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THE VOLVO
GROUP
FINANCIAL
REPORT
2004

Table of contents

  • Page 1
    THE VOLVO GROUP FINANCIAL REPORT 2004

  • Page 2
    ...50 CEO comment The Volvo share Board of Directors' report The year 2004 Financial performance Financial position Cash-flow statement Financial targets Risk management Trucks Buses Construction Equipment Volvo Penta Volvo Aero Financial Services Sustainable development Corporate Governance Corporate...

  • Page 3
    1

  • Page 4
    ...strong markets in Europe, North and South America. The new distribution systems in Eastern Europe and Asia that we established in recent years contributed to a rapid sales increase in these regions. Volvo CE, Volvo Penta and Trucks achieved sales records. Trucks increased sales from 156,000 vehicles...

  • Page 5
    ...form of dividends and share repurchase. During this period, the Group has grown and has now achieved similar sales levels as it had before the divestment of Volvo Cars. The Group has entered 2005 at a high pace. We expect continued high demand in Europe, in which the market for heavy trucks, boosted...

  • Page 6
    ... the total market value of the companies listed on the Stockholm Stock Exchange. Trading The objective is that the effective return to the shareholders, the dividend combined with the change in the share price, should exceed the average for the industry. Distribution of Ainax At the Annual General...

  • Page 7
    ... Svenska Handelsbanken Pension Fund and Oktogonen. 4 Savings and pension funds. holders. The value of the distribution was SEK 6,310 M or SEK 15.05 per share. Repurchase of shares On June 17, 2004, the Board of AB Volvo decided to acquire, through purchase on the Stockholm Stock Exchange, a maximum...

  • Page 8
    ... production of Renault heavy trucks is being concentrated to the plant in Bourgen-Bresse, France. A total of about 450 employees will be affected by the decision. As a result a cost of approximately SEK 470 M was charged to operating income. SCANIA B SHARES SOLD Volvo's holding of Scania B shares...

  • Page 9
    ... from which to develop the North American engine remanufacturing business. NEW COMPACT EXCAVATORS LAUNCHED Volvo CE launced its ECR range of short swing radius compact excavators from 2.5 to 8 tons, designed to meet the needs of operators working in confined areas. The four models in the launch...

  • Page 10
    ... Volvo Electric signed Aero an and General have Company agreement whereby Volvo Aero will be responsible for the design and manufacture of three major components for the new GEnx engine. According to the agreement signed in Seattle on December 15, 2004, Volvo Aero becomes a risk and revenue sharing...

  • Page 11
    ... Mack. According to the acquisition agreement in 2000, AB Volvo received 100% of the shares in Renault's truck subsidiaries, Renault V.I. and Mack in exchange for 15% of the shares in AB Volvo. Since then, AB Volvo and Renault SA have had ongoing discussions regarding the value of certain acquired...

  • Page 12
    .... The Group's net sales in Western Europe increased by 7%. Net sales in North America were up 23% due to a strong replacement demand for both trucks and construction equipment. Sales in Eastern Europe and Asia grew by 27% Trucks Buses Construction Equipment Volvo Penta Volvo Aero Financial Services...

  • Page 13
    ... M 2002 2003 2004 Operating margin % 2002 2003 2004 Net sales Cost of sales Gross income Research and development expenses Selling expenses Administrative expenses Other operating income and expenses Income from Financial Services Income from investments in associated companies Income from other...

  • Page 14
    ... operating activities Investments in fixed assets and leasing assets, net Customer financie receivables, net Investments in shares, net Acquired and divested operations Cash flow after net investments, excluding Financial Services Contribution to US pension plans Write-down of convertible debenture...

  • Page 15
    ... 2002 2003 2004 Financial Services 2002 2003 2004 Total Volvo Group 2002 2003 2004 Assets Intangible assets 16,919 16,662 Property, plant and equipment 27,789 27,248 Assets under operating leases 11,155 8,976 Shares and participations 34,750 9,598 Long-term customer-financing receivables 55 53...

  • Page 16
    ... Volvo Group, that was concluded during 2004, was the main factor for this development. All business areas have reported significant improvements in capital efficiency as a result of the program and focus on operating capital will continue. Cash flow after net investments within Financial Services...

  • Page 17
    ... and leasing assets Customer Finance receivables, net Investments in shares, net Acquired and divested operations Cash flow after net investments excl Financial Services Cash flow after net investments, Financial Services Cash flow after net investments, Volvo Group total Financing activities Change...

