Volvo 2012 Annual Report Download - page 6

A GLOBAL GROUP 2012
When I look back at 2012, I see a year when the Volvo Group experienced major changes. In rapid
sequence, we implemented a major organizational change, we started work toward new strategic
objectives, we sold Volvo Aero and we launched a very important product with the new Volvo FH
truck. At the same time, it was a year when we faced some tough challenges.
CEO COMMENT
A year of major changes
Financially strong
The year started out strong, with increasing
sales and improved profitability during the first
half, but during the second half we were
impacted by the decline in the global economy.
During the autumn, demand fell in nearly all of
our markets. From a full-year perspective, the
truck markets in North America and Japan grew,
Europe was slightly lower than in 2011 and Bra-
zil saw a big decline.
For the Volvo Group, net sales in 2012
dropped to SEK 303.6 billion, compared with
SEK 310.4 billion in 2011. Operating income
amounted to SEK 17.6 billion (26.9) and the
operating margin was 5.8% (8.7). A part of the
explanation for the lower earnings is the meas-
ures we implemented in the Group to cope with
the declining demand. We cut production but
were not able to lower our costs at the speed of
the drop in demand. At the same time, we
worked hard to reduce inventories. This
impacted Group earnings in the short-term, but
enabled us to get inventories in balance by year-
end. We also took restructuring charges for a
number of important activities aimed at increas-
ing long-term efficiency and profitability. None-
theless, sales above SEK 300 billion and an
operating margin close to 6% in relatively weak
market conditions are proof of our products and
services being appreciated by customers and
also of the dedicated work of the Group’s
employees.
From a financial viewpoint we remain strong,
with a net debt to equity ratio of 29% in the
Industrial Operations, and for 2012 the Board of
Directors proposes an ordinary dividend of SEK
3.00 per share. This is on the same level as last
year and it would mean that the Volvo Group
would distribute SEK 6.1 billion to its owners.
Intensive phase of product renewal
Overall, we maintained our market positions in
most truck markets around the world, and Volvo
CE strengthened its position as number one in
China – the world’s largest market for construc-
tion equipment. Volvo Buses made inroads into
new customer segments thanks to hybrid buses
at the forefront of the bus industry and Volvo
Penta has a modern and competitive product
range. But we do not stop there. To secure com-
petitive future products for all our businesses,
we are in a very intense phase of renewing and
broadening the product portfolios.
In addition to the new Volvo FH, we are devel-
oping a completely new range for Renault
Trucks which will be launched in 2013, a new
series of trucks for the lower price segments in
emerging markets and a new medium-duty
engine range. We are also in the latter stages of
development of engines for the Euro 6 emission
legislation for trucks and buses and Tier 4f for
construction equipment and Volvo Penta. All of
these products will strengthen our position as a
front-runner in our industries and contribute to
taking us closer to our vision to be the world
leader in sustainable transport solutions.
Full focus on strategy
2012 was the year when we laid a new foundation
for the Group, and 2013 is the year when we are
to start executing on our strategic objectives for
2015, which are clearly aimed at improving the
Group’s overall profitability. We have full focus on
our strategy, and road maps have been developed
for each of the 20 strategic objectives. The road
maps have been further detailed and broken
down into over 400 main activities that will be
executed in order to improve profitability. Our
strategy is described in detail in this report.
The high activity level has been evident at the
start of the 2013. The newly signed agreement
with Dongfeng, which is pending approval by
authorities, is a key event in the history of the Volvo
Group. It will take us into the important Chinese
truck market and when the transaction has been
finalized the Volvo Group will become the world’s
largest manufacturer of heavy-duty trucks.
I would also like to extend my gratitude to all
employees in the Group for all their efforts dur-
ing 2012. In 2013 we continue with full speed
ahead. We have an intense and exciting period
ahead of us, and I am convinced that the Volvo
Group will stand even stronger in the market
when the economy turns upwards again.
Olof Persson
President and CEO
Foundation in place
 Revised Group vision
 New financial targets
 New incentive program
aligned with financial targets
 New strategic objectives
 New organization
 New management teams
 New process-oriented workflow
 New corporate governance
 New brand positioning
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