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SCANIA INTERIM REPORT JANUARY - SEPTEMBER 1996

Nine-month results in brief:

Number of trucks and buses sold: 31,872 (January-September 1995: 32,299).

Sales: SEK 24,566 m. (25,442) [USD 3,705 m. (3,837)]1)

Operating income: SEK 2,429 m. (3,888) [USD 366 m. (586)], equivalent to a margin of 9.9 (15.3) percent.

Operating income during the third quarter: SEK 136 m. (834) [USD 21 m. (126)]

Expenses for the changeover to production of the 4-series truck range totalled SEK 450 m. [USD 68 m.], of which SEK 300 m. during the third quarter.

Earnings reflect the actual foreign exchange situation. The stronger Swedish currency adversely affected earnings by SEK 720 m.

Income after financial items: SEK 2,142 m. (3,512) [USD 323 m. (530)].

Net income: SEK 1,530 m. (2,313) [USD 231 m. (349)].

Earnings per share: SEK 7.65 (11.57) [USD 1.15 (1.74)].

Earnings per share according to U.S. GAAP: SEK 7.59 (11.44) [USD 1.14 (1.73)].

Return on shareholders' equity: 30.2 (43.0) percent. 

The market in brief:

Scania's third-quarter order bookings for trucks from western European markets was at essentially the same level as in the third quarter of 1995.

Scania's market share in western Europe increased to 15.4 (14.4) percent.

In Brazil, Scania's market share rose to 37.5 (33.9) percent.

Scania launched a new generation of buses. 

Production in brief:

The third quarter was an intensive period of changeover to the 4-series.

The changeover of the European production system is expected to be completed during the fourth quarter. 

For further information, please contact:

Questions from the media:

Lars Christiansson, Communications and Public Affairs

Tel +46 8 5538 1212, mobile tel +46 70 590 50 80

Hans Rubenstein, " "

Tel +46 8 5538 1258, mobile tel +46 70 556 07 97

Questions from investors and analysts:

Cecilia Andersson, Capital Markets Relations

Tel +46 8 5538 3557, mobile tel +46 70 588 35 57

The complete Interim Report is also available on Scania's Internet home page, address http://www.scania.com

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

The market

Trucks

Scania's order bookings from western European markets declined by 4 percent, compared to the first nine months of last year. Order bookings during the third quarter, i.e. when the 4-series was more widely available in the market, was at essentially the same level as during the corresponding period of 1995. Scania's order bookings increased in the German market, while they decreased in the British and French markets.

During the report period, the changeover in the European production system from the 3-series to the 4­series limited Scania's ability to offer its customers all the planned specification alternatives in the 4-series. Order bookings were negatively affected by this.

The European market for heavy trucks with a gross weight exceeding 16 tonnes (Class 8), measured as the number of vehicle registrations, continued to be larger than last year. During the first nine months of 1996, the number of heavy truck registrations in western Europe was 4 percent higher than during the corresponding period of 1995.

Scania's market share in western Europe increased to 15.4 (14.4) percent.

Great Britain remained Scania's largest market with 4,487 (4,105) truck registrations. The market share was 18.2 (16.7) percent. The market shrank by 9 percent until the end of August. The enforcement of stricter EU exhaust emission regulations, Euro2, from 1 October resulted in an increased registration of Euro1 trucks. This reversed the trend of total market figures during September and during the first nine months of 1996, this meant that the market increased by 1 percent to 24,700 heavy trucks.

In the largest market in Europe, Germany, the number of registrations declined by 4 percent to 29,300 trucks during the first nine months of the year. Scania increased its market share slightly, to 7.8 (7.7) percent.

In Europe's second largest market, France, registrations rose by 16 percent to 28,000 trucks. Scania's market share decreased slightly, to 9.9 (10.0) percent.

In the Nordic countries, the market grew by over 20 percent to 10,200 trucks. Scania truck registrations rose by more than 30 percent, resulting in a market share of 36.8 (34.1) percent. In the Swedish market, registrations increased by more than 85 percent.

