Volvo 2012 Annual Report Download - page 70

BOARD OF DIRECTORS’ REPORT 2012 GROUP PERFORMANCE
VOLVO FINANCIAL
SERVICES
Profitable growth
The demand for VFS products in 2012 was
good and the global VFS credit portfolio reached
historically high levels. In the Americas, Brazil
rebounded well after a short downturn during
Q3 and the US and Canadian credit portfolios
continued to grow and perform well throughout
the year. In EMEA (Europe, Middle East and
Africa), the market remained soft but the VFS
portfolio grew nonetheless and the perfor-
mance of the credit portfolio improved steadily
throughout the year. In APAC (Asia Pacific), the
slowdown in China experienced towards the latter
half of the year negatively impacted VFS growth
rates in that country. However, portfolio perfor-
mance remained good in China during the year
even in light of the weakening economic condi-
tions. In 2012, VFS continued to serve the markets
of South Africa, India and Indonesia with third
party finance alliances.
Customer finance operations
Total new financing volume in 2012 amounted to
SEK 46.6 billion (44.8). Adjusted for changes in
exchange rates, new business volume increased
by 5.3% compared to 2011 as a result of increased
penetration levels. In total, 50,994 new Volvo
Group vehicles and machines (49,757) were
financed during the year. In the markets where
financing is offered, the average penetration
rate was 27% (25).
As of December 31, 2012, the net credit port-
folio amounted to SEK 99,690 M (94,275). The
funding of the credit portfolio is matched in terms
of maturity, interest rates and currencies in
accordance with Volvo Group policy. For further
information see note 15 to the Consolidated
financial statements.
The operating income for the year amounted to
SEK 1,492 M compared to SEK 969 M in the pre-
vious year. Return on shareholders’ equity was
12.5% (7.3). The equity ratio at the end of the year
was 8.1% (9.1). The improvement in profitability is
driven mainly by higher earning assets and good
margins. During the year, credit provision
expenses amounted to SEK 640 M (682) while
write-offs of SEK 577 M (804) were recorded.
The write-off ratio for 2012 was 0.58% (0.93). At
the end of December 31, 2012, credit reserves
were 1.23% (1.33) of the credit portfolio.
Conducts operations in customer and
dealer financing.
Number of employees
1,400
Position on world market
Volvo Financial Services operates
exclusively to provide finance and
leasings solutions to customers and
distributors of Volvo Group products,
thus enhancing the sales process and
the competitiveness of the Group
product offering.
y developing long-term relationships
with customers and dealers, VFS
seeks to establish a number one
market position for the financing of
Volvo Group products wherever VFS operates.
When customers choose a vehicle or equipment
supplier, the availability of financial solutions is an
important factor. Customers desire total transport
solutions that enable them to work more effi-
ciently while maximizing profitability and reliability.
VFS creates value for Volvo Group customers
by providing solutions including customer financ-
ing and leasing, dealer financing and other fee-
based products such as insurance. Financial
services are delivered to customers through VFS
in conjunction with dealers of Volvo Group prod-
ucts, allowing customers to enjoy the benefits of
a convenient, one stop-shop experience.
Good profitability levels
Although global economies and financial mar-
kets continued to be characterized by uncertainty
and slow movement during 2012, VFS continued
to achieve good profitability levels and growth
while at the same time improving credit portfolio
performance. Customer repayment patterns
improved, which resulted in continued reductions
in customer delinquencies, defaults and repos-
sessions. During the year, VFS also continued to
reduce inventories of repossessed units through
good, coordinated remarketing activities with the
other business areas.
In markets where VFS financing is offered,
market penetration and financing volumes were
strong in 2012. Through a disciplined approach to
balancing new business development with risk
and cost control, VFS managed its portfolio in a
good way while growing its operations and sup-
porting Volvo Group sales with historically high
levels of finance market penetration of 27%.
Market development
During 2012, VFS provided financial services in
40 markets around the globe. In support of
these offerings, VFS continued to strengthen its
services through operational consolidation, pro-
cess standardization and systems harmoniza-
tion. These activities have enabled VFS to capi-
talize on profitable growth opportunities with
scalable business platforms that boost efficien-
cies while improving service levels.
Volvo Financial Services
(VFS) supports the Volvo
Group product range with
expert financial services
by delivering integrated,
competitive financial solu-
tions that meet customer
and dealer needs.
B
3% (3)
Share of Group
net sales
66