AB Volvo

So welcome this morning to the Volvo Group fourth quarter press conference. Today we'll do as we always do. We will listen to the presentation from our CEO, Martin, and then listen to Mats. And then we'll follow up with a Q&A session. So with that short introduction, I'll hand over to you, Martin. Thank you.

Thank you, Johan, for that. Also from my side, welcome. It was very special with the full year also report. And of course also in more detail quarter four. So, maybe now to get started. As you know, we are still in a period with uncertainty in our key regions, and in particular for North and South America. where we have seen a continuation of cautious stance among our truck customers. Having said that, lately in the later part of the quarter and also in the beginning of the year, there are signs of stabilization and somewhat of recovery. And while Europe had a positive volume development in the quarter, volumes in both North and South America were lower in the quarter and are expected to be weak also in the first quarter of 2026. And that is, of course, related to the order intake that we had earlier in 25. But however, when it comes to the market forecast for the full year of 2026, we are revising our market forecast upwards for North America, as we do also for Europe, even if that is more marginal. Despite the many moving parameters, the group had a solid performance in the fourth quarter, with a flat level of sales if you adjust for currency and the divestment of SGLG. and adjusted operating margin of 10.3% and good cash generation. Operationally, we continue to drive what we can impact ourselves, not at least by utilizing our flexibility toolbox to maintain balance between demand and supply, and very important where we are in the cycle to keep inventories at the right levels. focuses also on effective cost control, commercial discipline, and the service business. And services did have a positive development during the quarter with a strong underlying growth of 5% adjusted for FX and SDLG, showing that our customers around the world continue to utilize their vehicles and machines. And that is, of course, a very important feedback. And it also means that the fleet replacement rate eventually will have to increase. That is a given. While having strict cost control, selling, admin, industrial, our priority on innovation and technology continues. At the same time, also in these areas, we are continuing to gradually adjust and to have a correct time facing for our project and product portfolios. Having said that, there are segments that are moving quicker than anticipated with good growth prospects both here and now and moving forward. The huge demand, a little bit surprising also, for smart and not at least speedy alternatives for energy and power is driving the demand for Volvo Penta's power and energy solutions, not at least for data centers and AI factories. And with the recent launch in the beginning of this quarter of the gas-powered G17 engine that is building on our existing technology and industrial stack, meaning that we can benefit from scale immediately, that position will strengthen further. The same goes also for mining and defense areas where we will continue to increase focus. So moving forward in these turbulent times for global trade, we focus, and I've already said that, on activities that we can influence ourselves. Apart from what I've said in terms of cost and commercial discipline and services, we continue to build on our strong regional value chains, combined with global capabilities. The world is moving from a more global, synchronized system, more in steps into a regional platform. And there, Volvo is well positioned. So as we conclude the Turbulent 25 with solid sales and group margin, supported by underlying resilience, I would like to take the opportunity when we have the full year report to thank customers, business partners, and colleagues for great cooperation. With uncertain business conditions, strong and close relations are required. They are always important, but more important than ever. And finally, the world will still need efficient and effective transport and infrastructure and energy solutions. And the group is well positioned to leverage these opportunities moving forward. So if you look then into the fourth quarter, net sales declined to 124 billion on the back of lower truck volumes, but it was flat development when adjusted for currency and divestment of SGLG. We delivered a solid result in these turbulent times, resulting in an operating income of 12.8 billion and a growing operating margin of 10.3%. Cash flow amounted to 19.3%, which resulted in a net cash position in industrial operations of 63 billion. Return on capital employed in industrial operations at 25.3% and EPS at 4.73%. Moving over to volumes, truck deliveries declined by 3% in the quarter to 56,700 vehicles, with drag in North and South America that I've already said, offset by then growth in Europe. For construction equipment, deliveries decreased by 46%, but when adjusting for SDLG, the machine deliveries increased by 9%. And if you want to be even more granular, they increased by 10% for the Volvo brand. Since ROC back then, previous TRX didn't increase as much. So 9% excluding SLT. Electrification, still with different uncertainties related to the electrification, not at least when it comes to a number of the enabling conditions. Underlying demand continues to be rather slow. But orders for fully electric vehicles adjusted for SDLG increased still by 3%. And deliveries increased with 20% when adjusting for SDLG. This growth was mainly supported by a 15% growth of electric light commercial vehicles in the trucks segment. That is not surprising. We are now... more and more into the new master also, Renault master, 4-4 Renault truck in that segment. And obviously that is also a segment that will continue to grow with last mile deliveries, et cetera. Coming over to top line and sales, if we start then with vehicle machines, overall sales of vehicle machines declined 1% adjusted for currency and SDLG. Truck vehicle sales were down 4% on the minus 3% truck volumes, which is showing that