In the remaining western European markets, the number of heavy truck registrations rose by 1 percent. Scania increased its registrations by 7 percent. This resulted in higher market share in most markets.

Scania's sales to central and eastern Europe increased to 638 (499) trucks.

Inventory levels at Scania's European importers continued to decrease.

In South America, order bookings were about 20 percent lower during the first nine months this year compared to 1995. The Brazilian market, measured as the number of trucks delivered, totalled 10,100 (15,600). This means an annual rate of about 14,000 heavy trucks. Scania's market share increased to 37.5 (33.9) percent.

In Argentina the market increased by 40 percent to 2,800 trucks. Scania's market share was 40.6 (43.1) percent. Gearbox production in Argentina was disrupted at times during September by labour market unrest, which in turn reduced deliveries from Scania's Brazilian subsidiary by about 150 vehicles.

In Asian markets, sales remained at the same level as during the corresponding period last year. Deliveries to Malaysia and South Korea more than doubled, while Scania's sales to Taiwan and Indonesia declined sharply during the year.

Scania's order bookings totalled 26,539 (29,563) trucks. Sales amounted to 28,799 (29,156) trucks.

Scania's ten largest truck markets.

Market shares for trucks during the first nine months, in percent.

1996

1995

Great Britain

18.2

16.7

Brazil

37.5

33.9

France

9.9

10.0

The Netherlands

23.1

21.5

Germany

7.8

7.7

Italy

15.3

13.9

Sweden

47.3

44.1

Denmark

31.6

31.5

Belgium

20.0

19.2

Spain

11.3

13.7

Western Europe

15.4

14.4

Scania's ten largest truck markets.

Registrations of Scania trucks during the first nine months.

1996

1995

Change in percent

Great Britain

4,487

4,105

9

Brazil

3,775

5,271

-28

France

2,760

2,428

14

The Netherlands

2,303

1,762

31

Germany

2,290

2,348

-2

Italy

1,553

1,451

7

Sweden

1,466

787

86

Denmark

1,049

982

7

Belgium

867

1,020

-15

Spain

910

1,170

-22

Western Europe

20,627

18,551

11

Buses

Order bookings in Europe declined by 12 percent and in South America by 30 percent.

In terms of registrations, the total market in western Europe increased for buses in Scania's segment - heavy buses and coaches for more than 30 passengers. According to preliminary registration statistics for the first seven months of the year, the market grew by about 7 percent compared to last year. Scania's market share rose to 9.7 (8.6) percent.

In South America, Scania increased its market shares. In Brazil, which is Scania's largest bus market, the company's share increased to 9.4 (9.1) percent for the first nine months despite a shrinking total market.

Scania's order bookings totalled 2,501 (3,328) buses. Sales amounted to 3,073 (3,143) buses.

Scania's five largest bus markets.

Market shares for buses during the first nine* months, in percent.

1996

1995

Brazil

9.4

9.1

Spain

17.4

19.5

Great Britain

12.2

12.5

Sweden

34.4

39.3

Finland

29.9

32.8

*Aggregate western European registration statistics are only available for the first seven months of 1996. For certain countries, however, nine-month figures are available.

Scania's five largest bus markets.

Registrations of Scania buses during the first nine* months.

1996

1995

Change in percent

Brazil

1,147

1,253

-8

Spain

256

266

-4

Great Britain

248

230

8

Sweden

219

218

1

Finland

112

66

70

Industrial and marine engines

The number of Scania industrial and marine engines sold declined during the report period. The largest decrease occurred in Latin America. In September, the first units in the new upgraded engine range were produced.

Order bookings for industrial and marine engines declined to 1,923 (2,369) units. Sales totalled 1,931 (2,234) engines.