  • Page 18
    ... 7% over a business cycle. The average annual operating margin for the Volvo Group during 2000 to 2004 was 3%. equity ratio excluding Financial Services, should over the business cycle reach the target level of approximately 40%. At the end of December 2004, the Volvo Group had a net financial asset...

  • Page 19
    ...construction and mining, and housing affect the Group's operations as its products are an important part of these activities. Economic development in Europe and North America is particularly important to Volvo because a significant part of the Group's revenues are derived from sales in these markets...

  • Page 20
    ... costs as well as deliver new competitive products and services. The Group's operations are exposed to currency fluctuations Approximately 90% of Volvo's sales are in countries other than Sweden. Changes in exchange rates have a direct effect on Volvo's results of operations, balance sheet...

  • Page 21
    ... products and services. To secure these rights and avoid having the trade- mark eroded, AB Volvo and Volvo Car Corporation have jointly adopted mechanisms to control their respective use of the trademark and to prevent others from taking undue advantage of it. With regard to the "Mack" trademark...

  • Page 22
    ... trucks and services. The three truck brands - Mack, Renault Trucks and Volvo - have highly competitive products and worldwide market coverage. Total deliveries from the Group's truck operations amounted to 193,219 trucks in 2004, an increase of 24% compared with the year-earlier period. In Europe...

  • Page 23
    ... and specializes in heavy trucks, with gross vehicle weight above 16 tons. Volvo Trucks products are marketed in more than 130 countries. The greater part of the sales takes place in Europe, North and South America and Asia. In the beginning of 2005, Volvo Trucks presented the new truck model Volvo...

  • Page 24
    ...with a year earlier. Deliveries increased by 52% in North America, by 45% in Asia and by 43% in South America. The strong development in Asia was mainly based on high deliveries to the Middle East. Total market The total market for heavy trucks in Europe 27 (Members of the European Union plus Norway...

  • Page 25
    ... Europe. In North America both Mack Trucks and Volvo Trucks showed significant earnings improvements. Renault Trucks also reported higher earnings. The improvement in the truck operations was largely attributable to higher sales volumes and increased margins. Production and investments Production...

  • Page 26
    ... as opening new Bus Service Centers and introducing new variations of service contracts. As part of the restructuring of the bus manufacturer Henlys Group plc, Volvo Group reached an agreement to acquire 0 440 (524)(94) (361) 185 Operating margin*, % the remaining 50% of the North American bus...

  • Page 27
    ... to delivery. Production and investments During the year Volvo produced 8,089 buses (7,223) and bus chassis, of which 34% were complete buses and coaches. Capacity utilization in the production system in Europe and North America increased, partly as a result of the upturn in the market and partly...

  • Page 28
    ...Board of Directors' Report Net sales, SEK bn CONSTRUCTION EQUIPMENT Volvo CE's products, spare parts and services are offered worldwide in more Total market The total world market for heavy and compact construction equipment, within Volvo CE's product range, increased by 20% during 2004. In North...

  • Page 29
    ... geographical and product areas the market shares were higher compared with a year earlier. This was mainly due to recently launched products equipped with new fuel-efficient and more environmentally adapted Volvo engines and improved distribution. Financial performance Volvo CE's net sales amounted...

  • Page 30
    ... toward year-end when the Chinese authorities instituted a number of restrictions in order to cool the economy. In North America, the total market rose for gasoline and diesel engines. Continued stable demand for marine diesel engines was noted in Europe. equipment. Volvo Volvo Penta offers...

  • Page 31
    ... SEK 695 M to SEK 937 M, an increase of 35% compared with a year earlier. The operating margin was 10.3% (9.1). Both sales and Market share development The positive reception by the market of Volvo Penta's new generation of diesel engines has contributed to continued strong positions among the world...

  • Page 32
    ...quite modest at 434 in the first eleven months of the year, but there were about 213 order announcements in December. The aircraft manufacturers have announced plans to increase production rates in 2005. Financial performance Volvo Aero's net sales declined 14% to SEK 6,925 M (8,030). The decline in...

  • Page 33
    ...and to start building up the extension into fan cases as a specialization. Volvo Aero also aims to improve the aftermarket businesses by increased volumes and reducing costs. Net sales per market SEK M 2002 2003 2004 Western Europe Eastern Europe North America South America Asia Other markets Total...

