Volvo - Report on 2000 operations

Volvo - report on 2000 operations 2000 1999 Net sales, SEK M 130 070 125 019 Operating income, excluding items 6 154 6 726 affecting comparability, SEK M Items affecting - 26 695 comparability, SEK M* Operating income, SEK M 6 154 33 421 Income after financial 6 246 34 596 items, SEK M Net income, SEK M 4 709 32 222 Income per share excluding items affecting 11.20 12.40 comparability , SEK Return on shareholders' equity, excluding 5.0 8.0 items affecting comparability , % * Items affecting comparability for 1999 concerns gain on sale of Volvo Cars to Ford Motor Company. * Volvo's acquisition of Renault's truck business accomplished. * Net sales of the Volvo Group increased by 4%, to SEK 130,070 M in 2000. A continuing weak trend of business in North America was offset by a positive trend in Europe, Asia and South America. * Volvo Trucks' profit improvement program develops well and contributed to a strong improvement in results in the fourth quarter. * Volvo Penta's and Volvo Aero's operating income was the best ever. * Operating income in 2000 amounted to SEK 6,154 M, compared with SEK 6,726 M a year earlier (excluding the sale of Volvo Cars). * The Board of Directors proposes that a dividend of SEK 8.00 per share be paid for 2000. Furthermore, the Board of Directors has today decided to repurchase a maximum of 10 percent of the Company shares. Comments by the Chief Executive Officer Effective January 2, 2001, as a result of the acquisition of Mack Trucks and Renault V.I., the Volvo Group has been substantially strengthened. The volumes of our truck business have been nearly doubled, and we are the largest manufacturer in the heavy-truck segment in Europe and the second largest in the world, with significantly improved volumes in the medium- heavy segments as well. In the heavy diesel engine sector we are among the four very largest producers in the world. The new organization that was established in connection with the acquisition is designed to develop and strengthen the three truck brand names, based on a common industrial platform. Accordingly, Mack, Renault and Volvo are competing brands in the market, as they were before, while purchasing, product planning and product development is being coordinated in a common structure. The development and production of engines has been transferred to a separate business unit, with the task of supplying the entire Volvo Group with engines and other driveline components. The operations in Mack, Renault and Volvo complement each other well in terms of both markets and products. This factor, combined with the new industrial structure, is expected to result in larger volumes and significantly lower costs. The savings will increase as the number of common components increases and we change over to a common basic engine program. The purchase price for Mack Trucks and Renault V.I. amounts to approximately SEK 10.7 billion (see also page 19). As earlier announced, the goodwill amount and the structural costs in connection with the acquisition will be published when the opening balance is complete, however, not later than in connection to the report on the first quarter of 2001. During 2000, the business areas introduced a number of new products that were very well received in the markets. They included new vocational trucks for the North American market, a new medium-heavy truck in Europe, a new series of articulated haulers, new diesel engines for marine and industrial use, and a new tourist bus built on the new platform for our large buses. In terms of earnings, Marine and Industrial Power Systems, Finance, Construction Equipment and Aero were successful, despite the downturn in North America. Marine and Industrial Power Systems had its best earnings ever, with a very strong fourth quarter. During the last year, the business area began the most comprehensive renewal and broadening of its product program in its history. Finance, which has the main part of its operations within the truck business, was successful in limiting credit losses in North America and is today our fastest-growing business area. Construction Equipment continues to show good earnings capacity despite a weaker demand in North America, which had an impact in the fourth quarter. Aero, which continues to be stable, signed several important contracts with leading manufacturers during the year. In North America the entire truck industry is facing problems in the form of large inventories of used trucks and price pressures that have also affected Volvo's North American operations, whose earnings were unsatisfactory. Since midyear Volvo Trucks has been conducting a comprehensive turn-around program to restore profitability. The program had substantial effects in the autumn, including improved profitability in Europe. This, combined with the strong growth in Asia, Eastern Europe and South America, contributed to Trucks' improvement in the fourth quarter. The business climate in North America was also difficult for buses, which is reflected in earnings. We cannot expect any major improvements in 2001, but there is a favorable trend within Buses that is based on an increasing volume of business and coordination between the units within Buses. We have a very exciting time ahead of us, with new and strong brand names and an organization that has a global presence and expertise. The integration of Mack Trucks and Renault V.I. has begun in a positive atmosphere, which is very important for the future development. With the acquired units we are approaching the sales volume that the Volvo Group had before the sale of Volvo Cars, but with the significant difference that the Volvo Group is now homogeneous. This gives us benefits of scale that were not possible earlier and the Volvo Group is now better equipped to develop competitive products and services in all business areas. We look forward to continuing to develop the Volvo Group, based on the new platform that we have created. Our distinct ambition is to create profitable growth in all of the Volvo Group's business areas. Leif Johansson Significant events and structural transactions in the fourth quarter Competition authorities approve Volvo's acquisition of Mack Trucks and Renault V.I. Volvo's acquisition of Renault's truck business became effective January 2, 2001. The acquisition implies that AB Volvo acquires all the shares of Renault's truck operations - Mack Trucks and Renault V.I. - in exchange for 15 percent of AB Volvo's shares. The competition authorities in the European Union and the United States completed their examination of AB Volvo's proposed acquisition of Renault's truck operations during the second half of 2000 and decided to approve the transaction after Volvo and Renault had agreed to make certain concessions. The concessions mean that; AB Volvo will divest the LCOE business (special trucks with the cab directly over the engine and with a low entrance), conducted by Volvo Trucks in the US, within three months following the approval from the American competition authorities, AB Volvo will divest its shareholding in Scania within a period of three years following the same date, and Renault V.I. will divest its 50% holding in RS Hansa Oy, a Finnish truck distributor, and Renault's and Iveco's cooperation in the jointly owned Irisbus bus company will cease. During 2000 AB Volvo repurchased 10 percent of the Company's outstanding shares. On January 2, 2001 these shares were transferred to