Volvo Car GROUP interim report QUARTER ONE Volvo Car ab (556810-8988) INTERIM report JANUARY-MARCH Gothenburg, APRIL 25 TH, QUARTER ONE Volvo Cars retail sales at 120,591 (107,721) units Net revenue at 41,757 (33,651) Operating income (EBIT) of 3,145 (-11) Net income of 2,069 (-241) Cash flow from operating and investing activities of -323 (-988) S90 and V90 launched during Key figures Net revenue, 41,757 33,651 Research and development expenses, -2,413-1,975 Operating income, EBIT, 3,145-11 Net income, 2,069-241 EBITDA, 5,588 2,237 Cash flow from operating and investing activities, -323-988 EBIT margin, % 7.5 0.0 EBITDA margin, % 13.4 6.6 Retail Sales (units) Western Europe (excl. Sweden) 49,305 43,522 China 19,636 17,311 US 16,361 13,723 Sweden 16,047 14,093 Other markets 19,242 19,072 Total 120,591 107,721 All amounts are in unless otherwise stated. Amounts in brackets refer to the same period preceding year, unless otherwise stated. As the incorporation of the Chinese entities was a common control transaction Volvo Car Group elected to apply predecessor accounting, meaning that all comparative information presented in the report is presented as if the incorporated entities always have been controlled by Volvo Car Group. This report contains statements concerning, among other things, Volvo Car Group s financial condition and results of operations that are forward looking in nature. Such statements are not historical facts but, rather, represent Volvo Car Group s future expectations. Volvo Car Group believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions; however, forward-looking statements involve inherent risks and uncertainties, and a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward looking statement. Such important factors include, but may not be limited to: Volvo Car Group s market position; growth in the automotive industry; and the effects of competition and other economic, business, competitive and/or regulatory factors affecting the business of Volvo Car Group, its associated companies and joint ventures, and the automotive industry in general. Forward-looking statements speak only as of the date they were made, and, other than as required by applicable law, Volvo Car Group undertakes no obligation to update any of them in light of new information or future events. 1 of 8
CEO Comment I am very pleased with the progress we have made in the first quarter of. We continued our strong performance from by recording a 12 per cent year-on-year increase in retail sales with double-digit growth in all regions: Western Europe, China, and the United States. During the quarter we sold more than 120,000 cars and the main driver was the XC90. With revenue up 24 per cent reaching SEK 41.8bn, we reported firstquarter operating profit of SEK 3.1bn, compared to a loss of 11 in the first quarter of, reaching an operational margin of 7.5 per cent. The new XC90 proves that customers like what they see from the transformed Volvo Cars: one in five new Volvo cars sold in the first quarter was an XC90. The initial response to the S90 and V90 has been very encouraging as well and we expect these cars to have a further positive impact on sales. Yet our transformation is far from completed and the second phase of our expansion is now fully underway. After all, the new 90-series cars are only the first three in a whole range of new Volvo cars to be launched over the coming years. This completely renewed portfolio will deliver on our strengths such as world-leading safety and semi-autonomous driving technologies, powertrains with a best-in-class combination of performance and efficiency, flexible platforms and modern Scandinavian design. At the same time, all our future cars will be designed for electrification, and every new model will be available with Volvo Cars Twin Engine plug-in hybrid technology. As our sales in the US is turning around on back of our revival plan and the Chinese and European car markets remain strong, Volvo Cars anticipates the full-year retail sales to increase. The XC90 will, with a whole year of production, be a main driver for the increase. During the latter part of the year the start of production of the S90 and the V90 will also contribute to the increased sales. Based on the volume increase, albeit influenced by launch costs for the new models reaching the markets during the year, we anticipate our full year net revenue and operating income to increase year over year. The operating and investing cash flow is expected to be positive. To increase the transparency of the Group, we will issue financial information on a quarterly basis from now on. Håkan Samuelsson President and Chief Executive Officer Retail sales by market Retail sales by carline 16% 16% 11% 41% 14% 13% China Sweden US Western Europe Other markets 53% 36% S V XC 50,000 40,000 Net revenue 41,757 33,651 4,000 3,000 Operating profit (EBIT) 3,145 30,000 20,000 10,000 0,000 2,000 1,000 0,000-11 2 of 8
