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Volvo Group Interim / Quarterly Report 2021
2992_10-q_2021-04-22_8370c4db-ad5f-4f43-abc2-4a055df576a1.pdf
Interim / Quarterly Report
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VOLVO RACING GROUP
REPORT ON THE FIRST QUARTER 2021
> In Q1 2021, net sales increased by 3% to SEK 94.0 billion (91.4). Adjusted for currency movements, net sales increased by 13%.
> Adjusted operating income¹ amounted to SEK 11,821 M (7,140), corresponding to an adjusted operating margin of 12.6% (7.8).
> Reported operating income amounted to SEK 12,067 M (7,374).
> Currency movements had a negative impact on operating income of SEK 1,125 M.
> Earnings per share amounted to SEK 4.35 (2.30).
> Operating cash flow in the Industrial Operations amounted to SEK 5,665 M (-4,117).
> Volvo Group and Daimler Truck AG completed creation of fuel-cell joint venture cellcentric.
> On April 1, Volvo Group and Isuzu Motors completed the UD Trucks transaction as part of the strategic alliance.
> Shortage of semiconductors impacting production.
| SEK M unless otherwise stated | First quarter | |
|---|---|---|
| 2021 | 2020 | |
| Net sales | 94,018 | 91,449 |
| Adjusted operating income ¹ | 11,821 | 7,140 |
| Adjusted operating margin, % | 12.6 | 7.8 |
| Operating income | 12,067 | 7,374 |
| Operating margin, % | 12.8 | 8.1 |
| Income after financial items | 12,290 | 6,490 |
| Income for the period | 9,004 | 4,766 |
| Earnings per share, SEK | 4.35 | 2.30 |
| Operating cash flow in Industrial Operations | 5,665 | -4,117 |
| Net financial position in Industrial Operations, SEK bn ² | 74.8 | 74.7 |
| Return on capital employed in Industrial Operations, % ³ | 17.1 | 23.9 |
| Return on equity, % ³ | 16.4 | 22.0 |
| Net order intake, number of trucks | 85,461 | 38,399 |
| Deliveries, number of trucks | 52,444 | 44,765 |
| Net order intake, number of construction equipment | 35,616 | 20,614 |
| Deliveries, number of construction equipment | 30,957 | 20,170 |
1 For information on adjusted operating income, please see note 7.
2 Excluding post-employment benefits and lease liabilities.
3 12 months rolling.
Report on the first quarter 2021
CEO'S COMMENTS
Good profitability and high activity among our customers
The first quarter of 2021 was characterized by high activity among our customers, which was reflected in good demand for both new products and services. Compared with the first quarter of 2020, our net sales increased by 3% to SEK 94.0 billion. The good sales volumes, not least in the service business, and our own measures to keep costs down contributed to the adjusted operating income improving to SEK 11.8 billion (7.1). The adjusted operating margin increased to a historically high 12.6% (7.8).
We had an operating cash flow in the Industrial Operations of SEK 5.7 billion (-4.1) during the quarter and a net cash position of SEK 74.8 billion at its end, excluding pension and lease liabilities. Our strong financial position allows us to invest in the technologies, products and solutions that transform our industry as well as provide a good return to our shareholders.
A strong freight market with increased transport volumes, not least driven by increased e-commerce, and rising freight prices is positive for our customers' profitability and means that they both renew and expand their fleets to meet the increased demand. This contributed to a strong order intake in our truck business. Our inventories of both new and used trucks are globally low and we have full focus on trying to satisfy the demand from our customers. Deliveries increased by 17% during the first quarter. The truck business improved the adjusted operating margin to 12.8% (6.8) on the back of high volumes and good cost execution.
The global shortage of semiconductors had a limited impact on our production during the first quarter. As we announced at the end of March, we still expect to take stop days corresponding to two to four weeks in the global truck manufacturing, depending on production site, in the second quarter. The global supply chain for semiconductors as well as for other components remains very unstable and the uncertainty about the development is high. We can therefore not rule out further disruptions in both the truck business and other parts of the Group. Together with our business partners, we work hard to minimize the number of vehicles affected and the impact on customers and our costs. We maintain our readiness to increase production when possible.
On April 1, as part of the formation of a strategic alliance, Isuzu Motors acquired UD Trucks for approximately SEK 19 billion. We hand over a company that has a positive profitability development and I would like to thank everyone at UD Trucks for their hard work. UD Trucks will be a strong foundation for our collaboration with Isuzu Motors.
Demand for construction machines is good. In many countries there is a need to invest in an aging infrastructure and we see that such investments are now both ongoing and planned for the future. Together with a high level of construction activity in several other sectors, this is driving demand for both new machines and services. During the first quarter, both deliveries and order intake rose sharply.
Profitability also improved and the adjusted operating margin amounted to 15.4% (13.3).
For Volvo Buses, the continued low activity in the tourism industry means that demand for coaches is very weak and many operators' fleets are standing still, which also affects our service business. Compared with the first quarter of 2020, bus deliveries decreased by 26% and order intake by as much as 68%. Volvo Buses has done a very good job of reducing costs, but it is difficult to fully compensate for the large volume loss and the adjusted operating margin amounted to -1.8% (-2.5).
Volvo Penta's sales volume was at roughly the same level as in the first quarter of 2020, while order intake rose by 27%. The adjusted operating margin was 18.9% (15.2).
For our customer financing operations in Volvo Financial Services, the good freight market and increased construction activity mean that customers' profitability and their ability to repay their loans continue to improve. Adjusted operating income increased to SEK 682 M (605).
We continue to invest in electrified, automated and connected solutions. The Group already has fully-electric trucks, buses and construction equipment in serial production. Even if volumes are currently small, customer interest is high and we expect a transition to electric vehicles segment by segment, market by market and region by region. With the rollout of the heavy-duty electric trucks from both Volvo Trucks and Renault Trucks in the next two years, the Volvo Group will offer electric trucks with ranges that cover almost half of the truck transports carried out in the EU. In the quarter we also started the new joint fuel cell company cellcentric together with Daimler Truck, with the ambition to make it a leading global manufacturer of fuel cells. Furthermore, Volvo Autonomous Solutions has entered a strategic partnership with US-based company Aurora to jointly develop on-highway autonomous trucks.
We are convinced that demand for both transport and infrastructure will continue to grow in the long term. It is driven by population growth, urbanization, a growing middle class and increasing e-commerce. It is also clear that we need to meet that demand with sustainable solutions. We stand by our long-term ambition to offer transport and infrastructure solutions that are 100% safe, 100% fossil-free and 100% more efficient than today.
Martin Lundstedt
President and CEO
Report on the first quarter 2021
FINANCIAL SUMMARY OF THE FIRST QUARTER 2021
Net sales
In Q1 2021, the Volvo Group's net sales amounted to SEK 94,018 M compared with SEK 91,449 M in the same quarter the preceding year.
Adjusted for currency movements, net sales increased by 13%, of which vehicle sales increased by 17% and service sales increased by 5%.
Operating income
In Q1 2021, the adjusted operating income amounted to SEK 11,821 M (7,140), corresponding to an adjusted operating margin of 12.6% (7.8). The adjustment in Q1 2021 refers to a positive impact of SEK 246 M (234) related to the ceased depreciation and amortization of assets held for sale.
Compared with Q1 2020, the higher adjusted operating income is mainly an effect of higher vehicle volumes and industrial capacity utilization, good cost execution across the Group and higher earnings in the service business. This was partly offset by an unfavorable mix and currency development.
Currency movements, compared with Q1 2020, had a negative impact of SEK 1,125 M.
Reported operating income amounted to SEK 12,067 M (7,374).
Financial items
In Q1 2021, interest income of SEK 76 M (79) was on par with the previous year, whereas interest expenses decreased to SEK 296 M (343). The decrease relates primarily to the effect from the repayment of the first tranche of the hybrid bond in Q2 2020.
Other financial income and expenses amounted to SEK 443 M (-620). The change is primarily due to revaluation effects of financial assets and liabilities related to changes in long-term interest rates.
| Net sales | First quarter | Change | |
|---|---|---|---|
| SEK M | 2021 | 2020 | % |
| Europe | 37,222 | 35,751 | 4 |
| North America | 24,420 | 25,651 | -5 |
| South America | 5,599 | 5,846 | -4 |
| Asia | 21,434 | 18,787 | 14 |
| Africa and Oceania | 5,343 | 5,414 | -1 |
| Total | 94,018 | 91,449 | 3 |
| Of which: | |||
| Vehicles 1 | 70,955 | 67,107 | 6 |
| Services | 20,254 | 21,097 | -4 |
| Financial Services revenue | 3,257 | 3,810 | -15 |
| Eliminations | -447 | -566 | 21 |
1 Including construction equipment and Volvo Penta engines.
| Consolidated Income Statement, Volvo Group | First quarter | |
|---|---|---|
| SEK M | 2021 | 2020 |
| Net sales | 94,018 | 91,449 |
| Cost of sales | -70,322 | -69,759 |
| Gross income | 23,696 | 21,689 |
| Research and development expenses | -4,370 | -4,962 |
| Selling expenses | -6,249 | -7,462 |
| Administrative expenses | -1,156 | -1,318 |
| Other operating income and expenses | -503 | -549 |
| Income/loss from investments in joint ventures and associated companies | 645 | -31 |
| Income/loss from other investments | 3 | 7 |
| Operating income | 12,067 | 7,374 |
| Interest income and similar credits | 76 | 79 |
| Interest expenses and similar charges | -296 | -343 |
| Other financial income and expenses | 443 | -620 |
| Income after financial items | 12,290 | 6,490 |
| Income taxes | -3,286 | -1,724 |
| Income for the period * | 9,004 | 4,766 |
| * Attributable to: | ||
| Owners of AB Volvo | 8,841 | 4,675 |
| Non-controlling interest | 164 | 92 |
| 9,004 | 4,766 | |
| Basic earnings per share, SEK | 4.35 | 2.30 |
| Diluted earnings per share, SEK | 4.35 | 2.30 |
Report on the first quarter 2021
Income taxes
In Q1 2021, income taxes amounted to SEK 3,286 M (1,724), corresponding to a tax rate of 27% (27). The tax rate was impacted by transactions in preparation of the divestment of UD Trucks to Isuzu Motors.
Income for the period and earnings per share
In Q1 2021, income for the period amounted to SEK 9,004 M (4,766). Earnings per share amounted to SEK 4.35 (2.30).
Operating cash flow in the Industrial Operations
During Q1 2021, operating cash flow in the Industrial Operations amounted to SEK 5,665 M (-4,117). The higher cash flow compared to Q1 2020 is primarily an effect of a lower seasonal increase in working capital of SEK 3,183 M, compared with an increase of SEK 9,556 M in Q1 2020. This is primarily due to higher payables reflecting increased production levels in Q1 2021 compared to Q1 2020, when production was reduced. The improved cash flow is also an effect of a higher operating income of SEK 11,384 M (6,768).
Volvo Group financial position
During Q1 2021, net financial assets in the Industrial Operations, excluding provisions for post-employment benefits and lease liabilities, increased by SEK 0.1 billion resulting in a net financial asset position of SEK 74.8 billion on March 31, 2021. The positive effect from the operating cash flow was offset by the acquisition of shares in the new fuel cell joint venture with Daimler Truck AG, cellcentric. Currency movements increased net financial assets by SEK 2.0 billion.
Including provisions for post-employment benefits and lease liabilities, the Industrial Operations had net financial assets of SEK 54.9 billion on March 31, 2021. Provisions for post-employment benefits and lease liabilities decreased by SEK 3.8 billion during the quarter. This was mainly related to remeasurements of defined benefit pension plans by SEK 4.5 billion. The decrease in defined benefit obligations was primarily an effect of significantly higher interest rates in all countries, which were partly offset by lower return on assets.
Total assets in the Volvo Group increased by SEK 20.6 billion compared to year-end 2020. Currency movements increased total assets by SEK 15.2 billion.
On March 31, 2021 total equity for the Volvo Group amounted to SEK 164.9 billion compared to SEK 148.1 billion at year-end 2020. The equity ratio was 31.0% (29.0). On the same date the equity ratio in the Industrial Operations amounted to 38.1% (35.8).
Number of employees
On March 31, 2021, the Volvo Group had 98,982 employees, including temporary employees and consultants, which was a decrease of 54 employees compared with March 31, 2020. The number of blue-collar employees increased by 2,025 while the number of white-collar employees decreased by 2,079.