price discipline also in this quarter in the softer market environment is working well. Construction equipment adjusted for SDLD was growing with 13%, which was supported by sales of Volvo branded machines in mainly Europe. Pentas, 18% sales growth, FX adjusted, supported by North American data centers as well as the mining segment. Also good demand in Asia. And Bustis had a growth of 28% in the quarter, primarily driven by the Prevost brand in North America and by the Volvo brand in South America. Top line for service. Our service business, as I said, continued to develop well. And we grew 5% in Q4 adjusted then for currency and SGLG. You will hear that a couple of times. We're positively developing in all business areas. And these developments, as I said, and I think this is very important, are proof points of one part our push for more extensive service offerings that have been alluded to many times before, not at least when it comes to service, repair and maintenance contracts, etc., but also then that our customers continue to utilize their vehicles and machines and that the installed fleet needs to be renewed sooner or later. Buses were particularly strong with growth of 17% driven by strong sales in Europe, Asia and Mexico. And Penta also continued to be strong with 8% and the same goes for VCE, excluded then SDLG, also had 8% growth. So the group's service business pacing up to 124 billion, 12 months rolling, represent almost 26% of the group revenues, which is, of course, good in this part of the cycle. On the truck side, very proud, of course, and maybe you did see also the press release yesterday. Super proud for our Volvo Trucks colleagues here. Second year in a row, Volvo Trucks was the heavy-duty champion in the European heavy-duty market with over 90% market share. And we really see that also on the back of strong customer satisfaction and a very competitive offering. You did see the FH Aero here that has really been doing great strides into the market. So tremendous offer by the Volvo Truck team and led by Roger and all the colleagues there, but of course the complete value chain. Volvo Trucks in North America also importantly delivered the 125 all-new Volvo VNL to highlight motor corporation, marking the largest order of the next generation of the all-new VNL in Canada to date. So now we are getting in also with this step-by-step with these volumes. And the first all-new Mach Pioneer was delivered to a customer in October, in the beginning of the quarter. And this marks, of course, a significant milestone for Mach Trucks, bringing the rejuvenation of the product range into the market. Also in October, Volvo Autonomous Solutions team and Babi, the leader in physical AI, have successfully integrated the Vavi driver with the Volvo VNL autonomous redundant truck. With this integration complete, both companies together now are focusing on really deploying this and support broad commercial deployment. Market environment. Always very interesting. If we start with North America here, North American fight market, as I said, remains if you look at the figures and also the order intake during the bigger part of the year in recession. And so far into quarter one, we believe that the North American will continue to be primarily replacement driven on the back of an aging fleet. The EPA 27 emission change will, in our view, only drive a if anything, a modest pre-buy effect. So our current assessment of full year 26 is 265,000 heavy-duty trucks in 26. And we have increased then the forecast with 15,000 units versus the guidance provided in quarter three. And what we can say is that later part of quarter four and also in the beginning of this year, we are starting to see somewhat better activity level. If that is a sign that we'll prevail, Maybe too early to say, but of course there are a number of parameters supporting that. The European registration pace continues to increase, and we have lifted the 26 total market forecasts up to 305,000, which is then 10,000 units versus the guidance we had in Q3. Brazilian market contracted through 25, and we believe that the total market will continue to decline. We repeat and reiterate our total market of 75,000 for 26, even though that there are some movements in Brazil, not at least related to Finam and the financing. And all of us that have been part of this for a while, we know that that has normally a rather big effect. So let's see if that can support on the upside. But for the time being, we reiterate that. And both for India and China, we are reiterating the market focus as we had it also for quarter three, or in conjunction with quarter three, I should say. Book-to-bill, the overall book-to-bill for medium and heavy duty amounted to 94%, both for the last quarter and for 12 months rolling. We managed our industrial system well in quarter four and had book-to-bill balance both in Europe and North America. And also, as I alluded to, with the right levels of inventory. That is super important where we are in the cycle right now. And for North America, we kept the balance by also working with a number of stop days, causing an under-absorption that Mats will talk about. But that is the right thing to do now, rather than to take a further structural adjustment downwards. So on the back of the week, U.S. demand during the fall, we will also have some stop weeks for Volvo and Mac in the U.S. in the first quarter. And we take stop weeks, as I said, in quarter one rather than to structure it just further downwards. And the reason is that we anticipate... also partly supported now by recent order activity, a gradual recovery during the course of the year, and in line with our full year guidance that we are increasing the NSSL to 265,000. In South America, we have been more restrictive with order slotting in quarter four, That is also explaining then the book-to-bill of 80%. We wanted to assure that we did sell out more retail inventories, and we now have a situation that is in good balance when it comes to the inventories. Africa and China in balance, and in Asia, book-to-bill mainly impacted by number one strong deliveries in quarter four, in combination with lower demand