* Scania reports record earnings and cash flow for the third quarter
* Deliveries will total about 65,000 vehicles during 2006
* Operating income 2006 will substantially exceed SEK 8,000 m.
* The production rate will be further increased from the first quarter
of 2007

IN BRIEF Nine months Change Q3
Units 2006 2005 in % 2006 2005
Trucks and
– Order
bookings 49,481 44,991 10 13,544 13,455

– Deliveries 46,783 41,249 13 14,959 12,226

SEK m.
otherwise EUR
stated) m.**

Group 5,583 51,731 45,042 15 16,507 14,608

Service 625 5,790 4,305 34 1,883 1,060

Finance 41 374 397 -6 134 146

income 666 6,164 4,702 31 2,017 1,206

taxes 649 6,005 4,595 31 1,912 1,155

· Net
income 445 4,115 3,141 31 1,281 825

percent 11.9 10.4 12.2 8.3

Return on
percent*** 23.5 20.9

Return on
percent 30.1 28.4

per share,
SEK*** 20.58 15.71 31 6.41 4.13

Cash flow,
Service 575 5,330 2,132 2,072 1,191

Number of
September 32,211 30,675

Number of

* An Interim Report reviewed by the company’s auditors will be
published on 30 October.

** Translated to euros solely for the convenience of the reader at a
balance sheet date exchange rate of SEK 9.27 = EUR 1.00.

*** Attributable to Scania’s shareholders.

Unless otherwise stated, all comparisons in brackets refer to the same
period of last year.

This report is also available at


Scania’s revenue rose by 15 percent to SEK 51,731 m. in the first nine
months of 2006. Operating income increased by 31 percent to SEK 6,164
m., resulting in an operating margin of 11.9 percent. Net income
strengthened by 31 percent to SEK 4,115 m., equivalent to earnings per
share of SEK 20.58 (15.71). The cash flow for Vehicles and Service
amounted to SEK 5,330 m. (2,132). Vehicle order bookings rose by 10
percent, while deliveries increased by 13 percent. Service and Customer
Finance operations showed a continued good trend.

In the third quarter, Scania reported record earnings and cash flow.
Earnings were favourably affected by substantially higher volume and
increased capacity utilisation. The cash flow is an effect of strong
earnings development and continued focus on working capital. The lag in
deliveries of about 1,000 vehicles that existed at the end of the second
quarter has now been delivered.

Order bookings for trucks rose by 12 percent during the first nine
months of 2006. In western Europe, order bookings were 2 percent higher.
Demand in central and eastern Europe increased by 76 percent. Most
countries in the region noted a continued increase in order bookings,
with an especially strong upturn in Russia and Poland.

Order bookings from markets in the European Union were affected less
than previously anticipated by pre-buy effects in the run-up to the Euro
4 environment regulation that entered into force on 1 October. Order
bookings in the EU, which have shifted to Euro 4 and Euro 5 trucks, are
thus better than expected. There is a shortage of transport capacity in
Europe, and the supply of used vehicles is limited.

In Latin America, order bookings increased by 16 percent. An upturn in
Brazil and Peru was partly offset by a downturn in Argentina. In other
markets, demand rose by 9 percent; Asia strengthened while order
bookings in Africa were unchanged.

After weak demand early in the year, demand for buses and coaches
improved following the launch of the new bus and coach range. Virtually
all regions showed a positive trend at the end of the period.

Scania’s concentration of European axle and gearbox production in
Södertälje and of parts management in Belgium is expected to lead to
savings of more than SEK 300 m. per year starting in 2007 and with full
effect from 2009 onward.

Scania will continue to develop its sales and service business in the
new structure. The service offering will be expanded and introduced in
new markets. Within the next few years, the potential for savings in the
sales and service organisation amounts to more than SEK 500 m. annually.

Customer Finance is continuing to perform well. Scania maintains its
market penetration of more than one third of new vehicle sales in
markets with captive customer finance operations, despite increased
competition from banks and finance companies. The credit portfolio is
growing, with well-balanced risk and with low provisions for bad debts.
At the end of September, the portfolio amounted to about SEK 30,700 m.,
which was more than SEK 2,000 m. more than on the same date last year.
During 2006, new operations have been established in Turkey and in
Chile. A new rental concept is about to be introduced in the European
market, starting in the Benelux countries.

Scania’s strategic alliances with Cummins and Hino are performing well.
Through its partnership with Cummins, Scania has secured the technology
required to meet the Euro 6 environmental regulation. In South Korea,
Scania will during 2007 begin to distribute Hino’s medium-duty trucks.
In India, Scania has established a partnership with Larsen & Toubro, the
leading supplier of construction equipment in India. Larsen & Toubro
will distribute Scania’s multi-wheeler construction trucks to its
customers in the construction and mining segments.

Strong economic growth is contributing to higher demand for transport
equipment. Scania’s deliveries will total about 65,000 vehicles during
2006 and operating income will substantially exceed SEK 8,000 m. Based
on current order bookings and sizeable order backlog, Scania has decided
to further increase its rate of production starting in the first quarter
of 2007. Due to expectations of higher future growth in transport
demand, within the next several years Scania intends to expand
production capacity to 100,000 vehicles, which it can achieve with
limited capital spending.

On 18 September, MAN AG presented a public offer for Scania, which was
unanimously rejected by the Board of Directors. On 4 October Volkswagen
announced its acquisition of 15 percent of the shares in MAN. Because
of this, a conflict of interest has occurred, which means that the
representatives of Volkswagen on Scania’s Board do not participate in
any decisions regarding MAN. On 12 October MAN modified the terms of the
offer to SEK 475. Scania’s Board of Directors subsequently rejected
MAN’s modified offer as it substantially underestimates the value of

Following the completion of the previously announced capital structure
review, management has concluded that the company has the ability to
make a special distribution of up to SEK 7,000 m., equivalent to SEK 35
per share, before the end of 2006. Given the current circumstances, the
Board will review the timing of such distribution before the year end.

About Us

Scania is a world-leading provider of transport solutions. Together with our partners and customers we are driving the shift towards a sustainable transport system. In 2017, we delivered 82,500 trucks, 8,300 buses as well as 8,500 industrial and marine engines to our customers. Net sales totalled nearly SEK 120 billion, of which about 20 percent were services-related. Founded in 1891, Scania now operates in more than 100 countries and employs some 49,300 people. Research and development are concentrated in Sweden, with branches in Brazil and India. Production takes place in Europe, Latin America and Asia, with regional production centres in Africa, Asia and Eurasia. Scania is part of Volkswagen Truck & Bus GmbH. For more information visit:


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