Volvo Group –Three months ended March 31, 2008

Volvo Group –Three months ended March 31, 2008


· Strong sales increase in the first quarter, up 26% to SEK 76.7
billion (61.0)
· In the first quarter, operating income rose 22% to SEK 6,487 M
(5,328)
· Income for the period rose 12% to SEK 4,215 M (3,756) in the first
quarter
· In the first quarter, basic and diluted earnings per share rose to
SEK 2.07 (1.85)
· Operating cash flow in Industrial operations was negative in an
amount of SEK 3.3 billion (neg. 2.9)



Volvo Group
First quarter
2008 2007 Change
Net sales Volvo
Group, SEK M 76,683 61,036 26%
Operating income
Volvo Group, SEK
M 6,487 5,328 22%
Operating
income
Industrial
operations, SEK
M 6,106 4,933 24%
Operating
income Customer
Finance, SEK M 381 395 (4%)
Operating margin
Volvo Group, % 8.5 8.7
Income after
financial items,
SEK M 6,141 5,407 14%
Income for the
period, SEK M 4,215 3,756 12%
Diluted earnings
per share, SEK 2.07 1.85
Return on
shareholders'
equity, % 19.2 18.6


Contacts Investor Relations:

Investor Relations, VHQ

Christer Johansson +46 31 66 13 34

Patrik Stenberg +46 31 66 13 36

Anders Christensson +46 31 66 11 91

John Hartwell +1 212 418 7432

www.volvogroup.com











CEO’s comments – highest operating income to date

During the first quarter of 2008, Volvo’s rate of growth was very high
and operating income was the Group’s highest to date for a single
quarter. With net sales of SEK 77 billion, the underlying growth was
16%, excluding currency effects and acquired companies. Sales continue
to increase in Europe and South America as well as in the Middle East
and most of Asia. We can conclude that our increased presence in growth
markets in Eastern Europe and Asia, among others, more than well offset
the weaker trend in North America. Asia is now the Group’s second
largest market.
Operating income rose 22% to SEK 6.5 billion, corresponding to an
operating margin of 8.5%, despite the weak market in North America. All
business areas except Buses reported increased operating income. After a
second half of 2007 in which the Group’s profitability was affected by
production disturbances, internally as well as at suppliers, production
is now flowing better and we are delivering at a very high rate.

Strong growth and favorable profitability in truck operations

In the truck operations, we posted a strong sales increase and favorable
profitability on most markets. Volvo Trucks developed well, with very
good profitability in Europe and in the International region, but
precisely as is the case for Mack Trucks, the situation was
significantly more difficult in North America. The weak market in North
America and the nearly two-month long strike at the plant in New River
Valley affected deliveries as well as profitability. We are continuing
to align operations in North America to the prevailing market situation.
During the second quarter, Mack Trucks initiated negotiations with the
UAW union after the previous contract expired.
Renault Trucks continued to strengthen its brand through competitive
products with high quality, which results in a favorable price
realization. This has laid the foundation for Renault Trucks’ continued
favorable profitability trend. Integration of Nissan Diesel continues,
which involves costs, but work is proceeding in accordance with our
established plan.
Construction Equipment improved its profitability compared with the
weak second half of 2007. We see that the internal measures taken last
year to remove bottlenecks in production are beginning to have an
impact, even though there is more to accomplish.
Business area Buses continued to enhance the efficiency of the
production structure in Europe, as part of the important work to improve
profitability. A new bus plant was inaugurated during the quarter in
Bangalore, India – a growth market in which Volvo is a very strong
brand. With regard to cooperation with Indian Eicher Motors within
trucks and buses, we expect to have a final agreement in place during
the second quarter.

Volvo Penta captures market shares

In the marine segment, Volvo Penta continues to capture market shares in
Europe and in the weakening market in North America, while at the same
time growing in the industrial segment, due largely to the advantages
with the Group’s common engine platforms. Volvo Aero’s participation in
the GEnx engine program developed well, despite a certain shift forward
in time and we foresee major demand for aircraft engines.
The Group’s customer financing through Volvo Financial Services (VFS)
is developing well and increased the return on equity. In many cases,
VFS acts as a barometer regarding the well-being of our customers’
operations and VFS has a solid credit portfolio with continued
relatively low levels of delinquencies and write-offs.

Continued strong order backlog

Overall, we have strong order backlogs in Europe and despite a reduced
order intake our truck operations continue to secure orders at a pace
that is surprisingly high, taking into account the long delivery times
and uncertainty about how much the weak business climate in North
America and concerns on the financial markets will impact the real
economy. In most countries, we have delivery times of 10-12 months,
compared with the normal 3-4 months. Against the background of the
extensive order backlogs, we have increased the forecast for the
European truck market somewhat and expect that it will grow by about 10%
in 2008.
With regard to North America, the market is weak, which places
pressure on operations, and hard work will be required in many areas to
achieve satisfactory profitability. Our assessment is that the weak
North American market for trucks will remain and that the total market
will be at about the same level as in 2007.
In many other areas of the world, prospects look better. With our
global platform, we are present on growing markets around the world, and
in the important European market we expect that growth will continue in
the long term, driven by economic integration with growing trade, rising
levels of prosperity in the eastern parts and investment in
infrastructure. Against this background and the knowledge that many
employees are working hard to increase the Volvo Group’s productivity
and delivery capability, I view our possibilities of continuing to
create value for an increasing number of customers worldwide as
positive.


Leif Johansson
President and CEO