Volvo 2014 Annual Report Download - page 72

BOARD OF DIRECTORS’ REPORT 2013 GROUP PERFORMANCE SIGNIFICANT EVENTS
Volvo CE transfer backhoe loaders and motor graders to
SDLG to improve profi tability
As part of the Volvo Group’s ongoing activities to improve profi ta-
bility and reduce costs, Volvo CE on November 13, 2014
announced that it will discontinue development and production of
its current product line of Volvo-branded backhoe loaders and
motor graders. In the future, these products will instead be manu-
factured by Volvo CE’s Chinese company SDLG. Combined with
other effi ciency enhancement measures, this will result in a work-
force reduction of about 1,000 employees, of whom the majority
is in Poland, the U.S. and Brazil.
Provision for expected credit losses for Volvo CE
On November 21, 2014 it was announced that Volvo CE’s operat-
ing income for the fourth quarter of 2014 would be negatively
impacted by a provision for expected credit losses in China. The
provision impacted the operating income in the fourth quarter of
2014 in an amount of SEK 660 M.
Provision related to EU antitrust investigation
After an evaluation of the Statement of Objections, issued by the
European Commission on November 20, 2014 in the on-going anti-
trust investigation relating to the time period prior to January 18,
2011, the Volvo Group on November 25, 2014 announced that it had
decided to make a provision of EUR 400 M. The provision impacted
the operating income negatively in the fourth quarter 2014.
Volvo issued hybrid bond
On December 4, 2014 AB Volvo announced that it had successfully
issued a hybrid bond via its wholly-owned subsidiary Volvo Treasury
AB, amounting to EUR 1.5 billion in order to further strengthen the
Group’s balance sheet and prolong the maturity structure of the
debt portfolio. The hybrid bond is accounted for as a loan and sub-
ordinated to all other fi nancial liabilities currently outstanding. The
hybrid bond will be eligible for 50% equity treatment from both
Moody’s and S&P when calculating Volvo’s credit ratios.
EVENTS AFTER BALANCE SHEET DATE
Completion of the acquisition of 45% of Dongfeng
Commercial Vehicles
On January 5, 2015 AB Volvo announced that it had completed
the acquisition of 45% of the Chinese automotive manufacturer
Dongfeng Commercial Vehicles Co., Ltd (DFCV). The purchase
consideration amounted to RMB 5.5 billion. DFCV includes most
of Dongfeng’s operations in heavy- and medium-duty commercial
vehicles. The transaction strengthens the Volvo Group’s position
in medium-duty trucks signifi cantly while the Group will become
one of the world’s largest manufacturers of both medium- and
heavy-duty trucks.
In 2013, DFCV’s pro-forma sales amounted to RMB 35 billion
(SEK 37 billion) and the pro-forma operating income to RMB 950
million (SEK 1 billion). The total Chinese market for heavy-duty
trucks amounted to about 774,000 vehicles in 2013, while the
corresponding fi gure for the medium-duty truck market was
286,000 vehicles. DFCV had a leading position in both the heavy-
duty and medium-duty segments, with sales of 120,600 heavy-
duty trucks and 51,000 medium-duty trucks, corresponding to
market shares of 15.6% and 17.8%, respectively.
During the fi rst three quarters of 2014, DFCV’s sales amounted
to RMB 26 billion (SEK 28 billion) and the operating profi t to RMB
1.1 billion (SEK 1.2 billion). During the same period, DFCV sold
85,000 heavy-duty and 31,000 medium-duty trucks. On Septem-
ber 30, 2014, DFCV had a net fi nancial asset of RMB 3 billion
(SEK 3.6 billion).
Detailed information about the events is available at
www.volvogroup.com
THE THIRD QUARTER
01/07/2014 Invitation to Volvo Group Capital Markets Day in Ghent, Belgium on March 5, 2015 01/07/2014 Volvo Group signs EUR 3.5 bn revolving credit facilities
03/07/2014 Invitation to the Volvo Group report on the fi rst six months 2014 18/07/2014 Volvo Group – the second quarter 2014 19/07/2014 Volvo Group ordered
by US Court to pay penalties in engine emission case 21/07/2014 Volvo Buses and ABB in electro mobility cooperation 13/08/2014 Olof Persson appointed co-chair-
man of the UN advisory group 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 Volvo Treasury AB (publ) 11/09/2014 The Volvo Group one of the world’s most sustainable companies 18/09/2014 Truck deliveries in
August 2014
Volvo CE will transfer backhoe loaders
and motor graders to SDLG to
improve profi tability.
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