Volvo Group nine months ended September 30, 1998

AB Volvo Press Information Volvo Group nine months ended September 30, 1998 First nine months 1998 1997 Net sales, SEK M 150,320 130,948 Operating income, excluding items affecting 6,318 5,775 comparability, SEK M 1) Operating income, SEK M 5,168 5,775 Income after financial items, SEK M 2) 7,787 10,721 Net income, SEK M 5,558 9,253 12.60 13.80 Income per share, SEK, excluding items affecting comparability and gains on sales of shares, during most recent 12-months period, SEK Return on shareholders' equity, excluding 9.4 11.8 items affecting comparability and gains on sales of shares, % 1) Items affecting comparability in 1998 pertain to reserves for restructuring costs in Buses and Construction Equipment amounting to SEK 240 M and SEK 910 M, respectively. 2) Includes gains on sales of shares amounting to SEK 2,125 M in 1998 and SEK 4,070 1997. New heavy truck program and new buses for city traffic were introduced during the third quarter. Favorable order bookings for the new Volvo S80. Volvo's net sales during the first nine months of the year amounted to SEK 150,320 M, an increase of 15% compared with sales in the first three quarters of 1997. Excluding acquisitions the increase was 12%. Sales in Volvo's principal markets in Europe and North America continued to be strong. Demand in Southeast Asia, Japan and South America declined significantly. Operating income, excluding items affecting comparability, amounted to SEK 6,318 M (5,775), and the operating margin was 4.2% (4.4). Cars' operating income for the full period was according to plan charged with the increased production and launching costs for the new Volvo S80. MASA, a Mexican bus manufacturer, was acquired. Comments by the Chief Executive Officer Group sales are growing according to plan. Up to now the declining economy and financial turbulence in Japan and Southeast Asia have been offset by increased sales in other regions. The percentage of Volvo's sales in markets that are experiencing financial crises is relatively small. The fact that higher sales during the year have not resulted in an improved operating margin is due mainly to ongoing generational changes in which the full earnings capacity of new products has not yet been achieved. Nor did the cost- reduction programs implemented in the Group fully offset the tendency towards a disadvantageous product mix during the third quarter. In addition to the global introduction of the Volvo S80, the product-renewal program continued during the third quarter with the launching of other strategically important products. This applied in particular to the heavy truck program - the Volvo FM series, based on the FH concept and designed for use in regional distribution systems and construction operations. Volvo Buses also launched important products - the Volvo 5000 and Volvo 7000 city buses. Costs incurred prior to and during these introductions were charged against earnings. Our overall view is that the Group's new products have been very well received. In the area of acquisitions and establishment of new operations, the ongoing integration of the former Samsung construction equipment division is of major importance and is proceeding according to plan. The establishment of an industrial base in Mexico - and thereby within NAFTA - is an important element of Volvo's growth strategy. In addition to acquiring MASA, a bus manufacturer, Volvo is planning to begin assembling passenger cars in Mexico, for the local market and to establish a common Group purchasing and financing function, as well as to explore the opportunities to begin manufacturing construction equipment cabs. The joint-venture agreement signed in October with Deutz AG in Germany is part of Volvo's effort to achieve an efficient development and production structure. Deutz is becoming Volvo's principal supplier of small and medium-size diesel engines, while Volvo will be able to concentrate on developing heavy diesel engines with 8-to-16-litres piston displacement. Volvo's operations to date have followed the growth strategy that was presented in 1997. The current turbulence in the financial market and the deep crises in certain geographical markets were not part of the global scenario that served as the foundation for the plan. If the turbulence and crises continue and result in a declining total market, measures will have to be taken to adapt the Group's level of costs to smaller volumes. Leif Johansson Volvo Group - First three quarters of 1998 Group