Martin Lundstedt - President, Chief Executive Officer Jan Gurander - Chief Financial Officer Claes Eliasson - Senior Vice President of Media Relations & Group Communication

Ladies and gentlemen, my name is Claes Eliasson and I wish you all, welcome to this conference call covering the second quarter 2020. We will be listening to a presentation by the Volvo President and CEO, Martin Lundstedt, followed by a presentation by Chief Financial Officer, Jan Ytterberg. When done, we will open the line for a Q&A session. And with that, Martin please go ahead.

Thank you, Claes for that introduction. Also welcome from my side to this 2020 quarter or second quarter 2020 report from the Volvo Group. And this is of course a very special report after an unprecedented quarter, that to almost the full extent have been hovering around the COVID-19 pandemic and the different related effects from that pandemic. Our various business areas have been severely affected with initially in this quarter, both disruptions in supply and also gradually then into the quarter, lower level of demand leading to a drop of sales of 38% or almost SEK 50 billion in one quarter. In the light of that dramatic decrease in revenues, it was a solid and firm execution by our organization, our colleagues and business partners that led to an adjusted operating margin of 4.5%. In order to reach level of margin, cost decreased excluding restructuring charges with SEK 36 billion well off short term layoff programs in various countries where SEK 1.7 billion and in Sweden approximately SEK 1.1 billion. We are still in the midst of the COVID-19 pandemic and even if we see positive signs in utilization of installed fleet and the demand of equipment and services. We also must be clear about that numerous uncertainties remain and the risk for further and repetitive lookdown are still relatively high as we see and uncertainty about durations and severity unknown that can cause both, disruptions in supply moving forward and we are monitoring and working very closely with our supply chain in that respect, and that is working well, but still important to be very, very close there, but also how demand gradually will come back into what levels obviously. Also the consequences on the general economy is, and I think we will agree on that it’s still uncertain and thereby how the short term demand will develop. So therefore apart from health and safety as priority number one, moving forward of course as it has been almost in this quarter, the main focus is to continue to balance activity level in the group, with actual level of demand of products and services, also moving forward into the fall, because that has been a very important and I should say successful activity in our industrial system during the second quarter. So, that will be moving into the fall, so the group can continue to maneuver from a position of strength into the future. Since the ongoing transformation of our industry, will mean lots of opportunities also and that is very important to remember in this situations, that we are all seeing a transformation with lots of interesting opportunities for the future. So, by that I will like to come back to the slide that we actually showed during the presentation in quarter one, where we had started to outline our way through this pandemic, even if it was a lot of uncertainty at that time. At that time we were in the stock phase and had started to plan for a restart of our industrial system in the main regions such as Europe and North and South America and we were up-and-running you can say in Asia. The planning in different phases has served the group well and the organization has done a very strong and sold job during the first – during this quarter. We have now paused the restart phase that in most aspects have been working well and have now moved into the gradual return in almost all regions in the world. We noticed good performance in the entire industrial value chain. In the current situation we have realized that all the deep return, since there is a mix between pent-up demand after the four to six weeks of stoppage period depending on what plants and operations we are talking about and also a general demand of course among our customer. It is however still too early to judge whether the stabilization, on what level the stabilization will be in the short term and that we are monitoring closely, even if we see that in quarter three we have a solid filling rate, according also to the production level that we have now. So that gives a visibility into the third quarter. So again, a very much focused balance. Of course the activity levels in the group with the actual demand level and also balanced production and inventories accordingly, but we will come back to that. So during the quarter two, just to summarize, what has been a focused activities for us in the group: Number one, of course we call them the four C’s that has been the cornerstone also in our crisis management here. And number one of the Cs is our colleagues, business partners and customers, with the health and safety first for everyone involved in our business. And really great efforts have been made to put in place routines, procedures, physical measures to allow work with good protection in accordance with authorities requirements, not at least when it comes to the industrial restarts and as I said, still a lot to focus in that area. Second priority, serving our customers, running societal critical activities. It has been functioning really well I have to say during the whole quarter, given all the different lockdowns and restrictions in various countries, but we have been able to secure a good up time support, repair and maintenance, financial services, fleet management, etc., to our own customers. We have on the financial services side also supporting customers with the lease payments and modifications and thereby also easing the burden temporarily in order to make sure that they can maintain their operation, and we know how important that is also for retention and for future relations. And then number three, of course during the quarter also the restart as I saying towards the industrial system in different steps. And also in that area, very, very strong cooperation with all suppliers in the complete value chain here globally. Number three cash, we will hear more about that from Jan, but also in these areas that you can see, we have the number of very important areas that have been working fine. Also the growing concern of receivables and payables, but also a strong focus on reducing inventory both on new and used equipment has been executed with a successful outcome, decreasing of course CapEx across the company, partly, temporarily with certain measures, but gradually now mitigating those temporary measures into permanent, in order to have an aligned activity level with the demand of both products and services. And then also strengthen of course liquidity and prolonged credit facilities in order to have the maneuverability when it comes to our financial positions. And finally then on the cost side, immediate and forceful actions to reduce cost also, short term layoffs, consultant salary cuts, activity level decrease, halt prioritization in different areas and thereby maintaining flexibility. So summarizing the highlights of the second quarter, net sales decreased as I said with 38% in total, 46% for vehicles and equipment and 15% for services. Good volume flexibility in production, resulting in a gross margin that note was decreasing that dramatically and holding up through all the value in relation to previous quarters, despite the significant drop in deliveries and even more in certain cases, obviously in production given also the stock inventory reductions, and we are very pleased to see those achievements by the industrial organizations on a global scale here. Cash, R&D, selling and administration down with 30% and the adjusted operating margin as I said came out at 4.5%. In addition the group made a restructuring provision of SEK 3.2 billion with yearly savings that’s from first half of 2021 in the same magnitude, and the provision is related to the redundancy notice that was announced in the mid of June and