Scania - Annual Report 2006

Scania annual report 2006 95 the agreed payment plan. Collateral in Customer Finance operations mainly exists in the form of the products being financed. The portfolio mainly consists of financing of trucks, buses and trailers for small and medium-sized companies. A description of credit risk exposure can be seen in the table below: Concentration of credit risk Number of customers Percentage of total number of customers Percentage of portfolio On 31 December 2006 Exposure < 15 SEK m. 21,322 98.8 69.1 Exposure 15–50 SEK m. 221 1.0 16.8 Exposure > 50 SEK m. 48 0.2 14.1 Total 21,591 100.0 100.0 The credit risk concentration in 2006 was equivalent to that of 2005 and 2004. The table shows that most customers are in the segment with exposure < SEK 15 m. This segment included 98.8 (98.8 and 99.0, respectively) percent of the total number of customers, equivalent to 69.1 (66.9 and 68.4, respectively) percent of the portfolio. The segment with exposure of SEK 15-50 m. included 1.0 (1.0 and 0.8, respectively) percent of the total number of customers, equivalent to 16.8 (18.2 and 17.2, respectively) percent of the portfolio. The segment with exposure > SEK 50 m. included 0.2 (0.2 and 0.2, respectively) percent of the total number of customers, equivalent to 14.1 (14.9 and 14.4, respectively) percent of the portfolio. Obligations with past-due receivables ordinarily lead to relatively quick repossession of the item being financed, unless the customer’s payment problems can be deemed to be of a short-term, temporary nature. Since most countries have a smoothly functioning second-hand market for the products being financed, these can be sold relatively easily. Financing contracts whose conditions have been materially renegotiated, and that would otherwise be recognised as past due or that have been the object of impairment losses, thus represent an extremely limited portion of the total. Timing analysis of portfolio assets: Contracts are regarded as bad debts when payment is more than 90 days past due or when there is information that causes Scania to terminate the contracts early. During 2006, 958 (1,092 and 883, respectively) financed vehicles were repossessed. At year-end, the number of repossessed but not yet sold vehicles amounted to 208 (175 and 147, respectively), with a total carrying amount of SEK 111 m. (87 and 70, respectively). Repossessed vehicles are sold off by means of a new financing contract with another customer, direct sale to an end customer or sale via Scania’s dealership network. Provisions for bad debts from customers amounted to SEK 521 m. (532 and 500, respectively), equivalent to 1.6 (1.8 and 1.9, respectively) percent of the total Customer Finance portfolio. Provisions for bad debts changed as follows: Provisions for bad debts 2006 2005 2004 Provisions, 1 January 532 500 457 Provision for potential losses 58 60 102 Actual credit losses -55 -62 -60 Exchange rate differences -14 32 1 Other 0 2 0 Provisions, 31 December 521 532 500 The year’s bad debt expense amounted to SEK 63 m. (80 and 89, respectively). 2006 2005 2004 Past due but not recognised as impairment losses Past-due payments Total exposure Estimated fair value of collateral Past-due payments Total exposure Estimated fair value of collateral Past-due payments Total exposure Estimated fair value of collateral < 30 days 89 2,930 2,985 64 2,081 2,082 101 1,590 1,515 30–90 days 71 1,484 1,370 88 1,109 1,063 46 663 667 Past due and recognised as impairment losses 2006: 91–180 days 50 395 343 43 403 341 45 316 291 >180 days 74 376 269 56 254 204 46 338 323 Completed contracts 62 408 262 47 317 210 44 239 145 Total 346 5,593 5,229 298 4,164 3,900 282 3,146 2,941 Vehicles and Service In the Vehicles and Service segment, receivables from customers totalled SEK 9,048 m. (9,319), most of which consisted of receivables from independent dealerships and end customers. The total estimated fair value of collateral was SEK 2,135 m. Most of the collateral consisted of repossession rights and bank guarantees. During the year, collateral valued at SEK 59 m. was repossessed. Timing analysis of portfolio assets past due but not recognised as impairment losses Past due payments 2006 Past due payments 2005 < 30 days 1,101 1,041 30-90 days 418 451 91-180 days 144 182 >180 days 801 849 Total 2,464 2,523 Provisions for bad debts amounted to SEK 626 m. (642), equivalent to 6.5 (6.4) percent of total receivables. The year’s bad debt expense amounted to SEK 125 m. (196). Continued on next page