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Volvo Financial Services Capital Markets 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 Buses • Volvo Construction Equipment • Volvo Aero • Volvo Penta 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.
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