Scania Interim Report January–March 2019

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Scania’s net sales rose to SEK 36.1 billion and earnings in the first quarter amounted to an all-time-high of SEK 4,207 m., which gave an operating margin of 11.7 percent.

Comments by Henrik Henriksson, President and CEO

“Scania’s net sales rose to SEK 36.1 billion and earnings in the first quarter amounted to an all-time-high of SEK 4,207 m., which gave an operating margin of 11.7 percent. Higher vehicle and service volume, currency effects and the market mix contributed positively while higher production costs due to the changeover in Latin America and supply chain constraints impacted earnings negatively. Scania’s last PGR series truck has rolled off the assembly line and only  trucks from the new truck range are now produced in the entire global production system. The final stage of the transition was completed during the quarter with the changeover of production in Latin America. Some limitations remain in the flexibility and capacity of our global production system. There is still a higher than normal cost situation in general for products and production related to the new truck generation. The measures put in place to normalise cost levels are continuing.

Service revenue during the first quarter of 2019 amounted to a record high SEK 7,166 m. (6,500), an increase of 10 percent. Financial Services reported operating income of SEK 345 m. and maintained its trend of increased profitability.

henrik-henriksson-scania
Henrik Henriksson, President and CEO

Order bookings for trucks fell by 9 percent in the first quarter of 2019 compared to the high level during the year-earlier period. Demand for trucks in Europe remains strong due to the positive economic situation.

In Latin America, the trend in demand is positive thanks to the recovery in Brazil. Demand in Eurasia was impacted negatively by a slowdown in Russia. In Asia, order bookings fell in comparison with the previous year due to the Middle East, while demand in other parts of Asia remained strong. Buses and coaches were also impacted negatively by lower order intake in the Middle East and overall order bookings for buses and coaches were 28 percent lower than last year. In the Engines business area, demand remains at a high level.

We see ever-increasing interest in Scania’s gas vehicles. When the city of Bogotá renewed their Bus Rapid Transit system, TransMilenio chose 741 Scania Euro 6 gas buses, the cleanest and most silent buses on the Colombian market. Scania will also deliver 100 gas trucks to a customer in Germany for transports to the food retail sector. Regardless of whether they are powered by biogas or natural gas, Scania’s gas engines have essentially the same technical solution. From a sustainability perspective, biogas is preferable since this fuel reduces CO2 emissions by up to 90 percent (20 percent with natural gas). However, the use of biogas is hampered by a shortage of fuel. For  this reason, Scania is working actively in various partnerships to secure the production of biogas and thereby enable a broader penetration for sustainable gas solutions to reduce carbon footprint.”

Scania-G-410-4x2-LNG-
Scania G 410 4×2 LNG with box semitrailer

Sales performance

Total vehicle deliveries increased by 4 percent during the first quarter of 2019 to 23,576 (22,640) units, compared to the year-earlier period. Group net sales rose by 16 percent to SEK 36,092 m. (31,115). Currency effects had a positive impact on sales of SEK 1,346 m.

Continued strong demand in several regions

Order bookings for trucks and buses and coaches in the first quarter of 2019 fell by 10 percent to 26,703 (29,759) vehicles, compared to 2018.

Demand for trucks in Europe remains strong due to the positive economic situation combined with an expansion need and attractive financing levels. Transport growth is continuing, driven by basic industries such as forestry, agriculture and industrial goods. In Latin America, the trend in demand is positive thanks to the recovery in Brazil. In Russia, there is a modernisation need but demand has slowed somewhat. In the Middle East, demand fell drastically while in other parts of Asia, demand is strong. In China, the European truck segment is growing in line with the development of the logistics systems, along with stricter emission legislation levels. A particularly strong increase in order bookings came from the Japanese market where Scania’s customer offering is starting to gain a strong foothold.

Scania-R620-6x2Highline
Scania R 620 6×2 Highline, fuel transport

The truck market

Order bookings

Scania’s order bookings fell during the first quarter of 2019 and totalled 24,789 (27,103) trucks. Order bookings in Europe decreased by 9 percent to 14,551 (15,917) units, compared to the first quarter of 2018, related to lower demand in Great Britain, Germany and Austria, which was partly offset by upturns in France, Poland and the Czech Republic.

Order bookings in Latin America rose significantly during the first quarter of 2019 compared to the year-earlier period, to 6,296 (3,063) trucks, mainly related to increased demand in Brazil.

In Eurasia, total order bookings fell during the first quarter and amounted to 1,271 trucks (3,144), a decrease that was primarily related to Russia.

In Asia, order bookings fell to 1,951 (3,751) trucks during the first quarter. The decrease was mainly related to Iran and Indonesia, which was offset somewhat by upturns in Israel and Japan.

In Africa and Oceania, order bookings were lower compared to the first quarter of 2018 and amounted to 720 (1,228) units, compared to the first quarter of 2018.

Deliveries

Scania’s total truck deliveries increased by 8 percent to 22,186 (20,567) units during the first quarter of 2019 compared to the year-earlier period. In Europe, deliveries rose by 25 percent to 16,150 (12,960) units compared to the first quarter of 2018. Latin America has now also changed over to the new product range and therefore all production units globally have changed over to production of the new truck generation.

In Eurasia, deliveries fell to 767 (1,223) trucks. In Latin America, deliveries fell by 6 percent to 2,470 (2,629) units, compared to the first quarter of 2018. In Asia, deliveries fell compared to the first quarter of 2018 to 1,920 (2,659) trucks. In Africa and Eurasia, deliveries fell by 20 percent to 879 (1,096) trucks.

