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ANNUAL REPORT
2014
EFFICIENCY
THE VOLVO GROUP
ANNUAL REPORT 2014
THE VOLVO 7900 ELECTRIC HYBRID REDUCES FUEL
CONSUMPTION AND CARBON DIOXIDE EMISSIONS BY UP
TO 75% COMPARED WITH A CONVENTIONAL DIESEL BUS.
TOTAL ENERGY CONSUMPTION IS REDUCED BY 60%.

Table of contents

  • Page 1
    THE VOLVO GROUP ANNUAL REPORT 2014 ANNUAL REPORT 2014 EFFICIENCY THE VOLVO 7900 ELECTRIC HYBRID REDUCES FUEL CONSUMPTION AND CARBON DIOXIDE EMISSIONS BY UP TO 75% COMPARED WITH A CONVENTIONAL DIESEL BUS. TOTAL ENERGY CONSUMPTION IS REDUCED BY 60% .

  • Page 2
    ... position 16 Strategic framework 18 Strategy for the period of 2013-2015 20 Increased scope of the strategic program 24 Financial targets 25 BUSINESS MODEL Creating value in every stage of the value chain Brands Efficient products and services Renault Trucks T-range Product development Volvo 7900...

  • Page 3
    ... America. In the year 2000, markets outside of Western Europe and North America accounted for 16% of Group sales. In 2014 that share had grown to 42%. Share of net sales by market 2014 North America 27% 38% 18% Asia Europe South America 10% Rest of the world 7% STRONG BRANDS By developing...

  • Page 4
    ... Global market presence. GROUP MARKET SHARES - Heavy-duty trucks 2014 Europe North America Brazil Japan 24.4% 20.1% 21.3% 18.8% India* Australia South Africa 4.3% 24.6% 26.8% Environmental performance of Volvo production plants, Industrial operations Absolute values related to net sales...

  • Page 5
    ...reduce the cost base. Increased cost-savings scope in addition to the Strategic Program. Strengthened financial position - at year end net debt in the Industrial Operations amounted to 14% of shareholders' equity. Proposed dividend of SEK 3.00 per share (3.00). Net sales, SEK bn Operating income...

  • Page 6
    ... the sales and service organization for trucks in Europe and a restructuring of global spare-parts distribution. As planned, the program generated savings at a clearly increasing rate during the year and the combined savings in cash spend in research and development and costs for sales and...

  • Page 7
    ...equipment in the market. This has generated pressure on liquidity at dealers and customers, which impacts their ability to make the installment payments on leasing contracts. Accordingly, we made a provision of SEK 660 M for expected credit losses in China. During the year, we adapted our production...

  • Page 8
    ...income based on higher margins for new products as well as services and aftermarket products in both Europe and North America. This was partly off-set by a negative market mix, with lower volumes in Brazil and China. Research and development expenses were higher compared to 2013 as a consequence of...

  • Page 9
    A GLOBAL GROUP 2014 IMPROVED UNDERLYING PROFITABILITY Net sales development SEK bn +13.2 -2.8 -1.4 +0.5 282.9 +1.5 272.6 -0.7 20 13 es W ter n ro Eu pe Ea s ter u nE rop e No rth e Am ric a So uth e Am ric a As ia Ot h er ts rke a m 20 14 Operating income development SEK bn ...

  • Page 10
    ... The world evolves at a rapid pace, making it more important than ever for the Volvo Group to have an informed understanding of our global operating environment. As part of our business and sustainability strategies, we continually analyze megatrends and regional variations to assess their impact on...

  • Page 11
    ... NEEDS TODAY AND TOMORROW Long-term challenges and some of our solutions From a Volvo Group perspective, there are a number of trends and challenges driving our work to develop and deliver sustainable transport and infrastructure solutions today and tomorrow. A few key challenges and some of our...

  • Page 12
    ... When the Volvo Group developed the new heavy duty truck ranges for Volvo and Renault Trucks launched in 2013-14, we considered every aspect of the fuel efficiency and emissions equation, including engines, tractor weight, fuel type and driver behavior, and we continue to do so with new technology...

  • Page 13
    ... our commitment to more sustainable transport solutions, the Volvo Group uses more and more lightweight materials in product design and continuously works to reduce or eliminate the use of potentially harmful substances in our products. This means not only complying with legal requirements, but also...

  • Page 14
    ..., and gas detectors. The Volvo Group is in the forefront of developing new technology to help reach our ultimate goal of zero accidents with Volvo Group products. Volvo Group is an industrial partner in the world's most advanced active safety testing grounds, AstaZero, which was inaugurated in 2014...

  • Page 15
    ... superior support and service, the Mack Masters competition was launched in late 2014 to challenge technicians on abilities relating to products, parts, and diagnostics. Volvo CE continues to develop its "eco-operator" event in China, Operator Idol. Over the years the contest has generated thousands...

  • Page 16
    ..., more technically complex trucks. This has often generated an advance Economic growth in the U.S., Europe and Brazil Annual GDP-growth, % Economic growth in Asia Annual GDP-growth, % The Volvo business moves in close tandem with macroeconomic development Euro area GDP and heavy-duty trucks...

  • Page 17
    ...) Financial performance Workplace health & safety Innovation Fuels (availability/quality) Human rights Environmental impacts (operations) Supply chain Risk management (ERM) Transport system efficiency Diversity & inclusion Product use & end of life Societal engagement Leadership & knowledge sharing...

  • Page 18
    2 STRATEGY The Volvo Group's strategy contributes to realizing the Group's vision and wanted position by developing and driving strategies for profitable growth, efficiency and transformation towards sustainable transport solutions. 14

  • Page 19
       2012 2013 2014 2015 REORGANIZATION & STRATEGY EXTENSIVE PRODUCT RENEWAL EXECUTE EFFICIENCY PROGRAM & DRIVE ORGANIC GROWTH DELIVER PROFITABILITY IMPROVEMENT 15

  • Page 20
    ... STRATEGY Vision, Core values, Code of conduct and Wanted position The Volvo Group is part of the global society as well as many local societies. This provides us with the opportunity to inï¬,uence and contribute to social and business development. We strive to act responsibly, take into account...

  • Page 21
    ...GLOBAL GROUP 2014 STRATEGY Our Vision The Volvo Group's vision is to become the world leader in sustainable transport solutions by: • creating value for customers in selected segments • pioneering products and services for the transport and infrastructure industries • driving quality, safety...

  • Page 22
    ... include product plan, industrial plan, sales and marketing plans and service offering plan. The plans are aligned and reviewed regularly. Some long term-plans are Group common and some are specific to Group Trucks or an individual business area. The plans may impact activity plans for strategic...

  • Page 23
    ... noise Safe and secure transport systems for people and goods Key focus areas & Strategic objectives Gov. Sales Group Trucks Volvo CE Volvo Buses Volvo Penta VFS Economic dimension Environmental dimension Social dimension Group Trucks/BA long-term plans Group long-term plans Corporate core...