During Q1, the number of employees increased by 2,788. The number of blue-collar employees increased by 2,380 and the number of white-collar employees by 408. The increase in blue-collar employees relates to increased production levels. The increase in white-collar employees mainly relates to research and development.
| Number of employees | Mar 31 2021 | Dec 31 2020 | Mar 31 2020 |
|---|---|---|---|
| Blue-collar | 51,131 | 48,751 | 49,106 |
| Whereof temporary employees and consultants | 6,801 | 5,223 | 4,014 |
| White-collar | 47,851 | 47,443 | 49,930 |
| Whereof temporary employees and consultants | 4,221 | 3,479 | 3,859 |
| Total number of employees | 98,982 | 96,194 | 99,036 |
| Whereof temporary employees and consultants | 11,022 | 8,702 | 7,873 |
Report on the first quarter 2021
BUSINESS SEGMENT OVERVIEW
| Net sales | First quarter | Change | Change | 12 months rolling | Jan-Dec 2020 | |
|---|---|---|---|---|---|---|
| SEK M | 2021 | |||||
| Trucks | 58,372 | 58,010 | 1 | 12 | 208,624 | 208,262 |
| Construction Equipment | 24,742 | 20,148 | 23 | 34 | 86,047 | 81,453 |
| Buses | 3,570 | 5,190 | -31 | -24 | 18,171 | 19,791 |
| Volvo Penta | 3,409 | 3,338 | 2 | 9 | 11,962 | 11,891 |
| Group Functions & Other | 2,022 | 2,350 | -14 | -10 | 7,542 | 7,870 |
| Eliminations | -906 | -832 | - | - | -2,870 | -2,796 |
| Industrial Operations | 91,209 | 88,204 | 3 | 14 | 329,477 | 326,472 |
| Financial Services | 3,257 | 3,810 | -15 | -3 | 13,407 | 13,960 |
| Reclassifications and eliminations | -447 | -566 | - | - | -1,869 | -1,987 |
| Volvo Group | 94,018 | 91,449 | 3 | 13 | 341,015 | 338,446 |
1 Adjusted for exchange rate fluctuations.
| Adjusted operating income 1 | First quarter | Change | 12 months rolling | Jan-Dec 2020 | |
|---|---|---|---|---|---|
| SEK M | 2021 | ||||
| Trucks | 7,479 | 3,948 | 89 | 20,782 | 17,251 |
| Construction Equipment | 3,822 | 2,678 | 43 | 11,214 | 10,071 |
| Buses | -64 | -129 | 50 | -380 | -445 |
| Volvo Penta | 643 | 509 | 26 | 1,583 | 1,448 |
| Group Functions & Other | -727 | -469 | -55 | -1,639 | -1,382 |
| Eliminations | -15 | -2 | - | -1 | 12 |
| Industrial Operations | 11,138 | 6,534 | 70 | 31,560 | 26,955 |
| Financial Services | 682 | 605 | 13 | 1,683 | 1,606 |
| Reclassifications and eliminations | 1 | 1 | - | 2 | 2 |
| Volvo Group adjusted operating income | 11,821 | 7,140 | 66 | 33,245 | 28,564 |
| Adjustments 1 | 246 | 234 | 5 | -1,069 | -1,081 |
| Volvo Group operating income | 12,067 | 7,374 | 64 | 32,177 | 27,484 |
1 For more information on adjusted operating income, please see note 7.
| Adjusted operating margin % | First quarter | 12 months rolling | Jan-Dec 2020 | |
|---|---|---|---|---|
| 2021 | 2020 | |||
| Trucks | 12.8 | 6.8 | 10.0 | 8.3 |
| Construction Equipment | 15.4 | 13.3 | 13.0 | 12.4 |
| Buses | -1.8 | -2.5 | -2.1 | -2.2 |
| Volvo Penta | 18.9 | 15.2 | 13.2 | 12.2 |
| Industrial Operations | 12.2 | 7.4 | 9.6 | 8.3 |
| Volvo Group adjusted operating margin | 12.6 | 7.8 | 9.7 | 8.4 |
| Volvo Group operating margin | 12.8 | 8.1 | 9.4 | 8.1 |
Report on the first quarter 2021
TRUCKS
Strong profitability and order intake
- Q1 net sales increased by 1% to SEK 58,372 M
- Both adjusted and reported operating income increased to SEK 7,479 M (3,948), with an operating margin of 12.8% (6.8)
- Order intake increased by 123% to 85,461 trucks
Market development
In Q1, the freight market continued to be strong with high volumes of both industrial goods and consumer goods in the Volvo Group's main markets. In combination with a general shortage of transport capacity, this has meant that freight rates have increased and customer profitability improved, driving demand for both for new and used vehicles. The increase is broad based across segments in both Europe and North America. With truck fleet utilization on pre-Covid-19 levels, demand for spare parts and service is strong.
The Brazilian market continued to grow on the back of a strong commodity export market as well as a general need to replace old trucks.
The Indian truck market continued to regain momentum driven by increased freight volumes, infrastructure investments and a pent-up replacement need.
The Chinese market grew strongly in Q1 driven by subsidies to accelerate the replacement of vehicles of lower than CN3 emission standards. The market almost doubled compared with Q1 2020, which was affected by the outbreak of Covid-19.
The Japanese truck market has remained solid through the pandemic but declined by 5% in Q1.
Orders and deliveries
Total net order intake increased by 123% to 85,461 trucks while deliveries increased by 17% to 52,444 trucks.
In Europe, order intake of heavy- and medium-duty trucks increased by 126% to 39,081 vehicles. The increase is a combination of good demand in Q1 2021 and a weak order intake in the same period in the preceding year, which was impacted by order cancellations. European deliveries of heavy- and medium-duty trucks amounted to 18,871 vehicles, which was 10% above last year. Volvo Trucks' heavy-duty market share through February was stable at 17.1% (17.1) and so was Renault Trucks' market share at 9.0% (9.1).
Order intake in North America increased by 369% to 22,215 trucks, driven by very strong order volumes in Q1 2021 and a weak order intake the same period in the preceding year, which was impacted by order cancellations. Deliveries in North America increased by 22% to 12,972 trucks. Volvo Trucks' heavy-duty truck market share through March increased to 10.3% (9.1) while Mack Trucks' market share declined to 6.6% (6.9).
South American order intake increased by 27% to 3,856 trucks and deliveries increased by 13% to 5,522 vehicles. Through March Volvo Trucks' market share in heavy-duty trucks in Brazil decreased to 20.9% compared with the historically high 26.0% in the same period the preceding year.
In Asia, order intake increased by 27% to 8,802 vehicles and deliveries increased by 25% to 7,072 vehicles. UD Trucks heavy-duty truck market share in Japan increased through March to 17.0% (15.3).
The Indian joint venture VECV increased order intake by 98% to 16,831 vehicles and deliveries by 93% to 17,103 vehicles. Deliveries from the Chinese joint venture, DFCV, increased by 127% to 36,647 vehicles in the first two months of the year.
| Total market development | First quarter | Change % | Forecast 2021 | Change vs. previous forecast | |
|---|---|---|---|---|---|
| Registrations, number of trucks | 2021 | 2020 | |||
| Europe 28^{1} heavy-duty (as of February) | 40,093 | 39,508 | 1 | * | * |
| Europe 30^{1} heavy-duty (preliminary as of February) | 44,021 | 43,237 | 2 | 290,000 | unchanged |
| North America heavy-duty (Retail sales) | 65,439 | 57,459 | 14 | 290,000 | unchanged |
| Brazil heavy-duty | 19,735 | 15,100 | 31 | 95,000 | unchanged |
| China heavy-duty | 531,572 | 274,139 | 94 | 1,420,000 | +120,000 |
| China medium-duty | 55,498 | 26,658 | 108 | 140,000 | +10,000 |
| India heavy-duty | 54,027 | 29,076 | 86 | 175,000 | unchanged |
| India medium-duty (Preliminary) | 34,276 | 16,548 | 107 | 90,000 | unchanged |
1 EU 28 includes Norway and Switzerland but excludes the UK and Bulgaria. Forecast for EU 30 includes the UK and Bulgaria.
Report on the first quarter 2021
| Net order intake | First quarter | Change |
|---|---|---|
| Number of trucks | 2021 | 2020 |
| Europe | 46,564 | 21,178 |
| Heavy- and medium-duty | 39,081 | 17,312 |
| Light-duty | 7,483 | 3,866 |
| North America | 22,215 | 4,732 |
| South America | 3,856 | 3,044 |
| Asia | 8,802 | 6,913 |
| Africa and Oceania | 4,024 | 2,532 |
| Total orders | 85,461 | 38,399 |
| Heavy-duty (>16 tons) | 71,688 | 30,322 |
| Medium-duty (7-16 tons) | 5,932 | 4,021 |
| Light-duty (<7 tons) | 7,841 | 4,056 |
| Total orders | 85,461 | 38,399 |
| Volvo | 44,153 | 18,471 |
| UD | 5,017 | 4,331 |
| Renault Trucks | 22,703 | 11,853 |
| Heavy- and medium-duty | 15,120 | 7,956 |
| Light-duty | 7,583 | 3,897 |
| Mack | 13,588 | 3,744 |
| Total orders | 85,461 | 38,399 |
| Non-consolidated operations | ||
| VE Commercial Vehicles (Eicher) | 16,831 | 8,501 |
| Deliveries | First quarter | Change |
| --- | --- | --- |
| Number of trucks | 2021 | 2020 |
| Europe | 23,982 | 21,003 |
| Heavy- and medium-duty | 18,871 | 17,103 |
| Light-duty | 5,111 | 3,900 |
| North America | 12,972 | 10,660 |
| South America | 5,522 | 4,878 |
| Asia | 7,072 | 5,669 |
| Africa and Oceania | 2,896 | 2,555 |
| Total deliveries | 52,444 | 44,765 |
| Heavy-duty (>16 tons) | 43,316 | 38,265 |
| Medium-duty (7-16 tons) | 3,736 | 2,443 |
| Light-duty (<7 tons) | 5,392 | 4,057 |
| Total deliveries | 52,444 | 44,765 |
| Volvo | 28,309 | 25,320 |
| UD | 3,994 | 3,409 |
| Renault Trucks | 13,685 | 10,535 |
| Heavy- and medium-duty | 8,511 | 6,627 |
| Light-duty | 5,174 | 3,908 |
| Mack | 6,456 | 5,501 |
| Total deliveries | 52,444 | 44,765 |
| Non-consolidated operations | ||
| VE Commercial Vehicles (Eicher) | 17,103 | 8,862 |
| Dongfeng Commercial Vehicle Company (Dongfeng Trucks)1 | 36,647 | 16,170 |
1 First quarter includes 2 months of deliveries.
Net sales and operating income
In Q1 2021, the truck operation's net sales amounted to SEK 58,372 M, which was 1% higher than in Q1 2020. Excluding currency effects, net sales increased by 12% with sales of vehicles increasing by 14% and sales of services increasing by 5%.
Both adjusted and reported operating income amounted to SEK 7,479 M (3,948), corresponding to an operating margin of 12.8% (6.8). Compared with Q1 2020, the higher operating income is an effect of increased vehicle volumes, cost reductions, increased capacity utilization in the industrial system, higher joint venture income, and higher service earnings, which were partly offset by a negative mix. Compared with Q1 2020, currency movements had a negative impact of SEK 445 M.
Report on the first quarter 2021
| Net sales and operating income | First quarter | Change |
|---|---|---|
| SEK M | 2021 | 2020 |
| Europe | 25,183 | 24,866 |
| North America | 16,752 | 16,781 |
| South America | 4,331 | 4,541 |
| Asia | 8,759 | 8,356 |
| Africa and Oceania | 3,347 | 3,466 |
| Total net sales | 58,372 | 58,010 |
| Of which: | ||
| Vehicles | 43,490 | 42,318 |
| Services | 14,882 | 15,692 |
| Adjusted operating income 1 | 7,479 | 3,948 |
| Adjustments | - | - |
| Operating income | 7,479 | 3,948 |
| Adjusted operating margin, % | 12.8 | 6.8 |
| Operating margin, % | 12.8 | 6.8 |
1 For more information on adjusted operating income, please see note 7.
Important events
In Q1, the Volvo Group signed a partnership agreement with Aurora in the U.S. to accelerate the deployment of autonomous transport solutions. The initial focus is on hub-to-hub trucking transport applications in the U.S. market.
