SCANIA INTERIM REPORT, 1998-08-03
JANUARY - JUNE 1998
HIGHLIGHTS, SECOND QUARTER OF 1998
Operating income rose by nearly 30 percent.
A stronger market in Europe and a resulting increase in sales volume improved earnings.
Price levels in Europe stabilised.
In central and eastern Europe, rapid market growth continues. Scania is continuing to invest in its marketing organisation. Order bookings rose by 30 percent during the quarter.
In Latin America, the production changeover to the new truck range has been completed.
RESULTS
Second quarter of 1998, compared to second quarter of 1997
Number of trucks and buses sold: 13,041 (12,274).
Sales: SEK 11,604 m. (10,137) [USD 1,458 m. (1,273)]*.
Operating income: SEK 1,010 m. (781) [USD 127 m. (98)], equivalent to a margin of 8.7 (7.7) percent.
First half of 1998, compared to first half of 1997
Number of trucks and buses sold: 24,710 (22,433).
Sales: SEK 22,027 m. (18,941) [USD 2,767 m. (2,380)].
Operating income: SEK 1,639 m. (1,423) [USD 206 m. (179)] , equivalent to a margin of 7.4 (7.5) percent.
Income after financial items: SEK 1,489 m. (1,348) [USD 187 m. (169)].
Net income: SEK 1,054 m. (1,001) [USD 133 m. (126)].
Earnings per share: SEK 5.25 (5.00) [USD 0.67 (0.63)].
Earnings per share according to U.S. GAAP: SEK 5.45 (6.30) [USD 0.68 (0.79)].
THE MARKET
Second quarter of 1998, compared to second quarter of 1997
Order bookings for heavy trucks in western European markets rose by more than 20 percent.
In European operations, truck deliveries rose by about 15 percent.
First half of 1998, compared to first half of 1997
Order bookings for heavy trucks in western European markets rose by more than 20 percent.
Scania’s market share for heavy trucks in western Europe was 15.2 (15.4) procent.
In Latin America, truck deliveries declined due to the production changeover. Scania’s market share in Brazil was 33.1 (41.5) percent.
* Translated solely for the convenience of the reader at an exchange rate of SEK 7.96 = USD 1.00.
SUMMARY
Jan-June
1998
Jan-June
Jan-June
Change
Units
USD m.*
1998
1997
Trucks and buses
– Order bookings
27,274
25,567
7%
– Sales
24,710
22,433
10%
Amounts in SEK m. unless otherwise stated
Sales
2,767
22,027
18,941
16%
Operating income
206
1,639
1,423
15%
Income after financial items
187
1,489
1,348
10%
Net income
133
1,054
1,001
5%
Operating cash flows
80
634
336
89%
Capital expenditures
125
992
1,353
-27%
Number of employees
30 June
1998
31 Dec
1997
Total number of employees
23,703
23,763
* Translated solely for the convenience of the reader at an exchange rate of SEK 7.98 = USD 1.00.
Scania’s operating income during the first six months of the year improved by SEK 216 m. or 15 percent to SEK 1,639 m. This improvement in earnings was attributable to operations in Europe, where higher volumes led to greater capacity utilisation. Operating income for Latin America was negative due to expenses for the introduction of the 4-series truck generation as well as expenses for employee cutbacks.
The market for heavy trucks in western Europe continued to grow during the first half of 1998. Scania’s order bookings rose by more than 20 percent, compared to the corresponding period of 1997. Price levels stabilised during the second quarter.
The trend in the total western European market indicates an annual volume of 200,000 heavy trucks, compared to an average total market of about 170,000 vehicles annually over the past three years. Scania’s market share for the first half of 1998 amounted to 15.2 (15.4) percent.
The market trend in central and eastern Europe remained strong. Scania’s order bookings rose by more than 50 percent and deliveries by 80 percent, compared to the same period of 1997.
Scania continued the expansion of its marketing organisation. During the second quarter, Scania signed an agreement in principle to acquire Italscandia, the importing company in Italy. A number of importer and distributor facilities in central and eastern Europe were inaugurated.
In the Far East, market activity remained low. Scania’s operations focused mainly on providing service to existing customers and on keeping its distribution network intact.
In Latin America, the Brazilian market was nearly unchanged during the first half, compared to the same period of 1997. In the run-up to the coming presidential election in Brazil, there is some uncertainty about the market trend for the remainder of the year. In Argentina, the total market expanded by about 30 percent during the first half.
During June, truck production reached planned levels after certain initial problems, mainly related to deliveries from sub-contractors. The introduction of Scania’s 4-series product range involves the establishment of a new sub-contractor structure. As its truck deliveries have gradually increased, Scania has started to regain market share both in Brazil and Argentina which was lost in conjunction with the 4-series introduction.
In May the new Scania bus and coach range was introduced in Latin America. The bus production changeover is taking place during the second and third quarter.
Magnus Hahn, Communications and Public Affairs
Tel +46 8 5538 3510, mobiltel +46 70 551 79 03
Oscar Stjerngren, Investor Relations
Tel +46 8 5538 3657, mobiltel +46 70 598 36 58
Ulf Söderström, Communications and Public Affairs
Tel +46 8 5538 1044, mobiltel +46 70 680 95 95
Torbjörn Boije, Financial Reporting
Tel +46 8 5538 2228, mobiltel +46 70 591 50 16