Volvo 2003 Annual Report Download - page 8

6
The Volvo Group year 2003
Net interest expense
Net interest expense for the year amounted
to SEK 791 M (624). The higher net interest
expense was mainly explained by lower yield
on financial assets and higher average net
financial debt during 2003, in part due to
higher provisions for post-employment bene-
fits and the acquisition of Bilia’s truck and
construction equipment operations, KFAB.
Income taxes
During 2003, an income tax expense of SEK
1,334 M was reported, compared with SEK
590 M for the year-earlier period. The income
tax expense was mainly related to current tax
expenses.
Minority interests
Minority interests in the Volvo Group were
mainly attributable to Volvo Aero Norge AS
(22%) and Volvo Aero Services LP (5%).
Net income
Net income amounted to SEK 298 M
(1,393) corresponding to an income per
share of SEK 0.70 (3.30). The return on
shareholders’ equity was 0.4% (1.7%).
Excluding the write-down of shares in Scania
AB and Henlys Group Plc, income per share
more than tripled and amounted to SEK
10.30 and the return on shareholders' equity
amounted to 5.7%.
Impact of exchange rates
on operating income
Compared with preceding year, SEK bn
Net sales1(12.3)
Cost of sales 8.0
Research and development expenses 0.3
Selling and administrative expenses 1.4
Other operating income and expenses 1.7
Income from investments in shares 0.0
Total effect of changes in exchange
rates on operating income (0.9)
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 2001 2002 2003
USD 8,100 7,100 7,500
EUR 8,000 9,700 11,800
GBP 4,200 5,400 3,400
CAD 1,000 1,600 1,600
Other currencies 2,800 5,000 5,200
Total 24,100 28,800 29,500
Financial position
Balance sheet
The Volvo Group’s total assets at December
31, 2003 amounted to SEK 231.3 billion,
corresponding to a decline of SEK 8.0 billion
since year-end 2002. Total assets declined
by SEK 13.4 billion due to changes in cur-
rency rates and by SEK 4.0 billion due to
write-down of shares in Scania AB and
Henlys Group Plc. The decrease was partly
offset by an increase of SEK 4.0 billion relat-
ed to changes in the Group structure, mainly
due to the acquisition of Bilia’s truck and
construction equipment operations, and an
additional increase of SEK 3.6 billion as a
consequence of the adoption of new
accounting principles for derivative instru-
ments (see Note 1).
Shareholders’ equity and minority inter-
ests amounted to SEK 72.6 billion, corre-
sponding to 40.5 % of total assets, exclud-
ing Financial Services. The Group’s net
financial debt at year-end 2003, amounted to
SEK 2.4 billion, which corresponded to
3.3% of shareholders’ equity and minority
interests. Changes in shareholders’ equity
are specified on page 34. Effective in 2003,
Volvo adopted new accounting principles for
employee benefits (see Note 1).
The carrying value of Volvo’s holding in
Scania AB at year-end 2003 has been deter-
mined to SEK 20.4 billion, a write-down of
SEK 3.6 billion has thereby been charged to
operating income. The carrying value of the
holding of Scania B shares was determined
based upon the consideration received when
Volvo divested those shares to Deutsche
Bank on March 4, 2004. The carrying value
of the holding of Scania A shares was deter-
mined based upon the closing share price of
SEK 202 on December 31, 2003.
Preparations for adoption
of International Financial
Reporting Standards
For a description of Volvo’s preparations for
adoption of International Financial Reporting
Standards (IFRS) in 2005, see further in Note 1
on page 36.
impact. Changes in spot-market rates for
other currencies had minor effects. The total
effect of changed spot-market rates was
negative, approximately SEK 2,050 M.
The effect on income of forward and
option contracts amounted to a gain of SEK
1,243 M (loss: 195), which resulted in a
positive impact of SEK 1,438 M for 2003,
compared with 2002.
Changes in spot rates in connection with
the translation of income in foreign sub-
sidiaries and the revaluation of balance
sheet items in foreign currencies had a neg-
ative effect of SEK 290 M.