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WORLD
TOGETHER WE MOVE THE
THE VOLVO GROUP
ANNUAL REPORT 2011

Table of contents

  • Page 1
    The VolVo Group annual reporT 2011 ToGeTher we MoVe The worlD

  • Page 2
    .... Board of Directors' report 46 52 54 56 58 60 62 64 66 68 69 Sustainable development The share Significant events Trucks Construction Equipment Buses Volvo Penta Volvo Aero Volvo Financial Services Financial strategy Risks and uncertainties Financial information 71 Financial information 2011 72...

  • Page 3
    ... and construction equipment and is today also a leading manufacturer of heavy-duty diesel engines, marine and industrial engines as well as engine components for the aerospace industry. 10 More information. +57 Share of Group's net sales by geography Europe, 39% North America, 19% South America, 11...

  • Page 4
    ...3 in construction equipment.  One of the world's largest manufacturers of heavy duty diesel engines. Strong positions also in the other business areas.  Good market presence globally.  Group Trucks Sales & Marketing EMEA Group Trucks Sales & Marketing Americas Group Trucks Sales...

  • Page 5
    ...M operating income industrial operations, SeK M operating income Customer Finance, SeK M operating margin Volvo group, % income after financial items, SeK M income for the period, SeK M Diluted earnings per share, SeK Dividend per share, SeK return on shareholders' equity, % 1 according to the Board...

  • Page 6
    ... the heavy-duty truck segment. in the short-term, the Brazilian market will be impacted by the transition to new emission standards that took place at the turn of the year, but we have a positive view on the long-term development in Brazil and the other markers in South america. "We have now taken...

  • Page 7
    ... increasing market shares driven by competitive products translated into us delivering some 238,000 trucks during 2011 - an increase of 32% compared to the preceding year. net sales in the truck operations surpassed SeK 200 billion and profitability improved to an operating margin of 9.1%. Volvo Ce...

  • Page 8
    a gLoBaL groUP 2011 Vision Values wanTed posiTion 4

  • Page 9
    ... best business partner. new  Volvo Group wanted position 2020 We are among the most profitable in our industry We are our customers' closest business partners We have captured profitable growth opportunities We are proven innovators of energy-efficient transport solutions We are a global team...

  • Page 10
    ... average annual operating margin for the Volvo group's industrial operations was 4.1% from 2007 to 2011. 10 Target: above 7% 0 (10) 07 7.8 08 5.2 09 (7.8) 10 6 .9 11 8.6 07 08 09 10 11 5.7 39.7 70.9 37.4 25.2 Return on shareholders' equity, % Target: 12-15% the target for Customer Finance is...

  • Page 11
    .... • each year, the operating margin for the truck, bus and construction equipment operations, as well as Volvo Penta, shall be ranked among the top two companies when benchmarked against relevant competitors. • For Customer Finance operations, the existing targets of 12-15% return of equity...

  • Page 12
    ...on January 1, 2012. Background to the change the Volvo group has grown significantly since the end of the 1990s when the realignment toward commercial vehicles began, and today the group is one of the world's largest actors in heavy trucks, construction equipment, buses and heavy diesel engines. the...

  • Page 13
    ... units: group trucks technology and group trucks operations. there are no changes to the financial external reporting - truck companies report their earnings combined as previously. 5O What happens with Volvo Financial Services? the company is organized under Finance and Business Support headed...

  • Page 14
    ... there is more information about the development on important markets and on some of the Volvo group's investments and successes on them. Long-term growth the recovery that started in the group's mature markets in 2010 continued in Western europe and north america during 2011, with some tendencies...

  • Page 15
    ...service company Celero Support. 2008 Joint venture with Eicher Motors of India within trucks and buses. Volvo Group net sales, SeK bn 300 225 150 75 0 02 03 04 05 06 07 08 09 10 11 2006 Acquisition of Japanese Nissan Diesel (Now 2007 Acquisition of Chinese wheel UD Trucks). Comloader manufacturer...

  • Page 16
    ... net sales. Europe is the historical home market for both Volvo and Renault Trucks. In Europe, the Group has a considerable industrial structure with a relatively large share of its manufacturing and sizeable exports. Growing markets in 2011 the heavy-duty truck market in europe 29 (eU's 27 member...

  • Page 17
    ... in Europe, heavy-duty trucks % 10 14.2 11 16.0 10 10.2 11 10.3 Volvo Renault VolVo Fm MetHaneDieSeL Volvo Group in Europe • Net sales: SeK 120,828 M (102,947) • Share of Group sales: 39% • Number of employees: 55,121 • Share of Group employees: 56% • Largest markets: France, Sweden...

  • Page 18
    ..., the plant in Kaluga can assemble 10,000 Volvo and 5,000 renault trucks annually. in 2011, 3,800 Volvo and 1,400 renault trucks were manufactured in the plant. Volvo Construction Equipment invests in Russia Volvo Construction equipment will invest SeK 350 M to build a 20,660 m2 excavator plant in...

  • Page 19
    ... employees: 1,644 • Production: truck factory in Kaluga. excavator factory under construction in the same city • Net sales: SeK 8,895 M, 3% of group sales • Volvo - the largest fleet of Western trucks consisting of more than 55,000 vehicles Russia • Area: 17,075,000 km2 (the largest country...

  • Page 20
    ... products During 2011, Volvo group captured market shares in north america. in the U.S. the group's combined market share in the heavy-duty segment rose from 18.0% in 2010 to 19.8% in 2011. the increased market share is the result of a competitive customer offering of trucks equipped with engines...

