Scania Interim Report* January-September 2006

Södertälje (ots) -

- Scania reports record earnings and cash flow for the third
quarter
- Deliveries will total about 65,000 vehicles during 2006
- Operating income 2006 will substantially exceed SEK 8,000 m.
- The production rate will be further increased from the first
quarter of 2007

FIRST THREE QUARTERS IN BRIEF Nine months Change Q3
in %
Units 2006 2005 2006 2005
Trucks and bus chassis
- Order bookings 49,481 44,991 10 13,544 13,455
- Deliveries 46,783 41,249 13 14,959 12,226

Revenue and earnings EUR
SEK m. (unless m.**
otherwise stated)

- Revenue, Scania Group 5,583 51,731 45,042 15 16,507 14,608

Operating income,
Vehicles and Service 625 5,790 4,305 34 1,883 1,060
Operating income,
Customer Finance 41 374 397 -6 134 146
Operating income 666 6,164 4,702 31 2,017 1,206

Income before taxes 649 6,005 4,595 31 1,912 1,155
- Net income 445 4,115 3,141 31 1,281 825

Operating margin, percent 11.9 10.4 12.2 8.3
Return on equity, percent*** 23.5 20.9
Return on capital employed,
Vehicles and Service, percent 30.1 28.4

- Earnings per share, SEK*** 20.58 15.71 31 6.41 4.13
Cash flow,
Vehicles and Service 575 5,330 2,132 2,072 1,191
Number of employees,
30 September 32,211 30,675

Number of shares: 200 million

* An Interim Report reviewed by the company's auditors will be
published on 30 October.
** Translated to euros solely for the convenience of the reader at a
balance sheet date exchange rate of SEK 9.27 = EUR 1.00.
*** Attributable to Scania's shareholders.
Unless otherwise stated, all comparisons in brackets refer to the
same period of last year.

This report is also available at www.scania.com

SCANIA, FIRST NINE MONTHS OF 2006 -
COMMENTS OF THE PRESIDENT AND CEO

Scania's revenue rose by 15 percent to SEK 51,731 m. in the first
nine months of 2006. Operating income increased by 31 percent to SEK
6,164 m., resulting in an operating margin of 11.9 percent. Net
income strengthened by 31 percent to SEK 4,115 m., equivalent to
earnings per share of SEK 20.58 (15.71). The cash flow for Vehicles
and Service amounted to SEK 5,330 m. (2,132). Vehicle order bookings
rose by 10 percent, while deliveries increased by 13 percent. Service
and Customer Finance operations showed a continued good trend.

In the third quarter, Scania reported record earnings and cash
flow. Earnings were favourably affected by substantially higher
volume and increased capacity utilisation. The cash flow is an effect
of strong earnings development and continued focus on working
capital. The lag in deliveries of about 1,000 vehicles that existed
at the end of the second quarter has now been delivered.

Order bookings for trucks rose by 12 percent during the first nine
months of 2006. In western Europe, order bookings were 2 percent
higher. Demand in central and eastern Europe increased by 76 percent.
Most countries in the region noted a continued increase in order
bookings, with an especially strong upturn in Russia and Poland.

Order bookings from markets in the European Union were affected
less than previously anticipated by pre-buy effects in the run-up to
the Euro 4 environment regulation that entered into force on 1
October. Order bookings in the EU, which have shifted to Euro 4 and
Euro 5 trucks, are thus better than expected. There is a shortage of
transport capacity in Europe, and the supply of used vehicles is
limited.

In Latin America, order bookings increased by 16 percent. An
upturn in Brazil and Peru was partly offset by a downturn in
Argentina. In other markets, demand rose by 9 percent; Asia
strengthened while order bookings in Africa were unchanged.

After weak demand early in the year, demand for buses and coaches
improved following the launch of the new bus and coach range.
Virtually all regions showed a positive trend at the end of the
period.

Scania's concentration of European axle and gearbox production in
Södertälje and of parts management in Belgium is expected to lead to
savings of more than SEK 300 m. per year starting in 2007 and with
full effect from 2009 onward.

Scania will continue to develop its sales and service business in
the new structure. The service offering will be expanded and
introduced in new markets. Within the next few years, the potential
for savings in the sales and service organisation amounts to more
than SEK 500 m. annually.

