Thank you, and hello everyone. My name is Anna Oxenstierna, Head of IR, and I would like to welcome you all to this debt analyst conference call covering the 2021 first- half-year results of Volvo Cars. With me in the room I have Volvo Cars Chief Financial Officer, Björn Annwall, and Group Controller Per Ansgar. We'll start with a short presentation by Björn, and then we'll open up for questions. With that, Björn, I'll hand over to you.
Terrific. Thank you, and welcome everyone. I think Per will help me as well through this presentation before we go to the Q&A. I'll give a brief update then on the H1 result and put that a little bit in the context of the change journey and transformation we are going through. In short, the key highlights of this H1 is basically a message of continued strong growth or back to strong growth. It is also an H1 with record profits and premium profitability. Come back to cover that. As you will hear, we are truly accelerating our transformation into the future. I will spend a few minutes going through that. In short, the sales came out at 381,000 cars for H1, which is a strong growth of more than 40% compared with last year.
Of course, the last half-year was heavily affected by the COVID situation with lockdowns in major parts of the world. A more true comparison would be to compare with 2019, the growth is around 20%. A strong growth. If you look at the EBIT, it came out at SEK 13 billion or 9.4%, which is truly a strong and a record for Volvo Cars. Zoom out a bit and add to the H1, also the last six months of last year, look at the last 12 months. This means that our retail sales pace now is at 773,000 cars, which is very close to the 800,000 target we set for ourselves for 2020 back in 2011, which I think is quite remarkable.
Yes, it's a bit delayed due to the pandemic, and it's slightly below 800,000, but given the semiconductor situation, I do feel that those 773,000 cars are principally where we should be on the 800,000. Same goes with our profit margin. If you look at the last 12 months, the total EBIT is SEK 22.7 billion or close to 8% EBIT margin, which was the target we set for ourselves by 2020 in 2011. Principally, we feel very good about ticking off that landmark post that we have, and now moving forward with our transformation. As we move forward with our transformation, we have very clear mid-decade business ambitions. We're saying that we're going to continue to grow at approximately the pace we've been growing lately. To 1.2 million cars by mid-decade.
We're also saying that half of the sales should be from fully electric cars, on route to become a fully electric company by the end of this decade. We're also saying 50% of the sales should be online. Importantly, we will have a sustainable margin at 8%-10% EBIT margin. We will reduce the CO2 footprint of a new car in mid-decade with 40% comparing to the baseline we had actually in 2018. We will, and those of you who's looked at our Tech Moment and looked at our plans with central compute, you also understand why it's important that we take control over the software in the car. We plan that by mid-decade, at least 50% of the software in the car is in-house controlled and developed. Those are pretty clear and aspirational mid-decade ambitions that we are steering the company against.
During this H1, we made clear progress on the journey towards reaching those ambitions. When it comes to our Recharge cars, chargeable cars, plug-in hybrids, and full electric, it is now 25% for our sales globally. It's 40% in Europe. Last few months, it's been 50% in California. It's really a significant part of our business, and it's the highest share of any traditional car manufacturer in the world. We also launched the C40 Recharge, our second fully electric car. We have opened for orders, and deliveries will start in the fall. Another very important announcement we made was the creation of Aurobay, which is an operational unit that will manage the ICE powertrain assets of Volvo Cars and Geely Holding and coordinate those also with the ICE powertrain assets of Geely Auto.
Which means that we, as Volvo, are deconsolidating all the ICE powertrain units, managerially and also financially. We have a 33% ownership in this company, but as a management team, we will not focus on that. We get a great supply of high-quality and energy-efficient engines. The management of Volvo Cars is fully dedicated on delivering on the ambitions I just showed you. Another important announcement we made during the last time is the partnership with Northvolt. Just as ICE engines were a vital part of Volvo in the past, it's such a fundamental part of the material cost, it's such a fundamental part of the performance of a vehicle. Same goes now for battery cells and the electric motors in the future. It's such a big part of the material cost, and it fundamentally sets the characteristics of the vehicle and the performance of the vehicle.