  • Page 21
    ...will start at its U.S. engine plant in the third quarter of 2012. Volvo trucks introduced its i-Shift transmission on the north american market in 2007. During 2011, 45% of trucks with Volvo engines in north america were equipped with i-Shift and customers continue to report significant fuel economy...

  • Page 22
    ... the total cost of ownership. against the background of a truck fleet that is at its oldest in many years, there is a need to replace old trucks with new ones at many haulers. Volvo CE invests in North America over the next couple of years, Volvo Construction equipment (Volvo Ce) plans to spend...

  • Page 23
    ... and excavators in Shippensburg, Pa will have no significant impact on the current production in other Volvo locations. it will, however, further improve the competitiveness and profitability of the total business. Multi-million dollar contract for Volvo Buses in New York City in June 2011, Volvo...

  • Page 24
    a gLoBaL groUP 2011 deVelopmenT by ConTinenT SoUtH aMeriCa ContinUeS to riSe The South American market has had high growth rates in recent years with Brazil as the engine. The fundamentals are in place for this development to continue. Strong market the South american market for heavy-duty trucks...

  • Page 25
    ...heavy-duty trucks, South America thousands 148 07 91 08 117 09 86 10 139 11 148 Market development, construction equipment, South America thousands 42 07 25 08 33 09 21 10 35 11 42 5,200 employees Volvo Group in South America • Net sales: SeK 35,142 M (29,013) • Share of Group sales...

  • Page 26
    ... truck Volvo VM, which is produced specifically for the South american market. the truck is adapted to applications such as regional and city distribution. in order to meet the increasing demand for buses in the front engine segment, which in South america amounts to as many as 16,000 buses annually...

  • Page 27
    ... for heavy vehicles. Volvo Group in Brazil • Number of employees: 4,546 • Production: Curitiba (trucks and buses) and Pederneiras (construction equipment) • Net sales: SeK 26,056 M, 8% of group sales • Best employer 2011 Brazil • Area: 8,547,404 km2 • Population: 195 million (2010...

  • Page 28
    ... the segment for wheel loaders and excavators. in asia outside of China, the market for construction equipment grew by 28%. in 2012 the Chinese market is expected to be on the same level as in 2011. asia excluding China is expected to grow by 10-20%. Volvo CE number 1 in China With a volume totaling...

  • Page 29
    ... in China. a number of european manufacturers are trying to get into China, and some have shares in domestic companies producing Chinese brands, but the Volvo group is the only Western manufacturer making trucks under its own brand, UD, in the country. China is the world's largest truck market with...

  • Page 30
    ... investments in infrastructure. Exciting development in VECV the Volvo group's joint venture company Ve Commercial Vehicles (VeCV) comprises the entire eicher Motors truck and bus operations and the Volvo group's indian sales operations in the truck segment as well as the service operations...

  • Page 31
    .... Volvo Group in India • Number of employees: 3,919 • Production: Pithampur (eicher - engines, gearboxes, axles, trucks, bus chassis) and Bangalore (Volvo - assembly of trucks, buses and construction equipment) • Net sales: SeK 6,007 M, 2% of group sales • third largest commercial vehicle...

  • Page 32
    ... has developed pioneering products and services. Much has happened since 1927. Volvo has developed from a small local industry to one of the world's largest manufacturers of trucks, buses and construction equipment with more than 100,000 employees, production facilities in 20 countries and sales in...

  • Page 33
    ...30O Competent labor For many years, interest has waned for education and careers in the fields of mathematics, natural sciences and engineering in industrialized countries. However, the need for competent employees with these types of specialist skills will increase as the products and services are...

  • Page 34
    ... gLoBaL groUP 2011 bus rapi SoLVeS toMorroW'S Challenge All over the world, there is a growing need for safer, more efficient and greener public transportO In particular, cities are increasingly impacted by congestion, pollution and noiseO Congestion costs society billions annually and impairs life...

  • Page 35
    d TransiT Today PUBLiC tranSPort ProBLeMS 31

  • Page 36
    a gLoBaL groUP 2011 With easy boarding and debarking, together with efficient ticket systems, the travel time can be shortened significantly. VolVo's soluTion - brT Bus rapid transit (Brt) is a public transport concept specially developed for cities to meet growing transportation needs, to ...

  • Page 37
    How much public transport does USD 1 billion buy? 10 kilometers of subway 50 kilometers of tramway 250 kilometers of Bus Rapid Transit 33

  • Page 38
    a gLoBaL groUP 2011 Transp so inteLLigent 34

  • Page 39
    ... of the risks faced by the Group's customers and societyO The issues are complex and require collaboration between several partiesO Therefore, the Volvo Group collaborates with the public sector, private sector, academic institutions and our customers to develop services and solutions that make the...

  • Page 40
    a gLoBaL groUP 2011 Advanced IT and communication technology improves the efficiency and safety of the transport system. VolVo's soluTions and eXpeCTed resulTs Green Corridors - safer and more efficient transportation to meet increased needs for transportation, the various modes of transport need ...

  • Page 41
    The goal with Green corridors is to reduce the impact on the environment while simultaneously increasing efficiency and safety on highways through specially adapted transport stretches for heavy traffic. 37

  • Page 42
    ... bus chassis, engines and vehicle components. Mack For more than a century Mack has been one of the largest manufacturers of heavy-duty trucks in north america, and focused on commercial vehicles from the start. today, Mack is one of the strongest heavyduty truck brands in the north american market...

  • Page 43
    ... machinery industry, especially for wheel loaders. the SDLg brand is sold primarily in China and other emerging markets. Prevost With more than 10,000 vehicles on north american roads, Prevost is a leading north american manufacturer of premium touring coaches and bus shells for high-end motorhomes...