mainly related to white collar reductions globally of approximately 4,100 positions. And the cast flow came out strong, given the very tough period at minus SEK 5.7 billion. Coming to volume development, truck deliveries was down with 58% during the quarter, and many of us sitting in this room here, we have been very long in the industry, 30-plus years and we haven’t seen something like this, but that was reality and Europe was also down with 53% and North America down with 79%. Construction equipment deliveries increase with 8% and the positive side was of course Asia related to China, Asia up 38%, whereas Europe and North America showed similar patterns at the truck side. Volvo branded products down with 20% and SDLG up equal to 1%. Service sales, currency adjusted were down with 14%, which is also a big drop that is bigger than we normal see during downtowns and of course later to the very big hit we had in the beginning of the quarter, also related to restrictions in some of the main markets. And that has gradually then improved during the quarter, and you will see later on also how that is with certain time line also following the utilization of the fleet. Buses very heavily affected, minus-38%, since the coach business and tourist business have been hardly hit and a big part of the fleet has been idling actually during the quarter, related to all the travel restrictions that you see across the globe. Then if you go into the truck side and managing the COVID-19 impact, as I said the forecast visibility is still low. But the utilization as you can see on the left side is gradually coming back after the initial period of lockdowns and other restrictions. Utilization is currently now around 5% lower in Europe than pre-Corona you can say and also confirmed by my old figures from Germany. Also the United States here we’re seeing get around minus-5%. In total to say what level it will stabilize since very still in mix of you can society catch up of the lockdowns and the current or actually general activity level. But the trend do far at least has been clear and as I said also, service business related to that with certain timeline. The right graph shows the global net order intake and the gradual recovery that has happened after the initial shock in stock phases related to the measures to fight the pandemic. I mean in April we are down with orders of magnitude up to (minus)- 90%. And then you can see that’s been a rather steep increase back is now currently at the level or approximately minus-5%. But also in this regard, I think we need to look at this with humble – in a humble way, it is too early to judge at what level we will see a stabilization. It might be so that we will have a certain overswing after, so to speak the pent-up demand of the stock period. So really being close here on the demand side, short guidelines in production, good balance with inventory is key factors for a continues, successful moving forward in this crisis move so to speak. Given the fact that we still all in the COVID-19 crisis, we have several remaining uncertainties, both as we go on continues measures to fight the outbreaks as such, but also risk following repetitive outbreaks, as well as how the short term consequences on the economy in general will look like. The visibility in our view is still too low to provide meaningful forecast figures. So we concentrate instead currently to keep a good balance between order intake inventory levels, production to keep a good flexibility in the industrial system and also on the sort of the side obviously. That has been the case during the whole second quarter here. When we look into the book-to-bill situation, orders and deliveries, quarterly orders for trucks were down with 47% and deliveries with 58%. But the most important achievement is the organizations work to get the good alignment between orders and deliveries as you see here. Worth noticing maybe in particular is the very high alignment in Europe during the last three, four quarters, but also other regions get into a good alignment, in particular during this second quarter. High focus has been put on a correction on the inventory, both in the group but also among our dealer partners, and the results of those activities have been good. The focus on getting to the right level in the dealer network or dealer inventory in our network in North America has been a special attention, explaining also this deep decline of deliveries and a better alignment with order intake and that was also partly already anticipated with an anticipated downturn in North America also for the market that we guided for already at the – during – at the end of last year. On the market share side, in North America can comment that Volvo has a stable development and we see gains for Mack, partly also related to the mix, the segments where Mack is operating or holding up better and they are keeping positions there, but a good development. In Europe a Volvo positive development up to 16.7%, but also with the rather stable prices given the circumstances, Jan will comment a little bit more on that and Renault stable around you can 8.5%, also knowing that manual core markets renewal have been severely of course affected by restrictions in Southern Europe. Strong progress in Brazil and all-time high for the group in total in Australia, whereas Japan shows a decline primarily related to a weak start in quarter one and we did see a stabilization in quarter two and the rather weak start in quarter one was partly related also to the announcement of the strategic alignment with Isuzu that temporarily created some lost momentum you can say, but that is better now. On the construction equipment side, quarterly figures show plus-11% in orders and plus-8% in deliveries, with increase almost entirely affected to a strong demand and performance in China. For the remaining regions, the figures are showing as similar pattern as for trucks, but also in VCE with a good alignment and balance between ordering and taking deliveries. With exception as you can see, North America where the very steep decline in order intake is in addition to the pandemic. Also it’s out of a very strong order in-taking quarter for last year and as a result also I mean balancing out that now with stock reduction among your dealers and also we see a continues softening you can say when rental fleets are adjusting their activities in accordance with the multi-dictated levels. But also in the field of construction equipment, we judge it similar to trucks. Its meaningful now with low visibility to provide on a forecast for the year. Then moving into Volvo Buses, and Volvo Penta. To start with, Volvo Buses had as I started to say also, a very tough quarter with severe declines in both orders of minus-55% and deliveries of minus-68%. The coach and tourist segment came almost into a complete standstill related to travel and tourist restrictions in most parts of the world. And even if the organization has been acting firmly and swiftly, there is no D&A that will compensate to this, and we also did see the various fee decline on the service side. Volvo Penta, we are little less effect than trucks and buses and both orders and deliveries came in at only into minus-34%, but of course still very big declines here. Finally, on the business update, financial services, high focus has been as we said, to support customers, also with increased modifications of contracts. VFS has performed this in a very professional way and we know that I have said also that this closeness with customers during rainy days as building strong loyalty retention for the future. So an important activity that is ongoing in the financial services area. We see however an elevated risk and we have therefore increased our provisions to be on the conservative side given the very low visibility of future activities. Finally, we see a positive development of the penetration of new contracts related to all business areas. That is also an important move forward where we can actually increase our presence during difficult times and that we will also gain from when the activity is coming back. So by that Jan, I’ll leave it over to you, Jan Ytterberg to continue the financial updates.