Net sales

Net sales of trucks rose by 22 percent to SEK 23,325 m. (19,112) during the first quarter of 2019.

The total European market for heavy trucks

The total market for heavy trucks in 27 of the European Union member countries (all EU countries except Malta) plus Norway, Switzerland, Iceland and Bosnia and Herzegovina increased by about 6 percent to about 86,300 (81,200) units during the first quarter of 2019. Scania truck registrations amounted to about 16,200 units (13,800), equivalent to a market share of about 18.7 (17.0) percent.

Scania-Citywide-01
100% Electric & Autonomous – Bus Scania Citywide

The bus and coach market

Order bookings

Order bookings for buses and coaches during the first quarter of 2019 fell compared to the previous year to 1,914 (2,656) units.

In Europe, order bookings fell and totalled 526 (631) units in the first quarter, mainly related to Spain and Sweden, which was partly offset by upturns in the Czech Republic and Norway. In Latin America, order bookings rose by 35 percent to 1,012 (751) units compared to the first quarter of 2018, mainly related to Colombia and Chile, which was partly offset by downturns in Peru and Argentina. In Asia, order bookings fell to 166 (880) buses and coaches compared to the first quarter of 2018, mainly related to Iran, which was partly offset by increases in Japan and Hong Kong. Order bookings in Eurasia rose compared to the year-earlier period and amounted to 10 (0). Order bookings in Africa and Oceania fell to 200 (394) buses and coaches.

Deliveries

Scania’s bus and coach deliveries fell to 1,390 (2,073) units during the first quarter of 2019. In Europe, deliveries fell by 38 percent to 328 (527) units compared to the first quarter of 2018. In Latin America, deliveries fell by 1 percent to 626 (630). In Asia, deliveries fell by 42 percent to 250 (430) and deliveries of buses and coaches in Africa and Oceania fell during the first quarter to 171 (237) units. Deliveries to Eurasia fell to 15 (249) buses and coaches.

Scania’s market share in buses and coaches in Europe amounted to 5.1 percent in the first quarter of 2019 compared to 8.2 percent during the year-earlier period.

Net sales

Net sales of buses and coaches fell by 28 percent to SEK 1,858 m. (2,576) during the first quarter.

Scania-DC-16-litre
Scania DC 16 litre

Engines

Order bookings

Total engine order bookings fell by 34 percent to 2,587 (3,913) units during the first quarter of 2019 compared to the year-earlier period. The decrease was primarily related to Germany and South Korea, which was offset somewhat by increases in Brazil and the Czech Republic.

Deliveries

Engine deliveries fell by 6 percent to 2,571 (2,737) units during the first quarter of 2019.

Net sales

During the first quarter, sales fell by 1 percent to SEK 566 m. (569).

Services

Service revenue amounted to SEK 7,166 m. (6,500) during the first quarter of 2019, an increase of 10 percent. Higher volume had a positive impact on revenue. In local currencies, revenue increased by 6 percent.

In Europe, service revenue rose by 11 percent to SEK 5,014 m. (4,508) compared to the first quarter of 2018. In Latin America, revenue increased by 9 percent to SEK 808 m. (741) and service revenue in Eurasia rose by 20 percent to SEK 218 m. (181) compared to the first quarter of 2018. Service revenue in Asia was 8 percent higher than the previous year at SEK 674 m. (626). In Africa and Oceania, service revenue rose by 7 percent to SEK 472 m. (442).

Earnings

Vehicles and Services

First quarter

Operating income in Vehicles and Services totalled SEK 3,862 m. (3,013) during the first quarter of 2019. Higher vehicle and service volume, currency effects and the market mix contributed positively while higher production costs due to the changeover in Latin America and supply chain constraints impacted earnings negatively.

Compared to the first quarter of 2018, the total currency effect was positive and amounted to about SEK 523 m.

Scania’s research and development expenditures amounted to SEK 1,716 m. (1,640). After adjusting for SEK

496 m. (338) in capitalised expenditures, and SEK 175 m. (182) in depreciation of previously capitalised expenditures, recognised expenses decreased to SEK 1,395 m. (1,484).

Scania-Product-family-Scania-Citywide-LE-Hybrid-Scania-13-Litre-Industrial-Engine-Scania-R-500-4x2-Highline-with-box-semitrailer
Scania Product family, Scania Citywide LE Hybrid, Scania 13 Litre Industrial Engine, Scania R 500 4×2 Highline with box semitrailer

Financial Services

Customer finance portfolio

At the end of the first quarter of 2019, the size of Scania’s customer finance portfolio amounted to SEK 94.7 billion, which was SEK 5.5 billion higher than the end of 2018. In local currencies, the portfolio increased by SEK 3.1 billion.

Penetration rate

The penetration rate was 40 (41) percent during the first quarter in those markets where Scania has its own financing operations.

Operating income

Operating income in Financial Services rose to SEK 345 m. (302) during the first quarter of 2019, compared to the same period in 2018. A larger portfolio and currency effects had a positive impact on earnings, while lower margins had a negative impact.

Scania Group

During the first quarter of 2019, Scania’s operating income amounted to SEK 4,207 m. (3,315). Operating margin amounted to 11.7 (10.7) percent. Scania’s net financial items amounted to SEK -292 m. (-101).

The Scania Group’s tax expense amounted to SEK 879 m. (847), equivalent to 22.5 (26.4) percent of income before taxes. Net income for the period totalled SEK 3,036 m. (2,367), equivalent to a net margin of 8.4 (7.6) percent.

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