TRATON GROUP – CREATING A GLOBAL CHAMPION
COMPANY PRESENTATION
3 JUNE 2019 DISCLAIMER
The following presentation contains forward-looking statements and information on the business development of TRATON GROUP. These statements and information may be spoken or written and can be recognized by terms such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “will” or words with similar meaning. These statements and information are based on assumptions relating to the company's business and operations and the development of the economies in the countries in which the company is active. TRATON GROUP has made such forward-looking statements on the basis of the information available to it and assumptions it believes to be reasonable. The forward-looking statements and information may involve risks and uncertainties, and actual results may differ materially from those forecasts. If any of these or other risks or uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, the actual results may significantly differ from those expressed or implied by such forward looking statements and information. TRATON GROUP will not update the following presentation, particularly not the forward-looking statements. The presentation is valid on the date of publication only.
Certain financial information and financial data included in this presentation, including such information and date for the first quarter of 2019, are unaudited and may be subject to revision upon completion of future audit processes for the year 2019. The TRATON GROUP reports its financial results using two segments. Its Industrial Business is comprised of its three operating units, Scania V&S, MAN T&B, and VWCO. Its other reporting segment is Financial Services, comprised of Scania Financial Services. Statements contained in this presentation should not be unduly relied upon and past events or performance should not be taken as a guarantee or indication of future events or performance. Return on sales as used in this presentation is defined as operating profit margin (operating profit divided by revenue). Financial figures in relation to Scania (i) include financial services (unless denoted otherwise) and (ii) when expressed in EUR have been translated from SEK into EUR, using the exchange rate prevailing at the relevant date or for the relevant period that the relevant financial figures relate to. References to Scania before 2014 refer to Scania AB. Operating and financial data relating to alliance partners are as publicly reported by the relevant partner. Unless otherwise indicated, financial information presented in the text and tables in the following presentation is rounded to a whole number. Percentage changes and ratios in the text and tables of the presentation are calculated based on the respective underlying numbers and then commercially rounded to a whole percentage or to one digit after the decimal point. Because of rounding, figures shown in tables in the presentation do not necessarily add up exactly to the respective totals or sub-totals presented, and aggregated percentages may not exactly equal 100%. Furthermore, these rounded figures may vary marginally from unrounded figures that may be indicated elsewhere in the presentation. Financial information presented in parentheses denotes the negative of such number presented.
When describing TRATON GROUP and its operating units for periods before 2016, and unless designated otherwise, all references in the following presentation to MAN are references to MAN Truck & Bus (reported as “MAN Truck & Bus” by MAN SE) and all references to Volkswagen Caminhões e Ônibus are references to “MAN Latin America” as reported by MAN SE. As of March 31, 2019, TRATON SE owned approximately 94.4% of the share capital and 94.7% of the voting rights in MAN SE. All references to sales of buses and coaches also include chassis. While prior to December 31, 2018, the Power Engineering business was legally a part of TRATON GROUP, it is not included as an operating unit as described in this presentation and is shown as discontinued operations in the financial information for TRATON GROUP. While the TRATON GROUP holds 100% of the voting rights in Scania, its economic interest in Scania is less than 100% due to partial ownership through TRATON’s majority stake in MAN SE.
To the extent available and unless denoted otherwise, the industry and market data contained in this presentation has been derived from official or third party sources and all market and market share data has been derived from data published by IHS Markit Ltd. for heavy duty trucks (>15t) and heavy/medium duty trucks (>6t), McKinsey & Company, LMC Automotive, Transparency Market Research, Verband der deutschen Automobilindustrie (VDA) and the World Bank. Third party industry publications, studies and surveys generally state that the data contained therein have been obtained from sources believed to be reliable, but that there is no guarantee of the accuracy or completeness of such data. While TRATON GROUP believes that each of these publications, studies and surveys has been prepared by a reputable source, TRATON GROUP has not independently verified the data contained therein. In addition, certain of the industry and market data, if not labelled otherwise, contained in this presentation are derived from TRATON GROUP's internal research and estimates based on the knowledge and experience of its management in the markets in which it operates. TRATON GROUP believes that such research and estimates are reasonable and reliable, but their underlying methodology and assumptions have not been verified by any independent source for accuracy or completeness and are subject to change without notice. Accordingly, undue reliance should not be placed on any of the industry or market data contained in this presentation.
This presentation has been prepared for information purposes only. It does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of Volkswagen AG, TRATON SE or any company of TRATON GROUP in any jurisdiction. Neither this presentation, nor any part of it, nor the fact of its distribution, shall form the basis of, or be relied on in connection with, any contractual commitment or investment decision in relation to the securities of Volkswagen AG, TRATON SE or any company of TRATON GROUP in any jurisdiction, nor does it constitute a recommendation regarding any such securities.
2 TRATON GROUP HAS CONTINUOUSLY DELIVERED ON ITS STRATEGIC GOAL SINCE THE INCEPTION OF VOLKSWAGEN TRUCK & BUS
Successful creation and implementation of New corporate identity Collaboration among strategic alliance partnerships brands in Volkswagen T&B fully on track
Significant 6.0% 6.4% 5.4% performance 1 Adj. Return on Sales improvement
20162 20173 20184
Note: TRATON GROUP including Financial Services. 1 Calculated as the ratio of adj. operating profit to sales revenue. Adj. operating profit includes PPA (from Scania and VWCO), VGSG operations (sold as of Jan-2019) and consolidation effects (MAN T&B – VWCO). 2 Including €403m adjustment for provision in relation to Scania antitrust fine and €58m adjustment for restructuring expense at VWCO. 3 Including (€50m) adjustment for release of restructuring provision at MAN T&B. 4 Based on Adj. Operating Profit including PPA (from Scania and VWCO), operations no longer held by TRATON GROUP as of Jan-2019 and consolidation effects (MAN – VWCO). Including €137m adjustment for expense in relation to Indian market exit at MAN T&B. 3 LEADING GLOBAL BRANDS AND STRATEGIC ALLIANCE PARTNERS
FULLY CONSOLIDATED ASSOCIATES STRATEGIC PARTNER
16.8%1 25% + 1 share2
Leader in core markets Powerful strategic alliance partners enabling leading global scale with differentiated brands
