Volvo Group's Industrial Operations

Weak sales

In the first quarter, net sales for the Volvo Group’s Industrial Operations decreased by 26% to SEK 56,380 M (75,999). Adjusted for both changes in exchange rates and acquired and divested units (Volvo Aero) net sales in the Industrial Operations decreased by 18%. Sales decreased in all regions.

Significant sales drop and low production levels impact profitability
In the first quarter of 2013, operating income for the Volvo Group’s Industrial Operations amounted to SEK 101 M, compared with SEK 5,906 M in the first quarter of 2012. The operating margin was 0.2% compared with 7.8% in the first quarter of 2012.

The lower operating income is a result of significantly lower sales as well as under absorption of costs in the range of SEK 1.9 billion in the industrial system as a consequence of production rates being cut in a more rapid pace than the cost levels could be reduced. All in all, gross income declined by SEK 5.8 billion. In the first quarter of 2012 under absorption of costs amounted to SEK 200 M. In the first quarter of 2012, Volvo Aero, which has been divested, contributed with an operating income of SEK 233 M.

Profitability was also affected by the current high investment pace in research and development for the upcoming comprehensive product renewal and related launch costs in the sales, production and aftermarket support organizations.

Compared with the first quarter of 2012, changes in currency exchange rates had a negative impact on operating income amounting to SEK 168 M.

Seasonal build-up of working capital
In the first quarter of 2013, operating cash flow from the Industrial Operations was negative in an amount of SEK 7.6 billion compared with a negative SEK 4.9 billion in the first quarter of 2012. The negative cash flow is primarily a consequence of the seasonally normal build-up of working capital, amounting to SEK 6.2 billion in the first quarter of 2013.