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SCANIA INTERIM REPORT JANUARY–SEPTEMBER 2006

* Scania reports record earnings and cash flow for the third quarter

* Deliveries will total about 65,000 vehicles during 2006

* Operating income 2006 will substantially exceed SEK 8,000 m.

* The production rate will be further increased from the first quarter of 2007

FIRST

THREE

QUARTERS

IN BRIEF Nine months Change Q3

Units 2006 2005 in % 2006 2005

Trucks and

bus

chassis

– Order

bookings 49,481 44,991 10 13,544 13,455

– Deliveries 46,783 41,249 13 14,959 12,226

Revenue

and

earnings

SEK m.

(unless

otherwise EUR

stated) m.**

·

Revenue,

Scania

Group 5,583 51,731 45,042 15 16,507 14,608

Operating

income,

Vehicles

and

Service 625 5,790 4,305 34 1,883 1,060

Operating

income,

Customer

Finance 41 374 397 -6 134 146

Operating

income 666 6,164 4,702 31 2,017 1,206

Income

before

taxes 649 6,005 4,595 31 1,912 1,155

· Net

income 445 4,115 3,141 31 1,281 825

Operating

margin,

percent 11.9 10.4 12.2 8.3

Return on

equity,

percent*** 23.5 20.9

Return on

capital

employed,

Vehicles

and

Service,

percent 30.1 28.4

·Earnings

per share,

SEK*** 20.58 15.71 31 6.41 4.13

Cash flow,

Vehicles

and

Service 575 5,330 2,132 2,072 1,191

Number of

employees,

30

September 32,211 30,675

Number of

shares:

200

million

* An Interim Report reviewed by the company’s auditors will be

published on 30 October.

** Translated to euros solely for the convenience of the reader at a

balance sheet date exchange rate of SEK 9.27 = EUR 1.00.

*** Attributable to Scania’s shareholders.

Unless otherwise stated, all comparisons in brackets refer to the same

period of last year.

This report is also available at www.scania.com

SCANIA, FIRST NINE MONTHS OF 2006 – COMMENTS OF THE PRESIDENT AND CEO

Scania’s revenue rose by 15 percent to SEK 51,731 m. in the first nine

months of 2006. Operating income increased by 31 percent to SEK 6,164

m., resulting in an operating margin of 11.9 percent. Net income

strengthened by 31 percent to SEK 4,115 m., equivalent to earnings per

share of SEK 20.58 (15.71). The cash flow for Vehicles and Service

amounted to SEK 5,330 m. (2,132). Vehicle order bookings rose by 10

percent, while deliveries increased by 13 percent. Service and Customer

Finance operations showed a continued good trend.

In the third quarter, Scania reported record earnings and cash flow.

Earnings were favourably affected by substantially higher volume and

increased capacity utilisation. The cash flow is an effect of strong

earnings development and continued focus on working capital. The lag in

deliveries of about 1,000 vehicles that existed at the end of the second

quarter has now been delivered.

Order bookings for trucks rose by 12 percent during the first nine

months of 2006. In western Europe, order bookings were 2 percent higher.

Demand in central and eastern Europe increased by 76 percent. Most

countries in the region noted a continued increase in order bookings,

with an especially strong upturn in Russia and Poland.

Order bookings from markets in the European Union were affected less

than previously anticipated by pre-buy effects in the run-up to the Euro

4 environment regulation that entered into force on 1 October. Order

bookings in the EU, which have shifted to Euro 4 and Euro 5 trucks, are

thus better than expected. There is a shortage of transport capacity in

Europe, and the supply of used vehicles is limited.

In Latin America, order bookings increased by 16 percent. An upturn in

Brazil and Peru was partly offset by a downturn in Argentina. In other

markets, demand rose by 9 percent; Asia strengthened while order

bookings in Africa were unchanged.

After weak demand early in the year, demand for buses and coaches

improved following the launch of the new bus and coach range. Virtually

all regions showed a positive trend at the end of the period.

Scania’s concentration of European axle and gearbox production in

Södertälje and of parts management in Belgium is expected to lead to

savings of more than SEK 300 m. per year starting in 2007 and with full

effect from 2009 onward.

Scania will continue to develop its sales and service business in the

new structure. The service offering will be expanded and introduced in

new markets. Within the next few years, the potential for savings in the

sales and service organisation amounts to more than SEK 500 m. annually.

Customer Finance is continuing to perform well. Scania maintains its

market penetration of more than one third of new vehicle sales in

markets with captive customer finance operations, despite increased

competition from banks and finance companies. The credit portfolio is

growing, with well-balanced risk and with low provisions for bad debts.

At the end of September, the portfolio amounted to about SEK 30,700 m.,

which was more than SEK 2,000 m. more than on the same date last year.

During 2006, new operations have been established in Turkey and in

Chile. A new rental concept is about to be introduced in the European

market, starting in the Benelux countries.

Scania’s strategic alliances with Cummins and Hino are performing well.

Through its partnership with Cummins, Scania has secured the technology

required to meet the Euro 6 environmental regulation. In South Korea,

Scania will during 2007 begin to distribute Hino’s medium-duty trucks.

In India, Scania has established a partnership with Larsen & Toubro, the

leading supplier of construction equipment in India. Larsen & Toubro

will distribute Scania’s multi-wheeler construction trucks to its

customers in the construction and mining segments.

Strong economic growth is contributing to higher demand for transport

equipment. Scania’s deliveries will total about 65,000 vehicles during

2006 and operating income will substantially exceed SEK 8,000 m. Based

on current order bookings and sizeable order backlog, Scania has decided

to further increase its rate of production starting in the first quarter

of 2007. Due to expectations of higher future growth in transport

demand, within the next several years Scania intends to expand

production capacity to 100,000 vehicles, which it can achieve with

limited capital spending.

On 18 September, MAN AG presented a public offer for Scania, which was

unanimously rejected by the Board of Directors. On 4 October Volkswagen

announced its acquisition of 15 percent of the shares in MAN. Because

of this, a conflict of interest has occurred, which means that the

representatives of Volkswagen on Scania’s Board do not participate in

any decisions regarding MAN. On 12 October MAN modified the terms of the

offer to SEK 475. Scania’s Board of Directors subsequently rejected

MAN’s modified offer as it substantially underestimates the value of

Scania.

Following the completion of the previously announced capital structure

review, management has concluded that the company has the ability to

make a special distribution of up to SEK 7,000 m., equivalent to SEK 35

per share, before the end of 2006. Given the current circumstances, the

Board will review the timing of such distribution before the year end.