SCANIA INTERIM REPORT JANUARY - JUNE 1996

Six-month results in brief:

Number of trucks and buses sold: 23,012 (January-June 1995: 22,811).

Sales: SEK 17,376 m. (18,015) [USD 2,620 m. (2,716)]1).

Operating income: SEK 2,293 m. (3,054) [USD 346 m. (461)], equivalent to a

margin of 13.2 (17.0) percent.

Income after financial items: SEK 2,102 m. (2,806) [USD 317 m. (423)].

Net income: SEK 1,512 m. (1,860) [USD 228 m. (280)].

Earnings per share: SEK 7.56 (9.30) [USD 1.14 (1.40)].

Earnings per share according to U.S. GAAP: SEK 7.50 (9.26) [USD 1.13

(1.40)].

Return on shareholders’ equity: 36.3 (46.5) percent.

Return on capital employed, excluding customer finance operations: 29.0

(34.6) percent.

Return on capital employed: 24.9 (30.0) percent.

The market in brief:

Scania’s market share in western Europe increased to 16.1 (14.7) percent.

Scania’s order bookings from western European markets declined by 4

percent.

Scania’s truck deliveries to central and eastern Europe increased.

The Brazilian truck market has stabilised at an annual rate of around 14,000

units.

In July, Scania introduced a bonneted truck (conventional) in the 4-series.

In July, Scania introduced a new brake system with electronically controlled

disc brakes on all wheels.

Production in brief:

During May the Angers, France plant converted to production of the 4-series.

During the third quarter, production will change over to the 4-series in

Zwolle, the Netherlands.

In Brazil, a new assembly plant for bus chassis was inaugurated.

For further information, please contact:

Questions from media:Lars Christiansson, Communications and Public Affairs Tel. +46 8 5538 1212, mobile tel. +46 70 590 50 80Hans Rubenstein, ” ” Tel. +46 8 5538 1258, mobile tel. +46 70 556 07 97Magnus Hahn, ” ” Tel. +46 8 5538 3510, mobile tel. +46 70 551 79 03

Questions from investors and analysts:Cecilia Andersson, Capital Market Relations Tel. +46 8 5538 3557, mobile tel. +46 70 588 35 57

The complete interim report is also available on Scania’s homepage on the Internet, address http://www.scania.se

1) Translated solely for the convenience of the reader at an exchange rate of SEK 6.63 = USD 1.00.The marketTrucks

The European market, measured as the number of heavy truck registrations, continued 

to grow. During the first six months of 1996, 6.9 percent more trucks with a gross 

weight exceeding 16 tonnes (Class 8) were registered in western Europe than during 

the same period of 1995. The growth rate is slowing, however, as the large order 

backlogs built up during the latter part of 1995 have now been delivered to the market.

Scania’s market share in western Europe increased to 16.1 (14.7) percent, partly due to 

final sales of the 3-series. Most of this increase in market share was attributable to 

trucks from the 3-series. The number of 4-series trucks delivered increased gradually. 

In Great Britain, the total market shrank by nearly 10 percent, while the number of 

Scania registrations rose by 10 percent. Scania became the market leader, with a 20.5 

(16.9) percent market share and Great Britain is maintaining its position as Scania’s 

largest market.

The French market grew by 20 percent. Scania’s market share was 10.1 (10.4) percent.

In Germany, the market increased slightly. Scania’s market share declined to 8.1 (8.4) 

percent.

In the Nordic countries, the market expanded by 24 percent. Scania’s market share 

climbed to 37.9 (32.9) percent. Scania became the market leader in Sweden.

In the remaining western European markets, the total number of heavy truck 

registrations rose by 8.6 percent. The number of Scania registrations rose by 17.6 

percent, resulting in a higher market share in most markets.

Scania’s order bookings from western European markets declined by 4 percent 

compared to the same period of 1995.

The eastern and central European markets continued to grow. Scania’s efforts in these 

markets paid off. Deliveries rose to 485 (316) trucks.

Inventory levels at Scania’s European importers, which rose during early 1996, are now 

gradually being reduced. To meet known customer demand during the changeover 

between production of 3- and 4-series trucks, a number of 3-series trucks were manu-

factured. These trucks are now being delivered to customers. The production 

changeover from the 3-series to the 4-series is increasing the inventory level in 

production.