Production

The production changeover from 3- to 4-series trucks at Scania's European plants limited the company's delivery capacity during the third quarter. During the report period, the changeover to the 4-series was implemented at factories that account for most of Scania's European manufacturing capacity: those in Zwolle, the Netherlands and Angers, France and the cab production plant in Oskarshamn, Sweden. The sharp increase in the number of variants of 4­series trucks during the period made the production changeover more difficult. As a result, the actual shortfall in production was approximately 500 vehicles larger than planned and this influenced third quarter sales and earnings. Fourth quarter earnings will also be affected by the changeover, which is expected to be completed during this quarter.

The costs of the changeover in Europe, which have been estimated at about SEK 500 m. for 1996, amounted to SEK 450 m. by the end of the report period, of which about SEK 300 m. occurred during the third quarter. During the first nine months of the year, Scania decreased the number of production employees in Europe by 750 persons through natural attrition and completion of temporary employment contracts. To achieve the personnel reduction earlier announced, a programme will be introduced which is estimated to affect fourth quarter earnings by approximately SEK 300 m.

*Aggregate western European registration statistics are only available for the first seven months of 1996. For certain countries, however, nine-month figures are available.

New products

In September, Scania introduced a new generation of buses and bus chassis, based on its modular product concept. First out was a fully bodyworked city bus with an all-through low floor and an aluminium body - the Scania OmniCity - in which aluminium has both weight and environmental advantages over steel.

Owing to the modularisation of its new bus chassis range, Scania achieves up to 85 percent integration with its truck range. Scania's seven new main modules offer the customer a substantially larger number of choices than its older bus range.

Svenska Volkswagen

The Svenska Volkswagen Group, which sells Volkswagen, Audi, Porsche, Seat and Skoda passenger cars and light trucks in Sweden, improved its market share to 19.3 (14.8) percent. This sharp increase was due to a strong product range and the fact that the Swedish market is becoming increasingly similar to those of other European countries. The medium-sized segment is growing sharply at the expense of the large car segment. The Volkswagen Group has a broad range in the medium-sized segment, including a number of models that have recently been introduced or announced.

In the light truck segment, i.e. trucks up to 6 tonnes, the Svenska Volkswagen Group increased its market share to 37.3 (32.0) percent.

Sales and earnings

Scania Group sales totalled SEK 24,566 m. (25,442), a decrease of 3 percent. Sales of Scania products amounted to SEK 21,839 m. (23,160), a decrease of 6 percent. Measured as the difference between average spot rates during each respective nine-month period, the effect of currency rate fluctuations was about SEK 1,850 m. or 8.5 percent. Adjusted for a stronger Swedish krona, sales increased by 2 percent. A total of 31,872 (32,299) trucks and buses were sold, a decrease of 1 percent. Sales of V.A.G products rose to SEK 2,727 m. (2,282).

Operating income amounted to SEK 2,429 m. (3,888), equivalent to an operating margin of 9.9 (15.3) percent. Operating income for Scania products declined to SEK 2,272 m. (3,742), equivalent to an operating margin of 10.4 (16.2) percent. The stronger Swedish krona adversely affected operating income by about SEK 720 m. Operating income mainly reflects the prevailing exchange rates during the period, since the settlement of forward exchange contracts had a negligible impact on earnings. Operating income was also affected by expenses of about SEK 450 m. for the changeover to the 4-series in the European production system and by continued expansion of the marketing organisation. Latin American operating income was significantly lower than last year. During the first half of 1995, income reached a high level before gradually declining for the rest of the year. During 1996, the profitability situation has improved marginally compared to the fourth quarter of 1995.

During the third quarter, operating income for Scania products amounted to SEK 77 m. (781). Compared to the same quarter of 1995, earnings were affected by about SEK 300 m. in costs for the production changeover from the 3- to the 4-series, approximately SEK 170 m. in exchange rate effects and lower sales volume as well as the expansion of the marketing organisation and a lower Latin American operating income.

Operating income for V.A.G products during the first nine months increased to SEK 157 m. (146).

Consolidated net financial itemsamounted to SEK -287 m. (-376).

Income after financial items declined to SEK 2,142 m. (3,512).

