Volvo Group last week reported that sales increased in the fourth quarter by 25 percent to SEK 84.6 billion (U.S. $13.1 billion) from SEK 67.6 billion (U.S. $10.5 billion) a year ago and operating income rose 12 percent to SEK 5.8 billion (U.S. $901.1 million) from SEK 5.2 billion (U.S. $807.9 million). The operating margin of 6.8 percent was negatively affected by the development in North America, integration expenses, which initially yield lower profitability in acquired companies, and a provision for engine-related warranty expenses in North America amounting to SEK 370 million (U.S. $57.5 million).
The underlying profitability remained at a favorable level, which is a reflection on the positive development in most of the company’s markets. For the full year, the group’s sales increased by 10 percent to slightly more than SEK 285 billion (U.S. $44.3 billion) from SEK 258.8 billion (U.S. $40.2 billion), while operating income was up 9 percent to more than SEK 22 billion (U.S. $3.4 billion) from SEK 20.4 billion (U.S. $3.2 billion).
“During the year we carried out several major acquisitions, established a strong presence in Asia, advanced our positions in important product segments, launched many new products and managed widely shifting demand trends in our main markets — continued growth in Europe and Asia and a sharp decline in North America,” said Leif Johansson, president and CEO. “Following the acquisitions of Nissan Diesel, Lingong and Ingersoll Rand’s road development division, we now have a significant industrial structure in Asia, with a presence in Japan, China and, when the expected cooperation with Eicher Motors is in operation, also in India. These are rapidly growing markets and we want to be part of that growth.”
Construction Equipment made major advances in Asia following the acquisition of Lingong and Ingersoll Rand’s road development division. Product renewal was substantial during the year. The product offering increased by 100 products from acquired companies, while at the same time new generations of existing machinery were launched — a total of 46. During the fourth quarter, Volvo CE had a very strong growth but profitability was impacted by increased production costs and costs related to the integration of acquired companies.
In 2007, Volvo transferred slightly more than SEK 20 billion (U.S. $3.1 billion) to shareholders through dividends and share redemptions. For 2007, the board of directors proposes an ordinary dividend of SEK 5.50 per share (U.S. $0.85), corresponding to 74 percent of the year’s profit.