Therefore, we, as Volvo, need to be first involved in that. That's the context for this, setting up a new research unit where Northvolt's battery cell competence and Volvo's vehicle integration competence is together developing the next level of battery cell chemistry. We're also building a battery cell factory. We're continuing the competence shift. Aurobay, one example where, yes, our powertrain asset, the production asset, but also the engineering unit working with ICE engines, is being spun off from Volvo. We're continuously investing into competence when it comes to battery, when it comes to software, when it comes to building a digital solution for direct commerce. That will continue. As announced, Volvo is evaluating a potential listing later this year at Nasdaq Stockholm. Nothing new to report on that front.
Evaluation is ongoing. We will inform in due course what the result of such an evaluation will become. Accelerating transformation. Looking deeper into the results. Retail sales, as I said, 381,000 cars. Revenue, SEK 141 billion . If you look then at the percentage growth on unit and revenue, you are used to see a higher revenue growth than retail sales growth because Volvo Cars have become more premium, they cost more, and we have mixed up. Now you see the opposite. That is not due to the fact that we have sold our cars less pricey or that we have mixed down. This is an effect that the retail sales measure the delivery from our retailers, whereas, of course, revenues is in a wholesale model. It measures our sales to retailers.
During this period, the inventory at dealers have been drastically reduced as a consequence of the semiconductor supply shortages and therefore the supply shortages in the industry. The EBIT margin, we've already talked about. Cash flow, we come back to it in more detail, but it's SEK -7 billion. You know that we have a seasonality in our business where the cash flow is typically negative first half year, positive in the second half year. There were a number of time-phasing elements affecting this period that we come back to, but the underlying cash flow is strong. That's the key message here. Double-clicking on the growth, it's very reassuring to see that this growth is consistent across our regions. If you compare with 2020, very strong growth in all regions. Compared with 2019, very strong growth in China, 40%, U.S., almost 30%.
Europe is slightly declined, it's -4%, that is in a market that has declined with 23%. We are -4% in a market that's going down with 23%. That means we are gaining massively on market share, which is true in all regions. Very reassuring to see such strong market share growth. This is, of course, coming from a good product lineup, and the sales of SUVs, XC40, XC90, and XC60 were record high. That's still 75% of our total sales. The product offer is strong. We also see if you take a bit longer time horizon, the strength of Volvo's brand is helping us to drive market shares. We have the brand values that are totally in line with where the society is moving.
Our human centricity, understated, warm care aspect of the brand, combined with the kind of safety, responsibility, sustainability focus, that is truly what modern premium consumers aspire to. Much more consumer groups are coming to the values that are the traditional Volvo pillar. That helps drive growth. We're also driving growth based on leveraging macro trends in the industry. Of course, electrification is the fastest-growing part of the automotive market. Those 25% Recharge sales that I already talked about. In that, I would say it's around two percentage points that fully electric cars, the XC40s, and then 23% then is plug-in hybrids. The fully electric cars, we're basically selling the capacity we have, and we're following a ramp-up of capacity for XC40s. In the fall, the capacity is increasing, and we also have the C40, and then next year there's another capacity step.
Those cars will grow quickly as we speak. Why is the plug-in hybrid so important? Why we keep on talking about that? It is not the end state. It is a step towards a fully electric future, but it's extremely important that the consumers that buy plug-in hybrid cars today are the consumers that will buy fully electric cars next time they buy a car. Our market share in chargeable cars is much higher than in non-chargeable cars. We're taking market share in the growing part of the market. If you compare Volvo quickly with the three German premium competitors, they are 3x our size globally. If you look at cars that can be charged, we are the same size. Our market share is very different in this important, growing part of the market. That's also the future for Volvo.