Renault S.A. as partial payment for the shares of Mack Trucks and Renault V.I. Volvo plans to repurchase additional shares in order to be able to transfer the remaining five percent of the Company's shares to Renault S.A. as final payment. Significant events and structural transactions earlier in 2000 Effective in 2000, all financing operations within the Volvo Group were brought together in Finance, a new Groupwide business area. The new business area includes all of Volvo's customer-financing operations; Volvo Treasury, the internal bank; Volvo's insurance operations and Danafjord, the Volvo Group's real estate company. In February Volvo Aero sold its operation that produced truck components to the Finnveden engineering group. The sale was part of Volvo Aero's program to concentrate on core operations. On March 14 the European Union Commission rejected AB Volvo's application for approval of its proposed acquisition of Scania. As a result of the Commission's decision, AB Volvo was not able to fulfill its agreement to acquire Investor's holding of Scania's shares, or to implement its public offer to Scania's shareholders. Volvo's present holding in Scania amounts 30.6 percent of the voting rights in the company and 45.5 percent of the company's share capital. During 2000 AB Volvo repurchased 10 percent of its outstanding shares - 13,860,494 Series A shares and 30,291,594 Series B shares. The transaction was carried out through an offer to repurchase shares held by Volvo shareholders and, to a minor extent, through additional purchases in the open market. Following the repurchase transactions, 397,368.797 Volvo shares are outstanding; the average number of shares outstanding in 2000 was 421,683,857. On January 2, 2001, the repurchased shares were transferred to Renault S.A. as partial payment for the shares of Mack Trucks and Renault V.I., whereby the number of outstanding Volvo shares amounts to 441,520,885. Following delivery of these shares to Renault S.A., AB Volvo does not own any of its own shares. Volvo's repurchase of its own shares transferred a total of SEK 11.8 billion to AB Volvo's shareholders. In June, Tryggve Sthen, formerly president of Volvo Construction Equipment, was named the new president of Volvo Trucks. He succeeded Karl- Erling Trogen, who continues to serve on Volvo's Group Executive Committee with responsibility for synergy and integration matters, as well as Group responsibility for certain developing markets. Tony Helsham, formerly president of Volvo Construction Equipment Korea, has been named the new president of Volvo Construction Equipment and a member of the Group Executive Committee. In June Volvo Bus Corporation and Shanghai Automotive Industry Corporation (SAIC) signed an agreement covering the establishment of a joint-venture company to manufacture and sell city and commuter buses. During the third quarter Volvo and Mitsubishi signed an agreement specifying the terms for Volvo's acquisition of 19.9 percent of the shares of Mitsubishi Fuso Truck & Bus Company. In connection with the conversion of its truck and bus divison into a subsidiary of Mitsubishi Motors in June 2001, a special issue of new shares will be implemented. Volvo will then make a capital contribution to Mitsubishi Fuso Truck & Bus Company totaling approximately SEK 3.2 billion and will receive newly issued shares equal to 19.9 percent of the voting rights and capital in the new company. In accordance with the original timetable, this transaction is scheduled to take place July 1, 2001. In addition to the above fixed portion of the purchase price, Volvo may also make a supplementary payment, depending on the development of earnings in Mitsubishi Fuso Truck & Bus Company in the years 2002 to 2005. After the agreement was reached, DaimlerChrysler renegotiated its agreement with Mitsubishi, resulting in ongoing discussions with respect to the future cooperation between Volvo and Mitsubishi. The Volvo Group - 2000 Net sales Net sales of the Volvo Group for the full-year 2000 amounted to SEK 130.070 M, compared with SEK 125,019 M in 1999, an increase of 4%. Adjusted for the effects of foreign exchange movements, the increase was 2%. All business areas with the exception of Trucks reported increases in net sales. The growth rates for Buses and Marine and Industrial Power Systems weakened slightly in the fourth quarter but were substantial - 17% and 15% respectively - for the full year. Trucks' net sales for the full year amounted to SEK 62,196 M, slightly lower than in the preceding year. The North American market continued to weaken, with a resulting negative impact on Trucks' sales. Deliveries declined by 31%, but the company was able to maintain its share of the market. The rate of growth for Construction Equipment rose in the fourth quarter and the increase for the full year amounted to 6%. In contrast, growth in Aero was weaker in the fourth quarter but there was a stable 8% increase in sales for the full year. Net sales for the Volvo Group as a whole amounted to SEK 35,932 M (35,213) in the fourth quarter, an increase of 2%. Except in North America, Volvo Group net sales developed well in all markets, also in the fourth quarter. Sales in Western Europe, which constitute more than 50% of the Group total, increased by 3%. Sales in the North American market declined by 5% for the full year and by 11% in the fourth quarter. The decrease was mainly attributable to Trucks. The favorable trend of business continued in Asia, where Group sales rose by 45% for the full year, but from a low level. Trucks, in particular, is benefited from the economic recovery in Asia, where its deliveries more than doubled. Eastern Europe and South America also reported strong growth during the year and the increases relative to 1999 amounted to 36% and 31%, respectively. Eastern Europe showed an especially strong increase, 59%, in the fourth quarter. The increases for the other markets were attributable mainly to South Africa, where sales nearly tripled during the year. The percentage of net sales attributable to Volvo's growth markets - Asia, Eastern Europe and South America - continued to increase and amounted to 14% of Group sales. The comparable figure in 1999 was 10%. Operating income Reported operating income for the Volvo Group in 2000 amounted to SEK 6,154 M (1999: SEK 6,726 M, excluding the sale of Volvo Cars). Operating income in the fourth quarter was strengthened as a result of a recovery in Trucks and amounted to SEK 1,689 M (2,125). Trucks' operating income for the full year amounted to SEK 1,414 M (3,247). Operating income in the fourth quarter, Trucks' strongest quarter during the year, amounted to SEK 685 M (1,116). The problems in North America are continuing, with declining deliveries and a severe competitive situation. This was offset in part by continuing strong demand in Western Europe in the fourth quarter, with larger volumes and gradually improved margins. The turn-around program that was initiated in June also helped to strengthen operating income mainly through lower levels of cost in production and product development, and as a result of realized price increases. All business areas except Trucks and Construction Equipment reported higher operating income in 2000, compared with 1999, as well as operating margins in line with, or exceeding, the preceding year's levels. Construction Equipment, with an operating margin of 8%, has the highest earnings capacity in the Volvo Group. Operating