1 As of 31-Mar-2019. 2 Held by MAN SE as of Mar-2019.
4 SNAPSHOT TRATON GROUP 2018
UNIT SALES1 BY GEOGRAPHY SALES REVENUE BY BRAND ADJ. OPERATING PROFIT5 BY BRAND % of total € bn / % of total € bn VWCO VWCO Germany Other 1.4 6 15% 0.0 MAN T&B 23% (5%) 0.5 2 EU28+2 10.8 4% Scania 13.4 Scania 56% (42%) MAN T&B 1.3 S. America Group4 (52%) Group4 (ex. Brazil) 16% 41% EU28+22 Brazil (ex. Germany)
233k Units sold1 € 25.9bn3 Sales Revenue € 1.7bn5 Adj. Operating Profit
Note: Trucks >6t, VWCO trucks ≥ 5t; figures are financially rounded. TRATON GROUP including Financial Services. 1 TRATON GROUP unit sales total figures based on company information. 2 EU28+2 region consisting of EU member states plus Norway and Switzerland. 3 Including operations no longer held by TRATON GROUP as of Jan-2019 (VGSG), consolidation effects (MAN – VWCO), other segments and reconciliation. 4 Includes Vehicles and Services and Financial Services; post consolidation effects; excl. PPA. 5 Including aligned PPA (VWCO PPA – MAN Origin; Scania PPA – VW Origin). 6 Including €137m adjustment for expense in relation to Indian market exit at MAN T&B. 5 KEY COMPANY HIGHLIGHTS
• Scale and global reach through leading brands and GLOBAL strategic alliance partners 1 CHAMPION • Unique platform enabling growth and positioning us for best-in-class profitability
• Customer value focused product and service offering GROWTH • New product generations 2 • Further expansion in key geographies
• Concrete path to profitability improvement PROFITABILITY • Stand-alone brand performance plus synergies 3 AND SYNERGIES • Earnings growth and cash generation potential
• Strong team with industry-leading track record EXECUTION 4 • Committed to Global Champion strategy
6 TRATON GROUP WITH #1 TRUCK MARKET POSITION IN EUROPE AND SOUTH AMERICA Core markets of TRATON GROUP brands TRATON GROUP truck market share in 2018 (>15t)
Europe1 33% Market leader with 33% market share Market leader in Germany with 38% market share
South America2 30% Market leader with 30% market share Market leader in Brazil with 37% market share Export GROUP TRATON business
Source: IHS Markit. Note: Smaller presences in additional countries not highlighted (TRATON GROUP active in >120 countries worldwide, including bus activities). 1 EU28+2 region consisting of EU member states plus Norway and Switzerland. Cyprus, Malta, and Luxembourg excluded, as no IHS Markit data available. TRATON GROUP’s sales in Russia not included in calculation of Europe market share. 2 Including Argentina, Brazil, Bolivia, Chile, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Nicaragua, Panama, Peru, Uruguay, Venezuela; excl. Mexico (part of North America); excl. Paraguay as no IHS Markit data for trucks >15t available. 7 EXPANDING GLOBAL REACH THROUGH ALLIANCE PARTNERS TO ADDRESS
ALL MAJOR PROFIT POOLS Core markets of TRATON GROUP brands Truck market share in 2018 (>15t) Alliance partners
North America – Partnership since 2016 1 13% • Technology cooperation: first SoPs by 2020/21 • Synergies in procurement JV achieved, further potential
China – Partnership since 2009
ASSOCIATES 16%2 • Intention to localize MAN heavy-duty truck in world’s largest market • Evaluation of technology/procurement cooperation
ALLIANCE PARTNERS ALLIANCE Japan & South East Asia – Cooperation since 2018 38%3 • Cooperation: Future logistics/transportation, technology and e-mobility • LoI for procurement JV signed with global synergy
potential STRATEGIC PARTNER STRATEGIC
Source: IHS Markit. Note: SoP = Start of Production. 1 Market share of Navistar Canada and USA. 2 Market share of CNHTC (parent company of Sinotruk) in China (including Hong Kong). 3 Market share of Hino in Japan and South East Asia (Indonesia, Australia, Malaysia, New Zealand, Philippines, Singapore, South Korea, Taiwan, Thailand, Vietnam). 8 TRATON GROUP WITH MULTIPLE STRATEGIC LEVERS FOR GROWTH
TRATON GROUP SALES REVENUE
• Market leadership in Europe and South America SUSTAIN CORE • Aftermarket and service growth on existing rolling fleet
• Mutually beneficial / smart partnerships globally GO GLOBAL • Expanding premium segments in China €25.9bn1 • New truck generation for each TRATON GROUP brand targeted GROW SHARE to be launched by 2021 • Leverage (captive) sales and service network
DRIVE • Intelligent services utilizing connected fleet of 450k+ vehicles2 INNOVATION • Broadest range of alternative fuel technologies3
2018 Mid-term
1 Including operations no longer held by TRATON GROUP as of Jan-2019 (VGSG), consolidation effects (MAN – VWCO), other segments and reconciliation. 2 As of Q4-2018. 3 Based on a company comparison with other offerings in the market.
9 SUSTAIN CORE – SALES VOLUMES IN TRATON GROUP'S CORE MARKETS AND
THE US ARE STILL FAR FROM HISTORICAL PEAKS x% Current-to-peak variation Truck sales volumes (>6t)1, in k units 600 545 521 10% 500 449
400 US 348 15% 300
200 2 238 Western Europe 47% 194
100 South America3 0 1980 82 84 86 88 90 92 94 96 98 2000 02 04 06 08 10 12 14 16 2018
Source: Verband der deutschen Automobilindustrie (VDA data); IHS Markit. 1 Western Europe and US data based on VDA, South America data based on IHS Markit. 2 EU15 + EFTA: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, United Kingdom + Iceland, Liechtenstein, Norway and Switzerland. 3 Incl. Argentina, Brazil, Bolivia, Chile, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Nicaragua, Panama, Peru, Uruguay, Venezuela; excl. Mexico (part of N. America); excl. Paraguay, as no IHS Markit data for trucks >6t available. 10 GO GLOBAL – ADDRESSABLE MARKET FOR TECHNOLOGY LEADERS EXPECTED TO INCREASE ON THE BACK OF REGULATION & CUSTOMER REQUIREMENTS
INCREASING LEVEL OF REGULATION & CUSTOMER REQUIREMENTS TRUCK MARKET VOLUME IN SELECTED MARKETS2, in k units TRIAD markets1 Emerging markets Euro VI-comparable emission standard, NOx (g/kWh) Other emission standard
Move from 2,906 Powertrain Euro VI Euro II-V to Euro VI 2,562
2,044 ~20% of OEMs' revenue Today still limited but Aftersales from aftermarket3 increasing
Automated driving improves driver efficiency Driver today; autonomous trucks will help to address availability driver shortage (in the future)
GDP share of Up to 25%5 As low as 8%4 logistics industry (China: ~15%-18%) 2015 2018 2025e
Euro VI-comparable share increases from ~30% in 2017 to ~85% in 2025e globally6 leading to a higher share of attractive markets
Source: IHS Markit, McKinsey, World Bank. 1 North America, Europe, Japan. 2 Mexico standards not in line with the US and Canada, currently Euro IV-comparable in place, Euro VI-comparable to be implemented by 2020e. 3 Based on Scania and MAN figures for FY2017. 4 Based on countries classified as most efficient by the World Bank, such as the US and the Netherlands. 5 Based on countries classified as least efficient by the World Bank. 6 National standards; selected cities with stricter emission reguIations; based on McKinsey analysis. 11 GROW SHARE – BENEFIT FROM HIGHLY ATTRACTIVE PRODUCT PIPELINE
% of truck units of respective brand affected post full production ramp-up
NTG NEW TRUCK GENERATION NEW DELIVERY TRUCK
Current / upcoming launch 100% 100% ~60%
New generation for all trucks (R, G and P trucks New state of the art truck Modern truck for urban logistics as well as newly introduced S and L trucks) generation / Model year 2019 tailored to emerging markets Launch / ramp-up (targeted) 2016 – 2019e 2019 – 2021e 2017 – 2019e Launch of 1995 2000 2005 preceding truck (4-Series) (TGA) (Delivery) generation1