Online, we're also continuing to grow. You might say 10,000 active contracts there in the big scheme of things, when we have sold 773,000 cars last 12 months. Why do you mention that? I do mention that because this is a start of a fundamental transformation journey that is very important. Consumers want transparency, consumers want convenience, and efficiency. Our way of meeting that is to offer cars in a slightly more simplified way. You have a few cars with preset specifications to choose from. You get the fixed set price. You get everything around the car included, also transparently in the price, service, warranty, or financing insurance. That is the way Volvo consumers want to get access to mobility. In order to do that, we clearly need great global scalable digital systems.
We need the direct consumer e-commerce competence, and we need the support and collaboration with our retail partners in providing this, because we want our consumers to be able to get access to Volvo with a very few clicks online and as much human interaction as they want. It could be nothing, it could be a lot, and our retail partners are there to support that. This is now in place in five spearheading markets in Europe, Germany, Netherlands, U.K., Sweden, and Norway, and the U.S. In those markets, you see the ramp- up here, which is very quick. So far, the digital solution is focused on the B2C segment. As you know, the B2B segment, fleet segment, is the biggest segment, especially in Europe.
As we develop now the digital capabilities and in the near future add that functionality, add more countries to this, of course, the scale of this business will quickly grow. This is really part of our future. Zooming out a bit, looking at the long-term trends, prior to COVID, from the last five years, 2014 to 2019, we grew with about 10% per year. Now, comparing the last 12 months with 2019, it's about the same pace, 10%. Yes, this is one and a half years rather than one year, but we have a pandemic in between. I think it's roughly a fair comparison to look at the growth pace. If we end that, now zoom in again on H1 and look at the revenue walk, how that has increased. Nothing major here to comment on. I think volume is clearly the biggest contributor.
On top of that, we had a very good mix of products and sales channels, and good price realization. That, of course, helped. FX was going in the wrong direction. That's the main thing on revenue. As I already said, the key point there is revenue growth was lower than retail delivery growth, that's because we have a wholesale model, and basically, we have been supply- constrained in this period and used the dealer inventory to satisfy as many consumers as we can. Changing instead to the EBIT bridge, I'll focus. The short message is very strong on most dimensions. There are two dimensions that have gone against us in this period. One is FX, as you can see here. The other one are the increased raw material prices.
The good news is that we more than compensated for that with material cost efficiencies. That's part of the efficiencies in other buckets. The major explanation for the strong increase in EBIT is, of course, the strong volume and the very strong mix and price realization. In this, we also have a number of non-recurrent items if you compare with last year. We had some restructuring costs negative H1 last year. We have two positive non-recurring, or at least not occurring every half year, types of items. One is a valuation effect from Polestar, as Polestar did a private placement, and the value appreciation of Polestar affects the result. Of course, that's part of the plan that Polestar's value should appreciate. That's one of the reasons we have them.
The other one is a dividend from Zenuity, which is the last thing you're going to hear about Zenuity. We separated that from Veoneer, and then the last dividend that was paid out, it's around SEK 1 billion, has affected the result for this half year. On the EBIT, then, taking this in the big picture, reassuring to see that the last 12 months then almost SEK 23 billion, which is much stronger than we have had before. Before our record full-year result was SEK 14.3 billion in 2019. Of course, we are happy to have pushed the EBIT level of this company to levels we have not seen before. That's very reassuring. Before I move on, I think this is an important slide I will spend a few minutes on.
Going forward, given our focus on fully electric cars, it will be a bit difficult to shift what's going on in Volvo, because it's going to be two different segments. It's going to be ICE, which is going to go down in volume, go down in profitability, and go down in investments.
You're going to have BEVs, which is going to go up in volumes, go up in profitability, and go up in investments. In order for any analysts to get a better sense of what's really going on and be transparent around it, we have also said that if Volvo comes into a listed environment, if the decision would be to list Volvo, then we would, starting from next year, provide transparency on BEV versus non-BEV separately, basically showing the volume, the revenues, the gross profit for new cars there, obviously, on the gross margin for new cars and the share of CapEx, the share on capitalized R&D, and we call it the physical investment in production. That's something we will do for the future. Last slide for me before I hand over to Per.
