Capital Market Day June 21, 2005
Sal Mauro Volvo Financial Services 1 Capital Market Day 2005
A Global Services Organization
Customer Finance Treasury
Real Estate
Volvo Financial Services Sal Mauro 05 06 21 2 Capital Market Day 2005 A Global Services Organization
RE FC FC TC FC FC FCFC FC FC FC FC FC HQ FC FC FC FC FC FC TC FC
FC
FC
TC
FC FC TC Volvo Financial Services consist of 25 Finance operations (FC) 4 Treasury Centers (TC) 1 Real Estate Group (Danafjord) (RE)
Volvo Financial Services Sal Mauro 05 06 21 3 Capital Market Day 2005
Supporting the Brands
Financial Services
• Volvo Trucks • Renault Trucks • Mack Trucks
• Volvo Construction Equipment
• Volvo Aero
Volvo Financial Services Sal Mauro 05 06 21 4 Capital Market Day 2005 Gross Credit Portfolio and Write-Off Ratio
SEK bn 80 2.0%
60 1.5%
40 1.0%
20 0.5%
0 0.0% 2002 2003 2004 Q1 2005 Volvo Trucks Renault Trucks Mack Trucks Construction Equipment Buses Other Write-Off Ratio* * Annualized
Volvo Financial Services Sal Mauro 05 06 21 5 Capital Market Day 2005 New financing Volume and Penetration Ratio
SEK bn 40 25%
20% 30
15% 20 10%
10 5%
- 0% 2002 2003 2004 Q1 2005 Volume* Penetration *12 month moving Volvo Financial Services Sal Mauro 05 06 21 6 Capital Market Day 2005 Operating Income and Return on Equity
SEK M
1,600 16.0%
1,400 ROE Target: 12-15% 14.0%
1,200 12.0%
1,000 10.0%
800 8.0%
600 6.0%
400 4.0%
200 2.0%
- 0.0% 2002 2003 2004 Q1 2005
Operating Income Return on Equity*
*12 months moving Volvo Financial Services Sal Mauro 05 06 21 7 Capital Market Day 2005 Mature and Emerging Markets
Customer Finance: Operations in 25 Countries • Mature Markets – 17 Finance Operations • Emerging Markets – 8 Finance Operations Cross Border Activities in up to 20 countries
Volvo Financial Services Sal Mauro 05 06 21 8 Capital Market Day 2005 Gross Credit Portfolio & Penetration Ratio
SEK M 70,000 60%
60,000 50% 50,000 40% 40,000 30% 30,000 20% 20,000
10,000 10%
0 0% 2002 2003 2004 Q1 2005 Mature Market Gross Credit Portfolio Emerging Market Gross Credit Portfolio Mature Market Penetration Emerging Market Penetration
Volvo Financial Services Sal Mauro 05 06 21 9 Capital Market Day 2005
Mature Market Characteristics
• Stability of Portfolio • Good Profitability • Steady Growth • More Competition and Liquidity than Emerging Markets • Wider Product Offerings
Volvo Financial Services Sal Mauro 05 06 21 10 Capital Market Day 2005
Typical Mature Market Product Offerings
• Installment Credit Financing • Finance Lease Financing • Operating Lease Financing • Dealer Financing • Rental Franchisee Financing • Insurance Offering • Maintenance and Service Contracts • Packaged Products
Volvo Financial Services Sal Mauro 05 06 21 11 Capital Market Day 2005 Mature Market: Germany
Gross Credit Portfolio and Write-Offs Ratio Profitability MSEK MSEK 6,000 0.35% 90 16.% 80 14% 5,000 0.30% 70 12% 0.25% 4,000 60 10% 0.20% 50 8% 3,000 40 0.15% 6% 2,000 30 0.10% 20 4% 1,000 0.05% 10 2% 0 0.00% 0 2002 2003 2004 Q1 2005 2002 2003 2004
Portfolio Write-Offs Ratio Operating Income ROE*
Penetration 60%
50%
40%
30%
20%
10%
0% 2002 2003 2004 Q1 2005 *12 - months rolling
Volvo Financial Services Sal Mauro 05 06 21 12 Capital Market Day 2005
Emerging Market Characteristics
• Selective Product Offerings • Lower Competition and Liquidity, but Increasing • Lower Lending to Asset Value Ratio • Market Specific Collection Procedures and Techniques • Higher Market Share • Generally Higher Returns • Good Profitability • Good Potential for Further Controlled Growth
Volvo Financial Services Sal Mauro 05 06 21 13 Capital Market Day 2005
Typical Emerging Market Product Offerings
Limited Product Offering: • Cross-Border Financing • Installment Credit Financing • Finance Lease Financing
Note: • Further Financial Product Development as Market Stabilizes • Establishment of Finance Companies in Markets as they Develop (Russia, Turkey and Romania)
Volvo Financial Services Sal Mauro 05 06 21 14 Capital Market Day 2005 Emerging Market: Eastern Europe
Gross Credit Portfolio and Write-Offs Ratio Profitability MSEK MSEK
5,000 4.0% 160 25% 4,500 3.5% 140 4,000 20% 3.0% 120 3,500 3,000 2.5% 100 15% 2,500 2.0% 80 2,000 1.5% 60 10% 1,500 1.0% 40 1,000 5% 500 0.5% 20 0 0 2002 2003 2004 Q1 2005 2002 2003 2004 Portfolio Write-Offs Ratio Operating Income ROE*
Penetration
70% 60% 50% 40% 30% 20% 10% 0% 2002 2003 2004 Q1 2005 *12 - months rolling
Volvo Financial Services Sal Mauro 05 06 21 15 Capital Market Day 2005
Summary
• Overall Steady Earnings and Growth • Good Portfolio Performance • Room for Further Growth in Mature Markets • Developing Further - Region International
Volvo Financial Services Sal Mauro 05 06 21 16 Capital Market Day 2005 Key Objectives
1. Stability in earnings over a business cycle
2. Profitability in all business segments
3. Controlled and profitable asset growth
4. Sound portfolio structure / asset diversification
5. Support Business Areas & maximize customer satisfaction
Volvo Financial Services Sal Mauro 05 06 21