1 Previous key launch of respective product range.
12 DRIVE INNOVATION – TRATON GROUP IS TRANSFORMING TRANSPORTATION
Hybrid Broadest range of Autonomous transport system Natural Gas Large connected fleet 3 alternative fuel BEV in customer operation1 450k+ HVO technologies2 Ethanol Biogas Autonomous Mining System Connected vehicles on the road Here and now solutions
Utilization of collected Automated L4 safety truck Sold electric solutions tested under real conditions data for service offering
MAN aFAS – Driverless safety vehicle RIO, Scania Flexible Maintenance VWCO e-Delivery
Note: HVO = Hydrogenated Vegetable Oil; BEV = Battery Electric Vehicle. 1 Scania and Rio Tinto trialing autonomous truck in Australia. 2 Based on a company comparison with other offerings in the market. 3 As of Q4-2018. 13 ALREADY TODAY TRATON GROUP HAS MULTIPLE SOLUTIONS FOR AUTONOMOUS DRIVING ON THE WAY…
Scania project in mining system MAN project with German • Autonomous vehicle operates Federal Ministry for Economic in real life conditions at Rio Affairs and Energy Tinto's mining operations in • Automatic driverless safety Australia since August 2018 vehicle1 tested under real conditions • Winner of the Truck Innovation Award for 2019
MAN project with DB Schenker Autonomous Transport Solutions Mining Pilot and Hochschule Fresenius Complexity • Platooning pilot in live traffic 2018 2019e 2020e 2021e+ (145km road on Autobahn A9; up to three drives per day) Safety driver, Safety driver, No safety Autonomous no dynamic with dynamic driver operations obstacles obstacles
1 Developed with seven partners: BASt – Federal Highway Research Institute, Hessen Mobil – Road and Traffic Management, Karlsruhe University of Applied Sciences – Technology and Economics, Technical University of Braunschweig – Institute of Automatic Control, ZF TRW, WABCO and Bosch Automotive Steering. 14 EXPANSION OF SERVICE OFFERING THROUGH SMART AND CONNECTED SERVICES
SCANIA HAS A LARGE AND CONTINUOUSLY GROWING DATA BASE ...... AND KNOWS HOW TO CAPITALIZE ON IT – EXAMPLE: FLEXIBLE MAINTENANCE Selected examples of collected vehicle data Who is using flexible maintenance? Who benefits from flexible maintenance? Win / Win Vehicle • Current location status • Mileage status Customer Scania Trucks on the road • Higher uptime • Higher service • Demand-driven point utilization Route • Driving route service point • Optimized net information • Driving conditions visits working capital • Higher • Feedback loops to predictability R&D • Driving time • Peace-of-mind • Proactive cus- Driving • Speed characteristics planning tomer contact • Fuel • Potential for up- selling
Collected data is basis for Scania’s tailored and ~60% contract penetration in vehicles sold Customer can realize reduced TCO – comprehensive service offering through captive distributors1 Scania benefits as well 1 Reflects share of captive vehicle sales with Repair & Maintenance service contract in 9M 2018. 15 TRATON GROUP E-MOBILITY PORTFOLIO CONTINUOUSLY BEING DEVELOPED WITH FULL PIPELINE UNTIL 2025 AND BEYOND
Pilot Series readiness
e-Delivery e-Delivery
e-Truck e-Truck e-Truck2 (eTGM)1 TRUCKS Full e-Highway truck e-Truck e-Truck pipeline Plug-in hybrid truck until 2025 Hybrid truck and beyond Mild hybrids/KSG
BUS & Hybrid bus COACH BEV bus BEV bus
Today3 2020e 2025e+ Systematic approach to gain a modular kit for all segments and all brands to leverage investment in electrification and gain profitable scale, once market is ready 16 1 eTGM small series. 2 Based on new Truck Generation. 3 During a transition phase to fully electric, powertrains with hybrid solutions will be important to complement the fossil-fueled combustion engine. COMMON BASE ENGINE (13L) COMPATIBLE WITH CONVENTIONAL AND ALTERNATIVE FUELS
COMMON BASE 13L ENGINE (CBE) – PART OF OUR IN THE SHIFT TO ALTERNATIVE FUELS TRATON GROUP EXPECTS TO JOINTLY DEVELOPED HD POWERTRAIN PLATFORM BENEFIT FROM ITS BROAD RANGE OF ALTERNATIVE FUEL SOLUTIONS Scania vehicles displayed at IAA Nutzfahrzeuge 20182
HVO3 Hybrid HVO3 Theoretical LNG 3 HVO3 LNG CO HVO 2 CNG Plug-in hybrid reduction HVO3 potential Up • More than 50% Brake Thermal Efficiency1 Up to Up to Up to Up to to >90% 15% 85% 90% 90% • Designed to address expected future emission 90% legislation • Expected to be installed in >50% of TRATON Natural Biodiesel Biogas HVO Ethanol Hybrid GROUP´s HD trucks per year from 2025e onwards gas FAME with HVO
Note: HVO = Hydrogenated Vegetable Oil. LNG = Liquefied Natural Gas. CNG = Compressed Natural Gas. BEV = Battery Electric Vehicle.
1 More than half of the energy is converted into mechanical energy. 2 Scania vehicles displayed at IAA 2018 – all alternatively fueled including newly launched plug-in hybrid. 3 Also compatible with biodiesel FAME and ethanol engines. 17 INCREASING VOLUMES AND SALES GROWTH BEYOND CORE MARKETS
TRATON INDUSTRIAL BUSINESS TRATON INDUSTRIAL BUSINESS Volume delivered1 (k units / % growth) Sales revenue (€bn)3 Book-to-bill2 Aftersales sales revenue4 share as % of total industrial sales revenue 1.04 1.12 1.05 20.1% 19.3% 19.0%
11.6% 13.7% 11.3% 6.7%
233.0 25.0 204.9 23.4 183.6 21.0
2016A 2017A 2018A 2016A 2017A 2018A
1 After considering consolidation effects at group level. 2 Book-to-bill is defined as the ratio of trucks and bus units ordered to trucks and bus units delivered in a given period. 3 Reflecting sales revenue before intersegment consolidation. 4 Aftersales sales revenue including genuine parts and workshop services; before intersegment consolidation. 18 ADJ. OPERATING PROFIT EXPANDING
TRATON INDUSTRIAL BUSINESS Adj. Operating Profit1 (€m) Commentary
5 Adj. Return on Sales (%) Fixed cost degression on the back of market growth (e.g. 5.0%2 5.6%3 5.9%4 volume growth in EU and Brazil) and market share expansion (e.g. MAN) 24.8% 12.6% Operational Performance improvements in place across brands - 4 Scania: Focus and Ambition, MAN T&B: PACE2017 and 3 1,484 1,318 Operational excellence, VWCO: turnaround program 2 1,057 Service growth positively impacting margins Increased costs from parallel production at Scania
Financial Services earnings before tax increased from €106m in 2016A to €148m in 2018A – driven by growth in new vehicle 2016A 2017A 2018A sales TRATON FINANCIAL SERVICES Earnings before Tax (€m) Attractive return on equity6 of 16.1%, 15.9% and 19.2% in 2016A, 2017A and 2018A, respectively, in the Financial Services 106 112 148 segment 2016A 2017A 2018A