  • Page 44
    ... total offering that, in addition to buses, includes a global service network, efficient spare parts handling, service and repair contracts, financial services and traffic information systems. City buses intercity buses Coaches Chassis Marine and industrial applications Volvo Penta manufactures...

  • Page 45
    ... Construction equipment develops, manufactures and markets equipment for construction and related industries under the brands Volvo and SDLg. its products are leaders in many world markets, and include a comprehensive range Compact construction equipment Heavy construction equipment of wheel loaders...

  • Page 46
    ... Offering Spare parts Software Accessories Service Products Uptime Services Fleet/Transport Services Support Services Financial Services new parts Vehicle software accessories Service literature Service planning transport management Competence development Dealer financing Used...

  • Page 47
    ...group's new markets. During 2011, the services and aftermarket products business (soft products) represented approximately 23% of net sales in the industrial operations compared to 27% in 2010. the extended product offering such as used vehicles and machines, trailers and superstructures and special...

  • Page 48
    ... offerings including total solutions with spare parts, workshops, service packages, financing and leasing, the Volvo Group's companies have established leading positions on a global market. 15,427 employees 5,234 employees Production facilities North America South America Volvo renault trucks...

  • Page 49
    Share of Group's net sales Trucks, 64% Construction Equipment, 21% Buses, 7% Volvo Penta, 3% Volvo Aero, 2% Customer Finance, 3% 39% 56% EU R 55,121 employees 2,456 employees Europe Asia göteborg, Umeå (Se), gent (Be), Kaluga (rU) Blainville, Bourg-en-Bresse, Limoges, Vénissieux (Fr...

  • Page 50
    BoarD oF DireCtorS' rePort 2011 susTainable deVelopmenT Part oF tHe ProBLeM - anD tHe SoLUtion The Volvo Group's vision is to become world leader in sustainable transport solutions. Efficient transport is crucial for societal and economic development. While the Group's products and services are ...

  • Page 51
    ... on business to provide solutions to the challenges are growing. today, a company is largely judged by the value it brings to society the Volvo group develops products and services based on customer needs and the group intends to give its shareholders a good return on their investment. But the group...

  • Page 52
    ... and a diesel engine working in parallel, whereby each of them can be used where they are most effective. Production of the Volvo Hybrid city bus and the Volvo Hybrid doubledecker started in 2010. Significant fuel savings of up to 37% makes this bus a commercially viable option. in 2011 Volvo trucks...

  • Page 53
    ... oil and fuel production Life Cycle Assessment E ach new product from the Volvo Group should have less environmental impact than the product it replaces. The Group uses Life Cycle Analysis (LCA) to map a product's environmental impact in order to make better informed decisions in the development...

  • Page 54
    ...secure access to future competence. Geographic distribution of employees Key figures number of employees at year-end Share of women, % Share of women, Board Members, % Share of women, Presidents and other senior executives, % 2011 2010 Sweden 25% Europe, excl. Sweden 31% North America 16% South...

  • Page 55
    ...in the business plan. Since 2004, the Volvo group has put an extra strong focus on energy reduction in its own production process. energy consumption has since decreased by 46% per produced unit. the energy-saving goal for 2010-2012 is divided into two parts: • Continue the work with investigating...

  • Page 56
    ... financial reports, search for information concerning the share, insider trading in Volvo and statistics for truck deliveries. it is also possible to access information concerning the group's governance, including information about the annual general Meeting, the Board of Directors, group Management...

  • Page 57
    ... OMX Price trend, Volvo Series B shares, 2011, SEK 130 3 120 110 16 100 90 80 70 60 Q1 Volvo B Source: NASDAQ OMX Events 1 truck deliveries for December 2010, February 4 2 Year-end report 2010, February 4 3 truck deliveries for January, February 16 4 annual report 2010, March 16 5 truck deliveries...

  • Page 58
    ... in the construction equipment industry, with 10 of these in senior management roles within Volvo Ce. He assumed his new position on May 7, 2011. Annual General Meeting of AB Volvo the annual general Meeting of aB Volvo held on april 6, 2011 approved the Board of Directors' motion that a dividend of...

  • Page 59
    ... units under the Ceo. Production, product planning and product development for the non-truck business areas will remain with their respective business area. the new organization was in place as of January 1, 2012. The fourth quarter Volvo Group's 2011 Capital Market Day at Volvo's Capital Market...

  • Page 60
    ... ownership). the product offer stretches from heavy-duty trucks for longhaulage and construction work to light-duty trucks for distribution. Number of employees 41,469 Position on world market in total, the Volvo group is europe's largest and the world's second largest Western manufacturer of heavy...

  • Page 61
    ... as percentage of Volvo Group's sales 64% (63) Net sales SeK bn Net sales by market SeK M europe north america South america asia other markets Total 2011 85,173 37,120 26 ,822 37,551 14,037 200,703 2010 69,606 26 ,901 21,680 35,231 13,888 167,305 200.7 07 08 09 10 11 187.9 203.6 138.9 167...

  • Page 62
    ... through a global network of independent dealers, and in some instances, Volvo-owned distributors. the customer offering also includes services such as financing, leasing and used equipment sales. Customers are using Volvo Ce products in different applications, including general construction, road...

  • Page 63
    Net sales as percentage of Volvo Group sales 21% (20) Net sales , SeK bn Net sales by market SeK M europe north america South america asia other markets Total 2011 19,052 7,862 4,177 30,151 3,745 64,987 2010 16,138 6,267 4,130 24,352 2,923 53,810 65.0 07 53.6 08 56.3 09 35.7 10 53.8 11 65.0...

