Scania annual report 2003

STATEMENT OF THE PRESIDENT AND CEO
Prioritising better earnings paid off
Despite weak economic growth in
our main markets in 2003, Scania’s
operating income rose by more than
30 percent and operating margin improved
to 10 percent. After several
years of weak economic growth in
western Europe, the economic situation
is expected to improve somewhat
during 2004. The economies in
central and eastern Europe as well
as Latin America are also expected
to develop favourably. Meanwhile
Scania is carrying out an extensive
renewal of its product range.
Price ceremony, Young European Truck Driver.
Meeting with Tadaaki Jagawa, President of Hino.
The American economy, which has a
major impact on economies around the
world, recovered during 2003. However,
the outbreak of war in Iraq made customers
more cautious and temporarily slowed
order bookings. Meanwhile the economic
outlook in several of Scania’s main
markets in western Europe cooled as a
consequence of large government budget
deficits. Towards the end of the year, the
picture became brighter, and there are
many signs that economic growth may be
somewhat better during 2004. Economic
growth is important to Scania, since the
need for transport services, which generates
demand for trucks, is directly
connected to the GDP trend.
The somewhat lower order bookings in
major western European markets were offset
by rising order bookings in central and
eastern Europe, as well as in Asia. Also
very positive was the turnaround we saw
in Latin America during 2003. The big
economies of Brazil and Argentina have
again begun to show good growth.
The bus business also developed well
during 2003, bus and coach sales were
the highest in Scania’s history.
Integrated market
The overall market in western Europe was
largely unchanged compared to 2002,
which means a level about 13 percent
lower than in the record year 2000. In
recent years, exports of 4-6 year old
trucks to central and eastern Europe have
risen. These exports are expected to rise
further, as the large volume of trucks sold
in western Europe during the late 1990s
begins to be replaced in the next few
years. The outflow of used trucks, together
with low interest rates, has contributed
significantly to the fact that demand for
new trucks has not fallen as sharply as
during earlier economic slumps in western
Europe. The greater flow of used vehicles
from traditional markets in western Europe
to new markets in eastern Europe means
that Europe as a whole is becoming an
increasingly integrated market.
In central and eastern Europe,
economic growth in most countries was
strong, and both order bookings and deliveries
rose. The manufacturing sector is
moving production at an ever faster pace
from western to central and eastern
Europe. This generates a rising demand
for fast, flexible transport services. With a
growing number of central European
countries as members of the European
Union, this trend will accelerate.
Recovery in Latin America
In both Brazil and Argentina, the economic
and political situation stabilised. The total
market increased, and Scania’s order
bookings and deliveries improved.
Scania is continuing to assign higher
priority to profitability than to volume.
In recent years, we have streamlined production,
adjusted price levels and boosted
exports of both components and whole
vehicles to countries outside Latin America.
Meanwhile competitors with considerably
simpler products have gained market
share in the lighter heavy vehicle segment.
Strong growth in Asia
Scania had a good year in many of its markets
outside Europe and Latin America.
Turkey evolved into an important market
and many countries in the Middle East
showed strong volume growth. In east
Asia, Scania’s growth continued in South
Korea and Taiwan.
During the year, we reinforced our
presence in the Chinese market and we
see that developments in China are important
to economic growth in the region.
ANNUAL REPORT 2003 8