  • Page 34
    ... Board of Directors' Report Credit portfolio, net, SEK bn FINANCIAL SERVICES Volvo Financial Services (VFS) provides services in four main areas: customer finance and insurance, treasury oper- al pricing. All customer finance regions performed better than the previous year: Region International...

  • Page 35
    ... markets where financial services are offered, the average penetration during the year was 28% for Volvo Trucks, 35% for Construction Equipment, 14% for Buses, 17% for Renault Trucks and 11% for Mack Trucks. Expressed as an average, Volvo Financial Services financed 22% of the Group's products sold...

  • Page 36
    ... to all members of the Board of Directors and all employees of the Volvo Group. The Code of Conduct details important principles concerning ethics in Volvo's business operations, environmental work and its view on human rights and working conditions. Our Code of Conduct is based on parts of the UN...

  • Page 37
    ... and control of the Volvo Group is carried out through a number of corporate bodies. At the General Meeting, the shareholders exercise their voting rights with regard to i.a. the composition of the Board of Directors of AB Volvo and election of external auditors. A Nomination Committee proposes...

  • Page 38
    ... the financial positions of AB Volvo and the Volvo Group on a regular basis. The Board also dealt regularly with matters involving divestments, acquisitions, the establishment of new operations, and matters related to investments in product renewal and product development in the Group's business...

  • Page 39
    ... Group Executive Committee an account of their respective age, education, board memberships, ownership of shares in Volvo, and year of joining Volvo can be found on pages 48-49. Nomination Committee The Nomination Committee is the shareholders' body responsible for submitting to the Annual General...

  • Page 40
    ... policies and in the Volvo Group's overarching guidelines for corporate culture, The Volvo Way. QUALITY Quality expresses our mindset, that we provide products and services that can be trusted. In all aspects of our business, from product development and manufacturing to delivery and customer...

  • Page 41
    ...into our customers' operations is a key factor in maintaining the requisite level of quality in products and services. All employees within the Volvo Group's production work in certified quality management systems in accordance with ISO 9001:2000. Operational development Several quality initiatives...

  • Page 42
    40 Corporate values SAFETY Safety relates to the use of our products in society. We strive to minimize the risks and consequences of accidents, and to improve the safety and work conditions for vehicle operators. The Volvo Group has a strong commitment to provide customers with products that meet ...

  • Page 43
    ... the Volvo Group. The team's findings contribute significantly to our safety work and have led to a large share of Volvo's safety solutions historically. Information is compiled in a database with data from 1,500 accidents. The team's findings are also available to public authorities and researchers...

  • Page 44
    ... within the Group, such as product development and the marketing organizations, are also covered by environmental management systems. Education plays an important role and all employees must complete a basic environmental training program. Specialists within the Volvo Group are trained to deal with...

  • Page 45
    ... is replacing, environmental demands are placed on the development of new products. Engineers test various materials, designs and manufacturing processes in order to determine what has the least impact on the environment. emissions. While the primary focus is on developing diesel engines, Volvo has...

  • Page 46
    44 Corporate values Environmentally adapted production Energy consumption Energy, TWh Energy/net sales MWh/SEK M Environmental protection and responsible utilization of our shared natural resources are obvious aspects of Volvo's production. The Volvo Group places environmental requirements on all...

  • Page 47
    ... Recognition and feedback are key to promoting team and individual development. Each manager is expected to conduct regular performance appraisals and involve employees in planning their competence development. Leaders and employees also review these plans. create value for our shareholders. In...

  • Page 48
    ... team members, gives feedback on performance and contributes to resolving negative conflicts. changes throughout the Volvo Group. Results of the survey are compiled and discussed within each team to identify key improvement areas. The attitude surSweden (35) Europe, excl. Sweden (36) North America...

  • Page 49
    ... young people operate their own UF businesses each year. Volvo Adventure In partnership with the UN's environmental program, UNEP, the Volvo Group runs an educational program in environmental issues. The program, called Volvo Adventure, targets young people aged between 10 and 16. Each team works on...

  • Page 50
    .... President of Volvo Construction Equipment Korea, 1998-2000. Member of Group Executive Committee since 2000. With Volvo since 1985. Holdings: 25,000 employee stock options. Jorma Halonen Executive Vice President and Deputy CEO Staffan Jufors President of Volvo Truck Corporation Göran Gummeson...

  • Page 51
    ...of Science in Accounting. President of Volvo Financial Services since 2001. President of Volvo Car Finance Europe 1999-2001. Member of Group Executive Committee since 2001. With Volvo since 1985. Holdings: 1,003 American Depositary Receipts (ADRs) of AB Volvo and 25,000 employee stock options. Born...

