AB Volvo

So good morning and welcome to this fourth quarter press conference. Today we will listen to the presentations by Martin and Mats, and then follow up with a Q&A session. So with that, I hand over to Martin.

Thank you, Johan, for that. And also welcome from my side to everyone here in the room and also online. Great to have you here. First and foremost, I will come back to the full year 24 later. But as we also conclude the fourth quarter, I would like to start by thanking everyone that has been involved. It has been an interesting year, to say the least. So big thanks to customers, business partners and colleagues for continued good cooperation and work. And we are still in uncertain times, so strong and close relations are more important than ever. As expected, the normalization of demand continued into a replacement-driven market across many of Volvo Group's major segments also during Q4. But we also saw a momentum in order intake turning book-to-bill positive for Group Trucks, VC and Volvo Penta in Q4. We have continued prioritized high quality in the business by focusing on our customers and the service operation, continuous volume flexibility in the industrial system, cost control combined with commercial discipline and price management. Specifically for volume flexibility, we are in a good place for almost all markets. And the only exception is Group Trucks North America, where we continue to have more costs related to specific situations. The first one during the quarter, we had a continuous one, but the first one was related to the devastating effect related to the storm Helen that, apart from human suffering, caused supply issues and disruptions mainly in western North Carolina and thereby losses of volumes in the beginning of the quarter. Those volumes have been gradually recovered during the quarter with fantastic efforts, I have to say, by the complete supply chain internally and externally. But, of course, it comes with extra costs. And secondly, the continuous ramp-up of the, as you did see on the movie here, the all-new VNL, where extra resources and thereby costs are needed to cope with introduction in parallel with normal production. Planned for, but still the case. And thirdly, as we talked about during quarter three, the impact coming from cab supply for Mac as reported in quarter three, as I said, which continued into quarter four, but improvements are now stepwise visible. So that is very encouraging also for given the order board that we have for Mac. And in total, the specific events for group trucks North America affected the global trucks margin negatively on still a rather high level, but was somewhat lower than what we reported for quarter three. But more importantly, and I think that is worthwhile reiterating, it has been the right priority for the future. Really going through now the ramp up, getting these fantastic products out to the market, and also seeing that we are capable of really getting the volumes into place here. And the start of production of the all-new VNL in North America is very important, of course, because that is a future platform that we have invested considerably into. And that is for North America over the last five, six years. It's materializing now as an introduction, but that goes also across the board with R&D investments in new technology products and services combined with the digitalization. And just to finish off with the North American introduction also, I mean, very clear to achieve the ambitions that we have in market shares as well. But if we go into the figures here and summarize the quarter, net sales declined 6%, 138 billion on the back of still softer markets and lower volumes combined with negative FX or currency of 1.1 billion. Adjusted operating income come in on the level of 14 billion, corresponding to a margin of 10.1%. And we finished 24 with high deliveries and release of working capital, giving a very, very strong operating cash flow of 24.3 billion for the quarter, and resulting in a financial position of 86 billion. Return on capital employed in industrial operations remained strong at almost 36% and earnings per share was 5.28 krona per share then. So all in all, we summarize another solid result and resilient quarter thanks to great cooperation with customers and business partners. And foremost, a day like this, dedicated work by our colleagues around the globe. So thank you. Then coming into volume development, total truck deliveries declined 11% in quarter four, with heavy-duty deliveries holding up relatively better. It was minus 6%. and for construction equipment deliveries were down 5%, Volvo coming down 23% and SDLG increasing 20%. When it comes to the electrification progress and the transformation with different uncertainties related to the electrification, underlying demand has been slowing down in some of the core markets and the switch over to zero emission transport is still driven by early adopters. Still, as you can see, orders for fully electric vehicles and machines increased with 62%, but it was in the quarter mainly driven by Renault Trucks light commercial vehicles and STLG machines, primarily then for China. Deliveries increased with 11%, supported mainly also their STLG machines for China. But I think it's important in summary to say that despite the slowdown, we continue to push also in our core markets, which is reflected in our high market shares for medium and heavy duty trucks. Around 70% in Europe for the full year of 2024, even if the volumes in total are still too low. But it will come. When it comes to sales development, on the back of the lower volumes, vehicle and machine sales declined. 