Scania - Annual Report 2006

Scania annual report 2006 56 NET SALES The net sales of the Scania Group, in the Vehicles and Service segment, rose by 12 percent to SEK 70,738 m. (63,328), due to higher volume. Currency rate effects had no influence on sales. New vehicle sales revenue rose by 13 percent. Service revenue increased by 8 percent in Swedish kronor to SEK 13,595 m. (12,591). Revenue was not influenced by currency rate effects. Interest and leasing income in the Customer Finance segment increased due to higher financing volume but was offset by lower average interest rates. Net sales by product SEK m. 2006 2005 Trucks 43,021 37,778 Buses 6,766 6,256 Engines 1,024 803 Service-related products 13,595 12,591 Used vehicles 5,189 4,897 Miscellaneous 3,032 2,773 Delivery sales value 72,627 65,098 Adjustment for lease income 1 -1,889 -1,770 Total Vehicles and Service 70,738 63,328 Customer Finance 3,527 3,518 Elimination -1,643 -1,742 Scania Group total 72,622 65,104 1 Refers to the difference between sales recognised as revenue and sales value based on deliveries. This difference arises when Scania finances a sale with an operating lease or has an obligation to repurchase a product at a guaranteed residual value. NUMBER OF VEHICLES During 2006 Scania delivered 59,344 (52,567) trucks, an increase of 13 percent. Bus chassis deliveries totalled 5,937 (5,816) units. Vehicles delivered and financed 2006 2005 Vehicles and Service Trucks 59,344 52,567 Buses 5,937 5,816 Total new vehicles 65,281 58,383 Used vehicles 16,322 16,393 Customer Finance Number financed (new during the year) Trucks 15,747 13,471 Buses 487 386 Total new vehicles 16,234 13,857 Used vehicles 5,402 5,418 New financing, SEK m. 17,215 15,443 Portfolio, SEK m. 31,841 29,634 EARNINGS Scania’s operating income rose by 28 percent to SEK 8,753 m. (6,859) during 2006. The operating margin amounted to 12.4 (10.8) percent. Operating income in Vehicles and Service increased by 30 percent to SEK 8,260 m. (6,330) during 2006. Higher vehicle and service volume and better capacity utilisation were the main contributors to the earnings improvement. Restructuring costs related to the concentration of axle and gearbox production in Södertälje affected earnings by about SEK 150 m. Scania’s research and development expenditures amounted to SEK 2,842 m. (2,479). After adjusting for SEK 180 m. (278) in capitalised expenditures and SEK 361 m. (283) in amortisation of previously capitalised expenditures, recognised expenses increased to SEK 3,023 m. (2,484). Costs related to MAN ’s offer for Scania affected earnings by about SEK 200 m. The operating margin increased to 11.7 percent, compared to 10.0 percent the previous year. Compared to 2005, currency spot rate effects totalled about SEK -715 m. Currency hedging income amounted to SEK 110 m. During 2005, the impact of currency hedgings on earnings was SEK -410 m. Compared to 2005, the total negative currency rate effect was thus SEK 195 m. Operating income in Customer Finance amounted to SEK 493 m. (529). This was equivalent to an operating income of 1.6 (1.9) percent, expressed as a percentage of the average portfolio during the year. The positive effect of increased financing volume was offset by lower interest margins. Operating expenses increased due to continued expansion, mainly in emerging markets. At the end of December, the size of the portfolio amounted to about SEK 31,800 m., which represented an increase of about SEK 2,200 m. since the end of 2005. In local currencies, the portfolio increased by 10 percent, equivalent to about SEK 3,000 m. Operating income per segment, SEK m. 2006 2005 Vehicles and Service Operating income 8,260 6,330 Operating margin, % 11.7 10.0 Customer Finance Operating income 493 529 Operating margin1, % 1.6 1.9 Operating income, Scania Group 8,753 6,859 Operating margin, % 12.4 10.8 Income after financial items 8,583 6,765 Taxes -2,644 -2,100 Net income 5,939 4,665 Earnings per share, SEK 29.70 23.33 Return on equity, % 24.1 20.8 1 The operating margin of Customer Finance is calculated by taking operating income as a percentage of the average portfolio. Scania’s net financial items amounted to SEK -170 m. (-94). Net interest items amounted to SEK -231 m. (-187). Higher interest expenses were partly offset by improved net debt. Other financial income amounted to SEK 142 m. (299). This included SEK 80 m. (74) in positive valuation effects related to financial instruments where hedge accounting was not applied. In addition, the acquisition of Ainax had a positive effect of SEK 47 m. on financial income during 2005. Other financial expenses mainly included bank-related expenses. Financial review