Scania Annual Report 2011

ANNUAL REPORT 2011 Scania AB (publ), SE-151 87 Södertälje, Sweden. Telephone: +46 8 55 38 10 00. Fax: +46 8 55 38 10 37 www.scania.com 1599138/EN/Kreab Gavin Anderson/Trosa Tryckeri, 2012 Tryckeri, Gavin Anderson/Trosa 1599138/EN/Kreab Scania’s objective is to provide the best profitability for its customers throughout the product life cycle by delivering optimised heavy trucks and buses, engines and services – thereby becoming the leading company in its industry. The foundation is Scania’s core values, focus on methods and dedicated employees. This English version of Scania’s Annual Report is a translation of the Swedish-language original, the binding version that shall prevail in case of discrepancies. Photo: Dan Boman, Carl-Erik Andersson, Göran Wink, Translation: Victor Kayfetz, Scan Edit and David Murphy, Word of Mouth. Jonas Nordin, Tedd Soost, Bryan Winstanley, Silvio Serber, Kjell Olausson, Sten Jansin, The Financial Reports encompass pages 74-141 and 144-151 and were prepared in compliance with International Financial Reporting Standards (IFRSs). Jürgen Doom, Scania Archive and Shutterstock. The Report of the Directors encompasses pages 32-73 and 142-143. The Report of the Directors and accompanying Financial Reports also fulfil the requirements of the Swedish Annual Accounts Act and have been audited by Scania’s auditors. Scania’s Swedish corporate identity number: Scania AB (publ) 556184-8564. Unless otherwise stated, all comparisons in this Annual Report refer to the same period of the preceding year. 1 OPERATIONS 2–31 Statement of the President and CEO 2 Scania in brief 4 Scania’s strategy 6–17 Scania’s strategic platform 6–7 A focus on the customer and sustainability 8 –11 Profitable business through customised solutions 12–15 Methods for sustainable profitability 16–17 Market 18–31 Trucks 18–21 Buses and coaches 22–25 Engines 26–27 Services 28–29 Financial services 30–31 REPORT OF THE DIRECTORS 32–73, 142–143 Market trends, 2011 32–35 Production 36–39 Research and development 40–43 Scania’s sustainability work 44–55 Global driving forces 44–45 Key role for sustainable transport solutions 46–47 Safety, health and the environment in the value chain 48–49 Scania’s environmental work 50–51 Competency, dedication and well-being 52–53 Management and monitoring of sustainability work 54–55 Scania share data 56–57 Annual General Meeting and financial information 58 Risks and risk management 59–62 Corporate Governance Report 63–68 Articles of Association 69 Board of Directors 70 Executive Board and Corporate Units 72 FINANCIAL REPORTS 74 –141, 144 –151 Group financial review 76 Consolidated income statements 80 Consolidated balance sheets 82 Consolidated statements of changes in equity 84 Consolidated cash flow statements 85 Notes to the consolidated financial statements 86–137 Parent Company financial statements, Scania AB 138 Notes to the Parent Company financial statements 140 Proposed guidelines for salary and other remuneration 142 Proposed distribution of earnings 143 Audit report 144 Quarterly data 146 Key financial ratios and figures 148 Definitions 149 Multi-year statistical review 150 SCANIA 2011 2 STATEMENT OF THE PRESIDENT AND CEO Partnering with customers Scania showed strong earnings in 2011. Meanwhile demand slowed in the final months of the year, and we are entering 2012 with lower demand. We are, however, well prepared because of our strong balance sheet and product and service portfolio. Our focus is on continuing to develop Scania’s business model and brand – we will ensure long-term growth by strengthening the product and service offering to customers. In 2011, Scania achieved record high sales and deliveries of As a leading actor in the industry, we can achieve good results vehicles and services. Earnings per share were the best in the in cooperation with various stakeholders. We are develop- company’s history. However, profitability weakened compared ing better, more sustainable components together with our to our very strong performance in 2010. The Swedish krona sub-contractors. Through an active dialogue with legislators, appreciated and our operating costs increased, compared to we can improve knowledge about longer vehicle combinations, a low level in 2009 and 2010. The upturn that dominated the which provide significant reductions in emissions per tonne market in recent years also ended in 2011. During the second transported. half of 2011, we noticed that the demand for vehicles was Cooperation with MAN slowing, while service deliveries continued to rise. In November 2011, Volkswagen completed its acquisition of Growing service demand 55.9 percent of the voting rights in MAN, after the approval of We adjusted our production rate during the final months of competition authorities around the world. This removed impedi- 2011 and in early 2012 in response to lower demand. As a ments against deeper cooperation between Scania and MAN. consequence of this adjustment, we could not extend the A number of working groups are currently reviewing the