Sweden: AB Volvo reports 24% rise in 2006 net income
Friday, February 02, 2007, AutomotiveWorld.com
Volvo Group has reported a 7% increase in net sales for 2006 to SEK 250bn (US$35.9bn), while the company's operating margin for the year was 9%.
Net income for the year was up by 24% at SEK 16.32bn (US$2.34bn), while basic earnings per share rose to SEK 40.2 (US$5.77) from SEK 32.22 (US$4.62) in 2005. Excluding goodwill adjustment, operating income rose by 22% to SEK 22bn (US$3.16bn).
It was noted that a Brazilian Supreme Court decision favouring the Group in an export credits dispute had a positive impact of SEK 357m (US$51.27m) on operating income in the fourth quarter. This was, however, offset by capacity reduction costs in North America and reserves for the closure of Volvo Aero's operations in Bromma, Sweden, totalling SEK 358m (US$51.41m).
For the fourth quarter, net sales amounted to SEK 65.06bn (US$9.35bn). Income for the period increased by 24% to SEK 3.7bn (US$231.5m), while basic earnings per share rose to SEK 9.13 (US$1.3).
By division, Volvo's Trucks reported a 7% rise in net sales for 2006, to SEK 166.3bn (US$23.89bn).
Operating income, excluding adjustments of goodwill, amounted to SEK 14.36bn (US$2.06bn), while the operating margin was 8.6%. Included in the operating income was a gain of SEK 310m (US$44.53m) from the settlement of the export credit dispute in Brazil. The favourable product and market mix and higher prices for new products with increased customer value also helped the division's earnings.
Meanwhile, sales at the Bus division rose by 2% to SEK 16.85bn (US$2.42bn). Volumes were mainly affected by reduced deliveries in South America, which resulted in a 15% decline in fourth quarter volumes.
Operating income for the Bus division rose by 35% year-on-year to SEK 633m (US$90.93m), while the operating margin was 3.8% compared to 2.8% in 2005, helped by strong sales in the US and Canada.
Operating income for the Construction Equipment division was up by 41% to SEK 3.89bn (US$558.85m), while the OEM registered SEK 40.56bn (US$5.83bn) in net sales, an increase of 17% year-on-year. The improved performance is mainly due to higher volumes, a favourable product mix and high capacity utilisation.
Volvo Penta's operating income rose by 6% to SEK 1bn (US$143.66m), but income for Volvo Aero fell by 59% to SEK 345m (US$49.56m) in 2006. Financial services reported SEK 2.3bn (US$330.41m) as its 2006 operating profit.
The board of directors has proposed an ordinary dividend of SEK 25 (US$3.59) per share and an extraordinary dividend through a share split of 6:1, where the sixth share will be redeemed by the Group for an amount of SEK 25 (US$3.59) per share.
"The year 2006 was eventful, with extensive product launches and major changes in the industrial system, particularly toward the end of the year," Leif Johansson, president and chief executive officer said. "The year 2007 will be exciting, particularly since we will roll out an entire new product generation and take new steps in the expansion eastward."
Looking ahead, he said that the OEM expects to sell about 300,000 units in the total European market during 2007, compared with previous forecasts of 290,000 CVs. Demand in the North American market is however, expected to plunge in the first half of 2007 due to 2006's pre-buying effect. "Demand in the second half of the year remains difficult to assess," Johansson added.
Published on Friday, February 02, 2007
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