  • Page 64
    ..., financial solutions, as well as service and maintenance contracts. the company offers global products adapted to local conditions, with manufacturing in europe, asia, north america and South america. Volvo Buses has sales in about 85 countries and is one of the bus industry's strongest service...

  • Page 65
    ... sales as percentage of Volvo Group sales 7% (8) Net sales SeK bn Net sales by market SeK M europe north america South america asia other markets Total 2011 7,009 7,541 2,721 3,027 1,991 22,289 2010 6,242 7,200 1,737 3,299 2,038 20,516 22.3 07 16.6 08 17.3 09 18.5 10 20.5 11 22.3 Operating...

  • Page 66
    ... cost control and a favorable product mix. Production and investments in 2011, Volvo Penta completed the launch of a new logistics system that enables efficiency enhancements across the entire chain - from order to delivery. in recent years, Volvo Penta's engine plant in Vara, Sweden has worked...

  • Page 67
    ... sales as percentage of Volvo Group sales 3% (3) Net sales by market Net sales, SeK bn SeK M europe north america South america asia other markets Total 2011 4,546 1,386 342 2,245 340 8,859 2010 4,507 1,500 335 2,008 366 8,716 8.9 07 11.7 08 11.5 09 8.2 10 8.7 11 8.9 Engine volumes Operating...

  • Page 68
    ... year. the operating margin was 5.2% (3.7). on March 31, Volvo aero acquired all of Pratt & Whitney's shares in Volvo aero norway and thus became the company's sole shareholder. on november 21, aB Volvo announced - as part of its efforts to further refine the group's focus on heavy commercial...

  • Page 69
    ... of Volvo Group sales 2 % (3 ) Net sales by market Net sales, SeK bn SeK M europe north america South america asia other markets Total 2011 3,036 3,304 8 108 53 6,509 2010 3,768 3,599 27 233 81 7,708 6.5 07 7.6 08 7.6 09 7.8 10 7.7 11 6.5 Operating income (loss) and operating margin 336...

  • Page 70
    BoarD oF DireCtorS' rePort 2011 VolVo FinanCial serViCes inCreaSeD ProFitaBiLitY anD groWtH Volvo Financial Services (VFS) supports the Volvo Group product range with financial services by delivering integrated, competitive financial solutions that meet customer and dealer needs. By developing ...

  • Page 71
    ... of credit portfolio 1 Share of unit sales financed by Volvo Financial Services in relation to total number units sold by the Volvo group in markets where financial services are offered. Volvo Trucks 44% Volvo CE 27% Renault Trucks 12% Mack Trucks 8% Buses 5% UD Trucks 3% Other 1% imporTanT Part...

  • Page 72
    BoarD oF DireCtorS' rePort 2011 FinanCial sTraTegy BaLanCing gooD retUrnS anD FinanCiaL StaBiLitY The purpose of Volvo's long-term financial strategy is to ensure the best use of Group resources in providing shareholders with a favorable return and offering creditors financial stability. Volvo's ...

  • Page 73
    ...'s in-house bank, Volvo treasury, that conducts its operations within established risk mandates and limits. Credit risks are mainly managed by the different business areas. Interest rates in Sweden, Europe and the UOSO Sweden Europe The U.S. Source: Reuters Source: Reuters Government bonds, 10 year...

  • Page 74
    ...or the fair value of financial assets and liabilities (price risks). Currency-related risk More than 90% of the net sales of the Volvo group are generated in countries other than Sweden. Changes in exchange rates have a direct impact on the Volvo group's operating income, balance sheet and cash flow...

  • Page 75
    ...participations Segment reporting income other operating income and expenses other financial income and expenses income taxes minority interests intangible assets tangible assets leasing customer-financing receivables receivables inventories marketable securities and liquid funds Shareholders' equity...

  • Page 76
    ... ProFitaBilitY For the full year 2011, the Volvo Group generated the highest net sales, the best operating income and the highest operating margin ever.1 Income statements VolVo Groqp industrial operations SEK m 2011 2010 customer Finance 2011 2010 Eliminations 2011 2010 Volvo Group total 2011 2010...

  • Page 77
    ...). the return on shareholders' equity was 23.1% (16.0). net sales by business area , SEK m trucks construction Equipment Buses Volvo Penta Volvo aero Eliminations and other Industrial operations1 customer Finance reclassifications and eliminations Volvo Group 2011 2010 % operating income (loss...

  • Page 78
    ... in associated companies income from other investments operating income (loss) Industrial operations operating margin, % 2011 2010 net sales by market area, SEK m Western Europe Eastern Europe north america South america asia other markets total Industrial operations 2011 2010 % 303,589...

  • Page 79
    ...24.8 35 27 19 20 15 14 83.1 167 0.4 24.5 35 29 17 20 11 12 Volvo cE Volvo trucks renualt trucks mack trucks Buses UD trucks 1 Share of unit sales financed by Volvo Financial Services in relation to the total number units sold by the Volvo Group in markets where financial services are offered. 75

  • Page 80
    ... Volvo Group Dec 31 2011 Dec 31 2010 Assets non-current assets intangible assets Tangible assets Property, plant and equipment investment property assets under operating leases Financial assets Shares and participation non-current customer-financing receivables Deferred tax assets Prepaid pensions...

  • Page 81
    ...-flow investments and divestments of shares acquired and divested operations, net capital injections (to)/from customer Finance operations currency effect Payment to aB Volvo shareholders Dividend paid to minority shareholders other total change net financial position at end of period 2011 2010...

