For the Scania Group, the first quarter of 2020 started in a positive way but was from March dominated by the Coronavirus outbreak and the extraordinary social measures taken to reduce the spread of infection.
Summary of the first three months of 2020:
- Net sales fell by 8 percent to SEK 33,051 m. (36,092)
- Operating income fell by 29 percent to SEK 3,005 m. (4,207)
- Cash flow amounted to SEK 1,441 m. (507) in Vehicles and Service
Comments by Henrik Henriksson, President and CEO: “The first quarter of 2020 started in a positive way but was from March dominated by the Coronavirus outbreak and the extraordinary social measures taken to reduce the spread of infection. Scania’s delivery capacity became increasingly limited due to component shortages and disruptions in the supply and logistics chain. A decision to stop Scania’s European production was taken at the end of March, which was then followed by a structured shutdown of remaining production globally.
During the period, Scania’s net sales fell to SEK 33.1 billion and earnings amounted to SEK 3,005 m., giving an operating margin of 9.1 percent. Lower vehicle deliveries impacted earnings negatively, partly offset by currency effects and slightly higher service volume.
Although Scania’s production was severely affected in March, the service network managed to support our customers with parts, workshop services and assistance, ensuring that they could maintain vitally important transports for society. Scania’s service revenue during the first quarter increased by 5 percent to SEK 7,509 m. (7,166).
Financial Services reported lower operating income of SEK 277 m. (345), partly due to an increased share of bad debt provisions. As a consequence of the coronavirus outbreak our customer’s payment ability has deteriorated. We are working closely together to support them in these tough times.
There is great uncertainty about the full effect of the spread of the virus and its consequences for global demand. At the end of the first quarter of 2020, Scania’s order bookings for trucks had fallen by 27 percent compared to the year-earlier period, with major downturns in Europe and Latin America. Order bookings for buses and coaches and in the Engines business area were slightly higher, in line with the same period in 2019, respectively. Given the uncertainty in the global economy, the demand situation in the short term is difficult to judge, with a risk of cancellations of already placed orders.
We are in an exceptional situation for people, societies and companies. In light of this, we are forced to make tough decisions and take powerful measures, depending on which scenario will materialise. We are reprioritising projects and investments. Though Scania in the short term has managed to retain most of the jobs through short-term work allowance, further measures may need to be taken.
It makes me proud to see the social responsibility and power of initiative that Scania’s employees are showing. To mention some great efforts, our staff have helped with production of healthcare equipment, such as respirators, and provided the healthcare system with expertise in order to coordinate and acquire large quantities of healthcare material.
In April, Scania has begun a cautious restart of global production at low levels in order to test our own and our suppliers’ delivery capacity. We are carefully following developments and are taking decisions about activities in our global production system at close intervals. A successful come-back now relies on a synchronised restart of the whole European industrial system.”