1 Including aligned PPA (VWCO PPA –MAN Origin; Scania PPA –VW Origin); reflecting Operating Profit before intersegment consolidation. 2 Including €403m adjustment for provision in relation to Scania antitrust fine and €58m adjustment for restructuring 19 expense at VWCO. 3 Including (€50m) adjustment for release of restructuring provision at MAN T&B. 4 Including €137m adjustment for expense in relation to Indian market exit at MAN T&B. 5 Based on Adj. Operating Profit before intersegment consolidation. Including aligned PPA (VWCO PPA –MAN Origin; Scania PPA –VW Origin). 6 Defined as earnings before tax as % of average equity; average equity is derived from the balance sheet at the beginning and end of the relevant period. WITH THE INTRODUCTION OF THE NEW TRUCK GENERATIONS, TRATON GROUP VERY WELL POSITIONED TO FUND NEW TECHNOLOGIES TRATON GROUP Research and development costs and capex (€bn) Commentary on Free Cash Flow % of TRATON GROUP sales revenue 10.9% 10.4% 9.1% Significant funding of new truck generations across brands in order to be prepared for the future 2.5 2.4 2.4 Target to cap absolute amount of primary R&D going forward Capex1 1.1 1.1 0.9 Capex in 2017 incl. purchase price for 16.6% stake in Navistar3 Capex to remain flat in absolute terms in line with 2017 Total research and development 1.3 1.4 1.4 costs2 Free up cash flow for future funding of new technologies
2016A 2017A 2018A
1 Including investments in intangible assets (excluding development costs), property plant and equipment, and investment property, acquisition of subsidiaries and acquisition of other equity investments; from continuing operations. 2 Total research and development costs from continuing operations equal to capitalized R&D plus period expensed R&D from continuing operations. 3 Stake in Navistar has increased to 16.8% as of 30-Nov-2018. 20 SCANIA GROUP – CAPITALIZING ON EXCELLENCE
Track-Record Current Focus Target
Increased average price per vehicle Phase-out ofdouble Industry leading profitability and strong volumes in Europe productionline Increase share of high Substantially morehigh-margin Focus and Ambition program to margin service business services sold improve COGS basis with 200+ Synergies derived from dedicated employees “Dual costs” NTR/NTG TRATON GROUP – innovation truck generation NTG ramp-upglobally leader 0.6%pts 0.1%pts
2 9.4 10.0 10.1 Adj. RoS 12% RoS3 (%)1
2016A 2017A 2018A Supply chain challenges Focused NWC management leading to increase in NWC post ramp-up of NTG
Limited Net Cash Flow Focus on Net Cash Flow Strong Net Cash Flow
Note: Scania Group including Financial Services post Scania consolidation effects; excl. PPA. Only selected key performance drivers displayed. %pts rounded to the first decimal place. 21 1 Calculated as the ratio of adj. operating profit to sales revenue. 2 Including €403m adjustment for provision in relation to Scania antitrust fine. 3 Strategic target Scania Group wants to achieve over the cycle. MAN T&B – FOCUSED PATH TO OPERATIONAL EXCELLENCE
Track-Record Current Focus Target
PACE performance program Ramp-up/“dual costs” for new Leverage investment in new truck (mainly production, material truck generation generation across Europe costs and aftersales) Market shares gains in European Profit from transfer of operational Fixed cost degressionfrom core markets (ex Germany) excellence best-practices higher volumes driven by OperationalExcellence Synergies derived from TRATON strong Europeanmarket performanceprogram GROUP
0.4%pts 0.2%pts
2 3 4.4 4.8 5.0 Adj. RoS 8% RoS4 (%)1 Ongoing investment in new truck generation 2016A 2017A 2018A Ongoing investment in Focused investment and product and network NWC discipline
Limited Net Cash Flow Focus on Net Cash Flow Strong Net Cash Flow
Note: Only selected key performance drivers displayed. %pts rounded to the first decimal place. 1 Calculated as the ratio of adj. operating profit to sales revenue. 2 Including (€50m) adjustment for release of restructuring provision at MAN T&B. 3 Including €137m adjustment for expense in relation to Indian market exit at MAN T&B. 22 4 Strategic target MAN T&B wants to achieve over the cycle. VWCO – MARKET DRIVEN RETURN TO PROFITABILITY STRENGTH
Track-Record Current Focus Target
Increased averageprice Leverage recovering Brazilian market Brazilian market recovery per vehicle New delivery truck generation New product portfolio with higher average price per vehicle Headcount reduction Strengthen plant/logistic efficiency Weak demand due to Synergies with TRATON GROUP Brazilian crisis
6.8%pts 10.8%pts
2.0 Adj. RoS 8% RoS3 (%)1 +0.6%pts 4.4 (8.8)4.8 5.0
2 (15.6) Utilize lean set-up 2016A 2017A 2018A Focus on Net Cash Flow Strong Net Cash Flow
Note: Only selected key performance drivers displayed. %pts rounded to the first decimal place. 23 1 Calculated as the ratio of adj. operating profit to sales revenue. 2 Including €58m adjustment for restructuring expense at VWCO. 3 Strategic target VWCO wants to achieve over the cycle. TRATON GROUP SYNERGIES RAMPING UP ON THE BACK OF FIVE INDIVIDUAL CATEGORIES
Production footprint 5th Category and logistics ~€0.7bn 4th Category New technologies
3rd Category Joint Powertrain
2nd Category Modularisation in trucks and components
1st Category Purchasing
• Synergies executed on the back of five individual categories, which are leveraging the common platform potential and technological edge of TRATON GROUP • All operating units collaborating in order to drive successful synergy realization Long-term target • Moving from opportunistic synergy projects to more systematic approach to synergy identification and realization
24 TRATON GROUP – KPI AND OUTLOOK ON GROUP LEVEL
Over-the-cycle TRATON GROUP 2016A 2017A 2018A 2019E RoS target
Volume 204.9k 233.0k 183.6k (Units; Growth in %) 11.6% 13.7%
Sales revenue €24.4bn €25.9bn slightly above €21.9bn (in €bn; 11.2% 6.4% previous year Growth in %)
Adj. return on Sales 5.4% 6.0% 6.4% 9% 6.5% – 7.5%1 (in %, Adj. operating €1.2bn €1.5bn €1.7bn over-the-cycle RoS profit in €bn)
25 1 No adjustments applied to estimated return on sales 2019. TRATON GROUP – UNIQUE PROFITABLE GROWTH PROFILE
• Scania: Enters harvesting period on New Truck Generation, profits from short- Three strong brands… term improvement of cost base and attractive aftermarket and service growth • MAN: Achieved profit stabilization, enters new era of profitability post ramp- up of new truck generation • VWCO: Benefits from Brazil market recovery and broader product pipeline
• Exceptional synergy potential among TRATON GROUP brands and with alliance …creating a Global Champion… partners • Smart partnership approach creates scale and access to global profit pools • Monetize on customer focused innovation and ensure efficient capital allocation
…with highly experienced team • Longstanding industry experience ~175 years • Proven track record • Commitment to deliver the Global Champion Strategy of cumulative industry experience
26 APPENDIX
27 TWO-TIER BOARD STRUCTURE WITH INDEPENDENCE SECURED BY SUPERVISORY BOARD COMPOSITION EXECUTIVE BOARD SUPERVISORY BOARD Executive Board composition Supervisory Board composition
