Traton SE (TRATF) Q4 2022 Earnings Call Transcript

Traton SE (OTCPK:TRATF) This autumn 2022 Earnings Convention Name March 7, 2023 4:00 AM ET

Firm Contributors

Lars Korinth – Head, IR

Christian Levin – CEO

Annette Danielski – CFO

Convention Name Contributors

Klas Bergelind – Citi

Michael Jacks – Financial institution of America Merrill Lynch

Nancy Ni – Goldman Sachs

Hampus Engellau – Handelsbanken

Himanshu Agarwal – Jefferies

Miguel Borrega – BNP Paribas Exane

Anthony Dick – ODDO BHF

Jose Asumendi – JPMorgan

Nicolai Kempf – Deutsche Financial institution

Shaqeal Kirunda – Morgan Stanley

Erik Golrang – SEB

Lars Korinth

Good morning, everybody. Welcome to the Digital TRATON and Annual Outcomes Convention 2023. Thanks for becoming a member of us right now. Along with me are Christian Levin, our CEO; and Annette Danielski, our CFO. We are going to begin with the presentation of the total yr outcomes 2022 and our outlook 2023, which we each have launched this morning. After the presentation and a brief break, we stay up for answering your questions.

Earlier than we begin, let me make you conscious of the disclaimer, which you’ll be able to see right here, which, after all, is all the time the premise of our presentation. And in case you have not executed so already, now you can obtain all related paperwork on our web site, traton.com/ir.

With that, I hand it over to Christian.

Christian Levin

Thanks loads, Lars. And in addition from my facet, an excellent morning, and thanks, everybody, for becoming a member of in.

So right now, we’re summarizing 2022 in some ways, a really, very particular yr, stuffed with challenges and to some extent, a yr that you simply’d moderately put behind you. However I might say that it took our tremendous devoted and targeted crew to attest. It actually examined our flexibility and our entrepreneurial spirit. And I might say that we managed to make very sturdy progress, particularly in our technique execution, but additionally our monetary outcomes. And let’s take a look on the major outcomes for 2022.

We took incoming orders to a stage of 335,000 items regardless of having a really restrictive coverage in accepting orders lengthy into the long run. Our deliveries, our unit gross sales had been held again by provide chain bottlenecks. We have been speaking about that in our Q1, Q2, Q3. However nonetheless, we managed first time ever to return above 300,000 bought automobiles, not least, because of the now absolutely built-in Navistar.

Each high line and backside line then clearly improved. We did higher volumes, however we additionally managed greater pricing, and we had a really sturdy underlying rising car providers enterprise, which took lastly our adjusted return on gross sales to a stable 5.1% for the total yr. I feel extra importantly, we had a optimistic pattern, particularly all through second half and we closed the yr in This autumn at effectively above 6% and naturally, extra about that from Annette these days — later from the COVID-19 and the next shocks to the totally different economies all over the world.

Bottlenecks continued all through the entire yr. They had been particularly extreme within the first half. After which we noticed gradual enchancment, particularly on the semiconductor state of affairs all through the second half.

Then there may be the Ukraine struggle, which additional exaggerated the headwinds for these already careworn provide chains hitting very weak publish COVID restoration and particularly turned in on logistic, the worldwide logistics methods.

In a means unusually, transport markets had been much less affected by this turmoil, possibly a lot of you’ll have anticipated them to be as secure as many different elements of the economic system. However that is not what now we have seen and what we see. In all probability as a result of there’s a very excessive demand for renewal. The fleet is getting older and older additionally within the developed a part of the world, but additionally as a result of there’s a good underlying transport demand.

We wanted to implement broad-based value will increase as a result of we took on uncooked materials and vitality value will increase. And we realized find out how to deal with not solely Latin America however in the remainder of our system, traditionally excessive inflationary pressures. In fact, adopted then by central banks taking motion and rising rates of interest.

One further remark to the yr. Due to the struggle in Ukraine, we did announce additionally the disposal of the MAN and the Scania, each Gross sales and Monetary Companies companies. In Russia and within the meantime, we additionally utterly accomplished the sale of those Russian actions in response to plan. And Annette will present extra details about that in a while in right now’s convention.

Okay. Trying on the demand facet. All our manufacturers recorded a really sturdy underlying buyer demand, as you may see on this image. We had a great progress of deliveries, particularly within the fourth quarter. And really, now we have a consequent improve all of the quarters since quarter two after all, supported by setting headwinds in our provide chains.

We stuffed up the order e book very effectively regardless of being, as I mentioned earlier than, fairly restrictive in accepting orders past 12 months into the long run which means about what you may see on this image is greater orders than supply, therefore, and additional elevated backlog and longer supply instances. That is, after all, detrimental for our prospects, but it surely’s, after all, giving some consolation for our monetary outcomes and our outlook of 2023 as our manufacturing for this yr is kind of utterly bought out.

So in these difficult instances, we did handle to convey the TRATON GROUP ahead and as I mentioned, particularly when it comes to our technique, our so-called TRATON Manner Ahead. And let me take a couple of highlights, beginning with the electrification journey. We additional expanded our providing, and we ready much more introductions of recent automobiles and providers for the upcoming years. You all noticed the MAN heavy eTruck that was displayed finally yr’s [indiscernible], 4 deliveries in 2024 with an impressing every day vary as much as 800 kilometers per cost. We’re amassing orders from prospects and demand is most promising.

Additionally, Scania expanded its already present portfolio of BEVs, introducing a BEV truck that now cowl all main purposes inside regional lengthy haulage purposes. 40-tonne vehicles, which might journey as much as 350 kilometers on one cost, which truly covers a giant a part of right now’s conventional European long-haulage market.

But in addition Volkswagen Truck & Bus introduced, a world information, the 17-ton Volkswagen e-Supply, which is the heaviest electrical truck truly ever manufactured within the nation of Brazil. And we noticed rising demand for electrical bus options, particularly for inner-city visitors and for college buses. We noticed the IRA, the Inflation Discount Act within the U.S. supporting electrical college buses. And we noticed particularly European cities shifting into electrical buses the place MAN did good enterprise in most of the large capital equivalent to Copenhagen and Oslo to say a couple of. So our deliveries in consequence and our orders proceed to realize additional momentum, and we did all in all, all through 2022, ship 1,740 full electrical automobiles and bought 2,366 orders.

One prerequisite and maybe an important prerequisite to proceed the transition into electrical automobiles is charging infrastructure. And to do our a part of that transformation, now we have based along with our major rivals, Volvo and Daimler, the now named Milence three way partnership. So this summer season, we bought the antitrust clearance from the EU and Milence kicked off its operation, beginning working in the direction of a rollout of Europe’s first, hope will likely be first, public charging for heavy industrial automobiles alongside the principle highways in Europe.

We bought shortly a really skilled administration crew in place who will run this firm and assist our transportation to electrical highway transport. So it is an important begin, however there may be rather more to be executed within the space of infrastructure, and it isn’t solely as much as us. It is as much as companions, each non-public and public, and it is actually as much as regulators to now assist a quick transformation to finish CO2-neutral car and transport.

Okay. So there are automobiles and they’re electrical and there are electrical infrastructure in place, and that’s with 100% inexperienced electrical energy. What’s then the problem for our business to additional decarbonize? Effectively, it is going to be all in regards to the provide chain. And due to this fact, Scania, because the forerunner in 2022 took the important thing initiative to arrange targets, formidable targets to decarbonize additionally the availability chain.

And I am very proud to say that we’re taking sustainability to the subsequent stage. We’re taking the lead in TRATON, we’re taking the lead within the business by saying that in 2030, our goal is 100% inexperienced batteries, 100% inexperienced metal, 100% inexperienced aluminum and 100% inexperienced forged iron in our manufacturing.

As a result of at that time, emissions will then be again to what’s within the car manufacturing within the car provide chain. And in case you simply take the batteries on a BEV, it’s going to stand for greater than 50% of the CO2 footprint. So it will assist rural transformation inside Scania in addition to the entire TRATON GROUP in the direction of extra — being a extra sustainable firm.

One other tremendous essential milestone is the introduction, the group-wide introduction of what we name the TRATON Modular System. So a typical product platform for all of the manufacturers within the group. And the key milestones up to now is, after all, the launch of what in Scania is known as the Scania Tremendous.

