Volvo 2011 Annual Report Download - page 11

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In September 2011 the Board of Directors of AB Volvo decided to implement new financial
targets for the Volvo Group starting in 2012. The new targets have been set in order to enable
the growth and profitability of the various operations to be measured and benchmarked annually
against competitors.
Transparent comparison with competitors
Volvo’s financial targets have included a focus on growth
since the end of the 1990s and the Board of Directors
expects growth to remain important in the future, but is
now adding a continuous benchmarking of the growth
and profitability of the various operations against a
number of selected competitors.
To facilitate comparisons, the truck operations will be
measured jointly with the bus operations and the con-
struction equipment operations will be measured jointly
with Volvo Penta. In 2012, the comparisons will be made
in accordance with the table below:
Trucks and buses Volvo CE and Volvo Penta
Daimler Brunswick
Iveco CAT
MAN CNH
Navistar Cummins
Paccar Deere
Scania Hitachi
Sinotruk Komatsu
Terex
The targets are followed up annually
• The annual organic sales growth for the truck, bus and
construction equipment operations, as well as Volvo
Penta, shall be equal to or exceed a weighted-average
for comparable competitors.
• 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 (ROE) and an equity ratio
exceeding 8% stand firm.
• Volvo Aero has an ROE target of 15–25%. When calcu-
lating the ROE, Volvo Aero will be assigned the
same equity ratio as that for the Group’s Industrial
Operations.
• The capital structure target is set to a net debt, including
provisions for post-employment benefits, for the Indus-
trial Operations of a maximum of 40% of shareholders’
equity under normal conditions.
NEW TARGETS FROM 2012
“Following the Group’s successful
geographic and volume expansion,
we have the prerequisites in place
to compete successfully in our
various product segments and it is
with this in mind that the Board
has now decided to introduce new
financial targets.”
7