  • Page 82
    ... Volvo Group total Dec 31 2011 Dec 31 2010 operating activities operating income (loss) Depreciation tangible assets amortization intangible assets Depreciation leasing vehicles other non-cash items total change in working capital whereof C)ange in accounts receivable C)ange in customer financing...

  • Page 83
    ...the engine plants with machining and assembly processes in Skövde, Sweden, and ageo, Japan. During 2011 we have also invested in the dealer network and workshops, mainly in Europe and asia, as well as in our joint venture VE commercial Vehicles (VEcV). capital investments for construction Equipment...

  • Page 84
    ... (144) (1,118) Total income for the period Transactions wit) s)are)olders Dividends to shareholders transactions with minority interests Share based payments changes in minority interests other changes transactions with shareholders Balance at December 31, 2011 1 For specification of other reserves...

  • Page 85
    ... sale and discontinued operations Joint ventures investments in associates operating segments revenue Shares and participations Financial income and expenses income taxes minority interests research and development expenditure intangible assets tangible assets leasing customer-financing receivables...

  • Page 86
    ...-end, impact profit or loss in the year in which they are incurred. the more important exchange rates applied are shown in the table. exchange rates country currency average rate 2011 2010 closing rate 2011 2010 Brazil canada china Denmark Euro zone Great Britain Japan norway South Korea United...

  • Page 87
    ...on the financial statements. Source of estimation uncetainty revenue recognition Deferred taxes impairment of goodwill and other intangible assets assets and other non-current assets credit loss reserves inventory obsolescence Pensions and other post-employment benefits Product warranty costs legal...

  • Page 88
    ...to the Group's share of acquired net assets is reported as goodwill. any lesser amount, known as negative goodwill, is recognized in profit and loss. in step acquisitions, a business combination occurs only on the date control is achieved, which is the point when goodwill is calculated. transactions...

  • Page 89
    ...area Volvo aero. a divestment is in line with the further streamlining of the Volvo Group towards commercial vehicles. Depending on the progress with the sales process, changes in the business environment, access to liquidity, market outlook, etc. the fair value of assets held for sale may change in...

  • Page 90
    ...account, outstanding loans had interest terms corresponding to an interest-rate fixing term of three months and the average interest at year-end amounted to 4.1% (4.3), including Volvo's credit costs. Price risks c Exposure to price risks as result of changed interest-rate levels refers to financial...

  • Page 91
    ... recognized balance sheet may be affected by changes in different exchange rates. currency risks in Volvo's operations are related to changes in the value of contracted and expected future payment flows (commercial currency exposure), changes in the value of loans and investments (financial currency...

  • Page 92
    ...assets in foreign subsidiaries and associated companies amounted at year-end 2011 to SEK 67.8 billion (60.3). the remaining loans used as hedging instruments have expired in 2011. For more information on hedging of net investments in foregin operations recognized in equity refer to note 30 Financial...

  • Page 93
    ... from credits to customers, credits to suppliers, counter party risks and customer Dealer Financing activities. Financial credit risk the Volvo Group's financial assets are largely managed by Volvo treasury and invested in the money and capital markets. all investments must meet the requirements of...

  • Page 94
    ... Read more about the maturity structure concerning bond loans and other loans, as well as granted but unutilized credit facilities in note 22. Read more about contractual term analyses of Volvo's future rental payments from non-annullable financial and operational lease contracts in note 14. Future...

  • Page 95
    ...Feng nissan Diesel motor co., ltd., china VE commercial Vehicles, ltd., india Xian Silver Bus corp., china 1 Direct and indirect ownership. Holding percentage 50 50 501 - 50 50 501 50 Volvo's share of joint ventures' income statements net sales operating income income after financial items...

  • Page 96
    ... Quingdao Sunwin Bus corp, china arabian Vehicle & truck industry ltd, Saudi arabia Effpower aB, Sweden3 Powercell Sweden aB, Sweden other holdings total shares and participations in associated companies4 1 in 2011 Volvo acquired additional 6% and the company is now a subsidiary. in 2010 the holding...

  • Page 97
    ... 31, preceding year change in Group structure acquisitions and divestments, net Write-downs capital contribution Share of income in associated companies revaluation of shares to fair value translation differences Dividends reclassifications other Balance sheet, December 31 2011 2010 2,098 2,044...

  • Page 98
    ... cost of sales, including calculated interest and product improvement expenses. internal sales from service companies are generally made at market prices. operating income trucks construction Equipment Buses Volvo Penta Volvo aero other Industrial operations customer Finance Volvo Group Depreciation...

  • Page 99
    ...Volvo aero other Industrial operations customer Finance Eliminations Volvo Group total Reporting by market net sales Europe north america South america asia other markets Volvo Group total* *of which: Sweden United States France total assets Sweden Europe excluding Sweden north america South america...

  • Page 100
    ... and engines and some extended product offerings, that are sold to customers to provide the customer with an enhanced experience and greater satisfaction. Refer to page 42 for more about the Volvo Group's services. Refer to note 6 for information regarding net sales by product and market. 96

  • Page 101
    ...of write down of assets held for sale change in allowances and write-offs for doubtful receivables, customer financing change in allowances and write-offs for doubtful receivables, other Damages and litigations restructuring cost Volvo profit sharing program other income and expenses total (19) (54...

  • Page 102
    .... at year-end 2011, the Group had unused tax-loss carryforwards amounting to 22,462 (24,869). these loss carryforwards expire according to the table below: Due date 2011 2010 ! soqrce of qncertaInty In estImates Volvo recognizes valuation allowances for deferred tax assets where management does...

  • Page 103
    ...: accelerated depreciation on property, plant and equipment accelerated depreciation on leasing assets liFo valuation of inventories capitalized product and software development adjustment to fair value at company acquisitions Untaxed reserves market value of derivative instruments other taxable...

