Sales levels still below last year
In the second quarter, net sales for the Volvo Group’s Industrial Operations decreased by 13% to SEK 70,830 M (80,977). Adjusted for both changes in exchange rates and acquired and divested units (primarily Volvo Aero) net sales in the Industrial Operations decreased by 4%. Sales decreased in all regions with the exception of South America.Earnings recovery compared to the first quarter of 2013
In the second quarter of 2013, operating income for the Volvo Group’s Industrial Operations amounted to SEK 2,846 M, compared with SEK 101 M in the first quarter of 2013 and SEK 7,322 M in the second quarter of 2012. The operating margin was 4.0% compared with 0.2% in the first quarter of 2013 and 9.0% in the second quarter of 2012.
The increased profitability compared to the first quarter of 2013 is primarily an effect of higher sales volumes and higher capacity utilization in the industrial system as a consequence of higher production volumes. Profitability was also positively impacted by a favorable market mix, with higher sales volumes in Brazil. In the second quarter of 2013, operating income in the truck segment was negatively impacted by an increase in warranty reserves of SEK 900 M and positively impacted by a divestiture of non-core operations of SEK 99 M. Volvo Penta’s operating income was positively impacted by SEK 81 M from non-recurring items.
Operating income in the second quarter of 2013 was positively impacted by net capitalization of R&D expenses in an amount of SEK 489 M. Because many projects have entered launch phase, where they are no longer capitalized, it is expected that the operating income in the third quarter of 2013 will be negatively impacted by net amortization of about SEK 300 M, although cash spend will be on about the same level as in the second quarter of 2013. In the third quarter of 2012, operating income was positively impacted by net capitalization amounting to SEK 651 M.
Compared with the second quarter of 2012, changes in currency exchange rates had a negative impact on operating income amounting to SEK 1,210 M.
Compared to the second quarter of 2012, operating income continued to be negatively impacted by lower sales and continued high investment pace in the comprehensive product renewal and related launch costs in the production, sales and aftermarket support functions.
In the second quarter of 2012 Volvo Aero, which has been divested, contributed with an operating income of SEK 315 M. In the second quarter of 2012 Cost of sales was positively affected by the recognition of VAT credits in Brazil of SEK 495 M relating to too high payments in previous years. Operating income in the second quarter of 2012 was also positively affected by SEK 100 M from insurance compensation within Construction Equipment for damages from the earthquake and tsunami in Japan in 2011.Positive operating cash flow in the Industrial Operations
In the second quarter of 2013, operating cash flow from the Industrial Operations was positive in an amount of SEK 4.1 billion. The positive cash flow in the second quarter of 2013 is primarily a consequence of an operating income of SEK 2.8 billion and a minor release of working capital of SEK 1.6 billion. In the second quarter of 2012 operating cash flow amounted to SEK 2.5 billion.