Scania being the primary model within the group to introduce this 13-liter Frequent Base Engine platform however together with additionally a typical gearbox, a typical aftertreatment system software program and rear axle gear. It provides an impressive gasoline effectivity, and now we have already gained a number of unbiased checks, I might say essentially the most prestigious being the 1000 Level take a look at right here in Germany, but additionally the Inexperienced Truck award for the sixth time in a row.

Manufacturing began up early 2022 in a really demanding surroundings with, I need to say, sadly, a number of hiccups, however is now ramping up and is predicted to speed up all through the primary half and to be finalized throughout 2023. However adopted on this similar yr by Navistar, who launched throughout June final yr, and taking buyer orders for deliveries throughout the second half of this yr.

And I am coming again to that slightly bit later. So standardized parts that’s good, that creates scale, however to actually obtain the mixture of tailor-making with scale, it’s essential to go to utterly modularized system. And due to this fact, it’s essential to introduce the three rules of modularization and also you want there to have standardized interfaces.

You want effectively thought by way of efficiency steps and it’s essential to apply to the precept, same-need an identical resolution. And that is what now we have determined to do contained in the TRATON GROUP, and we, after all, focus totally on the long run, which means our battery electrical automobiles, and our software program architectures that will likely be based mostly on this and that will likely be shared. However to assist that, we additionally must optimize and alter our construction.

So now we have already world central R&D unit, and now we have a product administration world central unit set as much as outline one highway map for our services and products based mostly on the distinctive buyer wants from all our manufacturers throughout the entire group. So we foster extra collaboration, extra simplification throughout the group and we take away waste, we take away friction and we take away pointless coordination, which means that we are going to be extra environment friendly within the allocation of our sources.

Lastly, in our technique, we make the most of the chances inside digitalization and new enterprise mannequin to form the way forward for transport and logistics ecosystems. And Right here, I am proud to say that three of our manufacturers, Volkswagen Truck & Bus, Scania and MAN, all delivered self-driving truck options to prospects in several stage of improvement, I might say, and throughout very totally different utility areas, as you may see on this image with a Brazilian harvester in a sugarcane discipline. These purposes are all appropriate for autonomous driving.

In Scania, we proceed to work with Rio Tinto now within the iron ore mines in Australia and now we have made plenty of trials and reached some actually good key milestones in 2022, the place we will run full with driver out with simulating load and conveying cycle environments within the mine. New milestones to be reached all through this yr in that undertaking. So we proceed to do discipline expertise along with buyer, we accumulate extra knowledge, we study and we enhance and this chapter, after all, has nearly began.

Earlier than I am handing over to Annette, let me sum up this primary half and this 2022. We, TRATON, proved our resilience and we delivered a strong monetary efficiency in a most difficult enterprise surroundings. We did document ranges in each unit gross sales and in gross sales income. Our order books are effectively stuffed, and they’re supported by continued sturdy buyer demand for our automobiles and providers. We made crucial steps within the execution of our TRATON Manner Ahead technique alongside all of the 4 key pillars.

And as well as, we managed to finish the disposal of our enterprise actions in Russia. And with this, Annette, the stage is yours.

Annette Danielski

Thanks, Christian, and a heat welcome from my facet as effectively.

Trying again at 2022, the struggle in Ukraine has been dominating our enterprise surroundings, however it’s excess of that. It is a human catastrophe and I really feel with the folks within the Ukraine and their households. Two years into the pandemic, COVID was and remains to be a part of our lives. Final yr, we skilled a major improve of costs for uncooked supplies, parts and vitality.

We confronted shortages in semiconductors and tires and plastic elements, shopping for harnesses and lots of extra. Drivers had been quick in each inbound and outboard transportation. We noticed sturdy demand however with bottlenecks within the provide chain, the manufacturing flows had been interrupted with siting and lengthy lead instances.

We, as a world firm managed all of this extremely skilled and we grew stronger collectively as one crew. Collectively, we achieved an honest consequence with greater than 300,000 items bought, gross sales income above €40 billion and an adjusted working outcomes of €2.1 billion, all new document ranges for TRATON. Lastly, we achieved an adjusted return on gross sales at a stage of 5.1%.

Allow us to now take a look at our monetary efficiency within the fourth quarter in addition to the total yr 2022 in additional element. Two indicators in our business are unit gross sales and incoming orders which you’ll be able to see on the left of this slide. Beginning with the total yr, incoming orders declined barely by 7%, however they remained on a wholesome stage with a book-to-bill ratio of 1.1. Within the last quarter, orders had been decrease year-on-year at 78,000 items. There are two drivers for this decline.

Navistar booked the retroactive adjustment of the total yr order consumption in This autumn, and we proceed to be restrictive in accepting orders as we’re tightly managing the availability chain state of affairs and the enter prices. Nonetheless, the event of order consumption is extra pushed by provide and the flexibility to provide and ship later than by demand.

Our very excessive order backlog is already overlaying the overwhelming majority of 2023 manufacturing. Our unit gross sales, which you’ll be able to see in the precise graph, had been considerably up by 16% within the full yr 2022. Importantly, we recorded enhancing quantity in every quarter of the yr.

This was supported by continued gradual easing of the availability chain shortages and improved manufacturing ranges. Our world enlargement was very profitable. And in consequence, in 2022, we bought greater than 300,000 automobiles for the primary time in TRATON historical past. Right here, you may see our gross sales income improvement with a separate car service enterprise contribution. Gross sales income elevated by almost 1/3, each in fourth quarter in addition to within the full yr.

Prime line progress has clearly exceed unit gross sales price of 16% in This autumn and 12% within the full yr, that are defined on the chart earlier than. This was pushed by step by step improved unit gross sales and powerful pricing initiatives and supported by optimistic results from change fee actions. As well as, gross sales income from Car Service enterprise once more delivered double-digit share will increase. In consequence, and for the primary time, the TRATON GROUP recorded a gross sales income of greater than €40 billion in 2022. And with the dynamic quarterly income enchancment all year long, we ended the yr on a really optimistic word with €11.8 billion in This autumn.

This sturdy efficiency is proof of the flexibility of TRATON to shortly react to the modifications in surroundings. On the similar time, the group’s resilience improved additional because the Car Service enterprise continued to realize increasingly traction. Transferring to our working websites and profitability.

Most significantly, we recorded a really optimistic improvement because the second quarter. The adjusted working consequence got here at €724 million within the fourth quarter, a robust enchancment in comparison with the ultimate quarter of final yr.

This corresponds to adjusted return on gross sales of 6.1%. The optimistic improvement was primarily pushed by the upper deliveries and corresponding enchancment in capability utilization. As well as and importantly, with the profitable execution of our pricing initiatives, we had been in a position to compensate for considerably elevated enter prices. Each within the quarter in addition to within the full yr 2022. In consequence, adjusted return on gross sales amounted to five.1% for the total yr.

We reached, as forecasted, the decrease finish of the projected vary of 5% to six%. Regardless of the numerous challenges in our surroundings, we had been in a position to virtually attain return on gross sales of the prior yr. Once more, this consequence underpins the improved robustness of the TRATON GROUP. Allow us to take a look on the model’s efficiency with particular give attention to the fourth quarter. Scania Car & Service benefited from greater volumes, value and blend results and vital progress in Car Service enterprise.

At an adjusted return on gross sales of 10.5%, Scania returned to a double-digit margin. However, margin was nonetheless held again by chosen headwinds within the provide chain, tight logistic capability and materials value inflation. The adjusted return on gross sales of MAN improved to 1.8%. This was pushed by higher mounted price absorption by way of greater deliveries and progress within the Car Service enterprise in addition to value results. The numerous price will increase for materials and vitality prevented a stronger consequence.

Navistar confirmed a really compelling efficiency with return on gross sales of 5.9% regardless of continued provide chain constraints. The event was primarily pushed by elevated unit gross sales, main to higher manufacturing utilization in addition to sturdy implementation of pricing initiatives. Volkswagen Truck & Bus achieved a return on gross sales of 9.3%. Once more, improved pricing was a serious driver. Manufacturing remained on a excessive stage within the fourth quarter whereas supply of about 4,000 items had been shifted to Q1 2023 to handle the transition of the brand new emission regulation.