  • Page 52
    ... Sweden, Germany and the UK), President and CEO Seco Tools AB; President and CEO Sandvik AB. Principal work experience: Economics Department at IBRD (the World Bank), USA; Economist on Japan, Vickers, da Costa & Co Ltd.; Partner, James Capel & Co; Vice Chairman and Board Director, Nikko Europe Plc...

  • Page 53
    ...: 500 Volvo shares, including 248 Series B shares and 25,000 employee stock options. Auditors Principal work experience: Numerous positions with Ford Motor Company mainly within finance and marketing, President Ford Credit, Chairman and CEO Ford Europe, President Ford Financial Services Group...

  • Page 54
    ... Volvo Group Financial Information Consolidated income statements SEK M Net sales Cost of sales Gross income Research and development expenses Selling expenses Administrative expenses Other operating income and expenses Income from investments in associated companies Income from other investments...

  • Page 55
    ...-financing receivables Other receivables Shares in Scania AB Marketable securities Cash and bank accounts Total current assets Total assets Shareholders' equity and liabilities Shareholders' equity Restricted equity Share capital Restricted reserves Unrestricted equity Unrestricted reserves Net...

  • Page 56
    ...method of accounting 1 Transfer between unrestricted and restricted equity Translation difference Transition impact of new accounting standards for post-employment benefits 3 Other changes Balance at December 31, 2003 Cash dividend Distribution of shares in Ainax AB to shareholders Net income Effect...

  • Page 57
    ... other business units, net Cash flow after net investments Financing activities Increase (decrease) in bond loans and other loans Loans to external parties, net Cash dividend to AB Volvo shareholders' Repurchase of own shares Dividends to minority shareholders Other Change in liquid funds, excluding...

  • Page 58
    ... balance sheets at year-end rate, is charged or credited to unrestricted reserves. Movements in exchange rates change The consolidated financial statements for AB Volvo (the Parent Company) and its subsidiaries have been prepared in accordance with generally accepted accounting principles in Sweden...

  • Page 59
    ...-rate contracts that do not fullfil the criteria of hedge accounting are valued at the balance sheet date at which time provisions for unrealized losses are made. Net sales The Group's reported net sales pertain mainly to revenues from sales of goods and services. Net sales are reduced by the value...

  • Page 60
    ... to Renault Trucks, Mack Trucks, Volvo Construction Equipment, Champion Road Machinery, Volvo Aero Services, Prévost, Nova BUS, Volvo Bus de Mexico, Volvo Construction Equipment Korea, Volvo Aero Norge and Kommersiella Fordon Europa are being amortized over 20 years due to the holdings' long...

  • Page 61
    ... acquired the Volvo's axle plant and foundry in Lyon, France. Bilia's truck and construction equipment business ("Kommersiella Fordon Europa AB") In the third quarter 2003, the acquisition of the truck and construction equipments operations of Bilia was completed. Volvo exchanged 41% of the shares...

  • Page 62
    ... method up to 2002. Volvo's share of joint ventures' income statements Net sales Operating income Income after financial items Net income 2002 2003 2004 2,724 74 10 (21) 1,832 51 19 3 492 (27) (32) (34) At the end of 2004 no guarantees were issued for the benefit of joint ventures, neither...

  • Page 63
    ... made at standard cost of sales, including calculated interest and product improvement expenses. Internal sales from service companies are generally at market prices. Operating income (loss) Trucks Buses Construction Equipment Volvo Penta Volvo Aero Financial Services Other Volvo Group total 2002...

  • Page 64
    ... Financial Services Financial Services Volvo Group total Research and development expenses Trucks Buses Construction Equipment Volvo Penta Volvo Aero Other Volvo Group total Income from investments in associated companies Trucks Buses Construction Equipment Volvo Penta Volvo Aero Other Volvo Group...

  • Page 65
    ... Trucks Buses Construction Equipment Volvo Penta Volvo Aero Other Volvo Group excl Financial Services Financial Services Volvo Group total Reporting by geographical segment Net sales Europe North America South America Asia Other markets Volvo Group total* *of which: Sweden United States France...

  • Page 66
    64 The Volvo Group Notes to consolidated financial statements Total assets Sweden Europe excluding Sweden North America South America Asia Other markets Volvo Group total Capital expenditures Sweden Europe excluding Sweden North America South America Asia Other markets Volvo Group total 2002 ...