Thank you, Martin and I think we should also take a step back and reflect that a year ago actually we presented a peak of the cycle quarter, and now one year later we have just paused an unprecedented quarter with truck deliveries decrease from 60% compared to last year's service revenues, from 15% down in group net sales close to 40% down and this is to put some reflections into modern times the worst quarter ever if we compare it also with 2009 and actually in my 30 years in the business, unheard in this industry. So we should remember that when we compare figures here now. But despite this, we were able to deliver over SEK 3 billion of adjusted operating income, passing action all months with black figures, which was very important for us internally as well, and that's due to a strong cost execution. I will come back to that. Starting then on the top of the income statement with the net sales and with the different regions here you can clearly see how the pandemic and the measure to hinder the outbreak have gradually affected the region from east to west and both seen them in that sales and earnings. The 39% for the group is a combination of decreases in main regions, Europe and Americas with 40% to 60% respectively, reflecting on the low deliveries of each of the machines. Whereas Asia was flat compared to the second quarter last year and that is due to an increased machine delivery volume and then compensate for more limited drop of vehicles and services. China was the main contributor behind this of course then. Prices, Martin was into that. It had actually limited negative effect on vehicles and machines. We see more of price pressure when we come into inventory reduction vehicles, whereas we go to the factory and we are seeing more of a stable price level. But this was compensated for the group by a continued good price realization on services. Moving over to the adjusted operating income in the second quarter that was close to SEK 3.3 billion and adjusted margin of 4.5%. Of course now we're comparing as I started to say with the Q2 last year. It’s difficult to find good references for this quarter actually, but if we make that comparison, it becomes quite obvious how decisive action volume is in this industry. If we start with the lower new vehicles and service volume that impacted negatively compared to last year then, both related to less gross income of lower sales, but also as a big deterioration of the capacity utilization, and it was of course difficult to take out production costs with the same speed and magnitude as the volume decreased. As you heard Martin say, production volume, since we halt the production was actually more down than we can see on the delivery side out to the customers, but the volume flexibility in production was impressive mitigating a substantial part of the volume effect by reduced, fixed and variable costs. Used truck, vehicles delivers actually increased substantially in the quarter and that is not normal when we are in a crises mode. But the lack of new vehicles during the stoppage period and the reduction of price levels impacted positively on sales that were higher than last year then, but negatively on the valuation of residual value commitments and used vehicle inventory. In total, those effects I’ve just mentioned represented an impact in the gross income, represent more or less the full result we had in Q2 last year, SEK 15 billion. If we move further down in the income statement, we had an effect. Martin has hinted that as well, where we actually due to the situation of the COVID-19 and the future forecast of the economy, made us increase our credit provision by some SEK 850 million, but the main contributed to the positive operating and it was primary then of course the hard work to bring down activity and cost level in the group by eliminating and postponing activities, but also by reaching agreements with employees on voluntary salary reductions, both in countries with state supported short term growth programs, but especially then in countries without such programs. And also of course the state support for such short term where programs impacted positively and also by reducing activities we were able to take our, replace consultants, which also contributed to the strong cost execution here and it can clearly be seen then in the operating expense side or in the selling and admin. Then we also had a positive impact from JV’s in the quarter and that was related to the strong performance of our Dongfeng joint venture, demonstrating the strength of the Chinese market and the recovery of the Chinese market. FX impacted positively with SEK 300 million and that was despite stronger Swedish krona, but we got the positive reevaluation effect on our net payable position, which is not normalized, but in this situation it is in some major currency and that more than compensated for a negative transaction and translation effect. The transaction effect for the reminder of the year, now for the H2 is expected then to be minus SEK 1 billion to SEK 1.5 billion reflecting the stronger krona and of course very much depending on the volume assumption as such. But we don’t provide forecast for the full FX as we don’t normally do either for 2020. If we move over to the cash flow, and already in the first quarter we talked about this, that with the structure we have of the working capital, we were going to face a challenging second quarter, with a substantial negative effect coming from the trade payables, as we had to supply material in the first quarter to be paid out to the suppliers in the second quarter, and in