The first quarter of the year was characterised by a high degree of uncertainty due to the changing global macroeconomic and geopolitical situation. However, the level of activity in Scania’s key markets remains high and demand for trucks is strong.
Summary of the first three months of 2022
• Net sales decreased by 3 percent to SEK 34,757 m. (35,708)
• Operating income decreased by 44 percent to SEK 2,607 m. (4,657)
• Operating margin amounted to 7.5 percent (13.0)
• Cash flow amounted to SEK -1,184 m. (2,862) in Vehicles and Services
Comments by Christian Levin, President and CEO
The first quarter of the year was characterised by a high degree of uncertainty due to the changing global macroeconomic and geopolitical situation. However, the level of activity in Scania’s key markets remains high and demand for trucks is strong. We have been restrictive also in the first quarter with the placing of orders for trucks due to an already large order book and the production transition to Scania’s new powertrain range, hence the reduced order intake. In buses and coaches, we have seen a positive demand trend during the quarter with increased order intake, particularly in Latin America.
The shortage of semiconductors and other components in the global supply chain has continued to cause production disruptions in the quarter, although the situation has eased somewhat during the latter part of the period. Delivery flows have also been destabilised by the conflict in Ukraine. With only a few suppliers in the region, Scania has been affected less than other manufacturers, but the entire industry is impacted by rising raw material and energy prices and a shortage of manpower.
Our customers have high capacity utilisation in their fleets and the service business is continuing to grow. During the first quarter, service revenue increased by 19 percent. Vehicle deliveries decreased by 28 percent while deliveries in Power Solutions increased by 19 percent. The finance portfolio increased and the underlying Financial Services operations is strong. Due to the conflict in Russia and Ukraine where the payment capacity is expected to deteriorate, provisions for receivables have been made. Scania’s net sales decreased by 3 percent while operating income decreased by 44 percent, mainly due to lower vehicle volume and weaker capacity utilisation in production caused by component shortages, as well as increased cost of input goods.
Despite a turbulent global situation, Scania is continuing to drive the shift towards a sustainable transport system. During the quarter, further investments were made as well as progress in electrification. Among other things, Scania announced the plan to build a test track adapted for autonomous and electrified vehicles. We are also supplying an e-mobility solution to the haulier Falkenklev Logisitk, including five battery-electric trucks and charging equipment. This is part of the haulier’s plan to build charging stations for charging its own fleet but also to be able to offer charging to other vehicles, a clear example of how new user models are being created around electrified solutions. In partnerships with customers, Scania is also continuing to test innovative solutions for electrification of the heaviest applications. An example is the 74-tonne electrified truck for heavy transports that will be delivered to the mining and metal company Boliden in spring 2022. Furthermore, an electric Scania Heavy Tipper will operate in LKAB’s mine in Malmberget, in northern Sweden, alongside an electric crane truck specially adapted for mining operations. We see that interest in our range of electric vehicles in the market is slowly but surely increasing even though the market for fully electric trucks is still small. During the quarter, Scania signed an agreement with Copenhagen’s municipal waste company ARC to deliver more than 100 fully electric trucks for waste handling.
Increased electric vehicle volume is necessary to reduce emissions in line with the Paris Agreement. Scania’s Science Based Targets is the measurement of how we are driving the shift. In addition to the targets to decrease the footprint from our own operations and from our products when in use, we have now expanded our decarbonisation targets to also include Scania’s supply chain. Battery and steel production for example account for a significant part of our total carbon footprint. For our European supply chain, we have set targets for 2030, ranging from a 35 to 90 percent reduction for the various materials and components. This is only the beginning of our journey towards decreased carbon emissions in the supply chain. We are working on widening the scope, so our strategy for phasing out fossil fuels eventually will cover Scania’s whole value chain.”