Scania Interim Report January - June 1999

SCANIA INTERIM REPORT JANUARY - JUNE 1999 SECOND QUARTER * Continued improvement in operating income. * A strong market in western Europe. * Higher order bookings in central and eastern Europe as well as in Asia. RESULTS First half of 1999, compared to first half of 1998 Number of trucks and buses sold: 24,869 (24,710), an increase of 1 percent. * Sales: SEK 23,419 m. (22,027) [USD 2,770 m. (2,605)] , an increase of 6 percent. Operating income: SEK 2,503 m. (1,639) [USD 296 m. (194)], an increase of 53 percent. Operating margin: 10.7 (7.4) percent. Income after financial items: SEK 2,240 m. (1,489) [USD 265 m. (176)]. Net income: SEK 1,554 m. (1,054) [USD 184 m. (125)]. Earnings per share: SEK 7.75 (5.25) [USD 0.92 (0.62)]. Earnings per share according to U.S. GAAP: SEK 8.50 (5.45) [USD 1.01 (0.64)]. Second quarter of 1999, compared to second quarter of 1998 Number of trucks and buses sold: 11,959 (13,041). Sales: SEK 11,640 m. (11,604) [USD 1,377 m. (1,372)]. Operating income: SEK 1,263 m. (1,010) [USD 149 m. (119)], equivalent to a margin of 10.9 (8.7) percent. MARKET First half of 1999, compared to first half of 1998 Order bookings for heavy trucks in western European markets were essentially unchanged. Scania's market share for heavy trucks in western Europe totalled 14.9 (15.2) percent. In Latin America, the number of trucks delivered declined due to the uncertain economic situation; Scania's market share in Brazil was 32.4 (33.1) percent. Second quarter of 1999, compared to second quarter of 1998 Order bookings for heavy trucks in western European markets were essentially unchanged. In western Europe, the number of trucks delivered rose by about 3 percent. EARLIER ASSESSMENT STILL STANDS Delivery volume in Europe during the first half of 1999 and current market demand support our earlier assessment of an improvement in operating income of SEK 1.5 billion for the full year. The market in Latin America remains weak and difficult to assess. *Translated solely for the convenience of the reader at an exchange rate of SEK 8.455 = USD 1.00. This report is also available at www.scania.com SCANIA INTERIM REPORT, JANUARY - JUNE 1999 Scania's operating income for the first six months of the year improved by 53 percent, reaching SEK 2,503 m. This improvement in earnings was attributable to European operations.* Latin American operations were adversely affected by lower sales volume and narrower margins. The heavy truck market in western Europe remains strong. Scania's order bookings in western Europe during the first six months of the year were essentially unchanged, compared to the same period of 1998. Order bookings in southern European markets rose. They were stable in the three main markets - Great Britain, Germany and France - while they fell in the Netherlands. Despite a strong market in Europe, prices did not improve. During the first half of 1999, according to preliminary statistics, 124,600 (105,000) heavy trucks were registered in western Europe, for an increase of 19 percent. This currently indicates an annual rate of about 230,000 trucks. The number of Scania trucks registered totalled 18,500 (16,000), for a preliminary market share of 14.9 (15.2) percent. Scania's order bookings in central and eastern European markets were 40 percent lower during the first half of 1999 than during the same period last year. Order bookings nevertheless improved during the second quarter, compared to the two preceding quarters. In Asian markets, order bookings improved both cumulatively and compared to the second quarter of 1998. In Latin America, demand was adversely affected by economic uncertainty: in Brazil by currency turbulence and high interest rates, and in Argentina by heavy indebtedness, currency instability and uncertainty in the run-up to the October presidential election. Scania's order bookings for heavy trucks declined during the first half of 1999, compared to the same period last year. During the second quarter, the economic situation in Brazil stabilised somewhat, resulting in lower inflation, lower interest rates and a more stable currency. This is expected to help strengthen demand during the second half. In Brazil, where the market shrank by 18 percent to 7,000 (8,500) during the first half, Scania's market share was 32.4 (33.1) percent. In Argentina, where the market shrank by 37 percent to 1,790 heavy trucks, Scania's market share rose to 27.1 (25.3) percent. The total number of Scania trucks sold rose to 23,052 (22,560), or by 2 percent during the first half of 1999, compared to the same period last year. In western Europe, the number of trucks sold rose by 13 percent to 17,896 (15,882). In Latin America, the number of Scania trucks sold declined by 18 percent to 3,137 (3,846). *European operations are the portion of Scania's operations that supply all markets except Latin American ones with the company's products and services. Scania's bus order bookings rose by 17 percent in European operations, while they declined by 57 percent in Latin America. Overall, this meant that bus order bookings were 25 percent lower during the first half of 1999 than during the same period last year. Bus sales in European operations remained at the same level as during the first half of 1998, while they declined by 40 percent in Latin America. Total bus sales declined by 15 percent. Scania's sales of service-related products continued to expand. They rose by 13 percent during the first half of 1999, compared to the same period last year. In European operations, sales increased by 17 percent. The number of industrial and marine engines sold increased by 8 percent during the first half of 1999. During the second quarter, Scania announced that it will acquire Norsk Scania, the independent Norwegian importing and dealership company. Scania also decided to concentrate its European cab production in Oskarshamn, Sweden, and in conjunction with this it will invest in a new finishing paintshop as well as a modification and extension of the cab assembly plant. SALES AND EARNINGS During the first half of 1999, the Scania Group sold 24,869 (24,710) trucks and buses, an increase of 1 percent. In monetary terms, sales for