the second quarter we have limited production. And now we see the effect, and trade payables have now been paid down to a new lower level. The focus work and the hold in production for some four to six weeks had a positive effect on cash flow on inventories, where both new and used inventory decreased, and the receivables contributed slightly positively, but actually gradually moved up deliveries. We got less of that effect in this quarter. And CapEx level as Martin was hinting as well was one of our focus areas, was kept at the minimum level to safeguard cash. All in all this meant that we had cash outflow of SEK 5.7 billion in a normally strong cash flow generation second quarter, but that was also then of course reflected in our net cash position for industrial operations. That actually decreased to SEK 51 billion from the SEK 57 billion we had end of Q1. If we move over to the segments and start with trucks, of course lower truck deliveries of some all-in-all 28,000 units, including the full range, not only heavy duty and medium duty, and the drop off service revenues of some 14% affected both net sales and operating income negatively for the group trucks. Close to half of net sales disappeared compared to the second quarter last year. We had a net sale of just about SEK 40 billion and an adjusted operating margin of around 2% and an income of SEK 0.7 billion. Same explanation as for the Group, except then of course the credit provisioning which we will come back to when we talk about the FX. FX had a positive impact of SEK 0.4 billion. We will stay a little longer time on construction equipment then. After the first quarter, actually where we had then the Chinese market being negatively affected by the measure to hinder the COVID-19 outbreak. We saw the Chinese marketing recovering here substantially and Chinese deliveries actually double compared to the second quarter last year. The increase was particularly strong for our SDLG brands and for compact machines and at the same time we saw other remaining markets and regions decrease substantially and service volume drop some 10%. With less Volvo branded heavy machines and more compact machines, net sales decreased from 15% despite the higher delivers, which also impacted gross margins negatively, but we have a nice cost structure in China and the substantial volume effect. We got a really good leverage and we can see that the EBITDA margin in our Chinese operations have improved compared to last year. Also in construction equipment, a good execution on bringing down activity levels and costs, an impressive achievement, making then the adjusted operating income decrease SEK 1.1 billion to some SEK 3.1 billion and a drop of 2 percentage units as we got margin down to an impressive 13.6% in a challenging quarter. Busses was our most heavily affected segment by measures to stop the outbreak around the globe. And as personal mobility was halted, restricted or avoided a substantial part of the bus fleet stood idle in part of the quarter with a halt of production deliveries were also periodically stopped. The decrease of vehicle sales of two-thirds more or less and a drop of service revenues were close to 40% are very unlike early crises we have seen, where the bus business in general have being holding up better than for example trucks as regular demand. The lower sales and lower capacity concession reported and mitigated by a successful execution, also here of decreasing activities and reducing costs, but operating income – adjusted operating income was negative with over SEK 500 million. Penta then showed a more similar trend as we brought them on, as we experienced for trucks. Drop of deliveries and services is substantial of course, but which - and also we have got this somewhat negative mix effect here of less heavier machines that impacted negatively. But also here this was mitigated by a successful execution on the cost side to reduce activities and costs. So even though we lost adjusted operating income with some SEK 2750 million compared to last year, the operating margin showed good resilience and decrease to 13.7%, which is a strong performance of course under these circumstances. Coming back to VFS, we have an improved penetration in general for VFS and we are increasing penetrations compared to last year and that mitigated partly then the substance drop of deliveries across the group. New retail volumes stayed at SEK 17 billion, similar to what we saw in first quarter 2020 and the portfolio was slightly above second quarter last year, if we adjust for currency. Coming back to modifications then, since we had a high number of requests for modifications in the beginning of the quarter, new request decreased gradually during the quarter and we were through the backlog of modification here in this second quarter. And this together with general deterioration of the business environment and also then an effect of lower prices of used vehicles as they are used as collectors in this business, we needed to have change of provision and parameters and thereby also we increased credit provision for future losses. Write-off is not increasing. It’s still at a pretty low level comparable to what we saw in the first quarter. Compared to last year, credit provision expenses were some SEK 650 million higher. We have been last year around SEK 200 million per quarter, so this SEK 850 million, SEK 650 million higher and of course increased credit provisioning was re-explanation behind the drop of operating income and also of return on equity compared to last year. By that Martin, I’ll move it over to you.