In March, Renault Trucks announced their investment ambitions in electric mobility. From 2023, an all-electric Renault Trucks' offer will be available for each segment: distribution, construction and long-distance transports. In April, Volvo Trucks announced the start of sales of three new heavy-duty all-electric models later this year.
In Q1, Volvo Group and Daimler Truck AG completed the creation of the fuel-cell joint venture, cellcentric. The ambition is to make the new joint venture a leading global manufacturer of fuel cells.
On April 1, Volvo Group and Isuzu Motors completed the UD Trucks transaction as part of the strategic alliance. More information is available under Important events for the Volvo Group on page 14.
| Net order intake of fully electric trucks | First quarter | Change |
|---|---|---|
| Number of trucks | 2021 | 2020 |
| Volvo | 77 | - |
| UD | - | - |
| Renault Trucks | 123 | - |
| Heavy- and medium-duty | 29 | - |
| Light-duty | 94 | - |
| Mack | - | - |
| Total orders | 200 | - |
| Deliveries of fully electric trucks | First quarter | |
| --- | --- | --- |
| Number of trucks | 2021 | 2020 |
| Volvo | 10 | 2 |
| UD | - | - |
| Renault Trucks | 16 | 2 |
| Heavy- and medium-duty | 4 | - |
| Light-duty | 12 | 2 |
| Mack | - | - |
| Total deliveries | 26 | 4 |
Report on the first quarter 2021
CONSTRUCTION EQUIPMENT
Good performance and increased order intake
- In Q1 net sales increased by 23%
- Both adjusted and reported operating income amounted to SEK 3,822 M (2,678), with an operating margin of 15.4% (13.3)
- Order intake increased by 73%
Market development
Overall, market demand continued to increase in Q1 following the recovery that started in the second half of last year. High activity level in the infrastructure segment and increased demand for commodities were the main growth drivers.
The European market, however, had a slow start to the year impacted by Covid-19 restrictions in key markets such as France and Germany but has since gained momentum.
In North America, increased construction activity had a positive impact on the market, and expectations of increased government investments in infrastructure are creating a positive sentiment among customers.
Demand in China, the world's largest construction equipment market, was strong due to governmental infrastructure investments. The market was up 142% in the first two months when compared to the very low volumes caused by Covid-19 in Q1 2020.
The South American market was strong, reflecting increased demand for commodities.
Asia (excluding China) had a positive start to the year with an improvement in key markets including India, Korea and South East Asia.
Orders and deliveries
Order intake increased by 73% in Q1 2021 compared to the relatively weak order intake in Q1 2020. The improved construction activity and increasing investments in infrastructure drove demand. Low inventory levels at dealers and their need to restock also contributed to the higher order intake. Demand for large and medium sized machines were stronger than those for compact machines. In the preceding year, customer activity was low due to expectations of a slowdown combined with the uncertainty created by the outbreak of Covid-19.
Deliveries increased by 53% in Q1, driven by higher sales in all regions with the largest increase in China.
| Total market development | Year-to-date February | Previous forecast | |
|---|---|---|---|
| Change in % measured in units | 2021 | Forecast 2021 | 2021 |
| Europe | -9 | 0% to +10% | 0% to +10% |
| North America | 7 | +5% to +15% | 0% to +10% |
| South America | 41 | +20% to +30% | +10% to +20% |
| Asia excl. China | 16 | +5% to +15% | 0% to +10% |
| China | 142 | -5% to +5% | -15% to -5% |
| Net order intake | First quarter | Change | |
| --- | --- | --- | --- |
| Number of construction equipment | 2021 | 2020 | % |
| Europe | 7,808 | 4,173 | 87 |
| North America | 3,564 | 1,791 | 99 |
| South America | 1,324 | 599 | 121 |
| Asia | 22,038 | 13,312 | 66 |
| Africa and Oceania | 882 | 739 | 19 |
| Total orders | 35,616 | 20,614 | 73 |
| Large and medium construction equipment | 25,832 | 14,001 | 85 |
| Compact construction equipment | 9,784 | 6,613 | 48 |
| Of which fully electric | 78 | - | - |
| Total orders | 35,616 | 20,614 | 73 |
| Of which: | |||
| Volvo | 16,166 | 11,243 | 44 |
| SDLG | 19,403 | 9,332 | 108 |
| Of which in China | 17,191 | 8,520 | 102 |
10
Report on the first quarter 2021
| Deliveries | First quarter | Change | |
|---|---|---|---|
| Number of construction equipment | 2021 | 2020 | % |
| Europe | 5,927 | 4,549 | 30 |
| North America | 1,684 | 1,501 | 12 |
| South America | 793 | 457 | 74 |
| Asia | 21,849 | 13,070 | 67 |
| Africa and Oceania | 704 | 593 | 19 |
| Total deliveries | 30,957 | 20,170 | 53 |
| Large and medium construction equipment | 21,871 | 13,355 | 64 |
| Compact construction equipment | 9,086 | 6,816 | 33 |
| Of which fully electric | 111 | - | - |
| Total deliveries | 30,957 | 20,170 | 53 |
| Of which: | |||
| Volvo | 11,275 | 10,799 | 4 |
| SDLG | 19,635 | 9,332 | 110 |
| Of which in China | 17,396 | 8,520 | 104 |
| Net sales and operating income | First quarter | Change | |
| --- | --- | --- | --- |
| SEK M | 2021 | 2020 | % |
| Europe | 7,263 | 6,477 | 12 |
| North America | 4,297 | 3,711 | 16 |
| South America | 674 | 559 | 21 |
| Asia | 11,319 | 8,403 | 35 |
| Africa and Oceania | 1,189 | 998 | 19 |
| Total net sales | 24,742 | 20,148 | 23 |
| Of which: | |||
| Construction equipment | 21,844 | 17,291 | 26 |
| Services | 2,898 | 2,857 | 1 |
| Adjusted operating income 1 | 3,822 | 2,678 | 43 |
| Adjustments | - | - | - |
| Operating income | 3,822 | 2,678 | 43 |
| Adjusted operating margin, % | 15.4 | 13.3 | |
| Operating margin, % | 15.4 | 13.3 |
1 For more information on adjusted operating income, please see note 7.
Net sales and operating income
In Q1 2021, net sales increased by 23% to SEK 24,742 M (20,148). Adjusted for currency movements net sales increased by 34%, of which net sales of machines increased by 37% and service sales by 12%.
Both adjusted and reported operating income amounted to SEK 3,822 M (2,678), corresponding to an operating margin of 15.4% (13.3). Earnings were positively impacted by higher machine volumes and capacity utilization in the industrial system, cost reductions and increased service earnings, which were partly offset by negative mix effects. Compared with Q1 2020, currency movements had a negative impact of SEK 562 M.
Important events
In March, Volvo CE announced that it will build a test and demonstration area for electric autonomous transport solutions at the Customer Center in Eskilstuna, Sweden. The 66,000 sqm innovation zone will include a secure track for fully-electric, automated and teleoperated machines with charging infrastructure and 5G connectivity.
Also in March, the company used a new online sales channel in China to promote the recently launched excavators developed for the important Chinese market. The sales channel proved successful with orders for over 400 machines during the 90-minute event that was attended by around 1.5 million participants online.
Report on the first quarter 2021
BUSES
Improved operations in a continued weak market
- Order intake decreased by 68% and deliveries by 26% in Q1
- Both adjusted and reported operating income amounted to SEK -64 M (-129) with an operating margin of -1.8% (-2.5%)
- Currency-adjusted service sales -17% reflecting low utilization of coach fleets
Various restrictions following Covid-19 continue to have a severe effect on the global bus market. The decline in demand is still especially steep for coaches and related service sales. Activity in the city and transit bus markets also continues to be at lower levels. The market shift towards electrification of city buses continues.
Compared with Q1 2020, net order intake decreased by 68% to 871 units as a consequence of the continued weak demand in the global bus market.
Major orders included a Nova Bus contract with Chicago Transit Authority for 100 units with options for an additional 500. Volvo Buses received an order for 64 Volvo 7900 S-Charge from Belgian operator OTW, the largest order to date for the new hybrid bus.
Deliveries in Q1 2021 amounted to 1,168 units, 26% fewer than in Q1 2020. Volumes decreased in all regions, mainly related to lower demand for coaches.
Net sales decreased by 31% to SEK 3,570 M (5,190). Adjusted for currency movements, net sales decreased by 24%, of which vehicle sales decreased by 27% and service sales by 17%.
Both adjusted and reported operating income amounted to SEK -64 M (-129), corresponding to an operating margin of -1.8% (-2.5). Earnings were negatively impacted by lower vehicle and service volumes as well as capacity utilization in the industrial system, which were offset by cost reductions. Compared with Q1 2020, currency movements had a positive impact on operating income of SEK 34 M.
In January, Volvo Buses launched a new 4-meter-high version of its double decker, the Volvo 9700 DD, followed by an order of 22 units from Keolis in Sweden.
As of February, Anna Westerberg, previously Head of Volvo Group Connected Solutions, assumed the position as President of Volvo Buses.
| Net order intake and deliveries | First quarter | Change | |
|---|---|---|---|
| Number of buses | 2021 | 2020 | % |
| Total orders | 871 | 2,753 | -68 |
| Of which fully electric | 26 | 140 | -81 |
| Of which hybrids | 71 | 329 | -78 |
| Total deliveries | 1,168 | 1,570 | -26 |
| Of which fully electric | 30 | 5 | 500 |
| Of which hybrids | 100 | 113 | -12 |
| Net sales and operating income | First quarter | Change | |
| --- | --- | --- | --- |
| SEK M | 2021 | 2020 | % |
| Europe | 971 | 1,012 | -4 |
| North America | 1,607 | 2,631 | -39 |
| South America | 170 | 268 | -37 |
| Asia | 451 | 789 | -43 |
| Africa and Oceania | 371 | 490 | -24 |
| Total net sales | 3,570 | 5,190 | -31 |
| Of which: | |||
| Vehicles | 2,627 | 3,964 | -34 |
| Services | 943 | 1,226 | -23 |
| Adjusted operating income 1 | -64 | -129 | 50 |
| Adjustments | - | - | - |
| Operating income | -64 | -129 | 50 |
| Adjusted operating margin, % | -1.8 | -2.5 | |
| Operating margin, % | -1.8 | -2.5 |
1 For more information on adjusted operating income, please see note 7.
Report on the first quarter 2021
VOLVO PENTA
Strong profitability and market demand
- Net order intake increased by 27% and deliveries by 7% in Q1
- Both adjusted and reported operating income amounted to SEK 643 M (509), with an operating margin of 18.9% (15.2)
- Volvo Penta announced partnership with TICO in electromobility
The marine leisure market has recovered strongly since the initial weakening due to Covid-19 and demand was high in Q1. In the marine commercial market, some investments in new vessels have been postponed. However, demand for vessels serving the offshore wind industry continued to be good. The positive development in the market for industrial off-road engines continued in Q1. This was driven by a strong construction market, especially in China, good momentum in the mining sector as well as a recovery in agriculture and material handling. The industrial power generation market also had a positive development.
Net order intake in Q1 increased by 27% to 14,508 units and deliveries increased by 7% to 10,623 units. Both the marine and industrial segments are affected by disturbances in the supply chain, which holds back production increases and is resulting in longer lead-times to customers.
In Q1, net sales increased by 2% to SEK 3,409 M (3,338). Adjusted for currency movements, net sales
increased by 9%, of which sales of engines increased by 5% and sales of services by 20%.
Both adjusted and reported operating income amounted to SEK 643 M (509), corresponding to an operating margin of 18.9% (15.2). Earnings were positively impacted by higher service earnings, cost reductions and increased engine deliveries, which were partly offset by negative mix effects. Compared with Q1 2020, the currency impact on operating income was negative in an amount of SEK 99 M.
During Q1, Volvo Penta and North American terminal tractor company TICO announced a joint development of emissions-free, fully-electric terminal truck prototypes.