Andreas Christian Henrik • Supervisory Board composition reflects targeted Renschler Schulz Henriksson shareholder structure CEO CFO CEO Scania • Broad complementary skills and experience 30 20 21 • Chairman of the Supervisory Board: Hans Dieter Pötsch • Deputy Chairman: Athanasios Stimoniaris • 20 members with equal number of shareholder and employee representatives1 23 40 24 17 Audit Committee Joachim Antonio Christian Carsten Drees Roberto Levin Intra • Comprises 6 members CEO MAN Cortes CTO CHRO • Equal number of shareholder and employee CEO VWCO representatives2 Years of experience relate to automotive / truck industry
1 Members of the shareholder side: Hans Dieter Pötsch, Dr. Manfred Döss, Gunnar Kilian, Dr. Albert Kirchmann, Dr. Julia Kuhn-Piëch, Nina Macpherson, Dr. Dr. Christian Porsche, Dr. Wolf-Michael Schmid, Hiltrud Werner, Frank Witter. Members of the employee side: Athanasios Stimoniaris, Torsten Bechstädt, Mari Carlquist, Jürgen Kerner, Lisa Lorentzon, Bo Luthin, Michael Lyngsie, Bernd Osterloh, Karina Schnur, Steffen Zieger. 2 Members of the Audit Committee are Frank Witter, Dr. Julia Kuhn-Piëch, 28 Nina Macpherson, Lisa Lorentzon, Torsten Bechstädt and Karina Schnur. TRATON GROUP CORPORATE SUSTAINABILITY – OVERVIEW
• Ability to contribute to leading the transport sector towards sustainability is a prerequisite for TRATON GROUP’s long-term TRATON GROUP success Corporate Sustainability • Transparent sustainability reporting according to GRI standards1 • Corporate sustainability is firmly anchored throughout the organizations at Scania and MAN T&B/VWCO • Scania: Driving customer profitability through sustainable solutions and pursuing responsible business Corporate Corporate Sustainability at Sustainability at • MAN T&B/VWCO: Responsibility for product, production, supply Scania MAN T&B/VWCO chain, human beings as well as society and integrity • Commitment to UN Sustainable Development Goals as common basis • Scania and MAN T&B/VWCO are participant and signatory of UN Global Compact2, respectively 1 The global reporting initiative (GRI) is an international independent standards organization that sets out principles and indicators for measuring and reporting economics, environmental and social performance. 2 Non-binding United Nations pact to encourage businesses worldwide to adopt sustainable and socially responsible policies, and to report on their implementation
29 CORPORATE SUSTAINABILITY AT SCANIA
DRIVING THE SHIFT TOWARDS A SUSTAINABLE TRANSPORT SYSTEM
Sustainable transport: Doing the right things Responsible business: Doing things right Sustainable transport KPIs Business area Selected targets
Reduction in CO emission from • Ecolution by Scania 1 Environmental footprint 2 Energy land transport in 2016-2025 • Driver training and coaching (50)% efficiency • Maintenance with flexible plans 2 Diversity and inclusion Reduced energy consumption (33)% in industrial facilities per Alternative 3 Business ethics vehicle in 2010-2020 fuels and • Sales of alternative fuels and electrification Reduction of un-recycled waste electrification 4 Health and safety 25% material in industrial operations in 2015-2020 Smart and 5 Human and labor rights Of operations to run on fossil safe • Size of connected fleet 100% free electricity by 2021 transport 6 Community engagement
Enable partnerships in the Deliver full service offering Create a capable and Eliminate waste and Eco-system of transport that improves lifecycle Attract and retain talent innovative organization achieve cost savings and logistics profitability 30 CORPORATE SUSTAINABILITY AT MAN T&B/VWCO
STRUCTURED APPROACH APPLIED TO DERIVE MAN/VWCO SUSTAINABILITY ACTION FIELDS SUSTAINABILITY ACTION FIELDS • Reduce • Reduce greenhouse gas, • Allocation relevance greenhouse gas pollutant emission of CS standards • Focus on global challenges emission in Identification of • Improve traffic safety • Responsible use of • Concrete objectives production & 1 potential action fields • Sustainable mobility services conflict minerals • logistics for MAN T&B/VWCO High business impact Responsibility for • Review human, • Alignment with corporate strategy • Reduce pollutant Products employee rights emission • CO2 footprint of Assessment by supply chain • Analysis and prioritization of 2 dedicated corporate potential action fields Responsibility for Responsibility for sustainability council Production Supply Chain
• Alignment of action fields with stakeholders Assessment by • 3 Stakeholders include suppliers, customers, Responsibility for Responsibility for stakeholders NGOs, universities, auto OEMs, representatives Human beings Society and Integrity of cites and insurance companies • Holistic health management • Best practice compliance / risk Alignment of • Sustainability action fields linked to existing / • Need-based, future-oriented management 4 sustainability topics future programs of corporate functional education • Transparent stakeholder dialogue with corporate strategy strategy • Future of work • Fact-based, constructive dialogue • Sustainable talent management with politicians MAN T&B/VWCO employs a structured multi-step approach to Corporate sustainability strategy fully integrated derive sustainability action fields into the corporate functional strategy
Note: MAN comprises MTB and VWCO. CS = Corporate sustainability. 31 LIMITED AMOUNT OF ADJUSTMENTS TO HISTORICAL OPERATING PROFIT FOR TRATON GROUP
Operating Profit to Adj. Operating Profit table (€m) Commentary
in €m 2016A 2017A 2018A • Scania provisioned €403m in relation to the European Commission’s antitrust fine in 2016A Operating Profit 727 1,512 1,513 • Lower than expected restructuring expenses at RoS in % 3.3% 6.2% 5.8% MAN T&B leading to €50m reversal of respective provision in 2017A Provision for Scania antitrust fine 403 - - Release of restructuring provision at MAN T&B - (50) - • Adjustment of €137m reflected in 2018A with regards to market exit/plant closure of MAN Expense in relation to Indian market exit at MAN T&B - - 137 T&B in India Restructuring expense at VWCO 58 - -
Adj. Operating Profit 1,188 1,462 1,650 Adj. RoS in % 5.4% 6.0% 6.4%
32 INDUSTRIAL BUSINESS: INCOME STATEMENT OVERVIEW
in €m 2016A 2017A 2018A Commentary Sales revenue1 21,023 23,403 24,963 Cost of sales (17,026) (18,985) (20,298) Financial result in 2018A of €98m mainly includes: Gross Profit 3,997 4,418 4,665 • €209m resulting from share of earnings from minority SG&A2 (2,983) (3,100) (3,272) investments in Navistar, Sinotruk and RMMV Other operating income/expenses5 (419) 51 (46) • €190m positive impact from re-valuation of the investment in Sinotruk Operating Profit 596 1,368 1,346 • €(142)m impact from valuation of put option and RoS in % 2.8% 5.8% 5.4% compensation rights minority share holder • €(165)m net interest result mainly related to the Adjustments 461 (50) 137 financial liabilities with VW AG (€2.3bn drawn as per 31- Adj. Operating Profit 1,057 1,318 1,484 Dec-2018A) Adj. RoS in % 5.0% 5.6% 5.9% Tax expense declined, despite positive EBT development resulting in an effective tax rate of 26% for 2018A Financial result (156) (196) 98 Industrial Business Adj. EBITDA4 Earnings before tax (from continuing operations) 440 1,172 1,444 Income tax income/expense (245) (418) (344) 2016A €1,911m Result from continuing operations, net of tax 195 754 1,100 2017A €2,107m Result from discontinued operations, net of tax3 (123) 85 509 Earnings after tax 72 839 1,610 2018A €2,557m
