Volvo 2010 Annual Report Download - page 6

ing that we have been able to provision SEK 350
M for profit sharing to our employees, since
return on shareholders’ equity for 2010 amounted
to 16%. The past two years have required quick
adaptations that we would never have managed
without the extraordinary efforts undertaken by
employees throughout the Group.
Based on the much improved profitability and
the significantly reduced debt level, the Board
proposes to resume dividends with a pay-out of
SEK 2.50 per share for the financial year of 2010.
Improvements within all business areas
The improved demand was clearly visible in our
truck operations, with order intake rising by 75%
while deliveries increased by 41%. Order intake
gradually increased from low levels in Europe and
North America. In many emerging markets such
as Brazil and India, demand remained strong. On
the other hand, the Japanese market weakened
during the second half of the year. Net sales in
the truck operations increased 20% to SEK 167
billion and the operating margin improved to
6.0%. The positive trend in order intake led to a
gradual increase in the pace of manufacturing
and delivery in most of our truck plants.
The growth and profitability development of
Construction Equipment was strong throughout
the year with a gradual improvement in Europe and
North America, and with a very good contribution
from emerging markets, particularly China. Sales
rose 51% to SEK 54 billion and the business area
recorded an operating income of slightly more
than SEK 6 billion. The full year operating margin
was 11.5% with a strong finish to the year. We have
increased our market share in the important Chi-
nese market and now rank as its third largest
manufacturer. We are moving our position forward
further with the launch of SDLG branded excava-
tors from Lingong and a large number of Volvo
products.
Buses’ sales increased by 11% and the operat-
ing margin rose to 3.8%. The business area had
a positive trend in profitability throughout the
year despite relatively low volumes in the impor-
tant markets of Europe and North America. The
improved profitability is partly a result of increased
sales, but primarily the fruit of considerable
efforts to raise internal efficiency and lower
costs.
Volvo Penta turned around with a profit of SEK
578 M and a margin of 6.6% despite continued
weak demand for marine engines. With one of the
industry’s broadest product ranges and a global
network of service and distributors, Volvo Penta
is strategically well-positioned to be an innovative
partner to important boat builders. The industrial
engine business had a good development and
the aim is to further increase sales of industrial
engines by breaking into new segments of the
market.
Volvo Aero’s operating income rose to SEK
286 M despite a loss of SEK 538 M related to the
divestment of the U.S.-based service business.
Core operations developed strongly due to
increased volumes, resulting in improved capacity
utilization, improved productivity and lower costs.
Volvo Aero remains well-established with partici-
pation in many interesting engine programs that
will be entering production in coming years.
In our Customer Finance Operations profitabil-
ity gradually improved as our customers’ business
activity increased, which in turn led to a more sta-
ble financial situation for them. As a consequence
of the Volvo Group’s increased sales of new prod-
ucts, we also see that our credit portfolio is grow-
ing again.
Intensive year of news
We take a long-term view of our business and
what needs to be done to create value for our
customers and to create sustainable profitability.
Accordingly, we maintained our relatively high
investments in product development during both
2009 and 2010. We also continued to invest in
our plants and sales channels. Combined, this
means that we now stand well-prepared in terms
of both products and capacity.
As one of the world’s largest manufacturers of
commercial vehicles, we have a responsibility to
reduce the impact on the environment caused by
our production as well as the usage of our prod-
ucts – it is a responsibility that we take most
se riously. Engines that use less fuel lower our
customers’ operating costs and strengthen their
competitiveness while reducing environmental
impact. At the beginning of the year, we intro-
duced on a broad front in the USA, the new
engines that meet the latest, extremely stringent
requirements on emission levels that are in fact
practically zero for nitrogen oxides and particu-
lates. Trucks fitted with the new engines have
been well received by both old and new custom-
ers and we are capturing market share in North
America as a consequence. But the truck news
doesn’t end there. In Europe, Volvo Trucks
launched the new construction truck Volvo FMX
that strengthens the offering within this impor-
tant segment of the market. In Japan, UD Trucks,
in conjunction with the introduction of new emis-
sion regulations, launched a new heavy Quon
truck equipped with Group engines.
Through Eicher, we have a very strong position
in medium-duty trucks in India and a well-per-
forming sales network. We are now further devel-
oping Eicher to keep pace with the strong growth
in the country and for export to other countries.
We are developing a new generation of heavy-
duty trucks and investing in new assembly cap-
acity. We are also building a new engine plant that
will be the global base for the medium-duty
engine platform to be launched in increasing
numbers of the Group’s products in the coming
years.
Volvo CE launched a number of new Volvo
products during the year. Manufacturing was also
begun in China of the new series of excavators
under the SDLG brand. In addition, Volvo CE’s
engines received certification in accordance with
the new environmental rules that are beginning to
be introduced in Europe and North America in
2011. During the year, Volvo Buses began mass
production of hybrid buses at its plant in Poland.
This is but a small selection of news for a year
when the pace of renewal remained high for all
business areas.
CONTINUED CEO COMMENT
2
A GLOBAL GROUP 2010