The company also announced the industry's first fully, integrated Assisted Docking system at the Consumer Electronics Show (CES), earning two 'Best of CES' award nominations. Collaboration on Assisted Docking with Azimut Yachts, Beneteau Group and Tiara Yachts were showcased.
| Net order intake and deliveries | First quarter | Change | |
|---|---|---|---|
| Number of Engines | 2021 | 2020 | % |
| Total orders | 14,508 | 11,437 | 27 |
| Of which fully electric | 4 | - | - |
| Total deliveries | 10,623 | 9,964 | 7 |
| Of which fully electric | 4 | - | - |
| Net sales and operating income | First quarter | Change | |
| --- | --- | --- | --- |
| SEK M | 2021 | 2020 | % |
| Europe | 1,898 | 1,847 | 3 |
| North America | 614 | 640 | -4 |
| South America | 107 | 83 | 29 |
| Asia | 592 | 585 | 1 |
| Africa and Oceania | 197 | 183 | 8 |
| Total net sales | 3,409 | 3,338 | 2 |
| Of which: | |||
| Engines | 2,470 | 2,491 | -1 |
| Services | 939 | 847 | 11 |
| Adjusted operating income 1 | 643 | 509 | 26 |
| Adjustments | - | - | - |
| Operating income | 643 | 509 | 26 |
| Adjusted operating margin, % | 18.9 | 15.2 | |
| Operating margin, % | 18.9 | 15.2 |
1 For more information on adjusted operating income, please see note 7.
Report on the first quarter 2021
FINANCIAL SERVICES
Improved penetration levels and financial results
- Increased new business volume and higher penetration
- Both adjusted and reported operating income of SEK 682 M (605)
- Stable portfolio performance
In Q1 2021, new business volume was up by 17%, currency adjusted, over Q1 2020 due to both higher deliveries of Group products and improved finance penetration levels. Adjusted for currency, the credit portfolio grew by 3% on a year over year basis.
Both adjusted and reported operating income increased to SEK 682 M (605). This was primarily a result of profitable portfolio growth and lower credit provisions reflecting improved customer profitability. Compared with Q1 2020, currency movements had a negative impact on operating income in an amount of SEK 115 M.
Portfolio performance continued to be stable.
| Financial Services | First quarter | |
|---|---|---|
| SEK M | 2021 | 2020 |
| Number of financed units, 12 months rolling | 63,550 | 63,089 |
| Total penetration rate, 12 months rolling, %^{1} | 31 | 26 |
| New retail financing volume, SEK billion | 18.2 | 17.5 |
| Credit portfolio net, SEK billion | 162 | 175 |
| Credit provision expenses | 182 | 329 |
| Adjusted operating income^{2} | 682 | 605 |
| Adjustments^{2} | - | - |
| Operating income | 682 | 605 |
| Credit reserves, % of credit portfolio | 2.06 | 1.56 |
| Return on equity, 12 months rolling, % | 8.7 | 14.7 |
1 Share of unit sales financed by Volvo Financial Services in relation to the total number of units sold by the Volvo Group in markets where financial services are offered.
2 For more information on adjustments, please see note 7.
IMPORTANT EVENTS FOR THE VOLVO GROUP
Daimler Truck AG and the Volvo Group complete creation of fuel-cell joint venture
On March 1, Volvo Group and Daimler Truck AG completed the transaction to form the previously announced fuel-cell joint venture. The Volvo Group has acquired 50% of the partnership interests in the existing Daimler Truck Fuel Cell GmbH & Co. KG. Daimler Truck AG and the Volvo Group have agreed to rename the company cellcentric GmbH & Co. KG.
Shortage of semiconductors impacting production
On March 22, the Volvo Group announced that the global shortage of semiconductors will have a substantial impact on the Group's production in the second quarter. In the beginning of the second quarter, the Group will implement stop days across its global truck manufacturing operations. In total, these are estimated to between two and four weeks depending on production site. In addition, disturbances are also expected to impact the Group's other business areas. The disturbances are expected to have a negative impact on earnings and cash flow.
Annual General Meeting of AB Volvo
The Annual General Meeting of AB Volvo on March 31 adopted the income statement and balance sheet as well as the consolidated income statement and the consolidated balance sheet. In accordance with the Board of Director's proposal, the Meeting resolved that an ordinary dividend of SEK 6.00 per share and an extraordinary dividend of SEK 9.00 per share should be paid to the shareholders. The Board Members, Board Deputies and the President were discharged from liability for their administration during the 2020 fiscal year. Matti Alahuhta, Eckhard Cordes, Eric Elzvik, Kurt Jofs, Martin Lundstedt, Kathryn V. Marinello, Martina Merz, Hanne de Mora, Helena Stjernholm and Carl-Henric Svanberg were reelected as members of the Board. Martha Finn Brooks was elected as new member of the Board. Carl-Henric Svanberg was reelected as Chairman of the Board. The Annual General Meeting approved the Board of Director's
Report on the first quarter 2021
remuneration report. A remuneration policy for senior executives was adopted in accordance with the Board of Directors' motion.
Volvo Group and Isuzu Motors complete UD Trucks transaction as part of the strategic alliance
On April 1, the Volvo Group and Isuzu Motors completed the transaction whereby Isuzu Motors acquired UD Trucks from the Volvo Group for an enterprise value of approximately SEK 19 billion on a cash and debt free basis. The strategic alliance within commercial vehicles
between the two groups, aiming to capture opportunities in the ongoing industry transformation, will now also become operational. The transaction is estimated to have a positive impact on the Volvo Group's operating income in the second quarter 2021 of close to SEK 2 billion and increase the Volvo Group's net cash position by approximately SEK 19 billion.
Detailed information about the events is available at www.volvogroup.com
15
Report on the first quarter 2021
CONSOLIDATED INCOME STATEMENT FIRST QUARTER
| SEK M | Industrial Operations | Financial Services | Eliminations | Volvo Group | ||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |
| Net sales | 91,209 | 88,204 | 3,257 | 3,810 | -447 | -566 | 94,018 | 91,449 |
| Cost of sales | -68,919 | -67,988 | -1,851 | -2,338 | 448 | 566 | -70,322 | -69,759 |
| Gross income | 22,289 | 20,216 | 1,406 | 1,473 | 1 | 1 | 23,696 | 21,689 |
| Research and development expenses | -4,370 | -4,962 | - | - | - | - | -4,370 | -4,962 |
| Selling expenses | -5,664 | -6,854 | -584 | -608 | - | - | -6,249 | -7,462 |
| Administrative expenses | -1,153 | -1,315 | -3 | -3 | - | - | -1,156 | -1,318 |
| Other operating income and expenses | -366 | -292 | -137 | -257 | - | - | -503 | -549 |
| Income/loss from investments in joint ventures and associated companies | 645 | -31 | - | - | - | - | 645 | -31 |
| Income/loss from other investments | 3 | 7 | 0 | 0 | - | - | 3 | 7 |
| Operating income | 11,384 | 6,768 | 682 | 605 | 1 | 1 | 12,067 | 7,374 |
| Interest income and similar credits | 78 | 122 | - | - | -2 | -43 | 76 | 79 |
| Interest expenses and similar charges | -298 | -386 | 0 | 0 | 2 | 43 | -296 | -343 |
| Other financial income and expenses | 443 | -620 | - | - | - | - | 443 | -620 |
| Income after financial items | 11,607 | 5,884 | 682 | 605 | 1 | 1 | 12,290 | 6,490 |
| Income taxes | -3,105 | -1,580 | -180 | -144 | 0 | 0 | -3,286 | -1,724 |
| Income for the period * | 8,502 | 4,305 | 502 | 461 | 1 | 0 | 9,004 | 4,766 |
| * Attributable to: | ||||||||
| Owners of AB Volvo | 8,841 | 4,675 | ||||||
| Non-controlling interest | 164 | 92 | ||||||
| 9,004 | 4,766 | |||||||
| Basic earnings per share, SEK | 4.35 | 2.30 | ||||||
| Diluted earnings per share, SEK | 4.35 | 2.30 | ||||||
| Key ratios, % | ||||||||
| Gross margin | 24.4 | 22.9 | - | - | - | - | 25.2 | 23.7 |
| Research and development expenses as percentage of net sales | 4.8 | 5.6 | - | - | - | - | 4.6 | 5.4 |
| Selling expenses as percentage of net sales | 6.2 | 7.8 | - | - | - | - | 6.6 | 8.2 |
| Administrative expenses as percentage of net sales | 1.3 | 1.5 | - | - | - | - | 1.2 | 1.4 |
| Operating margin | 12.5 | 7.7 | - | - | - | - | 12.8 | 8.1 |
CONSOLIDATED OTHER COMPREHENSIVE INCOME FIRST QUARTER
| SEK M | 2021 | 2020 |
|---|---|---|
| Income for the period | 9,004 | 4,766 |
| Items that will not be reclassified to income statement: | ||
| Remeasurements of defined benefit pension plans | 3,499 | -152 |
| Remeasurements of holding of shares at fair value | 40 | -67 |
| Items that may be reclassified subsequently to income statement: | ||
| Exchange differences on translation of foreign operations | 3,595 | 3,321 |
| Share of OCI related to joint ventures and associated companies | 669 | -1 |
| Accumulated translation difference reversed to income | - | - |
| Other comprehensive income, net of income taxes | 7,803 | 3,101 |
| Total comprehensive income for the period * | 16,807 | 7,867 |
| * Attributable to: | ||
| Owners of AB Volvo | 16,467 | 7,571 |
| Non-controlling interest | 340 | 296 |
| 16,807 | 7,867 |
16
Report on the first quarter 2021
CONSOLIDATED BALANCE SHEET
| Industrial Operations | Financial Services | Eliminations | Volvo Group | |||||
|---|---|---|---|---|---|---|---|---|
| Mar 31 2021 | Dec 31 2020 | Mar 31 2021 | Dec 31 2020 | Mar 31 2021 | Dec 31 2020 | Mar 31 2021 | Dec 31 2020 | |
| SEK M | ||||||||
| Assets | ||||||||
| Non-current assets | ||||||||
| Intangible assets | 35,204 | 34,423 | 154 | 154 | - | - | 35,358 | 34,577 |
| Tangible assets | ||||||||
| Property, plant and equipment | 50,644 | 49,045 | 67 | 68 | - | - | 50,711 | 49,113 |
| Assets under operating leases | 30,463 | 29,460 | 19,693 | 19,155 | -11,557 | -10,653 | 38,599 | 37,962 |
| Financial assets | ||||||||
| Investments in Joint Ventures and associated companies | 21,267 | 13,160 | - | - | - | - | 21,267 | 13,160 |
| Other shares and participations | 364 | 262 | 15 | 15 | - | - | 379 | 276 |
| Non-current customer-financing receivables | 1,247 | 1,061 | 74,519 | 70,773 | -1,472 | -1,287 | 74,295 | 70,547 |
| Net pension assets | 1,771 | 1,712 | - | - | - | - | 1,771 | 1,712 |
| Non-current interest-bearing receivables | 3,364 | 4,603 | - | - | -575 | -410 | 2,789 | 4,193 |
| Other non-current receivables | 9,692 | 9,228 | 159 | 157 | -823 | -815 | 9,028 | 8,569 |
| Deferred tax assets | 9,976 | 9,505 | 1,178 | 1,089 | 1 | 1 | 11,154 | 10,595 |
| Total non-current assets | 163,992 | 152,458 | 95,785 | 91,411 | -14,427 | -13,164 | 245,351 | 230,705 |
| Current assets | ||||||||
| Inventories | 56,389 | 47,273 | 257 | 352 | - | - | 56,646 | 47,625 |
| Current receivables | ||||||||
| Customer-financing receivables | 696 | 635 | 63,703 | 58,096 | -861 | -746 | 63,538 | 57,985 |
| Tax assets | 1,497 | 1,659 | 219 | 528 | - | - | 1,716 | 2,187 |
| Interest-bearing receivables | 971 | 1,698 | 4 | 4 | -18 | -15 | 957 | 1,686 |
| Internal funding | 18,246 | 10,925 | - | - | -18,246 | -10,925 | - | - |
| Accounts receivable | 41,481 | 34,278 | 1,449 | 1,383 | - | - | 42,930 | 35,660 |
| Other receivables | 17,580 | 17,105 | 1,910 | 1,361 | -3,694 | -3,208 | 15,795 | 15,258 |
| Marketable securities | 227 | 213 | - | - | - | - | 227 | 213 |
| Cash and cash equivalents | 67,439 | 81,973 | 6,290 | 4,680 | -1,585 | -1,448 | 72,144 | 85,206 |
| Assets held for sale | 27,116 | 29,362 | 5,032 | 4,934 | - | - | 32,148 | 34,296 |
| Total current assets | 231,643 | 225,121 | 78,863 | 71,337 | -24,404 | -16,342 | 286,102 | 280,116 |
| Total assets | 395,635 | 377,579 | 174,648 | 162,748 | -38,831 | -29,506 | 531,452 | 510,821 |
| Equity and liabilities | ||||||||
| Equity attributable to owners of AB Volvo | 147,734 | 132,280 | 13,971 | 13,018 | -3 | -3 | 161,702 | 145,295 |
| Non-controlling interest | 3,187 | 2,847 | - | - | - | - | 3,187 | 2,847 |
| Total equity | 150,921 | 135,127 | 13,971 | 13,018 | -3 | -3 | 164,888 | 148,142 |
| Non-current provisions | ||||||||
| Provisions for post-employment benefits | 14,348 | 18,282 | 152 | 148 | - | - | 14,500 | 18,430 |
| Provisions for deferred taxes | 2,135 | 1,166 | 2,191 | 2,099 | - | - | 4,326 | 3,265 |
| Other provisions | 10,540 | 10,217 | 228 | 238 | 497 | 464 | 11,265 | 10,918 |
| Non-current liabilities | ||||||||
| Bond loans | 60,492 | 66,391 | - | - | - | - | 60,492 | 66,391 |
| Other loans | 18,353 | 18,053 | 11,235 | 11,905 | -1,359 | -1,182 | 28,229 | 28,775 |
| Internal funding | -60,608 | -58,839 | 64,681 | 59,412 | -4,073 | -573 | - | - |
| Other liabilities | 39,957 | 38,094 | 1,459 | 1,371 | -8,393 | -8,041 | 33,023 | 31,424 |
| Current provisions | 12,800 | 12,411 | 231 | 225 | 521 | 517 | 13,552 | 13,153 |
| Current liabilities | ||||||||
| Bond loans | 32,567 | 30,904 | - | - | - | - | 32,567 | 30,904 |
| Other loans | 15,825 | 17,055 | 10,258 | 10,968 | -743 | -669 | 25,340 | 27,354 |
| Internal funding | -40,545 | -38,547 | 57,221 | 51,050 | -16,676 | -12,503 | - | - |
| Trade payables | 70,705 | 59,013 | 737 | 598 | - | - | 71,442 | 59,611 |
| Tax liabilities | 5,091 | 3,885 | 384 | 714 | - | - | 5,475 | 4,599 |
| Other liabilities | 58,289 | 57,730 | 7,071 | 6,354 | -8,601 | -7,515 | 56,758 | 56,569 |
| Liabilities held for sale | 4,765 | 6,638 | 4,830 | 4,649 | - | - | 9,595 | 11,286 |
| Total equity and liabilities | 395,635 | 377,579 | 174,648 | 162,748 | -38,831 | -29,506 | 531,452 | 510,821 |
Key ratios, %
| Equity ratio | 38.1 | 35.8 | 8.0 | 8.0 | 0.0 | 0.0 | 31.0 | 29.0 |
|---|---|---|---|---|---|---|---|---|
| Equity attributable to owners of AB Volvo, per share in SEK | - | - | - | - | - | - | 79.5 | 71.5 |
| Return on operating capital 1 | 35.0 | 29.4 | - | - | - | - | - | - |
| Return on capital employed 1 | 17.1 | 14.7 | - | - | - | - | - | - |
| Return on total equity 1 | - | - | 8.7 | 8.3 | - | - | 16.4 | 13.8 |
1 12 months rolling.