Tax expenses amounted to SEK -616 m. (-1,198), equivalent to 29 (34) percent of income after financial items.

Net income amounted to SEK 1,530 m. (2,313).

Earnings per share were SEK 7.65 (11.57). Earnings per share for the period according to U.S. GAAP amounted to SEK 7.59 (11.44). Calculated on the basis of income in the 12 months to September 30, earnings per share reached SEK 12.49 (full year 1995: SEK 16.40).

Return on shareholders' equity was 30.2 (43.0) percent during the 12 months to September 30.

Return on capital employed, excluding customer finance operations , was 24.5 (34.0) percent for the 12 months to September 30.

Return on capital employed during the same period amounted to 20.9 (29.6) percent.

Capital expenditures

Capital expenditures for property, plant and equipment, excluding leasing assets, amounted to SEK 1,646 m. (1,545). Capital spending in Sweden was SEK 1,220 m. (1,114). During the third quarter, capital expenditures totalled SEK 643 m. (605).

Financing and liquidity

Cash flows, excluding customer finance operations, amounted to SEK 1,356 m. (651) during the report period. Including customer finance operations, cash flows amounted to SEK 690 m. (432). The on going changeover to the new truck range in the European production system led to an increase in production inventories during the third quarter, while inventories of finished goods at the importer level shrank. Overall inventories declined by about SEK 300 m. during the third quarter.

Net indebtedness, excluding pension liabilities and net borrowings of customer finance operations, amounted to SEK 6,145 m., compared to SEK 6,168 m. at the beginning of 1996. During the second quarter, SEK 1,100 m. in dividends were paid to shareholders for the 1995 financial year. Net indebtedness as a ratio of shareholders' equity improved to 0.73 (0.85).

Personnel

At the end of the report period, the number of employees - including contract employees - was 22,340, a decrease of 780 persons since the beginning of 1996.

The number of production employees in Europe decreased by 750. These reductions were offset by an increase of 250 employees related to the continued expansion of the marketing organisation.

The number of employees in Latin American operations decreased by 280 persons.

Södertälje, 7 November 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 18 February 1997.

Income statement

Nine months

1996

USD m.1)

1996

SEK m.

1995

SEK m.

Change in %

Oct 95-Sep 96 SEK m.

Full year 1995

SEK m.

Sales

3,705

24,566

25,442

-3

33,964

34,840

Manufacturing, selling and administrative expenses

-3,231

-21,423

-20,911

-29,305

-28,793

Other income and expenses

6

42

51

89

98

Operating income before depreciation

480

3,185

4,582

-30

4,748

6,145

Depreciation

-147

-977

-915

-1,198

-1,136

Share of income of associated companies

33

221

221

343

343

Operating income after depreciation

366

2,429

3,888

-38

3,893

5,352

Financial income and expenses

-43

-287

-376

-416

-505

Income after financial items

323

2,142

3,512

-39

3,477

4,847

Taxes

-93

-616

-1,198

-984

-1,566

Minority interests

1

4

-1

4

-1

Net income

231

1,530

2,313

-34

2,497

3,280

Earnings per share

USD 1.15

SEK 7.65

SEK 11.57

SEK 12.49

SEK 16.40

Income by product area

Nine months

1996

USD m.1)

1996

SEK m.

1995

SEK m.

Change in %

Oct 95-Sep 96 SEK m.

Full year 1995

SEK m.

Sales

- Scania products

3,294

21,839

23,160

-6

30,395

31,716

- V.A.G products

411

2,727

2,282

20

3,569

3,124

Scania Group total

3,705

24,566

25,442

-3

33,964

34,840

Operating income after depreciation

- Scania products

343

2,272

3,742

-39

3,639

5,109

- V.A.G products

23

157

146

8

254

243

Scania Group total

366

2,429

3,888

-38

3,893

5,352

Operating margin, percent

- Scania products

10.4

16.2

12.0

16.1

- V.A.G products

5.8

6.4

7.1

7.8

Scania Group total

9.9

15.3

11.5

15.4

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

Income by quarter

1995

1996

SEK million

(unless otherwise stated)