Lastly, the Monetary Service enterprise recorded a robust progress, primarily on the again of the enlargement of its portfolio. Increased funding prices had a counteracting impact on the margin, which climbed to 23.7% in opposition to a really excessive prior yr foundation. Allow us to take a look on the earnings after tax and the earnings per share within the full yr. Start line of the earnings web page on the left is the adjusted working results of €2.1 billion. The changes had been primarily associated to the struggle in Ukraine and particularly the disposal of enterprise exercise in Russia.

Please word that we are going to document and regulate for a particular impact of minus €108 million within the first quarter 2023. This pertains to the sale of the Scania Monetary Service enterprise in Russia which was closed on January 17 after the year-end. The corresponding working consequence got here at €1.6 billion was €1.2 billion greater than within the prior yr. The earnings per share greater than doubled to €2.28, up from €0.91 within the earlier yr. Primarily based on this good efficiency in a difficult yr, the Govt Board and the Supervisory Board of TRATON will suggest a dividend payout of €0.70 per share on the annual January assembly in June.

This corresponds to a payout ratio of near 31% of our earnings after tax. This leads me to our web money move improvement. TRATON operations achieved a robust web money move of greater than €700 million within the last quarter of the yr. This brings the total yr to minus €625 million. Excluding the impact from Scania’s fee associated to the EU antitrust proceedings, web money move amounted to €312 million.

The steering vary of €700 million to €1 billion was not reached. The primary driver for this deviation had been working capital actions on account of provide chain headwinds and shortages and logistic capability, which led to higher-than-expected stock ranges, the changeover to the brand new emissions executed at in Brazil, and better receivables on account of elevated deliveries within the last quarter. Investments are barely greater year-on-year at round €2 billion.

Given the constraints within the provide chain, we elevated the extent of inventories to make sure a extra fixed manufacturing move in our vegetation and to ship car to our prospects as quick as doable. In Brazil, we elevated our inventory ranges of completed automobiles with a purpose to deal with the changeover to the brand new emission commonplace.

By doing so, we had been in a position to retrofit the manufacturing and allow deliveries to our sellers within the first quarter 2023. With the implementation of those measures, we’re effectively ready for a great begin into the yr 2023 with a transparent focus of additional optimized working capital and to cut back our web debt place. This brings me to the subsequent web page of our presentation. As you may see, web debt of period operation elevated to just about €3.6 billion by the year-end 2022. Key drivers for this improvement was a settlement of authorized proceedings and dealing capital actions.

Including the €4.2 billion beneath company gadgets, brings a complete web debt in our industrial enterprise to a stage of €7.7 billion. Please word that the online debt determine can be impacted by deadline results associated to the sale of Monetary Service exercise of Scania in Russia. Web debt by year-end 2022 included a detrimental affect of €670 million for the Russian entities. The associated optimistic impact from the acquisition value of €400 million was booked in January 2023 following the closing of the deal. To wrap it up, the buying and selling group managed the challenges on this particular yr very effectively and improved its vastness based mostly on the expanded world footprint.

We’re effectively ready for 2023 with a full order e book, enhancing manufacturing in our vegetation and with full give attention to supply automobiles to our prospects and managing our working capital. We’re strongly dedicated to ship, and we’ll.

Now let me hand again to Christian to current you the strategic focus areas for 2023.

Christian Levin

Sure. Thanks, Annette.

And I might say that our focus areas keep secure for 2023 and past. The highest precedence for the TRATON crew is crystal clear. we have to execute and we have to ship. And doing so, we have to present sizable steps in the direction of reaching our strategic monetary targets. So the crew and myself, we imagine, greater than ever, that we are actually not off course, and now we have the precise strategic priorities laid out.

In fact, you all the time must adapt. We’ve got realized the arduous means all through the final couple of years to modifications within the surroundings, however our technique stays unchanged, and the priorities are crystal clear. So let me take you into all of our 4 strategic pillars on the upcoming slide.

And beginning with the primary one, which is to be a accountable firm, and an important a part of that’s, after all, to decarbonize transport. And as I mentioned earlier, Scania begins the deliveries of the brand new 40-ton eTruck vary for regional-haulage to prospects this yr. It is a big step on the way in which to return to zero emission automobiles.

We expect electrified unit gross sales with this to strongly improve as we are actually lastly addressing what’s the major phase of our complete gross sales, not solely in Europe, but additionally outdoors. In MAN, we’re getting ready the Munich plant to begin the manufacturing of the electrical heavy-duty truck originally of subsequent yr, 2024.

Plenty of questions are approaching batteries, provide of batteries and that’s, after all, a strategic a part of the shift out battery electrical automobiles. We’ve got come to the conclusion that we are going to supply, we’ll supply cells from exterior companions, companions we’ll work very shut with. However our battery fashions and our battery packs, they are going to be produced in-house, and they are going to be produced near the principle meeting traces. And due to that, we’ll, in 2023, begin up manufacturing within the already introduced Scania plant that’s within the last stage of building proper now in Södertälje, and simply subsequent to the Swedish and meeting line.

Concurrently, now we have began up building of a big sequence battery plant at MAN in Nuremberg which can start this yr, however meant to provide battery packs as from 2025. Complete capability above 100,000 packs per yr. This plus intensifying actions within the ecosystem, together with the creation of Milence, the charging infrastructure will take the primary high-performance battery electrical automobiles into operation and hopefully, with a speedy ramp up. The second pillar is creating worth. Worth creation wants to enhance within the TRATON GROUP and a key a part of that’s executing the MAN’s realignment program.

And it must be this time a sustainable change. And 2023, we’re all effectively conscious, we’ll be a decisive yr when we have to present and MAN wants to point out the world that it’s rising stronger than ever and that the measures which have been put in over the past two years make a major contribution to MAN’s backside line, but additionally the TRATON GROUP’s monetary efficiency.

And it is wanting good. MAN’s transformation, nonetheless, invisible on the 2022 consequence consequence, as Annette simply confirmed, is seen in lots of different methods. And it’s essential to do not forget that MAN had a very robust yr on the availability chain facet and on the quantity facet as a consequence final yr.

However we will see improvement on all three constructing blocks on this realignment. We see a leveraging on pricing on volumes we see a minimal impact from materials prices, and most significantly, we see a brand new construction rising and rising in response to plan. So all through 2023, a key structural initiative will begin to materialize and they’ll make a considerable contribution to the underside line consequence.

Maybe the most important one is the sale of the Steyr website in Austria and the next ramp down of manufacturing and shift of capability which is step by step taking place as we converse and coming to an finish by the summer season holidays this yr. And by that, we should always actually begin to see a full affect on the P&L of MAN.

By that, and additional shifting our manufacturing capability over to Krakow in Poland to be anticipated to be finalized ultimately of the fourth quarter, we’ll see 2/3 of MAN’s truck meeting to be situated in best-cost nations.

Additional on, we take, sadly, personnel measures as effectively in MAN, they’re being executed this time, and they’re effectively on observe. And by that, we proceed to create a extra versatile firm, an organization ready for modifications and an organization that may tackle modifications within the surroundings and in its market. And by persevering with to work in MAN, the crew has additionally determined themselves to begin the restructuring of the bus operation provided that they do not see a sustainable profitability within the present setup, however extra about that within the upcoming quarters. Third pillar, TRATON Accelerated.

So taking digitalization, new enterprise fashions into what could possibly be the most effective to our prospects. And one factor I wish to spotlight right here is the creation of our group-wide Monetary Companies firm. We’ve got been ready for nearly a yr now, and we’re virtually prepared for launch. We’ve got a lot of the approvals from the regulatory our bodies that we’d like, and now we have virtually all the choices wanted to begin operations. And that is the expectations for this yr.

It is, once more, execution. It is to go dwell and it is to stepwise ramp up again workplace and entrance workplace capabilities for all our 4 manufacturers with all of the Monetary Companies, all their merchandise in order that they are often delivered to the good thing about all prospects of the group. As you understand, we use Scania’s extremely profitable Monetary Companies operations as a spine, as a basis for this creation and create separate entrance workplace for every of the manufacturers.

