Volvo 2005 Annual Report Download - page 16
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Targets and
execution
01 03
50 (2)
02
(1)
0
10
05
14
01 03
(0.4) 1.6
02
1.4
0
7
5
05
7.9
01 03
(1.7) 1.7
02
0.4
0
05
17.8
01 03
(8.2) (7.7)
02
(3.3)
15
0
–30 05
23.7
04
16
04
7.3
04
13.9
04
25.8
Net sales growth1, %
Operating margin1, %
Return on shareholders’
equity1, %
Net financial position as
percentage of shareholders’
equity and minority interest1, %
15
12
The Volvo Group’s ambition is to achieve a sustainable level of profitability above the
industry average. The Group has a number of financial targets covering growth, oper-
ating margins, return on shareholders’ equity and capital structure. These financial
targets are set and evaluated over a business cycle.
The Volvo Group’s ambition is that net sales will increase by an annual
average of more than 10%. This objective should be achieved through both
organic growth and acquisitions. Net sales rose by 14% in 2005. During
2001–2005, the average annual growth rate, excluding divested oper-
ations, was 14%.
The target range for the operating margin is between 5% and 7% over a
business cycle. The operating margin in 2005 was 7.9%. The average
annual operating margin for the Volvo Group during 2001–2005 was 3.9%.
The objective is to achieve a return on shareholders’ equity of 12% to 15%.
The average annual return on shareholders’ equity during 2001–2005 was
6.4%. The return on equity in 2005 was 17.8%.
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 financial position of 30% of shareholders’ equity and minority
interest. Over a business cycle, the target for the equity ratio, excluding
Financial Services, is approximately 40%.
At the end of December 2005, the Volvo Group had a net financial
asset position of 23.7% of shareholders’ equity and minority interests.
Additionally, the equity ratio for the Group, excluding Financial Services,
was 40.4% and the equity ratio for Financial Services was 11,2%.
1 Years 2004 and 2005 are reported in accordanc
with IFRS and 2001, 2002 and 2003 in accordance
with Swedish GAAP. See Note 1 and 3.
12 Volvo Group 2005