  • Page 67
    ...2004 Gains (losses) on sale of shares in associated companies Bilia AB 3 Effero AB 2 Eddo Restauranger AB 1 Other companies Subtotal Total income from investments in associated companies 1 Divested in 2002. 2 Divested in 2003. 3 Main part of holding divested in 2003, remaining part divested in 2004...

  • Page 68
    66 The Volvo Group Notes to consolidated financial statements Note 8 9 Other financial income and expenses Other financial income and expenses in 2004 include a write-down of 1,196, pertaining to the restructuring of Henlys Group plc. The net amount of exchange losses were 1 (gain 31; losses 55...

  • Page 69
    ...balance sheet 2002 Value in balance sheet Capital 2003 expenditures Acquired and Sales/ divested Translation scrapping operations 4 differences Reclassifications and other Value in balance sheet 2004 Acquisition costs Goodwill Entrance fees, aircraft engine programs Product and software development...

  • Page 70
    ... were leased during the year. Net income for the year was affected by 332 in rental income from investment properties and 66 in direct costs. Note 12 Shares and participations Carrying value Market value The market values of Volvo's holdings of shares and participations in listed companies as...

  • Page 71
    ... Plc During 1998 and 1999, Volvo acquired 9.9% of the capital and voting rights in Henlys Group plc at a total acquisition cost of 524. Henlys Group is a British company involved in manufacturing and distribution of buses and bus bodies in Great Britain and North America. In February and March 2004...

  • Page 72
    70 The Volvo Group Notes to consolidated financial statements Changes in the Volvo Group's holdings of shares and participations: Balance sheet, December 31, preceding year Acquisitions and divestments, net New issue of shares and shareholders' contributions Share of income in associated companies...

  • Page 73
    ...(174) 1 17 91 837 Note 18 Marketable securities Marketable securities consist mainly of interest-bearing securities, distributed as shown below: 2002 2003 2004 Government securities Banks and financial institutions Corporate institutions Real estate financial institutions Other Total 1 203 484...

  • Page 74
    ... benefit plans apply for salaried employees in Sweden (mainly through the Swedish ITP pension plan) and employees in France and Great Britain. As of 2003 Volvo has adopted RR 29 Employee Benefits in its financial reporting. In accordance with the new standard, defined benefit plans in all the Group...

  • Page 75
    ... plan, actuarial gains and losses are reported as income or expenses, when the accumulated amount exceeds the so called corridor. The income or expenses are then recognized over the expected average remaining service period of the employees. Costs for post-employment benefits other than pensions...

  • Page 76
    ...service costs Vested past service costs Termination benefits Curtailments Employee contributions Actuarial gains (-) and losses (+) Exchange rate translation Benefits paid Obligations at December 31, 2004 of which Funded defined benefit plans Sweden Pensions United States Pensions France Pensions...

  • Page 77
    ... past service costs Net provisions for post-employment benefits at December 31, 2004 whereof reported as Prepaid pensions and other assets Provisions for post-employment benefits Sweden Pensions United States Pensions France Pensions Great Britain Pensions US Other benefits Other plans Total...

  • Page 78
    76 The Volvo Group Notes to consolidated financial statements Note 22 Other provisions Value in Value in balance balance sheet 2002 sheet 2003 Provisions and reversals Acquired and divested Utilization companies Translation differences Value in Reclassibalance fications sheet 2004 Whereof due ...

  • Page 79
    ... loans, 2002 2003 2004 Advances from customers Current income tax liabilities Wages, salaries and withholding taxes VAT liabilities Accrued expenses and prepaid income1 Deferred leasing income Residual value liability Other liabilities1 Total Secured bank loans at year-end 2004 amounted to 194 (96...

  • Page 80
    ... settlement, Renault SA transferred EUR 108 M to AB Volvo. The receivable was reported as a reduction of the goodwill amount pertaining to the acquisition of Renault VI/Mack. Volvo is involved in a number of other legal proceedings incidental to the normal conduct of its businesses. Volvo does not...

  • Page 81
    ... The Volvo Group has transactions with some of its associated companies. The transactions consist mainly of sales of vehicles to dealers. Commercial terms and market prices apply for the supply of goods and services to/from associated companies. Bilia AB was reported as an associated company until...

