Volvo Car AB (publ.) (VOLCARB) Earnings Call Transcript & Summary

Thank you for standing by. Welcome to the distribution of Polestar shares to Volvo Car's shareholders conference call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, John Hernander. Please go ahead.

Thank you, Nadia. Good morning, and welcome to this 30-minute call with Volvo Cars where we are to discuss the proposed distribution of shares in Polestar to Volvo Car's shareholders. With me today, I have our Chief Financial Officer, Johan Ekdahl, who will give you a short presentation. After that, we will be happy to open up for any question and answer that you -- questions that you have. But for now, let me hand over to our CFO, Johan Ekdahl. Johan, please go ahead.

Thank you, John, and good morning, everyone. Yes, a short presentation before we take the Q&A then. And well, as you know, on February 1 we announced the evaluation of a potential adjustment of our shareholding in Polestar, including potential distribution of shares to our shareholders, which we have now -- the Board has now decided to propose. And this is to allow us to concentrate our resources on the next stage of our transformation, ramping up production and in a period of investments to lead in next-generation mobility and further sharpening our focus on Volvo Car's own journey. And as such, we will also not provide further funding into Polestar. The Board has then decided to make a significant reduction of our shareholding in Polestar from 48% to 18% of the capital, or 15% of the votes or 638.5 million shares. And as we have significant operational collaborations still with Polestar and financial relationships, we also feel that it makes sense for us to retain certain influence through a smaller stake in Polestar also for the time being going forward. And after this distribution, Geely Holding will continue to provide operational and financial support to Polestar. And we also think that it makes sense in the journey where Polestar are right now, coming up with a couple of new cars and on the revised business plan, that they are part of the Geely Holding ecosystem, being a holding company structure, rather than us, being a stand-alone one brand operational car company. So that makes sense for all parties involved. And also as Polestar has communicated, they are well progressed on a financing plan to provide the remaining of the funding required, including additional external debt and equity. And hence, as I said, Volvo Cars will therefore, going forward, not provide further funding to Polestar but concentrate our resources on the next phase of our own transformation. And Volvo Cars and Polestar's strong operational collaboration across research and development, manufacturing of cars, aftersales and in different commercial areas will continue to the benefit of both companies going forward. And if we look a little bit shortly on the transaction structure, which is then that there will be a decision then, or a proposed decision, on the AGM on March 26 on this distribution. And then it technically will be done by a share split in Volvo Cars; then we will have a common share and a so-called redemption share. And that redemption share will then be traded on the Nasdaq Stockholm Stock Exchange in the period from the 15th of April to the 30th of April 2024. And as a shareholder, you can actively choose to keep redemption shares and receive the SDRs, or sell redemption shares and receive cash. After that period, the redemption shares are redeemed for SDRs. These will then have a 3-month conversion period. And the reason for that is that due to the fact that some -- the equal treatment of shareholders, if you will, because a small minority of the Volvo Car shareholders are direct holders of the share rather than through other -- I mean, capital insurances or investment accounts, et cetera. And that means that they need to take certain active action in order to be able to hold the Polestar shares, which means that that's -- and hence, the 3-month conversion period. And after that period, these SDRs may be converted into Polestar ADSs. And that can be, of course, done earlier if you -- depending on the way that you're holding the Volvo Car shares today. That's more -- so the -- and the relatively complex technical structure is then due to, of course, the fact that Polestar is a U.S.-listed company. And high-level preliminary timetable is done. Today, we did the announcement in connection with the notice to the AGM. Then on the 5th of March, there will be a publication of an information brochure and some other information. This is also in connection with the publication of our annual report in then 3 weeks before the AGM. The AGM then takes place March 26, with a decision on the proposed distribution. And then following the time plan, the record date for the share split is April 12. Then we have the trading period for the redemption shares on Nasdaq Stockholm, April 15 to April 30. The SDRs are planned to be distributed on May 13, and then there is this 3-month conversion period. And then the SDR program is planned to be terminated mid-August. So that follows then the transaction structure showed on the previous slide. So with that short presentation, I'll leave back to you, John, again.

Thank you, Johan. And that makes us ready to start the question and answer session. So I hand it over to Nadia again to go through the practicalities once again. Please, Nadia.

[Operator Instructions] And now we'll go first question, and it comes from the line of Pushkar Tendolkar from HSBC.

I have a couple. The first one, your press release mentioned that you keep the 18% capital stake in Polestar for influence. If you could just elaborate on what could that mean in terms of influence. And then a follow-up just related to that, you retain the 18% stake and you also have said that you would not fund Polestar anymore. So any further potential capital raise at Polestar? Can you confirm that Volvo won't participate in it and let its stake in Polestar get diluted further down from that 18%?

Yes. Thank you. On the first question, on the influence, I think -- I mean, we have Board representation today. Our CEO, Jim Rowan, is on the Board at this -- he will remain there. So -- and I guess, to have a certain influence, as an example, a Board seat then requires a certain ownership. So I think that hopefully answers the question. And I guess, considering that we have -- there's a lot of collaboration industrially and in manufacturing, et cetera, we also have the financial corporations, we have the shareholder loan, et cetera, which means that we think that it's a logical -- or the Board has also evaluated that it's a logical step to have a certain influence over Polestar despite not funding them. And on your second question, yes, I can confirm there are no intentions to participate in fundraising. And we have -- we will accept dilution in such a case.

And the question comes from the line of Alexandre Raverdy from Kepler Cheuvreux.

Just a confirmation on the accounting treatment of the remaining 18% stake. Will there be any change? Or will it still be equity accounted?

Again, it may be a little bit early to finally determine that. But in my -- as I said, we have an 18% stake and we have a Board seat, so I would foresee that it's very likely that it will still be treated as an associated company despite the fact that we no longer have the -- as high an ownership and not funding them and have that responsibility as an owner, it will rather be an associated company where we have operational partnerships.

[Operator Instructions] Dear speakers, there are no other questions at this time. I would now like to hand the conference over to John Hernander for any closing remarks.

All right. Thank you, Nadia. That concludes then today's presentation around the proposed distribution of shares in Polestar to Volvo Car's shareholders. Just as I notice as well, there are more details about the proposal also in the AGM notice that have been published today. But as always, if you want to follow up on any questions, just reach out to us in the Investor Relations team. And with that, we wish you a good day and have a nice weekend when it comes. Goodbye.

Bye.

That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day. Dear speakers, please stand by.