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10
The Volvo Group year 2003
Financial targets
Volvo’s ambition for the period up to 2005 is
to achieve a sustainable level of profitability
above the industry average. Sustainable
profitability is driven by strong and profitable
growth combined with a high degree of
operating efficiency. At the same time a
strong capital structure is essential in order
to maintain investments on a competitive
level – with the ultimate aim of providing
world-class products and services. In order
to achieve the strategy for growth and gen-
erate a competitive return for our sharehold-
ers, Volvo has set a number of Group-wide
financial targets covering growth, operating
margin, return on equity and capital struc-
ture. These financial targets are set and eval-
uated over a business cycle.
Sales growth
Volvo’s ambition is that net sales should
increase by an average of more than 10% on
an annual basis. This objective should be
achieved through both organic growth and
acquisitions. During the period from 1999 to
2003, the average annual growth rate,
excluding divested operations, was 11.7%.
Operating margin
The objective is to maintain an operating
margin of between 5% and 7% over an eco-
nomic cycle. The average annual operating
margin for the Volvo Group during 1999 to
2003 was 2.9%.
Return on equity
Over time, the return on shareholders’ equity
should more than compensate for inflation as
well as for industrial and financial risks. The
objective is to achieve a return on sharehold-
ers’ equity of between 12% and 15% over
an economic cycle. Return on shareholders’
equity during 1999 to 2003 averaged 8.1%
per year.
Capital structure
A strong capital structure and a competitive
cash flow is essential in order to be able to
maintain investments in research and devel-
opment, product development and in pro-
duction on competitive levels – and in the
end generate world-class products and serv-
ices.
The Group’s objective is to maintain a net
financial position ratio, excluding Financial
Services, between a net financial assets
position of 15% and a net debt position of
30%. The equity ratio, excluding Financial
Services, should not be lower than 40% and
the equity ratio in Financial Services should
not be lower than 10%.
At the end of December 2003, the net
financial position of the Volvo Group amount-
ed to a net debt of SEK 2.4 billion, corre-
sponding to a net debt ratio of 3.3%. On
December 31, 2003, the equity ratio for the
Group, excluding Financial Services, was
40.5% and the equity ratio for Financial
Services was 12.0%.
99 00 01 03
8350 (1)
Net sales growth*, %
02
(2)
99 00 01 03
6.4 5.5 (0.4) 1.4
Operating margin*, %
02
1.6
99 00 01 03
34.9 5.0 (1.7) 0.4
Return on shareholders´
equity, %
02
1.7
99 00 01 03
29.3 10.6 (8.2) (3.3)
Net financial position as percentage
of shareholders´ equity, %
02
(7.7)
99 00 01 03
67 61 42 40
Equity ratio*, %
02
42
*Excluding divested
operations
*Excluding divested
operations
0
0
7
5
*Excluding divested
operations
0
15
12
15
0
-30
40
10