7% adjusted for currency. Truck sales declined 5% on 11% lower volumes. On the CE side, sales of machines were down 19% driven by continued decline in Europe and North America. And sales for buses were down 12% on the back of, primarily actually because we have good activity levels, very strong comparison from previous years. As you know, it's a little bit more volatile between the quarters for buses. And for Volvo Penta, despite a drop of 22% in volumes, their sales were only down by 9%. One part of that is the positive mix, more heavy energy also. Not at least for the energy transition, but we will come back to that. Service sales, we continue our focus on services, as we have talked about for many years now, and have flat development year over year for the fourth quarter adjusted for currency. However, and I think I mean excluding Arcus that was divested during the course of the year, service sales grew currency adjusted with 4% year-over-year and continue to show resilience in a softer market, generally speaking. And efforts to increase service contract penetration and other services will continue also to pay off step-by-step. We see that in our portfolio. Rolling 12 months, we had service sales of 130 billion SEK. So all in all, another solid result from services and a very good achievement here. And that journey will continue step by step. Group news then. During the quarter, first and foremost, the group hosted and many of you were present that are here in the room but also online. Capital Markets Day in Virginia, United States, with a theme geared for growth, of course, related to the opportunities when it comes to the underlying growth in our sector, but also the transformational elements of that, and outlining our future opportunities combined with the key strategic levers. Another important event was that together with Diamond Truck, we have signed a binding agreement to establish a joint venture to develop a software-defined vehicle platform. for the heavy-duty sector. The aim of the new company named Cortura is to set up an industry standard and to offer a brand and application-agnostic software product and platform also to other commercial vehicles or industrial equipment OEMs. And that is important because in order to really get enough volumes for hardware and software development and to make that a cutting-edge innovation and also to innovate, on the edge there, it is important to join forces. And this is an innovation milestone for the industry, as we said, and the company will be headquartered in Gothenburg, Sweden. On the truck side, Volvo Autonomous Solutions has, together now with DHL, started autonomous hub-to-hub operations in Texas, United States, on public roads. And the operation is enabled by the purpose-built Volvo VNL Autonomous in combination with the Aurora virtual driver. And this milestone marks a critical phase now in validating the full ecosystem required for autonomous transport at scale, where hub-to-hub is, of course, the key focus to start with. During the validation phase there are safety drivers on board, but this is a very important step now to materialize the great benefits of this type of technology. And the second big news is that the European Test Organization, Euro NCAP, for the first time ever has assessed the safety of heavy-duty trucks. And the Volvo Group's best-selling models in Europe, the Volvo FM, the Volvo FH and Renault T-Series are ranked number 1, 2, 3 respectively in the test, which of course is very encouraging but more so important. Safety is the top priority for our customers and I have to say deeply ingrained into our Group's DNA. This recognition from Euro NCAP marks a significant and proud accomplishment by our colleagues and business partners, and of course in particular our engineers. Coming down to market environment for Europe, our forecast for 2025 is unchanged at 290,000 units on the back of a market driven primarily by replacements, and that we have seen an increased share of fleets. However, and that is important, we see early signs that retail customers are starting to move. Also for North America, our full year 2025 forecast is unchanged at 300,000 units, and we expect some demand tailwind in the second half of 2025, driven by expected pre-buys ahead of emission legislation changed for 2027. Brazil, the market is expected to normalize back to the long-term trend line, so 90,000 units is estimated for 2025, and that is unchanged in relation to what we said in Q3 as well. India, market expected at 370,000 units in 2025, minus 10,000 in relation to previous forecast. And the more significant adjustment we do on China is not expanding as previously expected, and the forecast is revised to move sideways versus 24. So the new forecast is at 710,000 units, which is 110,000 lower than we actually had in the forecast in relation to Q3 reporting. Truck book-to-bill then. Interesting news, right? We did see an order momentum turning book-to-bill positive in Q4. Important, of course. Specifically for medium and heavy-duty trucks, book-to-bill in Q4 was 106%, and for 12-month rolling then coming up to 93%. The European book-to-bill in Q4 of 102% was in balance, but it is worth