Volvo 1999 Annual Report Download - page 37

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Sales and m arket shares
Net sales in 1999 increased by 17%, to SEK 5,761 M (4,931), due primarily to strong
sales of marine engines in Europe and North America. Volvo Penta’s sales of industrial
engines developed favorably, in Asia and Europe in particular, due in part to a sharp
increase in demand for generator equipment during the second half of the year. During
1999 Vovo Penta’s market share increased in Europe and North America.
The value of the order book at December 31, 1999 was 35% higher than at the end
of 1998.
Operating incom e
Operating income amounted to SEK 314 M (1998: 95, excluding items affecting
comparability) and the operating margin increased to 5.5% (1.9). Strong growth in
sales in all markets, combined with lower operating costs – notably in Europe – contrib-
uted to the sharp improvement in trend of income.
The return on operating capital exceeded 25% (1998: 7, excluding items affecting
comparability).
Production and capital expenditures
Compared with the preceding year, utilization of capacity was high in both the
American and Swedish plants. In China approximately SEK 40 M was invested in
construction of a plant for the assembly of Volvo Penta industrial engines.
Strategic developm ent
In recent years, Volvo Penta has worked to strengthen its industrial engine business and
consequently reduce its dependence on marine engines for leisure craft, which are more
sensitive to the economic climate. The goal is that growth in the industrial engine segment
should exceed growth in the marine engine segment. The increase in sales in 1999 was
32% for Volvo Penta’s industrial engines operations and 15% for marine engines.
Another significant element in the strategic development is the ongoing consolida-
tion of Marine and industrial engine’s global sales and service organization. The aim is
to increase market shares in Europe, North America and selected growth markets and
to enhance the efficiency of operations. In addition, there is the product renewal
program planned in the years ahead, featuring the launch of new, competitive products
each year.
Goals for the year 2000
The year 2000 began with the inauguration by Volvo Penta and its joint-venture
company, Wuxi Diesel Engine Works, of an assembly plant for diesel engines and
generator sets in Wuxi, China. China has a great need for electric power and there is a
very substantial demand for reliable generator equipment. The goal is to continue to
develop the Chinese operation, increase sales in the Chinese market, and also to export
to other markets in Asia. The assembly plant has a capacity for 5,000 engines per year.
Major efforts will be made in 2000 in the industrial engine segment, mainly
involving engines for mobile gensets as well as in fixed generator sets and continued
expansion of the distribution network for industrial engines. In the marine segment,
work is being intensified to establish Volvo Penta as the leading supplier in the North
American market of marine diesel engines in the segments in which the company is
active, and to strengthen the market organization by expanding the dealer and service
network.
SEK M 1997 1998 1999
Western Europe 2,219 2,725 2,986
Eastern Europe 34 23 26
North America 1,332 1,412 1,770
South America 136 153 134
Asia 643 476 692
Other markets 102 142 153
Total 4,466 4,931 5,761
SEK M 1997 1998 1999
Net sales 4,466 4,931 5,761
Operating income 1181 95 314
Operating margin, % 14.1 1.9 5.5
1 Excluding items affecting comparability 1998.
Including items affecting comparability of SEK (158) M
operating loss amounted to SEK (63) M and the
operating margin was (1.3)%.
Key ratios Marine and Industrial Engines
Net sales/ m arket Marine and Industrial Engines
Hans Wiklund
Nimbus Boats AB
Göteborg, Sweden
Quality, economy
and safety in
terms of both
delivery reliability
and being close at
hand. I believe
that the Volvo of
today m eans new
approaches and
ventures, that are
also positive for
Penta.
My view of Volvo