income for 2000 includes SEK 610 M pertaining to realized gains on the remaining securities portfolio in Volvia (of which SEK 210 M in the first quarter and SEK 400 M in the second quarter). Furthermore, operating income includes surplus funds of SEK 683 M from SPP, booked in the second quarter, distributed as follows: Trucks, SEK 192 M; Buses, SEK 22 M; Construction Equipment, SEK 147 M; Marine and Industrial Power Systems, SEK 41 M; Aero, SEK 106 M; and Finance, SEK 38 M and other operations, SEK 137 M (see also page 19.) Income also includes SEK 520 M resulting from a favorable adjustment of gain on the sale of Volvo Cars, of which SEK 375 pertains to the fourth quarter. The adjustment of income was due to a supplement to the purchase price and to the fact that part of a reserve for restructuring costs proved to be unnecessary. Operating income in the second quarter was charged with provisions within Volvo Trucks in the amount of approximately SEK 160 M. Operating income in 1999 included a capital gain of SEK 180 M in connection with the sale of a company in Construction Equipment, as well as the reversals of reserves of approximately SEK 240 M for customer- financing operations. The Volvo Group's operating margin for the year amounted to 4.7%, compared with 5.4% in 1999; the margin in the fourth quarter was 4.7% (6.0). Income from investments in associated companies Income from investments in associated companies - primarily Scania, Bilia and Volvofinans - amounted to SEK 444 M (567). On March 14, 2000 the European Union Commission rejected Volvo's application for approval of Volvo's proposed acquisition of Scania. As a result, effective in the second quarter of 2000, Volvo's holding in Scania is no longer reported in accordance with the equity method. The dividend of SEK 637 M received from Scania in the second quarter reduced the book value of the holding. Net interest income/expense Net interest expense for the full-year 2000 amounted to SEK 257 M (income 307). The decrease was due largely to lower net financial assets. Furthermore, net interest expense was charged with increased borrowings in Poland. A higher return on financial assets and lower costs of borrowing in Brazil and South Korea had a positive impact on net interest expense, compared with last year. Net interest expense in the fourth quarter amounted to SEK 237 M, compared with SEK 133 M in the third quarter. The decrease was in part attributable to lower net financial assets compared with the third quarter. Taxes Tax expenses for full-year 2000 amounted to SEK 1,510 M (2,270), corresponding to an average tax rate of 24% (29% excluding the sale of Volvo Cars). The Volvo Group's average tax rate during 2000 was affected favorably by the supplementary payment received for Volvo Cars of SEK 375 M, for which no income tax was incurred. In addition, the tax expenses reported during the year were reduced through revaluation of provisions in prior years for deferred tax receivables. The reported tax expenses pertain primarily to current taxes in Swedish and foreign Volvo Group companies. Net sales by market area Fourth quarter Year Change SEK M 2000 1999 2000 1999 in % Western Europe 19 401 19 116 68 182 66 158 +3 Eastern Europe 1 408 888 3 933 2 899 +36 North America 10 046 11 333 40 655 43 002 -5 South America 1 318 1 123 5 182 3 942 +31 Asia 2 930 1 976 8 765 6 028 +45 Other countries 829 777 3 353 2 990 +12 Total 35 932 35 213 130 070 125 019 +4 Consolidated income Fourth quarter Year statements SEK M 2000 1999 2000 1999 Net sales 35 932 35 213 130 070 125 019 Cost of sales (28 610) (27 967) (104 548) (99 501) Gross income 7 322 7 246 25 522 25 518 Research and development (1 291) (1 142) (4 876) (4 525) expenses Selling expenses (2 892) (2 379) (10 140) (8 865) Administrative expenses (1 303) (1 062) (4 974) (4 791) Other operating income and (147) (538) 622 (611) expenses Items affecting - - - 26 695 comparability * Operating income 1 689 2 125 6 154 33 421 Income from investments in associated companies 14 89 444 567 Income from other (33) (28) 70 170 investments Interest income and 312 418 1 588 1 812 similar credits Interest expenses and (549) (280) (1 845) (1 505) similar charges Other financial income and (46) 92 (165) 131 expenses Income after financial 1 387 2 416 6 246 34 596 items Taxes (194) (715) (1 510) (2 270) Minority interests in net (6) (44) (27) (104) (income) loss Net income 1 187 1 657 4 709 32 222 *Items affecting comparability for 1999 concerns gain on the sale of Volvo Cars to Ford Motor Company. Condensed income statement - Finance Fourth quarter Year SEK M 2000 1999 2000 1999 Net sales 2 695 2 293 9 678 8 637 Operating income 127 335 1 396 977 Income from associated companies 24 38 103 89 Income (loss) after financial items 151 373 1 499 1 066 Taxes (41) (104) (471) (316) Net income 110 269 1 028 750 Gross and operating margins Fourth quarter Year % 2000 1999 2000 1999 Gross margin 20.4 20.6 19.6 20.4 Research and development expenses in % of net sales 3.6 3.2 3.7 3.6 Selling expenses in % of net sales 8.0 6.8 7.8 7.1 Administrative expenses in % of net sales 3.6 3.0 3.8 3.8 Operating margin, excluding items affecting comparability 4.7 6.0 4.7 5.4 Operating margin 4.7 6.0 4.7 26.7 Consolidated balance Volvo Group excl Volvo Group sheets Finance 1) Finance total SEK M 001231 991231 001231 991231 001231 991231 Assets Intangible assets 6 781 6 518 144 100 6 925 6 618 Property, plant and 19 652 17 318 2 579 2 470 22 231 19 788 equipment Assets under operating 4 245 1 611 11 883 10 726 14 216 12 337 leases Shares and 37 366 35 296 778 744 30 481 29 213 participations Long-term customer finance receivables 10 0 23 026 17 817 22 909 17 817 Long-term interest- 5 091 17 605 23 0 5 032 17 605 bearing receivables Other long-term 2 186 2 337 90 147 2 232 2 484 receivables Inventories 22 998 21 053 553 385 23 551 21 438 Short-term customer finance receivables 5 9 19 168 16 487 18 882 16 496 Short-term interest 14 195 1 012 1 - 14 196 1 012 bearing receivables Other short-term 22 696 18 738 2 627 2 797 24 120 21 535 receivables Marketable securities 5 682 17 990 3 886 2 966 9 568 20 956 Cash and bank 5 276 6 475 1 764 1 838 6 400 8 313 Total assets 146 183 145 962 66 522 56 477200 743 195 612 Shareholders' equity and liabilities Shareholders' equity 88 338 97 692 7 663 6 827 88 338 97 692 Minority interests 593 544 0 0 593 544 Provision for post- employment benefits 2 619 2 118 13 12 2 632 2 130 Other provisions 8 277 9 861 6 620 4 971 14 941 14 832 Loans 18 233 12 206 49 048 41 139 66 233 53 345 Other liabilities 28 123 23 541 3 178 3 528 28 006 27 069 Shareholders' equity and 146 183 145 962 66 522 56 477200 743 195 612 liabilities 1) The business area Finance is reported in accordance with the equity method. 