Significantly improved earnings

Operating income improved to SEK 18 billion, compared with the loss of SEK 17 billion the preceding year. The operating margin was 6.8%. The improvement in earnings is of course an effect of us selling more products and services, but it is also the result of focused work on rationalizing and streamlining all parts of the Group, as well as our tight grip on costs. The combination of increased profitability with our achievement of growth without tying up any additional operating capital resulted in our Industrial Operations generating an operational cash flow of SEK 19 billion.

In spite of our debt increasing when we were going through the global financial crisis in 2009, we made the assessment that we could take it upon ourselves to reduce our debt by lowering cost levels and turning around the negative cash flow. Through hard work, we succeeded in what we set out to accomplish. Thanks to the improved profitability and strong cash flow, we once again stand financially strong, with a net debt in Industrial Operations that at the close of the year was down to 37% of shareholders’ equity – in line with our objective.

We have been fortunate to be able to welcome the return of increasing numbers of our former colleagues to the Volvo Group – colleagues who sadly had to leave us in conjunction with the financial crisis but who have now been offered work again in increasing numbers. It is also pleasing that we have been able to provision SEK 350 M for profit sharing to our employees, since return on shareholders’ equity for 2010 amounted to 16%. The past two years have required quick adaptations that we would never have managed without the extraordinary efforts undertaken by employees throughout the Group.

Based on the much improved profitability and the significantly reduced debt level, the Board proposes to resume dividends with a pay-out of SEK 2.50 per share for the financial year of 2010.