Customer Finance is continuing to perform well. Scania maintains
its market penetration of more than one third of new vehicle sales in
markets with captive customer finance operations, despite increased
competition from banks and finance companies. The credit portfolio is
growing, with well-balanced risk and with low provisions for bad
debts. At the end of September, the portfolio amounted to about SEK
30,700 m., which was more than SEK 2,000 m. more than on the same
date last year. During 2006, new operations have been established in
Turkey and in Chile. A new rental concept is about to be introduced
in the European market, starting in the Benelux countries.

Scania's strategic alliances with Cummins and Hino are performing
well. Through its partnership with Cummins, Scania has secured the
technology required to meet the Euro 6 environmental regulation. In
South Korea, Scania will during 2007 begin to distribute Hino's
medium-duty trucks. In India, Scania has established a partnership
with Larsen & Toubro, the leading supplier of construction equipment
in India. Larsen & Toubro will distribute Scania's multi-wheeler
construction trucks to its customers in the construction and mining
segments.

Strong economic growth is contributing to higher demand for
transport equipment. Scania's deliveries will total about 65,000
vehicles during 2006 and operating income will substantially exceed
SEK 8,000 m. Based on current order bookings and sizeable order
backlog, Scania has decided to further increase its rate of
production starting in the first quarter of 2007. Due to expectations
of higher future growth in transport demand, within the next several
years Scania intends to expand production capacity to 100,000
vehicles, which it can achieve with limited capital spending.

On 18 September, MAN AG presented a public offer for Scania, which
was unanimously rejected by the Board of Directors. On 4 October
Volkswagen announced its acquisition of 15 percent of the shares in
MAN. Because of this, a conflict of interest has occurred, which
means that the representatives of Volkswagen on Scania's Board do not
participate in any decisions regarding MAN. On 12 October MAN
modified the terms of the offer to SEK 475. Scania's Board of
Directors subsequently rejected MAN's modified offer as it
substantially underestimates the value of Scania.

Following the completion of the previously announced capital
structure review, management has concluded that the company has the
ability to make a special distribution of up to SEK 7,000 m.,
equivalent to SEK 35 per share, before the end of 2006. Given the
current circumstances, the Board will review the timing of such
distribution before the year end.

MARKET OVERVIEW

Trucks

Number of Scania truck registrations, Scania's 10 largest markets,

January-September (preliminary)

2006 2005 Change in %
Great Britain 4,724 4,091 16
Brazil 3,782 3,945 -4
Germany 3,494 3,151 11
France 2,850 2,997 -5
Spain 2,328 2,297 1
Italy 2,304 2,184 6
The Netherlands 2,199 1,668 32
Russia * 1,839 1,026 79
Sweden 1,669 1,622 3
Turkey 1,523 1,305 17

* deliveries

Scania's market share, heavy trucks, Scania's 10 largest markets,
January-September, percent (preliminary)

2006 2005
Great Britain 16.5 15.4
Brazil 25.7 24.0
Germany 7.1 7.4
France 8.2 8.9
Spain 9.8 10.3
Italy 12.8 13.0
The Netherlands 19.1 18.3
Russia not available n/a
Sweden 44.6 46.6
Turkey 6.4 5.9

Scania's order bookings in the first nine months of 2006 amounted
to 45,205 (40,200) trucks, an increase of 12 percent.

In western Europe, order bookings rose by 2 percent to 25,205
units. Order bookings increased in most markets of western Europe,
offset somewhat by a downturn in the Nordic countries and Great
Britain. During the third quarter, order bookings slowed somewhat
after the gradual transition to Euro 4 and Euro 5. The quarter's
order bookings amounted to 6,447 units, equivalent to a decline of 16
percent compared to the corresponding quarter of last year.

The total market for heavy trucks in western Europe rose by 8.2
percent during the first nine months of 2006 and amounted to about
201,200 units, according to preliminary data. Scania truck
registrations totalled about 25,700 units, equivalent to a market
share of about 12.8 (13.0) percent.
In central and eastern Europe, the strong trend continued. During the
nine-month period, order bookings increased by 76 percent to 7,093
(4,024) trucks. In the third quarter, order bookings were 41 percent
higher than in the year-earlier period, totalling 2,156 (1,527)
trucks. Demand rose in most markets, especially in Russia and Poland.

In Latin America, order bookings rose by 16 percent during the
first nine months. In the third quarter, order bookings increased by
6 percent. An increase in Brazil and Peru was somewhat offset by a
decrease in Argentina during the third quarter.

Order bookings in Asia rose by 14 percent during the first nine
months. In the third quarter, order bookings rose by 48 percent,
mainly attributable to Taiwan and the United Arab Emirates.