2) The Volvo Group's total assets amounted at year-end to SEK 200.7 billion, corresponding to an increase of SEK 5.1 billion compared with year-end 1999. Translation effects of foreign exchange movements increased the Volvo Group's total assets by SEK 7.2 billion. In addition, the continued growth within the Finance business area resulted in an increase of SEK 6.6 billion (excluding exchange rate effects). Investments in fixed assets and shares and increased capital tied-up in inventories and receivables also contributed to the increase in total assets. Liquid funds declined by SEK 13.3 billion during the year, due mainly to dividends paid and payments in conjunction with the repurchase of own shares (see consolidated cash-flow statement). Shareholders' equity declined during 2000 by SEK 9.4 billion and amounted at year-end to SEK 88.3 billion. The Volvo Group's net income during the year contributed SEK 4.7 billion, while dividends paid and repurchase of own shares reduced equity by SEK 3.1 billion and SEK 11.8 billion, respectively. The remaining increase of SEK 0.8 billion pertains primarily to translation effects due to changes in currency rates. Net financial assets amounted at year-end to SEK 9.4 billion. The change during the year and during the fourth quarter is specified in the accompanying table. Change of Net financial assets* Fourth quarter Year Beginning of period 9.0 28.8 Cash flow from operating 1.9 3.6 activities Investments in fixed assets and (1.7) (5.0) leasing assets, net Operating cash flow, excluding Finance 0.2 (1.4) Acquisition of shares in Scania - (1.3) Dividend paid - (3.1) Repurchase of own shares - (11.8) Other, including changes in exchange rates 0.2 (1.8) Total change 0.4 (19.4) December 31, 2000 9.4 9.4 *Effective in 2000, the Volvo Group's net financial assets are calculated excluding the Finance business area, since interest income and interest expense in Volvo Group operations are reported in consolidated operating income. The change resulted in a decrease of SEK 2.2 billion in net financial assets as of January 1, 2000. Key ratios Jan - Dec Jan - Dec 2000 1999 Income per share, SEK 11.20 73.00 Income per share, excluding items affecting 11.20 12.40 comparability, SEK Return on 5.0 34.9 shareholders' equity, % Return on shareholders' equity excluding items 5.0 8.0 affecting comparability, % Net financial assets at end 9.4 28.8 of period, SEK billion Net financial assets at end of period as 10.6 29.3 percentage of shareholders' equity and minority interests Shareholder' equity and minority 44.3 50.2 interests as percentage of total assets Shareholders' equity and minority interests 60.8 67.3 excluding Finance, as percentage of total assets Cash flow statement Volvo Group Volvo Group excl Finance Finance total SEK billions 2000 1999 2000 1999 2000 1999 Operating activities Operating income 1) 4.8 5.7 1.4 1.0 6.2 6.7 Depreciation and amortization 3.8 3.1 2.5 2.1 6.3 5.2 Other non-cash items (1.2) 0.2 0.4 0.3 (0.8) 0.5 Change in working capital (3.0) (1.7) (0.3) 0.7 (3.3) (1.0) Financial items and income (0.8) (1.7) 0.4 0.0 (0.4) (1.7) taxes Cash flow from operating 3.6 5.6 4.4 4.1 8.0 9.7 activities Investing activities Investments in fixed assets (5.1) (4.7) (0.3) (0.2) (5.4) (4.9) Investments in leasing assets (0.6) (0.5) (5.1) (5.1) (5.7) (5.6) Disposals of fixed assets and leasing assets 0.7 0.8 1.4 0.8 2.1 1.6 Customer Finance receivables, 0.0 0.1 (4.5) (7.2) (4.5) (7.1) net Operating cash-flow (1.4) 1.3 Investments in shares, net (1.6) (25.9) - - (1.6) (25.9) Loans to external parties, net 0.3 (3.2) - - 0.3 (3.2) Acquired and divested 0.0 31.0 - - 0.0 31.0 operations Cash flow after net (2.7) 3.2 (4.1) (7.6) (6.8) (4.4) investments Financing activities Increase in bond loans and other loans 8.1 16.3 Repurchase of own shares (11.8) - Dividends paid to AB Volvo's (3.1) (2.6) shareholders Other 0.0 (0.1) Change in liquid funds excl (13.6) 9.2 translation differences Translation difference on liquid 0.3 (0.2) funds Change in liquid funds (13.3) 9.0 1) For 1999, excluding the gain on sale of Volvo Cars. In the cash flow statements, the effects of major acquisitions and divestments of subsidiaries are excluded from other changes in the balance sheet. The effects of foreign exchange movements in connection with the translation of the accounts of foreign subsidiaries to Swedish kronor have been excluded since they do not affect cash flow. The Volvo Group's cash flow Excluding Finance, the Volvo Group's operating cash flow during the year was negative in the amount of SEK 1.4 billion (positive 1.3). The weaker result, compared with the preceding year, was due mainly to lower operating income, an increase in the amount of capital tied-up in inventories and receivables and increased investments. However, the operating cash flow was improved during the last six months of the year, amounting to SEK 0.3 billion (of which SEK 0.2 billion during the fourth quarter). The improvement is partly explained by an action program to improve the Volvo Group's cash flow, initiated during the third quarter. The action program includes a review of the Volvo Group's operating capital tied up and reconsideration of earlier plans for production and investments, among other measures. The Group's cash flow after net investments was negative in the amount of SEK 6.8 billion (4.4). Apart from the operating cash flow, this item included investments in shares of SEK 1.6 billion and a negative cash flow of SEK 4.1 billion within the business area Finance, due to a continued expansion within this area. Financial review by business area Net sales Fourth quarter Year Change SEK M 2000 1999 2000 1999 in % Trucks 17 651 18 040 62 196 63 010 (1) Buses 4 910 4 390 17 187 14 713 +17 Construction Equipment 5 102 4 788 19 993 18 882 +6 Marine and Industrial Power Systems 1 679 1 591 6 599 5 761 +15 Aero 2 882 2 842 10 713 9 953 +8 Finance 2 695 2 293 9 678 8 637 +12 Other 3 465 3 429 12 669 11 934 +6 Eliminations (2 452)(2 160) (8 965) (7 871) - Volvo Group 35 932 35 213 130 070 125 019 +4 Operating income Fourth quarter Year SEK M 2000 1999 2000 1999 Trucks 685 1 116 1 414 3 247 Buses 162 156 440 224 Construction Equipment 261 353 1 594 1 709 Marine and Industrial Power Systems 63 49 484 314 Aero 161 190 621 584 Finance 127 335 1 396 977 Other 230 (74) 205 (329) Operating income* 1 689 2 125 6 154 6 726 Items affecting comparability - - - 26 695 Operating income 1 689 2 125 6 154 33 421 *) excluding items affecting comparability 1999 Operating margin Fourth quarter Year % 2000 1999 2000 1999 Trucks 3.9 6.2 2.3 5.2 Buses 3.3 3.6 2.6 1.5 Construction Equipment 5.1 7.4 8.0 9.1 Marine and Industrial Power Systems 3.8 3.1 7.3 5.5 Aero 5.6 6.7 5.8 5.9 Finance 4.7 14.6 14.4 11.3 Operating margin* 4.7 6.0 4.7 5.4 Operating margin 4.7 6.0 4.7 26.7 *) excluding items affecting comparability 1999 Trucks Net sales by market area Fourth quarter Year Change SEK M 2000 1999 2000 1999 in % Europe 10 810 10 192 36 541 35 015 +4 North America 4 325 5 866 17 201 22 303 (23) South America 915 673 3 111 2 190 +42 Asia 1 053 933 3 432 2 010 +71 Other countries 548 376 1 911 1 492 +28 Total 17 651 18 040 62 196 63 010 (1) During 2000 the total market for heavy trucks in Western Europe increased to a record level of 245,000 (237,000) vehicles, according to preliminary figures. The total market also increased - from relatively low levels - in Southeast Asia, Eastern Asia and Brazil. The total market for heavy (Class 8) trucks in the United States declined by 19%, to 212,000 vehicles, compared with 1999 figures. The market in the U.S. declined by 40% in the fourth quarter compared with the year-earlier quarter. As a result of the decline in the market combined with large inventories of new and used trucks, the competition continued to stiffen, causing cutbacks in production and personnel reductions by most manufacturers. Volvo delivered 81,830 (85,087) medium-heavy and heavy trucks during the year, including 23,139 (23,981) in the fourth quarter. Deliveries in Europe rose by 9%, to 46,143 (42,527) units in 2000, with 13,852 (12,656), an increase of 9%, being delivered in the fourth quarter. Volvo's deliveries in North