1 Reflecting sales revenue before intersegment consolidation. 2 Reflecting distribution expenses and general and administrative expenses; includes cost of €68m in 2018A for capital market readiness 3 Reflecting non-recurring consolidation effects with Power 33 Engineering. 4 Adj. EBITDA defined as Adj. Operating Profit plus D&A of, and impairment losses on, intangible assets, PP&E and investment property, amortization of and impairment losses on capitalized development costs and impairment losses on equity investments plus share of the result of equity-accounted investments plus other financial result. 5 Including net impairment losses on financial and contract assets. INDUSTRIAL BUSINESS: TRADE NET WORKING CAPITAL DEVELOPMENT ILLUSTRATION LEASE ASSET ACCOUNTING
Trade working capital (TWC)1 development (€m) Vehicle Sales with Buy-Back Obligation – IFRS 15
As % of sales revenue Vehicle sale to customer with buy-back obligation 17.3% 16.9% 16.9% - TRATON receives a cash payment and recognizes a liability split into pre-payment and buyback liability (residual 4,214 value) 3,633 3,962 - TRATON recognizes a lease asset at cost (and de- recognizes inventories) Inventory 3,994 4,321 4,822 Ongoing lease recognition - Asset is depreciated on a straight-line basis over the 2,293 2,355 Trade receivables 2,112 lease-term - The pre-payment liability is deferred as revenue on a Trade payables (2,472) (2,652) (2,963) straight-line basis over the lease term
2016A 2017A 2018A End of lease term • Increase of inventories in line with overall increase of sales volumes - Buy-back: cash effect - TRATON purchases at pre-agreed price and de-recognizes liability • Trade receivables driven by Scania V&S and overall increases in - No buy-back: no cash effect – buyback asset and liability sales revenue de-recognized by TRATON • Trade payables driven by overall growth in production volumes 34 1 Working Capital development as per Balance Sheet perspective. INDUSTRIAL BUSINESS – NET CASH FLOW EVOLUTION in €m 2016A 2017A 2018A Commentary Earnings before tax 440 1,172 1,444 Income taxes paid (81) (217) (403) D&A of, and impairm. losses on, int. assets, PP&E, and inv. property4 552 585 634 a. IFRS 15 relevant lease assets incl. in the Amortization of and impairm. losses on capitalized development costs4 237 225 170 positions: Depreciation of and impairment on 4 Impairment losses on equity investments 0 1 6 lease assets, Change in lease assets and change Depreciation of and impairment losses on lease assets4 1,085 1,155 1,089 a. Change in pensions 23 13 57 in liabilities (excl. financial liabilities) Gain/loss on disposal of noncurrent assets and equity investments (14) (13) 13 Share of profit or loss of equity-accounted investments (12) (63) (347) b. b. Share of profit or loss of equity-accounted Other noncash expense/income 134 30 134 investments increased due to higher profits and Change in inventories (364) (456) (670) c. Change in receivables (excluding financial services) (114) (615) (57) reversal of non-cash impact from re-valuation of Change in liabilities (excluding financial liabilities) 1,714 1,012 1,073 a. the investment in Sinotruk Change in provisions 408 (69) 38 Change in lease assets (1,865) (1,439) (1,596) a. c. Increase in inventory in line with sales increase Change in financial services receivables 3 (11) 0 Cash flows from operating activities - discontinued operations (123) 80 (88) d. Other cash flow from investing activities mainly Cash flow from operating activities 2,024 1,392 1,497 Inv. in int. assets (excluding dev. costs), PP&E, and inv. property (1,054) (839) (931) includes €592m from changes in loans and time Additions to capitalized development costs3 (400) (416) (449) deposits within the Group (see also e.) Acquisition of subsidiaries (4) 4 (7) Acquisition of other equity investments (7) (272) (17) e. Resulting from changes in loans and time Other cash from investing activities1 (293) (88) 631 d. deposits within the Group Cash flows from investing activities – discontinued operations 0 (4) (0) Cash flows from investing activities (1,758) (1,615) (773) Net Cash Flow I2 266 (223) 724 Adjustment to Net cash flow definition Volkswagen AG5 336 137 (592) e. Adjustment to discontinuing operations6 123 (76) 88 Net Cash Flow II7 724 (162) 221
1 Includes disposal of subsidiaries, disposal of other equity investments, proceeds from disposal of intangible assets, property, plant and equipment, and investment property, change in investments in securities and changes in loans and time deposits. 35 2 Net Cash Flow I is defined as cash flows from operating activities reduced for cash flow from investing activities. 3 Including capitalized borrowing costs. 4 Net of impairment reversals. 5 Includes change in investments in securities and changes in loans and time deposits. 6 Includes Cash flow from operating activities and Cash flow from investing activities. 7 Net Cash Flow II is defined as cash flows from operating activities reduced by cash outflow from investing activities from continued operations adjusted for “changes in securities” and “change in loans and time deposits”. FINANCIAL SERVICES – INCOME STATEMENT OVERVIEW
in €m 2016A 2017A 2018A Financing income (Lease income and interest income)1 709 721 760 Cost of sales (482) (469) (489) Gross Profit 228 252 271 SG&A2 (102) (106) (110) Other operating income/expenses3 (21) (36) (22) Operating Profit 105 111 138 Financial result 1 1 10 Earnings before tax 106 112 148 Income tax income/expense (41) (20) (40)
Result from continuing operations, net of tax 65 92 108 Result from discontinued operations, net of tax - - - Earnings after tax 65 92 108
Return on Equity Calculation 2016A 2017A 2018A Average Equity (in €m)5 657 702 772 Return on Equity4 16.1% 15.9% 19.2%
1 Reflecting lease income and interest income before I/C adjustments; corresponds to Financial Services segment sales revenue before intersegment consolidation. 2 Reflecting distribution expenses. 3 Including net impairment losses on financial assets. 4 Defined as earnings before tax as % of average equity. 5 Average equity is derived from the balance sheet at the beginning and end of the relevant period. 36 FINANCIAL SERVICES – NET CASH FLOW EVOLUTION