accounting during the first three quarters of 1998 was affected by the purchase of Carrus Oy - the Finnish bus body company - Nova BUS of Canada and BRS Truck Rental and Contract Hire of Great Britain and by the acquisition of the Construction Equipment Division of Samsung Heavy Industries of South Korea. Income summary Net sales of the Volvo Group in the first three quarters of 1998 amounted to SEK 15,320 M, an increase of 12%, excluding acquired units. Adjusted for the effects of foreign exchange movements, the increase was 11%. Net sales per market area were characterized by major geographical differences - ranging from strong demand in North America and Europe to very weak demand in Southeast Asia and leveling off of demand in South America. Net sales per Percent First nine months Percent market area of 1998 1997 Change SEK M Volvo's 1) total sales Western Europe 55 82,437 72,008 +14 Eastern Europe 2 3,644 2,540 +43 North America 31 46,865 36,534 +28 South America 4 5,634 5,023 +12 Asia 6 8,456 11,659 (27) Other 2 3,284 3,134 +3 Volvo Group total 100 150,320 130,948 +15 1) Includes acquistions and effects of foreign exchange movements. Compared with the first three quarters of 1997, net sales in all Volvo business areas, excluding acquired units, increased. Net sales of Cars increased by 6%, due to a very favorable trend of sales for the Volvo S/V40 that compensated for the phasing out of the Volvo 940 and Volvo S/V90. Sales in Trucks' principal markets in North America and Western Europe continued to be strong, with sales of the business area as a whole increasing by 26%. Sales of the Construction Equipment business area rose 9%, but there were signs of weakening demand in the third quarter. Group operating income amounted to SEK 5,168 M (5,775). This includes items affecting comparability totaling SEK 1,150 M, pertaining to reserves for restructuring costs in Buses and Construction Equipment. Excluding items affecting comparability, operating income increased by 9% to SEK 6,138 M (5,775). A favorable volume increase, positive foreign exchange movements and cost-savings programs offset higher costs for product development, start-up of production and the launch of new products within Cars, Trucks and Buses. Income was also affected by a shift in demand toward products with lower margins, and by declining demand in Southeast Asia. The operating margin, excluding items affecting comparability, decreased to 4.2% (4.4). Income from investments in associated companies - mainly NedCar, Bilia and Volvofinans - amounted to SEK 340 M (3,165). The deviation compared with the preceding year is attributable mainly to the gain of SEK 3,027 M on the sale of shares in Pripps Ringes AB. Income from other investments and participations amounted to SEK 2,162 M (1,179), with the sale of holdings in Pharmacia & Upjohn, Inc. accounting for the greater part. Net interest income in the first three quarters of 1998 was SEK 247 M, compared with SEK 659 M in the corresponding period in the preceding year. The change is attributable partly to lower interest- bearing assets, where lower interest levels in Europe adversely affected return. Volvo's expansion in growth markets and the resulting increased financing requirement on these markets also contributed to the lower net interest. The growing financial unrest in the world resulted in significantly higher interest rates, in Asia and South America, among other areas. Tax expense of SEK 2,224 M (1,383), which was equal to an average tax rate of 29% (13) and is attributable mainly to current taxes. In 1997, the Group's tax expense was affected by a tax loss carryforward on the sale of the shareholding in Renault. Net income amounted to SEK 5,558 M (9,253) and the return on equity, excluding items affecting comparability and gains on the sale of shares, was 9.4% at the end of the third quarter, compared with 11.8% a year earlier. 