America declined by 31%, to 23,610 (34,303) in 2000. Deliveries in North America in the fourth quarter amounted to 5,936 (8,663) trucks. Deliveries in South America during the year increased by 16%, to 4,534 (3,901) trucks, and deliveries in Asia, which amounted to 5,554 (2,723) trucks, more than doubled. Volvo Trucks' total order bookings during 2000 declined by 6%, to 74,067 units, compared with orders in 1999. Orders booked in North America in the fourth quarter were 15% lower than a year earlier. Volvo Trucks' total order backlog at year-end amounted to 24,476 trucks, 19% less than on the same date a year earlier. The decrease was largely related to the decline of the market in North America. Volvo's share of the market for heavy trucks in Western Europe at year-end amounted to 14.9% (15.0). Its share of the market for Class 8 trucks in the U.S. as of December 31 amounted to 10.7% (10.7), and its share of the market in Brazil at year-end was 27.4% (27.3). Volvo Trucks' net sales in 2000 amounted to SEK 62,196 M (63,010), of which SEK 17,651 M (18,040) was booked in the fourth quarter. Operating income for the full year declined to SEK 1,414 M compared with SEK 3,247 M in the preceding year. The decrease in income was attributable to the continuing sharp reduction in the volume of business and the price pressure in North America. The profit improvement program that was begun in June to strengthen Volvo Trucks' earnings capacity is developing well. Among other measures, improvements in efficiency have been made in production, product- development costs have been normalized and product costs have been reduced. Price increases have also been implemented in Western Europe, among other markets. Operating income in the fourth quarter amounted to SEK 685 M and was the highest during the year. Volvo Trucks' operating margin declined to 2.3% (5.2). The operating margin in the fourth quarter was 3.9% (6.2). During the year Volvo Trucks introduced two new models, the medium-heavy Volvo FL in Europe and the Volvo VHD in the heavy-truck segment in North America. The Volvo VHD, which is built on Volvo's global-module platform, has been developed initially for vocational use but is also suitable for many other applications. The Volvo VHD, which was well received when introduced on the market, strengthens Volvo's position in the important vocational segment in the North American market. This segment has not experienced the same decline in the market that has affected the demand for long-haul trucks. Volvo's deliveries of trucks in the medium-heavy class (less than 16 tons total weight) increased by 39% in 2000. The new Volvo FL model, which was well received in the market and which has many technical features in common with the heavy-truck program, contributed substantially to the increase. Buses Net sales by market area Fourth quarter Year Change SEK M 2000 1999 2000 1999 in % Europe 2 119 1 816 6 949 5 961 +17 North America 2 051 2 089 7 723 6 871 +12 South America 164 160 732 469 +56 Asia 425 174 1 269 943 +35 Other countries 151 151 514 469 +10 Total 4 910 4 390 17 187 14 713 +17 The total market for heavy buses increased in 2000, compared with 1999. The primary increases were noted in Mexico and South America. Volvo delivered 11,015 (9,504) buses and bus chassis in 2000, 16% more than in 1999. During the fourth quarter 2,975 (2,905) buses and bus chassis were delivered. The percentage of deliveries of complete buses produced by Volvo amounted to 47% (51) of total sales during the year. Volvo's share of the market for heavy buses in Europe was 18%, compared with 15% a year earlier. There was a notably favorable trend in Great Britain, where Volvo introduced new products successfully. The Nordic markets are also showing strong growth. The order backlog at December 31, 2000 was 25% smaller than on the same date a year earlier. There is a negative trend of order bookings in North America, the Middle East and Europe, due mainly to a change in product- generations. Net sales increased to SEK 17,187 M (14,713), due to larger volumes of business in Europe and to the favorable effects of foreign exchange movements. Net sales in the fourth quarter amounted to SEK 4,910 M (4,390). Operating income, which amounted to SEK 440 M (224), nearly doubled, due to increased sales and the positive effects of an improved level of costs. Of the total operating income, SEK 162 M (156) was attributable to the fourth quarter. Strong sales, high utilization of capacity and the continuing favorable trend in Mexico were offset to a certain extent by smaller sales of tourist buses in North America. The operating margin for the year was 2.6% (1.5) and the margin in the fourth quarter was 3.3% (3.6). The Volvo 8500, the first bus built on the new TX product platform, was introduced during the year. The common TX platform constitutes a modernization of Volvo Buses' product program that will result in the replacement of many of the company's present models in the years ahead. In June, Volvo Buses signed a joint-venture agreement with Shanghai Automotive Industry Corporation (SAIC) covering the production and sale of city and commuter buses in China. The first jointly produced bus was manufactured in September. An expansion of production facilities in Mexico was inaugurated parallel with the successful market introduction of Volvo's 7550 model. Construction Equipment Net sales by market area Fourth quarter Year Change SEK M 2000 1999 2000 1999 in % Europe 2 609 2 714 10 284 10 094 +2 North America 1 396 1 268 5 823 5 725 +2 South America 224 116 776 498 +56 Asia 778 539 2 484 1 903 +31 Other countries 95 151 626 662 (5) Total 5 102 4 788 19 993 18 882 +6 The total market for heavy construction equipment increased by 3% in 2000, compared with 1999. The market in Western Europe grew by 6%, while the market in North America declined by 12%. The total increase in the other markets amounted to 12%. The world market in the segment for compact machines increased by 4% in 2000. The market in North America increased by 28% and the growth in Europe amounted to 12%, while the market in the rest of the world declined by about 7%. The total world market declined by 3% in the fourth quarter, with the market for heavy equipment decreasing by 4% and the segment for the compact machines decreasing by 3%. Volvo Construction Equipment's net sales rose by 6%, to SEK 19,993 M (18,882), of which SEK 5,102 M (4,788), an increase of 7%, was booked in the fourth quarter. Operating income amounted to SEK 1,594 M (1,709), including SEK 261 M (353) in the fourth quarter. Income in the fourth quarter was affected negatively by increased pressure on prices in North America and by costs related to cutbacks in personnel, SEK 46 M. The operating margin for the year was 8.0% (9.1%), one of the highest in the industry. The operating margin in the fourth quarter was 5.1% (7.4%). The value of the order backlog at year-end was 3% higher than on the year- earlier date. However, the order backlog decreased by 5%, compared with the figure at the end of the third quarter. For the first time in the company's history Volvo CE sold more than 21,000 machines in a single year. This represented an increase of approximately 8%, compared with sales in 1999. The number of heavy excavators sold rose by 25%. In the beginning of the year Volvo CE introduced a new, broad generation of excavators that were developed and manufactured in its plant in South Korea. The new "D" generation