In Navistar, their Monetary Companies anticipated to begin up throughout the starting of the fourth quarter this yr, whereas for MAN and Volkswagen Truck & Bus, it will likely be a gradual takeover of market by market from — that’s presently being served by Volkswagen Monetary Companies. And we’ll, after all, report on this all through the rest of this yr.

Transferring on to what’s maybe an important pillar within the execution a part of the technique of TRATON to roll out the widespread product platform, the TRATON Modular System. And the subsequent seen step of that technique — that journey is the launch of the Worldwide S13, that’s the identify that Navistar has given the engine and driveline platform within the Worldwide heavy truck vary. It is based mostly on the CBE the place we have already got a extremely aggressive built-in powertrain and it will likely be — begin to ship to prospects within the second half of this yr.

And it is impressing as a result of along with an up to date aerodynamic package deal, — this powertrain will provide as much as 15%, 1-5 %, improved gasoline effectivity, which is a real sport changer within the market for Navistar. However not solely the gasoline effectivity is essential, additionally for us that we will lastly provide to the shoppers of Navistar an built-in in-house service providing based mostly on captive parts.

Now suggestions from prospects is extraordinarily optimistic. And I am very assured that we are going to see an excellent pickup fee rising through the years to return. And this ramp-up of this powertrain will first be supported out of Europe from Scania, but additionally in a while from Latin America, the place Scania is presently introducing the identical driveline, however will step by step evolve into absolutely unbiased manufacturing at an upgraded Huntsville website in our Navistar plant there in Alabama.

And to assist the rollout of this TRATON Modular System, we wanted to implement a brand new steering philosophy and a brand new organizational construction. And I already talked right now about our world product administration perform that’s headed by Catharina Modahl Nilsson but additionally about our world R&D group that’s dealt with by Anders Williamsson.

However right now, I am very, very glad to announce that we’re additionally launching two new world features, the one for buying and the one for manufacturing. And now we have appointed Murat Aksel, who’s presently a Board member for Buying at MAN to imagine the group-wide duty for Buying. And we’re appointing Stefan Palmgren as from right now to be accountable not just for manufacturing at Navistar, but additionally to take the lead in your entire manufacturing community of the TRATON GROUP.

Now this new steering and this new construction is critical with a purpose to strengthen the collaboration and the introduction of the modular system to have a coordinated system, a coordinated governance as an alternative of getting waste, friction and coordination. So all the industrial features, all the industrial operations will thus be represented in an prolonged TRATON Truck Board.

However after all, the manufacturers stay the spine of the group’s enterprise efficiency. And the intersection between the manufacturers and the general industrial operation is the inspiration for our sustainable worth creation and our scale results going ahead. However shifting to a subject that can be very, very near my coronary heart. It’s the firm tradition. And I am satisfied that the corporate’s tradition is completely key to the enterprise success of the identical firm.

So we determined to overview our company values within the TRATON GROUP. We’ve got a brand new member of the family with Navistar becoming a member of in and we have to speed up collaboration and execution all through your entire group. So this overview has been accomplished. And I am very proud right now to introduce our new company values that will likely be rolled out as from right now with the highest administration assembly later this afternoon throughout your entire TRATON universe. And these are buyer first, respect, crew spirit, duty and elimination of waste.

These values will likely be our North Star and orientation for collaboration between our staff and the way we act as an organization in our markets and in our surroundings. Now values, they all the time work collectively one after the other, they do not make a lot sense and they’re utterly relying on one another, and so they additionally complement the TRATON objective, remodeling transportation collectively for a sustainable world. That takes me into the outlook and our major assumptions for the upcoming yr. Because the struggle in Ukraine sadly continues, it’s nonetheless anticipated that world economies will develop, though at a slower tempo. Costs for key uncooked supplies have declined from their peaks, however uncertainty is excessive.

And we anticipate inflationary pressures to stick with rate of interest prone to additional rise. We’ve got enter price inflation that may proceed. We are going to see incremental price strain now coming from wage will increase and from vitality in all probability moderately than what now we have had to date based mostly on uncooked materials. And our provide chains are anticipated to proceed to ease step by step however we’ll sadly nonetheless see chosen bottlenecks and lack of logistic capability, making our life a continued problem.

We anticipate buyer demand although in most world markets to be resilient to those financial fluctuations as a result of there’s a excessive want for substitute, the fleet age is rising in virtually all of our markets, and we proceed to see a robust underlying demand for logistics providers and therefore, transport capability.

That brings me in to the outlook for our key areas of the truck markets. In 2023, our truck markets are anticipated to proceed to be strong with a unique improvement in the important thing areas. Most forecast for truck markets in Europe and in North America fluctuate between a minus 5% to plus 10%, a slight enlargement on the midpoint of those ranges. The place South America, these markets will expertise some slowdown triggered by the introduction of the brand new emission commonplace CONAMA P8 in Brazil.

And our present estimates are for a minus 15% as much as a flattish improvement. And we’d like to not overlook, there’s a very excessive diploma of uncertainty in all of our market. And we’d like as a bunch to be ready to shortly react to any change in these forecasts.

And with that, I hand over to Annette.

Annette Danielski

Thanks, Christian.

And now on to the total yr outlook of the TRATON GROUP. As you may see, we modified the methodology and now present the forecast ranges for all key KPIs to boost understanding and monitoring of our improvement. Our focus for this yr is evident. We try to realize a major enchancment in our efficiency.

We’re wanting on the fiscal yr 2023 with optimism, and that is mirrored in our monetary forecast. Primarily based on the excessive order backlog and improved provide chains, we anticipate a considerable improve in truck unit gross sales. Against this, bus unit gross sales are anticipated to reasonably decline. In complete, we anticipate each unit gross sales and gross sales income to develop by 5% to fifteen%. Additional, we anticipate adjusted working return on gross sales within the vary of 6% to 7%, a major enchancment in comparison with the 5.1% recorded in 2022.

We’ve got our sights set firmly on our goal return of 9%, and intend to take an important step in the direction of our goal this yr. That is strongly supported by the strategic initiatives we introduced to you earlier. Lastly, we anticipate a web money move for commerce and operations within the vary between €1.3 billion and €1.8 billion.

Again to you, Christian, on your last remarks.

Christian Levin

Nice. Thanks, Annette.

So earlier than we transfer into the Q&A session, let me summarize the important thing takeaways from right now’s convention. In a extremely difficult surroundings, TRATON offered its resilience and delivered a strong monetary efficiency. We recorded a excessive stage of incoming orders, we strongly improved unit gross sales and elevated gross sales income to document ranges, backed by a step by step enhancing provide chain.

There may be good momentum in gross sales and profitability is optimistic regardless of being held again by provide chain bottlenecks and comparatively low manufacturing utilization. So our focus for 2023 may be very clear. We purpose for a major enchancment in our efficiency and to take essential steps in the direction of our goal return. So in 2022, our technique and our becoming a member of our forces to form the transition to sustainable transportation entered into a brand new section. And 2023 would be the yr to implement execution of our TRATON Manner Ahead and we’ll ship.

Thanks.

Lars Korinth

Thanks, Christian. We could have a brief break earlier than we’ll enter the Q&A session. So keep tuned.

Query-and-Reply Session

A – Lars Korinth

All proper. Howdy, everybody, and welcome again to the Q&A session, which we’ll now enter. [Operator Instructions] And with that, now allow us to begin the Q&A and take the primary query and which comes from Klas Bergelind from Citi. Klas the stage is yours.

Klas Bergelind

Thanks Lars, hello Chris and Annette, Klas at Citi. The primary one I had is on the worth improve that you simply’re pushing by way of. I feel it is a reasonably large carryover impact on pricing into the primary half, however you are guiding unit gross sales and revenues on the similar tempo. Is there a detrimental combine affect that you’ve got baked in into that ASP quantity? Is it slower service progress versus greater unit gross sales because the bottlenecks ease? I am making an attempt to know what sort of pure value assumption, Christian, that as a part of your information. I will begin there.

Christian Levin

Thanks, Klas. I will shoot that query straight over to Annette who’s a grasp of the steering.

Annette Danielski

Okay so thanks for this, okay thanks Klas. Sure, you might be proper, it we could have affect from the pricing 2022 and 2023. So we’ll see there additionally the total yr impact, however we even have then a unique combine slightly bit. And that is the principle subject. And in addition the tempo of the service enterprise, we’ll proceed, however it will likely be not on the excessive ranges that we noticed in 2022, as a result of the fleets will likely be renewed and new vehicles got here in and this is the reason we’re forecasting this improve the identical as a gross sales improve.