Quarter

1

Quarter

2

Quarter

3

Quarter

4

Quarter

1

Quarter

2

Quarter

3

Number of trucks and buses sold

10,840

11,971

9,488

12,338

11,691

11,321

8,860

Sales

8,525

9,490

7,427

9,398

8,726

8,650

7,190

Operating income after depreciationas % of sales

1,52117.8

1,53316.2

83411.2

1,46415.6

1,229

14.1

1,064

12.3

136

1,9

Income after financial items

1,401

1,405

706

1,335

1,113

989

40

Net income

930

930

453

967

792

720

18

Earnings per share, SEK

4.65

4.65

2.27

4.83

3.96

3.60

0.09

Balance sheet

30 Sep

30 Sep

30 Sep

31 Dec

1996

USD m.1)

1996

SEK m.

1995

SEK m.

1995

SEK m.

Assets

Cash and short-term investments

343

2,278

2,311

1,047

Interest-bearing receivables

655

4,341

4,071

3,673

Other receivables

622

4,124

4,030

5,140

Inventories

905

6,003

5,556

5,656

Shares and participations

174

1,151

995

1,046

Property, plant, equipment, etc.

1,935

12,827

11,593

12,127

Total assets

4.634

30,724

28,556

28,689

Liabilities and shareholders' equity

Borrowings

1,851

12,276

11,366

10,578

Provisions for pensions

243

1,610

1,217

1,540

Other liabilities

1,268

8,405

8,450

8,475

Debenture loan

-

-

3,000

-

Shareholders' equity

1,272

8,433

4,523

8,096

Total liabilities and shareholders' equity

4,634

30,724

28,556

28,689

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

Balance sheet including customer finance companies according to the

equity accounting method

30 Sep

30 Sep

30 Sep

31 Dec

1996

USD m.1)

1996

SEK m.

1995

SEK m.

1995

SEK m.

Assets

Cash and short-term investments

338

2,246

2,307

1,032

Interest-bearing receivables

178

1,183

1,300

870

Other receivables

603

3,997

3,920

4,999

Inventories

903

5,986

5,524

5,632

Shares and participations

262

1,740

1,387

1,591

Property, plant, equipment, etc.

1,701

11,280

10,602

10,817

Total assets

3,987

26,432

25 040

24,941

Liabilities and shareholders' equity

Borrowings

1,266

8,391

8,252

7,200

Provisions for pensions

242

1,608

1,215

1,538

Other liabilities

1,207

8,000

8,050

8,107

Debenture loan

-

-

3,000

-

Shareholders' equity

1,272

8,433

4,523

8,096

Total liabilities and shareholders' equity

3,987

26,432

25,040

24,941

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

Statement of cash flows2)

Nine months

1996

USD m.1)

1996

SEK m.

1995

SEK m.

Full year 1995

SEK m.

Cash from operating activities

345

2,289

3,097

4,789

Change in working capital, etc.

77

509

-929

-2,364

Net cash flows provided by operating activities

422

2,798

2,168

2,425

Net capital spending by industrial operations

-217

-1,442

-1,517

-1,888

Operating cash flows excluding customer finance operations

205

1,356

651

537

Operating cash flows, customer finance operations

-101

-666

-219

-507

Operating cash flows including customer finance operations

104

690

432

30

Change in net indebtedness through financing activities

252

1,668

-349

-1,133

Dividend paid to shareholders

-166

-1,100

-800

-800

Net change in cash and short-term investments

Effect of exchange rate fluctuations on cash and short-term investments

190-4

1,258

-26

-717-159

-1,903-237

Cash and short-term investments at the beginning of the period

158

1,047

3,187

3,187

Cash and short-term investments at the end of the period

344

2,278

2,311

1,047

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

2) The statement of cash flows is prepared in accordance with U.S. GAAP, which means, among other things, that the effects of currency rate fluctuations are eliminated when consolidating the accounts of foreign subsidiaries.