Financial summary QUARTER ONE INCOME AND RESULT The comparative figures refer to the consolidated income statement of the first quarter if not otherwise stated. The consolidated income statement for includes the result of the acquired Chinese industrial entities for the period starting from January 1,. During the first quarter, Volvo Car Group generated net revenue of 41,757 (33,651), an increase of 24.1 per cent. The increase was primarily driven by volume and a positive sales mix, mainly due to the all-new XC90. Cost of sales increased by 5,293 to -32,318 (-27,025), an increase of 19.6 per cent. This increase is primarily attributable to higher sales volumes and the sales mix, resulting in increased material costs. Gross income increased to 9,439 (6,626), resulting in a gross margin of 22.6 (19.7) per cent. Research and development expenses recognised in the income statement increased to -2,413 (-1,975), including amortisation of capitalised development expenses of -643 (-466). The increase is related to higher amortisation of capitalised development expenses and increased costs for upcoming car models. See table below. Administrative expenses were flat at -1,551 (-1,592). Other operating income and expense, net, increased to 261 (-625). The increase is mainly related to a positive result from realised cash flow hedges and income from collaborations with related parties regarding common development activities. Operating income (EBIT) increased to 3,145 (-11), resulting in an operating margin of 7.5 (0.0) per cent. Net financial items amounted to -377 (-169). This decrease was due to a negative net foreign exchange result on financing activities, mainly related to a weakened US dollar. Tax expense increased based on the increase in income before tax. Net income amounted to 2,069 (-241). Selling expenses increased by 216 to -2,683 (-2,467) primarily due to increased marketing and event expenses related to the launch of new car models and advertising campaigns. Income Statement () Net revenue 41,757 33,651 Gross income 9,439 6,626 Operating income 3,145-11 Income before tax 2,768-180 Net income 2,069-241 3 of 8
NET FINANCIAL POSITION AND LIQUIDITY The presented figures refer to the consolidated figures for the first quarter if not otherwise stated. The comparative figures for the cash flow items refer to the consolidated cash flow statement for the first quarter if not otherwise stated. The comparative figures for the balance sheet items refer to the consolidated balance sheets of December 31, if not otherwise stated. Cash flow from operating and investing activities increased by 665 to -323 (-988). Cash flow from operating activities increased by 605 to 3,232 (2,627). The increase is based on the improved operating result, offset by a negative development in working capital. The negative change in working capital is mainly related to increased volumes and sales mix, resulting in increased inventories, negative effect in other working capital assets/liabilities due to decreased VAT liabilities, partly offset by a positive effect in accounts payable. Cash flow from investing activities amounted to -3,555 (-3,615). Investments in tangible assets amounted to -2,534 (-2,730) and is primarily due to assets under construction related to the ongoing construction of the US plant, as well as preparation for production of the new S90 in China. Investments in tangible assets also includes special tool investments related to new car models based on the SPA platform such as the S90/V90. Investments in intangible assets amounted to -1,176 (-1,081) and includes investments in upcoming new car models. Cash flow from financing activities increased to 1,515 (-23) and is mainly attributable to a positive effect from investments in marketable securities, amounting to 1,737 (79). Cash and cash equivalents including marketable securities decreased to 28,514 (29,135). The revolving credit facility of MEUR 660 remains undrawn. Net cash at the end of the first quarter increased to 7,506 (-1,230). Total equity has increased by 2,531 to 37,166 (34,635), resulting in an equity ratio of 27.0 (26.2) per cent. The change in equity is mainly related to the positive net income for the period, as well as the positive effects included in other comprehensive income related to revaluation of cash flow hedge reserves of 1,025. These effects are offset by negative effects related to remeasurement of postemployment benefits of -460, related to a decrease in discount rates. 4 of 8
