SODERTALJE, Sweden, Nov. 1, 2005 (PRIMEZONE) -- "Based on Scania's order bookings during the second and third quarter, and given the current production rate, our assessment is that this year's earnings will be somewhat higher than last year's," says Leif Ostling, President and CEO.(1)(1)Please refer to page 7 for forward looking statement from six-month report 2005.
This report is also available at www.scania.com
SCANIA, FIRST THREE QUARTERS OF 2005 - COMMENTS BY THE PRESIDENT AND CEO
Scania's operating income in the first nine months of 2005 rose by 7 percent to SEK 4,702 m. The operating margin fell to 10.4 percent. Net income increased by 8 percent to SEK 3,141 m., which resulted in earnings per share of SEK 15.71 (14.49). Based on Scania's order bookings during the second and third quarter, and given the current production rate, our assessment is that this year's earnings will be somewhat higher than last year's.
Demand for Scania trucks was nearly unchanged during the first nine months of the year. In western Europe, order bookings for trucks climbed 4 percent. During the third quarter, corresponding order bookings were 12 percent higher than in the year-earlier period. In central and eastern Europe, demand continued to improve after a period of weakness early in the year. In Latin America, demand declined somewhat during the third quarter. Asia showed a decreased demand which was partially offset by an increase in other markets.
Historically high oil prices and continued uncertainty about economic developments in certain countries are factors that are making it difficult to forecast market demand in the short-term perspective. The introduction of Euro 4 regulations in the autumn of 2006 may lead customers to bring forward their investments in vehicles with Euro 3 engines. Increasing transport needs in western Europe and continued strong demand for used trucks in central and eastern Europe point towards a favourable long-term market for trucks in Europe.
In Buses and Coaches, demand rose during the nine-month period, but during the third quarter a weakening in demand was noted. In Industrial and Marine Engines, Scania signed a major order for V8 engines. Service-related sales and Customer Finance strengthened further.
Aside from seasonally low volume in the third quarter, increased material prices and production costs, as well as higher research and development costs also affected earnings. Lower steel prices are expected to have an impact on earnings during the first half of 2006. Adjustment of the number of employees is continuing as planned, after last year's extra staffing in connection with the introduction of the new truck range. This adjustment will be completed by year-end.
Scania is continuing its efforts to improve road safety and the environment. During 2005, about 13,000 drivers competed in safe and fuel-efficient driving skills as part of the Young European Truck Driver competition. Similar driving competitions were held in Brazil, Argentina, South Africa and Taiwan. Scania's international transport conference in Brussels focused on economic growth in Europe and improved safety and environment in the transport industry. Scania is supporting the World Health Organisation in its global efforts to improve road safety.
Scania has now introduced a complete range of engines in Euro 4 versions. Starting in the first quarter of 2006, Scania will also deliver engines in Euro 5 versions. This means that Scania is well equipped with a range of engines complying with Euro 3, Euro 4 and Euro 5. Scania and Cummins have decided to begin production of XPI, the next generation of fuel injection systems. The system is an important part of Scania's strategy for meeting future emission standards. Scania has launched a new bus and coach chassis range for the European market. The range of bus and coach chassis include models that meet Euro 4 standards. From late 2006, a Euro 5 engine will also be available for city buses.
Scania is increasing its focus on marketing and service operations in order to expand business further as well as to benefit from synergies, for example in purchasing, IT systems, training and development of working methods. Since the early 1990s service operations have increased their share of Scania's assets, excluding Customer Finance, from 20 percent to 45 percent. The aim is to boost service-related sales and reduce costs, something that Scania intends to realise during the next few years.
During the past decade, Scania has improved its productivity by 6-8 percent annually, which is a prerequisite for remaining competitive. In the past five years, Scania has moved component production in Europe to Sweden, which has created 1,500 new jobs in the country. Scania is now examining ways of streamlining the production and flow of axles and gearboxes as well as components for these in Falun, Sibbhult and Sodertalje. This review will be completed during the first quarter of 2006 and is expected to lead to substantial cost savings.
Contact persons:
Cecilia Edstrom, Corporate Relations tel. +46 8 5538 3557 mobile tel. +46 70 588 3557 Stina Thorman, Investor Relations tel. +46 8 5538 3716 mobile tel. +46 70 518 3716 Eric Osterberg, Corporate Communications tel. +46 8 5538 5883 mobile tel. +46 70 590 0599
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