in Middle East and Indonesia in the quarter. On the market share then, Volvo and Renault trucks continue to deliver strong market shares for the full year. Volvo at 19 and Renault trucks at 9.4, giving a total of 28.4%. And Volvo trucks then ended as the market leader. And on the battery electric side, and despite that more OEMs are now delivering bad solutions, by the way, which is good because we need to accelerate that for Europe, Volvo-Renault still holds a 39.1% market share combined for the year. North America, Mack Trucks' self-help activities, not at least to stabilize the supply chain, paid off during the course of the year, and they have Step-by-step now regain momentum, and their share is now 8% for the full year and later part higher. And Volvo Trucks are back on the right track also after the introduction of the all-new VNL here. So we also did see better market shares during the later part of the year, but 8.5% I think it was for the full year. Brazil, Volvo remains market leader. Market share of 23.2%. And Australia has been transitioning during the year from Euro 5 to Euro 6. We were ready with that rather early. Lost market share when market were selling out Euro 5s. But we have seen also a good momentum during the later part of the year. So we expect that to stabilize. VC, selected Eskilstuna. You're all aware of that. In Sweden, as location for the crawler excavator factory for the European market. Capacity of 3,500 machines in the 14 to 50 ton classes. And these excavators will be built on a mixed model assembly line for all these models, but also for both electric and internal combustion engine. And the closing of Svecon Acquisition, our retail partner, and wholesaler retail partner, I should say, in Sweden, bigger part of Germany, Baltics, It's expected to close this week on January 31st. And this acquisition will strengthen Volvo C's market position further, not at least in the very important service business. Market forecast, similar picture you can say as truck. For North America, we are now guiding a flat market in relation to previous year. That is a five percentage point upgrade since the forecast in quarter three. Same goes for Europe. Now we say 5% as midpoint of the market, so somewhat growth. That is also an upgrade of 5 percentage points. China, as a matter of fact, same, plus 5% as midpoint, 5% percentage growth. And for South America and Asia, flat, and that is no change in relation to what we said in conjunction with Q3. Book-to-build construction equipment reached 180% in the quarter, driven by both North America and Europe. North American demand is broad-based from the digital development, data centers, energy sector, on-shoring of manufacturing, as well as the possibility for customers to write off 100% of the machine value the first year of operation. In addition, refilling of inventory at dealers, given the better outlook now, and where also dealers would like to have the right type of capacity to deliver to the market. And the European demand is encouraging, with a larger market such as Germany, UK, Sweden, now gradually coming back, as well as the fact that dealer inventories are clearly moved into customers' operations. And also the other markets are supported with largely then positive book-to-bill. For buses, the transition towards electric vehicles in city traffic continues in quarter four. Just to mention one very important example. Volvo buses secured an order from Vybus for 73 electric buses that will operate in the city of Borås. Borås, Borås. From April 27, the order comprises city and intercity buses, including articulated buses. And just as a small anecdote, they will also be produced in Borås. So even if you are talking about radial value chains, maybe that is a little bit of an exaggeration of having that full circularity in the same city. But it happens to be there. We are very proud. And book-to-bill, 91% in the quarter. 98% that is more relevant for the bus business, as you know, with rather long lead times. So that is a healthy and good book-to-bill. In the quarter, somewhat lower was on the back of somewhat lower demand in markets such as Brazil and Mexico. Penta. As I said, it's interesting to see the rather high, or I should say not rather, but high activity level when it comes to the power generation and industrial segment. Launch its first gas engine, both natural and biogas, for sure, to strengthen the lower emission power generation offer. This will further strengthen Penta's position to meet the global energy demand across many segments, and not at least data centers and AI factories. And again, that I think is interesting now, with more and more of the customers in this space wanting to have alternatives for lead time and volumes. And with the control system capabilities that you have today, to really bring in more engines with the right type of capabilities is a very efficient way of doing it for lead times, for cost, and for efficiency. And the Volvo Penta IPS professional platform, you know, the biggest now pod for propulsion systems, the biggest IPS, which was launched in 25 and opted for commercial use, but also for big yachts, has made strong inroads in the yacht segment and very, very well received with several OEM now placing orders. And Volvo Penta has a positive demand momentum. Book-to-bill reached 109% in the quarter and 102% well-mounted rolling. Financial services, finally. The portfolio continued to grow with stable new retail financing. It doesn't look like it's growing here, but that is, I mean, it's growing adjusted for currency. And the sound portfolio performance was maintained, although increased delinquencies and high write-offs. But if you see where we are in the cycle, I should argue that we have a stable and good situation well under control here. And the penetration rate for year 2025 came in on a solid level of 30%. And also what is possible to see is the focus that we have had also on insurance offer from VFS working together with other business areas and the group brands to enhance the total offer for our customers. So by that, I will leave the word to Mats Wachtman, our CFO, to present the financial figures.