fixed term temporary contracts of about 1,900 employees. potential for synergies in procurement, development and We have become restrictive about recruitment and are focus- production. This is taking place in line with Volkswagen’s ing increasingly on cost trends. well- established strategy of independent brands, in which Our service operations are continuing to develop favour- competition between brands has high priority. The strategy ably. The average age of the truck population in Europe is means developing and strengthening each brand with its rising and this impacts demand for workshop hours and parts customer base. positively. It also means that there is an increasing need for 100th anniversary of Scania buses and coaches transport companies to invest in new vehicles. – tomorrow’s mode of transport We are continuing to invest in and develop our service Scania’s bus and coach operations have performed very well operations – being close to customers is crucial. It is not just in recent years. Bus chassis and trucks are assembled in the about workshops, but also about mobile solutions where we same production units, using a large number of common com- perform service out among our customers. Meanwhile we ponents. This has boosted productivity considerably. are introducing the same thinking and methods from the well- Scania delivered its first bus 100 years ago. Buses and known Scania Production System in our sales and services coaches are playing a key role in the establishment of sustain- operations in order to become more efficient and to reduce able transport systems. As global urbanisation continues and lead times for our customers. major cities expand, Bus Rapid Transit (BRT) systems will be a Further development of Scania’s business model cost-effective investment for solving congestion and environ- and brand mental problems. These systems offer public transport that combines the advantages of rail-bound traffic with the flexibility Like other companies in the transport industry, Scania is of buses. There are many advantages if passenger traffic can facing major challenges. Demographic changes, urbanisation, be shifted from cars to buses: reduced climate impact, better economic growth and increased trade are driving the demand health and improved traffic flow. for transport services. Meanwhile there are increasing calls for sustainable and efficient transport systems. Long-term growth For our customers, it is ultimately a matter of meeting their Another interesting product in our bus and coach operations is day-to-day needs by having vehicles with the best possible Scania Touring, which is strengthening our position in the mar- uptime. The more hours the customer’s transport equipment ket for intercity services and tourist coaches. Our new Scania is available, the more revenue for the customer. However, Citywide model, which was launched during 2011, supplements each customer is unique and has specific needs. In partner- our product range in the city bus segment. ship with customers, we develop packages of products and We foresee good growth in our industrial and marine engine services that deliver high efficiency, profitability and sustain- operations. As early as 2009, we launched industrial engines ability. that met the emission standards introduced in 2011. OperATIONS SCANIA 2011 SCANIA’S STRATEGY 3 Our solution will also enable customers to use essentially the same installations to meet the new emission standards that take effect in 2014. In 2011, we began deliveries of engines to US- The outlook for 2012 based Terex and South Korean-based Doosan Infracore. We are is difficult to assess, also seeing strong interest in our low-emission engines among but Scania is well other machinery manufacturers. prepared. The share of our vehicle deliveries that go to Europe has de- creased in recent years, but demand for our type of products and services is increasing strongly in many emerging market coun- tries. We are optimistic in the long term about Brazil and the other markets in Latin America. The middle class is growing and con- sumption is rising. Brazil is also facing major infrastructure invest- ments and has strong agricultural and mining sectors. In China, Scania sells to customers that have strict standards concerning uptime, performance and service life. There are increasingly strong demands for efficiency in the transport sector in China and in other parts of Asia. This will mean higher demand for Scania’s type of vehicles and services. In early 2012, we strengthened our presence in India and started the construction of an assembly facility in Bangalore. About SEK 200 million will be invested during the coming year. 2012 – a year of uncertainty A number of national governments in Europe have financial problems, and it is uncertain how this will affect demand in the economy generally and thus the demand for transport services. Meanwhile truck deliveries were at a high level during 2005–2008, followed by low deliveries in recent years.

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