Christian Levin

Thanks, Annette, nice. And if I add there in, Klas, slightly bit from the shopper finish, there’s a little — possibly surprisingly slightly resistance now from prospects as these value will increase have been moderately hefty, each on the brand new car facet and on the half facet and repair facet, and we bundle that right into a month-to-month installment. So discussing with the shopper did not purchase automobiles for a yr or two, it begins to be slightly bit cumbersome.

However up to now, we’re coming by way of in the principle markets. However after all, we have to – we have to someplace anticipate that this can’t proceed. So, we have chosen to be moderately conservative on this. And due to this fact, we’re guiding as we’re. However to be sincere, up to now, within the first couple of months, we’re getting continued value will increase by way of and we compensate greater than effectively for the uncooked materials and vitality price will increase. I hope that was sufficient to…

Klas Bergelind

No, that is sensible. Sure that is sensible, however there may be some form of carryover, proper, into the primary half on pricing?

Annette Danielski

Sure.

Christian Levin

In fact, there may be.

Klas Bergelind

Sure, sure okay. My second and last one is on the deliveries. After we have a look at the VW supply report, clearly, Scania ended over 10,000 in December, however solely 5,000 for January. I assume that is your seasonality after a robust year-end. Nevertheless it’s fairly a giant distinction and in addition relative to your fairly bullish unit gross sales information for the yr?

I do know its early days, proper? However how ought to we take into consideration the short-term margin trajectory if Scania begins the yr at a slower tempo? Will we see form of a weaker margin within the first quarter versus fourth earlier than we ramp up on the tremendous by way of the yr, Christian?

Christian Levin

Sure, I am not going to information you on the margin within the Q1, as you understand, but it surely’s a great query and it has a few underlying causes. So sure, after all, we had been moderately pushy ultimately of the This autumn. We had been disenchanted. We did not get quantity by way of. We had all the issues on this planet with the availability chain and as from November, we actually got here collectively and began to ship.

So there was some form of a catch-up impact, and we additionally did a great job emptying our yards. So we principally had nothing on the commercial yards, and we had fairly empty yards additionally at dealerships, the captive dealerships. In order that explains the form of overshoot in December. However we’re planning 2023 to be above 100,000 vehicles and to be there, after all, we must be within the vary of 8,000 to 10,000 per 30 days.

January is considerably decrease. I might provide you with two major causes for that. The primary is that we stopped utterly our Brazilian manufacturing unit in Sao Paulo. So we wanted additionally there to rebuild to absorb the Scania Tremendous which is now, and by the way in which, have had a really, excellent begin versus Europe the place we had a number of bother. However from 1st of February, we’re up and operating absolutely with the introduction of the Tremendous in Brazil.

So in January, you misplaced that 120 per day in manufacturing capability. The opposite is just not manufacturing truly we produced virtually in response to plan. We misplaced 5% in January in Europe. However you understand our system. So, we emptied the yards of the sellers in This autumn, which means that we fill them up now in January, and that may proceed all through February.

However sure, that is form of an overswing. I anticipate the system to stabilize in Q2 maybe the place we’ll see a steadiness between actually good manufacturing unit output and in addition actually good deliveries to finish prospects from the captive vendor community. So these are the 2 major the explanation why January was low when it comes to volumes.

We see different good issues. We see margins. As you mentioned, there’s a good realization on pricing. We see service volumes persevering with to develop at an excellent tempo.

So I am not nervous for Q1 to inform you the reality.

Klas Bergelind

All proper thanks.

Christian Levin

Thanks Klas.

Lars Korinth

Thanks, Klas. And the subsequent query comes from the road of Michael Jacks from Financial institution of America. Michael, good morning.

Michael Jacks

Thanks Lars, and good morning Christian and Annette, congrats on a robust end to the yr. My first query is simply on the money move steering. How a lot of the working capital launch are you factoring every of the total yr steering, that is my first query? After which the second query is simply on the MAN structural measures?

Can you maybe quantify for us the extent of enchancment anticipated within the second half from the switch of the Steyr plant and from personnel measures? After which I assume additionally on the anticipated uplift from shifting manufacturing to Krakow, which I believe will likely be extra accretive for 2024? Thanks.

Annette Danielski

So for the money move steering, it doesn’t embody a optimistic affect from working capital as a result of now we have full order books for the yr 2023. And so, we additionally imagine on the year-end, we could have greater stock. And people are the availability chain shortages that we skilled. So, now we have to have slightly bit greater stock to run the plant on a clean manufacturing stage. I feel it is extra essential for us on this one.

The advance primarily within the money move comes actually from our enchancment within the working consequence. And in addition – as a capital expenditure and R&D, you noticed the rise additionally burdened our money move, however we nonetheless have a great steering with a midpoint of 70% money conversion fee, and I feel that is okay. You wish to add?

Christian Levin

Sure, no – I feel you coated it effectively on the money facet. Michael, you additionally requested in regards to the MAN and we’re – we spent me and Annette, we spent a day with MAN yesterday truly on – the larger administration crew to form of strain take a look at the place are we, – and are we on plan? And that that is, after all, a troublesome industrial train that we’re into, together with the HR measures that aren’t to be seen, particularly not in Germany.

However we’re effectively on observe, and we really feel assured that we will, thanks to those measures be up and operating on the 7% return on gross sales stage in MAN that now we have got down to do on our extra strategic path to take them to eight%. So we’re concentrating on 7% for the yr.

Michael Jacks

Okay understood. And I might think about that there will likely be fairly a giant distinction between the primary half and the second half efficiency?

Christian Levin

Sure, you will note a gradual improve all year long and particularly as you had been into there with the Steyr closure, that may fairly dramatically cut back the associated fee per car. However we expect to see good outcomes already from Q1 popping out of MAN. I imply, there has, been many different measures taken into – motion already all through 2021 and 2022.

And the principle motive they didn’t come by way of final yr was the dearth of quantity. So – and volumes are wanting good. We’re seeing a extra secure manufacturing from MAN and the ramp-up of the plant in Krakow goes truly in response to plan this yr, so touchwood.

Michael Jacks

Okay excellent, thanks.

Christian Levin

Thanks Michael.

Annette Danielski

Thanks.

Lars Korinth

Thanks Michael. We’ve got a subsequent query from Nancy Ni from Goldman Sachs in line. Nancy, good morning.

Nancy Ni

Hello, good morning, and thanks Lars for my query. I take the one in your EV battery investments. I assumed the remark will likely be fascinating. And a few of your friends have truly determined to go form of direct into cell manufacturing. So I am simply form of questioning why and you’ll not take into account it the cell core and form of who will you provide from — and who you’ll get your provide from? And in addition, simply generally, in your EV form of it is arduous to imagine is in the identical line as your ICEs.

Christian Levin

Nice. Good query, Nancy. Sure. So we classify all parts which are in our automobiles in three classes. Both we classify them as core or strategic or as nonstrategic. And parts which are core, we wish to each develop and manufacture ourselves in-house. If there are strategic, we wish to develop or codevelop and we wish to produce or co-produce with suppliers or companions.

And on the subject of the battery cell, it’s, after all, essential for the efficiency of the car. It’s not as essential because the software program which the platform is operating on. So now we have taken the choice to categorise this as strategic, not core.

And therefore, it is completely effective for us to produce the cells as such from a companion. What’s essential right here is it isn’t conventional provide buyer relationship, but it surely’s actually a partnership the place now we have, on the cell facet, on the cell chemistry facet, now we have plenty of inner analysis. So we actually codevelop with our companions. And you understand what we’re presently in Scania, working with prominently with Northvolt, the place MAN working with CATL. So we’re growing this collectively.

And we predict that alongside the highway, there will likely be not initially, however there will likely be ample battery cell capability. It would, after all, be a bumpy highway. However all through that interval, we predict there are many possibilities to do actually good collaborations with companions. So due to this fact, we come to this conclusion. I do not know if you wish to add Annette, on the battery cell technique.