  • Page 24
    ... 15 years of an active acquisition strategy and streamlining to commercial vehicles, the Volvo Group has entered a new phase, with a focus on improving efficiency and profitability.    2012 2013 2014 2015 REORGANIZATION & STRATEGY EXTENSIVE PRODUCT RENEWAL EXECUTE EFFICIENCY PROGRAM...

  • Page 25
    ... the overall long term strategy remains valid, with corrective measures implemented where necessary to keep the plan on course. Volvo CE's focus areas Profitably grow SDLG business globally. Develop Volvo-branded products for emerging markets. Significantly increase Customer Solutions revenues...

  • Page 26
    A GLOBAL GROUP 2014 STRATEGY STRATEGY FOR THE PERIOD OF 2013-2015 Volvo Buses Volvo Penta Two years into the strategic period 2013-2015, Business Area Buses continues on the identified areas for growth and internal efficiency, according to head of Buses, Håkan Agnevall. The global bus market...

  • Page 27
    ...full potential in support of Volvo Group sales. Customer value and ease of doing business are at the heart of such initiatives and will continue to shape VFS' activities throughout the strategic period. Volvo Financial Services' focus areas • Strengthen customer and dealer partnerships throughout...

  • Page 28
    ... Group Trucks Sales in order to increase efficiency and reduce costs • Implement further cost-reduction activities in Volvo CE • Review what is core and non-core in the Group's IT operations. Full-year savings of SEK 10 billion In the ongoing activities in the Strategic Program 2013-2015...

  • Page 29
    ... the competitors. The operating margin of 1.4% for the Volvo Group's truck and bus operations was ranked number six in comparison with the competitors. CONSTRUCTION EQUIPMENT AND VOLVO PENTA Target The annual organic sales growth for the construction equipment operations and Volvo Penta, shall be...

  • Page 30
    3 BUSINESS MODEL The Volvo Group's business model is focused on utilizing its strong brands, technological expertise, efficient products and world-class services and distribution to create value for its customers. 26

  • Page 31
    The Volvo Group's strong brand portfolio is an important asset. 27

  • Page 32
    ..., changes in society and new technology. • Safety and environmental issues are integrated in product development. • More than 90% of the environmental impact from a truck occurs during use. Consequently, product development focuses on sustainable transport solutions. • The Volvo Group has...

  • Page 33
    ... North America and South America has been significantly increased in recent years. • The dealer and service networks in Central and Eastern Europe have been optimized, with increased service availability particularly for Renault Trucks. • Trucks manufactured by the Volvo Group transport goods...

  • Page 34
    ... reach their strategic objectives. New Brands - new potential Growth markets are an important part of the Volvo Group's strategy. These markets are drivers of long-term global growth and they offer a great deal of potential for quality trucks which balance operational cost with purchase price. We de...

  • Page 35
    ...the brand promise "Going the Extra Mile". SDLG is a leading brand in the Chinese construction machinery industry, especially for wheel loaders. The SDLG brand is sold primarily in China and other emerging markets to customers focused on reliable and competitive equipment. Nova Bus is a leading North...

  • Page 36
    A GLOBAL GROUP 2014 BUSINESS MODEL EFFICIENT PRODUCTS AND SERVICES Contribute to customer profitability All of the Volvo Group's products have been developed to contribute to efficient transport and infrastructure solutions in all parts of society. Trucks | All brands in oup's the Volvo Group's...

  • Page 37
    ...GLOBAL GROUP 2014 BUSINESS MODEL EFFICIENT PRODUCTS AND SERVICES Construction Equipment | Volvo Construction Equipment develops, manufactures and markets equipment for construction and related industries under the brands Volvo, SDLG and Terex Trucks. Its products are leaders in many world markets...

  • Page 38
    ... GLOBAL GROUP 2014 BUSINESS MODEL RENUALT TRUCKS T-RANGE RENAULT TRUCKS voted international TRUCK OF THE YEAR T On 23 September 2014, the Renault Trucks T was voted International Truck of the Year 2015 by the International Truck of the Year jury made up of 25 journalists from the international...

  • Page 39
    A GLOBAL GROUP 2014 BUSINESS MODEL RENUALT TRUCKS T-RANGE Technological innovations On-road performance Comfort Total cost of ownership Safety Environmental footprint Fuel savings 35

  • Page 40
    A GLOBAL GROUP 2014 BUSINESS MODEL PRODUCT DEVELOPMENT Development focusing on more efficient products The Volvo Group's future success depends on its ability to continue to deliver innovative solutions and develop technologies that can be converted into financially viable products and services....

  • Page 41
    ... selected European markets during 2011 to 2013. There are no hybrid versions for Euro 6 at the moment, but the Volvo Group believes in truck hybrid technology long-term and will continue to invest in research and development for more commercially viable applications. In June 2014, tests with a Volvo...

  • Page 42
    ... product it replaces. The Group uses Life Cycle Assessments (LCA) to map a product's environmental impact in order to make well-informed decisions in the development process. Findings from analyses indicate over 90% of the environmental impact results from the use of the products. The Group's main...

  • Page 43
    A GLOBAL GROUP 2014 BUSINESS MODEL PRODUCT DEVELOPMENT Off Peak, aims to test nightly deliveries with reduced noise and emissions, at the same time as increasing efficiency in the transport system. The tests and evaluation will continue until 2016. A ï¬,eet of ten Renault Trucks Maxity Electric ...

  • Page 44
    ... Sustainable transport solutions solve customer problems, optimize customer operations and at the same time, take the environment into consideration. The Volvo Group develops enabling technologies, customer and dealer services, as well as integrated solutions to increase revenue and reduce costs...

  • Page 45
    A GLOBAL GROUP 2014 BUSINESS MODEL PRODUCT DEVELOPMENT climate savers partnership with WWF Renewed cooperation The Volvo Group is renewing its partnership with a new ambitious commitment to the Climate Savers program. In addition to reducing emissions from products and production, the Volvo Group...

  • Page 46
    ...the International IAA Commercial Vehicles show in September 2014. Silent, cleaner and with significantly lower fuel consumption, it represents a new generation of public transportation solutions. Volvo has already signed contracts with several European cities for the first deliveries. V A number...

  • Page 47
    A GLOBAL GROUP 2014 BUSINESS MODEL ELECTRIC HYBRID FACTS ABOUT VOLVO'S ELECTRIC HYBRID BUS • The bus is equipped with an electric motor that is powered by lithium batteries. It also has a small diesel engine. • The bus is charged quickly at charging stations via an overhead power connection....

  • Page 48
    ... a global industrial structure with manufacturing as well as sales and distribution channels on all continents. 6,353 7% Share of employees Major production facilities North America South America Eicher* Group Trucks Operations Mack Renault Trucks UD Trucks Volvo Engines and transmissions...

