Scania annual report 2004

CASH FLOW
Cash flow in Vehicles and Service
amounted to SEK 2,685 m. (2,450). Tiedup
working capital rose by SEK 1,153 m.
(236) during 2004, mainly due to increased
inventory and receivables related to higher
volume. Net investments totalled SEK
2,847 m. (3,311), including SEK 316 m.
(669) in capitalisation of development
expenditures. The effects of acquisitions
of businesses totalled SEK 49 m. (26).
Cash flow in Customer Finance
amounted to SEK – 285 m. (–1,456). Net
investments in customer finance contracts
amounted to SEK 478 m. (1,868).
FINANCIAL POSITION
Financial ratios related to
the balance sheet
2004 2003
Equity/assets ratio 30.0% 27.7%
Equity/assets ratio,
Vehicles and Service 40.3% 37.1%
Equity/assets ratio,
Customer Finance 11.2% 11.5%
Equity per share, SEK 105.25 91.26
Net debt, excluding provisions
for pensions, SEK m. 23,115 24,291
Net debt, Vehicles and
Service, excluding provision
for pensions, SEK m. 854 2,647
Return on capital employed,
Vehicles and Service 28.1% 22.0%
Net debt/equity ratio,
Vehicles and Service 0.05 0.17
During 2004, the shareholders’ equity of
the Scania Group rose by SEK 2,799 m.
and totalled SEK 21,050 m. (18,251) at
year-end. Net income for the year added
SEK 4,077 m. (3,034), while the dividend
to the shareholders decreased shareholders’
equity with SEK 1,200 (1,100).
Besides this, shareholders’ equity declined
by SEK 104 m. (614) because of exchange
rate differences that arose when translating
net assets outside Sweden and rose
by SEK 26 m. (0) due to changes in
accounting principles.
The dividend for the financial year
2004 proposed by the Board of Directors
is SEK 15.00 (6.00) per share.
NUMBER OF EMPLOYEES
The number of employees in the Scania
Group at year-end was 29,993 (29,112),
an increase of 881.
In Vehicles and Service the number
of employees was 29,639 (28,791) at
year-end 2004, of which the sales and
service organisation totalled 11,747
(11,460). The latter increase of 287 was
attributable to expansion in eastern
Europe, Asia and Africa in order to meet
increased service volume, as well as to
acquired businesses in western Europe.
In Scania’s global industrial operations,
the number of employees rose by 561,
with increases in both Europe and South
America. In Europe, the increase was
attributable to the introduction of the new
truck range and higher production volume.
The increase in South America was
attributable to higher production volume.
In Customer Finance the number of
employees rose by 33 to 354 (321). This
was mainly due to expansion in eastern
and western Europe.
FINANCIAL RISKS
Borrowing and refinancing risk
Scania’s borrowing consists of two committed
credit facilities in the international
borrowing market, bonds issued in the
capital market plus certain other borrowing.
At year-end 2004, borrowing amounted
to SEK 25.6 billion. In addition to utilised
borrowing, Scania has two unutilised
committed credit facilities equivalent to
SEK 11.1 billion plus unutilised capital
market programmes equivalent to SEK
21.8 billion.
Of utilised borrowing, about SEK 5.8
billion falls due for repayment during
2005, SEK 6.0 billion during 2006, SEK
7.2 billion during 2007 and SEK 6.5 billion
during 2008 or later.
Interest rate risk
Scania’s policy concerning interest rate
risks is that the interest rate refixing period
of its borrowing portfolio should normally
be 6 months, but deviations may be
allowed within the 0–24 month range.
One exception is Scania’s Customer
Finance companies, in which the interest
rate refixing period on borrowing is
matched with the interest rate refixing
period on assets. To manage interest
rate risks in the Scania Group, derivative
instruments are used.
Currency risk
Currency transaction exposure during 2004
totalled about SEK 19 billion. The largest
currency flows were in euro and British
pounds. Based on the 2004 geographic
distribution of revenue and expenses, a
one percentage point change in the
Swedish krona against other currencies
would affect operating income by about
SEK 190 m. on an annual basis.
Scania’s policy is to hedge currency
flows during a period of time equivalent to
the projected orderbook until the date of
payment. This normally means a hedging
period of 3 to 4 months. However, the
hedging period is allowed to vary between
0 and 12 months.
At the end of 2004, Scania’s net
assets in foreign currencies amounted to
SEK 8,761 m. Net assets outside Sweden
of Scania’s subsidiaries are not hedged
under normal circumstances. To the
extent a foreign subsidiary has significant
monetary assets in local currency, however,
they may be hedged.
Credit risk
To maintain a controlled level of credit risk in
Customer Finance, the process of issuing
credit is supported by a credit policy as
well as credit instructions. In Customer
Finance, the year’s expense for credit losses
47 FINANCIAL REVIEW • SCANIA ANNUAL REPORT 2004