Buses and coaches

During the first three quarters, Scania's order bookings for buses
and coaches declined by 11 percent to 4,276 (4,791) units. In Europe,
demand fell by 22 percent compared to the corresponding period of
2005. Last year there were a number of major orders. In Latin
America, order bookings fell by 13 percent, while "Other markets"
rose by 12 percent.

During the third quarter, order bookings rose by 36 percent to
1,342 (989) buses and coaches. In Europe, order bookings were up 60
percent, mainly attributable to Russia and Great Britain. In Latin
America, order bookings rose by 17 percent. Developments were
especially good in Brazil. In "Other markets", Scania's order
bookings rose by 26 percent.

Industrial and marine engines

Scania's deliveries of industrial and marine engines during the
first three quarters rose by 20 percent to 4,576 (3,801) units. Order
bookings rose by 10 percent to 4,602 (4,179) units. During the third
quarter, deliveries rose by 7 percent, while order bookings increased
by 1 percent.

REVENUE

During the first nine months of 2006, Scania delivered 42,452
(36,894) trucks, an increase of 15 percent. In the third quarter,
deliveries rose by 26 percent to 13,531 (10,778) trucks. During the
third quarter, Scania caught up with the lag in deliveries at the end
of the previous quarter.

Deliveries of bus chassis totalled 4,331 (4,355) units during the
first nine months. In the third quarter, deliveries amounted to 1,428
(1,448) bus chassis.

Revenue rose by 15 percent to SEK 51,731 m. (45,042) during the
first nine months of 2006. Positive currency rate effects influenced
revenue by about SEK 800 m. During the third quarter, revenue rose by
13 percent to SEK 16,507 m. (14,608). Currency rate effects amounted
to about SEK -150 m.

New vehicle sales revenue rose by 17 percent during the first nine
months of 2006, and by 15 percent in the third quarter.

Service revenue during the first nine months increased by 11
percent in Swedish kronor, equivalent to 9 percent in local
currencies, reaching SEK 10,080 m. (9,121). During the third quarter,
service revenue was SEK 3,250 m. (3,076), an upturn of 6 percent,
equivalent to 9 percent in local currencies.

EARNINGS

Scania's operating income rose by 31 percent to SEK 6,164 m.
(4,702) during the first nine months of 2006. In the third quarter,
operating income rose by 67 percent to SEK 2,017 m. (1,206).

Operating income in Vehicles and Service increased by 34 percent
to SEK 5,790 m. (4,305) during the first nine months. Increased
vehicle volume and better capacity utilisation were the main
contributors to the earnings improvement. Increased service-related
sales also contributed favourably. These effects were offset
primarily by increased research and development expenses.

Revenue by market (SEK m.), Scania's 10 largest markets,
January-September

2006 2005 Change in %
Great Britain 6 547 5 846 12
Brazil 4 021 3 644 10
Sweden 3 330 2 976 12
Germany 3 180 2 682 19
The Netherlands 2 955 2 457 20
France 2 931 2 687 9
Spain 2 532 2 274 11
Italy 2 442 2 354 4
Norway 2 235 2 131 5
Finland 2 146 2 148 0

Scania's research and development expenditures amounted to SEK
2,046 m. (1,810). After adjusting for SEK 91 m. (239) in capitalised
expenditures and depreciation of SEK 270 m. (208) on previously
capitalised expenditures, recognised expenses increased to SEK 2,225
m. (1,779).

Compared to the first nine months of 2005, currency spot rate
effects totalled about SEK -375 m. Currency hedging income amounted
to SEK +25 m. During the first nine months of 2005, the impact of
currency hedgings on earnings was SEK -215 m. Compared to the first
nine months of 2005, the total currency rate effect was thus SEK -135
m.

In the third quarter, operating income in Vehicles and Service
increased by SEK 823 m. to SEK 1,883 m. (1,060). Higher volume
together with better capacity utilisation contributed to the improved
earnings. Research and development expenses increased by SEK 124 m.
compared to the corresponding quarter of last year. Compared to the
third quarter of 2005, currency spot rate effects totalled about SEK
-145 m. Currency hedging income amounted to SEK +60 m. During the
third quarter of 2005, the impact of currency hedgings on earnings
was SEK -45 m. The total currency rate effect was thus SEK -40 m.

Operating income in Customer Finance amounted to SEK 374 m. (397)
during the first nine months. During the third quarter, operating
income was SEK 134 m. (146). The positive effect of increased
financing volume was offset by lower interest margins. Operating
expenses increased due to continued expansion in growth markets. At
the end of September, the size of the portfolio amounted to about SEK
30,700 m., which represented an increase of about SEK 1,000 m. since
the end of 2005. In local currencies, the portfolio increased by
about SEK 1,400 m.