17
Report on the first quarter 2021
CONSOLIDATED CASH FLOW STATEMENT FIRST QUARTER
| SEK M | Industrial Operations | Financial Services | Eliminations | Volvo Group | ||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |
| Operating activities | ||||||||
| Operating income | 11,384 | 6,768 | 682 | 605 | 1 | 1 | 12,067 | 7,374 |
| Amortization intangible assets | 634 | 707 | 9 | 13 | - | - | 643 | 719 |
| Depreciation tangible assets | 1,792 | 1,893 | 6 | 7 | - | - | 1,798 | 1,900 |
| Depreciation leasing vehicles | 1,037 | 1,109 | 1,068 | 1,260 | -5 | -1 | 2,101 | 2,368 |
| Other non-cash items | -696 | -280 | 245 | 303 | -23 | 21 | -475 | 45 |
| Total change in working capital whereof | -3,183 | -9,556 | -4,016 | -1,296 | 156 | 97 | -7,043 | -10,755 |
| Change in accounts receivables | -4,773 | -750 | -60 | 5 | - | - | -4,833 | -745 |
| Change in customer-financing receivables | -132 | 4 | -4,227 | -1,734 | 160 | -29 | -4,199 | -1,759 |
| Change in inventories | -6,357 | -3,462 | 97 | 36 | - | - | -6,260 | -3,426 |
| Change in trade payables | 9,237 | -3,691 | 113 | 145 | - | - | 9,350 | -3,546 |
| Other changes in working capital | -1,159 | -1,658 | 61 | 252 | -4 | 126 | -1,102 | -1,279 |
| Interest and similar items received | 78 | 96 | 0 | 0 | 4 | -48 | 83 | 48 |
| Interest and similar items paid | -399 | -399 | 4 | 0 | 21 | 28 | -375 | -371 |
| Other financial items | -32 | -42 | - | - | - | - | -32 | -42 |
| Income taxes paid | -3,082 | -2,964 | -274 | -156 | - | - | -3,356 | -3,120 |
| Cash flow from operating activities | 7,535 | -2,667 | -2,277 | 736 | 153 | 97 | 5,411 | -1,834 |
| Investing activities | ||||||||
| Investments in intangible assets | -634 | -1,133 | -9 | -20 | - | - | -642 | -1,154 |
| Investments in tangible assets | -1,419 | -1,409 | 0 | -1 | - | - | -1,420 | -1,410 |
| Investment in leasing vehicles | -16 | -3 | -2,325 | -3,226 | 7 | 885 | -2,333 | -2,344 |
| Disposals of in-/tangible assets and leasing vehicles | 199 | 1,096 | 1,550 | 1,903 | -7 | -885 | 1,741 | 2,114 |
| Operating cash flow | 5,665 | -4,117 | -3,061 | -608 | 153 | 97 | 2,757 | -4,627 |
| Investments of shares | -6,895 | -136 | ||||||
| Divestments of shares | - | 11 | ||||||
| Acquired operations | -13 | - | ||||||
| Divested operations | -11 | 141 | ||||||
| Interest-bearing receivables incl. marketable securities | -30 | -869 | ||||||
| Cash flow after net investments | -4,192 | -5,479 | ||||||
| Financing activities | ||||||||
| New borrowings | 17,262 | 22,622 | ||||||
| Repayments of borrowings | -27,625 | -14,082 | ||||||
| Other | -86 | -167 | ||||||
| Change in cash and cash equivalents excl. translation differences | -14,641 | 2,893 | ||||||
| Translation difference on cash and cash equivalents | 1,579 | 244 | ||||||
| Change in cash and cash equivalents | -13,061 | 3,137 |
Report on the first quarter 2021
CONSOLIDATED NET FINANCIAL POSITION
| Net financial position excl. post-employment benefits and lease liabilities | Industrial Operations | Volvo Group | ||
|---|---|---|---|---|
| Mar 31 | Dec 31 | Mar 31 | Dec 31 | |
| SEK bn | 2021 | 2020 | 2021 | 2020 |
| Non-current interest-bearing assets | ||||
| Non-current customer-financing receivables | - | - | 74.3 | 70.5 |
| Non-current interest-bearing receivables | 3.4 | 4.6 | 2.8 | 4.2 |
| Current interest-bearing assets | ||||
| Customer-financing receivables | - | - | 63.5 | 58.0 |
| Interest-bearing receivables | 1.0 | 1.7 | 1.0 | 1.7 |
| Internal funding | 18.2 | 10.9 | - | - |
| Marketable securities | 0.2 | 0.2 | 0.2 | 0.2 |
| Cash and cash equivalents | 67.4 | 82.0 | 72.1 | 85.2 |
| Assets held for sale | 0.0 | 0.0 | 4.8 | 4.7 |
| Total interest-bearing financial assets | 90.2 | 99.4 | 218.8 | 224.5 |
| Non-current interest-bearing liabilities | ||||
| Bond loans | -60.5 | -66.4 | -60.5 | -66.4 |
| Other loans | -13.8 | -13.6 | -23.7 | -24.3 |
| Internal funding | 60.6 | 58.8 | - | - |
| Current interest-bearing liabilities | ||||
| Bond loans | -32.6 | -30.9 | -32.6 | -30.9 |
| Other loans | -14.1 | -15.5 | -23.7 | -25.8 |
| Internal funding | 40.5 | 38.5 | - | - |
| Liabilities held for sale | 4.4 | 4.3 | -0.0 | -0.0 |
| Total interest-bearing financial liabilities excl. lease liabilities | -15.4 | -24.7 | -140.5 | -147.5 |
| Net financial position excl. post-employment benefits and lease liabilities | 74.8 | 74.7 | 78.3 | 77.0 |
| Provisions for post-employment benefits and lease liabilities, net | Industrial Operations | Volvo Group | ||
| --- | --- | --- | --- | --- |
| Mar 31 | Dec 31 | Mar 31 | Dec 31 | |
| SEK bn | 2021 | 2020 | 2021 | 2020 |
| Non-current lease liabilities | -4.6 | -4.5 | -4.5 | -4.4 |
| Current lease liabilities | -1.7 | -1.6 | -1.7 | -1.6 |
| Provisions for post-employment benefits, net | -12.6 | -16.6 | -12.7 | -16.7 |
| Liabilities held for sale | -1.1 | -1.1 | -1.1 | -1.1 |
| Provisions for post-employment benefits and lease liabilities, net | -19.9 | -23.7 | -20.0 | -23.8 |
| Net financial position incl. post-employment benefits and lease liabilities | Industrial Operations | Volvo Group | ||
| --- | --- | --- | --- | --- |
| Mar 31 | Dec 31 | Mar 31 | Dec 31 | |
| SEK bn | 2021 | 2020 | 2021 | 2020 |
| Net financial position excl. post-employment benefits and lease liabilities | 74.8 | 74.7 | 78.3 | 77.0 |
| Provisions for post-employment benefits and lease liabilities, net | -19.9 | -23.7 | -20.0 | -23.8 |
| Net financial position incl. post-employment benefits and lease liabilities | 54.9 | 51.0 | 58.3 | 53.2 |
Report on the first quarter 2021
CHANGES IN NET FINANCIAL POSITION, INDUSTRIAL OPERATIONS
| SEK bn | First quarter 2021 |
|---|---|
| Net financial position excl. post-employment benefits and lease liabilities at the end of previous period | 74.7 |
| Operating cash flow | 5.7 |
| Investments and divestments of shares, net | -6.9 |
| Acquired and divested operations, net | -0.0 |
| Capital injections to/from Financial Services | -0.1 |
| Currency effect | 2.0 |
| Other changes | -0.5 |
| Net financial position excl. post-employment benefits and lease liabilities at the end of period | 74.8 |
| Provisions for post-employment benefits and lease liabilities at the end of previous period | -23.7 |
| Pension payments, included in operating cash flow | 0.4 |
| Remeasurements of defined benefit pension plans | 4.5 |
| Service costs and other pension costs | -0.5 |
| Investments, remeasurements and amortizations of lease contracts | -0.0 |
| Currency effect | -0.5 |
| Other changes | -0.1 |
| Provisions for post-employment benefits and lease liabilities at the end of period | -19.9 |
| Net financial position incl. post-employment benefits and lease liabilities at the end of period | 54.9 |
CONSOLIDATED CHANGES IN TOTAL EQUITY
| SEK bn | Mar 31 2021 | Dec 31 2020 |
|---|---|---|
| Total equity at the end of previous period | 148.1 | 141.7 |
| Equity attributable to shareholders of AB Volvo at the end of previous period | 145.3 | 138.6 |
| Income for the period | 8.9 | 19.3 |
| Other comprehensive income | 7.6 | -12.4 |
| Total comprehensive income | 16.5 | 6.9 |
| Other changes | -0.1 | -0.2 |
| Equity attributable to shareholders of AB Volvo at the end of period | 161.7 | 145.3 |
| Non-controlling interest at the end of previous period | 2.8 | 3.1 |
| Income for the period | 0.2 | 0.8 |
| Other comprehensive income | 0.2 | -0.2 |
| Total comprehensive income | 0.3 | 0.5 |
| Dividend to non-controlling interest | - | -0.8 |
| Other changes | 0.0 | 0.0 |
| Non-controlling interest at the end of period | 3.2 | 2.8 |
| Total equity at the end of period | 164.9 | 148.1 |
Report on the first quarter 2021
QUARTERLY FIGURES
| Income Statements, Volvo Group | |||||
|---|---|---|---|---|---|
| SEK M unless otherwise stated | 1/2021 | 4/2020 | 3/2020 | 2/2020 | 1/2020 |
| Net sales | 94,018 | 96,917 | 76,852 | 73,227 | 91,449 |
| Cost of sales | -70,322 | -73,071 | -58,015 | -58,474 | -69,759 |
| Gross income | 23,696 | 23,847 | 18,837 | 14,753 | 21,689 |
| Research and development expenses | -4,370 | -4,314 | -3,711 | -3,811 | -4,962 |
| Selling expenses | -6,249 | -6,808 | -6,131 | -6,109 | -7,462 |
| Administrative expenses | -1,156 | -1,252 | -1,066 | -985 | -1,318 |
| Other operating income and expenses | -503 | 125 | -739 | -4,296 | -549 |
| Income/loss from investments in Joint Ventures and associated companies | 645 | 615 | 340 | 825 | -31 |
| Income/loss from other investments | 3 | 3 | -23 | 10 | 7 |
| Operating income | 12,067 | 12,215 | 7,508 | 388 | 7,374 |
| Interest income and similar credits | 76 | 86 | 71 | 63 | 79 |
| Interest expenses and similar charges | -296 | -334 | -308 | -364 | -343 |
| Other financial income and expenses | 443 | -90 | 369 | -177 | -620 |
| Income after financial items | 12,290 | 11,877 | 7,640 | -90 | 6,490 |
| Income taxes | -3,286 | -2,517 | -1,737 | 134 | -1,724 |
| Income for the period * | 9,004 | 9,360 | 5,903 | 44 | 4,766 |
| * Attributable to: | |||||