  • Page 49
    A GLOBAL GROUP 2014 BUSINESS MODEL INDUSTRIAL STRUCTURE 50,833 55% 17,793 19% 2,626 3% Europe Asia Other markets Pithampur* (IN) Brisbane (AU) Blainville, Bourg-en-Bresse (FR), Kaluga (RU) Ageo (JP), Hangzhou* (CN), Bangkok (TH) Göteborg, Umeå (SE), Gent (BE), Kaluga (RU) Köping, ...

  • Page 50
    A GLOBAL GROUP 2014 BUSINESS MODEL EFFICIENCY HIGHER EFFICIENCY IN TRUCK MANUFACTURING Several key measures are being implemented aimed at reducing manufacturing costs and strengthening the Group's competitiveness. The objective of the strategy is to balance the capacity between continents, ...

  • Page 51
    A GLOBAL GROUP 2014 BUSINESS MODEL EFFICIENCY More efficient logistics and spare-parts management Within the Group's truck business there is an extensive logistics operation responsible for all the ï¬,ows of goods and products to and from the Group's production facilities as well as the supply ...

  • Page 52
    ... MODEL EFFICIENT PRODUCTION AND RESPONSIBLE SOURCING Cornerstones of the Group's manufacturing operations Environmental, economic and social sustainability is a long-standing cornerstone of the Volvo Group business. We have adopted and developed tools, processes and production systems to help...

  • Page 53
    .... Our supplier requirements are based on the principles contained in the Group's Code of Conduct, which is reviewed and updated regularly. During 2014 a number of CSR roadshows were completed all over the world. The purpose was to train purchasers and Quality Engineers on business ethics, social...

  • Page 54
    ...GLOBAL GROUP 2014 BUSINESS MODEL WORLD-CLASS SERVICES AND DISTRIBUTION Strengthen customer relationships Renault Trucks enjoys challenges and has launched the RTEC, an aftersales challenge for its entire European dealer network. The aim is to develop skills and highlight the Renault Trucks network...

  • Page 55
    ... business represented approximately 26% of the Volvo Group's net sales, compared with 27% during 2013, with a larger portion of sales stemming from North America where the aftermarket part of total sales is smaller than in for instance Europe. Reliable products and service are crucial to customers...

  • Page 56
    ... on thirty years of experience that enables considerable fuel f savings 3) Monitoring the fuel consumption - use the right tool (i.e. Optifuel Infomax and O Optiï¬,eet) to manage drivers and trucks 4) Maintaining long-term lo performance - use the Renault Trucks service networ network's know-how...

  • Page 57
    A GLOBAL GROUP 2014 BUSINESS MODEL WORLD-CLASS SERVICES AND DISTRIBUTION Volvo Trucks Fuel Advice Fuel Advice consists of three modules: 1) Fuel Coaching. The fuel advisors register and analyze each driver's individual driving techniques. The advisors provide practical tips on how fuel ...

  • Page 58
    ... growth requires a strong partnership with independent dealer groups. Recent developments in the Mack Trucks and Volvo Trucks distribution networks make clear that the Group's private partners share our vision of the future, and are committed to providing each brand's customers with stronger network...

  • Page 59
    A GLOBAL GROUP 2014 BUSINESS MODEL NORTH AMERICA Captive components: Volvo I-Shift converts North America In addition to helping our brands deliver the optimized performance and fuel efficiency demanded by customers and regulators, proprietary powertrains represent an important ongoing source of...

  • Page 60
    ... some emerging markets and the long-term decline in the number of people in working age in developed markets. In order to develop and attract a qualified talent pool for our industries, the Volvo Group is engaged in several initiatives, such as the Volvo Step, a one year vocational training program...

  • Page 61
    A GLOBAL GROUP 2014 BUSINESS MODEL A HIGH-PERFORMING ORGANIZATION THE RIGHT COMPETENCE To be an Employer of choice, our work environment needs to be attractive to a diverse, multigenerational workforce representing our markets and customers. 57

  • Page 62
    .... Competence development Investing in the Group's employees is a fundamental part of staying competitive, sustainable and profitable. The Volvo Group's training programs are offered at all levels for employees, and the activities range from traditional and e-based training to individual coaching...

  • Page 63
    ... personnel. Every year, half a million training days is allocated to the Volvo Group's employees and retail organization worldwide. With employees in more than 190 markets working on everything from product development and assembly to finances, marketing and sales, the competency level and further...

  • Page 64
    ... in Africa. By training local manpower, we will contribute to sustainable growth in the countries in which Volvo operates, says Niklas Gustavsson, Volvo Group Chief Sustainability Officer. The Volvo Group's presence in Morocco dates back to the 1950s. The Group's high share of the truck market in...

  • Page 65
    ... training schools for mechanics and drivers for trucks, buses and con- struction equipment will be established in ten African countries. In collaboration with national education authorities, the Volvo Group will develop and finance the programs based on the industry's local competency requirements...

  • Page 66
    ... ten years ago, the Volvo Group has grown into the world's second largest manufacturer of heavy-duty trucks and one of the largest manufacturers of buses and construction equipment and is today also a leading manufacturer of heavy-duty diesel engines and marine and industrial engines. Year 2014 was...

  • Page 67
    Volvo Group Net sales , SEK bn 10 265 11 310 12 300 13 273 14 283 Operating income excl. restructuring charges , SEK bn 10 18.0 11 26.9 12 19.6 13 7.9 14 8.4 Share of net sales 2104 Trucks, 67% Construction Equipment, 19% Buses, 6% Volvo Penta, 3% Customer Finance, 3% Other, 2% 63

  • Page 68
    ...258 M (63,088) Share of net sales: sales 27% (23) Number of employ employees: 15,217 (16,397) Share of Group em employees: 16% (17) Largest markets: T The U.S., Canada and Mexico. Market development, heavy-duty trucks, Thousands 1,000 800 600 400 200 China Europe 30 N. America Brazil India Japan...

  • Page 69
    ... T range voted International Truck of the Year 2015. • The construction equipment market increased by 7%. OTHER MARKETS TS TS Net sales: SEK 21,481 M (20,942) Share of net sales: 7% (7) Number of employees: 2,626 (2,574) Share of Group employees: 3% (3) Largest markets: Australia, South Africa...

  • Page 70
    ...and hybrid technology 03/02/2014 Divestiture of Volvo Rents completed 06/02/2014 Report on the fourth quarter and the full year 2013 18/02/2014 Matti Alahuhta, James W. Griffith and Kathryn V. Marinello nominated to AB Volvo Board 20/02/2014 Truck deliveries in January 2014 28/02/2014 New number of...

  • Page 71
    ... of the hauler business from Terex 17/06/2014 Unique gearbox for heavy vehicles on the Volvo FH 18/06/2014 Truck deliveries in May 2014 27/06/2014 Scott Rafkin new President of Volvo Financial Services 30/06/2014 New number of votes in AB Volvo 30/06/2014 Logistics agreement to reduce environmental...

