THE SCANIA REPORT 2018 Annual and Sustainability Report Scania’s aim is to drive the shift towards a sustainable transport system, creating a world of mobility that is better for business, society and the environment. 06-11 06-11 The world of transport and logistics is changing and Scania is committed to helping reshape it, supported by our strong 12-21 culture and key competitive advantages. 12-21 By providing our customers with ‘here and now solutions’ – the ones that are presently available and make commercial sense – in cities, industries or long-haulage logistics. 22-25 With a holistic approach to flows, the value chain of our customers and the wider ecosystem of transport and logistics, 22-25 26-29 Scania is determined to make changes that will have a lasting impact not just on the transport system, but on society as a whole. 26-29 Through collaborations with a range of public and private sector stakeholders and by forming cross-party coalitions, Scania is evolving the ecosystem of transport and logistics to create 30-31 a roadmap to a viable future. 32-33 30-31 By working in innovative partnerships and sharing both knowledge and investments, we accelerate new technology and business ideas. 32-33 The engagement and determination of our highly skilled employees fuels our change journey. 34-37 In our own operations, and in the work that we do with partners, suppliers and customers, we aim for the highest social, environmental and ethical standards. 34-37 2018 HIGHLIGHTS Scania reflects on another year of strong growth and a continued focus on contributing to a sustainable future in the ecosystem of transport and logistics. Major milestones range from finalising the launch of the new truck generation to taking strategic initiatives and entering new partnerships that seek to accelerate change. Scania hosts its second Service volumes continue Sustainable Transport Forum to increase: service revenue in May, bringing together some amounts to a record high of the world’s most influential SEK 27 bn, an increase thought leaders and decision of 12 percent. makers to discuss the shift to a fossil-free transport system. A comprehensive analysis undertaken by Scania – The Pathways Study – shows the viability of concurrent pathways to phase out carbon emissions by 2050. In conjunction with presenting these findings Scania announces a coalition with H&M Group, Siemens and E.ON Scania will continue trials with to help further accelerate the decarbonisation the new generation autonomous of heavy transport. transport systems at Rio Tinto’s operations in Western Australia in 2019. The first phase of the trial involves a Scania autonomous tipper truck. At the 2018 IAA fair in Hanover, Scania reaches a deal with Germany, Scania launches the Japanese construction a plug-in hybrid electric equipment manufacturer Kobelco truck (PHEV). to supply it with 13-litre low- The hybrid trucks can run on HVO emissions industrial engines. (Hydrotreated Vegetable Oil) in parallel with electricity. At the same fair Scania launches The Scania engines will be fitted Scania Zone, a wireless, remote-controlled into Kobelco’s huge new mobile position-based service for automatic vehicle cranes which can lift more than adjustment to help drivers follow traffic and environmental regulations. The service enables 300 tonnes. smarter, cleaner and safer truck operation. The German government announces plans to fund the ‘Trucks for German eHighways’ project. Scania will supply 15 hybrid electrified long-haulage trucks for three different test areas on German public roads. In its largest gas bus delivery ever, Scania will supply 741 Euro 6 gas buses – the cleanest and most silent buses on the Colombian market – for the renewal of Bogotá’s TransMilenio Bus Rapid Transit system. Established in the early 1990s, the system carries 1.7 million passenger journeys every day. Scania Transport Laboratory, the company’s in-house haulier, is showing the way towards emission-free logistics with its Scania wins the 2018 Green Truck strategic decision to exclusively Award, a German fuel test focusing operate on HVO (a near-zero on the lowest fuel consumption. carbon alternative to diesel), A Scania R 500 with its updated 13-litre engine ensured that Scania won the prize again. The Green hybrids, ethanol and biogas. Truck Award is arranged by two leading German trade magazines, VerkehrsRundschau and Trucker. Scania co-founds a consortium with the purpose to stimulate a roll-out of gas fuelled trucks. With EUR 2.9 bn in EU funding, the consortium BioLNG EuroNet, including Shell, Grupo DISA, OSOMO and Iveco focuses on producing liquefied biogas from waste and residues and on building a network of gas filling stations covering key commercial routes in Europe. The launch of Scania’s new truck Scania premieres its new Interlink generation enters its final phases, Medium Decker – the world’s first with the much-anticipated roll-out gas-fuelled long-distance coach of the new vehicles in Latin America for liquefied natural gas, which has and Asia. a range of up to 1,000 kilometres. Contents 2018 IN