Volvo 2004 Annual Report Download - page 4

2 CEO comment
The year 2004 was one of the best years
in the Volvo Group’s history, with strong
growth, improved profitability, strong cash
flow and continued rapid product renewal.
Sales increased successively during the
year. The fourth quarter’s sales of slightly
more than SEK 57 billion brought net
sales for the full year to SEK 201 billion.
This is an increase of 15 percent
compared with 2003.
Sales growth was driven by successful
products launched in recent years as well
as the high level of demand in our trad-
itionally strong markets in Europe, North
and South America. The new distribution
systems in Eastern Europe and Asia that
we established in recent years con-
tributed to a rapid sales increase in these
regions.
Volvo CE, Volvo Penta and Trucks
achieved sales records. Trucks increased
sales from 156,000 vehicles in 2003 to a
record 193,000 vehicles and nearly SEK
137 billion in sales. Volvo CE approached
SEK 30 billion in sales and Penta
achieved slightly more than SEK 9 billion.
Volvo Aero reported a decline in sales in
2004.
Large parts of the Group had to handle
significant increases in the pace of
production and large development
projects, some of which entered their final
phases towards the end of the year.
These included the Renault Magnum and
Volvo Trucks’ VT880, which is aimed at
the most exclusive segment in North
America. Further, the launch of Volvo
Penta’s new IPS propulsion system has
generated a positive response from boat
builders. The investment level was high
for structural and product-driven reasons.
We succeeded, however, in limiting
investments in capacity, despite pro-
duction increases of more than 20
percent in some areas. It is also pleasing
that it was possible to generate strong
cash flow with this high level of activity.
For the full year, the Group achieved an
operating margin of 7 percent and a
return on equity of 13.2 percent, both of
which are well within the framework set
for our financial goals.
The higher margins are not only attri-
butable to higher capacity utilization, but
also largely to rationalization measures,
more cost-efficient work methods and
correct pricing of more efficient products.
In Trucks, all brands reported improved
earnings, particularly in North America
where Mack Trucks and Volvo Trucks
increased profitability considerably. Volvo
CE also posted higher earnings, but was
affected adversely by the USD decline
and by rising raw materials prices,
particularly for steel.
As a result of fine efforts in many
areas, Volvo Buses reversed heavy losses
into profit in 2004. Progress was made
particularly in Europe during 2004, but
much work remains to achieve satisfactory
profitability.
In addition to delivering highly favor-
able earnings, Volvo Penta also success-
fully launched a large number of products
that further strengthened its position and
which were well received by boat builders
and customers.
Volvo Aero continued to develop
strongly in components, while overhaul
operations faced difficulties in a market
characterized by intense competition and
price pressures. Positive aspects in the
industry are that passenger traffic is
rising sharply, and that orders for new air-
craft are increasing.
CEO
COMMENT