  • Page 72
    ... on sustainable transport 21/08/2014 Volvo Group developing safety system at the world's most advanced test track 21/08/2014 Truck deliveries in July 2014 28/08/2014 Volvo's engineers at Gothenburg's upper-secondary schools 29/08/2014 New number of votes in AB Volvo 29/08/2014 Semi-Annual Report of...

  • Page 73
    ...20/10/2014 Environment Prize-winner uses satellites to reveal human impact 24/10/2014 Volvo Group - the third quarter 2014 24/10/2014 Changes to Volvo's Group management 12/11/2014 Volvo the most sustainable company in the automotive sector in Brazil 13/11/2014 Volvo CE transfers backhoe loaders and...

  • Page 74
    ... and leasing. Position on world market Volvo Group is the world's second largest manufacturer of heavy-duty trucks. Brands Volvo, UD Trucks, Renault Trucks, Mack and Eicher. As of January 2015, Dongfeng is also included. Number of regular employees 58,067 (58,542) Share of Group net sales, % 67...

  • Page 75
    BOARD OF DIRECTORS' REPORT 2014 GROUP PERFORMANCE In general the Volvo Group maintained or increased its market positions in the main markets. In Europe the combined market share for heavy-duty trucks amounted to 24.4% (24.3) and in North America it increased to 20.1% (18.8). In Brazil the market ...

  • Page 76
    ... Group Trucks Sales in order to increase efficiency and reduce costs. Operating income* and operating margin* 5,622 10 6.0 11 9.2 12 6.5 13 3.8 14 2.9 SEK M % 10,112 18,227 12,219 6,824 5,622 *Excl. restructuring charges Market shares, heavy-duty trucks, % % 13 14 North America Europe...

  • Page 77
    ...as all significant changes can be found inside the truck: engine and transmission have been improved to decrease operating costs and improve drivability, new safety features have been added to enable safer driving and a complete range of services is available to optimize uptime and fuel-efficiency...

  • Page 78
    ... on world market Volvo CE is a leading manufacturer of rigid and articulated haulers, wheel loaders, excavators, road development machines and compact construction equipment. Brands Volvo, SDLG (Lingong) and Terex Trucks. Number of regular employees 14,901 (14,663) 19 (20) Share of Group net sales...

  • Page 79
    BOARD OF DIRECTORS' REPORT 2014 GROUP PERFORMANCE CONSTRUCTION EQUIPMENT Volvo CE's products and services are offered in more than 125 countries through proprietary or independent dealers. Customers are using the machines in quarries & aggregates, energy related industries (oil & gas), heavy ...

  • Page 80
    ...-art technology center in Jinan, China. Engineers at the 50,000 m2 site will develop products and components for customers in emerging markets. The company also opened a new test and development center in Hapcheon, Korea. In addition, Volvo CE inaugurated a new Customer Center at its North American...

  • Page 81
    ... in Europe, North America, South America and Asia. Facts The product range includes complete buses and bus chassis for city, intercity and coach traffic. The company has a total offering that, in addition to buses, includes a global service network, efficient spare parts handling, service and...

  • Page 82
    BOARD OF DIRECTORS' REPORT 2014 GROUP PERFORMANCE BUSES Net sales by market Prevost celebrated 90 years. Prevost, the leading manufacturer of premium motor coaches and commuters, marked the 90th anniversary of its founding in 1924. From Eugène Prevost's first woodenframe bus body to today's ...

  • Page 83
    ... trucks. Position on world market Volvo Penta is the world's largest producer of diesel engines for leisure boats and a leading, independent producer of industrial engines. Brands Volvo Penta Number of regular employees 1,422 (1,412) 3 (3) Share of Group net sales, % Leisure. In recent years Volvo...

  • Page 84
    BOARD OF DIRECTORS' REPORT 2014 GROUP PERFORMANCE VOLVO PENTA Net sales by market SEK M Europe North America South America Asia Other markets Total Engine volumes Number of units Marine engines1 Industrial engines Total 1 Excluding outboard engines. 2014 3,779 1,584 386 1,615 425 7,790 2013 3,...

  • Page 85
    ... VFS conducts customer financing in 42 countries in the world. Position on world market Volvo Financial Services operates exclusively to support the sales of vehicles and equipment which are produced by the Volvo Group. In doing so, VFS enhances the competitiveness of Volvo Group products and helps...

  • Page 86
    ... 23 Renault Trucks 21 23 Mack Trucks 16 27 Buses 36 39 Volvo CE 12 11 UD Trucks 13 14 * 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. Customer finance operations Total new...

  • Page 87
    ...corporate governance as reï¬,ected in the Swedish Corporate Governance Code. The risks to which the Volvo Group are exposed are classified into three main categories: • External-related risks - such as the cyclical nature of the commercial vehicles business, intense competition, changes in prices...

  • Page 88
    ...on the success of the Group's product development. Resale value commitments When selling products the Volvo Group at times enters into resale value commitments. At the time of the sale the evolution of the used commercial vehicle and equipment market may be uncertain, potentially leading to too high...

  • Page 89
    ... by changes in world market prices for raw materials or by an inability of our suppliers to deliver. Intangible assets AB Volvo owns or otherwise has rights to patents and brands that refer to the products the Company manufactures and markets. These have been acquired over a number of years and...

  • Page 90
    BOARD OF DIRECTORS' REPORT 2014 GROUP PERFORMANCE FINANCIAL MANAGEMENT Balancing the requirements of different stakeholders The objectives of the financial management in the Volvo Group is to assure shareholders long-term attractive and stable total return, and debt providers the financial ...

  • Page 91
    BOARD OF DIRECTORS' REPORT 2014 GROUP PERFORMANCE THE SHARE The most traded share in Stockholm Many of the world's leading stock markets had a positive development in 2014. The price of the Volvo B share ended the year on the same level as the start of the year. Share conversion option In ...

  • Page 92
    BOARD OF DIRECTORS' REPORT 2014 GROUP PERFORMANCE THE SHARE Price trend, Volvo Series B shares, 2010-2014, SEK 120 The largest shareholders in AB Volvo, December 311 2014 Voting rights, % 2013 Industrivärden Cevian Capital Norges Bank Investment Management SHB 2 Alecta 22.0 13.4 20.2 11.0...

  • Page 93
    BOARD OF DIRECTORS' REPORT 2014 GROUP PERFORMANCE THE SHARE Shareholder value - Long-term value creation The Volvo Group strives to create long-term value for its shareholders. The Volvo Group's origins can be traced to 1927, when the first serial produced Volvo car rolled out of the factory in...

  • Page 94
    ... relation with shareholders and other key parties. The Swedish Corporate Governance Code, which is applied by the Volvo Group, aims at empowering the shareholders and creating a sound balance of power between shareholders, the board of directors and the senior management. Sound corporate governance...