1) Pertains to Automotive operations prior to the first quarter of 1998. Consolidated income statements, SEK M First nine months 1998 1997 150,320 130,948 Net sales (115,038)(99,303) Cost of sales 35,282 31,645 Gross income (7,312) (6,489) Research and development expenses (13,446)(11,796) Selling expenses (5,738) (5,247) Administrative expenses (2,468) (2,338) Other operating income and expenses (1,150) - Items affecting comparability 1) 5,168 5,775 Operating income 340 3,165 Income from investments in associated companies 2,162 1,179 Income from other investments Interest income and similar credits 1,149 2,957 Interest expenses and similar charges (902) (2,298) Other financial income and expenses (130) (57) Income after financial items 7,787 10,721 Taxes (2,224) (1,383) Minority interests (5) (85) Net income 5,558 9,253 1) Items affecting comparability in 1998 pertain to reserves for restructuring costs in Buses and Construction Equipment amounting to SEK 240 M and SEK 910 M, respectively. First nine months 1998 1997 Gross and operating margin, % 23.5 24.2 Gross margin 4.9 5.0 Research and development expenses in % of net sales 8.9 9.0 Selling expenses in % of net sales 3.8 4.0 Administrative expenses in % of net sales 4.2 4.4 Operating margin, excluding items affecting comparability 3.4 4.4 Operating margin Financial position Volvo Group exclSales financing Total Consolidated sales financing balance sheets, 1) SEK M 980930 971231 980930 971231 980930 971231 Assets Intangible assets 4,956 3,262 113 22 5,069 3,284 Property, plant 35,278 30,677 158 116 35,436 30,793 and equipment Assets under 1,822 1,366 17,772 12,135 19,594 13,501 operating leases Shares and 8,903 8,069 686 728 3,582 4,583 participations 1) Long-term sales 216 190 21,266 13,777 21,482 13,967 finance reveivables Long-term interest-bearing 1,766 2,266 3 3 1,769 2,269 receivables Other long-term 4,904 3,708 13 0 4,917 3,708 receivables Inventories 31,414 27,756 139 237 31,553 27,993 Short-term sales 52 37 20,950 18,300 21,002 18,337 finance receivables Short-term interest bearing 1,364 2,398 0 0 1,364 2,398 receivables Other short-term 28,362 21,118 364 741 28,726 21,859 receivables Marketable 8,747 10,930 34 32 8,781 10,962 securities Cash and bank 9,069 8,807 1,067 834 10,136 9,641 Total assets 136,853120,584 62,565 46,925193,411163,295 Shareholders' equity and liabilities Shareholders' 64,223 60,431 6,007 4,214 64,223 60,431 1) equity Minority interests 1,126 859 63 40 1,189 899 Provision for post-employment 3,156 3,268 34 28 3,190 3,296 benefits Other provisons 21,474 18,266 1,717 1,391 23,191 19,657 Loans 4,785 2,097 51,194 39,120 55,979 41,217 Other liabilities 42,089 35,663 3,550 2,132 45,639 37,795 Shareholders' 136,853120,584 62,565 46,925193,411163,295 equity and liabilities Sales-finance operations are reported in accordance with the equity method. Internal receivables and liabilities related to the sales-finance operations are excluded. The Group's total assets rose by SEK 30.1 billion, or 18%, during the first three quarters. Excluding sales financing, acquired units and the effects of foreign exchange movements, the increase amounted to SEK 3.3 billion. Capital expenditures for property, plant and equipment amounted to SEK 7.3 billion (6.9), of which a substantial portion pertained to production changeovers in Cars and Trucks. Shareholders' equity increased by SEK 3.8 billion. Net income for the period provided SEK 5.6 billion, while the dividend to shareholders reduced capital by SEK 2.2 billion. The Group's net financial assets, excluding sales financing, decreased from SEK 19.1 billion at January 1 to SEK 13.1 billion at September 30, due mainly to acquisitions. Cash flow analysis, SEK Volvo Group Sales Total billions excl sales financing financing 1) 5.4 0.2 5.6 Net income Depreciation and other 2.1 4.7 noncash-related items 2.6 0,0 (0.2) (0.2) Change in operating capital and deferred tax liabilities Cash flow from 8.0 2.1 10.1 operations (7.2) (0.1) (7.3) Capital expenditures (0.6) (7.9) (8.5) Investments in leasing assets 0.9 0.4 1.3 Disposals 2.8 - 2.8 Investments in shares, net 0.1 (6.7) (6.6) Long-term receivables, net Acquisitions and sales (5.2) (0.6) (5.8) of companies Remaining after net (1,2) (12.8) (14.0) investments Increase in loans 14.3 Dividend paid to AB (2.2) Volvo's shareholders Other 0.0 Change in liquid funds, (1.9) excluding translation differences Translation differences in 0.2 liquid funds Change in liquid funds (1.7) In the cash flow analysis, the effects of major acquisitions and divestments of subsidiaries have been excluded from other changes in the balance sheet. The effects of changes in foreign exchange rates at translation of foreign subsidiaries have been excluded, since they do not affect cash flow. Key ratios Oct 1997 - Jan - Sept 1998 Dec 1997 Return on shareholders 10.8 17.4 equity, % Return on shareholders' equity excluding items affecting comparability and 9.4 10.4 gain on sales of shares, % Income per share, SEK 15.20 22.90 Income per share, excluding items affecting comparability and gain on sales of shares, 12.60 12.70 SEK Shareholders' equity and