Thank you, Jan. To summarize the presentation before moving into the Q&A session, solid execution during an unprecedented quarter, but now it’s important to continue to move through this COVID-19 pandemic, because as we said we are still in many cases in the midst of this pandemic and therefore continuous focus on a number of activities are the highest priority obviously. Safety first goes without saying. It has been executed as we said in a good way, but we need to continue to focus on that part. Carefully then monitor also the impact on economies demand and supply to continue to keep the balance of activity levels in the group with the actual demand levels globally, but also more importantly region-by-region and country-by-country. Balance, the resource now of the selected activities with recovery and demand and that goes across the company in all different parts of the value chain and different type of activities. We are – now, we have been working with this also basically through the whole quarter, where we have short term cost reductions that we are mitigating and converting them into structural cost savings, so we are creating the flexibility, maneuverability and headroom. But also remember that the prospects of our industry is good obviously. There are a lot of megatrends pointing forward. A continuous good development in the market place and therefore we need to make sure that we also have the flexibility and the strength to accelerate the transformation into the new technologies. A little mobility we are launching as we peak in on truck side more broadly. Automation, new technologies like fuel cells and hydrogen, but also the business model development related to these new technologies. So, by that I think we are ending the presentation part and moving into the Q&A session.

Yes, thank you gentlemen. Operator, will you please let the first question through.

Absolutely! Thank you. [Operator Instructions] Our first question comes from the line of Tom Narayan from RBC. Please go ahead.

Yeah, hi! Tom Narayan, RBC. Thanks for taking the questions. My first question is, could you provide some color on the Chinese construction equipment market, maybe what's driving the strength for you guys in Q2. I’m wondering if this is some pent-up demand from Q1 or you know is this strength you can expect to continue into Q3. And then on the bus, how much of this business is exposed to the tourism end market? I know you discussed that a little in your prepared comments you know versus other end markets, public transport, etc. And then finally, you know there's been a bit of chatter recently on new entrants into the fuel cell commercial truck market. You know could you comment on how much of a threat that is to the incumbent truck OEMs? You know what advantages your JV with Daimler may have in this nascent market? Thank you. A - Martin Lundstedt: Thank you, Tom, and thank you for the three different questions here. We thought with the Chinese construction market, obviously what we're seeing a quarter two is partly related to the pent-up demands in China, mostly in heavy restrictions during quarter one. Both, I mean the normal New Year stoppage period, but also then obviously the prolongations then related to the pandemic, so that is one factor. But we still see also that underlying and also support programs for defense sectors in China. I’m not talking about support in our end, about in the construction sector and different type of initiative reported for driving demand. And so we have been successfully in actually participating in that volume increase, both when it comes to the SDLG and the Volvo brand, which is of course important since we have seen a trend where the Chinese payers have been acting strongly. Not at least the wheel loaders for a long time, but also in excavators. So there we are very pleased with the development of volumes in our organization and we see that also on a fairly stable level moving into quarter three now at the beginning at least. But for all sectors now, we need to monitor that development closely obviously. And on the bus side, obviously it has mainly been related to the coach and tourist segment, even if of course the public transport segment has been affected mainly by them. The supply disruption in the beginning of the quarter where we have the delays, etc., and we’re not able to supply that, you have a little bit longer lead time since you also has have bought the builds to a big extent, etc. So in total, yes, much more heavy weight on the decline on the coach and tourist segment, but also the public transport affected by the – mainly by the supplier disruptions. Then we see now also an increased activity on the public transport side moving forward, not at least into the next mobility area. So let’s see how the development will continue now during the coming quarters here. Then when it comes to fuel cells, we think in many aspects it’s good that there are a number of players talking about that now, because of the fuel cell will be one of the cornerstones – and the hydrogen, as the fuel will be one of the cornerstones for sustainable and carbon free transportation, not only for the heavy and the long haul applications, and therefore it was extremely important for us to find a solid way forward since investments are required, but not only investments into the technology of such or fuel cells and the truck side, where of course we will do our part, but also giving a strong sign that other actors around this now should move along when it comes to the build-out of network infrastructure and also so to speak, “green generation of hydrogen” because also in that area it's important that you have the full value chain that is actually up to speed when it comes to renewable sect-up. We are very confident in our set up. A strong perimeter of the joint venture that is defining where this space of cooperation is and that is a space of cooperation in the fuel cell technology when we have done our job, then we see that there is a strong maturity level on that fuel cell technology and the setup will allow also a volume development with players that have the network and that can deploy that also in volumes needed in order to get TCO and Total Cost of Operations to a level that makes also the volume deployment possible. So we are very confident in our set up and we are looking forward to that development also into sustainable transport.

Okay, thank you. I’ll turn it over.

The next question comes from the line of Björn Enarson with Danske Bank. Please go ahead. Björn Enarson: Yes, thank you. I have a question on the balancing of the restart. When do you foresee that production would be more in line with the demand situation? And second question refers to truck pricing of new trucks. Can you give some more color on that? Thank you. A - Martin Lundstedt: Yeah, thank you Björn. It was totally the restart. As we said, we have had after the almost six weeks lockdown in our main factories and value chains. We restarted in the beginning of May you can say and gradually ramping up. But in June – and from end of May and in June we have had obviously around about two levels where we are now; where we see also that we have a good balance between demand and supply. So that’s the reason also why we gradually have taking out short term lay-off programs in our different plants in order to cope with that, because the name of the game now is to continue to keep a short guideline or a short lead time. Again, we call it guideline, but the lead time between orders to deliver this obviously, so we can serve our customers with the current demand on both, the pent up part and also the growing concern demand and keep the risk on a low level for us also when it comes to executing these orders and turn them into deliveries and receivables and eventually cash collection. So as I say, now and also after vacation now as we said, fielding rates are good to the level we order and we feel that they are also satisfying the demand level as we speak. Björn Enarson: And what did you say about the inventory situation in North America?