  • Page 95
    ... development and production of backhoe loaders and motor graders in Europe and Americas and transfer these operations to its Chinese company, SDLG. Higher ambition in structural cost-reduction efforts and increased expected restructuring charges in the Strategic Program 2013-2015 were communicated...

  • Page 96
    ... of the Volvo Group is carried out through a number of corporate bodies. At the General Meetings of AB Volvo, which is the Parent Company in the Volvo Group, the shareholders exercise their voting rights with regard to for example the composition of the Board of Directors of AB Volvo and election...

  • Page 97
    CORPORATE GOVERNANCE REPORT 2014 CORPORATE GOVERNANCE 1 Shareholders AB VOLVO Vote at the General Meetings 2 General Meeting Appoints Election Committee Elects Auditor 5 6 Audit Committee Remuneration Committee 3 Submits proposals concerning election of Board members, auditors and Election ...

  • Page 98
    ...its shareholders, refer to the Board of Director's report on pages 87-89 of the of the Annual Report. General The General Meeting is Volvo's highest decision-making body. The General Meeting held within six months after the end of the fiscal year adopting the income statement and the balance sheet...

  • Page 99
    ... the Board and of the Group Executive Team were present at the Meeting. Authorized Public Accountants Peter Clemedtson, Volvo's Lead Partner, and Johan Rippe were also present, representing the company's auditor PricewaterhouseCoopers AB. The Annual General Meeting 2014 decided to pay a dividend of...

  • Page 100
    CORPORATE GOVERNANCE REPORT 2014 CORPORATE GOVERNANCE 4 Board of Directors Duties The Board of Directors is ultimately responsible for Volvo's organization and management of the company's operations. The Board is responsible for the Group's long-term development and strategy, for regularly ...

  • Page 101
    CORPORATE GOVERNANCE REPORT 2014 CORPORATE GOVERNANCE In October 2014, the Board of Directors visited the Group's businesses in France, including a visit at Valbonne Renault Trucks Test Track Center. The above mentioned decisions relating to Volvo Construction Equipment and the IT review are part...

  • Page 102
    ...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 103
    CORPORATE GOVERNANCE REPORT 2014 CORPORATE GOVERNANCE The Boards composition and attendance at meetings January 1, 2014 - December 31, 2014 Board (12 incl. Audit Remuneration statutory) Committee (10) Committee (4) 12 10 2 12 10 10 11 12 12 2 12 1 2 10 8 10 4 3 4...

  • Page 104
    ... America and for the company's automotive business in North America. Until 2014 President and Chief Executive Officer at Timken Company. Holdings in Volvo, own and related parties 700,000 Series B shares 42,300 Series B shares. 20,000 Series B shares. BOARD MEMBERS APPOINTED BY THE EMPLOYEE...

  • Page 105
    ... his career at ABB; has held a number of executive positions at AdTranz and Bombardier; President of Volvo Aero; President of Volvo Construction Equipment. Board Chairman: Husqvarna AB. Board member: SSAB Svenskt Stål AB, Sandvik AB, Meda AB and Stena AB. Has held several management positions...

  • Page 106
    ... of trucks and the Group's engines and transmissions. GTO is also responsible for the Group's spare parts supply and logistics operations. There are five Corporate Functions: Corporate Human Resources, Corporate Communication & Sustainability Affairs, Corporate Finance, IT & Financial Services...

  • Page 107
    CORPORATE GOVERNANCE REPORT 2014 CORPORATE GOVERNANCE Vision Wanted position Group common Business specific Key focus areas & Strategic objectives Group Trucks Volvo CE Volvo Buses Volvo Penta Gov. Sales VFS Group Trucks/BA long-term plans Group long-term plans Corporate values, Group ...

  • Page 108
    ... alia relate to the Group's financial targets for improved operating margin. The Group Executive Team members have during 2014 participated in the Group's long-term, share-based incentive plan for senior executives comprising the years 2014-2016 which was adopted by the Annual General Meeting 2014...

  • Page 109
    ...of Business Unit Finance AB Volvo 1999-2001. Senior Vice President & Finance Director Scania AB 1998-1999. Member of the Group Executive Team since 2014. With Volvo 1999-2001 and since 2014. 1964 Responsible for Corporate Legal & Compliance and General Counsel of the Volvo Group since April 1, 2013...

  • Page 110
    ... account of outstanding share and share-price related incentive programs to the management, refer to Note 27 in the Group's notes in the Annual Report. Changes to the Group Executive Team As a result of the merger of the previous three sales regions in the truck operation into a single global sales...

  • Page 111
    ... the evaluation activities are reported to Group management and the Audit Committee. To the annual meeting of the shareholders of AB Volvo (publ), corporate identity number 556012-5790 It is the Board of Directors who is responsible for the Corporate Governance Report for the year 2014 on pages 90...

  • Page 112
    6 CONTENT FINANCIAL INFORMATION 2014 108

  • Page 113
    ... year, 2013. page Financial performance Financial position Cash ï¬, ow statement Changes in consolidated Shareholders' equity Notes to fi nancial statements Parent Company AB Volvo Proposed remuneration policy Proposed disposition of unappropriated earnings Audit report for AB Volvo Eleven-year...

  • Page 114
    ...profitability in a mixed economic environment. INCOME STATEMENTS VOLVO GROUP Industrial Operations SEK M Net sales Cost of sales Gross income Research and development expenses Selling expenses Administrative expenses Other operating income and expenses Income from investments in joint ventures and...

  • Page 115
    ... mainly related to Trucks business areas but also Bus and Volvo Penta made positive contribution while Construction Equipment had a negative development compared to previous year. Net sales by business area , SEK M Trucks Construction Equipment Buses Volvo Penta Corporate Functions, Group Functions...

  • Page 116
    ... in the year which is mainly explained by positive volume development for vehicle sale and price realization on the new Volvo and Renault Trucks models. Positive impact from price realization was also visible for both vehicle and service and aftermarket in North America while margin pressure on...

  • Page 117
    ..., % Volvo CE Volvo Trucks Renault Trucks Mack Trucks Buses UD Trucks 2014 54,819 54,7 117 858 1,717 1.33 12.5 28 2013 51,466 47.0 104 923 1,522 1.31 12.1 27 39 30 23 23 27 11 36 30 21 21 16 12 1 Share of unit sales financed by Volvo Financial Services in relation to the total number units sold...

  • Page 118
    ...of shareholders' equity. BALANCE SHEET VOLVO GROUP - ASSETS Industrial Operations SEK M Assets Non-current assets Intangible assets Tangible assets Property, plant and equipment Investment property Assets under operating leases Financial assets Investments in joint ventures and associated companies...

  • Page 119
    ... Investments and divestments of shares, net Acquired and divested operations, net Capital injections (to)/from Customer Finance Operations Currency effect Dividend paid to AB Volvo shareholders Dividend paid to minority shareholders Remeasurements of defined benefit pension plans Pension payments...

