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32 Board of Directors’ Report
al pricing. All customer finance regions
performed better than the previous year:
Region International showed strong prof-
itability and growth; Region Americas
benefited from higher income and lower
delinquencies and Region Europe
showed strong profitable growth and con-
tinued low delinquencies. VFS took a
conservative approach as it steadily
moved into selected emerging markets in
2004. Challenges remain in increasing
financing of trucks from Mack Trucks and
Renault Trucks.
Volvo Treasury coordinates the Group’s
global funding strategy and manages all of
its interest-bearing assets and liabilities.
Operating from Gothenburg, Greensboro,
Singapore and Curitiba, the international
presence supports the growth strategy of
the Volvo Group. The funding strategy
kept the Group’s borrowing cost at low
levels and gave support to the customer
finance activities. In 2004, Volvo Treasury
obtained favorable loans for funding
research and development, managed an
increase in assets resulting from the sale
of the Scania shares, and refinanced debt
resulting in funding cost savings. Volvo
Treasury’s role as an in-house bank also
includes advisory services to the Group
companies.
Danafjord, VFS’s real estate unit,
expanded further in 2004. The operation
covers the renting and development of
commercial real estate in Sweden and
increasingly in other countries. In the
Spring of 2004, Danafjord acquired Volvo
Trucks’ real estate in Lundby, Gothenburg
and began building a 15,000 sqm new
office building there. The occupancy rate
at the end of the year was 99.8% (99.8),
Volvo Financial Services (VFS) provides
services in four main areas: customer
finance and insurance, treasury oper-
ations, real estate management and re-
lated services. These services enable
Volvo to take a Group-wide approach to
financial risk. They also play a significant
role in Volvo’s strategy for becoming the
world’s leading provider of commercial
transport solutions.
The customer in focus
Volvo’s expanding customer finance oper-
ations cover Europe, North America,
Australia, and parts of South America and
Asia. VFS conducts customer financing
directly or through cross-border activities
in over 50 countries. Finance programs
support the dealers and end-customers
of Volvo’s business areas. The range of
financial services includes instalment
contracts, financial and operational leas-
ing, and dealer financing. In many mar-
kets, insurance, service and maintenance
contracts are also offered separately or in
combination with financing services.
At the end of 2004, VFS marked its
14th quarter of increasing operating
income. Driving these results were the
reorganization which VFS began in 2001
(focusing on portfolio control and risk
management) as well as the improved
global business climate. Throughout
2004 VFS successfully achieved a
healthy balance in terms of credit risk,
volume, sales penetration and profession-
FINANCIAL
SERVICES
* Share financed
by VFS in markets
where VFS offers
financial services.
Credit portfolio, net, SEK bn
Operating income, SEK M
Return on shareholders’ equity, %
Market penetration*, %
00 01 02 03 04
14.1 4.2 4.8 9.8 11.1
00 01 02 03 04
30.2 20.6 1 8.8
23.6 22.4
00 01 02 03 04
1,499
325 490 926 1,365
00 01 02 03 04
53.6 64.0 61.3
60.1 64.3