in €m 2016A 2017A 2018A Earnings before tax 106 112 148 Income taxes paid (57) (52) (41) D&A of, and impairm. losses on, int. assets, PP&E, and inv. property 2 3 4 Change in pensions 1 0 0 Gain/loss on disposal of noncurrent assets and equity investments (0) (0) 0 Other noncash expense/income 3 (21) 4 Change in receivables (273) 69 (184) Change in liabilities 25 86 (55) Change in provisions 5 (1) (0) Change in lease assets - - (3) Change in financial services receivables (922) (941) (947) Cash flow from operating activities (1,110) (744) (1,073) Inv. in int. assets (excluding dev. costs), PP&E, and inv. property (5) (3) (4) Other cash from investing activities1 (73) 34 (34) Cash flows from investing activities (78) 31 (37) Net Cash Flow I2 (1,188) (714) (1,111) Adjustment to Net cash flow definition Volkswagen AG3 76 (33) 34 Net Cash Flow II4 (1,112) (746) (1,076)
1 Includes disposal of subsidiaries, proceeds from disposal of intangible assets, property, plant and equipment, and investment property, change in investments in securities and changes in loans and time deposits. 2 Net Cash Flow I is defined as cash flows from operating activities reduced for cash flow from investing activities. 3 Includes change in investments in securities and changes in loans and time deposits. 4 Net Cash Flow II is defined as cash flows from operating activities reduced by cash outflow from investing activities from continued operations adjusted for “changes in securities” and “change in loans and time deposits”. 37 TRATON GROUP: DETAILED INCOME STATEMENT 2016A, 2017A & 2018A
in €m 2016A 2017A 2018A Sales revenue 21,915 24,366 25,927 Cost of sales (17,649) (19,653) (20,946) Gross Profit 4,266 4,713 4,981 Distribution expenses (2,316) (2,354) (2,391) Administrative expenses (789) (872) (1,011) Net impairment losses on financial assets (36) (44) (45) Other operating income 506 606 792 Other operating expenses (904) (537) (814) Operating Profit 727 1,512 1,513 Share of the result of equity-accounted investments 17 74 209 Interest income 79 91 83 Interest expenses (298) (263) (245) Other financial result (32) (34) 6 Financial result (234) (132) 53 Earnings before tax 493 1,379 1,566 Income tax income/expenses (297) (489) (415) Current (424) (377) (449) Deferred 127 (111) 34 Result from continuing operations, net of tax 196 890 1,151 Result from discontinued operations, net of tax 22 149 250 Earnings after tax 219 1,039 1,401 of which attributable to Noncontrolling interests 10 10 11 TRATON SE (former TRATON AG) shareholders 208 1,029 1,390
Earnings per ordinary share from continuing operations attributable to TRATON SE (former TRATON AG) shareholders in € (basic/diluted) 19.6 89.0 115.1 Earnings per ordinary share attributable to TRATON SE (former TRATON AG) shareholders in € (basic/diluted) 20.8 102.9 139.0 38 TRATON GROUP: DETAILED BALANCE SHEET 2016A, 2017A & 2018A (1/2)
in €m 2016A 2017A 2018A Assets Noncurrent assets 24,344 25,337 25,851 Intangible assets 7,055 7,019 6,597 Property, plant and equipment 5,940 6,003 5,469 Lease assets 5,840 6,103 6,599 Equity-accounted investments 491 836 1,223 Other equity investments 65 50 37 Financial services receivables 3,237 3,805 4,212 Other financial assets 402 93 63 Other receivables 598 662 663 Tax receivables 76 59 50 Deferred tax assets 639 707 939
Current assets 16,916 17,428 20,533 Inventories 5,405 5,781 4,822 Trade receivables 2,860 3,048 2,319 Financial services receivables 2,112 2,319 2,688 Other financial assets 777 782 6,371 Other receivables 659 736 939 Tax receivables 113 117 140 Marketable securities 84 51 98 Cash and cash equivalents 4,907 4,594 2,997 Assets classified as held for sale - - 157 Total assets 41,260 42,765 46,384
39 TRATON GROUP: DETAILED BALANCE SHEET 2016A, 2017A & 2018A (2/2)
in €m 2016A 2017A 2018A Equity and Liabilities Equity 10,931 11,810 16,801 Subscribed capital 10 10 10 Capital reserves 24,271 24,581 21,331 Retained earnings (11,817) (10,760) (2,064) Other comprehensive income (1,635) (2,130) (2,478) Equity attributable to TRATON SE (former TRATON AG) shareholders 10,829 11,702 16,799 Noncontrolling interests 102 108 2
Noncurrent liabilities 11,087 13,238 13,217 Financial liabilities 3,555 5,545 5,449 Tax payables - - 122 Other financial liabilities 2,105 2,239 2,333 Other liabilities 1,994 1,963 1,780 Deferred tax liabilities 389 612 824 Provisions for pensions 1,526 1,541 1,506 Provisions for taxes 127 18 16 Other provisions 1,393 1,319 1,184
Current liabilities 19,241 17,717 16,366 Put options and compensation rights granted to noncontrolling interest shareholders 3,849 3,795 1,827 Financial liabilities 5,485 3,426 5,366 Trade payables 3,362 3,507 2,969 Tax payables 256 253 125 Other financial liabilities 1,060 1,176 1,620 Other liabilities 3,681 4,072 3,263 Provisions for taxes 27 129 137 Other provisions 1,522 1,359 938 Liabilities directly associated with assets classified as held for sale - - 123 Total equity and liabilities 41,260 42,765 46,384 40 TRATON GROUP: DETAILED CASH FLOW STATEMENT 2016A, 2017A & 2018A (1/3)
in €m 2016A 2017A 2018A
Cash and cash equivalents at beginning of period 6,575 4,907 4,594 Earnings before tax 493 1,379 1,566 Income taxes paid (199) (303) (420) Depreciation and amortization of, and impairment losses on, intangible assets, property, plant and equipment, and investment property* 555 589 639 Amortization of and impairment losses on capitalized development costs* 237 225 170 Impairment losses on equity investments* 0 1 6 Depreciation of and impairment losses on lease assets* 1,074 1,128 1,090 Change in pensions 23 13 57 Gain/loss on disposal of noncurrent assets and equity investments (11) (13) 13 Share of profit or loss of equity-accounted investments (12) (63) (347) Other noncash expense/income 137 21 81 Change in inventories (353) (482) (632) Change in receivables (excluding financial services) (342) (415) (269) Change in liabilities (excluding financial liabilities) 1,392 1,121 993 Change in provisions 415 (70) 51 Change in lease assets (1,852) (1,408) (1,598) Change in financial services receivables (919) (952) (947) Cash flows from operating activities - discontinued operations 118 (46) (72) Cash flows from operating activities 758 726 382
41 * Net of impairment reversals. TRATON GROUP: DETAILED CASH FLOW STATEMENT 2016A, 2017A & 2018A (2/3)
in €m 2016A 2017A 2018A
Investments in intangible assets (excluding development costs), property, plant and equipment, and investment property (1,057) (849) (935) Additions to capitalized development costs (400) (416) (449) Acquisition of subsidiaries (4) (0) 6 Acquisition of other equity investments (7) (272) (17) Disposal of subsidiaries (0) (0) 394 Disposal of other equity investments (0) 7 0 Proceeds from disposal of intangible assets, property, plant and equipment, and investment property 43 43 69 Change in investments in securities (83) 31 (49) Changes in loans and time deposits 50 269 100 Cash flows from investing activities - discontinued operations (186) (174) (184) Cash flows from investing activities (1,643) (1,361) (1,065)
42 TRATON GROUP: DETAILED CASH FLOW STATEMENT 2016A, 2017A & 2018A (3/3)
in €m 2016A 2017A 2018A
