Value creation

Creating sustainable value

Our products and services create important opportunities for the growth of societies. The Volvo Group believes that we are better prepared to contribute to sustainable development and generate long-term value if we consider social and environmental challenges and opportunities and actively engage in dialogue with our stakeholders. This is imperative to the success of the Volvo Group.

Strong earnings

  • Highest net sales, operating income and operating margin thus far
  • Net sales rose by 17% to SEK 310.4 billion (264.7)
  • Operating income rose to SEK 26.9 billion (18.0)
  • Operating margin improved to 8.7% (6.8)
  • Strong operating cash-flow in the Industrial Operations of SEK 14.1 billion (19.0)
  • Net debt in the Industrial Operations reduced to 25.2% of shareholders’ equity
  • Proposed dividend of SEK 3.00 per share

Contributing to growth and development

Transport and infrastructure are vital drivers for economic growth and social development and enable societies to fulfil basic needs. The Volvo Group’s products and services are in many ways enablers of modern society. They contribute to socio-economic growth by acting as the bridge between businesses and their markets, goods and clients, or by simply providing the logistics for people to get to work, home, school, hospital or travel. 

Most of our customers run commercial transport-related business. They have specific demands and expectations on our products and services. It is therefore important for the Volvo Group to develop its products and services in close cooperation with customers, with the aim of improving our customers' productivity.

We aim at providing the right products and services in order to achieve high productivity in the transport system. We help cities setting up efficient bus systems to meet high demands on efficiency and environmental performance. Our trucks transport goods. Our engines ensure that the operations of large industries and at airports or electricity supplies at shopping malls or in hospitals have efficient power back-up systems.

The Volvo Group develops its products and services with the aim of improving our customers' productivity.

A broader approach to creating value

The Volvo Group strives to create value for a wide group of stakeholders such as customers, shareholders, investors, suppliers and employees. A company’s role in society is no longer viewed as merely providing financial value to the shareholders. Today, a company is largely judged by the value it brings to society. The Volvo Group creates value for the society by:

  • Delivering products and services in the most efficient way based on our customers’ expectations
  • Creating job opportunities for employees and for our business partners 
  • Contributing to technological developments 
  • Investments in e.g. new technology, infrastructure and employee competence 
  • Spreading good practices in the field of environmental care and social issues.
The Volvo Group strives to create shared value.

Sustainable business opportunities

With the customer in focus, the Volvo Group is committed to investing in and developing pioneering solutions that will contribute to the sustainable development of the transport and infrastructure sector. This is reflected in the Volvo Group's new vision – to become the world leader in sustainable transport solutions.

Our ability to meet customers’ and society’s growing demand for more efficient technologies, alternative fuel engines and smarter logistics will determine our future business success. Our customers are showing a steadily increasing interest in environmentally-enhanced products. Being in the forefront, we believe this will give us a competitive advantage and contribute to create the market for sustainable transport solutions.

Fuel accounts for approximately one third of the costs for typical customers in Europe, and any measure that can reduce their fuel consumption will help to improve profitability while reducing environmental impact.

With the customer in focus, the Volvo Group is committed to investing in and developing pioneering solutions that will contribute to the sustainable development of the transport and infrastructure sector.

The Volvo Group is firmly convinced that by addressing societal challenges and needs, we can seize business opportunities and create value for stakeholders beyond the traditional groups, such as shareholders and customers. We believe that our efforts will strengthen the perception of the Volvo Group as a trustworthy business partner. Transport is not only a key component of modern society and a precondition for welfare and growth, but also contributes to climate change. We realize that we are part of the problem as well as part of the solution.

The Volvo Group is firmly convinced that by addressing societal challenges and needs, we can seize business opportunities and create value beyond traditional groups, such as shareholders and customers.  

Taking economic responsibility

Today’s global market encompasses many challenges that affect the financial performance of the Volvo Group. The recovery that started in the Group's mature markets in 2010 continued during 2011, with some tendencies towards a weakening in Europe at end of the year. In the emerging economies, the demand for Volvo Group's products and services continued to be strong.

Long-term demand for transport capacity is closely linked to GDP development. The investments in infrastructure are also closely linked to economic growth which has a direct impact on the demand for construction equipment. In the short term the demand is affected by fuel price, introduction of new emission regulations, interest rates and so forth. The financial turbulence and uncertain global financial outlook accentuates the need for well-managed and sustainable businesses that contribute to stability but maintain the flexibility to adapt to new situations. Taking measures to adapt to any new situation is critical while taking into account the impact they may have on internal and external stakeholders.

Our economic responsibility is to continue to create sustainable value, which means that taking measures to adapt to any new situation is critical.

Profitable growth – a prerequisite for value creation

Profitability is a receipt for success. By being profitable, the Volvo Group generates value for a broad group of stakeholders, including our owners, employees, suppliers and the societies in which we operate.

In 2011, the Board of Directors decided on new financial targets for the Volvo Group. The new targets are set to enable the growth and profitability of Volvo Group’s various operations to be measured and benchmarked annually against relevant competitors. Profitable growth is a prerequisite for maintaining competitiveness and for securing investments in the research and development of new products and services. It is also a prerequisite for investing in activities and areas that contribute further to sustainable development.

EU studies estimate that the multiplier effect of one direct employee in the automotive sector ensures at least five more job opportunities at suppliers and related sectors and in retail. The industry is also the largest private investor in research and development in the EU and thereby a driver of innovation and economic growth. Profitable growth also facilitates social initiative efforts beyond ordinary business operations.

Profitable growth is a prerequisite for maintaining competitiveness and for securing investments in the research and development of new products and services.

Corporate taxes to profitable emerging markets

Profitable emerging markets in South America and Asia will gain most of the corporate tax that was paid by the Volvo Group in 2011. In total SEK 5.2 billion were paid in tax.

Key ratios 2011 2010
Net sales Volvo Group, SEK M 310,367 264,749
Operating income Volvo Group, SEK M 26,899 18,000
- Operating income Industrial Operations, SEK M 25,957 17,834
- Operating income Customer Finance, SEK M 942 167
Operating margin Volvo Group, % 8.7 6.8
Income after financial items, SEK M 24,929 15,514
Income for the period, SEK M 18,115 11,212
Diluted earnings per share, SEK 8.75 5.36
Dividend per share, SEK 3.00¹ 2.50
Return on shareholder's equity, % 23.1 16.0
     
¹ According to the Board's proposal.    

Market overview

In the long term, the demand for transport capacity and for trucks is closely linked to the growth of GDP. Trends in the demand for our products are therefore indicators of the state of the economy.

Did you know?

EU studies estimate that the multiplier effect of one direct employee in the automotive sector ensures at least five more job opportunities at suppliers and related sectors and in retail.

Case

CSR – an integral part of a successful business strategy
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Charts

Net sales

 

Economic growth in the U.S., EU and Brazil

Annual GDP-growth., %.

Source: Consensus Economics

 

Economic growth in Asia

Annual GDP growth, %

* China, Hong Kong, South Korea, Taiwan, Indonesia, Malaysia, Singapore, Thailand, Phillippines, Vietnam, Australia, New Zealand, India, Japan, Sri Lanka

Source: Consensus Economics