  • Page 120
    ... Equipment and production material. The value of assets held for sale amounted SEK 0.3 billion as of December 31, 2014 compared to SEK 8.1 billion at year-end 2013. The amount last year was related to the divestment of Volvo Rents and to the divestment of commercial real estate which were completed...

  • Page 121
    ... and leasing vehicles Operating cash ï¬,ow Investments and divestments of shares, net Acquired and divested operations, net Interest-bearing receivables incl marketable securities Cash ï¬,ow after net investments Financing activities Change in loans, net Dividend to AB Volvo's shareholders Dividend...

  • Page 122
    FINANCIAL INFORMATION 2014 CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY Shareholders' equity attributable to equity holders of the Parent Company SEK M Balance at December 31, 2012 Income for the period Share capital 2,554 - Other reserves1 558 - Translation reserve (2,670) - Retained earnings 75...

  • Page 123
    ... Reporting Board. Accounting principle Non-current assets held for sale and discontinued operations Business combinations Joint ventures Associated companies Operating segments Revenue Shares and participations Financial income and expenses Income taxes Minority interests Research and development...

  • Page 124
    ...-end, impact profit or loss in the year in which they are incurred. The more important exchange rates applied in the consolidated financial statements are shown in the table. Exchange rates Country Australia Brazil Euro Zone Japan Canada China Norway Great Britain South Africa South Korea United...

  • Page 125
    FINANCIAL INFORMATION 2014 NOTE 2 KEY SOURCES OF ESTIMATION UNCERTAINTY Source of estimation uncertainty Buy-back agreements and residual value guarantees Deferred taxes Impairment of goodwill and other intangible assets Impairment of tangible assets Credit loss reserves Note 7, Revenue 10, ...

  • Page 126
    ... acquisitions. The impact on the Volvo Group's balance sheet and cash-ï¬,ow statement in connection with the divestment of subsidiaries and other business units are specified in the following table: Acquisitions Intangible assets Property, plant and equipment Assets under operating lease Shares and...

  • Page 127
    ... referred mainly to the divestment of Volvo Rents in North America which was completed on January 31, 2014. Commercial real estate amounting to SEK 1,014 M was also classified as assets held for sale at year end 2013. Assets and liabilities held for sale Tangible assets Inventories Other current...

  • Page 128
    ... Operations. At year-end 2014, in addition to the assets in its Customer Finance Operations, the Volvo Group's interest-bearing assets consisted primarily of cash, cash equivalents and liquid assets invested in short-term interest-bearing securities. The objective for the Volvo Group's short-term...

  • Page 129
    ... The balance sheet may be affected by changes in different exchange rates. Currency risks in the Volvo Group's operations are related to changes in the value of contracted and expected future payment ï¬,ows (commercial currency exposure), changes in the value of loans and investments (financial...

  • Page 130
    ... exposure from commercial ï¬,ows in foreign currency is generated from internal purchases and sales between manufacturing units and market companies and external sales and purchases in foreign currency around the globe. As the predominant parts of the operations in the Volvo Group are situated...

  • Page 131
    ... in foreign currency, expressed as net surpluses or deficits in key currencies. For further information read more in the section Commercial currency exposure. 4:6 4:5 Translation effect on operating income in foreign subsidiaries in 2014 versus 2013 SEK bn 0.20 0.15 0.10 0,05 0 (0.05) (0.10) (0.15...

  • Page 132
    ... its part of the contract when using derivative instruments (financial counterparty risk). 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 low credit risk...

  • Page 133
    ... on a regular basis where prices are set in the global markets. Changes in commodity prices are included in the product cost calculation. Increased commodity prices are therefore reï¬,ected in the sales price of the Volvo Group's final products. Purchasing agreements with commodity suppliers may...

  • Page 134
    FINANCIAL INFORMATION 2014 NOTE 5 INVESTMENTS IN JOINT VENTURES, ASSOCIATED COMPANIES AND OTHER SHARES AND PARTICIPATIONS ACCOUNTING POLICIES Subsidiaries The Volvo Group has production facilities in 19 countries and sales of products in more than 190 markets which means that the Volvo Group ...

  • Page 135
    ... of SEK 303 M (138) are included within operating income whereof VECV SEK 273 M (115). Summarized balance sheets VE Commercial Vehicles, Ltd. Non-current assets Marketable securities, cash and cash equivalents Other current assets Total assets Equity Non-current financial liabilities Other non...

  • Page 136
    ... in the table below. Read more in Note 30 Financial Instruments regarding financial assets available for sale. 32 50 82 54 17 71 Holding of shares in listed companies Percentage holding 8 - - Dec 31, 2014 Carrying value 4,228 290 25 4,543 474 5,017 Dec 31, 2013 Carrying value 1,191 267 32...

  • Page 137
    ...the operating segments, has been identified as the Group Executive Team that makes strategic decisions. The internal reporting is provided based on the Group's different business areas which are Trucks, Construction Equipment, Buses, Volvo Penta, Governmental Sales and Customer Finance. Volvo Rents...

  • Page 138
    ... (total assets) B/S Assets held for sale (total liabilities) B/S Internal sales between segments are generally made at standard cost of sales, including calculated interest and product improvement expenses. Reporting by market Europe of which Sweden of which France North America of which USA South...

  • Page 139
    ... 30 Financial Instruments regarding the accounting policy for financial assets at fair value through the income statement. Vehicle and Service & Aftermarket The Volvo Group's product range is divided into Vehicle and Service & Aftermarket. The sale of new vehicles, machinery and engines comprise...

  • Page 140
    ... of tax-loss carryforwards is related to countries with long or indefinite periods of utilization. Securing the probability of utilization is based upon business plans when relevant. 1 The high income tax rate for the Volvo Group, as of December 31 2014, was mainly a result of the provision for...

  • Page 141
    ...160) 2,406 10,760 Summarized balance sheet Non-current assets Marketable securites, cash and cash equivalents Current assets Total assets Non-current liabilities Current liabilities Total liabilities Equity attributable to the Volvo Group's shareholders Minority interests Deferred tax liabilities...

  • Page 142
    ... statement. Impairment tests for amortizable assets are performed if there are indications of impairment at the balance sheet date. Amortization periods Trademarks Distribution networks Product and software development 20 years 10 years 3 to 8 years ACCOUNTING POLICIES Volvo Group applies the cost...

  • Page 143
    ...5 Read more in Note 3, Acquisitions and divestments of shares in subsidiaries, for a description of acquired and divested operations. Including the sale of Volvo Rents for 2014. Goodwill per Business Area Trucks Construction Equipment Buses Other business areas Total goodwill value Dec 31, 2014 11...

  • Page 144
    ... Depreciation periods ACCOUNTING POLICIES The Volvo Group applies the cost method for measurement of tangible assets. Borrowing costs are included in the acquisition value of assets that are expected to take more than 12 months to complete for their intended use or sale. Investment properties are...