CONSOLIDATED INCOME STATEMENTS Full year Net revenue 41,757 33,651 164,043 Cost of sales -32,318-27,025-128,238 Gross income 9,439 6,626 35,805 Research and development expenses -2,413-1,975-8,803 Selling expenses -2,683-2,467-10,951 Administrative expenses -1,551-1,592-7,234 Other operating income 609 231 2,005 Other operating expenses -348-856 -4,432 Share of income in joint ventures and associates 92 22 230 Operating income 3,145-11 6,620 Financial income 57 162 238 Financial expenses -434-331 -1,469 Income before tax 2,768-180 5,389 Income tax -699-61 -913 Net income for the period 2,069-241 4,476 Net income attributable to Owners of the parent company 1,833-538 3,130 Non-controlling interests 236 297 1,346 2,069-241 4,476 5 of 8
CONSOLIDATED BALANCE SHEETS ASSETS Non-current assets Mar 31, Dec 31, Intangible assets 23,235 22,834 Property, plant and equipment 39,373 37,428 Assets held under operating leases 2,226 2,172 Investments in joint ventures and associates 638 701 Other long-term securities holdings 13 15 Deferred tax assets 3,802 3,841 Other non-current assets 1,837 1,326 Total non-current assets 71,124 68,317 Current assets Inventories 22,556 20,306 Accounts receivable 8,900 8,805 Receivables on parent company 54 54 Current tax assets 452 307 Other current assets 6,167 5,393 Marketable securities 1,798 3,512 Cash and cash equivalents 26,716 25,623 Total current assets 66,643 64,000 TOTAL ASSETS 137,767 132,317 EQUITY & LIABILITIES Equity Equity attributable to owners of the parent company 34,915 32,550 Non-controlling interests 2,251 2,085 Total equity 37,166 34,635 Non-current liabilities Provisions for post-employment benefits 5,274 4,701 Deferred tax liabilities 2,291 1,768 Other non-current provisions 5,936 5,909 Liabilities to credit institutions 14,976 15,168 Other non-current liabilities 2,948 2,927 Total non-current liabilities 31,425 30,473 Current liabilities Current provisions 12,689 12,456 Liabilities to credit institutions 6,032 6,246 Advance payments from customers 433 534 Accounts payable 27,795 26,282 Current tax liabilities 549 446 Other current liabilities 21,678 21,245 Total current liabilities 69,176 67,209 TOTAL EQUITY & LIABILITIES 137,767 132,317 6 of 8
CONSOLIDATED STATEMENTS OF CASH FLOWS OPERATING ACTIVITIES Full year Operating income 3,145-11 6,620 Depreciation and amortisation of non-current assets 2,443 2,248 9,399 Interest and similar items received 57 47 141 Interest and similar items paid -66-77 -1,022 Other financial items -76-63 -176 Income tax paid -371-583 -1,645 Adjustments for items not affecting cash flow -63 91-235 Movements in working capital 5,069 1,652 13,082 Change in inventories -1,992-3,426-1,742 Change in accounts receivable -95-68 -994 Change in accounts payable 1,514 3,862 7,658 Change in items relating to repurchase commitments -70 211 29 Change in provisions 178 474 1,979 Change in other working capital assets/liabilities -1,372-78 2,564 Cash flow from movements in working capital -1,837 975 9,494 Cash flow from operating activities 3,232 2,627 22,576 INVESTING ACTIVITIES Investments in shares and participations 155 33-2,213 Investments in intangible assets -1,176-1,081-4,715 Investments in property, plant and equipment -2,534-2,730-8,677 Disposal of property, plant and equipment - 163 263 Cash flow from investing activities -3,555-3,615-15,342 Cash flow from operating and investing activities -323-988 7,234 FINANCING ACTIVITIES Proceeds from credit institutions 54 89 5,935 Repayment of liabilities to credit institutions -135-685 -6,626 Received shareholders contribution - - 3,992 Investments in marketable securities, net 1,737 79-2,488 Other -141 494 632 Cash flow from financing activities 1,515-23 1,445 Cash flow for the period 1,192-1,011 8,679 Cash and cash equivalents at beginning of period 25,623 17,002 17,002 Exchange difference on cash and cash equivalents -99 932-58 Cash and cash equivalents at end of period 26,716 16,923 25,623 7 of 8
DEFINITIONS Volvo Car Group and Volvo Cars Volvo Car AB, Volvo Car Corporation and all its subsidiaries Joint venture companies Joint ventures refer to companies in which Volvo Car Group, through contractual cooperation together with one or more parties, has a joint control over the operational and financial management Western Europe Norway, Denmark, Finland, Netherlands, Belgium, France, Spain, Italy, Germany, Switzerland, Austria, Ireland, UK, Greece and Portugal Retail sales Sales to end customer EBIT Earnings before interest and taxes EBITDA Earnings before interest, taxes, depreciations and amortisation Equity ratio Total equity divided by total assets Net Cash Liabilities to credit institutions minus cash and cash equivalents and marketable securities CONTACT Nils Mösko Vice President, Head of Investor Relations +46-(0)31-59 22 55 nils.mosko@volvocars.com Volvo Car Group Headquarters 405 31 Gothenburg www.volvocars.com 8 of 8