Volvo 2014 Annual Report Download - page 127

Divestments
Volvo Rents divestment
The divestiture of Volvo Rents was completed on January 31, 2014. The
price amounted to USD 1.1 bn, corresponding to SEK 6.9 bn, and had a
positive impact on the Group’s cash fl ow and net fi nancial debt within the
Industrial Operation in 2014 with the same amount. In connection with the
divestment, Volvo Rents repaid all outstanding loans to Volvo Financial
Services.
During 2014 the divestment impacted operating income positively by
SEK 212 M as an effect of the ongoing completion of accounts. The
adjusted purchase price is expected to be fi nalized during the fi rst half of
2015. In 2013, assets and liabilities pertaining to Volvo Rents were clas-
sifi ed as assets held for sale and valued at fair value. A revaluation was
therefore recognized within Other operating income and expenses
amounting to negative SEK 1.5 bn and impacting the segment “Group
functions, corporate functions and other”. Net sales for Volvo Rents in
2013 amounted to SEK 4,212 M and operating income for the corre-
sponding period amounted to negative SEK 133 M.
Divestment of commercial real estate
Companies in the Volvo Group signed an agreement in March 2014, to
sell commercial real estate. The transaction was fi nalized in the second
quarter 2014 and reduced net fi nancial debt in the Volvo Group’s Indus-
trial Operation by approximately SEK 1.8 bn, out of which SEK 0.3 bn is a
claim in a subordinated loan. The impact on operating cash-fl ow from the
transaction is SEK 0.3 bn. The transaction had a positive impact on the
Group’s operating income of SEK 815 M in 2014, whereof SEK 751 M in
the segment Group functions, Corporate functions and Other and SEK 64
M in the segment Trucks. The transaction covered to a large extent real
estate in Göteborg, Sweden owned by the Volvo Group and leased to
external tenants. The transaction also included properties in Denmark,
Finland and other parts of Sweden, where the real estate to a large extent
are continuously rented by companies in the Volvo Group. Those proper-
ties were part of assets held for sale at the end of the year 2013.
The Volvo Group has not made any other divestments during 2014,
which solely or jointly have had a signifi cant impact on the Volvo Group’s
fi nancial statements.
For the comparative year 2013, the Volvo Group did not make any
signifi cant divestment.
The impact on the Volvo Group’s balance sheet and cash fl ow statement
in connection with the divestment of subsidiaries and other business units
are specifi ed in the following table:
Divestments 2014 2013
Property, plant and equipment (1,584) (140)
Assets under operating lease (5,475) (162)
Inventories (221) (127)
Other receivables (340) (914)
Cash and cash equivalents – (87)
Other provisions (65) 36
Other liabilities 206 472
Divested net assets (7,479) (922)
Goodwill – (27)
Total (7,479) (949)
Additional purchase price – –
Cash and cash equivalents received 8,501 1,090
Cash and cash equivalents,
divested companies – (87)
Effect on Volvo Group cash and
cash equivalents 8,501 1,003
Effect on Volvo Group net fi nancial
position 8,868 537
Assets and liabilities held for sale
As of December 31, 2014, the Volvo Group recognized assets amounting
to SEK 288 M and liabilities amounting to SEK 130 M as assets and
liabilities held for sale. Those mainly pertain to a planned dealer divest-
ment and divestment activities within the effi ciency program. Translation
differences on foreign operations of SEK 10 M were recognized in other
comprehensive income.
For the comparative year 2013, the Volvo Group recognized assets
amounting to SEK 8,104 M and liabilities amounting to SEK 350 M as
assets and liabilities held for sale. Translation differences on foreign oper-
ations of SEK 13 M were also included in other comprehensive income.
This 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 classifi ed as assets held for sale at
year end 2013.
Assets and liabilities held for sale Dec 31,
2014 Dec 31, 2013
Tangible assets 173 7,185
Inventories 21 221
Other current receivables 94 684
Other assets – 14
B/S Total assets 288 8,104
Trade payables 87 76
Provisions 5 127
Other current liabilities 23 137
Other liabilities 15 10
B/S Total liabilities 130 350
Acquisitions and divestments after the end of the period
In the beginning of January 2015 Volvo Group completed the acquisition
of 45% of the shares in Dongfeng Commercial Vehicles Co., Ltd, DFCV, in
China. The ownership in DFCV is classifi ed as an associated company and
consolidated with the equity method as of January 2015 and will be
included in the Trucks segment. The result of DFCV will, from the begin-
ning, be included in the Volvo consolidation with a time lag of one month.
When Volvo and DFCV have aligned the book closing procedures a catch
up will take place and the result will then be recognized without a time lag.
Consequently, when the catch up occurs, the result of four separate
months will be included within one quarter. During 2013 DFCV’s sales
amounted to SEK 37 billion and the pro-forma operating income amounted
to SEK 1.0 billion. During the same period DFCV sold 120,600 heavy-
duty and 51,000 medium-duty trucks.
The purchase consideration amounted to approximately SEK 7 billion
and will in the fi rst quarter be recognized as Investments in joint ventures
and associated companies within Financial assets. The Cash fl ow after
net investments will be negatively affected by the same amount and the
purchase consideration will also have the same negative impact on net
fi nancial debt. The purchase consideration was hedged and positive
effects of the hedge have been recognized within Other fi nancial income
and expenses. The total positive effect of the hedge is SEK 1.5 billion,
SEK 300 M was recognized in 2013, SEK 1.1 billion in 2014 and the
remaining part will be recognized in the fi rst quarter 2015. This is an
effect of Volvo Group not applying hedge accounting. The hedge is pre-
sented in the cash fl ow statement as Changes in loans, net. None of these
two items will hence impact the Operating cash fl ow.
Read more in Note 29 Cash fl ow regarding Changes in loans, net.
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FINANCIAL INFORMATION 2014