  • Page 145
    ...sale of Volvo Rents 2014. 7 Of which Sales with residual value commitment SEK 10,837 M (10,041), Rental ï¬,eet SEK 1,153 M (734). Reclassifications and other mainly consist of assets under operating lease related to legal sales transactions, where revenue is deferred and accounted for as operating...

  • Page 146
    FINANCIAL INFORMATION 2014 NOTE 14 LEASING Volvo Group as a lessee As of December 31, 2014, future rental payments (minimum leasing fees) related to non-cancellable leases amounted to SEK 5,524 M (4,570). Future rental payments 2015 2016-2019 2020 or later Total Finance leases 168 230 342 740 ...

  • Page 147
    ... balance sheet item Customer Finance receivables for the Volvo Group and thereby excludes operating leases and inventory as they are recognized elsewhere in the balance sheet. Read more in Note 4 for a description of the credit risk, interest and currency risks and in Note 30 for further information...

  • Page 148
    ... of credit risks. Read more about Volvo Financial Services' development during the year on page 81. Geographic market, percentage of customer-financing portfolio (%). Europe, 40.8% North America, 36.0% Asia, 9.3% South America, 13.9% NOTE 16 RECEIVABLES ACCOUNTING POLICIES ! SOURCES OF...

  • Page 149
    ... are tested regularly and adjustments 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...

  • Page 150
    ...the Annual General Meeting 2013, was SEK 3.00 (3.00) per share or totally SEK 6,084.4 M (6,083.7). During 2014 AB Volvo transferred, free of consideration, 1,238,755 treasury B-shares, with a total quota value of 1,486,506 SEK, to participants in the long-term share-based incentive program for Group...

  • Page 151
    ... for post-employment benefits in the Volvo Group's balance sheet correspond to the present value of obligations at year-end, less fair value of plan assets. Discount rate is used when calculating the net interest income or expense on the net defined benefit liability (asset). All changes in the...

  • Page 152
    ... the United States mainly secure their pension obligations through transfer of funds to pension plans. At the end of 2014, the total value of pension obligations secured by pension plans of this type amounted to SEK 16,238 M (13,262). At the same point in time, the total value of the plan assets in...

  • Page 153
    ...ation United States Discount rate1 2 Expected salary increase Inï¬,ation France Discount rate1 Expected salary increase Inï¬,ation Great Britain Discount rate1 Expected salary increases Inï¬,ation Dec 31, 2014 Dec 31, 2013 4.00 3.00 1.50 Pension costs Current year service costs Interest costs...

  • Page 154
    ... opening balance 2013 Acquisitions, divestments and other changes Current year service costs Interest costs Past service costs Settlements Employee contributions Remeasurements: - Effect of changes in assumptions - Effect of experience adjustments - Effect of experience adjustments Exchange...

  • Page 155
    ... strategy and risk management The Volvo Group manages the allocation and investment of pension plan assets with the purpose of meeting the long term objectives. The main objectives are to meet present and future benefit obligations, provide sufficient liquidity to meet such payment requirements...

  • Page 156
    ... value commitment, management makes considerations of current price-level of the used product model, value of options, mileage, condition, future price deterioration due to expected change of market conditions, alternative distribution channels, inventory lead-time, repair and reconditioning costs...

  • Page 157
    ... regularly following the development of the proceedings. Read more in Note 24 Contingent liabilities. Provision for expected credit losses in Volvo CE Following an extended period of declining demand, low machine utilization and lower raw materials prices, profitability for customers and dealers...

  • Page 158
    FINANCIAL INFORMATION 2014 NOTE 22 LIABILITIES Non-current liabilities The tables below disclose the Volvo Group's non-current liabilities in which the largest loans are listed by currency. Loans are mainly in local currencies through Volvo Treasury. Volvo Treasury uses various derivatives to ...

  • Page 159
    .... Read more in Note 23 regarding assets pledged. NOTE 23 ASSETS PLEDGED Dec 31, 2014 88 209 7,343 40 7,680 Dec 31, 2013 84 57 4,897 40 5,078 Assets pledged Property, plant and equipment - mortgages Assets under operating leases Receivables Cash, loans and marketable securities Total Total...

  • Page 160
    FINANCIAL INFORMATION 2014 NOTE 24 CONTINGENT LIABILITIES Residual value guarantees amounted to SEK 2,850 M (3,389) and were attributable to sales transactions combined with buy back agreements or residual value guarantees for which assets are not recognized in the balance sheet. The recognized ...

  • Page 161
    ...to associated companies, Dec 31 2014 2,129 2,320 598 510 2013 2,138 2,609 301 707 The Volvo Group engages in transactions with its joint ventures. The transactions consist mainly of sales of vehicles and parts and purchase of engine long blocks and services. Commercial terms and market prices apply...

  • Page 162
    ... 2013. During 2014, a part of the shares granted under the program during 2011 have been allotted to the participants. At the Annual General Meeting 2014, as proposed by the Board of AB Volvo, it was decided to implement a new long-term share-based incentive program for Group Executive Team members...

  • Page 163
    ..., 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 programs Long-term share-based incentive program 2011-2013 The Annual General Meeting held in...

  • Page 164
    ... of shares. During 2014, for the equity-settled plan, a total of 1,238,755 Average number of employees AB Volvo Sweden Subsidiaries Sweden Western Europe (excl. Sweden) Eastern Europe North America South America Asia Other countries Group total 2014 Number of employees of which women, % 2013 Number...

  • Page 165
    ... 2013 1,230 (141) 229 61 - - 125 745 - 167 2,416 During 2014 Volvo Group acquired the hauler manufacturing business from Terex inc. and the divestiture of Volvo Rents and commercial nonstrategic real estate was completed. Read more in Note 3 Acquisitions and divestments of shares in subsidiaries...

  • Page 166
    ...debt portfolio. The hybrid is accounted for as a loan with a maturity of 61.6 years and subordinated to all other financial liabilities currently outstanding. Read more in Note 22 Liabilities regarding the hybrid bond. During 2014 external loans in the Volvo Group balance sheet increased by SEK 13...

  • Page 167
    ... fair values SEK M Assets Financial assets at fair value through the income statement The Volvo Group's outstanding interest and currency risk derivatives4 The Volvo Group's outstanding raw material derivatives B/S Dec 31, 2014 Carrying value Fair value Dec 31, 2013 Carrying value Fair value Note...

  • Page 168
    ... fair value as provisions in the balance sheet and amounted to SEK 650 M (79). The Volvo Group's maximum exposure to loss is considered being the total recourse relating to transferred assets are that are part of the reported credit guarantees, i.e. the total amount Volvo Group would have to pay in...

  • Page 169
    ...the loan related to hedge accounting amounted to negative SEK 1,022 M (1,157). The changes in the fair value of the hedge instruments and on the loan have been recognized in finance net in the income statement. • Hedging of certain net investments in foreign operations done in previous years. The...