No? Then I’ll reply your second a part of your query was, how will we handle to fabricate? So each in Södertälje, proper now, truly, we’re integrating the battery electrical automobiles combined in on the principle meeting chain with the combustion and automobiles, and we’ll do the identical once we rebuild the MAN plant for the launch in finish of ’24 of the — deliveries in finish of ’24. So with our modularized strategy, we don’t must construct a totally new meeting line or a totally new plant. We managed to do that in an built-in means.

It’s difficult. It’s troublesome as a result of we speak about very heavy stuff. These battery packs are as much as 5, six tonnes. However so we have to rebuild the traces, however executed that, we will work utterly combined as we do right now, by the way in which, between two axles, three axles, 4 axles, 5 axles; small caps, large caps, excessive caps, low caps; small engines, V8. So I feel we’re within the business fairly good at dealing with these kind of challenges. However that is how now we have deliberate to do it in TRATON. I hope that answered your questions, Nancy.

Nancy Ni

No, that was nice. Thanks. I simply possibly I had a follow-up on that then form of given your investments into modular affect manufacturing then, do you assume you may have the required steadiness sheet flexibility?

Annette Danielski

We’ve got to have. Sure, that is one among our strategic priorities to fund this fashion the battery automobiles. And as you comply with us within the final announcement, we introduced EUR 2.6 billion that we wish to spend for battery electrical car in 5 years. And that is the place we prioritize how we spend the cash. And as Christian defined, we actually structured very effectively how we wish to spend it and allocate it to the precise means and battery electrical is one among our priorities in TRATON.

Christian Levin

Sure, that is the place we in all probability want to speculate extra, whereas, after all, in different expertise areas, now we have scaled again. In order that’s a part of the transformation.

Nancy Ni

Thanks very a lot.

Lars Korinth

Thanks. Subsequent line is Hampus. Hampus Engellau from Handelsbanken. Good morning.

Hampus Engellau

Thanks very a lot. Two questions from me. Might you simply possibly make clear on the introduction of the commonality and the modular system between the manufacturers? I assume that you are going for utilizing the identical platform, similar structure — electrical structure, gearboxes and naturally, the widespread engine that we launched. Will this be parallel to present ICE merchandise? And on the battery electrical, will that transfer into the Frequent platform, in all probability be whenever you launched the electrical platform, how ought to we take into consideration that?

Christian Levin

Sure. Nice. Nice query, Hampus, and now we have, after all, struggled ourselves internally how to do that. We additionally endure from some dangerous selections of the previous, the place we determined to not go widespread on some core parts. So the way in which you must give it some thought is absolutely to develop into absolutely modular, we have to have widespread chassis and we have to have widespread electrical structure and software program as a result of these two issues are the backbones of the automobiles.

That is the place you can begin to speak about standardized interfaces. On the electrical facet, together with software program, now we have a really stable plan, and that plan is unbiased of whether or not it is ICE automobiles or battery electrical automobiles.

In order that plan is operating for all of the 4 manufacturers independently. It would, after all, take a while. There are authorized necessities that has moderately large affect on this plan, such because the cybersecurity, the worldwide cybersecurity, authorized — the worldwide legislation truly coming into our market.

So that is operating in full parallel. Then you may have the drivelines. The driveline is the opposite large chunk of the drivelines are, after all, relying on whether or not we discuss ICE. We’re shifting over to the 13-liter Frequent platform. On the electrical facet, we’ll go Frequent from the very begin.

The large problem is the chassis. And right here, now we have, after all, struggled essentially the most that is provide you with the technique, how will we go widespread on the chassis as shortly as doable as a result of each integration is form of waste of cash, even when the element is developed by the identical crew and utilizing the identical suppliers.

And now we have come to the conclusion that we have to transfer in the direction of widespread chassis as effectively and we’ll find yourself with two chassis households within the group. I can’t provide the precise time plan of that. That’s the work of Catharina, Anders and their groups, and so they’re working intensively on this proper now, however the plan is to shift over earlier than the market is shifting utterly over to battery electrical, which can in all probability occur given the proposed laws from EU in the timeframe as much as 2040.

So speed up this. It will likely be a bumpy highway. It would price some cash, however we predict that is the quickest strategy to come to a extremely high-performing firm. I hope that answered your query, Hampus.

Hampus Engellau

Completely. Can I do extra on the second query on – because the second query on the outlook. How ought to we predict is the vary you are offering for five% to fifteen% on items. Is the 5% like simply you might be executing on what you may have within the backlog? Or how ought to we take into consideration that? And what threat do you see within the backlog provided that, if I learn you proper, Christian, on the decision right here that it is virtually 10, 12 months, we’re when it comes to backlog?

Annette Danielski

And I say we introduced the outlook in the marketplace. In order we have a look at right now to the markets in North America and Europe will likely be little bit improve, not loads. So this is the reason we vary — put the vary collectively for the market forecast. In the event you comply with this, what we see, it is a 5%, possibly 10%. However then now we have the order backlog what we couldn’t ship final yr because of the provide chain constraints and order e book is full and it is confirmed.

So we imagine it is a mixture of each. As mentioned, the markets barely elevated, are secure and that we ship what we missed final yr to our buyer. That is how we should always learn the outlook and Christian put slightly bit extra consideration on the checklist, what he sees.

Christian Levin

I imply it is also a really related query. There’s all the time threat in an order e book, and we realized a really arduous means again with the monetary disaster in 2009, the place the — actually the order e book simply managed on this interval. As Annette mentioned, the order e book right now is extra secure, first, as a result of now we have the top buyer, all the time signed. There’s a written contract. There are penalties in case you cancel and it is all financed.

So it is a stable order e book. In fact, that does not cease the shopper from canceling if that buyer doesn’t have a transport project. And trying to the outlook that’s shared within the business, North America appears very stable, so we do not anticipate any cancellations from there. Europe stable. And I might say the identical, possibly with one or the opposite market exception.

The place there may be, after all, threat is in Latin America the place not solely you may have the brand new emission laws that made the worth will increase much more hefty to prospects, but additionally the political instability. What occurred after Lula’s taking workplace and the Bolsonaro assist storming governmental buildings, that was not good for the funding urge for food in Brazil.

And also you even have a not completely secure state of affairs, if I phrase it like that, in Chile, in Argentina as typical, but additionally in Peru. So a few of our large markets there are with slightly bit greater threat. And naturally, in that sort of surroundings, an order e book is just not price a lot regardless of the soundness that we see.

So it is precisely like an Annette says, it’s troublesome to forecast. We have to plan for going with full manufacturing, lastly put it to use the way in which now we have not been ready within the final two years. However we’d like additionally to be ready to place the foot on the brakes truly in all our markets areas, however particularly in Latin America.

Hampus Engellau

Thanks.

Lars Korinth

And we’ll take the subsequent query from Himanshu Agarwal from Jefferies. Himanshu, good morning.

Himanshu Agarwal

Hello. Thanks Lars. Hello Christian and Annette. Himanshu from Jefferies. Thanks for taking my questions. The primary one is on the pricing and provide chain constraints. I see you have talked about that your receiving some resistance out of your prospects when it comes to value will increase. And in addition, you talked about provide chain constraints. And I feel that is true for a lot of the European OEMs.

However once we hearken to your U.S. peer, they’re nonetheless fairly aggressive on pricing in addition to they are saying, the availability chain constraints are largely behind them now. So why such a stark distinction between OEMs? And has it bought one thing to do with the area — regional publicity? Sure. After which I’ve a second one.

Christian Levin

Okay. I can begin, Annette you may fill in. And naturally, I can not reply for the others in North America, for example. However what I attempted to say on the primary query right here right now on the subject of the negotiations with prospects, I say that we’re nonetheless coming by way of with value will increase, and the worth will increase proceed to be utilized. So we proceed to offset and we attempt to keep forward of the inflation curve, so to say, with the pricing curve.

However we expect that there’s a level the place this is not going to occur anymore. Prospects do additionally comply with the uncooked materials value improvement, for example. And what additionally occurs additionally within the U.S., however extra so in Europe is that freight charges are stabilizing. So it is tougher for our prospects to go on value will increase to their prospects. So I — we’re coming by way of with the worth will increase.