the same period were SEK 23,419 m. (22,027), an increase of 6 percent. Sales of Scania products rose by 8 percent. Operating income improved by 53 percent to SEK 2,503 m. (1,639), equivalent to a margin of 10.7 (7.4) percent. In European operations, unit sales of trucks and buses increased by 6 percent during the first half of 1999, compared to the same period of 1998. In monetary terms, sales rose by 11 percent. Operating income improved by 47 percent to SEK 2,557 m. (1,739). Operating margin increased to 13.5 (10.2) percent. Higher vehicle volume and larger sales of service-related products, positive currency effects of about SEK 300 m., improved productivity, lower warranty expenses as well as improved earnings for bus operations boosted earnings. More than half of the positive currency effects were attributable to hedging activities. During the second quarter, the corresponding operating margin amounted to 14.2 (11.1) percent. A somewhat lower vehicle volume was offset by higher sales of service-related products. Other factors that improved earnings were a more positive currency situation, a better market mix, higher earnings for bus operations and lower production and warranty expenses. During the first half, the net amount of deferred income recognition due to operational leasing amounted to SEK 240 m. (137). Operating income from European customer finance operations rose to SEK 69 m. (38), due to higher financing volume. In Latin American operations, unit sales of trucks and buses declined by 22 percent during the first half, compared to the same period last year. Operating income totalled SEK -254 m. (-271). The period was adversely affected by lower sales volume as well as narrower margins. During the first quarter, this was offset to some extent by a non-recurring effect from the translation of non-interest-bearing operating items in the balance sheet. Operating income for Svenska Volkswagen products amounted to SEK 131 m. (133). Net financial items totalled SEK -263 m. (-150). The deterioration was entirely attributable to Latin American operations, due to negative cash flow, higher interest rates and translation effects of interest-bearing items in the balance sheet. The Scania Group's tax expenses were equivalent to 30.6 (29.0) percent of income after financial items. Scania's operating cash flows, excluding customer finance operations, improved during the second quarter and amounted to SEK 825 m. Accumulated first-half cash flows were SEK 21 m., since cash flows during the first quarter of 1999 were adversely affected by the acquisition of Scania's Italian importer, Italscandia, as well as by supplementary tax payments. Tied-up working capital increased somewhat during the second quarter. Net capital expenditures returned to a more normal level during the second quarter compared to the first quarter of 1999 and amounted to SEK 504 m. (426). Customer finance operations expanded by SEK 962 m. during the first half of 1999, including SEK 668 m. during the second quarter. The number of employees totalled 23,660 at the end of the report period, an increase of 120 persons since the beginning of the year. At production units, the number of employees decreased by 265 in Europe and by 90 in Latin America. In European marketing companies, the number of employees rose, primarily due to heavier investments in the service organisation. The acquisition of Italscandia represented an increase of about 170 persons. Parent Company The assets of the Scania Group's Parent Company, Scania AB, consist of shares in the subsidiary Scania CV AB, shares in the Latin American subsidiaries and a 50 percent shareholding in Svenska Volkswagen AB. Scania CV AB is the parent company of the Scania Group's European operations, which comprise European production and marketing companies as well as other companies outside Latin America. The income of Scania AB after financial items amounted to SEK 23 m. (16). Earlier assessment still stands Delivery volume in Europe during the first half of 1999 and current market demand support our earlier assessment of an improvement in operating income of SEK 1.5 billion for the full year. The market in Latin America remains weak and difficult to assess. Södertälje, 6 August 1999 Leif Östling President and CEO This Interim Report has not been subject to special review by the company's auditors. This report contains forward-looking statements that reflect management's current views with respect to certain future events and potential financial performance. Such forward-looking statements involve risks and uncertainties that could significantly affect potential results. These statements are based on certain assumptions, including assumptions related to general economic and financial conditions in the company's markets and the level of demand for the company's products. This report does not imply that the company has undertaken to revise these forward-looking statements, beyond what is required under the company's registration contract with the Stockholm Stock Exchange, if and when circumstances arise that will lead to changes compared to the date when these statements were provided. Magnus Hahn, Corporate Tel. +46-8 5538 3510, mobile Communications tel. +46-70 551 79 03 Ulf Söderström, Corporate Tel. +46-8 5538 1044, mobile Communications tel. +46-70 680 95 95 Cecilia Edström, Investor Tel. +46-8 5538 5446, mobile Relations tel. +46-70 588 35 57 Oscar Stjerngren, Investor Tel. +46-8 5538 3657, mobile Relations tel. +46-70 598 36 58 ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/08/06/19990806BIT00290/bit0001.doc The full report http://www.bit.se/bitonline/1999/08/06/19990806BIT00290/bit0002.pdf The full report

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 2016, we delivered 73,100 trucks, 8,300 buses as well as 7,800 industrial and marine engines to our customers. Net sales totalled nearlySEK 104 billion, of which about 20 percent were services-related. Founded in 1891, Scania now operates in more than 100 countries and employs some 46,000 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 ofVolkswagen Truck & Bus GmbH. For more information visit www.scania.com.

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