  • Page 170
    ... year, 2013. Board of Directors' report AB Volvo is the Parent Company of the Volvo Group and its operations comprise of the Group's head office with staff together with some corporate functions. Income from investments in Group companies include dividends amounting to 6,826 (1,689) and transfer...

  • Page 171
    ... INFORMATION 2014 BALANCE SHEET SEK M Assets Non-current assets Intangible assets Tangible assets Financial assets Shares and participations in Group companies Receivables from Group companies Investments in joint ventures and associated companies Other shares and participations Deferred tax assets...

  • Page 172
    ... and divestments of shares in non-group companies, net Interest-bearing receivables Cash-ï¬,ow after net investments Financing activities Change in loans, net Dividends to AB Volvo shareholders Other Change in liquid funds Liquid funds, beginning of year Liquid funds, end of year 2014 4,530 17 113...

  • Page 173
    ... Available-for-sale investments: Gains/losses at valuation to fair value Other comprehensive income for the period Total income for the period Transactions with shareholders Dividends to AB Volvo shareholders Share based payments Transactions with shareholders Balance at December 31, 2013 Income for...

  • Page 174
    ...the accounting policies applied by the Volvo Group and the Parent Company are described below. Shares and participations in Group companies and investments in joint ventures and associated companies are recognized at cost in the Parent Company and test for impairment is performed annually. Dividends...

  • Page 175
    ... of shares Volvo Group UK Ltd. Volvo Italia Spa Volvo Business Services AB Volvo Parts AB Volvo Group Japan Corporation Subtotal Income from divestment of shares Non-compete clause Volvo Rents Adjustment divestment Volvo Aero AB 2012 Subtotal Income from investments in Group Companies 2014 367...

  • Page 176
    ...Marketable securities and liquid funds in the consolidated financial statements for a description of restrictions related to cash and cash equivalents. Volvo Group's operational structure gives a better overview of how the Volvo Group has chosen to organize its business. Read more about Volvo Group...

  • Page 177
    ...sheet, December 31 Holding of shares in Group companies Volvo Lastvagnar Sverige AB, Sweden Volvo Holding Sverige AB, Sweden Volvo Group Japan Co., Japan Volvo Bussar AB, Sweden Volvo Construction Equipment NV, The Netherlands AB Volvo Penta, Sweden VNA Holding Inc., USA Volvo Financial Services AB...

  • Page 178
    ...the Parent Company. Provisions for post-employment benefits in the Parent Company's balance sheet correspond to the present value of obligations at year-end, less value of plan assets. Obligations in defined-benefit plans Obligations opening balance 2013 Service costs Interest costs Pensions paid...

  • Page 179
    ...plan assets invested in the Volvo Pension Foundation. The accounting principles for defined-benefit plans differ from IAS19 mainly relating to: • Pension liability calculated according to Swedish accounting principles does not take into account future salary increases. • The discount rate used...

  • Page 180
    ... or limit variable salary to be paid to the Executives. The Annual General Meeting 2014 decided to adopt a share-based incentive program for senior executives in the Volvo Group relating to the financial years 2014, 2015 and 2016. 4. The principal terms of non-monetary benefits, pension, notice of...

  • Page 181
    ... year end 2014. The Board of Directors has the view that the Company's and the Group's shareholders' equity will, after the proposed dividend, be sufficient in relation to the nature, scope and risks of the business. Had the assets and liabilities not been estimated at their market value pursuant...

  • Page 182
    ... parts of the annual accounts and consolidated accounts. We therefore recommend that the annual meeting of shareholders adopt the income statement and balance sheet for the parent company and the group. Report on other legal and regulatory requirements In addition to our audit of the annual accounts...

  • Page 183
    ... statement Industrial Operations SEK M 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 (loss) from investments in joint ventures and associated companies...

  • Page 184
    FINANCIAL INFORMATION 2014 Consolidated balance sheets SEK M Intangible assets Property, plant and equipment Assets under operating leases Shares and participations Inventories Customer-financing receivables Interest-bearing receivables Other receivables Non-interest-bearing assets held for sale ...

  • Page 185
    FINANCIAL INFORMATION 2014 Consolidated balance sheets, Industrial Operations SEK M Intangible assets Property, plant and equipment Assets under operating leases Shares and participations Inventories Customer-financing receivables Interest-bearing receivables Other receivables Non-current assets ...

  • Page 186
    ... and leasing assets Shares and participations, net Acquired and divested subsidiaries and other business units, net Interest-bearing receivables including marketable securities Cash-ï¬,ow after net investments Change in loans, net Repurchase of own shares Dividend to AB Volvo's shareholders Dividend...

  • Page 187
    FINANCIAL INFORMATION 2014 Exports from Sweden SEK M Volvo Group, total 2014 78,174 2013 2012 84,314 2011 91,065 2010 72,688 2009 41,829 2008 96,571 2007 88,606 2006 80,517 2005 71,133 2004 62,653 88,560 Key ratios 2014 Gross margin, %1 Research and development expenses as percentage of net ...

  • Page 188
    ... dividend divided by basic earnings per share. 7 Shareholders' equity for shareholders in AB Volvo divided by number of shares outstanding at year-end. 8 Including extra payment of SEK 5 through redemption of shares. 9 Proposed by the Board of Directors. Other share data 2014 Number of shareholders...

  • Page 189
    ...(693) 211,076 Construction Equipment Volvo Penta Europe North America South America Asia Other markets Total Other and eliminations Net sales Industrial Operations Volvo Aero Customer Finance Europe North America South America Asia Other markets Total Eliminations Volvo Group total 2,999 2,900...

  • Page 190
    ...9.6 11.1 7.9 26.9 7.5 2004 6.6 1.2 6.5 10.4 5.8 7.3 14.2 7.0 Number of employees at year-end Number1, 2, 3 Trucks Buses Construction Equipment Volvo Penta Volvo Aero Financial Services Other Volvo Group, total 2014 58,067 6,900 14,901 1,422 - 1,339 10,193 92,822 2013 58,542 6,648 14,663 1,412...

  • Page 191
    Employees Number1 Sweden Europe, excluding Sweden North America South America Asia Other markets Volvo Group total 2014 21,384 29,449 15,217 6,353 17,793 2,626 92,822 2013 22,588 29,746 16,397 6,275 17,953 2,574 95,533 2012 23,052 30,382 16,569 5,977 20,222 2,515 98,717 ...

  • Page 192
    ...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 reï¬,ecting the Volvo Group's market information are published regularly...

  • Page 193
    ...- and long-term interest-bearing liabilities and provisions for post-employment benefits. Operating 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...

  • Page 194
    ... a circulatory system, our trucks, buses, uses, engines, construction equipment and related services are involved ved in several of the functions that most of us rely on every day. Together, her, we move the world. WE MOVE TOGETHER AB Volvo, Investor Relations and Corporate Financial Reporting