minority interests as 33.8 37.6 percentage of total assets Shareholders' equity and minority interests excluding sales financing, as 47.8 50.8 percentage of total assets Net financial assets, 13.1 19.1 SEK billion Net financial assets as percentage of shareholders' equity 20.0 31.2 and minority interests Net sales, SEK M First First Change Oct Jan-Dec nine nine in % 1) 1997- 1997 months months Sept 1998 1997 1998 Cars 73,936 70,005 +6 100,384 96,453 Trucks 45,041 35,315 +26 60,566 50,840 Buses 9,724 7,469 +1 12,837 10,582 Construction equipment 13,733 12,028 +9 18,463 16,758 Marine and industrial 3,659 3,337 +10 4,788 4,466 engines Aero 6,270 5,062 +24 8,684 7,476 Other and eliminations (2,043) (2,268) +10 (2,725) (2,950) Volvo Group total 150,320 130,948 +12 202,997 183,625 1) Excluding divested and acquired units. Operating income, SEK First First OctJan-Dec M nine nine 1997- 1997 months months Sept 1998 1997 1998 Cars 2,555 3,273 3,792 4,510 Trucks 1,939 990 2,761 1,812 Buses 1) 345 344 551 550 Construction equipment 1,133 996 1,581 1,444 2) Marine and industrial 153 205 129 181 engines Aero 349 343 478 472 Other and eliminations (156) (376) (331) (551) Operating income, 6,318 5,775 8,961 8,418 excluding items affecting comparability Items affecting (1,150) - (1,150) - comparability Volvo Group total 5,168 5,775 7,811 8,418 1) Including items of SEK 240 M affecting comparability, operating income was SEK 105 M for the first nine months 1998. 2) Including items of SEK 910 M affecting comparability, the operating income was SEK 223 M for the first nine months 1998. Operating margin, % First nine months 1998 1997 Cars 3.5 4.7 Trucks 4.3 2.8 Buses 1) 3.5 4.6 2) Construction Equipment 8.3 8.3 Marine and industrial 4.2 6.1 engines Aero 5.6 6.8 Operating income, 4.2 4.4 excluding items affecting comparability Items affecting (0.8) - comparability Operating margin total 3.4 4.4 1) Including items affecting comparability, the operating margin was 1.1% for the first nine months 1998. 2) Including items affecting comparability, the operating margin was 1.6% for the first nine months 1998. Cars The number of new-car registrations throughout the world increased by approximately 1% during the first three quarters of 1998, compared with year-earlier registrations. The Western European market, which continued to be strong, increased by 7%, while the North American market decreased by 2%. The Japanese market was down 10%. Net sales for Cars in the first three quarters of 1998 increased to SEK 73,936 M, an increase of 6% compared with net sales in the corresponding period last year. The number of Volvo cars sold rose 3%. Production of the Volvo 940 and Volvo S/V90 was halted in the first quarter, with the result that the supply of products was limited to two car models during the greater part of the period. Lower volumes in Asia (-31%) were offset favorably by higher volumes in Europe (+8%) and North America (+4%). Sales of the S/V40 is developing very favorably and utilization of capacity in the plant at Born is high. Orders for new Volvo S80 models are strong and production is now at an annual rate of 70,000 cars and will be increased gradually. Introduction of the Volvo S80 took place throughout the summer, with very positive reception in the press and from customers. It has been possible to signe orders since the beginning of June and showings in Volvo dealer showrooms in Sweden were begun at the end of August. A scheduled program in other countries will be completed during October. The market share of the Volvo S/V40 cars in Europe increased sharply, while the larger Volvo models lost market shares as a result of the phasing out of the Volvo 940 and Volvo S/V90. Volvo's share of the market in North America was higher, due in part to the strong demand for the four-wheel Volvo V70 Cross Country model and the V70 All Wheel Drive model. In Japan, 12,900 Volvo cars were registered during the period, a decrease of 14% from 1997. The total number of cars imported in Japan during the period decreased by 18%. Operating income for the period declined to SEK 2,555 M (3,273). A larger volume of sales, beneficial effects of foreign exchange movements and cost-reduction measures - mainly in production and purchasing - did not compensate fully for the planned higher costs of introducing and starting up production of the Volvo S80, and for the shift in demand toward models with lower margins. In addition, operating income was affected by weakening demand in Southeast Asia. The operating margin