Yeah, I means that’s why I’ve already said. I mean after a number of good years it’s always the situation that you’ll – I mean you start to see the decline, that was already pre-corona. Now you need to see that you had excess stock in the wood industry. We were in our view on the lower side if you compare with the players in the industry, but during also the second quarter we have continued, you can say successful execution would have been positive about our own management of inventories, both on the new and used side, but also on the dealer network we see also a good execution. But still focused we’ll continue in this area obviously.

Truck prices?

Oh! Truck prices. [Cross Talk] Since I had at similar presentation. Well, we see in store the normal pattern in the situation of course and I commented that with more of price pressure than reducing stock and if you take a look on the globe, Martin was already into that and that of course you see more of this in North American than we see it in Europe. But the combined effect, if you take a look on truck, it’s rather limited actually. Your talking small percentage numbers as a total, so rather limited in this situation during this stoppage period of second quarter. Björn Enarson: Okay, thank you, thank you.

The next question comes from the line of Hampus Engellau from Handelsbanken. Please go ahead.

Thank you very much. Three questions from me. A start up on the order intake. If I remember correctly, January started off better than expected, while net interest income is on the 5% decline year-on-year – sorry, compared to January. If you could maybe add some more flavor to that on what is the catch-up and what do you see underlying here? Second question, the 10,000 headcount reduction, how much of this is pre-COVID, given that we were already entering into slow down and even if we would get a recovery next year we would still be clearly below last couple of years volumes? Last question for me is if you could maybe add some flavor on the cost savings related to this government's support and also what under absorption cost you had during the quarter. I’ll stop there. Thanks.

Yeah, thank you Hampus. When it comes to the order intake, your right and when I show that slide also here on the truck section of the presentation, we was a little bit intentionally showed also that we had maybe the most pronounced – if I say pronounced slide overseeing all the expected level in the beginning of the year as you said. But we have tried also to illustrate that we’re taking away that so to speak, overswing. So we are talking a little bit about the levels that we were anticipating moving into 2020 and then we’re talking about the minus 5%. So that is so to speak a little bit how you should see it. But I think the more important point is your second point of your question. How much is pent-up demand and how much is so to speak the growing concern, the normal level as we speak right now, and that’s a little bit of reason also why we say that is still low visibility and it's not meaningful to give the full cost etc., because it is still a little bit difficult to judge what is what here. What I think is important, if you think about it, we know from historical downturns and also upturns that our general demand and that it could be small changes in that trend line depending on new thing's happening like e-promotions etc. But generally speaking, we are following the GDP development pretty close and therefore I think in the short term when we will have a hit to GDP and the gradual return etc. We must be prepared for the high level of flexibility and really work with the balance between what is the order impact, keep the guideline short, make sure that the production have the flexibility to deliver and hover around plus and minus levels in order to relate and make sure that the guidelines are kept short, inventories would balance, that is the most important now. Then obviously the medium to long term, the prospects of coming back to a positive trend line with the megatrends of increased population mobilization, e-commerce, etc., they are still there. But we need to be really strict now with the GDP development and we think will execute in good levels in such an environment, so that’s the reason why we are talking about focusing that way. On the second quarter, you’re absolutely right. Of course we have already started to reduce position and resources according to the anticipated downturns and corrections in the market levels and on the 10,000 you can say ball park that 50% approximately was related to the already decided measures and the remaining part and coming on top related mainly then to the outbreak of COVID-19, and then how we are as we have said also is the process of continuing to reduce on the white collar side with approximately around 4,000 positions.

And maybe I can comment on the cost savings and if I understood you correctly Hampus, it was more on the production side, because I mean what they’ve talked about reducing activities and be very careful with cost. Its of course valid for the whole organization. But also coming back to following the reduction of headcounts we lowered coming into that, already in the situation that we have brought down the structure into new lower levels that we expected coming in from 2019 then, where we have in Q1 was something more to do in U.S. But in Europe we were pretty well balanced actually. So we are already on the decreasing end mode so to say, but when this happened we were able to adjust of course pretty impressively I must say. I mean normally in this industry you're talking about the volume flexibility of 50%, i.e., if you can reduce cost by 50% of the volume, being then excluding direct material in production, that is a really good achievement, at least during a quarter or two and we have invested in that actually. Of course, part of this governmental support programs, but you must remember that these are programs for both, the companies putting in money, the employees putting in money and the states putting in money. And gradually as we are now moving up and getting back to a good balance in between demand and supply, of course we're moving out from these programs as well and that is gradually happening here and will also happen here and affect Q3, so I hope I gave some more flavors to you then Hampus.

Thank you.

The next question comes from the line of Klas Bergelind from Citi. Please go ahead.

