Volvo 1999 Annual Report Download - page 40

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38
Sales-financing operations are a significant part of Volvo’s strategy to increase
growth and enhance profitability in the Group. These operations fulfill the
market’s growing need for increasingly more complex financial solutions individu-
ally or combined with insurance and/or service contracts. Moreover, this strength-
ens the competitiveness of Volvo’s dealers.
Volvo’s sales-financing operations are conducted in 19 (18) countries and
pertain primarily to trucks, although buses and construction equipment are
included to an increasing extent. The range of financing services includes install-
ment contracts, financial leasing, operational leasing and dealer financing. In most
markets, insurance, service and maintenance contracts are also offered separately
or in combination with financing services.
Operations continued to expand strongly during 1999, primarily in North
America, Great Britain, France and Spain. Total assets, excluding divestments and
acquisitions, have increased by SEK 11.5 billion since 1998 and amounted to SEK
49.8 billion at the end of 1999. The credit portfolio amounted to SEK 45.1 billion
and consisted of about 100,000 contracts at year-end 1999 (66,000 excluding
Cars). A new financing company was also established in Mexico during the year.
Market penetration – the percentage of sales-financing and service contracts in
relation to total new sales – for trucks was 49% in Europe and 20% in North
America in 1999.
The financing of sales-financing operations is coordinated according to
established policies by Volvo Treasury, which acts as Volvo’s internal bank.
Trend of incom e
Operating income amounted to SEK 594 M (243 excluding Cars), of which SEK
240 M pertains to decrease of provisions that, as a result of favorable market de-
velopments, is no longer deemed necessary. This represents an improvement
in operating income of 46%.
Operating income was high in the established sales-financing companies, and
the return on equity in these companies exceeded the Volvo Group’s yield require-
ments. In the newly formed companies, particularly in North America, operating
income was strengthened considerably during 1999 due in part to increased
1997 1998 1999
Commercial products
Operational leasing 25 26 25
Financial leasing 30 31 29
Installment contracts 26 26 29
Dealer financing 16 16 16
Other customer credits 3 1 1
1) Excluding Cars in 1997 and 1998
Distribution of credit portfolio, net 1%
Volvo’s sales-financing operations
1997 1998 1999
Net sales 3,709 6,045 7,556
Operating income 148 243 594
Income from investments
in associated companies (196) 83 144
Income after
financial items (48) 326 738
Taxes (140) (187) (250)
Minority interests 5 11 0
Net income (183) 150 488
Condensed incom e statem ent 1SEK M
1997 1998 1999
Assets, SEK M 27,704 37,446 49,764
Credit portfolio, net, SEK M 26,217 35,420 45,110
Return on shareholders’
equity, % neg 4.6 12.1
Market penetration, % 30 27 33
Key ratios 1
Ruben Ochoa
Production
Supervisor, Volvo
Trucks, Köping,
Sweden
My view of Volvo
Alliances and
cooperation are
being established
around the world
and my security
and confidence in
the future is that
Volvo continues
to be one of the
leading truck
manufacturers in
the world.