So please, Mats. Thanks, Martin. looking into the fourth quarter financial stand and we are starting off with the group net sales so net sales decreased by two percent on a currency adjusted basis compared to last year vehicle sales dropped by four percent mainly due to lower volumes on trucks while service sales increased by four percent currency adjusted the contribution from all business areas European volumes increased, which led to an increased sales by 10% currency adjusted, driven mainly by trucks and construction equipment. In North America, FX adjusted sales decreased by 8%, driven mainly by trucks, while sales were higher for both buses and Penta. In South America, net sales decreased by 18% currency adjusted compared to last year, and this was driven by lower truck volumes. In Asia, net sales decreased by 10% adjusted for currency, driven by construction equipment and the divestment of SDLG. Excluding SDLG, sales increased with 21% in Asia. Other regions experienced slightly increased sales, mainly driven by trucks and buses. Overall effect was negative with 11 billion due to a general appreciation of the Swedish krona. The main driver was the US dollar depreciating 13% versus the SEC. The adjusted operating income for the group was $12.8 billion, with an adjusted operating margin of 10.3%. In Q4, earnings were again supported by the positive development of service business, continued lower operational expenses, and improvements from a joint venture business. The tariff cost increased during the fourth quarter, with a net impact for the group of $800 million, and we expect net impact from tariffs of about $1 billion in the first quarter. In the fourth quarter, we continued to see higher underlying material costs in North and South America, and we had under-absorption costs in the U.S. manufacturing system on the back of lower demand levels. The net R&D capitalization effect in the quarter was positive at $1.5 billion, with a year-over-year effect of $800 million. Effects had a negative impact of $2.1 billion in the quarter, driven by the strengthening of the SEC. In fourth quarter, cash flow amounted to 19.3 billion. The cash flow contribution in the quarter was driven mainly by strong inventory management, partly hampered by continued high level of investments. Return on capital employed trend declined to 25.3% on a rolling 12-month basis. And the net financial position amounted to 63 billion with support from the cash flow in the fourth quarter. Net sales for group trucks decreased by 3% currency adjusted, driven by lower volumes partly offset by positive development of a service business. Adjusted operating income amounted to $8.1 billion with an operating margin of 9.5%. The lower adjusted operating income and adjusted operating margin were mainly driven by lower volumes in North and South America. Higher material and tariff costs part of set by lower operational expenses together with good development of the service business and joint venture performance. And currency had a negative impact on one of one billion in the quarter. For construction equipment, net sales decreased 8% FX adjusted. Adjusted for FX and the STLG divestment net sales increased by 12% in the quarter. Adjusted operating income reached 2.6 billion with an operating margin of 13.9%. Product mix with less STLG from the divestment in the third quarter and more heavy machines together with positive development of a service business were the main drivers behind the improved performance. In the quarter, the tariff continues to building up and had a significant impact on the financial performance. The volumes were lower versus same quarter last year, driven by the SDLG divestment. And currency had a negative impact of 700 million in the quarter. For buses, the FX adjusted net sales increased significantly by 26%, driven by higher deliveries on both buses and services. Buses delivered another strong quarter with adjusted operating income of 683 million and 9% in margin. The result was supported by higher volumes with continued good price realization together with service business performance. In the fourth quarter, the tariff costs were building up and had a negative impact on the financial performance. And currency had a negative impact of 113 million in the quarter. Pentanet says increased significantly by 16% adjusted for currency, which was driven by more industrial engines and the service business. Adjusted operating income amounted to $608 million with an operating margin of 11.9%. This was again on the back of strong volume development for both engines and services, despite unfavorable market product mix and higher freight costs. Currency had a significant negative impact of $337 million in the quarter. And then looking into financial services. The credit portfolio adjusted for currency increased to $256 billion with a rolling 12-month return on equity of 10.4%. Portfolio performance continued to be good with delinquencies and write-offs under control. The adjusted operating income amounted to $889 million impacted by increased credit provisions but supported by the portfolio growth. Currency had a negative impact of $84 million compared to the same quarter last year. And then finally looking into a summary of our forward-looking guidances in the quarter and starting with FX. Based on the currency rates and 2025, we expect a negative first quarter effect from transaction and translation of about $2 billion. We expect R&D net capitalization at approximately $3 billion for the full year 2026 with a year-over-year negative effect of about $1 billion. And finally, the tax rate that we estimate to 24% for the full year 2026. So with that, I'm leaving for Martin to summarize 2025.