Industrial Operations

In 2010, net sales for the Volvo Group’s Industrial Operations increased by 23% to SEK 257,375 M (208,487). Hard products accounted for SEK 166,945 M and soft products (services and aftermarket products) for SEK 90,430 M of net sales.

Compared with 2009, sales increased in all of the Group's market areas. Demand in Europe and North America recovered gradually during the year at the same time as the emerging economies in South America and Asia continued to have strong growth. However, development in Japan continued to be weak.

Considerable earnings improvement
In 2010, the operating income for the Volvo Group’s Industrial Operations amounted to SEK 17,834 M, compared with an operating loss of SEK 16,333 M in 2009. The operating margin for the Industrial Operations amounted to 6.9% (neg: 7.8).

The earnings improvement is the result of increased sales, improved cost coverage in the industrial system, as an effect of increased production levels, and continued cost control.

During 2010, operating profit was negatively impacted by higher costs for raw material and components amounting to approximately SEK 300 M compared to the preceding year.

In 2010, research and development expenses amounted to SEK 12,970 M (13,193). Even though costs decreased compared with 2009, they remained at a relatively high level primarily a consequence of projects relating to new emission regulations in Europe, USA and Japan.

Selling expenses decreased by 5% and administration expenses by 3% compared to 2009, depsite net sales increasing by 23%.

Since return on equity was 16%, SEK 350 M was provisioned for profit-sharing to employees.

Impact of exchange rates on operating income
The combined effect of changed exchange rates had a positive effect on operating income of approximately SEK 3.2 billion in 2010, compared with 2009. This is mainly attributable to positive effects from forward exchange rate contracts in 2010 compared to major negative effects in 2009.