond 2025, the first cornerstone of our plan here is profitability. For U.S., we are taking commercial measures linked to pricing and what cars we sell and ship. And the net effect after these commercial mitigations, we estimate to a 1% to 2% negative on our group EBIT margin. So we need to do more than that, more than commercial mitigations. And that's also in light of other uncertainties we see. That's why we're today launching an 18 billion cost and cash action plan aimed to forcefully protect our profitability and to help offset these headwinds we see. So let me give you some details. So this plan has three components. It's variable cost, it's indirect spend, and it's additional capex and working capital improvements. And here we aim for at least 3 billion in variable cost reductions. We aim for at least 5 billion in indirect spend reduction. And this is in 2026 full year versus a full year 24 baseline. In addition to that, we're targeting 10 billion in capex and working capital improvements. And this is important to be on the already planned capex reductions we've shown before in 25 and 26. Another thing which is important to note here is that the variable cost will impact EBIT in full. The indirect spend, however, also includes engineering and things that are capitalized. that roughly half will hit EBIT in 2026. The rest will hit EBIT, but over time. All of this will of course then impact cash in the coming two years. To give you some more flavour of what we're doing then. So on variable cost, we're aiming for more than 3 billion and this is really an acceleration of our structured, holistic, executive level variable cost programme. This is at the highest attention of the company. And we are working across the value chain and also in deeper collaboration with Geely to help reduce product costs across materials, across manufacturing and across logistics. And importantly, when we say 3 billion here, this is real bottom line savings. So this is including headwinds from inflation, from claims, from part price increases and other things. This is real money hitting the bottom line. On indirect, we have just launched a company-wide indirect spend reduction program. And here we're basically engaging the entire company in a zero-based cost approach. We're looking at all our priorities to see what we should be delivering on. And importantly, for the things we are delivering on, how can we find structural lasting efficiency And to make sure that we execute on this, we also have a hard central steer on this. We track all initiatives with implementation level tracking and forcefully drive this to make sure we reach the finish line. On CapEx and working capital, it's 10 billion. This is in part continued efforts to optimize working capital. As you've seen, we've improved in the past, but we continue down that path and we're taking steps with systems and processes to optimize, for example, the inventory we have. We are lowering capex in part from reprioritization, but also from efficiencies, basically getting the same for less. And important here is that we're doing this still protecting the foundations for our profitable growth going forward. And these investment reductions are in addition to the already planned lower investment profile that we have shown to you before. So with that, that was the first cornerstone of our plan. Let me hand back to Håkan to present the other two.