In the first quarter, net sales for the Volvo Group’s Industrial Operations increased by 24% to SEK 69,956 M (56,459). Adjusted for changes in exchange rates and acquired and divested units net sales increased by 34%. Compared to the first quarter of 2010, all markets grew at a good pace resulting in a good geographical balance for the Group.
Considerable earnings improvement
In the first quarter of 2011, operating income for the Volvo Group’s Industrial Operations amounted to SEK 6,343 M, a significant improvement compared to the operating income of SEK 2,785 M in the first quarter of 2010. The operating margin for the Industrial Operations was 9.1%, compared to 4.9% in the first quarter of 2010.
The earnings recovery compared to the first quarter of 2010 is largely driven by higher sales. Increased production levels improved the capacity utilization in the industrial system which, together with higher productivity, also contributed to the improved earnings.
Continued cost control preserved the lower expense level in the Group that was implemented during 2009. Despite a significant sales increase of 24% in the first quarter of 2011 compared to the previous year, the increase in research and development expenses and selling and administrative expenses was limited to 6%.
During the quarter, operating income was positively impacted by SEK 590 M as a result of recognition of VAT credits in Brazil relating to previous years, of which SEK 500 M in Trucks and SEK 80 M in Buses.
The disturbances in the Group’s operations in Japan had a negative impact estimated at SEK 250 M.
Compared to the first quarter of 2010, changes in currency exchange rates had a negative impact on operating income amounting to approximately SEK 1.3 billion. Compared to the fourth quarter of 2010, the negative impact amounted to approximately SEK 0.7 billion.
Seasonal build-up of working capital
In the first quarter of 2011, operating cash flow from the Industrial Operations amounted to a negative SEK 4.0 billion compared to a negative SEK 2.7 billion in the first quarter of 2010. The cash-flow was negatively impacted by the seasonal build-up of accounts receivable and inventory, resulting in an increase in working capital of SEK 9.3 billion, which was partly offset by the increase in operating income.