| Owners of AB Volvo | 8,841 | 9,202 | 5,723 | -282 | 4,675 |
| Non-controlling interest | 164 | 158 | 180 | 326 | 92 |
| 9,004 | 9,360 | 5,903 | 44 | 4,766 | |
| Key ratios, Volvo Group, % | |||||
| Gross margin | 25.2 | 24.6 | 24.5 | 20.1 | 23.7 |
| Research and development expenses as percentage of net sales | 4.6 | 4.5 | 4.8 | 5.2 | 5.4 |
| Selling expenses as percentage of net sales | 6.6 | 7.0 | 8.0 | 8.3 | 8.2 |
| Administrative expenses as percentage of net sales | 1.2 | 1.3 | 1.4 | 1.3 | 1.4 |
| Operating margin | 12.8 | 12.6 | 9.8 | 0.5 | 8.1 |
| Key ratios, Industrial Operations, % | |||||
| Gross margin | 24.4 | 23.9 | 23.7 | 19.0 | 22.9 |
| Research and development expenses as percentage of net sales | 4.8 | 4.6 | 5.0 | 5.4 | 5.6 |
| Selling expenses as percentage of net sales | 6.2 | 6.7 | 7.5 | 7.9 | 7.8 |
| Administrative expenses as percentage of net sales | 1.3 | 1.3 | 1.4 | 1.4 | 1.5 |
| Operating margin | 12.5 | 12.4 | 9.6 | 0.5 | 7.7 |
| EBITDA margin, Industrial Operations | |||||
| Operating income Industrial Operations | 11,384 | 11,691 | 7,084 | 375 | 6,768 |
| Product and software development, amortization | 594 | 666 | 713 | 694 | 660 |
| Other intangible assets, amortization | 40 | 94 | 146 | 46 | 47 |
| Tangible assets, depreciation | 2,830 | 3,368 | 2,914 | 3,577 | 3,001 |
| Total depreciation and amortization | 3,464 | 4,128 | 3,773 | 4,317 | 3,708 |
| Operating income before depreciation and amortization (EBITDA) | 14,847 | 15,820 | 10,857 | 4,693 | 10,476 |
| EBITDA margin, % | 16.3 | 16.8 | 14.7 | 6.7 | 11.9 |
| Net capitalization of research and development | |||||
| Capitalization | 621 | 559 | 415 | 308 | 881 |
| Amortization | -561 | -574 | -667 | -672 | -635 |
| Net capitalization and amortization | 60 | -15 | -253 | -363 | 246 |
| Return on operating capital in Industrial Operations, % 1 | 35.0 | 29.4 | 25.4 | 28.4 | 44.2 |
| Return on capital employed in Industrial Operations, % 1 | 17.1 | 14.7 | 13.2 | 15.3 | 23.9 |
1 12 months rolling.
Report on the first quarter 2021
QUARTERLY FIGURES
| Net sales | |||||
|---|---|---|---|---|---|
| SEK M | 1/2021 | 4/2020 | 3/2020 | 2/2020 | 1/2020 |
| Trucks | 58,372 | 61,917 | 47,740 | 40,595 | 58,010 |
| Construction Equipment | 24,742 | 20,810 | 17,619 | 22,876 | 20,148 |
| Buses | 3,570 | 6,748 | 4,654 | 3,199 | 5,190 |
| Volvo Penta | 3,409 | 2,985 | 3,062 | 2,507 | 3,338 |
| Group Functions & Other | 2,022 | 2,340 | 1,661 | 1,519 | 2,350 |
| Eliminations | -906 | -754 | -666 | -544 | -832 |
| Industrial Operations | 91,209 | 94,047 | 74,070 | 70,151 | 88,204 |
| Financial Services | 3,257 | 3,369 | 3,304 | 3,477 | 3,810 |
| Reclassifications and eliminations | -447 | -498 | -522 | -401 | -566 |
| Volvo Group | 94,018 | 96,917 | 76,852 | 73,227 | 91,449 |
| Operating income | |||||
| --- | --- | --- | --- | --- | --- |
| SEK M | 1/2021 | 4/2020 | 3/2020 | 2/2020 | 1/2020 |
| Trucks | 7,479 | 8,866 | 4,549 | -1,598 | 3,948 |
| Construction Equipment | 3,822 | 2,460 | 1,951 | 2,493 | 2,678 |
| Buses | -64 | -8 | 232 | -617 | -129 |
| Volvo Penta | 643 | 37 | 562 | 295 | 509 |
| Group Functions & Other | -481 | 317 | -213 | -191 | -235 |
| Eliminations | -15 | 18 | 3 | -7 | -2 |
| Industrial Operations | 11,384 | 11,691 | 7,084 | 375 | 6,768 |
| Financial Services | 682 | 523 | 423 | 12 | 605 |
| Reclassifications and eliminations | 1 | 1 | 1 | - | 1 |
| Volvo Group | 12,067 | 12,215 | 7,508 | 388 | 7,374 |
| Adjusted operating income 1 | |||||
| --- | --- | --- | --- | --- | --- |
| SEK M | 1/2021 | 4/2020 | 3/2020 | 2/2020 | 1/2020 |
| Trucks | 7,479 | 8,045 | 4,522 | 737 | 3,948 |
| Construction Equipment | 3,822 | 2,321 | 1,963 | 3,108 | 2,678 |
| Buses | -64 | -24 | 240 | -532 | -129 |
| Volvo Penta | 643 | 25 | 570 | 345 | 509 |
| Group Functions & Other | -727 | 29 | -505 | -436 | -469 |
| Eliminations | -15 | 17 | 3 | -7 | -2 |
| Industrial Operations | 11,138 | 10,413 | 6,793 | 3,215 | 6,534 |
| Financial Services | 682 | 521 | 423 | 57 | 605 |
| Reclassifications and eliminations | 1 | 1 | 1 | - | 1 |
| Volvo Group adjusted operating income | 11,821 | 10,934 | 7,217 | 3,272 | 7,140 |
¹ For more information on adjusted operating income, please see note 7.
| Operating margin | |||||
|---|---|---|---|---|---|
| % | 1/2021 | 4/2020 | 3/2020 | 2/2020 | 1/2020 |
| Trucks | 12.8 | 14.3 | 9.5 | -3.9 | 6.8 |
| Construction Equipment | 15.4 | 11.8 | 11.1 | 10.9 | 13.3 |
| Buses | -1.8 | -0.1 | 5.0 | -19.3 | -2.5 |
| Volvo Penta | 18.9 | 1.2 | 18.3 | 11.8 | 15.2 |
| Industrial Operations | 12.5 | 12.4 | 9.6 | 0.5 | 7.7 |
| Volvo Group | 12.8 | 12.6 | 9.8 | 0.5 | 8.1 |
| Adjusted operating margin | |||||
| --- | --- | --- | --- | --- | --- |
| % | 1/2021 | 4/2020 | 3/2020 | 2/2020 | 1/2020 |
| Trucks | 12.8 | 13.0 | 9.5 | 1.8 | 6.8 |
| Construction Equipment | 15.4 | 11.2 | 11.1 | 13.6 | 13.3 |
| Buses | -1.8 | -0.4 | 5.2 | -16.6 | -2.5 |
| Volvo Penta | 18.9 | 0.8 | 18.6 | 13.7 | 15.2 |
| Industrial Operations | 12.2 | 11.1 | 9.2 | 4.6 | 7.4 |
| Volvo Group adjusted operating margin | 12.6 | 11.3 | 9.4 | 4.5 | 7.8 |
Report on the first quarter 2021
QUARTERLY FIGURES
| Share data | |||||
|---|---|---|---|---|---|
| 1/2021 | 4/2020 | 3/2020 | 2/2020 | 1/2020 | |
| Earnings per share, SEK^{1} | 4.35 | 4.53 | 2.81 | -0.14 | 2.30 |
| Earnings per share, SEK^{1}, 12 months rolling | 11.55 | 9.50 | 8.24 | 9.10 | 14.71 |
| Diluted earnings per share, SEK | 4.35 | 4.53 | 2.81 | -0.14 | 2.30 |
| Number of outstanding shares in millions | 2,033 | 2,033 | 2,033 | 2,033 | 2,033 |
| Average number of shares before dilution in millions | 2,033 | 2,033 | 2,033 | 2,033 | 2,033 |
| Average number of shares after dilution in millions | 2,033 | 2,033 | 2,033 | 2,033 | 2,033 |
| Number of own shares in millions | 0 | 0 | 0 | 95 | 95 |
| Average number of own shares in millions | 0 | 0 | 32 | 95 | 95 |
1 Earnings per share are calculated as Income for the period (excl. Non-controlling interest) divided by the weighted average number of shares outstanding during the period.
NOTE 1 | ACCOUNTING POLICIES
The Volvo Group applies International Financial Reporting Standards (IFRS) as endorsed by the EU. The accounting policies and definitions are consistently applied with those described in the Volvo Group Annual and Sustainability Report 2020 (available at www.volvogroup.com). This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting and the Swedish Annual Accounts Act. The Parent Company applies the Swedish Annual Accounts Act and RFR 2 Reporting for legal entities.
New accounting policies for 2021
As of January 1, 2021, the amendment to IFRS 7, IFRS 9 and IFRS 16 is effective. The amendments relate to the interest rate benchmark reform - phase 2 and provides guidance on how to account for the effects of the reform. The interest rate benchmark reform refers to the transition from current interest reference rate such as LIBOR to new benchmark interest rates. The Volvo Group closely follows the transition which will take place during 2021. The amendments to IFRS 7, IFRS 9 and IFRS 16 will be applied when new interest rate benchmarks are incorporated in the underlying contracts which are expected to have taken place by the end of 2021.
There are no other new accounting policies applicable from 2021 that significantly affects the Volvo Group.
NOTE 2 | RISKS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
Each of the Volvo Group's Business Areas is responsible for its own risk management. In addition, the Volvo Group works with Enterprise Risk Management (ERM), which is a systematic and structured framework to report and analyze risk assessments and mitigations as well as to follow-up on the risks that might impact the Group's business. The objective of the ERM framework is to improve business performance and to minimize the cost of managing risks; thus protecting the Group's enterprise value as well as enhancing and protecting the Group's assets.
The risks within the Volvo Group are classified into four categories:
Strategic risks – such as technology shift and convergence, intense competition and extensive government regulations;
Operational risks – such as customer satisfaction, cyclical nature of the commercial vehicles industry, reliance on suppliers and scarce materials, disturbances and inefficiencies in the industrial system, risk related to human capital and human rights, residual value commitments, cybersecurity and IT infrastructure as well as political instability across the world;
Compliance risks – such as non-compliance with data protection laws, protection and maintenance of intangible assets, complaints and legal actions by customers and other third parties, environmental regulations and corruption and non-compliance with competition law; and
Financial risks – such as insurance coverage, credit risk, pension commitments, interest level and currency fluctuations, liquidity risks, as well as impairment on goodwill and other intangible assets.
