Financial targets from 2012

Starting in 2012 new financial targets for the Volvo Group were implemented. The new targets have been set in order to enable the growth and profitability of the various operations to be measured and benchmarked annually against competitors. This creates a clear picture of how the operations are developing compared to the industry. Information on how the comparison with competitors is made is available under the heading Investors on www.volvogroup.com.

INDUSTRIAL OPERATIONS

Trucks and Buses

Target

The annual organic sales growth for the truck and bus operations shall be equal to or exceed a weighted-average for comparable competitors.

Each year, the operating margin for the truck and bus operations shall be ranked among the top two companies when benchmarked against relevant competitors.

Comparison group

Daimler, Iveco, MAN, Navistar, Paccar, Scania and Sinotruk.*

 

* Navistar's figures are based on rolling four quarters as of the third quarter of 2012 and Sinotruk's figures are based on rolling four quarters as of the second quarter of 2012.

Preliminary outcome*

The organic sales decreased by 3.2% for the Volvo Group's truck and bus operations and was below the weighted average of -1.0% for the competitors.

The operating margin of 4.3% for the Volvo Group's truck and bus operations was ranked number four in comparison with the competitors.

Construction Equipment and Volvo Penta

Target

The annual organic sales growth for the construction equipment operations and Volvo Penta, shall be equal to or exceed a weighted-average for comparable competitors.

Each year, the operating margin for the construction equipment operations and Volvo Penta, shall be ranked among the top two companies when benchmarked against relevant competitors.

Comparison group

Brunswick, Caterpillar, CNH, Cummins, Deere, Hitachi, Komatsu and Terex.

Preliminary outcome

The organic sales decreased by 2.9% for the Volvo Group's construction equipment operations and Volvo Penta and was below the weighted average of 2.3% for the competitors.

The operating margin of 8.3% for the Volvo Group's construction equipment operations and Volvo Penta was ranked number five in comparison with the competitors.

Industrial Operations

Target and outcome

The financial net debt, including provisions for post-employment benefits, for the Industrial Operations shall be a maximum of 40% of shareholders’ equity under normal conditions. At the end of 2012, the financial net debt amounted to 29.3% of shareholders' equity.

As of January 1, 2013, new accounting rules for employee benefits was effective. As a consequence, AB Volvo’s Board of Directors has decided to exclude pension obligations from the target. According

 

 

 

 

to the new target, the Industrial Operations’ net financial debt, excluding pension obligations, shall be a maximum of 35% of shareholders' equity under normal conditions. The new target of 35% corresponds to the previous financial target of 40% in which pension obligations were included.

Net financial debt as a percentage of shareholders' equity, %
Financial goals for Industrial Operations

CUSTOMER FINANCE OPERATIONS

Target and outcome

The target for Customer Finance is a return on shareholders’ equity of 12-15% and an equity ratio above 8%. The return on shareholders' equity for 2012 amounted to 12.5%. At year end 2012 the equity ratio was 8.1%.

Return on shareholders' equity, %
Financial goals for Customer Finance Operations