of wheel-loaders was also launched and the completely new A35D and A40D articulated haulers were presented during the autumn. New products were also presented in both the compact-machine and motor-grader segments. The new products were received very favorably by dealers, customers and the trade press. During the autumn Volvo CE decided to begin producing construction equipment in Volvo's bus plant in Poland. In addition to the industrial advantages, the venture strengthens the company's presence in the increasingly important markets in Eastern Europe. As of January 1, 2001, the final phase of the name change of the company and products from Champion - one of the world leaders in the motor-grader sector - was completed. As a result, all of Volvo CE's products are now being marketed under the Volvo brand name. Marine and Industrial Power Systems Net sales by market area Fourth quarter Year Change SEK M 2000 1999 2000 1999 in % Europe 792 837 3 234 3 012 +7 North America 524 482 2 257 1 770 +28 South America 50 45 160 134 +19 Asia 264 203 794 692 +15 Other countries 49 24 154 153 +1 Total 1 679 1 591 6 599 5 761 +15 The total market in North America and Europe continued to be strong in 2000. The order books of builders of leisure craft in Europe are well filled. The total market for industrial engines in both Europe and the rest of the world continues to be stable. Volvo Penta continued to increase its share of the market in the segment for marine engines and strengthened its position in the industrial-engine sector in Europe. Sales of industrial engines in Asia were marginally higher, while sales in North America showed a sharp increase. Net sales amounted to SEK 6,599 M (5,761), of which SEK 1,679 M (1,591) was booked in the fourth quarter. The increase was attributable to the successful product introductions during the year. Operating income - the best ever for Volvo Penta - which was affected favorably by the continuing larger volumes of sales and by cost-savings, increased 54%, to SEK 484 M (314), of which SEK 63 M (49) in the fourth quarter. The operating margin amounted to 7.3% (5.5%), with a margin of 3.8% (3.1%) in the fourth quarter. During the year Volvo Penta invested heavily in a new product program that resulted in the introduction of a new 12-liter diesel engine for industrial applications and a new series of V8 gasoline-powered engines. A new 5- and 7-liter diesel-engine program for generators was introduced in June. In the beginning of August, AB Volvo Penta and Mitsubishi Heavy Industries Ltd. (MHI) concluded a global agreement covering the distribution of diesel engines in the 25- to 65-liter range. The new Volvo Penta branded product program, substantially expands the engine program for use in marine commercial applications. Aero Net sales by market area Fourth quarter Year Change SEK M 2000 1999 2000 1999 in % Europe 1 645 1 357 4 693 4 576 +3 North America 808 1 305 5 040 4 557 +11 South America 42 42 134 193 (31) Asia 335 108 701 491 +43 Other countries 52 30 145 136 +7 Total 2 882 2 842 10 713 9 953 +8 Air traffic continued to increase throughout the world during the latter part of 2000. The increase in November amounted to 4.6% and the cumulative growth at the end of the year's first eleven months amounted to 7.2%. As expected, the level of deliveries of large commercial aircraft was slightly lower than the record-high 1999 level. In contrast, order bookings continued to be higher than a year earlier. Volvo Aero's net sales rose by 7.6%, to SEK 10,713 M (9,953), in 2000, of this amount, SEK 2,882 M (2,842) in the fourth quarter. Operating income, the best in Volvo Aero's history, amounted to SEK 621 M (584). The Aerospace Components and the Military Engines business areas, in particular, reported increases in both sales and profitability. Operating income in the fourth quarter amounted to SEK 161 M (190). The decrease was due mainly to weaker earnings in after-sales market operations. The operating margin amounted to 5.8% (5.9), including 5.6% (6.7) in the fourth quarter. AGES was affected by the downturn in the after-sales market. An aggressive action program was carried out during the year; among other measures, the number of employees was reduced by more than 15% and several warehouses in North America were closed. At the same time, a leasing company was formed jointly with the Finance business area and new customer services were developed. These combined measures resulted in an improvement of AGES' profitability. A number of important contracts were signed during the year. Under the terms of one, with General Electric Aircraft Engines, Volvo Aero will supply components for the F414 engine in the American F18 E/F Super Hornet fighter aircraft. In December it also became clear that Volvo Aero would participate in the program for the GE90 engine in Boeing's 777-200LR/300ER jumbo aircraft. During the year the Swedish Defense Materiel Administration and Volvo Aero concluded an agreement whereby Volvo Aero will be responsible for maintenance of RM engines for the Swedish Air Forces' JAS 39 Gripen aircraft for the next five years, and for maintenance of the Viggen RM8 engine until the end of 2004. Volvo Aero also signed an important agreement with Dresser-Rand whereby the Land & Marine Gas Turbines business area will assume all after-sales market responsibility for the DR 990 gas turbine. The agreement is strategically important because it creates new opportunities for sales of Volvo Aero's gas turbines. Finance The operations that were included in the Finance business area in 2000 were Volvo's customer-financing operations, Volvo's insurance operations, Volvo Treasury (the Volvo Group's internal bank), Danafjord (the Volvo Group's real estate company), and the associated company, Volvofinans. Operating income for the year 2000 amounted to SEK 1,396 M (977), of which SEK 610 M pertained to gain on the sale of Volvia's securities portfolio. Effective in the second quarter of 2000, Volvo Treasury's income has been included in Finance's operating income. (see also page 20.) Operating income in the fourth quarter amounted to SEK 127 M (335). Income in the fourth quarter of 1999 included approximately SEK 185 M that pertain to the reversal of reserves that had been established earlier for operations in Eastern Europe, among other purposes. The decline in earnings compared with the preceding year was due primarily to larger credit losses from truck financing in operations in North America during the second half of the year. Adjusted for the sale of securities, including the lower yield from Volvia's portfolio compared with the preceding year, the surplus fund from SPP, Volvo Treasury's income and the reversal of reserves in 1999, Finance's operating income declined by 8%, compared with year-earlier income. The total volume of new financing in 2000 amounted to SEK 20.6 billion, of which SEK 15.5 billion (75%) pertained to financing of Volvo trucks. The degree of penetration, in the markets where the Finance business area is offering financing on sales of new trucks, amounted to 31% in 2000, compared with a 26% degree of penetration in 1999. Volvo Finance's total assets as of December 31, 2000 amounted to SEK 66.5 billion, of which SEK 53.6 billion was in the credit portfolio. Adjusted for the effects of foreign exchange movements, the credit portfolio increased by 14% in 2000. Approximately 73% of the credit portfolio were related to truck financing, 11% to the financing