in the first three quarters was 3.5% (4.7). As part of the Group's review of its industrial structure, Volvo Cars decided to close the final assembly plant in Halifax, Canada. As a result, earnings in the third quarter were charged with SEK 70 M. Production is concentrated to the plants in Born, the Netherlands, Ghent in Belgium and Torslanda in Sweden. Trucks The world market for heavy trucks this year is expected to be slightly smaller than in 1997. Western Europe and North America are at a record number while Southeast Asia declines sharply. The South American truck market, which accounts for approximately 5% of the world total, will also be smaller in 1998 than it was last year. Volvo delivered 59,570 medium-heavy and heavy trucks during the first nine months of the year, 26% more than in the corresponding period of 1997. The upturn was attributable to the markets in Europe and North America, where deliveries increased by 22% and 47%, respectively. Volvo's share of the market in the heavy truck class in Western Europe was 15.4% (15.6) up to and including August; its share of the market in the United States was 11.9% (9.4), and its share of the market for heavy trucks in Brazil was 23.3% (23.1). Utilization of capacity in Volvo Trucks' industrial system was very high. Orders booked during the first nine months of the year were 22% higher than in the comparable period of 1997 and the order backlog at the end of the third quarter was 40% larger. Trucks' operating income amounted to SEK 1,939 M (990). The higher income was attributable to the larger volume of sales and to improved margins in the North American operations, which to some extent was offset by increased costs for introduction and start-up of production of new products. The operating margin for the first three quarters was 4.3% (2.8). In August Volvo Trucks launched a new truck program in the heavy class - FM - based on the modular technology of the FH concept. The FM series has been developed with emphasis on applications in regional distribution programs and construction operations. Buses The total market for heavy buses in Western Europe and North America remained strong, but slowed significantly in South America and Southeast Asia. Volvo increased the number of complete buses and bus chassis delivered by 13% to 6,720 units, compared with 5,930 units in the year-earlier period. The increase is attributable largely to the acquisition of Canadian Nova BUS. Net sales rose to SEK 9,724 M (7,469). The greater increase in sales, relative to the rise in delivered units, is due mainly to increased sales of complete buses. Operating income, excluding items affecting comparability, amounted to SEK 345 M (344). Among other items, earnings were charged with increased costs for product development in conjunction with the completion of the new products, Volvo 5000 and Volvo 7000, as well as adverse currency effects. The operating margin was 3.5% (4.6). Volvo has reached an agreement covering acquisition of the Mexican bus manufacturer Mexicana de Autobuses SA, MASA. The acquisition is part of Volvo's growth strategy in the NAFTA countries (U.S., Canada and Mexico) and means that the position as one of the world's largest bus manufacturers is strengthened. In addition, synergistic effects are expected, mainly with Volvo's existing bus production in North America as well as with the operations of the other business areas represented in the region. As a result of this acquisition, combined with the previous acquisitions of Prévost and Nova BUS, Volvo Buses becomes the leading bus manufacturer in North America, with a total market share in city, intercity and tourist buses of about 30%. After this acquisition, a consolidation phase is now being initiated in Buses' North American operations. Construction equipment The trend of business continues to be good in most of Volvo's most important markets for construction equipment. The total market in the United States and Western Europe increased, but the rate of increase is now smaller than it was earlier. The trend in Asia is still negative and the financial crisis, which has also affected Russia, is causing uncertainty with respect to the trend in a number of other markets, including those in South America. Net sales of the Construction equipment business area amounted to SEK 13,733 M (12,028), an increase of 9%, excluding acquired units. Operating income, excluding items affecting comparability, amounted to SEK 1,133 M (996), and the operating margin was 8.3% (8.3). Operating