How have we focused our investments in the recent times? And also, you who saw the Tech Moment, you know that what we are focusing on now is a full electric core compute architecture. That's the future architecture for our vehicles. That's the big focus. We're focusing on developing the next level of safety through lidars and ADAS technology, and we're focusing on connectivity and digital development. That's really where the R&D focus is. By being very purposeful on where we focus and where we do not focus, we've been able to hold the R&D flat as a percent of revenue, but given that we're growing, it has grown in absolute levels. When it comes to capital expenditure, we capitalize R&D, that has been pretty flat as a percent of sales.
The more physical investment has actually declined a bit, and that is a bit, I would say, cyclical. We spent a lot when we invested in SPA, in CMA, and in building up our global industrial footprint. There's been a few years with less physical investment, and we will get into a new cycle soon with a lot of new cars and investment in electrification. Right now, it's at a relatively low level. With that, I hand over to you, Per, to give a bit of sense on how the cash is flowing.
Thank you very much, Björn. I will talk about, on this slide, both our liquidity and also our cash flow. As you see here, our liquidity has moved from SEK 94 billion to SEK 67 billion, and there are basically three areas that has moved here. First of all, is that you see that we have undrawn credit facilities has reduced from SEK 25 billion to SEK 13 billion. During last year, during the Corona crisis, we actually increased our undrawn credit facilities as an extra insurance; obviously, we did not use that extra insurance. We did not use the normal credit facilities either. We, during these first six months, now went back to the normal range, which is around SEK 13 billion, which we think is a prudent number of undrawn credit facilities.
We have cash has also then gone out of the company, around SEK 7 billion from operating and investing cash flow, and around SEK 6 billion from financing. If I start with the financing, there are basically three areas into that one. First of all, we have repaid a bond of around SEK 5 billion. We have paid dividends, SEK 4.8 billion, and then we have also sold marketable securities for around SEK 3 billion, and that adds up to the SEK -6 billion. On the operating and investing cash flow, around SEK -7 billion, more or less in line with normal seasonality. Obviously, this year we had a very good year with DR. Net working capital around SEK -12 billion, following the season pattern, a little bit different, maybe the constitution of that one.
This year, we have built our inventory to a very small degree, and basically, the inventory that we have built is mainly related to slightly more expensive cars, which is basically an impact of selling more BEVs and more PHEVs, but also more production inventory. At the same time, we have less payables than we normally have. You see that both the payables and the production inventory partly fall out of the unstable situation of semiconductors. We have had less production than we normally have in May and June here. We have also then built a little bit of production inventory to be able to have the right components when we get a supply of semiconductors again here. Other working capital, SEK -8 billion . That is also slightly more than normal in that we have around SEK 4 billion of deferred VAT and tax.
During 2020, the Swedish government and also some European governments allowed companies to defer their payments of tax and VAT. We took that opportunity last year, and we repaid that now, earlier this year. That's around SEK 4 billion. We also have a couple of SEK billion in other working capital, which is really related to the Polestar evaluation and the Zenuity that Björn talked about. Those improvements in EBITDA doesn't really have a cash impact. They get back in other working capital. Investments are slightly lower compared to what you see on the page before; reality is that around SEK 10 billion-SEK 11 billion of real investments.
We have had some good news related to, again, Polestar, where we did the restructuring of the whole Polestar legal setup, where the main company of Polestar was moved from China to Hong Kong in 2020, and we got the cash back this year. That's a little bit more of a technicality. The underlying investments are around SEK 11 billion, which is quite normal here. That explains our journey on the cash and our liquidity. We think that we are still in a very good position on liquidity. You can also look into our change in net working capital. You see here that over the last couple of years, we have been improving that one steadily.
Same level as 2020, just above SEK 2 billion here. Obviously, then you see that we have had a , almost SEK -12 billion net working capital this year. On the other hand, we had SEK +14 billion in the second half last year, so that explains that one. I think very predictable and not any surprises in our cash flow. As you know, just making the point again that seasonality very much is that in the first half of the year, slightly negative on cash flow, and we make significantly more cash flow positive in the second half of the year. If you on the net cash position, then basically this is a little bit repeat. You see the SEK 66 billion, SEK 67 billion of liquidity we have.