Scania's net financial items amounted to SEK -159 m. (-107). Net
interest items amounted to SEK -173 m. (-151). Higher interest
expenses were partly offset by improved net debt. Other financial
income and expenses amounted to SEK 14 m. (44). This included SEK 37
m. (20) in positive valuation effects related to financial
instruments where hedge accounting was not applied. In addition, the
acquisition of Ainax had a positive effect of SEK 50 m. on financial
income during 2005. Other financial income and expenses also included
bank-related expenses.

The Scania Group's tax expenses in the first nine months of 2006
were equivalent to 31.5 (31.6) percent of income after financial
items.

Net income increased by 31 percent during the first nine months
and amounted to SEK 4,115 m. (3,141). During the third quarter, net
income rose by 55 percent to SEK 1,281 m. (825).

CASH FLOW

Scania's cash flow in Vehicles and Service amounted to SEK 5,330
m. (2,132) in the first nine months of 2006. During the third
quarter, cash flow in Vehicles and Service amounted to SEK 2,072 m.
(1,191).

Tied-up working capital during the first nine months of 2006
decreased by SEK 1,816 m., despite higher volume. This was mainly due
to increased liabilities and reduced receivables, which were partly
offset by increased inventory. During the third quarter the tied-up
working capital decreased by SEK 916 m. due to decreased inventories
and receivables.

Net investments including acquisitions amounted to SEK 2,668 m.
(2,819), including SEK 91 m. (239) in capitalisation of development
expenditures.

PARENT COMPANY

The assets of the Parent Company, Scania AB, consist of shares in
Scania CV AB and Ainax AB. Scania CV AB is the parent company of the
Group that comprises all production and sales and service companies
as well as other companies. The income of Scania AB after financial
items amounted to SEK 478 m. (434) during the first nine months.
According to a resolution approved by the Annual General Meeting and
implemented through a decision of the Swedish Companies Registration
Office, during the third quarter of 2006 Scania's share capital was
reduced by SEK 262,965,080 through a withdrawal of 26,296,508 Series
A shares in Scania that are owned by Scania. Scania's share capital
has thus been restored to what it was before the offer for Ainax was
completed. Liquidation of Ainax AB is expected to be concluded during
2006.

MISCELLANEOUS

Number of employees

The number of employees at the end of September 2006 was 32,211,
compared to 30,765 at the end of 2005. The number of employees
increased mainly in production, in bus bodybuilding and in research
and development. In the sales network, the number of employees
increased primarily outside western Europe.

Accounting principles

Scania applies International Financial Reporting Standards (IFRS)
as approved by the European Commission for application in the EU.
Scania's interim reporting is designed in accordance with IAS 34,
"Interim Financial Reporting", and RR 31, "Interim Reporting for
Groups". Accounting principles and calculation methods are unchanged
from those applied in the Annual report for 2005. New IFRS accounting
principles during 2006 have not had an impact on Scania's financial
reporting.

Annual General Meeting

The AGM will be held on Thursday, 3 May 2007 in Södertälje,
Sweden.

LEIF ÖSTLING
President and CEO

This report has not been subjected to review by the company's
auditors.

Financial information from Scania

Scania's Year-end Report for 2006 will be published on 8 February
2007.

This report contains forward-looking statements that reflect
management's current views with respect to certain future events and
potential financial performance. Such forward-looking statements
involve risks and uncertainties that could significantly alter
potential results. These statements are based on certain assumptions,
including assumptions related to general economic and financial
conditions in the company's markets and the level of demand for the
company's products.

This report does not imply that the company has undertaken to
revise these forward-looking statements, beyond what is required
under the company's registration contract with the Stockholm Stock
Exchange, if and when circumstances arise that will lead to changed
compared to the date when these statements were issued.

In the Interim Report for the first half of 2006, the following
was stated by Leif Östling, President and CEO:
"Scania is now reviewing its capital structure and will present a
proposal to the AGM 2007. Given current order books and production
rates, Scania's deliveries will be substantially higher during 2006
than during 2005. Within the next few years, the potential for cost
savings in the sales and service organisation will amount to at least
SEK 500 m. annually. Due to disruptions in production, some 1,000
vehicles that would have been invoiced in the second quarter will
instead be invoiced during the third quarter. This adversely affected
earnings in the second quarter by about SEK 250 m. in the form of
lower invoicing and additional production-related expenses."

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