  • Page 104
    ... in the cost of assets that necessarily take more than 12 months to prepare for their intended use or sale, known as qualifying assets. When participating in industrial projects in partnership with other companies, such as the aircraft engine projects in which Volvo aero participates, Volvo pays an...

  • Page 105
    Intangible assets, acquisition costs Goodwill1 Entrance fees, industrial programs capitalized product and software development other intangible assets2 total intangible assets Balance-sheet amount 2009 capital expenditures3 Sales/scrapping acquired and divested operations translation ...

  • Page 106
    ... equipment3 construction in progress, including advance payments total investment property, property, plant and equipment assets under operating leases total tangible assets Balance-sheet amount 2009 capital expenditures1 Sales/scrapping acquired and divested operations translation differences...

  • Page 107
    ... and equipment3 construction in progress, including advance payments total investment property, property, plant and equipment assets under operating leases total tangible assets Balance-sheet amount 2009 Depreciation and amortization4 Sales/scrapping acquired and divested operations translation...

  • Page 108
    ...834 1,660 423 2,917 2011 2010 Finance leases: contingent rents operating leases: contingent rents rental payments Sublease payments total (12) (20) (1,035) 5 (1,062) (8) (20) (923) 6 (945) carrying amount of assets subject to financial leases: 2011 2010 Volvo as the lessor at December...

  • Page 109
    ... recognized in Volvo's customer financing operations. Current customer-financing receivables Allocation of current customerfinancing receivables installment credits Financial leasing Dealer financing other receivables total ! soqrce of qncertaInty In the estImates 2011 2010 Credit loss...

  • Page 110
    ... Read more about Volvo's overriding description of all Group credit risks in note 4 , Financial-risk management. Read more about Volvo Financial Services' trend during the year on page 66. Geographic market, percentage of customer-financing portfolio (%). Europe, 45.9% North America, 26.9% Asia, 12...

  • Page 111
    ... are made based on current conditions. costs for research and development, selling, administration and financial expenses are not included. net realizable value is calculated as the selling price less costs attributable to the sale. Finished products Production materials, etc. total 28,985 15,614...

  • Page 112
    ... by the annual General meeting 2011 was SEK 2.50 (0.00) per share or total of SEK 5,068.6 million (0.0). During 2011 aB Volvo transferred, free of consideration, 929 treasury B-shares, with a total quota value of 1,114.80 SEK, to participants of Volvo's long-term, share-based incentive program for...

  • Page 113
    ... actuarial calculations are made separately for the respective countries of Volvo's operations which result in obligations for postemployment benefits. the assumptions include discount rates, health care cost trends rates, inflation, salary growth, long-term return on plan assets, retirement rates...

  • Page 114
    ...with other Swedish companies. Pension cost for 2010 has been adjusted downwards with an amount of 1,166 compared to the 2010 annual report. Costs for the period, post-employment benefits other than pensions current year service costs interest costs Expected return on plan assets actuarial gains and...

  • Page 115
    ... in defined-benefit plans Sweden Pensions United States Pensions France Pensions Great Britain Pensions US other benefits other plans total obligations at January 1, 2010 acquisitions, divestments and other changes current year service costs interest costs Past service costs - Unvested...

  • Page 116
    Financial inFormation 2011 notES to Financial StatEmEntS Fair value of plan assets in funded plans Sweden Pensions United States Pensions France Pensions Great Britain Pensions US other benefits other plans total Plan assets at January 1, 2010 acquisitions, divestments and other changes ...

  • Page 117
    ...collective family pension, which Volvo finances through an insurance policy with the alecta insurance company. according to an interpretation from the Swedish Financial reporting Board, this is a multi-employer defined-benefit plan. For fiscal year 2011, Volvo did not have access to information from...

  • Page 118
    ..., are generally recognized in the balance sheet as assets under operating leases. Depreciation expenses for these products are charged on a straight-line basis over the term of the commitment in amounts required to reduce the value of the product to its estimated net realizable value at the end of...

  • Page 119
    ... tables below show the Group's non-current liabilities in which the largest loans are listed by currency. the main part are issued by Volvo treasury aB. information on loan terms is from December 31, 2011. Volvo hedges foreign-exchange and interest-rate risks using derivative instruments. For more...

  • Page 120
    ... of changes to assets pledged. note 23 aSSEtS PlEDGED 2011 2010 Property, plant and equipment - mortgages assets under operating leases receivables cash, loans and marketable securities other assets pledged total 128 265 1,333 78 28 1,832 168 107 2,964 100 - 3,339 at year-end, liabilities...

  • Page 121
    ... rElatED PartiES the Volvo Group engages in transactions with some of its associated companies. the transactions consist mainly of sales of vehicles to dealers. commercial terms and market prices apply for the supply of goods and services to/from associated companies. 2011 2010 Sales to associated...

  • Page 122
    ... General meeting 2011, as proposed by the Board of aB Volvo, it was decided to implement a long-term share-based incentive program consisting of three annual programs covering each of the financial years 2011, 2012 and 2013. in addition to fixed and variable salary, normally other customary benefits...

  • Page 123
    ... fees on salaries and benefits, special pension tax and additional costs for other benefits. the remuneration model of the Volvo Group is to a main part designed to follow changes in the profitability of the Group. Long-term incentive program the annual General meeting held in 2011 approved a long...

  • Page 124
    ... Europe Eastern Europe north america South america asia other countries Group total 2011 number of employees 2010 of which women, % to participants, and an additional 203,520 shares will be alloted to participants when the employees leave the company. the total cost for the 2011 incentive program...