Capital contributions 0 311 (0) Profit transfer to/loss absorption by Volkswagen AG (2,365) 32 28 Dividends paid to minorities (0) - - Other changes (0) 0 - Proceeds from issuance of bonds 751 2,264 2,162 Repayments of bonds (1,105) (2,090) (720) Changes in other financial liabilities 1,963 (114) (2,329) Finance lease payments (2) (2) 1 Cash flows from financing activities - discontinued operations (16) (8) (7) Cash flows from financing activities (775) 392 (865) Effect of exchange rate changes on cash and cash equivalents (8) (71) (48) Net change in cash and cash equivalents (1,667) (314) (1,596) Cash and cash equivalents at end of period 4,907 4,594 2,997
43 TRUCK INDUSTRY CHARACTERIZED BY A LIMITED NUMBER OF OEMS COMPETING GLOBALLY
LIMITED NUMBER OF GLOBAL PLAYERS
• Trucks are highly customized products given HDT market share 2018 held by top 3 in each region Customization & heterogeneous customer requirements regulation • Products need to meet strict regulatory standards Europe1 76%4
• Large and dense service network important given high uptime requirements for trucks Service network North 84%5 • Need for high service quality America2
• Competitive R&D and innovation capabilities Continuous innovation for brand positioning and to South Technology • 74%6 reduce TCO America3
Source: IHS Markit. 1 EU28+2 region consisting of EU member states plus Norway and Switzerland. Cyprus, Malta, and Luxembourg excluded, as no IHS Markit data available. 2 Canada, Mexico, United States. 3 Incl. Argentina, Brazil, Bolivia, Chile, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Nicaragua, Panama, Peru, Uruguay, Venezuela; excl. Mexico (part of North America); excl. Paraguay, as no IHS Markit data for trucks >15t available. 4 Incl. TRATON GROUP, Volvo Truck & Bus, Daimler. 5 Incl. Daimler, Paccar, Volvo Truck & Bus. 6 Incl. TRATON GROUP, Daimler, Volvo Truck & Bus. 44 LEADING HEAVY DUTY PLATFORM AS BASIS FOR FURTHER EXPANSION AND SYNERGY REALIZATION Potential heavy duty platform reach of top OEMs incl. associates and strategic partner Leverage technologies and expertise through global brands
Sales volumes >15t in 2018, in k units 6 1 469
2,3 Partner Partner #1 #2 4 Partner Partner
Top 3 Alliances Top 3 Alliances #1 #2 • Leading powertrain
3 technology
6 • Broad sales and service network • Focus on accelerated benefits in partnership
Truck Players Truck approach
5 TRATON GROUP Associates TRATON GROUP Strategic Partner
Source: IHS Markit. Note: Truck volumes (>15t) including selected strategic alliances. 1 Top 3 players with alliance partners. 2 Including partnerships with Dongfeng (45% ownership) and Eicher. 3 Dongfeng including Dongfeng-Volvo JV sales volume. 4 Including partnerships with Foton (50% ownership) and Kamaz. 5 Foton including Foton- Daimler JV sales volume. 6 CNHTC volume shown. 45 SUSTAIN CORE AND GO GLOBAL – STRONG CORE MARKETS AND INCREASING EXPOSURE TO GLOBAL MARKETS FORM THE BASIS FOR FUTURE TOPLINE GROWTH
SUSTAIN CORE GO GLOBAL Market volume truck sales >6t Market volume truck sales >6t 2018, k units Mid-term market outlook 2018, k units Mid-term market outlook
Robust volumes; services with North Current strong macro-economic Europe1 381 560 positive impact on profits America4 conditions with mixed outlook
South Strong recovery expected Premium and upper budget 126 China 1,325 America2 post Brazil market downturn segment expected to grow
Continued solid growth 5 S.E. Asia Heterogenous markets with Russia 80 momentum accompanied by 328 & mixed growth outlook margin increase Japan Successful global (export) business of premium Other3 trucks out of European / Brazilian home base Addressable market volume Additional market volume • Drive mutually beneficial / smart partnerships • Maintain market leadership in Europe and Brazil • Expand profitable segments in China, South America and other • Grow service sales revenue on existing rolling fleet emerging markets
Source: IHS Markit (market volumes). 1 EU28+2 region consisting of EU member states plus Norway and Switzerland. Cyprus, Malta, and Luxembourg excluded, as no IHS Markit data available. 2 Including Argentina, Brazil, Bolivia, Chile, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Nicaragua, Panama, Peru, Uruguay, Venezuela; excl. Mexico (part of North America); excl. Paraguay, as no IHS Markit data for trucks >6t available. 3 Including e.g. Australia, China, SEA, South Africa, South Korea. 4 Canada, Mexico, United States. 5 Australia, Indonesia, Malaysia, New Zealand, Philippines, Singapore, South Korea, Taiwan, Thailand, Vietnam. 46 OUTLOOK FOR TRATON GROUP'S CORE MARKETS POSITIVE – EUROPE PROFITABLE AND INNOVATION DRIVEN, SOUTH AMERICA RECOVERING MARKET VOLUME TRUCK SALES >6t PROFIT POOL OUTLOOK (UNITS) 2018, k units Share 2017 CAGR 2018-25e CONSIDERATIONS
• Robust volumes TRATON GROUP 6 1 core markets Europe 3811 ~30-35% +0.6% • Services/aftermarket expected to increase • Forefront of innovation
South 2 ~0%7 +3.2%2 • Strong recovery expected post Brazil market downturn America 126
• Continued solid growth expected, driven by economic Russia n/a8 +5.0% 80 expansion
• Current strong macro-economic conditions with mixed outlook North 560 ~35% (0.7)% • Services/aftermarket expected to increase America3 • Most profitable market driven by captive powertrains
• Volume reset post regulatory change China 1,3254 ~15% (4.8%)4 • Premium and upper budget segments expected to grow
S.E. Asia 2405 ~10%9 (0.3%)5 • Heterogeneous markets with mixed growth outlook
Source: IHS Markit, McKinsey. 1 EU28+2 region consisting of EU member states plus Norway and Switzerland. Cyprus, Malta, and Luxembourg excluded, as no IHS Markit data available. 2 Incl. Argentina, Brazil, Bolivia, Chile, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Nicaragua, Panama, Peru, Uruguay, Venezuela; excl. Mexico (part of N. America); excl. Paraguay, as no IHS Markit data for trucks >6t available. 3 United States, Mexico, Canada. 4 Incl. Hong Kong. 5 Incl. Indonesia, Australia, Malaysia, New Zealand, Philippines, Singapore, South Korea, Taiwan, Thailand, Vietnam. 6 Incl. Western Europe and CEE regions. 7 As footnote two and incl. Belize, Caribbean, El Salvador, Paraguay. 8 Incl. in CEE region (part of EU28+2 profit pool share). 9 As footnote five and incl. Japan, Pakistan and excl. Taiwan. 47 LAUNCH HIGH QUALITY PRODUCT PORTFOLIO STRONG PIPELINE OF PRODUCT AND APPLICATION INNOVATIONS (SERIES LAUNCHES) New truck generation Next generation eTGM2 E-Truck CitE3 ADAS Truck
New Tourliner /
Coach Lions City Lions City E Low Entry Bus vehicles
Bus fleet
Early Early Concept 2017 2018 2019e 2020e 2021e 2022e
Van
TGE eTGE Power- train Euro VIc drive1 KSG / D15 Euro VId drive Euro VIe drive Common Axle Module Full pipeline of new products and application innovations in place, spearheaded by the launch of a new truck generation
1 Including GZ cooperation gears. 2 eTGM launch with CNL in 2018, small series in 2019e. 3 Concept at IAA Nutzfahrzeuge in 2018. 48