Yes, hi Martin and Jan; its Klas from Citi; so a couple of questions from me. So I want to come back to alternative power trains and on the JV with Daimler on the fuel cell side and your development of full electric separately. So when we look at this, the green dealers are megatrends, the shift alternative powertrains are really happening, seeping up fast. If you look at Nikolai and their valuation since the IOP, it’s obviously the same thing, they are really speeding ahead. So Martin, could you talk a little bit more about the timeline of your upcoming vehicle launches, both from the electric have you decide and also on the fuel cell then and also if R&D, the phase will start to creep up towards the levels we've seen in autos, i.e., 6% of sales over time. Thank you. A - Martin Lundstedt: Thank you, Klas. First and foremost, I think it’s important – good that your bringing up the two, so to speak powertrains in combination, because they all are really combined, because we are talking about factory electric details and fuel cell electric details. And why is that important? Because the modularity or the power train is the trick here, meaning that a lot of the electro mobility propulsion components when it comes to e-axels, gearboxes, control systems, management systems around these – and then obviously the whole modularity around the vehicle as such, because when we talk about electric mobility and fuel cells, you should still have the high performing truck you know, which is sometimes forgotten. And thereby we see that the perimeter of the joint venture providing a modular fuel cell stack will fit into our execution of the electro mobility roadmap, both for battery, electric and fuel cell electric and that I think is the strength that we are building up now. Not only for trucks, but that modularity will provide also opportunities to all our business areas when it comes to buses and construction equipment and Volvo Penta, etc. So that is number one. Then obviously as you say, when it comes to the timeline, first out here is factory electric vehicles. We have been out with that for a number of years in different executions on the bus side. We are ruling out that now when it comes to executions up to 26 tons you can say, so medium, medium-heavy duty executions for mainly their fit, their regional applications. Both on the renewal and Volvo side and also now gradually moving into the North American market, both for Volvo and Mack. And then also we have been showcasing also, meaning that it’s not that far away also on the next level when it comes to regional distribution and regional hold, where we have been showcasing that also for the Volvo, where the modularity is coming into play and obviously other type of energy layers etc. when it comes to the battery. Then when it comes to the fuel cell, maturity level wise we see that this must have a very important role when we are moving up to the later part of this decade, but that’s the reason why we think that the construct of it really is important, so we’re given the sign that some of the major players really want to move this way and a lot of the other access when it comes to infrastructure and green generation of hydrogen, we’ll invest as well, because this is really an ecosystem. But from a truck maturity level, we are not that many years away. It will be more about so to speak having the system in place, but looks promising.

No, very good. Now certainly it seems like Europe is serious with the near SEK 500 billion investments that you are talking about here. On that note, my second question is around the stimulus we got out from Germany and could be a European program now than when we had Germany from first July holding the EU presidency. When I listened to you during the AGM on the Q&A with the Chairman, you were -- seemed Martin pretty optimistic on the green deal and what that could do to replacement demand under you know potential stimulus. Could you comment a little bit about you know what you are thinking there?

What I’ve said, I mean in order to provide a meaningful stimulus into the transport sector, we have said that I mean if we would like to so to speak utilize the funds that will be provided for a meaningful transformation then we have said that I mean take out the rolling fleet that are Euro 3, Euro 4, Euro 5 and then you will get leap frogging so to speak into the next level of technologies and thereby making big improvements, while also stimulating so to speak mainly than the customer side on taking on this. So we are not asking for a direct stimulus, we don’t think that’s the right way to go. It’s more about stimulating the right technologies on the customer side and thereby taking the right steps when it comes to sustainable transportations.

Okay, a quick final one on cash flow and the moving parts for you Jan. So obviously the receivables, I thought that they would be bigger, but I guess obviously that disconnected to deliveries ramping through the quarter. If you look at the payables and now when you ramp production, the out flow that we had in the first half, is it your sort of working assumptions that you can compensate at the current obviously demand levels when you ramp production, if you can compensate for that outflow compactly in the second half.

Well that will of course be sort of a discussion of what volumes do we expect for the coming quarters, but what we can say is of course what we did here was to bring down the trade payables to new lower level, i.e., we are in Q3 paying the Q2 suppliers, supply and of course that was low due to the hope of production, and we believe we are moving in this way to have some positive effect coming into trade payables, but from a pure cash flow quarter-by-quarter comparison. But receivables is also a mix issue, because we are quick to turnover time in markets that were now more effected by the deliveries here, delivery drop being the Americas, whereas Asia where we have somewhat longer time. It’s having sort of a negative impact in that respect. But in generally we were going down as a said, but gradually going up here since we gradually move up on delivery. So that’s why the effect was maybe a little lower than you expected.

But in the big hit...

The big hit has happened, and so we are moving from a low level of working capital you can say.

Exactly, thank you.

The next question comes from the line of Daniela Costa from Goldman Sachs. Please go ahead.

Hi, good morning. Actually, just lastly a few follow ups to the prior questions. One on the cash point is the first question regarding the second half. What shall we expect in terms of CapEx? Would you have to – how progressively would you have to bring back up CapEx? And then two questions on the P&L, one related to R&D which you've decreased, but how should we look into R&D going forward? How quickly would you have to ramp up R&D as well? And then the other question on the P&L relates to you talked about the savings, the structural savings from the measures you've recently announced flowing in the first half of 2021. Do we have the furlough programs lasting until the end of 2020 or would you foresee a little bit of a gap between the temporary measures finish and the structural ones start to pay back? Thank you.