Scania in brief 2-3 Scania at a glance 2018 2 Our business 4-5 NUMBERS CEO statement 4 Driving the shift 6-11 Responding to a fast-changing world 6 How Scania creates stakeholder value 8 A strategy to take on the future 10 Driving adoption of sustainable solutions 12-21 Net sales Operating income Securing our customers’ future 12 At the frontier of sustainable transport 14 Solutions for leaner, greener value chains 16 137,126 Operating13,832 Income Profitable and sustainable long- distance solutions 18 SEK m. Operating income Operating margin SEK m. % Tailored for every need 20 160,000 16,000 16 A holistic approach to sustainable 140,000 14,000 14 transport 22-25 Securing a smooth flow 22 120,000 12,000 12 Partnerships to fuel the shift 24 100,000 10,000 10 Evolving the ecosystem of transport and logistics 26-29 80,000 8,000 8 Working with partners who 60,000 6,000 6 share our vision 26 Scania’s role in driving change 28 40,000 4,000 4 Bringing tomorrow’s breakthroughs 20,000 2,000 2 into today 30-31 0 0 0 Accelerating new technology and business ideas 30 2014 2015 2016 2017 2018 2014 2015 2016*2017 2018 Investing in our people 32-33 Total product deliveries and service Scania’s operational performance Our people are the key to our future 32 sales reached all-time high levels and was strong during the year, despite Scania’s net sales rose to a record going through the biggest industrial Sustainability at Scania 34-37 level in 2018. changeover in the company’s history. Sustainability every step of the way 34 The operating margin amounted to Corporate governance 38-41 10.1 percent in 2018. Report of the Directors 42-57, 126 * Operating income 2016 excluding items affecting comparability (a provision Market trends and performance in 2018 42 of SEK 3.8 bn related to the European Sustainability report statement 46 Commission’s competition investigation). Risk and risk management 47 Board of Directors 52 Executive Board 54 Number of employees Connected Scania vehicles Group financial review 55 Financial reports 58-135 52,103 363,676 Consolidated income statements 60 Consolidated balance sheets 61 No. Units (accumulated) Consolidated statement changes in equity 63 60,000 400,000 Consolidated cash flow statements 64 Notes to the consolidated 350,000 50,000 financial statements 65 Parent Company financial statements, 300,000 Scania AB 123 40,000 250,000 Notes to the Parent Company financial statements 124 30,000 200,000 Proposed distribution of earnings 126 150,000 Auditor’s report 127 20,000 Key financial ratios and figures 131 100,000 Definitions 133 10,000 Multi-year statistical review 134 50,000 0 0 Sustainability KPIs 136 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Sustainability report index 140 At the end of 2018 the number of The number of connected vehicles Financial information 141 employees had increased by 2,840 is steadily increasing, enabling Scania people compared to the end of 2017. to further optimise customer solutions About this report 141 and improve our service offering. Scania Annual and Sustainability Report 2018 1 Scania in brief SCANIA AT A GLANCE 2018 Luleå Södertälje Lahti Oskarshamn St. Petersburg Meppel Słupsk Zwolle Angers Bengaluru Bangkok Taipei São Paulo Johannesburg Kuala Tucumán Lumpur Regional Product Centres Production units Research and development Sales and services With around 52,100 employees in about 100 countries, our sales and service network is strategically placed where our customers Global net sales need us, no matter where they operate. Research and development Trucks 61% activities are mainly concentrated in Sweden, with branches in Buses 8% Brazil and India. Production takes place in Europe, Latin America Engines 2% and Asia with facilities for global interchange of both components Service-related products 19% and complete vehicles. In addition there are regional production Used vehicles 6% centres in Africa, Asia and Eurasia. Other 4% Scania is part of TRATON GROUP. Under this umbrella the brands Scania, MAN and Volkswagen Caminhões e Ônibus work closely together with the aim to turn TRATON GROUP and its brands into a Global Champion. 2 Scania Annual and Sustainability Report 2018 Scania is a world-leading provider of transport solutions, including trucks and buses for heavy transport applications combined with an extensive product-related service offering. Scania offers vehicle financing, insurance and rental services to enable our customers to focus on their core business. Scania is also a leading provider of industrial and marine engines. Our solutions Sales and deliveries 2018 Sales and deliveries 2018 America* 15% America* 33% Europe 59% Europe 26% Africa and Oceania 5% Africa and Oceania 13% Eurasia 9% Eurasia 4% Asia 12% Asia 24% Trucks America* 15% Buses and coaches America* 33% Europe 59% Europe 26% Scania supports transport Scania offers a complete range Africa and Oceania 5% Africa and Oceania 13% companies across the world of city buses and coaches for Eurasia 9% Eurasia 4% by delivering heavy trucks public transport operators and Asia 12% Asia 24% for each customer’s need.