Really, the point here is that we see that we have a very stable repayment maturity profile of our loans and bonds. You also see here that we have still some loans to be repaid in a 2022-ish time frame, but then from 2023 and beyond, it's more or less financed by bonds, and you have the maturities quite well spread. Also, what is very encouraging for us is that the last bond we raised here, the SEK 5.1 billion, is a green bond, and we're very proud of having that done as well.
Thank you, Per. To wrap up, we are going forward and summarize before we take the questions. Of course, the semiconductor supply situation makes it very hard to forecast the future right now. On balance, we are saying that we are not updating the full- year outlook. It remains that we believe for the full year that we are going to have growth and that we are going to have improved profitability to pre-coronavirus levels. I guess pre-coronavirus levels is a wide range. What we are seeing, however, is that during H1, yes, we have had some disturbances and had to close down production some days here and there. We believe the situation to remain in H2. In H1, we were able to sell down our inventory and retailers' inventory to meet consumer demands. You can only do that once.
For H2, we see basically flat volumes and revenue for H2, which will then give growth for the full year. You can't extrapolate the growth in H1 into H2 because the inventory trick, we can only do once. That's the clarification we are making to the outlook. To sum up, as I hope you can hear, we are proud about this result. Very strong growth. I would also underline that in H2, the flat growth of the delivery revenue it's purely due to supply. I mean, the consumer demand is there for Volvo and for our products. We're building order books, and there's strong demand. It's basically the supply situation that will determine the growth pace in the short run. We are not giving any real outlook to when this situation will clear. It will likely remain for the remainder of this year.
That's our assessment, but it's very hard to assess. Strong growth that we're happy about. We're gaining market share across all regions. We are growing in the right areas. We're growing with rechargeable cars. Profitability at premium levels. We are accelerating the transformation into the future that we see for Volvo as a full electric company, as a company that sells more online and direct, and as a company that has control over its own software and drives a more sustainable future. That's, in a nutshell, our H1. I hand back to you, Anna, for questions.
Thank you, Björn, and thank you, Per. It's time for the operator to please open up for questions.
Thank you. As a reminder to ask a question, you will need to press star and one on your telephone and wait for your name to be announced. To withdraw your question, please press the pound key. And once again, that is star and one if you wish to ask a question. Your first question comes from the line of Agnieszka Vilela at Nordea. Please ask your question. Your line is now open.
Thank you. I have a couple of questions, if I may. Starting with the semicon situation, can you just elaborate whether you had troubles to produce in H1? Did you need to close your factories at some point? How is the supply of semicon and other components looking into H2? Is it getting better or worse? Can you just elaborate on that?
Well, I can answer. During H1, we did have production disturbances, and some factories had areas where they couldn't produce. That's normal that you have sometimes component supply issues, so you need to play it very agile, but it's been much more disturbances than what is normal. That's problems we have had during H1. We would have liked to produce more than we have, and had we produced more, we would also have sold more. That's crystal clear. When it comes to H2, we are not seeing that the situation would be worsened, but we are not seeing either that the situation would get better.
We are assuming a similar degree of disturbances as in H1, but that a similar degree of production disturbances will translate into lower sales because we cannot resell off inventory once more, which we did in H1, but that's not a trick we can repeat in H2 because they're already gone.
Okay, great. Maybe last question from me, it's on the cost inflation side. If you are seeing more inflation when it comes to raw materials, and also how do you think about adjusting your own prices for your vehicles? Thanks.
We see increasing raw material prices. That is clearly an effect, and we see that as an effect for H2. Then we need to, of course, take measures to manage our profitability, and ongoing cost improvements is what we always do. Historically, I don't think this industry has been very good to price for raw material. I do believe we have a better opportunity now than historically, given that the supply constraint that exists in the market to work on pricing to compensate. That is still unproven. We are working hard, given the raw material, but also the supply constraint, to make sure we get great price realizations on the products we have, selling the right cars in the right channels, to compensate for those raw material cost increases.
