Volvo 2005 Annual Report Download - page 73

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Volvo Group 2005 69
Strong earnings trend
Volvo Aero’s net sales rose by 9% to SEK
7,538 M (6,925). The sales increase comes
primarily from increased volumes, particularly
in component manufacturing.
Operating income amounted to SEK 836 M
(403). The earnings improvement is mainly
attributable to increased volumes and higher
capacity utilization at the production plants in
Trollhättan, Sweden and Kongsberg, Norway.
Stronger demand for new spare parts and an
advantageous product mix also contributed to
the earnings improvement. Operating margin
rose to 11.1% (5.8).
The most profitable segment is still the pro-
duction of spare parts and components for
commercial aircraft engines. The after-market
contributed to the earnings improvement.
Volumes continued to be low in the engine
overhaul operations and profitability was
unsatisfactory.
Several important contracts
During the year, cooperation with General
Electric was increased. Volvo Aero and General
Electric signed contracts whereby Volvo Aero
increased its share in the LM2500 stationary
gas turbine. Since 1997 Volvo Aero has been
a risk-sharing partner on the LM2500, which
became known as the most reliable gas tur-
bine in its class. Over the next 12–15 years,
total sales for Volvo Aero’s share of the
LM2500 are expected to amount to approxi-
mately SEK 250 M per year. At the end of
November, almost exactly one year after sign-
ing the contract for the new GEnx aircraft
engine, Volvo Aero delivered the first compo-
nents – right on schedule.
On February 12, the new Ariane 5 rocket,
the ECA, was successfully launched. Since
December 2002, working under intense time
constraints, Volvo Aero has further developed
the exhaust nozzle of the rocket, which can
support a significantly greater usable load
than before. The launch of the rocket was ex-
tremely significant for the ongoing European
space program.
Volvo Aero Norway signed a contract with
Pratt & Whitney to manufacture a component
for the F135 engine for the F-35 JSF fighter
aircraft.
Volvo Aero signed a contract with Snecma
for the serial manufacture of nozzles and tur-
bines for the Ariane 5. In addition, Volvo Aero
and Snecma also signed a cooperation agree-
ment to develop new turbine technologies for
the aerospace industry.
In April, the world’s largest passenger air-
craft, the Airbus A380, flew for the first time.
The A380 has Trent 900-type Rolls Royce
engines, an engine program in which Volvo
Aero is part-owner. In addition Volvo Aero
delivers components for the second engine
alternative, the GP7000.
Volvo Aero develops and manufac-
tures high-technology components
for aircraft and rocket engines. In
addition, it offers a broad range of services,
including spare parts for aircraft engines
and aircraft, sale, brokering and leasing of
aircraft engines and aircraft, and mainten-
ance and repair of aircraft engines. Volvo
Aero also provides after-market services for
gas turbines and turbine systems.
Volvo Aero has specialized its operations
on developing and manufacturing certain
selected components in aircraft engines.
This is carried out in close cooperation
with its corporate partners. Volvo Aero con-
ducts operations on a global basis and has
manufacturing plants in Sweden, Norway
and the US.
Increased air traffic and more
aircraft
Airline passenger traffic, having recovered in
2004, continued to improve in 2005. After the
first eleven months, the increase in passenger
traffic was 6%. Despite the increasing num-
bers of people flying today, the IATA still
expects airlines to continue to report losses
for 2005. There are large regional differences,
however. European airlines and carriers in the
Asia-Pacific region posted profits in 2005.
The large American companies, on the other
hand, continue to struggle with significant
losses.
Order bookings for large commercial air-
craft basically increased in each month of the
year. Airbus and Boeing announced a com-
bined order intake of 2,140 orders in 2005
compared with 647 in 2004. Aircraft deliveries
increased by 10% from 606 to 668 in 2005.
Net sales per market
SEK M 2004 2005
Europe 3,179 3,406
North America 3,127 3,612
South America 138 168
Asia 400 284
Other markets 81 68
Total 6,925 7,538