We’re fencing off inflation. We see that persevering with however we expect in some unspecified time in the future that this can’t proceed eternally. And we expect that to occur earlier than in Latin America than in Europe. We expect that occurs earlier than in Europe in comparison with the U.S. However we expect that in some unspecified time in the future to occur.

However up till then, we’re going to be bullish. We’re simply going to maintain making an attempt. So long as our order e book is as much as 12, 13 months, why ought to we not improve costs? So I feel that is the message I wish to say. I do not know, Annette, would you want to enhance that image?

Annette Danielski

So primarily, what’s our purpose? Our purpose is absolutely to compensate for our greater enter price. Sure. And this the place we had been ready in 2022, and we wish to be additionally ready in 2023. However as we additionally comply with, the commodity costs got here down slightly bit.

So we aren’t on the peak ranges that we’re within the third quarter. So we see additionally that, that will get extra moderated. So why we should always over value. So we wish to steadiness this additionally for our prospects, and that is our major purpose.

After which you must remember now we have coming — our colleagues right here at Scania with a brand new Tremendous with a brand new CPE, the place now we have a brand new pricing to worldwide asserting is available in place within the second half within the yr, we include a brand new product in Brazil, the market is troublesome, however we include a brand new product there with a brand new engine in.

So now we have additionally pricing alternatives right here that — going down, and we’ll see and in addition we imagine that that is what now we have to steadiness. So the principle actually, for me, as finance is that we steadiness the enter price improve with our costs, and this we’re nonetheless ready and react optimistic to the request from our prospects. And I feel that is so essential, and also you pointed it already out and I feel that is what we…

Christian Levin

It was good with finishing with the worth half, if we — if a buyer within the U.S. sees a 15% gasoline discount, after all, there may be pricing energy behind that for the brand new driveline. So that’s form of approaching high. Okay. You had a follow-up query, Himanshu?

Himanshu Agarwal

Sure. And simply on the availability chain constraints, are you seeing any variations regionally? Or — and are they getting higher sequentially? And at what stage are you when it comes to the manufacturing?

Christian Levin

Sure. It appears to be slightly bit harder within the U.S. than in Europe. In Latin America, it has not been such a giant problem. In fact, a part of that system we take from Europe, so that they have been hit within the Scania facet, particularly slightly bit Volkswagen for MAN parts additionally from Europe.

However it’s easening throughout, truly. And it isn’t only one sector. It was solely semiconductors for a interval. Now it has actually been slightly little bit of the whole lot. And I feel a lot of our suppliers, and they’re — a lot of them are world, they run on actually, actually excessive capability right now.

And that could be a little bit scary from our viewpoint, as we aren’t but as an business again to the height ranges earlier than COVID. And as we see a rising demand, and now we have good order books, we, after all, anticipate our suppliers to proceed to speculate to have the ability to sustain with additional will increase.

So I feel it is a very troublesome market to learn as a result of you may have this after which you may have the form of regionalization that may be very counterproductive, that it is getting harder, costlier, extra unpredictable to ship parts over the globe, which can be, in a means, then each making it harder to foretell and plan, but it surely’s additionally making it barely costlier.

So it is actually not a world so that we’re dealing with. And I feel the procurement and the logistics groups are doing a unbelievable job to attempt to offset this, the most effective they will. And within the final quarter, they had been very, very profitable. I hope that answered your query on the availability chain.

Annette Danielski

Christian, possibly so as to add. I defined earlier than, our major goal this yr is absolutely to have secure manufacturing ranges. So we additionally — as we defined, we elevated the working capital slightly bit to safe that the manufacturing can run clean and we get the product out. I feel this we realized within the final yr very effectively with the availability chain shortages. And that is now what we’re doing.

And so we actually assume that it’ll simply — step by step ease away throughout the quarter. They’re getting higher. We are going to cease for utilizing elements nonetheless a day or two, however we is not going to stand hopefully for weeks or now we have actually a number of issues. And that is so we realized about this and take the precise measures to be extra clean manufacturing on a better stage in 2023. And that is the purpose now we have collectively.

Christian Levin

Sure. No, it is good to convey that occur. One illustration of that could possibly be the cable harness downside we had with being equipped out of Ukraine the place we, after all, proceed to be equipped out to Ukraine, and we see heroic companions working there in that surroundings. However for — to not be hit once more, now we have to construct up capability outdoors of Ukraine as a fallback. And naturally, that fallback capability someplace prices cash.

It prices capital and it has price. So that’s an instance of what you are saying Annette. In order that’s additionally why we — on the working capital facet, we must be cautious with our expectations as a result of it is extra essential to make the manufacturing system run now and actually get good price protection for each product we manufacture.

Himanshu Agarwal

Thanks.

Lars Korinth

All proper. We’ve got about 11, 12 minutes to go within the Q&A, and now we have six analysts within the line. So I wish to ask you with out being — I do not wish to be impolite…

Christian Levin

You are speaking to us now.

Lars Korinth

To limit possibly to at least one for the second. So the subsequent query will come from Miguel Borrega from BNP Paribas. Miguel?

Miguel Borrega

Hello, good morning, everybody. Thanks for taking my questions. So the primary one on the realignment of MAN. It appears there’s a number of modifications in 2023. So simply wished an replace on the operational facet of issues. So first on, is the plant in Austria already bought? And in that case, what could be the monetary affect of that?

After which start-up manufacturing in Krakow in This autumn, ought to we anticipate any modifications in manufacturing from the transition? After which lastly, personnel modifications on observe, what could be the affect of the restructuring, the headcount discount in Austria? Are you able to additionally quantify possibly a follow-up to a earlier query, the entire price saving of this entire transition? I feel I heard you, Christian, mentioning a 7% margin in some unspecified time in the future within the Q&A. I am unsure if that was H2 2023 or one thing else?

Annette Danielski

So Miguel, I wish to begin. So we bought the plant in Steyr final yr already, sure. However we nonetheless have a contract that they ship us at — till the summer season of this yr, 2023, and that is the principle driver. Then the contract runs out. And we transfer a number of the manufacturing to Krakow.

So we come to a greater price place out of this best-cost nation. And this affect, we’ll see beginning the second half of 2023, and the total affect of the shift of the manufacturing to Krakow is that now we have now closed 60%, 65% out of the manufacturing MAN at Krakow will actually be proven in 2024. So we have an effect already this yr, however the full affect in 2024. And so the revenue for the sale of Steyr, we took already in 2022. Sure, it was 2022 — sorry, in 2021, sorry, I’ve to right myself, in 2021. So the contract runs now beneath this after which we see the profit out of this.

Christian Levin

There was additionally on HR or on personnel. So what occurs is, on one hand, we’re shifting manufacturing out of Steyr, partly out of Munich and into Krakow and we’re shifting from, to illustrate, oblique to direct workforce. The proportion will go from 1:4 to 1:5. And all of this with a rise of manufacturing capability and the goal is to have the ability to do that with out rising the entire variety of staff within the firm. I hope that offers some steering to the headcount query. After which it was on the monetary.

Annette Danielski

Sure. We already introduced that with all of the measurements of the restructuring program, we wish to attain a 7% return on gross sales on MAN. We’re working strategically at 8%, sure. So we’re engaged on these.

Christian Levin

And it is a large a part of it, after all. However as we mentioned earlier than, it is also pricing. We’ve got an excellent product. We’ve got excellent providers in MAN. We’d like self-confidence.

I feel that’s coming. It is also the availability chain. We work extra within the group now collectively, and we work extra professionally on the buying, that can be contributing quite a lot of different measures which are executed on MAN. So once more, it appears actually promising that we should always have the ability to obtain in — the 8% within the longer time horizon.

Miguel Borrega

Thanks very a lot.

Lars Korinth

All proper. Thanks. We’ve got subsequent query on the road from Anthony Dick who is asking from ODDO BHF.

Anthony Dick

Thanks for taking my questions. Are you able to possibly present some additional granularity —

Lars Korinth

Are you able to converse up a bit?

Anthony Dick

Sure, Sorry. Might you possibly present a bit extra granularity into the person enterprise unit [indiscernible]. If I have a look at VWCO, for instance, you anticipate — the market will likely be declining fairly considerably subsequent yr. So I do know it is a enterprise the place you may have fairly a little bit of the variable price in your price construction, however what sort of decremental leverage you must we anticipate there? And in addition, if I have a look at the This autumn efficiency of some companies, the working leverage was fairly restricted versus the very sturdy efficiency of Scania, for instance. So simply questioning what held that efficiency? Thanks.