  • Page 82
    ... monthly salary times twelve, Volvo's internal value for company car, together with the average of the outcome of the variable salary for the previous five years. The corresponding agreement has been offered to all senior executives currently participating in the defined benefits pension plan. In...

  • Page 83
    ... 70 M. The Board has furthermore proposed to the Annual General Meeting that Volvo's own shares may be used for allotment in the stock-based incentive program. Programs from prior years 2000/2005, call options number 2003/2008 employee stock options number Financial instruments Board Chairman CEO...

  • Page 84
    ...financial statements Employee stock option program 2003 with allotment in 2004 The Board of AB Volvo decided to renew the employee stock option programs established in 2000, and renewed in 2001 and 2002, through which senior executives in the Volvo Group are allotted options on B shares in AB Volvo...

  • Page 85
    ... Volvo Sweden Subsidiaries Sweden Western Europe Eastern Europe North America South America Asia Other countries Group total Wages, salaries, other remunerations and social costs, SEK M AB Volvo 2 Subsidiaries Group total 3 2002 Board and Presidents1 of which variable salaries Other employees Board...

  • Page 86
    ... centrally and at each group company. Most of the Volvo Group's financial transactions are carried out through Volvo's inhouse bank, Volvo Treasury, which conducts its operations within established risk mandates and limits. Credit risks are mainly managed by the different business areas. The nature...

  • Page 87
    ... rates pertains mainly to the Group's customer financing operations and interest net. According to the Group policy, matching of interest rate terms between lending and funding should exceed 80% in the customer financing operations. At the end of 2004, this matching was 100%. Volvo's interest...

  • Page 88
    ... assets and obligations of Volvo's pension plans is presented in Note 21. Apart from Volvo's pension plans, investments in shares are only made if motivated by operational purposes. A comparison between carrying values and market values of Volvo's holdings in listed companies is included in Note 12...

  • Page 89
    ... Swedish accounting principles Items increasing (decreasing) reported net income Derivative instruments and hedging activities (A) Business combinations (B) Investments in debt and equity securities (C) Restructuring costs (D) Post-employment benefits (E) Software development (F) Product development...

  • Page 90
    ... Swedish accounting principles Items increasing (decreasing) reported shareholders' equity Derivative instruments and hedging activities (A) Business combinations (B) Investments in debt and equity securities (C) Restructuring costs (D) Post-employment benefits (E) Software development (F) Product...

  • Page 91
    ... the final value of acquired assets and liabilities in Renault V.I. and Mack Trucks. In 1995, AB Volvo acquired the outstanding 50% of the shares in Volvo Construction Equipment Corporation (formerly VME) from Clark Equipment Company, in the US. In conjunction with the acquisition, goodwill of...

  • Page 92
    ... based upon quoted market prices for listed securities. D. Restructuring costs. Up to and including 2000, restructuring costs were in the Volvo Group's year-end accounts reported in the year that implementation of these measures was approved by each company's Board of Directors. In accordance with...

  • Page 93
    ...pays an entrance fee. In Volvo's accounting these entrance fees are capitalized and amortized over 5 to 10 years. In accordance with US GAAP, these entrance fees are expensed as incurred. I. Other. Other include accounting differences regarding interest costs, leasing, stock option plans, guarantees...

  • Page 94
    ...The Volvo Group Notes to consolidated financial statements Under Swedish GAAP all sales not qualifying for revenue recognition are treated in the same way as deferred income. Under US GAAP sales that are made to companies who in turn lease out the equipment under operating leases are accounted for...

  • Page 95
    ...to Volvo Holding France SA as the owner of the shares in Renault V.I. and Mack. Income from investments in Group companies includes dividends in the amount of 101 (4,368; 770), write-down of shares of 1,364 (1,579; 531) and group contributions and transfer pricing adjustments received totaling a net...

  • Page 96
    ... AB Short-term investments in Group companies Cash and bank accounts Total current assets Total assets Shareholders' equity and liabilities Shareholders' equity Restricted equity Share capital (441,520,885 shares, par value SEK 6) Legal reserve Unrestricted equity Unrestricted reserves Net income...

  • Page 97
    ... Investments in fixed assets Disposals of fixed assets Shares and participations in Group companies, net Shares and participations in non-Group companies, net Cash flow after net investments Financing activities Increase (+)/ decrease (-) in loans Loans granted, net Dividend to AB Volvo shareholders...

  • Page 98
    ... among Income from investments in Group companies. As of 2003, the Volvo Group has adopted "RR 29 Employee Benefits" in its financial reporting. The parent company is still applying the principles of FAR's Recommendation No. 4 "Accounting of pensions liabilities and pension costs" as in previous...