noting that the order intake Year-over-year for heavy duty and medium duty increased with 68% to almost 25,000 units in Q4. And the North American book-to-bill was 124% for the quarter with both Mack and Volvo contributing. South America, Asia in balance while Africa and Oceania continued to deliver out of the order book. Then when it comes to market shares, in Europe we had solid and good performance for the year both for Volvo and Renault with a combined market share of 27%. For electric vehicles, the two brands kept their leading position with over 70% combined market share. In North America, Volvo and Mac had stable combined shares of 15% for the full year despite delivery problems throughout the year. And some of them we have now structurally addressed as we have talked about before. In Brazil, Volvo remains in the market leading position with almost a 24% share. And in Australia, Volvo and Mack combined had a share of 24%. Construction equipment. Maybe you did see the movie here before we started. First and foremost, in quarter four, when we talk about news, we continue to roll out products in the largest product portfolio, overhauling decades of construction equipment. For example, new excavators in Europe and Asia, and specifically in some of the key segments here. And in January, or to be more precise, yesterday, in Braås, Småland, Sweden, an updated range of the industry-leading articulated hauler range, as you can see here, was launched, including one completely new model, the A50, which is very important because we are strong on the heavy side here, and we will reinforce that because we are now entering a model between the A45 and the A60, so that will further reinforce our World leading plus 40% market share, global market share in these segments. Market environment, Europe, we have continued to see signs that the downward correction also in Europe for construction equipment is stabilizing and guide 25 to a flat market on the back of positive signs from dealers and customers. That is unchanged also from previous forecast so far. Also for North America, we keep our forecast unchanged with minus 5% as midpoint in relation to 24. And for South America and Asia, excluding China, also we forecast an unchanged flat development. In China, we increase somewhat the 24, 5 forecast up to plus 5% as midpoint in relation to 24. Book-to-bill, pretty much the same story here. Volvo CE showed growth in book-to-bill with 105% in Q4, and for 12 months rolling, book-to-bill was 95%. European book-to-bill improved to 138% for the quarter. North American book-to-bill was improving to 93% for Q4, after also a third quarter that was very low and was impacted by destocking and cautious order intake. And South America had destocking with boot-to-build at 77% while Africa, Oceania and Africa were in balance. Of the buses, quarter four Volvo buses received an order for 46 electric buses from Transdev in the Netherlands. Of course, that is a very important order in itself, but it also marks a very important shift here. Now we are gradually leveraging the new business model in Europe with Volvo chassis combined with bodies from select bodybuilder partner, but where Volvo bus team still delivering and serving the customer as a whole. Book-to-bill in the quarter was 76% on the back of very strong order comparisons from 23. But overall, a continued good demand for coaches. And Volvo Buses had a very strong year, and I would like to extend my appreciation to the whole team for the strong structural improvements over the last years that have taken place, which is, of course, very important. If we go down to Penta, Penta revealed the expansion of its existing docking system also to boats with DPI drives in addition to the IPS drives or pods. Another thing, data centers and expansion of that across the globe is driving demand for power generation gensets, which is supportive for Penta's mix towards larger engines. And generally speaking, the energy transition as such holds great opportunities for Penta moving forward, both for power generation, but also for energy storage solutions. Book-to-bill improved to 136% in Q4 and to 94% 12 months rolling. And also Volvo Penta concluded a very strong year with the best Q4 ever. And, of course, that is good in itself. But I think it's more important also to state that that is showing that Penta today is a different company. It is a company that are standing on two or I should say three legs, marine, industrial, both industrial oil speed and industrial power generation. And as many of you know that the quarter four has typically been a sign that it was more one-legged. And now we are seeing that it is a company with several opportunities and great growth opportunities. So great job done by the team here. Financial services. Quarter four, new business volumes reached $35.6 billion. That was plus 5% currency adjusted. And this was a quarterly record, as a matter of fact. And with the strong sales, BFS continued to grow the credit portfolio and with also improving penetration levels, that is important. The 12 months rolling penetration reached 29% and that was 2% better or 2 percentage points better compared to last year. And the portfolio performance continued to be good with customer delinquencies stabilizing at average business cycle levels. So a well managed portfolio and growing business. So by that Mats I leave the floor to you to Go through the financials.

