Scania interim report - january- june 2001

SCANIA INTERIM REPORT - JANUARY- JUNE 2001 "Due to continued weakening of demand in western Europe and greater uncertainty in Latin America, we expect clearly lower operating income this year compared to last year," says Leif Östling, President and CEO. FIRST HALF IN BRIEF Units First half Cha Second quarter nge in % USD 2001 2000 USD 2001 2000 m.* m.* Trucks and buses - Order bookings 25,895 28,759 -10 13,318 14,545 - Deliveries 24,821 27,647 -10 13,094 14,641 Sales and earnings1 SEK m. unless otherwise stated Sales 2,415 26,193 25,297 4 1,272 13,788 13,247 Operating income 148 1,602 2,156 -26 60 650 1,051 Operating margin, Scania Group, 6.1 8.5 4.7 7.9 percent Operating margin, Scania products2, 6.6 9.4 4.9 8.6 percent Income after 113 1,226 1,846 -34 38 407 891 financial items Net income 77 838 1,277 -34 24 265 616 Return on equity, 17.4 21.8 percent Return on capital employed, excluding customer finance 16.5 18.7 operations, percent Earnings per share, 0.39 4.19 6.39 0.12 1.33 3.08 SEK Cash flows before 100 1,085 1,474 47 514 993 acquisitions Number of shares: 200 million Unless otherwise stated, all comparisons in brackets refer to the same period of last year. This report is also available at www.scania.com * Translated solely for the convenience of the reader at a closing exchange rate of SEK 10.845=USD 1.00. 1 Beginning with the first quarter of 2001, the Scania Group is applying the new recommendation RR 11 of the Swedish Financial Accounting Standards Council on revenue recognition. See page 6. 2Trucks, buses, engines and service-related products. SCANIA, FIRST HALF 2001: COMMENTS BY THE PRESIDENT AND CEO "The Scania Group's operating income for the first half of 2001 totalled SEK 1.6 billion, of which SEK 650 m. during the second quarter. Operating income for Scania products during the first half was SEK 1,540 m., a decrease of 24 percent compared to the same period of last year. Truck deliveries fell by 17 percent in western Europe. A less favourable sales mix adversely affected earnings. Meanwhile product costs rose, due to lower volume as well as running-in of new products and systems, and phasing out of old products. Developments in Latin America remain very uncertain. Car operations showed weak earnings. Sales of service-related products rose by 22 percent and showed good earnings. Earnings growth continued in customer finance operations," Mr Östling notes. "We are now in the midst of a global cyclical slowdown, in which economic developments determine the need for transport services. When the need for transport services diminishes, transport companies slow their pace of new investments. The segment that is affected most quickly is long-haul trucks, in other words, the segment that is dominant for Scania. In a number of cases, we have abstained from sales transactions when the price levels have been too low. Together with our short orderbook, this has lowered our market share in western Europe to 14 percent. Viewed in the light of general economic developments, in our judgement the western European market for heavy trucks will continue to weaken during next year, but we estimate that the market will come back in 2003. "We are continuing to trim our European organisation. By year-end 2001, the number of production employees will be reduced by 1,200 persons. Besides that, a number of cost-cutting activities in production, sales and marketing as well as in administration have been initiated. A restructuring programme is also running in our bus and coach operations. The full effect of these measures will come during the first half of 2002. "The trend of earnings in Latin America remained negative during the second quarter. This was due to the considerable economic uncertainty in Argentina and the rapid depreciation of the Brazilian real. In Argentina, it meant that the demand for trucks fell to a very low level during the second quarter. Domestic sourcing of components in Brazil is increasing, but even these contain a sizeable import value. A considerable proportion of our value-added occurs in Argentina, with the disadvantage of the very strong peso. To offset these negative currency effects, the prices of Scania products have been raised a number of times, and further price increases will be implemented. "In the service-related sector, the positive trend is continuing. The worldwide fleet of Scania vehicles has never been larger than today, and the percentage of Scania's sales that includes service contracts continues to rise. "Due to continued weakening of demand in western Europe and greater uncertainty in Latin America, we expect clearly lower operating income this year compared to last year," Mr Östling concludes. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/07/20/20010720BIT00110/bit0001.doc http://www.waymaker.net/bitonline/2001/07/20/20010720BIT00110/bit0001.pdf