income includes Volvo Construction Equipment Korea (formerly the construction equipment division of Samsung Heavy Industries) beginning in the third quarter. Integration of the acquired operation is proceeding according to plan but income is being affected by the financial crisis in Asia and it has not yet been possible to compensate for the loss of domestic sales through increased exports. In Germany, Volvo Construction Equipment acquired its largest dealer, Kopsch AG, which had sales of approximately SEK 840 M in 1997 and accounted for approximately 20% of the sales of Volvo's construction equipment in that country. Volvo also took over the Trakma importing firm and four dealerships in Turkey. Early in October Volvo concluded an agreement with Hitachi Construction Machinery Ltd to reduce the Group's stake in Euclid Hitachi Heavy Equipment Company, a jointly owned company, from 60% at the present time to 20%. In connection with the agreement Volvo has also divested its rigid dump truck operations in Australia. The divestments are a result of Volvo's review of the current operational structure with the aim of increasing operating efficiency. Marine and industrial engines Net sales posted by Marine and industrial engines increased 10%, compared with sales in the year-earlier period. The sales trend for marine engines continued to be strong in Europe - notable in the Nordic region - and in Southern Europe. In North America, where the market for marine engines was sluggish, Volvo Penta's sales and market shares were higher. The trend of sales of marine engines was also favorable in South America and Australia. Sales of industrial engines rose in Europe, while sales to customers in Southeast Asia were lower than a year earlier. Operating income amounted to SEK 153 M (205). Earnings were charged with increased product development costs and costs attributable to marketing efforts. The operating margin declined to 4.2% (6.1). Aero Commercial air traffic has increased by 2.5% to date in 1998, half the rate of the increase recorded a year earlier. The decrease is attributable to the crisis in Asia, where air traffic has declined 4%. Orders received by the aircraft industry are still at the 1997 level but the bulk of the order backlog has shifted from customers in Asia to those in Europe and the U.S. Another consequence of the crisis in Asia is that Chile has deferred its decision to renew its air force. The Swedish multirole "Gripen" military aircraft, for which Volvo Aero supplies the engine, is one of the aircraft that Chilean authorities are considering acquiring. Aero's net sales increased to SEK 6,270 M (5,062), due primarily to higher sales in the Aviation Support Services, Engine Services and Commercial Engines. Operating income amounted to SEK 349 M (343). The operating margin declined to 5.6% (6.8), due to higher development costs in the commercial aircraft engine program and in the gas turbine operations. During the period British Airways placed orders for 59 Airbus 319/320 aircraft. The aircraft are to be equipped with V2500 engines - a type being supplied by a joint venture in which Volvo Aero is a risk-sharing partner with Pratt & Whitney, among other companies. Volvo Aero's share of this order will be worth approximately SEK 1 billion during a five-year period beginning in 1999. Volvo Aero reached an agreement in principle in October to acquire 67% of the capital in Norsk Jetmotor A/S, the Norwegian manufacturer of aircraft engine components. The sellers are the Norwegian government and the Kongsberg Group. Sales financing Total assets in Volvo's sales finance operations amounted to SEK 62.6 billion, an increase of 33% compared with year-end 1997. The increase is attributable mainly to a strong growth in the North American market from Trucks and Cars and the passenger car operations in Germany and Great Britain. Net sales rose to SEK 6,982 M (3,886) and the operating income amounted to SEK 318 M (142). Employees The number of employees in the Volvo Group increased by 6,740 between January 1 and the close of the period. Of this number, acquired units provided slightly more than 4,000 new employees. The number of employees as of September 30, 1998 was 79,640. New member in Volvo Group Executive Committee Stefan Johnsson has been appointed a new member of the Volvo Group Executive Committee, responsible for strategic matters and business development, effective October 15, 1998. Stefan Johnsson, formerly president of Volvo Group Finance, succeeds Claes