Volvo Group's Industrial Operations - continued sales growth

In the third quarter, net sales for the Volvo Group’s Industrial Operations increased by 15% to SEK 71,559 M (62,225). Adjusted for changes in exchange rates and acquired and divested units net sales increased by 23%. Compared to the third quarter of 2010, all markets grew with the most significant increases coming from Eastern Europe, North America and South America.

Higher operating income
In the third quarter of 2011, operating income for the Volvo Group’s Industrial Operations amounted to SEK 5,523 M, compared to SEK 4,866 M in the third quarter of 2010. The higher operating income is a result of increased sales.

Profitability was significantly impacted by adverse currency movements, primarily the strengthening of the Swedish krona. Compared to the third quarter of 2010, changes in currency exchange rates had a negative impact on operating income amounting to SEK 1,845 M, of which SEK 502 M in Trucks, SEK 400 M in Construction Equipment and SEK 680 M in “Group functions and other” related to market valuation of contracts used for hedging cash flows.

The operating margin for the Industrial Operations was 7.7%, compared to 7.8% in the third quarter of 2010. The negative currency development impacted the operating margin by 2.0 percentage points.

In the third quarter of 2011, Volvo Aero had a positive impact of SEK 63 M as a result of a number of non-recurring items.

In the third quarter of 2010, operating income included a positive impact of SEK 107 M from the divestment of Volvo Construction Equipment’s Turkish distribution network.

Positive operating cash flow
In the third quarter of 2011, operating cash flow from the Industrial Operations amounted to SEK 2.2 billion compared to a negative operating cash flow of SEK 1.9 billion in the third quarter of 2010. Operating income was SEK 5.5 billion in the quarter, but cash flow was negatively impacted primarily by a working capital build-up of SEK 1.6 billion driven by increased inventories and also by payments of taxes and interest of SEK 1.4 billion.