Volvo Sales Up 25% in 4Q, 10% For 2007

Volvo Trucks’ sales were up 25% in the fourth quarter of 2007, driving sales for the year to a 10% increase.

In the fourth quarter, operating income rose 12%, aiding an overall 2007 increase of 9%. Income for the period rose 11% and declined by 8% for the year.

“The Volvo Group concluded an intense 2007 with a fourth quarter in which sales and operating income reached record levels,” said Leif Johansson, President and CEO. “During the year we carried out several major acquisitions, established a strong presence in Asia, advanced our positions in important product segments, launched many new products and managed widely shifting demand trends in our main markets - continued growth in Europe and Asia and a sharp decline in North America.

“Following the acquisitions of Nissan Diesel, Lingong and Ingersoll Rand’s road development division, we now have a significant industrial structure in Asia, with a presence in Japan, China and, when the expected cooperation with Eicher Motors is in operation, also in India. These are rapidly growing markets and we want to be part of that growth.

“In the fourth quarter, sales increased by 25% and operating income rose 12%. The operating margin of 6.8% was negatively affected by the development in North America, integration expenses, which initially yield lower profitability in acquired companies, and a provision for engine-related warranty expenses in North America. The underlying profitability remained at a favorable level, which is a reflection on the positive development in most of our markets. During the fourth quarter, our industrial operations also had a very strong operating cash flow.

“The split market conditions are most apparent in our truck operations, in which nearly all markets continued to show favorable development, with the exception of North America and Japan. We have good stability and high profitability in Europe, where we increased deliveries during the autumn, despite already strained production. We are expanding production capacity, particularly against the background of very high demand in Eastern Europe. Following the acquisition of Nissan Diesel, Asia has grown to become our second largest truck market and we have continued high expectations about development there.

“In Asia, truck deliveries tripled in the fourth quarter. In North America, we introduced a new generation of engines during the year that comply with the world’s most stringent emission legislation, and simultaneously implemented adaptations in the industrial system. Combined with weak demand, these measures affected profitability. We have adapted the operations to suit market conditions and have a high level of preparedness for handling changes in demand. On February 1, the members of the UAW union at the New River Valley plant decided to go on strike, and production at the plant has been halted. In the Group’s other engine and truck plants in North America there is a temporary agreement since the old agreement expired.

“We estimate that the truck market in Europe will grow by 5-10% compared with 2007, with the industry’s delivery capacity as the limiting factor. The North American truck market is difficult to assess, but we estimate that it will be on about the same level as in 2007.”

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