In Latin America, Scania’s order bookings were substantially lower than during the 

same period of 1995, when demand was at an exceptionally high level. In Brazil, a 

loosening of credit restrictions have enabled the market to stabilise at its 1993 level of 

around 14,000 units per year - a high level by historical standards. Scania’s Brazilian 

market share rose to 37.5 (33.4) percent.

During the report period, the automotive industry in the São Paulo district was hit by a 

local labour dispute. Deliveries from Scania were disturbed. The economic consequen-

ces were marginal, however. During the dispute, demand was largely covered by selling 

trucks from inventories.

In Argentina, the economic trend was better than during 1995. The total heavy truck 

market, in terms of the number of trucks delivered, rose by nearly 2 percent. Scania’s 

market share amounted to 42.9 (43.9) percent.

In Asian markets, Scania’s order bookings were unchanged. Scania deliveries continued 

on the same scale as last year. Sales to Turkey and South Korea more than doubled. 

Deliveries to Taiwan declined due to political uncertainty.Scania’s order bookings totalled 19,308 (21,087) trucks. Sales during the first six

months of 1996 amounted to 20,686 (20,829) trucks.Buses

In terms of registrations, the total market in western Europe for buses in Scania’s 

segment - heavy buses and coaches for more than 30 passengers - continued to in-

crease. According to registration statistics for the first five* months of 1996, the mar-

ket grew by 7 percent compared to last year. In the same way as with trucks the 

growth rate is expected to decline as bus order backlogs, built up during the second 

half of 1995, are delivered to customers. Scania’s market share rose to 9.7 (8.4) per-

cent during this period. 

Scania’s order bookings from the western European market totalled 629 buses, a 

decline of 27 percent.

In Brazil, the previous downward trend in the total market reversed and the market 

rose by 4 percent. Scania’s market share amounted to 9.2 (8.9) percent.Scania’s order bookings totalled 1,684 (2,166) buses and sales rose to 2,326

(1,982) buses.Industrial and marine engines

The number of Scania industrial and marine engines sold declined during the report 

period. Meanwhile Scania successfully broke into the Spanish market by signing a six-

year contract for delivery of engines for military use.Order bookings for industrial and marine engines declined to 1,334 (1,787)

units. Sales totalled 1,262 (1,531) engines.

* Statistics are only available for the first five months of 1996.Production

According to schedule, production of the new generation of Scania trucks was limited 

during the first half of 1996. Starting in May, the percentage of 4-series trucks in the 

company’s production mix rose after the plant in Angers, France switched over to the 

new generation. During August, the corresponding conversion will take place at the 

plant in Zwolle, the Netherlands. As a result of these changeovers, the number of 4-

series trucks being produced is rising gradually. The first nine months of 1996 are an 

intensive changeover period, which will culminate during the third quarter. From 

November, Scania’s European plants will exclusively produce the new generation of 

trucks.

The changeover to the 4-series means higher manufacturing costs since production of 

the 3- and 4-series is taking place in parallel. The sharply increased number of parts 

and components included in Scania’s modular range during the changeover period 

entails higher manufacturing and logistics costs. By the end of 1996, these costs will 

gradually fall to a lower level, since Scania’s European truck production will 

exclusively consist of 4-series trucks. The company has begun to reduce the 1,500-

person labour surplus at its European production plants, hitherto by means of natural 

attrition and the phasing out of temporary employment contracts.

Scania’s bus chassis production capacity increased. In Brazil, a new assembly plant 

for bus chassis was inaugurated in June. Capacity doubled to 4,000 chassis per year in 

Latin America.New products

Early in July a bonneted truck - the T-model - was introduced in the 4-series. Parts 

and components are, with a few exceptions, common with the cabover 4-series 

models. This means that Scania now has a complete new product range for the world 

market.

As one element of its safety work, in July Scania introduced a new electronically con-

trolled brake system featuring disc brakes on all wheels. Scania is the first truck manu-

facturer to offer this to its customers. The electronically controlled brake system 

greatly reduces stopping distances because the brakes react more quickly. Braking 

force is optimally adjusted to a vehicle’s weight, speed and road conditions. For 

example, the stopping distance from 80 km/h can be reduced by more than 13 percent 

compared to a conventional brake system.

At the same time Scania introduced belt tensioners and airbags. The belt tensioner, 

combined with Scania’s integrated seat belt, further reduces the risk of injury in case 

of accident, since the belt tightens automatically. This system can, moreover, be 

combined with an airbag to further enhance the level of safety even more.V.A.G products in Sweden

The total Swedish market for passenger cars during the period amounted to 89,248 

(89,751) vehicles. The market share of V.A.G products (Volkswagen, Audi, Porsche, 

Seat and Skoda) rose by more than 5 percentage points to 19.4 (14.3) percent.