Malmros. Options program for senior executives The Board of Directors of AB Volvo has decided to establish a rolling options program whereby the senior executives in the Volvo Group will be allotted call options in Volvo, beginning in 1999. The senior executive's bonus serves as the base for the allotment of options. The lifetime of the options is five years. The options will be written and priced by an independent market player, beginning in April next year. The terms and conditions of the options will be based on a fair market assessment. Year 2000 problem at Volvo The transition to the year 2000 is a global technical problem and the extensive use of information technology means that the millennium shift effects major parts of the operations in most companies, as well as Volvo. Work with identifying and solving the problems which could arise due to the millennium shift has high priority at Volvo and has been intensified during 1998. The goal is to avoid disturbances which could have effect on Volvo's operations. The preliminary report on operations for the full year 1998 will be issued on February 11, 1999. Göteborg, October 21, 1998 Leif Johansson President and Chief Executive Officer This report has not been reviewed by AB Volvo's auditors Volvo Group 3/1997 4/1997 1/1998 2/1998 3/1998 quarterly figures, SEK M unless otherwise specified Net sales 41,924 52,677 48,839 52,867 48,614 Cost of sales (31,330)(39,687)(37,015)(40,717) (37,306) Gross income 10,594 12,990 11,824 12,150 11,308 Research and (2,000) (2,170) (2,372) (2,472) (2,468) development expenses Selling expenses (3,914) (5,364) (4,385) (4,528) (4,533) Administrative (1,788) (1,771) (1,754) (1,991) (1,993) expenses Other operating (1,065) (1,042) (1,337) (438) (693) income and expenses Items affecting - - - (1,150) - comparability Operating income 1,827 2,643 1,976 1,571 1,621 Income from 85 (236) 99 136 105 investments in associated companies Income from other 845 (11) 79 2,098 (15) investments Interest income and 929 529 427 552 170 similar credits Interest expenses (785) (450) (248) (438) (216) and similar charges Other financial (125) (20) (59) (84) 13 income and expenses Income after 2,776 2,455 2,274 3,835 1,678 financial items Taxes 22 (1,322) (710) (920) (594) Minority interests (7) (27) 17 (21) (1) Net income 2,791 1,106 1,581 2,894 1,083 Depreciations 1,557 2,030 1,933 2,264 2,286 included above Income per share, 6.40 2.60 3.60 6.50 2.50 SEK Average number of 441.5 441.5 441.5 441.5 441.5 shares, million Volvo car sales, First First Change Oct Jan-Dec number of units nine nine in % 1997- 1997 invoiced months months Sept 1998 1997 1998 Europe 185,530 172,320 +8 253,170 239,960 Western 180,910 168,070 +8 246,890 234,050 Europe Eastern 4,620 4,250 +9 6,280 5,910 Europe North America 79,500 76,390 +4 105,090 101,980 South America 1,260 1,740 (28) 1,800 2,280 Asia 18,650 27,050 (31) 27,770 36,170 Other markets 5,330 4.210 +26 7,170 6,050 Total Volvo cars 290,270 281,710 +3 395,000 386,440 Renault cars 24,030 20,910 +15 32,750 29,630 Total cars 314,300 302,620 +4 427,750 416,070 By series 8,700 21,570 (60) 15,420 28,290 Volvo S/V90 1) 6,460 27,000 (78) 18,810 39,450 Volvo 940 1) 6,450 - - 6,450 - Volvo S80 148,560 154,170 (4) 198,060 203,670 Volvo S/V70 113,580 78,900 +44 148,830 114,150 Volvo S/V40 6,520 70 - 7,330 880 Volvo C70 290,270 281,710 +3 395,000 386,440 Total 1) Production ceased during first half of 1998 Trucks, units invoiced Europe 28,950 23,760 +22 39,650 34,460 Western 25,940 21,550 +20 35,420 31,030 Europe Eastern 3,010 2,210 +36 4,230 3,430 Europe North America 21,210 14,430 +47 27,680 20,900 South America 5,060 4,920 +3 7,110 6,970 Asia 2,930 2,900 +1 4,740 4,710 Other markets 1,420 1,330 +7 2,030 1,940 Total trucks 59,570 47,340 +26 81,210 68,980 Volvo bus/bus chassis, units invoiced Europe 2,730 2,940 (7) 3,980 4,190 1) North America 1,450 600 +142 1,960 1,110 South America 1,230 1,050 +17 1,530 1,350 Asia 1,040 910 +14 1,540 1,410 Other markets 270 430 (37) 510 670 Total, buses 6,720 5,930 +13 9,520 8,730 Including the acquisition of Nova BUS as of second quarter 1998. As of the fourth quarter, 1997, the Volvo Group's reporting is by market area in accordance with new geographical definitions based on ISO standards. Reporting in prior periods has been adjusted to reflect the new principle. ------------------------------------------------------------ http://www.bit.se/bitonline/1998/10/21/19981021BIT00030/Q3-98.doc http://www.bit.se/bitonline/1998/10/21/19981021BIT00030/Q3-98.pdf