For a more elaborate description of these risks, please refer to the Risk Management section on pages 68-75 in the Volvo Group Annual and Sustainability Report 2020 (available at www.volvogroup.com).
Risk updates
Short-term risks, when applicable, are also described in the respective segment section of this report.
Update on supply situation
Our ability to deliver according to market demand depends significantly on obtaining a timely and adequate supply of materials, components and other vital services, as well as on our ability to properly utilize the capacity in the Group's different production and services facilities. At present, a global shortage of semiconductor components is causing us to adapt production. Our supply chain and industrial system is also strained in many areas due to e.g. shortages of other materials and components, shortages of transport services and developments of the Covid-19 pandemic and response measures taken. Stop days have been implemented in the global truck manufacturing operations which, as previously communicated, are estimated to extend over two to four weeks in the second quarter, and we also expect disturbances in other business areas. These disturbances are expected to have a negative impact on earnings and cash
Report on the first quarter 2021
flow, and there is also a risk that we may face additional supply chain or production disturbances going forward. Such disturbances could lead to higher costs and interruptions in production and delivery of Group products and services, that could have a material negative impact on the Group's financial performance.
The Covid-19 pandemic
The outbreak of the Covid-19 pandemic throughout the world has led to major disruptions in the economies of many countries, including the Group's key markets, and it is expected that economic activity will be negatively impacted in the coming quarters. This have had, and might also continue to have, an adverse effect on demand for the Group's products and services and on the financial performance of the Group. The duration and expected development of the Covid-19 pandemic is unknown, and no predictions can be made in relation to the length of present, and further measures that different countries and others may take in response to the crisis. However, any prolongation or worsening of the virus outbreak may lead to e.g. the following:
- the extension of containment measures and restrictions on freedom of movement in the Group's key markets,
- key suppliers experiencing severe financial difficulties,
- shortages of necessary material and parts from suppliers directly or indirectly affected by the virus outbreak that may in turn lead to supply chain disruptions and production downtimes,
- a larger number of customers directly or indirectly affected by the virus outbreak having difficulties, or being prevented from, making payments to the Group when due,
- further price pressure on new and used vehicles, which may give rise to write-downs or further reserve requirements with respect to vehicles in stock and residual value commitments,
- impairments of goodwill and other intangible assets,
- further disruption of financial markets and/or
- a prolonged global economic downturn leading to a more severe reduction in demand for Group products.
Given the evolving nature of the crisis, the above list is not exhaustive, but each of these events, or any combination of them, could amplify the negative impact of the crisis on the Group's financial performance and have material adverse
effect on the Group's business, financial development and shareholder value.
Detected premature degradation of emissions control component
As previously communicated, the Volvo Group has detected that an emissions control component used in certain markets and models, may degrade more quickly than expected, affecting the vehicles emission performance negatively. The Volvo Group made a provision of SEK 7 billion impacting the operating income in Q4 2018, relating to the estimated costs to address the issue. Negative cash flow effects started in 2019 and will continue in the coming years. The Volvo Group will continuously assess the size of the provision as the matter develops.
Contingent liabilities and contingent assets
The reported amounts for contingent liabilities reflect a part of Volvo Group's risk exposure. Total contingent liabilities as of March 31, 2021, amounted to SEK 15.1 billion, an increase of SEK 1.3 billion compared to December 31, 2020. The gross exposure of SEK 15.1 billion is partly reduced by counter guarantees and collaterals.
Total contingent assets as of March 31, 2021 amounted to SEK 1.0 billion (SEK 1.3 billion as of December 31, 2020) and is related to a tax credit in Brazil.
Legal proceedings
Following the adoption of the European Commission's settlement decision, the Volvo Group has received and will be defending itself against numerous private damages claims brought by customers and other third parties alleging that they suffered loss by reason of the conduct covered in the decision. The claims are being brought in various countries by claimants either acting individually or as part of a wider group or class of claimants. Further claims are likely to be commenced. At this stage it is not possible to make a reliable estimate of any liability that could arise from any such proceedings. An adverse outcome of some or all of the litigations, depending on the nature and extent of such outcomes, may have a material negative impact on the Volvo Group's financial results.
The other legal proceedings and investigations described in note 21 and note 24 in the Volvo Group Annual and Sustainability Report 2020 are progressing. No material changes have occurred in these matters in Q1 2021.
NOTE 3 | REVENUE
The two major revenue streams within the Volvo Group are vehicles and services. Vehicles include sales of vehicles, machinery and engines. Revenue is recognized when the control of the vehicle has been transferred to the customer, normally at one point in time, which is when the vehicle has been delivered to the customer. If the sale of a vehicle is combined with a residual value commitment and there is a significant economic incentive for the customer to return the vehicle, the revenue is recognized over the residual value commitment period. Services include sale of spare parts, maintenance services and other aftermarket products. Revenue is recognized when the control of the service has
been transferred to the customer, which is when the customer can benefit from the use of the delivered services.
For spare parts, revenue is normally recognized at one point in time, which is when it is delivered. For maintenance services and other aftermarket products, revenue is normally recognized over time, which is during the contract period. When payments for maintenance contracts are received in advance from the customers, the payments are recognized as contract liabilities. Income from operating leasing is recognized over the leasing period. Interest income related to finance leasing and installment credits is recognized as net sales within Financial Services during the underlying contract period.
Report on the first quarter 2021
NOTE 4 | ACQUISITIONS AND DIVESTMENTS
Acquisitions and divestments
On March 1, 2021, the Volvo Group and Daimler Truck AG completed the previously announced transaction to form a fuel cell joint venture. The Volvo Group has acquired 50 percent of the shares in the existing Daimler Truck Fuel Cell GmbH & Co. KG. The parties have agreed to rename the company cellcentric GmbH & Co. KG.
To enable the joint venture, the Daimler Group bundled all fuel cell activities and transferred the business to cellcentric. The assets acquired and liabilities assumed were measured at their fair values and the excess amount was recognized as goodwill. A substantial portion of cellcentric's net assets is related to technology.
In connection to the acquisition of shares in cellcentric, the Volvo Group has made a preliminary purchase price allocation of identified assets and liabilities, which is expected to be finalized within 12 months as of the acquisition date. Most of the purchase price of SEK 6,503 M corresponded to the Volvo Group's share of cellcentric's net assets at fair value. As of March 1, 2021, the investment in the joint venture is recognized in the Volvo Group's financial statements, in the segment Trucks, by applying the equity method.
The Volvo Group has not made any other acquisitions or divestments of operations during Q1 that have had a significant impact on the Volvo Group.
Assets and liabilities held for sale
At the end of Q1, assets and liabilities held for sale amounted to SEK 32,148 M (34,296) and SEK 9,595 M (11,286) respectively. The assets and liabilities held for sale mainly relate to the transfer of ownership of the complete UD Trucks business globally from the Volvo Group to Isuzu Motors. The balances are impacted by changes in the underlying assets and liabilities as well as changes in currency. The transaction was completed on April 1.
NOTE 5 | CURRENCY AND FINANCIAL INSTRUMENTS
Fair value of financial instruments
Valuation principles and classifications of Volvo Group financial instruments, as described in Volvo Group Annual and Sustainability Report 2020 Note 30 (available at www.volvogroup.com), have been consistently applied throughout the reporting period. Financial instruments in the Volvo Group reported at fair value through profit and loss consist mainly of interest and currency derivatives. Derivatives with positive fair values amounted to SEK 4.7 billion (6.6) and derivatives with negative fair values amounted to SEK 2.0 billion (1.4) as of March 31, 2021.
The derivatives are accounted for on gross basis. Financial liabilities valued at amortized cost, reported as current and non-current bond loans and other loans, amounted to SEK 145.3 billion (152.8) in reported carrying value with a fair value of SEK 147.5 billion (155.7). In the Volvo Group consolidated financial position, financial liabilities include loan-related derivatives with negative fair values amounting to SEK 1.4 billion (0.6).
| Currency effect on operating income, Volvo Group | Compared to first quarter 2020 | |||
|---|---|---|---|---|
| First quarter 2021 | First quarter 2020 | Change | ||
| SEK M | ||||
| Net flow in foreign currency | -422 | |||
| Realized and unrealized gains and losses on derivatives | 2 | -32 | 33 | |
| Unrealized gains and losses on receivables and liabilities in foreign currency | -8 | -662 | 654 | |
| Translation effect on operating income in foreign subsidiaries | -1,390 | |||
| Total currency effect on operating income, Volvo Group | -1,125 | |||
| Applicable currency rates | Quarterly exchange rates | Close rates | ||
| --- | --- | --- | --- | --- |
| First quarter 2021 | First quarter 2020 | Mar 31 2021 | Mar 31 2020 | |
| BRL | 1.53 | 2.18 | 1.51 | 1.94 |
| CNY | 1.30 | 1.39 | 1.33 | 1.42 |
| EUR | 10.12 | 10.66 | 10.24 | 11.08 |
| GBP | 11.59 | 12.37 | 12.00 | 12.39 |
| USD | 8.40 | 9.67 | 8.72 | 10.08 |
| JPY | 0.0792 | 0.0888 | 0.0788 | 0.0929 |
| KRW | 0.0075 | 0.0081 | 0.0077 | 0.0083 |
Report on the first quarter 2021
NOTE 6 | TRANSACTIONS WITH RELATED PARTIES
| Sales of goods, services and other income | Purchases of goods, services and other expenses | |||
|---|---|---|---|---|
| First quarter 2021 | First quarter 2020 | First quarter 2021 | First quarter 2020 | |
| SEK M | 365 | 554 | 12 | 27 |
| Associated companies | 417 | 397 | 278 | 199 |
| Joint ventures | ||||
| Receivables | Payables | |||
| --- | --- | --- | --- | --- |
| Mar 31 | Dec 31 | Mar 31 | Dec 31 | |
| SEK M | 2021 | 2020 | 2021 | 2020 |
| Associated companies | 208 | 242 | 8 | 24 |
| Joint ventures | 308 | 330 | 94 | 71 |
NOTE 7 | RECONCILIATION OF ADJUSTED OPERATING INCOME
| Adjusted operating income | |||||
|---|---|---|---|---|---|
| SEK M | 1/2021 | 4/2020 | 3/2020 | 2/2020 | 1/2020 |
| Trucks | 7,479 | 8,045 | 4,522 | 737 | 3,948 |
| Construction Equipment | 3,822 | 2,321 | 1,963 | 3,108 | 2,678 |
| Buses | -64 | -24 | 240 | -532 | -129 |
| Volvo Penta | 643 | 25 | 570 | 345 | 509 |
| Group Functions & Other | -727 | 29 | -505 | -436 | -469 |
| Eliminations | -15 | 17 | 3 | -7 | -2 |
| Industrial Operations | 11,138 | 10,413 | 6,793 | 3,215 | 6,534 |
| Financial Services | 682 | 521 | 423 | 57 | 605 |
| Reclassifications and eliminations | 1 | 1 | 1 | - | 1 |
| Volvo Group adjusted operating income | 11,821 | 10,934 | 7,217 | 3,272 | 7,140 |
| Adjustments | |||||
| --- | --- | --- | --- | --- | --- |
| SEK M | 1/2021 | 4/2020 | 3/2020 | 2/2020 | 1/2020 |
| Adjustment items (segment) | |||||
| Depreciation of Assets held for sale (Group functions & Other) | 246 | 287 | 291 | 315 | 234 |
| Restructuring charges related to headcount reductions: | |||||
| Trucks | - | 821 | 28 | -2,335 | - |
| Construction Equipment | - | 140 | -12 | -615 | - |
| Buses | - | 16 | -8 | -85 | - |
| Volvo Penta | - | 12 | -8 | -50 | - |
| Group Functions & Other | - | 1 | - | -70 | - |
| Financial Services | - | 2 | - | -45 | - |
| Total adjustments | |||||
| --- | --- | --- | --- | --- | --- |
| Trucks | - | 821 | 28 | -2,335 | - |
| Construction Equipment | - | 140 | -12 | -615 | - |
| Buses | - | 16 | -8 | -85 | - |
| Volvo Penta | - | 12 | -8 | -50 | - |
| Group Functions & Other | 246 | 288 | 291 | 245 | 234 |
| Industrial Operations | 246 | 1,278 | 291 | -2,840 | 234 |
| Financial Services | - | 2 | - | -45 | - |
| Volvo Group | 246 | 1,280 | 291 | -2,885 | 234 |
| Operating income | |||||
| --- | --- | --- | --- | --- | --- |
| SEK M | 1/2021 | 4/2020 | 3/2020 | 2/2020 | 1/2020 |
| Trucks | 7,479 | 8,866 | 4,549 | -1,598 | 3,948 |
| Construction Equipment | 3,822 | 2,460 | 1,951 | 2,493 | 2,678 |
| Buses | -64 | -8 | 232 | -617 | -129 |
| Volvo Penta | 643 | 37 | 562 | 295 | 509 |
| Group Functions & Other | -481 | 317 | -213 | -191 | -235 |
| Eliminations | -15 | 18 | 3 | -7 | -2 |
| Industrial Operations | 11,384 | 11,691 | 7,084 | 375 | 6,768 |
| Financial Services | 682 | 523 | 423 | 12 | 605 |
| Reclassifications and eliminations | 1 | 1 | 1 | - | 1 |
| Volvo Group | 12,067 | 12,215 | 7,508 | 388 | 7,374 |
For reconciliations of other Key Ratios, see www.volvogroup.com.
