AB Volvo

Ladies and gentlemen, a warm welcome to this press and analyst meeting covering the third quarter 2022 by the Volvo Group. My name is Claes Eliasson. I'm the senior vice president media relations. And today we will be listening to our CEO, Martin Lundstedt, and our CFO, Tina Hultqvist. So by that, Martin, I think the audience is eager to hear you take us through the quarter.

So go ahead. Thank you, Klaus. Thank you for that. And I have to start to say it's great to be back in Stockholm. It has been a couple of years now since we actually had a presentation here, so it's somewhat a sign that things are, I should not say normalizing because they are not, but anyhow, it's good to be here. It's also welcome from my side. Some comments before getting into the presentation here. In the third quarter, as you have seen also in the report, the group continued to deliver strong performance both from customer business but also financial perspectives. We are very proud that we continue to pave the way for the transition into fossil-free transportation, a milestone that we will come back to, and a big milestone, I think, not only for the Volvo Group but also for the industry. But maybe most significant, and I have to say I've been long in this industry, and most significant for me that we are continuing to live in extremely turbulent and uncertain times. And in that perspective, how the Volvo Group actually has been able to continue all the colleagues and business partners to do an outstanding job to master these really stormy waters. and to produce and deliver as many products as possible to satisfy the still high demand of our customers and to materialize also on the strong audiobook. That will continue to be the main priority right now. So if we take a look then of the quarterly highlights, We start with a strong top line growth that we have seen, of course, currency tailwind, but despite that also very strong growth up to 115 billion SEK, a 21% growth if we adjust for currency. despite the continuous challenges and low visibility in the supply chain, both as regards capacity, but also pressure due to accelerated cost for different input materials, and not at least than energy, and in particular than energy in Europe. The adjusted operating income amounted to a record high for a third quarter 11.9 billion SEK at a margin of 10.3%. So both for sales and operating income, it was the best ever quarter three as we continue to push boundaries to realize our strong order backlog and to build population amongst our customers. We also had, which is important in these times, a strong cash flow of almost 15 billion. And all in all, it resulted in an improved return on capital employed that was north of 27%, and an earning per share that also increased with 22%. We continued to launch new sustainable solutions for the transport sector as we started serial production of the 44-ton heavy-duty range, or up to 44-ton heavy-duty range for Volvo, and we will come back to that. And that is the major milestone, of course. So if we look to the volume development in the quarter, total truck deliveries increased with 21% to 53,300 units. And that is also record volume for the third quarter, which is both significant and astonishing, I have to say, given the... given the uncertain times. But thanks to, and I'm almost getting emotional when I think about it, the relentless efforts in our sourcing and industrial system and with very, very close cooperation with all truck business areas that is required. I cannot enough underline this team effort in very, very turbulent times. The Volvo construction equipment deliveries decreased with 7%, mainly on the back of lower deliveries in China, but also here we see really heavy lifting to execute volumes in other regions. When it comes to the demand for electric vehicles and equipment, that continue to increase rapidly. And if we look to the 12-month rolling order intake, it passed actually 4,000 units. So it's starting to be somewhat material now. But I think the acceleration is really good here. For the quarter, electric orders across all business areas were above 1,200 units and deliveries above 500. So a strong momentum still and also a good book-to-bill ratio. Service sales, service development, that is very close to my heart, as you know. We also had a strong service growth, 24%, and if we just for currency, plus 10%. That is showing the continuous high activity level, first and foremost among our customers, but also that the efforts to increase contract penetration is continuing and is paying off. And that is, of course, important now when we are also building a strong population with the high deliveries. So as we continue to work close with our customers to provide them with the best uptime and productivity, service sales' 12-month rolling is now above 100 billion SEK, an impressive achievement by the organization. And the good news is that we still see lots of potential to continue on that journey. When it comes to the truck news, we have taken significant steps, as I said, on electrification during the quarter in September, week 37 to be precise. And as the first global, and I should really say the first truck manufacturer, we started serious production of heavy electric trucks with trucks up to 44 tons gross combination weight. and that is covering the Volvo FH, the Volvo FM and the Volvo FMX models. And they were then added to our already broad range of medium and also heavy-duty or semi-heavy-duty trucks. So after this launch, Volvo Trucks' electric portfolio could cover around 45% of all goods transported in Europe today. But... Let's have a look how it looked in Tuve when we started production. We have a small film here with Sandra, who is the head of Tuve operations.

Welcome to Gothenburg, the hometown of Volvo trucks. We've just started our serial production of our heavy duty electric trucks here at our factory in Tuve. A real milestone. The electric trucks are produced on the same line as our diesel trucks. But where the combustion engine usually goes, we fit components for the electric trucks instead. That means that we're using the same people, the same tools and the same assembly line and we can quickly scale up the production volumes to meet an increase in demand. We've been producing trucks here in Tuve for over 40 years and now we're using that solid competence when integrating the electric trucks in our flexible production system. We are very excited that we're now increasing the speed when it comes to offer the customer zero emission transports.