Great. Thank you.
Thank you. Once again, as a reminder, if you wish to ask a question, please press star and one on your telephone. Your next question comes from the line of Christophe Boulanger at Barclays. Please ask your question. Your line is now open.
Hi. Good morning. Can you hear me?
Yes.
Yeah, good morning. I will have a few questions. First, on the semiconductor shortage, can you help us understand what is the current level of dealer inventories, at the end of June? What will be a fair level of dealer inventories going forward if there will not be any semiconductor shortage, so that we can understand what will have to be the inventory rebuilt once the chip shortage is disappearing. That's the first question, and I have two more questions.
Sorry, repeat the second question once more. Sorry, it broke up.
Well, what's the current level of dealer inventories, and what is a fair level of dealer inventories in your eyes, given where we are in the cycle?
Well, let me put it this way. The current level of dealer inventory is low, very low. I will not give a more precise number than that. What is the fair level of inventory? I think that's a very important question. If you compare to historic ratios, maybe you should have another 30,000 cars in the dealer inventory. I also think we should leverage this opportunity to learn how to run our business on a lower inventory level in the total system. Which is a core part of our commercial transformation as we move from a wholesale model into a more direct model. Rather than having 2,500 retailers who optimize their inventories, we have one inventory system.
With more simplified offers in the Care by Volvo and the direct offering, we can have a consignment stock of a number of pre-specified cars that is optimized by us. The whole idea is to take down the total inventory in the system. Yes, today, a big part of that inventory is with the dealers and not with us. Tomorrow, everything will be with us. On Volvo's balance sheet, it will be slightly more, but in the total system, it will be massively reduced. I'm not sure the inventory and the pipe should be refilled again. I think we should actually re-smart it rather than refill it.
Okay. I guess at this stage, we are not yet at this point, right? At this stage, what will be a fair level of inventory? Is it like 60 days? 50 days? What's your thinking?
Our thinking is, unless the supply constraints ease then, we cannot build up inventory. We need to live with the low inventories we have today. When there are no supply constraints, then we can have that optimization question. That's not a question for H2; that's going to be a question for next year. When we're there, I think we should think hard about how inventory should be built up for Volvo Cars. I don't think we should go back to historic rules of thumbs. We should rethink the complexity of our offering and the total stock system. That's something we're working very hard on.
Okay. That's very clear. I guess maybe my next question is indeed on the ongoing second half of the year. How do you see the production schedule developing so far compared to last year? What is the decline in production in, let's say, the last few weeks compared to last year?
We're not giving weekly updates on this. Big picture, we see a similar degree of disturbances this half year as we did last half year.
Okay. Daimler mentioned some level of retail sales, saying that it will be flat compared to last year, which implies a 12% decline in the second half of the year. Do you see a low double-digit percentage decline compared to last year? Is it less than that or more than that?
No, we're saying flat.
Flat-ish. Okay.
It will be flat for H2 versus last year's H2. That's what we're saying as the clarification, with the caveat that there is an enormous large degree of uncertainty in that statement.
Okay. Then the last two questions, do you see any specific regions where the supply chain is better with regard to the sourcing of semiconductors, like China, for instance? Then the last question is, how do you see full-year free cash flow developing?
I'll take the first one. Per will take the second. The short answer to your first question is that we truly have a global supply chain, so we are optimizing the supply globally. Of course, the sourcing of semiconductors is not global, but it's sourced for a global production. There is no real region- specific from a production perspective. On the cash flow-
Sorry, what was your exact question on the cash flow? How it-
How do you see full-year free cash flow developing?
Yeah, we are saying it should be in line with what we've seen historically here from a full-year perspective.
All right. Okay. Thank you very much. Have a lovely d ay.
Thank you.
Thank you. There are no further questions at this time. I would like to hand back to the speakers for closing remarks.
Thank you, everybody, and I think that concludes this call. Thank you for participating.
Thank you very much.
Thanks.
Thank you.