Annette Danielski

Anthony, in case you perceive the query, it was on MAN This autumn and improvement of MAN or…

Christian Levin

Effectively, I feel it was on the others, truly you need to give some enter.

Annette Danielski

On the others so I did not hear.

Christian Levin

No, however one query was, I perceive on Volkswagen and the way we see their efficiency going ahead, provided that Brazil may retract as a complete market. And I might say Volkswagen, as you understand, is already delivering effectively above the strategic goal and we anticipate them to proceed to be on or above their strategic goal additionally in a considerably shrinking market, they’ve an export technique that goes past Brazil, past Latin America, that may assist.

And so they have an up to date product program. Navistar is, after all, the most important lever now we have. And to get manufacturing going and get volumes out from Navistar is our goal primary this yr. And there, we actually anticipate the crew to ship in the direction of their strategic goal, in all probability not already this yr, however at the least in 2024. Scania, as you mentioned again on double-digit, we wish to do extra. And in addition see of Scania, I can say that we’re focusing very arduous to return again to 12%.

And the levers listed below are price – mounted price that has grown too shortly within the firm, particularly in comparison with quantity. And the quantity is the opposite lever. We’re, after all, pricing additionally as we all the time do, we’re being the worth chief available in the market. However volumes, wants to return again. And as I replied to Klas on the primary query, we see a optimistic quantity improvement now as manufacturing is stabilizing and we will lastly ship the shopper orders. I do know that was a fast run by way of Anthony, however as we’re quick on time, I hope that was supplying you with some steering.

Anthony Dick

Sure that is nice. Thanks very a lot.

Christian Levin

Thanks Anthony.

Lars Korinth

The subsequent one comes from the road from Jose Asumendi from JPMorgan. Jose, good morning.

Jose Asumendi

Good morning thanks Lars. Only one query, please, might you share with us, please, the output you are planning for long-haul Navistar items in 2023 in North America and in case you might touch upon the gross margin dilution between electrical truck and inner combustion engine? Thanks.

Annette Danielski

So Anthony, we’d not information on a model to be true – so I feel you see the outlook for the long-haul, and we already identified that we wish to acquire barely market share again. I feel you may estimate out of this, hopefully, what’s our estimation right here.

Christian Levin

1% to 2% market share acquire per yr.

Annette Danielski

Sure. We have already put this out. And so, I feel you may comply with us there.

Christian Levin

Sure, the cut up between battery electrical and ICE. It is slightly bit totally different in several manufacturers. However now we have – with Scania, now we have mentioned that by 2025, we must be 10% BEVs, by 2030, 50%. And MAN is an analogous trajectory, slightly bit delayed. And with Navistar, now we have not arrange a agency goal simply but. Was that okay, Jose?

Jose Asumendi

Sure, thanks.

Christian Levin

Thanks Jose.

Annette Danielski

Thanks, Jose.

Lars Korinth

We’ve got a subsequent query coming from Nicolai Kempf from Deutsche Financial institution. Hello Nicolai.

Nicolai Kempf

Nicolai Kempf from Deutsche Financial institution. If I’ve made on only one query, possibly assist dividends, and also you determined to pay dividend for 2022 regardless of producing a web free money move and that given that you’ve got nonetheless web money owed and in addition needless to say your largest shareholder possibly does not want the money. So my query is, why did you determine to pay a dividend?

Annette Danielski

Actually, we stick with our commitments, Jose In the event you comply with us since our IPO, we dedicated that we pay 30% to 40% of our annual earnings after tax to our stakeholder. And we purpose to be a dependable companion to the capital market. And actually what we actually do is cut back the online debt is our precedence, however we additionally wish to stick with the guarantees that now we have. And that is the explanation why we determined to pay the €0.70 and as you now on the decrease finish of the vary, we already confirmed within the IPO prospect.

Christian Levin

And if I could add, it is also sending the sign that we’re assured that we will cut back our web debt place within the upcoming years. Effectively realizing that, as you mentioned, that could be a high precedence. We do not wish to be the place we’re.

Christian Levin

All proper thanks Nicolai.

Nicolai Kempf

Okay, thanks and congrats.

Christian Levin

Thanks.

Annette Danielski

Thanks.

Lars Korinth

Thanks Nicolai. We’ve got a subsequent query from Shaqeal Kirunda from Morgan Stanley. Good morning Shaqeal

Shaqeal Kirunda

Hello, good morning, thanks for taking the query. Congratulations on the quarter. Just a few measures of the MAN restructuring plan weren’t concrete throughout the CMD and we noticed strong enchancment plan included now. Are you able to quantify how a lot this provides? And are there any additional measures which you can share at this stage? And in addition, are you able to simply affirm the time interval on the 7% goal? Thanks.

Annette Danielski

I feel we should always actually clarify this system that we put with restructuring is we actually observe very hardly. The MAN crew – does a great job. And in addition, in case you have the headwinds that we skilled within the final month, the availability chain, elevated wages, elevated logistic prices. In order that they need to offset all of the headwinds to nonetheless hold this system on observe. And that is the explanation why it contains the bus program, to actually attain this system targets that we put out.

So it is actually an enabler to nonetheless be on observe with all of the headwinds they’ve. And I feel that is an important that they’re wanting each day for brand spanking new measures to offset if one thing comes was a detrimental affect. And I feel we noticed this yesterday, it is an excellent proof how they do it and the way they observe the measures. Would you add to the opposite?

Christian Levin

Sure, so in a means, we’re form of operating slightly bit behind on buses then, we’re beginning two years later. We’re taking kind of the identical sort of measures, however adapting to the bus enterprise. And we’re making an allowance for that we do not see the bus market rising again to pre-COVID ranges for MAN. So the crew and inspired by us has determined that they wish to be the bus crew in MAN, they wish to be as worthwhile as MAN, which means that they need to contribute to the 8% in the long run, and they should ship on that stage.

And proper now, they’re removed from that. So it’s a large effort that they should put in. And you may ask why did not we embody that? In the event you return three years, and I do not actually have a solution to that query. I feel it is good that the crew is selecting that up themselves. I hope that gave you slightly bit extra on flesh on the bone, Shaqeal, on MAN.

Shaqeal Kirunda

Thanks that is clear. After which only a very fast follow-up on the widespread base or the widespread modular system, which divisions are set to profit essentially the most? And what sort of margin affect might that be?

Christian Levin

Sure, effectively – I feel it’s totally arduous to quantify. You have got a, totally different guidelines of thumbs the place you speak about double quantity, get 10% decrease price. I feel for us, what may be very clear is that we have to take away all of the double work that’s ongoing by having a number of, improvement ongoing on a number of platforms on the similar time. I can not have that, cannot have a number of coordination work, cannot have friction between groups, and that is why we’d like one head of R&D who can implement one technique, one highway map.

We’ve got mentioned, and I feel we mentioned on the CMD that now we have as much as 30% waste within the R&D group. And the R&D group is shut to fifteen,000 folks. So, I would just say with out supplying you with any quantity that there’s, substantial alternatives. However after all, it additionally comes with a giant effort to do the mixing and do this in a time once we do a number of different transitions just like the one to battery electrical automobiles. So, we must also not expect an excessive amount of too shortly out of this transformation. However there may be a number of profit to take out financially on R&D price. I cease there.

Shaqeal Kirunda

Okay nice, thanks.

Christian Levin

Thanks, Shaqeal.

Lars Korinth

Our last query will come from Erik, Erik Golrang from SEB. So you may have the consideration to ask the ultimate query, select properly.

Erik Golrang

Effectively, I truly will not as a result of they’ve all been requested with these final two, three classes it was on the electrical ramp and steadiness sheet priorities. Thanks.

Annette Danielski

Thanks.

Christian Levin

Hello Eric, thanks.

Lars Korinth

So with this, we’re coming to the top of our Q&A session and in addition the convention. Thanks all for becoming a member of us right now. It was an important session. Please attain out to the Investor Relations crew everytime you want something or have any further query. For now, I want you and we want you all a pleasant remaining day. Thanks.

Annette Danielski

Thanks.

Christian Levin

Thanks.