Volvo 2002 Annual Report Download - page 8

06/07
The Volvo Group year 2002
Restructuring costs within the truck
operations included costs for the integra-
tion of Mack and Renault Trucks, such as
reduction of the North American produc-
tion capacity, restructuring of the global
distribution system and production struc-
ture. Restructuring measures further
included significant personnel reductions
due to the prevailing business conditions,
especially in North America.
Restructuring costs in Buses were
attributable to the shutdown of the Nova
Bus plant for city buses in Roswell, US. In
Construction Equipment, restructuring
measures pertained to the Asheville oper-
ations, US and an overall redundancy pro-
gram.
Impact of exchange rates on
operating income
The effect of changes in currency
exchange rates on operating income in
2002 compared with 2001 was favorable
by approximately SEK 1,160 M.
The Swedish krona strengthened dur-
ing 2002 against the major part of Volvo’s
inflow currencies, with negative effects on
operating income. The US dollar, euro,
British pound, Canadian dollar and South
African rand had the greatest impact.
Changes in spot-market rates for other
currencies had minor effects. The total
effect of changed spot-market rates was
negative, approximately SEK 710 M.
The effect on income of forward and
option contracts amounted to a loss of
SEK 187 M (2001: loss of SEK 2,044 M),
which resulted in a positive impact of SEK
1,857 M for 2002, compared with 2001.
Changes in spot rates in connection
with the translation of income in foreign
subsidiaries and the revaluation of bal-
ance sheet items in foreign currencies
had a minor positive impact.
Net interest expense
Net interest expense for the year amount-
ed to SEK 624 M (1,000). The lower
expense was mainly explained by lower
net financial debt and lower funding costs
in the US as a consequence of lower
interest rates and lower US dollar
exchange rates.
Taxes
During 2002, a tax expense of SEK 590 M
was reported compared with a tax income
of SEK 326 M for the corresponding period
in the preceding year. The tax expense
was mainly related to current tax expens-
es in subsidiaries outside Sweden.
Minority
Minority interests in the Volvo Group were
mainly attributable to Volvo Aero Norge
AS (22%) and Volvo Aero Services LP
(5%, previously the AGES Group). The
Henlys Group’s holding (49%) in Prévost
Holding BV was reported as minority
interest up to the third quarter 2001.
Net income/loss
Net income amounted to SEK 1,393 M
(loss of 1,467) and the return on share-
holders’ equity was 1.7% (negative
1.7%).
Impact of exchange rates
Compared with preceding year, SEK bn
Net sales1(4.9)
Cost of sales 4.2
Research and development expenses 0.1
Selling and administrative expenses 0.6
Other operating income and expenses 1.2
Income from investments in shares 0.0
Total effect of changes in exchange
rates on operating income 1.2
1 Group sales are reported at average spot rates and the effects
of currency hedges are reported among “Other operating
income and expenses.”
Operating net flow per currency
SEKM 2000 2001 2002
USD 7,000 8,100 7,100
EUR 7,500 8,000 9,700
GBP 4,000 4,200 5,400
Other currencies 800 3,800 6,600
Total 19,300 24,100 28,800
quarters of progressively increasing earn-
ings was primarily pertaining to lower
credit losses in the US customer financ-
ing operations. The operating income in
2001 included significant losses in the
US truck financing portfolio and a gain on
the divestment of Volvia’s insurance oper-
ations.
Group operating income in 2002 was
negatively affected by provisions of SEK
807 M (292) relating to a deficit within
the Volvo Group’s Swedish pension foun-
dation for securing commitments in
accordance with the ITP plan. The deficit
was a result of the downturn on the stock
markets.
Operating margin during 2002 was
1.6%, compared with negative 0.4% in
2001.
Restructuring costs
Restructuring costs in 2001 amounted to
SEK 3,862 M, of which SEK 3,106 M for
Trucks, SEK 392 M for Buses and SEK
364 M for Construction Equipment.