Sweden: Volvo Group reports 14% decline in Q2 earnings; sales up 5%
Wednesday, July 25, 2007, AutomotiveWorld.com
Volvo Group says its net sales for the second quarter of 2007 increased by 5% to SEK 71.44bn (US$10.63bn). Adjusted for changes in exchange rates, and acquired and divested units, net sales were down by 1%, the company notes.
Operating margin for the quarter fell to 8.6% from 9.6% a year earlier, while operating income fell by 6% to SEK 6.119bn, mainly (negatively) affected by purchase price allocation adjustments of SEK 275m. Excluding these adjustments, the group's operating margin was 9%.
Net income fell by 14% year-on-year during the second quarter to SEK 4.03bn, or SEK 1.98 per share.
By division, net sales for the Group's Industrial Division Operations were up by 6%, at SEK 69.34bn.
As of the second quarter, Nissan Diesel and Ingersoll Rand's road development equipment division became part of Volvo Group. Nissan Diesel, which was consolidated as at 1 April, contributed SEK 4.614bn in net sales during the quarter. Ingersoll Rand's road development equipment, which was consolidated as at 1 May, contributed SEK 1.132bn.
The Group notes that net sales were negatively impacted by a sharp decline in demand for trucks in North America, following new, more stringent emissions legislation that became effective on 1 January 2007. Net sales were also negatively affected by delivery problems in conjunction with production changeovers in its North American truck operations.
The decline in North America was, however, partially offset by favourable demand in the rest of the world. High economic growth supported a sales increase of 60% in eastern Europe, while the contribution from Nissan Diesel and Lingong helped sales to more than double (up 106%) in Asia.
Meanwhile, lower demand and changeovers in the industrial system in North America resulted in a 6% fall for operating profit for the division, to SEK 5.698bn, while the operating margin stood at 8.2%.
The operations of the acquired companies, Nissan Diesel and Ingersoll Rand's road development equipment division contributed SEK 222m in operating income during the second quarter, excluding purchase price allocation adjustments.
Industrial Division Operations includes Volvo Trucks, Construction Equipment, Volvo Penta, Buses and Volvo Aero.
Sales for the Trucks' division rose by 3% to SEK 46.331bn, while Construction Equipment's sales increased by 24% to SEK 14.146bn and Volvo Penta's sales by 10% to SEK 3.215bn during the quarter. On the other hand, net sales declined by 11% to SEK 4.107bn for Buses division and by 5% to SEK 1.845bn for Volvo Aero.
Volvo Trucks contributed SEK 3.831bn to the Group's operating profit during the quarter (down 7%), while Construction Equipment accounted for SEK 1.398bn (up 10%), Buses for SEK 122m (down 40%), Volvo Penta for SEK 444m (up 19%) and Volvo Aero for SEK 93m (down 39%).
Meanwhile, the Group's Customer Finance operations reported SEK 421m in operating income for the period under review, down 13% year-on-year.
For the first six months of 2007, net sales amounted to SEK 132.48bn, up 1% year-on-year. Income for the period fell by 10% to SEK 7.786bn or SEK 3.83 per share.
Published on Wednesday, July 25, 2007
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