VOLVO CAR GROUP FY 2017 resultS Hans Oscarsson, Senior vice - - PowerPoint PPT Presentation

VOLVO CAR GROUP FY 2017 resultS

Patrik Tolf, Deputy CFO & head of Group Finance Hans Oscarsson, Senior vice president finance & CFO Nils Mösko, vice president & Head of investor relations

By accepting this document, the person to whom it is provided (the “Recipient”) agrees to be bound by the following obligations and limitations. This document has been prepared and issued by Volvo Car AB (together with its subsidiaries, “Volvo Cars”). The information contained in this document is derived from sources that have not been independently verified. Except in the case of fraudulent misrepresentation, no responsibility or liability is accepted by Volvo Cars or by any

• f its respective officers, employees, affiliates or agents in relation to the accuracy, completeness or sufficiency of

any information contained herein or any other written or oral information made available by Volvo Cars in connection therewith or any data which any such information generates, or for any loss whatsoever arising from or in connection with the use of or reliance on this document and any such liability is expressly disclaimed. Analyses and

• pinions contained herein may be based on assumptions that, if altered, can change the analyses or opinions
• expressed. This document speaks as of the date hereof and in providing this document, Volvo Cars gives no

undertaking and is under no obligation to provide the Recipient with access to any additional information or to update this document or to correct any inaccuracies in it which may become apparent. Volvo Cars’ past performance is not necessarily indicative of future results and nothing contained herein shall constitute any representation or warranty as to future performance of Volvo Cars or any security, credit, currency, rate or other market or economic measure. Nor does this document constitute a recommendation with respect to any securities.

DISCLAIMER

2

Financial Summary 2017 BNSEK 211

Revenue

BNSEK 14.1

ebit

571,577

units

6.7%

Ebit margin

3

38,000

EMPLOYEES

Comparable period: Jan – Dec 2016 Europe is defined as EU + EFTA

US –1.5% China +25.8% EUROPE +2.8%

Global growth +7.0%

Volvo Car Group Sales

4

2017 highlights

Torslanda plant - at full speed S90 - worldwide export from China Sales in China – first time over 100,000 XC40 - start of production in Gent Clear electrification strategy – T8 sales up 30 % Subscription model – Care by Volvo Complete SUV line up

5

Complete SUV Lineup

6

Fastest growing industry segment More than 50% of Volvo Cars’ revenue

Financials

7

Another year of strong growth

Net revenue (SEKbn)

211 181 164 138 50 100 150 200 250 +16.6% 15.2% 2017 2016 2015 2014

8

Net Revenue CAGR

EBIT (SEKbn)

5 10 15 +28.2% +65% 2017 14.1

6.7%

2016 11.0

6.1%

2015 6.6

4.0%

2014 2.1

1.5%

EBIT % margin CAGR

10 20 30 40 2017 32.3 6.0 16.6 9.7 2016 25.2 6.1 12.7 6.4 2015 18.9 5.5 8.7 4.7 2014 18.6 4.8 8.6 5.2 Non capitalised R&D Tangible investments Intangible investments

Investments (SEKbn) Retail sales (Thousand)

CAGR

572 534 503 466 200 400 600 +7.1% 7.1% 2017 2016 2015 2014

Retail sales

Net revenue 2017 – 17% Organic growth

9

MSEK

FY 2017

+17%

211,000 Other 8,000 Sales Mix and Pricing 7,500 Volume 14,500 FY 2016 181,000

XC 56% V 27% S 17% 49% Europe 20% China 17% US 14% Other

Revenue by carline FY 2017 Revenue by carline FY 2016

Revenue by carline and region

Revenue by carline FY 2017 Revenue by region FY 2016

17% China 18% Europe 51% 14% Other US XC 58% V 29% S 13%

10

Retail sales (Thousand units)

572 534 503 466 100 200 300 400 500 600 +7,1% 7,1% 2017 2016 2015 2014

Retail sales CAGR

ebit 2017 – 28% improvement in transition year

11

MSEK

• 500

+28%

2017 14,100 Fixed cost, FX and Other Sales Mix and Pricing

• 300

Volume 3,900 2016 11,000

6.1%

EBIT margin

6.7%

EBIT margin

Cash Flow – Investments financed

* Change in inventories, accounts receivables and accounts payables, **Adjusted for interests and other items, *** Adjusted for exchange on cash

500 2017 FY Liquidity 54,600 35,400 4,000 15,200 Financing*** Strategic investments

• 2,800

Operating investments**

• 24,300

Working capital*

• 2,800

EBITDA 26,200 2016 FY Liquidity 49,600 38,600 4,700 6,300

Cash Marketable securities Undrawn credit facilities

12

MSEK Free cash flow from recurring business MSEK -900

R&D Expenses (SEKbn)