of construction equipment and 13% to bus financing. The remaining 3% were related mainly to the remaining financing of passenger cars. Total reserves amounted to 2.7% of the credit portfolio, of which the reserve for residual-value risk amounted to 0.4%. Realized credit losses in 2000 amounted to SEK 411 M, compared with SEK 277 M in 1999. The negative effect on income for the year of changes in reserves and realized credit losses amounted to SEK 397 M. Number of employees As of December 31, 2000, the Volvo Group had 54,266 employees, compared with 53,470 at the end of 1999. The increase is attributable primarily to employees in acquired companies. Parent Company Operating income includes a surplus fund of SEK 89 M from SPP. Income from investments in Volvo Group companies includes dividends in the amount of SEK 589 M (996) and net Group contributions received totaling SEK 928 M (1,416). This also includes a capital gain of SEK 382 M (17,784) related to the 1999 sale of Volvo Personvagnar Holding AB to Ford Motor Company. Income from other shares and participations includes a dividend of SEK 637 M (180) from Scania AB. Parent Company income statement SEK M 2000 1999 Net sales 377 459 Operating income (300) (588) Income from investments in Volvo Group companies 1 558 18 728 Income from investments in associated companies (166) (11) Income from other shares and participations 663 195 Interest income and expenses (87) (6) Other financial income and expenses (44) 72 Income after financial items 1 624 18 390 Allocations (133) (227) Taxes (117) 384 Net income 1 374 18 547 Proposed dividend and repurchase of Company shares The Board of Directors proposes that the Annual General Meeting approve payment of a dividend of SEK 8,00 per share for 2000, or a total of SEK 3,532 M. The dividend paid in the preceding year was SEK 7,00 per share. Furthermore, the Board of Directors of AB Volvo voted today, in accordance with the authorization given by the Annual General Meeting on April 26, 2000, to acquire a maximum of 10 percent of the Company's shares on the OM Stockholm Exchange, not later than the next Annual General Meeting. Of the repurchased shares, 5 percent shall be transferred to Renault S.A. as final payment for the shares in Mack Trucks and Renault V.I. Any repurchase in addition to the 5 percent to be delivered to Renault S.A. shall be made to optimize the capital structure of the Volvo Group. The acquisitions are to be effected not later than the next Annual General Meeting. The shares are to be acquired at a price per share within the range of prices recorded on each date. 10 percent of the Company's shares corresponds to 44,152,088 shares, whereof 13.860.494 Series A shares and 30.291.594 Series B shares. In addition, the Board of Directors has today resolved to propose to the Annual General Meeting that the Board be authorized to make further decisions regarding the acquisition and transfer of Volvo's own shares. The proposal is on the same terms as in last year's proposal, which was approved by the Annual General Meeting. The terms are essentially the following: Acquisition may be made of a maximum number of Series A and/or Series B shares so that Volvo, after each purchase, holds not more than 10 percent of the total number of shares. Purchases may be made through trading on a stock exchange, authorized marketplace or another regulated marketplace on which the Company's shares are traded at a price per share corresponding to the prevailing market price. Acquisitions may also be made through an offer directed to all shareholders at a price that is a maximum of 30 percent higher than the prevailing market price at the time of the Board's decision regarding such an offer. The main purpose for purchases is to optimize the capital structure of the Group. For the purpose of financing company acquisitions, transfer may be effected through an offer to all shareholders. Transfer may also be made to another party than a shareholder as payment in conjunction with company acquisitions. The Annual General Meeting of AB Volvo will be held on April 25, 2001. Göteborg, February 1, 2001 AB Volvo (publ) The Board of Directors Quarterly figures Volvo Group SEK M unless otherwise 4/1999 1/2000 2/2000 3/2000 4/2000 specified Net sales 35 213 30 546 33 450 30 142 35 932 Cost of sales (27 967) (24 561) (26 844) (24 533) (28 610) Gross income 7 246 5 985 6 606 5 609 7 322 Research and development (1 142) (1 182) (1 281) (1 122) (1 291) expenses Selling expenses (2 379) (2 297) (2 454) (2 497) (2 892) Administrative expenses (1 062) (1 229) (1 173) (1 269) (1 303) Other operating income and (538) 148 688 (67) (147) expenses Operating income 2 125 1 425 2 386 654 1 689 Income from investments in 89 365 40 25 14 associated companies Income from other (28) 10 81 12 (33) investments Interest income and 418 500 443 333 312 similar credits Interest expenses and (280) (389) (441) (466) (549) similar charges Other financial income and 92 (23) (79) (17) (46) expenses Income after financial 2 416 1 888 2 430 541 1 387 items Taxes (715) (629) (521) (166) (194) Minority interests (44) 8 (23) (6) (6) Net income 1 657 1 267 1 886 369 1 187 Depreciation and amortization included above Volvo Group excl Finance 770 922 893 908 1 075 Finance 507 612 704 468 669 Total 1 277 1 534 1 597 1 376 1 744 Income per share, SEK 3.80 2.90 4.20 1.10 3.00 Average number of shares, 441.5 441.5 441.5 406.3 397.4 million Income per share is calculated as net income divided by the weighted average number of shares outstanding during the period. Gross and operating margin % 4/1999 1/2000 2/2000 3/2000 4/2000 Gross margin 20.6 19.6 19.7 18.6 20.4 Research and development expenses in % of net sales 3.2 3.9 3.8 3.7 3.6 Selling expenses in % of 6.8 7.5 7.3 8.3 8.0 net sales Administrative expenses in % of net sales 3.0 4.0 3.5 4.2 3.6 Operating margin 6.0 4.7 7.1 2.2 4.7 Net sales SEK M 4/1999 1/2000 2/2000 3/2000 4/2000 Trucks 18 040 15 129 15 781 13 635 17 651 Buses 4 390 3 838 4 556 3 883 4 910 Construction Equipment 4 788 4 649 5 438 4 804 5 102 Marine and Industrial Power 1 591 1 585 1 725 1 610 1 679 Systems Aero 2 842 2 286 2 731 2 814 2 882 Finance 2 293 2 206 2 546 2 231 2 695 Other 3 429 3 087 3 158 2 959 3 465 Eliminations (2 160) (2 234) (2 485) (1 794) (2 452) Net sales 35 213 30 546 33 450 30 142 35 932 Operating income SEK M 4/1999 1/2000 2/2000 3/2000 4/2000 Trucks 1 116 645 31 53 685 Buses 156 33 180 65 162 Construction Equipment 353 311 740 282 261 Marine and Industrial Power 49 103 197 121 63 Systems Aero 190 110 278 72 161 Finance 335 398 698 173 127 Other (74) (175) 262 (112) 230 Operating income 2 125 1 425 2 386 654 1 689 Operating margins % 4/1999 1/2000 2/2000 3/2000 4/2000 Trucks 6.2 4.3 0.2 0.4 3.9 Buses 3.6 0.9 4.0 1.7 3.3 Construction Equipment 7.4 6.7 13.6 5.9 5.1 Marine and Industrial Power 3.1 6.5 11.4 7.5 3.8 Systems Aero 6.7 4.8 10.2 2.6 5.6 Finance 14.6 18.0 27.4 7.8 4.7 Other (2.2) (5.7) 8.3 (3.8) 6.6 Operating margin 6.0 4.7 7.1 2.2 4.7 Financial effects of the repurchase When calculating the effect on the income as a result of the repurchase resolved by the Board of Directors, no consideration has been given to that Mack Trucks and Renault V.I. are consolidated in the Volvo Group as of January 2, 2001. As a consequence, the calculation is only aimed at illustrating the effect on income of the resolved repurchase as an isolated transaction. The calculation has been made on the basis of the reported performance