  • Page 99
    ...for a program of employee stock options also are included. Other financial income and expenses include exchange rate differences on loans, guarantee commissions from subsidiaries, costs for confirmed credit facilities as well as costs of having Volvo shares registered on various stock exchanges. In...

  • Page 100
    98 Parent Company AB Volvo Notes to financial statements Note 9 Intangible and tangible assets Value in balance sheet 2002 Value in balance sheet 2003 Capital expenditures Sales/ scrapping Value in balance sheet 2004 Acquisition cost Rights Total intangible assets Buildings Land and land ...

  • Page 101
    ...Global Trucks AB, 1 and Volvo Financial Services AB, 345. Write-downs were carried out at year-end on holdings in Sotrof AB, 600, Volvo China Investment Co Ltd, 99 and Volvo Penta UK, 10. 2003: Acquisition of the truck and construction equipment operations of Bilia was completed through the exchange...

  • Page 102
    ... accumulated benefit obligation of all AB Volvo's pension obligations at year-end 2004 amounted to 823, which has been secured in part through provisions for pensions and in part through funds in pension foundations. Net asset value in the Pension Foundation, marked to market, accruing to AB Volvo...

  • Page 103
    ... Dividends, transfer pricing adjustments and Group contributions Gain on sale of shares Other Total Further information is provided in Notes 2, 3 and 4. 557 (1,408) (32) 68 (815) 6,555 (6,017) (310) 60 288 545 (5,273) (27) 29 (4,726) Shares and participations in Group companies, net Investments...

  • Page 104
    ... The number of employees at year-end was 144 (132; 124). Information on the average number of employees, wages, salaries and other remunerations including option programs as well as Board members and senior executives by gender is shown in Note 31 to the consolidated financial statements. July...

  • Page 105
    ... value of the holdings is shown in Note 12 to the consolidated financial statements. AB Volvo's holding of shares and participations in Group companies Volvo Global Trucks AB, Sweden Volvo Lastvagnar AB, Sweden Volvo Finland AB, Finland Volvo Trucks (Deutschland) GmbH, Germany Volvo Europa Truck NV...

  • Page 106
    ... Equipment Europe Holding GmbH, Germany Volvo Motor Graders, Ltd, Canada AB Volvo Penta, Sweden Volvo Penta Norden AB, Sweden Volvo Penta Europe AB, Sweden Wuxi da Hao Power, Co Ltd, China Volvo Aero AB, Sweden Volvo Aero Engine Services AB, Sweden Volvo Aero Support AB, Sweden Volvo Aero Norge...

  • Page 107
    ... Truck Sales, Inc, USA Volvo Construction Equipment North America Inc., USA Volvo Penta of The Americas, Inc, USA Volvo Aero North America Inc, USA Volvo Aero Services LP, USA Volvo Treasury North America Inc, USA Volvo Commercial Finance LLC The Americas, USA Volvo Holding Sverige AB, Sweden Volvo...

  • Page 108
    ...be appropriated to restricted equity. AB Volvo Retained earnings Net income 2004 Total SEK M 38,680 5,098 43,778 The Board of Directors and the President propose that the above sum be disposed of as follows: SEK M To the shareholders, a dividend of SEK 12.50 per share To be carried forward 1 Total...

  • Page 109
    ... accepted accounting principles in Sweden. The Board of Directors' Report is consistent with the other parts of the annual accounts and the consolidated accounts. We recommend to the general meeting of shareholders that the income statements and balance sheets of the Parent Company and the Group be...

  • Page 110
    ... in accordance with IFRS as from 2005 The Volvo Group's financial reporting is up to 2004 prepared in accordance with generally accepted accounting principles in Sweden ("Swedish GAAP"). Effective from 2005, all listed companies within the European Union ("the EU") are required to prepare their...

  • Page 111
    ... Summarized reconciliation of shareholders' equity, SEK M Equity under Swedish GAAP IFRS adjustments: Capitalization and amortization of development costs and software Minority interest Non-amortization of goodwill Post employee benefits Investments in listed companies Fair value gains and losses...

  • Page 112
    ...financial instruments used for hedging of forecasted commercial cash-flows and forecasted electricity consumption: Under Swedish GAAP Volvo has applied hedge accounting for the main part of these derivatives and these instruments have consequently not been reported in the balance sheet ("Off-balance...

