“Strong demand for transports in Europe is contributing to an increase in order bookings. Also affecting demand is that some European customers are bringing forward their investments in vehicles, due to the introduction of digital tachographs in May and the Euro 4 environmental regulations, which enter into force in the autumn of 2006. This may lead to a slower pace of order bookings in Europe during the second half of 2006, which may then affect deliveries late in the year and early in 2007,” says Leif Östling, President and CEO. *
SCANIA, FIRST QUARTER OF 2006 – COMMENTS BY THE PRESIDENT AND CEO
Scania’s revenue rose by 24 percent to SEK 17,246 m. in the first quarter of 2006. Operating income increased by 26 percent to SEK 2,114 m, resulting in an operating margin of 12.3 percent. Net income increased by 25 percent to SEK 1,447 m., which resulted in earnings per share of SEK 7.24 (5.78). Vehicle order bookings rose by 23 percent, while deliveries increased by 16 percent.
Strong demand for transports in Europe is contributing to an increase in order bookings. Also affecting demand is that some European customers are bringing forward their investments in vehicles, due to the introduction of digital tachographs in May and the Euro 4 environmental regulations, which enter into force in the autumn of 2006. This may lead to a slower pace of order bookings in Europe during the second half of 2006, which may then affect deliveries late in the year and early in 2007. Substantially increased transport needs in western as well as central and eastern Europe will generate good demand for both new and used trucks, which point towards favourable long-term market development.
Demand for Scania trucks outside Europe was good during the quarter. In Latin America, demand in Brazil was lower than during the corresponding period last year, which was offset by other markets. However, the market in Brazil has improved after a weak second half of 2005. In Asia, demand improved in South Korea and in Taiwan compared to the first quarter of last year. Turkey showed substantially better order bookings.
Demand for buses and coaches was considerably lower than in the first quarter of last year, which was very strong. In Europe, a general weakening of the market occurred. In Latin American, Brazil weakened substantially, which was partly offset by an upturn in other markets. In Asia, Taiwan developed favourably, while several other markets contracted.
Service-related sales showed continued good volume growth, while the volumes in Customer Finance were stable. Both sales of parts and sales of workshop hours rose substantially. Scania continues to expand its service network in Europe and elsewhere in the world. A new organisation is being established in order to further expand the service business and take advantage of synergies.
Scania has decided to concentrate its European production of axles and gearboxes in Södertälje. European parts management is being concentrated in Belgium. The purpose is to increase efficiency and thereby strengthen Scania’s long-term competitiveness. These changes will occur over a three-year period and are expected to result in savings of about SEK 300 million per year once they are implemented. The announcement has led to some minor production disruptions.
Earlier this year, the liquidation of Ainax was approved. To restore Scania’s share capital to what it was before Scania completed its offer for Ainax, the Board of Directors is proposing that the Annual General Meeting approve a reduction in the share capital totalling SEK 262,965,080 by withdrawing a total of 26,296,508 A shares in Scania owned by Scania.
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