  • Page 125
    ... units Unrealized exchange rate gains/losses on accounts receivable and payable Provision for global profit sharing program Fair value commercial derivatives r&D tax credit Write-down of assets held for sale reversal of write-down of assets held for sale other non-cash items 2011 2010 Important...

  • Page 126
    ... as part of net financial items in accordance with the effective interest method. Dividends received attributable to these assets are recognized in profit and loss as income from other investments. Volvo recognizes shares and participations in listed companies at market value on the balance-sheet...

  • Page 127
    ... in the Group's operating income. During 2011, Volvo has applied hedge accounting for financial instruments used to hedge interest and currency risks on loans only for cases when hedge accounting requirements are fulfilled. the changes in the fair value of the hedge instruments outstanding and the...

  • Page 128
    ... Shares and participations for which a market value cannot be calculated Financial liabilities valued at amortized cost4 effect on operating income Reported in net financial items5 Financial assets and liabilities at fair value through profit and loss marketable securities interest and currency rate...

  • Page 129
    ...instruments outstanding and the changes in the carrying amount of the loan are reported in profit and loss. Hedging of net investments in foreign operations a total of negative 205 (neg: 202) in shareholders' equity relating to hedging of net investments in foreign operations was recognized in 2010...

  • Page 130
    ... in associated companies accruing to aB Volvo totaled 413 (322). Shares and participations in non-Group companies include listed shares in Deutz aG with a carrying value of 299, corresponding to the quoted market price at year-end. in 2011 revaluation of the ownership has decreased the value by 159...

  • Page 131
    Balance sheet SEK m December 31, 2011 December 31, 2010 Assets Non-current assets intangible assets tangible assets Financial assets Shares and participations in Group companies receivables from Group companies other shares and participations Deferred tax assets Total non-current assets Current ...

  • Page 132
    ...flow from operating activities Investing activities investments in fixed assets Shares and participations in Group companies, net Shares and participations in non-Group companies, net Cash-flow after net investments Financing activities increase in loans Dividend to aB Volvo's shareholders Change in...

  • Page 133
    ... income available-for-sale investments: Gain/(loss) at valuation to fair value other comprehensive income Total income for the period Transactions wit) s)are)olders cash dividend Dividend to aB Volvo's shareholders transactions with shareholders Balance at December 31, 2011 2,554 - 7,337 - 190...

  • Page 134
    ... term share-based incentive program adopted at the annual General meeting of 2011 is covered by iFrS 2 Share-based payments. the Volvo Group has adopted iaS 19 Employee Benefits in its financial reporting. the Parent company is still applying the principles of Far's recommendation redr4 "accounting...

  • Page 135
    ..., costs for credit rating and costs of having Volvo shares registered. note 6 incomE From inVEStmEntS in aSSociatED comPaniES note 10 allocationS income from associated companies that are reported in the Group accounts in accordance with the equity method amounted to 106 (neg 94). Dividend of...

  • Page 136
    ... anD tanGiBlE aSSEtS Acquisition cost rights other intangible assets Total intangible assets Buildings land and land improvements machinery and equipment construction in progress Total tangible assets Value in balance sheet 2010 investments Sales/scrapping Value in balance sheet 2011 52 138...

  • Page 137
    ... 31, previous year acquisitions/new issue of shares Divestments Shareholder contributions Write-downs/participations in partnerships revaluation of shares in listed companies Balance sheet, December 31 Shares and participations in Group companies During 2011 aB Volvo acquired total shares in VFS...

  • Page 138
    ... costs for 2010 has been adjusted downwards with 23. the accumulated benefit obligation of all aB Volvo's pension obligations at year-end 2011 amounted to 646, which has been secured in part through provisions in the balance sheet and through transfer of funds to pension foundations. net asset value...

  • Page 139
    aB VolVo'S HolDinG oF SHarES AB Volvo's holding of shares and participations in non-Group companies1 Deutz aG, Germany Blue chip Jet ii HB, Sweden other investments Total carrying value, non-Group companies Dec 31, 2011 registration number Percentage holding2 carrying value, SEK m Dec 31, 2010 ...

  • Page 140
    ... AB Volvo Penta, Sweden Volvo Aero AB, Sweden Volvo aero norge aS, norway VNA Holding Inc., USA Volvo Group north america inc., USa arrow truck Sales, inc., USa mack trucks inc., USa Volvo construction Equipment north america inc., USa Volvo Penta of the americas inc., USa Volvo commercial Finance...

  • Page 141
    ... Bus co, china 2 Shandong lingong construction machinery, china Volvo automotive Finance (china) ltd, china Volvo Group UK ltd, Great Britain3 Volvo Holding mexico, mexico Volvo technology transfer aB, Sweden Volvo Powertrain aB, Sweden Volvo information technology aB, Sweden Volvo Parts aB, Sweden...

  • Page 142
    Financial inFormation 2011 ProPoSED rEmUnEration PolicY the proposal by the Board of Directors of AB Volvo to be adopted by the Annual General Meeting April 4, 2012. this Policy concerns the remuneration and other terms of employment for the Volvo Group Executive team. the members of the Volvo ...

  • Page 143
    ... to receive dividends due to transfer of treasury shares to participants in the company's long-term, share-based incentive program. the Board of Directors and the President certify that the annual financial report has been prepared in accordance with generally accepted accounting principles and...

  • Page 144
    Financial inFormation 2011 aUDit rEPort For aB VolVo to the annual meeting of the shareholders of aB Volvo, corporate identity number 556012-5790 Report on the annual accounts and consolidated accounts We have audited the annual accounts and consolidated accounts of aB Volvo for the year 2011. the ...