  • Page 113
    ... as financial leasing contracts if the residual value in these contracts is guaranteed to Volvo Financial Services by another Volvo business area. In the Volvo Group's consolidated balance sheet, these leasing agreements are still reported as operating leases. In comparison with the 2004 closing...

  • Page 114
    ... receivables Marketable securities Cash and bank Total assets Shareholders' equity and liabilities Shareholders' equity Minority interests Provisions for post-employment benefits Other provisions Loans Other liabilities Shareholders' equity and liabilities Volvo Group, excl Financial Services 1 Dec...

  • Page 115
    ... receivables Marketable securities Cash and bank Total assets Shareholders' equity and liabilities Shareholders' equity Minority interests Provisions for post-employment benefits Other provisions Loans Other liabilities Shareholders' equity and liabilities Volvo Group, excl Financial Services 1 Dec...

  • Page 116
    ... Volvo Group (VFS reported according to the equity method) SEK M unless otherwise specified Net sales Cost of sales Gross income Research and development expenses Selling expenses Administrative expenses Other operating income and expenses Income from Financial Services Income from investments...

  • Page 117
    115 Key operating ratios % of sales Gross margin Research and development expenses Selling expenses Administrative expenses Operating margin IFRS 21.6 3.8 9.1 2.6 7.3 Sw GAAP 21.5 3.6 9.0 2.6 7.0 Net sales SEK M Trucks Buses Construction Equipment1 Volvo Penta Volvo Aero Other Net sales IFRS ...

  • Page 118
    ...1998 1999 2000 2001 2002 Net sales Cost of sales Gross income Research and development expenses Selling expenses Administrative expenses Other operating income and expenses Income from Financial Services Income (loss) from investments in associated companies Income from other investments Income from...

  • Page 119
    ... Property, plant and equipment Assets under operating leases Shares and participations Inventories Customer financing receivables Interest bearing receivables Other receivables Liquid funds Assets Shareholders' equity Minority interests Provision for post-employment benefits Other provisions Loans...

  • Page 120
    ... cash 2 Change in working capital 2 Financial items and income tax 2 Cash flow from operating activities Investments in fixed assets Investments in leasing assets Disposals of fixed assets and leasing assets Customer financing receivables, net Shares and participations, net Acquired and divested...

  • Page 121
    ... from 1997 Financial Services is accounted by the equity method. 3 As of 1999, Volvo's cash-flow statement is presented in accordance with the Swedish Financial Accounting Standards Council's recommendation, Reporting of Cash Flow, RR 7. Values in prior years are adjusted in accordance with the new...

  • Page 122
    ... at year-end. 8 Plus one share of Swedish Match per Volvo share, price of SEK 21.74 (weighted average first ten trading days following listing). 9 Proposed by the Board of Directors. The largest shareholders in AB Volvo, December 31, 2004 1 Number of shares Renault Robur fonder (savings funds...

  • Page 123
    ... 160 794 154 6,599 Volvo Penta Western Europe Eastern Europe North America South America Asia Other markets Total Other and eliminations 1 Net sales excl Financial Services Volvo Aero Financial Services Western Europe Eastern Europe North America South America Asia Other markets Total 3,682 4,231...

  • Page 124
    ...-year 1995. Operating margin for Volvo Construction Equipment for the years 1994 to 1995 amounted to 13.4 and 12.3. Number of employees at year-end Number 1994 Trucks Buses Construction Equipment Volvo Penta Volvo Aero Financial Services Other Volvo Group, excluding divested operations Cars Other...

  • Page 125
    ... The Volvo Group's accounting per market area reflects geographical definitions based on an ISO standard. The accounting for the years 1994-1996 has been adjusted to conform with the new principle. Environmental performance of Volvo production plants Absolute values related to net sales 2000 Energy...

  • Page 126
    ... leases. Investments in fixed assets included in the Group's cash flow statement include only capital expenditures that have reduced the Group's liquid funds during the year. Equity ratio Shareholders' equity divided by total assets. Income per share Net income divided by the weighted average number...

  • Page 127
    ....com on date of publication and are also sent directly to all shareholders who have advised Volvo that they wish to receive Group financial information. Historical and current time series reflecting the Volvo Group's financial development, market information and share data are published regularly...

  • Page 128
    AB Volvo (publ) SE-405 08 Göteborg, Sweden Telephone +46-31 66 00 00 AB Volvo, Investor Relations, 635 2904