The total market for light trucks and buses of up to 6 tonnes rose to 8,104 (6,379) 

vehicles. V.A.G’s share of this market rose to 36.1 (33.5) percent.Sales and earnings

Sales of Scania products amounted to SEK 15,467 m. (16,435), a decrease of 6 per-

cent. Measured as the difference between average spot rates during the period com-

pared with the first half of 1995, the effect of currency rate fluctuations was approxi-

mately SEK 1,300 m. or 8.5 percent. Adjusted for a stronger Swedish krona, sales 

increased by 2 percent. A total of 23,012 (22,811) trucks and buses were sold, an 

increase of 1 percent. Sales of V.A.G products rose to SEK 1,909 m. (1,580). Scania 

Group sales amounted to SEK 17,376 m. (18,015), a decrease of 4 percent.Operating income amounted to SEK 2,293 m. (3,054), equivalent to an operating 

margin of 13.2 (17.6) percent. Operating income for Scania products declined to SEK 

2,190 m. (2,961), equivalent to an operating margin of 14.2 (18.0) percent. The 

stronger Swedish krona compared with the previous year has had a negative effect on 

operating income of about SEK 550 m. This operating income essentially reflects the 

prevailing exchange rates during the period, since the settlement of forward exchange 

contracts during the first half of 1996 had a negligible impact on earnings.

The operating income attributable to European operations was adversely affected by 

the stronger Swedish krona, which was partially offset by higher volume. The 

changeover to the new truck range, the 4-series, in parallel with the continued pro-

duction of the outgoing range, resulted in increased costs.

Latin American operating income was significantly lower. During the first half of 1995, in-

come reached a high level before declining during the second half. During 1996, the 

profitability situation has improved slightly compared to the fourth quarter of 1995.

Operating income for V.A.G products increased to SEK 103 m (93).Consolidated net financial items amounted to SEK -191 m. (-248).Income after financial items amounted to SEK 2,102 m. (2,806).Taxes for the period amounted to SEK -594 m. (-946), equivalent to 28 (34) 

percent of income after financial items.Net income amounted to SEK 1,512 m. (1,860).Earnings per share were SEK 7.56 (9.30). Earnings per share for the period ac-

cording to U.S. GAAP were SEK 7.50 (9.26). Calculated on the basis of income in 

the 12 months to June 30, earnings per share were SEK 14.66 (full-year 1995: 

SEK 16.40).Return on shareholders’ equity was 36.3 (46.5) percent during the 12 months 

to June 30.Return on capital employed, excluding customer finance operations,

was 29.0 (34.6) percent for the 12 months to June 30.Return on capital employed during the same period amounted to 24.9 (30.0) 

percent.Capital expenditures

Capital expenditures for property, plant and equipment, excluding leasing assets, 

amounted to SEK 1,003 m. (940). Capital spending in Sweden amounted to SEK 

761 m. (651). Net capital expenditures during the period, including leasing assets in 

customer finance operations, amounted to SEK 1,271 m. (1,063).Financing and liquidity

Cash flows, excluding customer finance operations, amounted to SEK 1,365 m. (482) 

during the report period. Including customer finance operations, cash flows amounted 

to SEK 790 m. (213). The ongoing changeover to the new truck range has meant an in-

crease in inventories during the first half year. Cash and short-term investments at the 

end of the period amounted to SEK 2,282 m., compared to SEK 1,047 m. at year-end 

1995.

Net indebtedness, excluding pension liabilities and net borrowings of customer finance 

operations, amounted to SEK 6,065 m., compared to SEK 6,168 m. at year-end 1995. 

During the second quarter, SEK 1,100 m. in dividends were paid to shareholders in 

respect of 1995. Net indebtedness as a ratio of shareholders’ equity improved to 0.72 

(0.82).Personnel

The number of employees at the end of the report period was 22,028, a decrease of 33 

persons since the beginning of the year. In Sweden, the number of employees decreased 

by 167. The number of production employees in Europe, including contract employees, 

was reduced by 270 persons.

Södertälje, 2 August 1996

Leif Östling

President and CEO

The interim report has not been subject to special review by the company’s auditors.

The next report will be published on 7 November 1996.