I think the two first are pretty connected actually, because of course now we made a real stop, actually we stopped activity to a big extent completely during the month of April and then we are gradually ramping up. But that means that the CapEx was really low in this quarter and if you of course increase, as will R&D, as we are ramping up activities there as well. But we should remember that this is also connected to what you see on the topline side and on the order side, etc.,. On the demand side, because we are talking lots about affordability, what can we afford really in this situation and that is of course having an impact of what we are taking for decisions in this respect. But some of them are more legislative or safety driven and of course we cannot stop them, we have to do them. So we will see a ramp-up, but it will also be connected to what we see on our top-line and how the demand is developing. Then if it’s a gap or not, of course we are trying to avoid a gap here, but – and the programs you were asking about is a little different depending on where you are and as I said also on the questions of Hampus, when we are moving up in production than in volumes, then we are moving out from these programs, but we are still keeping them on the white collar side where we can of course. So we would like to have them in place as long as possible because, at least as a preparation and as a program and then how we use them, it's really depending on the affordability aspect as well. And there are different types depending on where we are in the world, especially in Europe and of course these are, we should remember that gratitude also chaining because we are part of the economy in total and of course society is supporting business here. So let’s see where we are, but right now I mean for Q3 we have the same programs as we have in Q2, and then we are coming into Q4. Let’s see if we can elaborate a little more about that when we have more of a complete picture of the decisions taken, but of course try for us, trying to avoid the gap.

But I think it's also important to remember that when, it is also a little bit later between furlough and the gradual return of activities aligned with good balance with the top line, is that the furlough is in many cases not just a furlough but we have the allowance to do the competence development, which is very important for both individuals, for society and of course the company to utilize these now, to drive competence and thereby increasing the ability to get a good match between individual competence and positions that we’ll also come back to now with the gradual return of activities. So that is a very positive thing with this that I think is solving both society and individuals jobs and companies.

Thank you very much.

Our next question comes from the line of Kai Mueller from Bank of America/Merrill Lynch.

Thank you very much for taking my questions. Again, a lot of them have already been asked. But if we jump into the truck side again, not on the original equipment agreed on your service revenues. You show obviously that chart on the utilization of your fleet only being down minus-5% as of the last week. How do you see that progressing? Is there a big shift? Also have you seen any significant trends from sort of online deliveries that have been supported on that side? I remember on your Q1 call you said obviously industrial activity is still very low and that has impact on your truck utilization, now the minus-5% doesn’t suggest that. Can you give us a bit of color how you expect the utilization to develop and how that really feeds through the end; also your service revenue for the second half? And on the second point is, you mentioned obviously you work very closely with your customers to help them throughout this difficult time. Can you also maybe outline what those conversations are? Is this customers just wanting to extend certain terms, is it trying to renegotiate monthly payments? What exactly – how do we need to think of that, what you are negotiating with them?

Yeah, thank you. On the first question, you can say that if you look at the utilization and as we said there is rather similar patterns also without the markets depending on restriction lockdowns, etc., because when we show this growth for example, it was modern tracks in Europe, but we said also that you have a similar gap, for example North America. What is interesting there is obviously when we look at the same data country-by-country we see also how much it is related to both. Well, you have the steep decline, the restrictions and lockdowns. The big difference is between countries with a more severe if I put it like that, restrictions, whereas counters with less severe had less drop in utilization, so that was the first part of it. Then gradually when you are moving out you are getting more a mirroring of how is the general economy level, because fleets are utilized, I mean very much according to how the general economy is moving along. So from that reason we believe that in Europe now, given also what you have seen with GDP and activity levels, it’s a pretty reasonable figure with a minus-5% even though most of the restrictions are lifted. At least unrelated to transportation of goods, then it’s still a completely different factor when you talk for example, for coaches, etc. And then when it comes to service revenues related to that, as we said its following, that is also the normal patter. It’s a sort of lag, because we start to use it again and then you are starting to get back to the normal service and repair schedules and this type of contract. So there is a lag of a couple of weeks or a month or something like that depending a little bit market penetration. Then when it comes to modification, yeah I can start and you can add here Jan, but I mean the primary discussion, and it has been a little bit you can say 50/50. Some that really need, say because they are in a financial stressing situation so to speak and some of them asking also us to create the headroom for so to speak the liquidity positions, etc., so there are of course different reasons obviously and different sectors. It’s not so much about I mean modifying the terms of the contract, it’s more about so to speak rescheduling of when payments etc. shall take place.

And then in general I mean compared to 2008 or 2009, then it was of course a liquidity crisis and we don’t see that happening now. So still coming into this with good financials, I mean good business for our transporters, but of course as Martin said, there are ways of both segments of customers let’s say and of course – so let’s see going forward. We have some segments that are heavily effected, some regions that are heavily effected as well and let’s see how it’s going to play out going forward.

Thank you. That’s very helpful.

Alright, thank you.

So this concludes the call for the second quarter 2020. We are looking forward to meeting you in three months’ time. Bye for now. Over and out. A - Martin Lundstedt: Thank you very much. Bye-bye.