2 4 6 8 10 12 8.8 5.4% 2014 7.2 2017 10.2 4.8% 2016 10.2 5.6% 2015 5.2%

R&D expenses % of Revenue

Investments (SEKbn)

13.6% 2014 18.6 4.8 8.6 5.2 25.2 6.1 12.7 6.4 13.9% 2015 2016 15.3% 9.7 18.9 5.5 8.7 4.7 11.5% 2017 6.0 32.3 16.6

Tangible investments Non capitalised R&D Intangible investments % of Revenue

13

Investments and R&D

Net working capital* (SEKbn & % of Revenue)

Cash conversion cycle – CCC** (days)

• 1

1 2 3 4 5 6 7 2017 2.9 1.4%

• 0.6
• 0.3%

2.8 1.7% 2016 6.8 5.0% 2015 2014

Net working capital % of Revenue

64 59 58 57 75 70 75 17 18 20 20 5 7 3 18 10 20 30 40 50 60 70 80 2014 2015 2016 2017

CCC - Days Days sales outstanding Days payables outstanding Days inventory outstanding

14

Working capital – in line with growth

• Increased sales
• New expanded manufacturing footprint
• Working capital to stabilize with the Charleston factory up

and running

Liquidity & debt – comfortable net cash position

27,700 Debt 26,900 6,700 7,400 12,800 Liquidity 54,600 35,400 4,000 15,200 12,500

Short-term Debt Bonds Long-term Debt Cash & Cash Equivalents Marketable Securities Undrawn Credit Facilities

MSEK Net cash position of SEK 12,5bn (2016 SEK18.9bn)

15

Balanced Amortisation schedule

5,800 1,200 2017 Dec 31 54,600 4,900 1,800 2020 3,000 2019 7,000 1,450 6,700 2018 4,900 3,000 2025 2022 2021

Repayment of CDB EUR loan Loans Liquidity Bonds

MSEK

16

51% 49% Bonds Loans

Funding by type

17

Looking ahead

18

Volvo Car Group

Volvo Cars Polestar Zenuity Lynk & Co Subscription Business

Outlook 2018

19

Further sales progress - complete SUV line up New disruption business opportunities Complete product portfolio renewal Truly global manufacturing footprint Continued strong growth and improved profits

Questions

20

NEW ERA AS AN INDEPENDENT, STANDALONE COMPANY UNDER GEELY OWNERSHIP

Zhejiang Geely Holding Group acquires Volvo Cars 2010 2013 Volvo Cars unveils the all-new XC90, the first product on the SPA platform 2014 Volvo Cars achieves new record unit sales of 503k and improved profitability 2015 Further footprint optimisation, new plant in US Initiation of strategic repositioning Commencement of the largest investment programme in the Company’s history 2011

2010 – 2015 PHASE I “STRATEGIC TRANSFORMATION” 2016-2020E PHASE II “PROFITABLE GROWTH”

Introduces new generation powertrains 2016 Volvo Cars another record year of sales 534k and earnings SEK 11bn Enters into the debt capital markets Launch Polestar – pure progressive performance Launch new XC60 and XC40 (new segment entry) 2017 First OEM to commit to fully electrified fleet New ways to consumers: Care By Volvo subscription based ownership 30% stake in Lynk & Co

Volvo Cars’ Transformation

2017 26.2 12.4% 2016 21.5 11.9% 2015 16.0 9.8% 2014 9.5 6.9% 2013 9.0 7.4% 2012 8.1 6.5%

EBITDA margin, % EBITDA, MSEK

21

Jan-Dec 2017 total Working Capital

• 2,800

Payables 8,200 Receivables

• 1,500

Inventory

• 9,500

2017 Dec 31 5.0 Payables

• 5.4

Receivables

• 1.2

Inventory 4.6 2016 Dec 31 7.0

Change in Working capital (MSEK) 12 months rolling CCC* days

Appendix 1: Working Capital and CCC days

22

* Cash Conversion Cycle (Working capital days) are calculated as Balance Inventory/LTM Cost of sales *365 + Balance Accounts receivables/LTM Revenue *365 - Balance Accounts payable/LTM Cost of sales *365

Appendix 2: Number of employees

23

* Cash Conversion Cycle (Working capital days) are calculated as Balance Inventory/LTM Cost of sales *365 + Balance Accounts receivables/LTM Revenue *365 - Balance Accounts payable/LTM Cost of sales *365

Number of employees* (Thousand)

30.000 10.000 20.000 5.000 25.000 15.000 40.000 35.000 13,5% 2017 +25,0% 38.000 26.000 28.100 2014 2015 30.400 2016 Sweden Other China Americas Europe, other CAGR

Appendix 3: Retail sales

24

Appendix 4: Key figures

25

Appendix 5: Definitions of performance measures

26

Appendix 6: Reconciliation tables of performance measures

27

Appendix 7: Reconciliation tables of performance measures contd.

28

29