for 2000, adjusted on the assumption that the repurchase was made on January 1, 2000 at a hypothetical price, based on the closing rate on January 31, 2000 of SEK 173 per Series A share and SEK 178.50 per Series B share. The Volvo Group's net income for 2000 would, based on this assumption, be reduced from SEK 4,709 M to SEK 4,456 M (proforma) and the income per share would increase from SEK 11,20 to SEK 11,80 (proforma). The number of outstanding shares in AB Volvo as of December 31, 2000 were 397,368,797. Considering the effect of the now resolved repurchase, as well as the effect of the transfer of 15 percent of the outstanding shares to Renault S.A. as payment for the acquisition of Mack Trucks and Renault V.I., the number of outstanding shares would increase to 419,444,842. The shareholder's equity of the Volvo Group as of December 31, 2000 amounted to SEK 88,338 M, corresponding to SEK 222 per share. Based on the assumption stated above, the Volvo Group's shareholder's equity would increase to SEK 90.889 M (proforma), corresponding to SEK 217 per share. Estimated purchase price for Mack Trucks and Renault V.I. As of 2001, Volvo intends to apply recommendation RR1:00 of the Swedish Financial Accounting Standards Council, which was issued in August 2000. In accordance with this recommendation, the purchase price is determined when subsidiaries are acquired through the issue of own shares at the market price for these shares on the date of the transaction. Accordingly, the purchase price for Mack Trucks and Renault V.I., including fees directly related to the acquisition, is estimated to amount to about SEK 10.7 billion. In accordance with the previous rules (RR1:96), such a purchase prices was determined based on the average market price of the shares ten days prior to the public announcement of the transaction. In applying this rule, the purchase price for Mack Trucks and Renault V.I., as announced previously should have been set at about SEK 14 billion. Accounting for refunds from SPP In the mid-1990s and later years surpluses arose in the SPP insurance company since the return on the management of ITP (pension fund) policies exceeded the growth in pension obligations. As a result of decisions in December 1998, SPP distributed, company by company, the surpluses that had arisen up to and including 1998. In accordance with a statement issued by a special committee of the Swedish Financial Accounting Standards Council, surplus funds that were accumulated in SPP should be reported in companies when their present value can be calculated in a reliable manner. The rules governing how the refund was to be made were established in the spring of 2000 and refund was stated in Volvo's accounts effective in the interim report for the first six months of 2000. The discounted value of the surplus funds has been shown as Other operating revenue in the income statement. In the balance sheet, the claim is shown as a long-term interest bearing receivable; however, the portion that is expected to be received within one year is stated as a current interest-bearing receivable. Changes in the Volvo Group's financial reporting as a result of the new business area, Finance Effective January 1, 2000, Volvo's operations in customer-financing, insurance, Treasury and real estate were brought together in a separate business area, Finance. When presenting the Volvo Group's sales and operating income per segment, the results of Finance's operations are reported separately from those of the five business areas. Comparable figures for 1999 have been adjusted to conform to the new organization. Income statements shown for Finance include total customer-financing operations including the Volvofinans associated company, Volvo's insurance operations including the Volvia, Danafjord, the Volvo Group's real estate company, and Volvo Treasury's income based on the definition below. Balance sheets and cash flow statements for Finance include Volvo's total customer-financing operations including the Volvofinans associated company, Volvo's insurance operations including Volvia, and Danafjord, the Volvo Group's real estate company. In connection with the formation of the Finance business area, there has been a modification of the principles used to classify financial income and expense in Volvo's insurance and real estate businesses. Effective January 1, 2000, financial income and expense in these operations are reported in the Volvo Group's operating income. Earlier, these items were included in the Volvo Group's next interest income/expense. Comparable figures for 1999 have been adjusted to conform to the classification principle. As a result of the above, the definition of the Volvo Group's net financial assets has also been modified. Effective January 1, 2000, the Volvo Group's net financial assets have been calculated excluding the Finance business area since financial income and expense in Finance is reported in consolidated operating income. As of January 1, 2000, as a result of the new definition, Volvo's net financial assets were reduced by SEK 2.2 billion. Effective in the second quarter of 2000, Volvo Treasury's income is reported as part of the operating income in the Finance business area. Volvo Treasury's income includes interest income and similar income, interest expense and similar expenses, as well as overhead costs of Volvo Treasury's operations. However, income excludes the effects of the equity- capital base in Volvo Treasury. Based on the above definition, Volvo Treasury's income for 2000 amounted to SEK 151 M. Of this amount, SEK 183 M was formerly included in interest income in accordance with the earlier principle, and a deficit of SEK 32 M was included in Other financial income. Change in identification of overhead costs in Volvo's spare-parts operations Effective January 1, 2000, the method of calculating Volvo's product costs related to spare parts has been revised. Beginning in 2000, overhead costs of the Volvo Group's spare-parts business, which earlier were included among administrative costs, are being included among costs of products sold. Comparable figures for 1999 have been adjusted to conform to the changed classification. Trucks, units Fourth quarter Fourth quarter Jan-Dec Jan-Dec Change in invoiced 2000 1999 2000 1999 % Europe 13,852 12,656 46,143 42,527 +9 Western 12,406 11,663 42,054 39,625 +6 Europe Eastern 1,446 993 4,089 2,902 +41 Europe North America 5,938 8,663 23,610 34,303 (31) South America 1,084 1,227 4,534 3,901 +16 Asia 1,619 1,072 5,556 2,723 +104 Other markets 646 363 1,987 1,633 +22 Total trucks 23,139 23,981 81,830 85,087 (4) Volvo Fourth quarter Fourth quarter Jan-Dec Jan-Dec Change in buses/bus 2000 1999 2000 1999 % chassis, units invoiced Europe 1,095 1,176 3,994 3,626 +10 Western 1,064 1,131 3,870 3,427 +13 Europe Eastern 31 45 124 199 (38) Europe North America 969 1,081 3,869 3,638 +6 South America 235 250 980 714 +37 Asia 481 241 1,659 1,001 +66 Other markets 195 157 513 525 (2) Total, 2,975 2,905 11,015 9,504 +16 buses/bus chassis ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/02/01/20010201BIT00410/bit0001.doc http://www.bit.se/bitonline/2001/02/01/20010201BIT00410/bit0002.pdf

About Us

The Volvo Group is one of the world’s leading manufacturers of trucks, buses, construction equipment and marine and industrial engines. The Group also provides complete solutions for financing and service. The headquarter is located in Gothenburg, Sweden.

Subscribe