  • Page 145
    ... income statements Industrial operations SEK m 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 Net sales cost of sales Gross income research and development expenses Selling expenses administrative expenses other operating income and expenses income from Volvo Financial Services income...

  • Page 146
    Financial inFormation 2011 ElEVEn-YEar SUmmarY Consolidated balance sheets SEK m 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 intangible assets Property, plant and equipment assets under operating leases Shares and participations inventories customer-financing receivables interest-...

  • Page 147
    Consolidated balance sheets, Industrial operations SEK m 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 intangible assets Property, plant and equipment assets under operating leases Shares and participations inventories customer-financing receivables interest-bearing receivables other ...

  • Page 148
    ... and divested subsidiaries and other business units, net (1.6) interest-bearing receivables including marketable securities 2.6 Cash-flow after net investments 3.9 change in loans, net repurchase of own shares Dividend to aB Volvo's shareholders cash payment to minority other Change in cash and cash...

  • Page 149
    ...from Sweden SEK m 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 Volvo Group, total 91,065 72,688 41,829 96,571 88,606 80,517 71,133 62,653 49,300 52,730 50,394 Key ratios 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 Gross margin, %1 23.7 23.3 research and development...

  • Page 150
    ... by aB Volvo for an amount of SEK 5.00 per share). 4 Share price at year-end divided by basic earnings per share. 5 market value at year-end minus net financial position and minority interests divided by operating income excluding restructuring costs and revaluation of shares. 6 cash dividend...

  • Page 151
    ...615 5,674 3,036 Europe north america 3,304 South america 8 asia 108 other markets 53 total 6,509 other and eliminations 242 net sales Industrial operations 303,589 north america South america asia other markets total Eliminations Volvo Group total Customer Finance Europe 4,663 2,326...

  • Page 152
    ...1.9 (0.7) 8.4 0.1 1.6 (1.8) 2.5 (5.5) 8.9 5.5 (0.4) number of employees at year-end number1, 2 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 trucks Buses construction Equipment Volvo Penta Volvo aero Financial Services other Volvo Group, total 62,315 8,529 18,422 2,549 3,179 1,323 1,845...

  • Page 153
    employees number1 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 25,420 27,130 12,440 2,020 2,590 1,560 71,160 2001 24,350 27,800 12,670 2,090 2,550 1,460 70,920 Sweden Europe, excluding Sweden north america South america asia other markets Volvo Group total 24,663 30,458 15,427 5,234 19,924 2,...

  • Page 154
    ... of north american trucks and mack trucks, assumed a newly established position as Executive Vice President Group trucks Sales & marketing americas, remaining a member of the Group Executive team. Peter Karlsten, former President of Volvo Powertrain and Senior Vice President technology of the Volvo...

  • Page 155
    ... & Marketing eMeA Born 1957. m. Sc. Electrical Engineering. President of Volvo Powertrain 2007-2011. Senior Vice President technology for the Volvo Group 2007-2011. Head of Volvo's north american truck operations 2003-2007. Head of Volvo trucks in Brazil 2001-2003. member of the Group Executive team...

  • Page 156
    .... member of the Volvo Board since 2009. Holdings in Volvo, own and related parties: 1,000 Series B shares. Principal work experience: Began his career at citibank. Has held various positions within renault since 1982 - director of financial services at renault V.i.; director of financial operations...

  • Page 157
    ... Volvo Board since 2008. Holdings in Volvo, own and related parties: 700 Series B shares. Principal work experience: Several leading positions within the american engine manufacturer cummins. chairman of microsoft india and responsible for microsoft's marketing, operational and business development...

  • Page 158
    ... committee, appointed by the annual General meeting of aB Volvo, proposes Board members, Board chairman and external auditors. the Board is responsible for the Group's long-term development and strategy, for regularly controlling and evaluating the company's operations and for the other duties...

  • Page 159
    ...in Volvo. moreover, the committee shall report on how it conducted its work. in accordance with existing instructions, the annual General meeting shall select five members to serve on the Election committee, of whom four shall represent the largest shareholders in the company, in terms of the number...

  • Page 160
    ... in 2011, meeting management and customers. the Board also reviewed the financial positions of aB Volvo and the Volvo Group on a regular basis and acted in order to ensure that there are efficient systems with regard to follow-up and control of the business and financial position of the Volvo Group...

  • Page 161
    ...the Board regarding the terms and conditions of employment and remuneration for the President of aB Volvo, principles for remuneration, including pensions and severance payments, for other members of the Group Executive team, and principles for variable salary systems, share-based incentive programs...

  • Page 162
    ... timely disclose to the financial market all share price sensitive information. the committee comprises the heads of the departments corporate Finance, internal audit, investor relations, corporate legal, Business control and Financial reporting. chairman of the Disclosure committee is the Executive...

  • Page 163
    ...General IT controls: Processes for maintenance, development and access management of financial applications are evaluated by testing of routines and controls. The results of the evaluation activities are reported to the Group management and the Audit Committee. Göteborg, February 23, 2012 AB Volvo...

  • Page 164
    ... margin Operating income divided by net sales. Penetration rate Share of unit sales financed by Volvo Financial Services in relation to total number units sold by the Volvo Group in markets where financial services are offered. Return on shareholders' equity Income for the period divided by average...

  • Page 165
    ... 2013 The reports are available on www.volvogroup.com on date of publication and are also sent electronically to shareholders who have advised Volvo that they wish to receive financial information. Historical and current time series reflecting the Volvo Group's market information and share data are...

  • Page 166
    DispoVer The worlD of The VolVo Group AB Volvo, Investor Relations