Great. Thanks, Martin. So, let's look into the financials now. Overall, we continue to execute on the all-now-perform and transform strategy. We maintain earnings resilience and deliver an all-time high operating cash flow in the quarter. And this is why we're continuing to invest in our future business growth as well. Looking into the details now, starting with the net sales. Price level for new vehicles remains stable with no significant carryover effect from last year. However, we still see a positive price realization on our service business. Net sales decreased by 6% on a currency-adjusted basis compared to last year. European volumes declined with sales coming down nearly 12% when adjusted to currency and Darcy's divestment. The decline is mainly due to lower volumes in truck and construction equipment. In North America, sales experienced a slight increase of 0.5% on a currency adjusted basis. And this was despite lower market activity for construction equipment. South America continued to perform strongly during the fourth quarter with net sales that marked an outstanding plus 26% FX adjusted compared to last year. This was mainly driven by group truck sales. The other regions experienced declining sales both in trucks and machines. Overall FX was 1.1 billion negative, driven by the Brazilian currency that depreciated by 14% versus the CET. And this gave a negative FX impact on sales of close to 2 billion in the quarter. Operating margin. The adjusted operating income for the group was 14 billion, with an adjusted operating margin of 10.1%. In Q4, earnings remained strong, supported by favorable price realization of services, while the downward trend in material cost had a positive year-over-year impact. It didn't fully compensate for the effects from reduced volume, unfavorable brand mix within construction equipment, and the additional manufacturing cost for trucks in North America. And this was related to the supply constraints and the all V&L ramp-up. These additional manufacturing costs are gradually fading. The ongoing transformation activities require significant investments. R&D spending increased by 1.4 billion in the quarter. Gross spending was seasonally high in the fourth quarter of 2024 and is expected to balance out to be slightly above the average for the 2024 spending. The net capitalization effect in the quarter was positive at 800 million. Guidance on net capitalization for the full year 2025 is positive at approximately 3 billion. Strict cost control remains in place, reflected by the stable trend in other fixed costs. Other is positive thanks to better performance in joint ventures compared to last year. FX had no significant impact on the quarter at the adjusted operating income level, and we expect the effect from transaction exposure to be neutral for the full year 2025, and we don't provide any guidance on the full 2025 currency effect on earnings. Cash flow, then. We generate an all-time high operating cash flow in the fourth quarter at 24.3 billion SEK. Mainly driven by good working capital management where we have been successful in execution of several activities reducing inventories with about 9 billion SEK in the quarter. This combined with a solid result brought us to mark a new record for the Volvo Group when it comes to the cash flow. Return on capital employed trends slightly lower at 35.8% on a rolling 12-month basis, while the net financial position improved to close to 86 billion, driven by record cash flow generation in the fourth quarter. Moving into the truck side. The decreased FX adjusted net sales for group trucks of 4% were driven by lower volumes and flat price effect on new vehicles. The lower adjusted operating income and adjusted operating margin were mainly driven by generally lower volume, high R&D investments, and manufacturing costs impacted by the disturbances in North America and by the extra cost efforts to execute on deliveries. Good performance was maintained through effective price realization of service, reduced material costs, and enhanced results from joint ventures. FX had a negative impact of 0.5 billion SEK in the quarter, and this was driven by the Brazilian currency. The extra cost in North America related to the hurricane and the ramp-up of the all-new V&L remained in the fourth quarter, but continues to gradually improve. Construction equipment. FX's net sales decreased by 17% due to lower volumes and negative brand and product mix. Adjusted operating income decreased by 0.7 billion SEK to 2.6 billion. The negative impact from higher volumes in China and lower volumes in Europe and North America were partly mitigated by reduced R&D expenses. The adjusted operating income margin reached 11.8%, and there was a positive impact from currency on earnings of 0.6 billion SEK, mainly driven by depreciation of the U.S. dollar versus the SEK. Moving into buses then, and as Martin mentioned as well, this is the best fourth quarter ever when it comes to adjusted operating income and the margin for buses. So great work done by the bus team then. Looking into the details then. FX adjusted net sales decreased by 10%, mainly driven by lower volumes. Adjusted operating income more than doubled from 323 million SEK to almost 700 million. The result was supported by effective price realization of both vehicles and parts, and continuous improvements of manufacturing and material costs, more than offsetting the impact from lower volumes. The adjusted operating income margin increased to 10.4 percent, and the currency impact was minor within the quarter. Moving to Penta, and also Penta had a record quarter down when it comes to operating income for a fourth quarter. Looking at the numbers then, driven by lower volumes, FX adjusted net sales decreased by 5% to $4.8 billion. Adjusted operating income increased to $583 million thanks to positive product and market mix driven by heavy duty engines and components, U.S. business, and price realization. This contributed to keep the high performance in a quarter with lower volumes. The adjusted operating margin reached 12.2%, and there was a slightly negative FX impact in the quarter at $17 million. And then financial services. The credit portfolio increased to $280 billion, with a rolling 12-month return on equity of 13%. Portfolio performance continued to be good, with customer delinquencies stabilizing at an average business cycle level. In Q4, adjusted operating income was stable above $1 billion, and the solid portfolio performance was partly offset by higher operating expenses, increased credit provisions, and unfavorable currency movements, which had a negative impact of about $40 million compared to the fourth quarter of 2023. So with that, I'm leaving for Martin to summarize.