Report on the first quarter 2021
PARENT COMPANY
Income from investments in Group companies and joint ventures for the first quarter include dividends amounting to SEK 856 M.
Investment in Volvo Fuel Cell Holding AB has increased the value of shares in Group companies by SEK 3,000 M.
Financial net debt amounted to SEK 9,922 M (7,565) at the end of the first quarter.
| Income Statement | First quarter | |
|---|---|---|
| SEK M | 2021 | 2020 |
| Net sales¹ | 75 | 81 |
| Cost of sales¹ | -75 | -81 |
| Gross income | 0 | 0 |
| Operating expenses¹ | -246 | -347 |
| Operating income (loss) | -246 | -347 |
| Income from investments in Group companies | 840 | - |
| Income from investments in joint ventures and associated companies | 16 | - |
| Interest income and expenses | -74 | -195 |
| Other financial income and expenses | 1 | -6 |
| Income after financial items | 537 | -548 |
| Income taxes | 26 | 104 |
| Income for the period | 563 | -444 |
¹ Of net sales in the first quarter, SEK 71 M (70) pertained to Group companies, while purchases from Group companies amounted to SEK 116 M (62).
| Other comprehensive income | ||
|---|---|---|
| Income for the period | 563 | -444 |
| Other comprehensive income, net of income taxes | - | - |
| Total comprehensive income for the period | 563 | -444 |
Report on the first quarter 2021
| Balance Sheet | Mar 31 2021 | Dec 31 2020 |
|---|---|---|
| SEK M | ||
| Assets | ||
| Non-current assets | ||
| Tangible assets | 7 | 7 |
| Financial assets | ||
| Shares and participations in Group companies | 74,857 | 71,857 |
| Investments in joint ventures and associated companies | 8,946 | 8,946 |
| Other shares and participations | 1 | 1 |
| Deferred tax assets | 353 | 298 |
| Total non-current assets | 84,164 | 81,109 |
| Current assets | ||
| Current receivables from Group companies | 1,129 | 1,735 |
| Tax assets | 435 | - |
| Other current receivables | 145 | 85 |
| Total current assets | 1,709 | 1,820 |
| Total assets | 85,873 | 82,929 |
| Equity and liabilities | ||
| Equity | ||
| Restricted equity | 9,899 | 9,899 |
| Unrestricted equity | 55,363 | 54,800 |
| Total Equity | 65,262 | 64,699 |
| Untaxed reserves | 10,000 | 10,000 |
| Provisions | 268 | 271 |
| Non-current liabilities^{1} | 5,595 | 5,595 |
| Current liabilities^{2} | 4,748 | 2,364 |
| Total equity and liabilities | 85,873 | 82,929 |
1 Of which SEK 5,589 M (5,589) pertains to Group companies.
2 Of which SEK 4,113 M (1,789) pertains to Group companies.
Events after the balance sheet date
For important events, please see page 13. No other significant events have occurred after the end of the first quarter 2021 that are expected to have a substantial effect on the Volvo Group.
Gothenburg, April 22, 2021
AB Volvo (publ)
Martin Lundstedt
President and CEO
This report has not been reviewed by AB Volvo's auditors.
Report on the first quarter 2021
NET ORDER INTAKE
| Net order intake of trucks | First quarter | Change | |
|---|---|---|---|
| 2021 | 2020 | ||
| Europe | 46,564 | 21,178 | 120 |
| Heavy- and medium-duty | 39,081 | 17,312 | 126 |
| Light-duty | 7,483 | 3,866 | 94 |
| North America | 22,215 | 4,732 | 369 |
| South America | 3,856 | 3,044 | 27 |
| Asia | 8,802 | 6,913 | 27 |
| Africa and Oceania | 4,024 | 2,532 | 59 |
| Total trucks | 85,461 | 38,399 | 123 |
| Heavy-duty (>16 tons) | 71,688 | 30,322 | 136 |
| Medium-duty (7-16 tons) | 5,932 | 4,021 | 48 |
| Light-duty (<7 tons) | 7,841 | 4,056 | 93 |
| Total trucks | 85,461 | 38,399 | 123 |
Net order intake of trucks by brand
| Volvo | |||
|---|---|---|---|
| Europe | 25,465 | 10,846 | 135 |
| North America | 9,180 | 1,160 | 691 |
| South America | 3,391 | 2,726 | 24 |
| Asia | 4,312 | 2,656 | 62 |
| Africa and Oceania | 1,805 | 1,083 | 67 |
| Total Volvo | 44,153 | 18,471 | 139 |
| Heavy-duty (>16 tons) | 42,869 | 17,627 | 143 |
| Medium-duty (7-16 tons) | 1,284 | 844 | 52 |
| Total Volvo | 44,153 | 18,471 | 139 |
| UD | |||
| --- | --- | --- | --- |
| North America | 33 | 16 | 106 |
| South America | 83 | 144 | -42 |
| Asia | 3,556 | 3,532 | 1 |
| Africa and Oceania | 1,345 | 639 | 110 |
| Total UD | 5,017 | 4,331 | 16 |
| Heavy-duty (>16 tons) | 3,885 | 3,430 | 13 |
| Medium-duty (7-16 tons) | 874 | 742 | 18 |
| Light-duty (<7 tons) | 258 | 159 | 62 |
| Total UD | 5,017 | 4,331 | 16 |
| Renault Trucks | |||
| --- | --- | --- | --- |
| Europe | 21,099 | 10,332 | 104 |
| Heavy- and medium-duty | 13,616 | 6,466 | 111 |
| Light-duty | 7,483 | 3,866 | 94 |
| North America | 64 | 38 | 68 |
| South America | 119 | 68 | 75 |
| Asia | 934 | 725 | 29 |
| Africa and Oceania | 487 | 690 | -29 |
| Total Renault Trucks | 22,703 | 11,853 | 92 |
| Heavy-duty (>16 tons) | 13,093 | 6,208 | 111 |
| Medium-duty (7-16 tons) | 2,027 | 1,748 | 16 |
| Light-duty (<7 tons) | 7,583 | 3,897 | 95 |
| Total Renault Trucks | 22,703 | 11,853 | 92 |
| Mack | |||
| --- | --- | --- | --- |
| North America | 12,938 | 3,518 | 268 |
| South America | 263 | 106 | 148 |
| Africa and Oceania | 387 | 120 | 223 |
| Total Mack | 13,588 | 3,744 | 263 |
| Heavy-duty (>16 tons) | 11,841 | 3,057 | 287 |
| Medium-duty (7-16 tons) | 1,747 | 687 | 154 |
| Total Mack | 13,588 | 3,744 | 263 |
Report on the first quarter 2021
DELIVERIES
| Deliveries of trucks | First quarter | Change | |
|---|---|---|---|
| Number of trucks | 2021 | 2020 | % |
| Europe | 23,982 | 21,003 | 14 |
| Heavy- and medium-duty | 18,871 | 17,103 | 10 |
| Light-duty | 5,111 | 3,900 | 31 |
| North America | 12,972 | 10,660 | 22 |
| South America | 5,522 | 4,878 | 13 |
| Asia | 7,072 | 5,669 | 25 |
| Africa and Oceania | 2,896 | 2,555 | 13 |
| Total trucks | 52,444 | 44,765 | 17 |
| Heavy-duty (>16 tons) | 43,316 | 38,265 | 13 |
| Medium-duty (7-16 tons) | 3,736 | 2,443 | 53 |
| Light-duty (<7 tons) | 5,392 | 4,057 | 33 |
| Total trucks | 52,444 | 44,765 | 17 |
Deliveries of trucks by brand
| Volvo | |||
|---|---|---|---|
| Europe | 11,703 | 11,528 | 2 |
| North America | 6,748 | 5,328 | 27 |
| South America | 5,204 | 4,627 | 12 |
| Asia | 3,286 | 2,673 | 23 |
| Africa and Oceania | 1,368 | 1,164 | 18 |
| Total Volvo | 28,309 | 25,320 | 12 |
| Heavy-duty (>16 tons) | 27,689 | 24,623 | 12 |
| Medium-duty (7-16 tons) | 620 | 697 | -11 |
| Total Volvo | 28,309 | 25,320 | 12 |
| UD | |||
| --- | --- | --- | --- |
| North America | 16 | 11 | 45 |
| South America | 109 | 59 | 85 |
| Asia | 3,028 | 2,722 | 11 |
| Africa and Oceania | 841 | 617 | 36 |
| Total UD | 3,994 | 3,409 | 17 |
| Heavy-duty (>16 tons) | 3,005 | 2,646 | 14 |
| Medium-duty (7-16 tons) | 771 | 614 | 26 |
| Light-duty (<7 tons) | 218 | 149 | 46 |
| Total UD | 3,994 | 3,409 | 17 |
| Renault Trucks | |||
| --- | --- | --- | --- |
| Europe | 12,279 | 9,475 | 30 |
| Heavy- and medium-duty | 7,168 | 5,575 | 29 |
| Light-duty | 5,111 | 3,900 | 31 |
| North America | 32 | 149 | -79 |
| South America | 76 | 32 | 138 |
| Asia | 758 | 273 | 178 |
| Africa and Oceania | 540 | 606 | -11 |
| Total Renault Trucks | 13,685 | 10,535 | 30 |
| Heavy-duty (>16 tons) | 6,940 | 5,495 | 26 |
| Medium-duty (7-16 tons) | 1,571 | 1,132 | 39 |
| Light-duty (<7 tons) | 5,174 | 3,908 | 32 |
| Total Renault Trucks | 13,685 | 10,535 | 30 |
| Mack | |||
| --- | --- | --- | --- |
| North America | 6,176 | 5,172 | 19 |
| South America | 133 | 160 | -17 |
| Asia | - | 1 | - |
| Africa and Oceania | 147 | 168 | -13 |
| Total Mack | 6,456 | 5,501 | 17 |
| Heavy-duty (>16 tons) | 5,682 | 5,501 | 3 |
| Medium-duty (7-16 tons) | 774 | - | - |
| Total Mack | 6,456 | 5,501 | 17 |
This information is information that AB Volvo (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out in the press release concerning this report, at 7.20 CET on April 22, 2021.
This report contains forward-looking statements that reflect the Board of Directors' and management's current views with respect to certain future events and potential financial performance. Although the Board of Directors and the management believe that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, among other factors, (i) changes in economic, market and competitive conditions, (ii) success of business and operating initiatives, (iii) changes in the regulatory environment and other government actions, (iv) fluctuations in exchange rates and (v) business risk management.
This report does not imply that the Company has undertaken to revise these forward-looking statements, beyond what is required under the company's registration contract with Nasdaq Stockholm, if and when circumstances arise that will lead to changes compared to the date when these statements were provided.
Financial calendar
| Report on the second quarter 2021 | July 20, 2021 |
|---|---|
| Report on the third quarter 2021 | October 21, 2021 |
Contacts
| Media relations: | |
|---|---|
| Claes Eliasson | +46 765 53 72 29 |
| Investor Relations: | |
| Christer Johansson | +46 739 02 25 22 |
| Johan Bartler | +46 739 02 21 93 |
| Anders Christensson | +46 765 53 59 66 |
Aktiebolaget Volvo (publ)
556012-5790
Investor Relations, VGHQ
SE-405 08 Göteborg, Sweden
Tel +46 31 66 00 00
www.volvogroup.com
VOLVO
VOLVO GROUP